ORION ENERGY SYSTEMS, INC. Q4 FY2025 earnings call

• Sally Washlow took over as CEO in mid-April, focusing on enhancing leadership, focus, and urgency to drive growth and profitability.
• Orion reorganized into 2 commercial business units: Solutions (includes products/services for specific end customers) and Partners (focused on product sales via distribution agents, etc.).
• Expanded pipeline for LED lighting projects with project wins enhancing future revenue visibility.
• Reduced LED lighting fixture costs through reengineering, plant efficiency, and diversified sourcing; reduced operating overheads by over $4M in FY '25, with plans for further reductions in FY '26.
• Achieved positive adjusted EBITDA in Q3 and Q4 and positive operating cash flow for full fiscal 2025 year.

In Fiscal 2025, the EV charging business saw strong performance with 18% revenue growth in Q4 '25 and 37% for the full year. LED lighting revenue was challenged, but achieved a gross margin of 26.6% in fiscal '25 vs 27.3% in fiscal '24, benefiting from price increases, cost reductions, and sourcing initiatives. Electrical maintenance segment revenue decreased Y/Y to $4.1M in Q4 '25, but gross margin rebounded to 18.2% in fiscal '25 from 4.4% in fiscal '24. EV charging achieved an improved gross margin of 28.3% in FY '25 vs 27.2% in FY '24. Blended gross profit margin increased to 27.5% in Q4 '25 from 25.8% in fiscal '24.

• Fiscal '26 revenue outlook 5% to approximately $84M based on new Solutions and Partners business unit structure.
• EV charging business expected to be flat to slightly lower in fiscal '26 due to near-term uncertainty in EV project scope, pace, and funding.
• Expect gross margin to remain strong in fiscal '26 though varied by quarter due to product mix and volume.
• Intends to implement a further $1.5M in annual overhead reductions during FY '26.

• Risks related to forward-looking statements as per Private Securities Litigation Reform Act of 1995.
• Uncertainty in federal funding impact on EV charging projects.
• Uncertainties in tariff impacts on domestic manufacturing and global cost structure, with more unknowns than knowns at present.

Q: How has the order trend been, especially in Q1 and going forward?

A: Sally Washlow said the beginning of the year had a good start with orders, April was strong, and May and June continued to progress, expecting it to continue. John Per Brodin added some orders are actualization of past projects.

Q: What are the assumptions behind EV charging being flat to down in fiscal '26?

A: Sally Washlow said taking a conservative approach, but there's a strong pipeline, leveraging work with fleets and electrified fleet building. John Per Brodin mentioned no direct federal funding issues yet but uncertainty in EV industry environment.

Q: Regarding the earn-out, thought process behind settling at current stock prices?

A: John Per Brodin said it was to reach a satisfactory agreement to mitigate near-term liquidity impact, combining shares, cash, and subordinated notes.

Q: Impact of federal government rule changes on Orion?

A: Sally Washlow said EV segment had one project canceled but others with federal government are underway. John Per Brodin added NEVI funding didn't directly impact EV pipeline, and other projects with federal government have significant revenues expected in fiscal '26.

Q: Frustrations with corporate structure and path to remedy?

A: Sally Washlow said there's potential to further leverage national footprint and capabilities within Solutions business, breaking down silos, and working on channel rebuilding in Partners business.