Orion Energy Systems, Inc. Q3 FY2026 earnings call

• Achieved fifth straight quarter of positive adjusted EBITDA. - Met milestones: maintained NASDAQ listing, enacted growth/profitability/cost containment initiative, on track to meet $84M revenue with positive adjusted EBITDA for FY '26. - Raised FY '26 revenue outlook to $84M-$86M with positive adjusted EBITDA, FY '27 outlook to $95M-$97M with positive adjusted EBITDA. - Notable orders include $14M-$15M exterior lighting project starting in Q4 '26 with bulk in FY '27, and Orion Voltrek's $4M EV charging station installation for Boston Public School System. - Proprietary supply chain helps with efficiencies and risk mitigation. - Focus on expanding products/services, including electrical infrastructure integration and maintenance contract renewals. - Distribution channel sales growth expected, with expanded team and product development based on customer requests.

Fiscal Q3 '26 revenue was $21.1 million. LED lighting segment revenue was $12.1 million (down from $13.2 million in Q3 '25, due to decreased project activity and ESCO channel sales, partially offset by distribution channel sales increase). Maintenance segment revenue increased 13% to $4.4 million (from $3.9 million in Q3 '25) due to new customer contracts and expanded relationships. EV charging solutions revenue was $4.7 million (up from $2.4 million in Q3 '25). Lighting segment gross margin in Q3 '26 was 30.6% (vs 30.2% in Q3 '25). Maintenance segment gross margin was 25.5% (vs 26.4% in Q3 '25). EV charging solutions gross margin was 36.7% (vs 30% in Q3 '25). Overall gross profit margin increased to 30.9% (vs 29.4% in Q3 '25). Total operating expenses declined to $6.1 million (from $7 million in Q3 '25). Q3 '26 net income was $160,000 ($0.04 per share) vs net loss of $1.5 million ($0.46 per share) in Q3 '25. Adjusted EBITDA improved to positive $761,000 (vs $32,000 in Q3 '25).

• Raised FY '26 revenue outlook to $84 million to $86 million with positive adjusted EBITDA. - Expect FY '27 revenue between $95 million and $97 million with positive adjusted EBITDA. - Q3 '26 revenue of $21.1M was a driver for the uptick, with expectations of strong Q4 '26 and FY '27 growth due to increasing orders and cost structure improvements.

• Execution risk exists with contracts, as mentioned when discussing potential delays in programs and how it affects margins and guidance. The company tempers outlook with this potentiality.

Q: About the $14 million to $15 million external lighting project, any early thoughts on linearity of revenue in 1Q, 2Q of fiscal '27?

A: Per Brodin said some revenue started in late January of the current quarter, expects ramp in January, February, March, with majority of revenue in first half of FY '27, and project expected to be complete by end of July.

Q: On the OpEx coming down, where could it potentially go?

A: John Brodin said they'll continue to manage operating expenses closely, with ongoing efforts to find cost savings to mitigate other cost increases, expecting operating expenses to be at current level or slightly more, at least starting with a 6 in Q4 '26.

Q: On maintenance side, about smaller midsized enterprises adopting preventative maintenance model?

A: Sally Washlow said no one to the scale of the large retailer in that division, but seeing month-over-month increases in other customers and continuing to pursue new ones.

Q: About underwriting execution risk with contract wins?

A: John Brodin said risk exists on an ongoing basis and they temper outlook with that potentiality.

Q: About distribution segment success, what's driving it and runway?

A: Sally Washlow said expanding relationships, expanded team calling on the channel earlier in the year, and developing products based on customer requests, expecting further engagement in the channel.

Q: About electrical infrastructure opportunity, how much revenue so far?

A: Sally Washlow and John Brodin said it's evolving, with some expansions on initial jobs not yet fully in results through Q3, with some revenue in Q4 and into FY '27, but hard to size at this point as they're continuing to build it.