Orion Energy Systems Q2 2024 Earnings Call Transcript

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Provided by Quartr
November 7, 2023

Key Takeaways

  • Revenue up 17% in Q2 to $20.6 M (17% sequential growth), driven by Voltrek EV activity and maintenance services, with fiscal 2024 revenue guidance of $100 M reiterated and several large lighting projects set to accelerate in H2.
  • Orion’s lighting business gained momentum with a €9.6 M European LED retrofit DoD project kicking off, a mid-seven-figure outdoor lighting rollout for its largest customer, and ESCO channel revenues up 43% in Q2.
  • The EV charging segment (Voltrek) delivered $4.3 M in Q2 versus zero last year, remains on track for $10 M–$12 M this fiscal year, and management sees potential to grow this business to $20 M–$50 M over the next few years.
  • Maintenance services continue to face legacy contract cost pressures with service margin still slightly negative despite renegotiating 3 of 4 major contracts; price resets may cause modest near-term revenue headwinds as customers renew.
  • Product gross margin improved 250 basis points to 30.1% in Q2, and the company expects positive free cash flow and further margin expansion in the second half of fiscal 2024.
AI Generated. May Contain Errors.
Earnings Conference Call
Orion Energy Systems Q2 2024
00:00 / 00:00

There are 8 speakers on the call.

Operator

Fiscal 20 24 Second Quarter Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, session. Mr. Bill Jones, Investor Relations. Please go ahead.

Speaker 1

Thank you, and good morning, everyone. Thank you for joining today's call. Session. Mike Jenkins, Orion's CEO, will begin with an overview of Orion's business, strategy and outlook, session followed by Pierre Brodin, Orion's CFO, who will discuss second quarter and year to date results, session. Today's conference call is being recorded session.

Speaker 1

And a replay will be posted on the Investor Relations section of Orion's website, orionlighting.com. Session. Remarks that follow and answers to questions include statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements generally include words session such as anticipate, believe, expect, project or similar words. Also, any statements that describe future objectives and goals, plans or outlook session are also forward looking.

Speaker 1

Such forward looking statements are subject to various risks that could cause actual results session to differ materially than currently expected. These risks include, among others, matters that the company has described in its press release issued this morning session as well in its filings with the Securities and Exchange Commission. Except as described therein, the company disclaims any obligation to update forward looking statements, which are made as of today's date. Reconciliations of certain non GAAP financial metrics session. I will now hand the call to Mike Jenkins.

Speaker 2

Session. Thanks, Bill. Good morning, everyone, and thank you for joining our call today. As anticipated in our last call, Orion's business progressed in Q2 with both sequential and year over year revenue growth of 17%, reflecting the revenue momentum we anticipated building as we progress through fiscal 2024. September was our strongest month of the year and within our top 3 months since the start of fiscal 2023 session for both our Lighting business and our overall total.

Speaker 2

Per will discuss our Q2 performance and financial guidance a bit later in the call. Session. Now I'd like to start by providing an overview of our strategy and performance across the business segments. Within our lighting business, the $9,600,000 Department of session. European LED retrofit project began in earnest in Q2 with revenues of approximately 1,200,000 session.

Speaker 2

And we expect to complete the bulk of this project in the fiscal year. This project experienced some unexpected startup issues session working its way through the EU regulatory bodies, but is now in full swing and we expect to catch up in the 2nd semester of fiscal 2024. Session. We anticipate several other larger retrofit projects to contribute to the balance of this fiscal year, including a project for a global technology customer Meaningful revenue to come from an outdoor lighting project for Orion's largest customer. We feel good about our growing pipeline of lighting business.

Speaker 2

Session. We also anticipate solid full year growth in LED lighting revenue from our ESCO and electrical contractor distribution channels. Session. In fact, the technology customer retrofit project I just mentioned was sourced through a relatively new ESCO partner. Session.

Speaker 2

By their nature, ESCOs are focused on delivering energy savings and environmental benefits to their customers. LED lighting retrofits are right in the sweet spot of their value proposition as they provide significant quantifiable long term energy savings and generally session. A full return on investment within 2 to 5 years. Our ESCO business was up 43% in quarter 2 and 38% for the session. 1st 6 months, which includes our expanded relationship with our large warehousing logistics customer, but excludes session.

Speaker 2

The DoD project, which was sourced through an international ESCO. We are continuing to build our base of productive agent and distribution channel relationships, focusing on partners who recognize the value of our high product quality, leadership and energy efficient performance and our commitment to the highest levels of customer service. To extend our penetration in our distribution channels, session. We recently launched a new line of more value oriented products that incorporate the industry leading design, quality and energy efficiency for which session Orion is known within the trade. These new products include Triton Pro LED retrofit high bay and other interior fixtures, session as well as an expanded line of Harris branded exterior LED lighting products.

Speaker 2

Session. They were developed in response to requests for more competitively priced LED contractor grade fixtures that incorporate Orion's strong Design and product quality. Feedback has been very positive and we've recorded over $1,000,000 in revenue from these new products in quarter 2, their first quarter of availability. Our quoting activity has been strong and we look to accelerate sales of these products in the second half of fiscal twenty twenty four. Importantly, these products also provide a solid margin contribution.

Speaker 2

Session. Also on the product front, we recently debuted several new products that are compliant with the Build America, Buy America or BAA Act, session. And we expect that they will be well received by those customers who prefer U. S. Manufactured products.

Speaker 2

BABA is a certification, which requires 55% or greater of material content and products to come from U. S. Sources. Session. The BaaBA standard was created as part of the federal IRA bill and that stipulates state, municipal and schools to use BABA compliant products when possible in order to receive federal funds.

Speaker 2

Session. Orion is uniquely positioned to provide this product due to our U. S.-based manufacturing facility and capabilities. Session. As you may know, over the past 24 months, we have diversified our business into 2 new complementary areas, which include electrical maintenance services session as well as providing turnkey electric vehicle or EV charging station solutions.

Speaker 2

These new areas session. Are well aligned with our core mission of helping customers achieve their business and sustainability goals, while providing Orion with exciting cross selling opportunities. Session. Many of our customers have previously asked us about our ability to help them in these areas, which was a key factor in our decision making to enter these spaces. Session.

Speaker 2

We entered the commercial industrial EV charging solutions market in our Q3 of last year with the acquisition of Voltriq. Session. We had a large bus project in quarter 4 of last year and then saw revenue dip sequentially in Q1 this year as we managed through Voltrex integration and the build out of its sales and project management teams session to support expanding revenues in a broader geographic reach. Our EV segment rebounded strongly in quarter 2 delivering 3 point session of $4,000,000 of revenue versus no contribution in the year prior. We anticipate continued growth at Voltrac in the coming periods session.

Speaker 2

As the business capitalizes on its long term track record of success, growing market interest in EVs throughout the U. S. And our ability to cross sell these solutions with our strong base of customers and partners. Projections are that 50% of the new vehicle fleet session. Will be EVs by 2,030 80% by 2,040.

Speaker 2

Businesses everywhere are now considering their electrification and EV charging strategy session to support their employees, customers and their own fleet needs. Orion is well positioned to help our customers and partners session through this exciting and rapidly evolving journey. Our Maintenance Services business also delivered both sequential and year over year revenue growth. Session. We acquired SeaLight Lighting in Q1 of last year, and with the acquisition came a number of multiyear contracts, some of which are now session no longer profitable given a range of cost increases, including higher subcontractor costs that have occurred over the past several years.

Speaker 2

Session. To address these inflationary pressures, we have updated our pricing for new and existing customers to better reflect our current cost structure. Session. We've been working to renegotiate contracts as they came up for renewal and we are making progress. Session.

Speaker 2

We have renegotiated 3 out of 4 of our most significant legacy contracts and believe this effort will return maintenance to solid profitability session as these new price levels continue to impact our results in the second half of fiscal twenty twenty four. We recognize session. Our pricing effort could result in the loss of some business and could therefore provide a modest near term revenue headwind for the segment. Session. Nonetheless, there are plenty of growth opportunities in this space, and we believe that we can restore profitability while delivering high standards session of service and great value to our customers.

Speaker 2

We recently finalized a 3 year preventative maintenance agreement with our historically largest customer. Session. Orion will provide LED lighting and light electrical preventative maintenance services to our customers approximately 2,000 retail stores nationwide. Session. The agreement formalizes and builds upon services we initiated in September in February and scaled through July.

Speaker 2

Session. Overall, I am pleased with the progress we are making, though we still have work to do in terms of integrating our lines of business session and pursuing expanded revenue opportunities. We are excited about our expanded array of solutions to offer customers and partners session and are encouraged by their interest. We have already secured product sales and new projects through our cross selling initiatives between all three of our segments. Session.

Speaker 2

This remains an area of focus for the business that we believe we can deliver growth synergies as we move forward. Session. In summary, we believe we are building a strong and diverse business for long term success. We expect to see our total revenue accelerate across session of the business in the second half of fiscal twenty twenty four, and as such, have reiterated our $100,000,000 revenue guidance for fiscal twenty twenty four. Session.

Speaker 2

Now I'll pass the call to Pierre Brodin to discuss our financials and fiscal year outlook in more detail.

Speaker 3

Session. Thanks, Mike. Orion's Q2 2024 revenue improved 17% to $20,600,000 session. From $17,600,000 in Q2 2023, primarily reflecting Voltrek activity in the current quarter and maintenance revenue growth, session, which was partially offset by lower lighting revenues. Revenue also grew 17% on a sequential basis compared to the Q1 of fiscal 2024.

Speaker 3

As discussed previously, we have several larger lighting projects, including the European DoD project session. And a large outdoor project, which we expect to ramp meaningfully in the second half of fiscal twenty twenty four. Session. We recognized $1,200,000 of revenue on the Department of Defense project in Q2 'twenty four, which leaves session. $8,000,000 of remaining revenue to complete this project.

Speaker 3

Our first half revenues rose 8% session to $38,200,000 from $35,500,000 in the first half of fiscal twenty twenty three. Session. Our gross profit grew to $4,600,000 from $4,400,000 in Q2 2023 in spite of a decline in gross profit session and better absorption of fixed costs across all businesses. As Mike discussed, our gross profit percentage session being impacted by inflationary challenges over the past several quarters on legacy contracts in our maintenance business. Session.

Speaker 3

During the quarter, we renegotiated pricing on 3 of 4 of our most significant legacy contracts and we are working to update other legacy contracts session. Well, our maintenance business also began benefiting from a new 3 year agreement to provide preventative maintenance services for our largest customer. Session. In Q2, our efforts led to an improvement in service margin from negative 11.2% in Q1. Session.

Speaker 3

Although it's still slightly negative, we expect further margin benefits in the back half of this fiscal year, driven by the rollout of our new pricing. Session. Gross margin on products improved approximately 250 basis points to 30.1% in Q2 2024 session from 27.6 percent a year ago. This increase is attributable to new product sales and overall higher volumes session. Reflecting the steps taken in our maintenance business session.

Speaker 3

And our expectation of growing sales volume in the business overall, we expect our blended gross margin to improve further in the second half

Speaker 4

session of

Speaker 2

this fiscal year.

Speaker 3

Our Q2 operating expenses increased to $8,700,000 session. From $7,400,000 in Q2 2023, mainly due to the addition of Voltrac operations included session. $1,100,000 of earn out accrual and $200,000 of intangible amortization related to the acquisition. Session. Operating costs declined sequentially from $9,600,000 in Q1 'twenty four due to lower compensation related costs session and a large credit write off that occurred in Q1 2024.

Speaker 3

We recorded a Q2 2024 net loss session of $4,400,000 or $0.14 per share, including the Goldstrike earn out versus a net loss of $2,300,000 or $0.07 per share in Q23. Cash used in operations was $4,000,000 in Q24, session, reflecting operating results and a $1,500,000 bull track earnout payment, partially offset by positive net working capital effects. Session. We achieved positive free cash flow in September and expect positive free cash flow over the balance of this fiscal year. Session.

Speaker 3

At September 30, we had current assets of $45,300,000 which included inventory of 20,200,000 Accounts receivable of $16,100,000 and cash of $4,000,000 session. Working capital was $16,200,000 at the close of Q2 2024. Total current liquidity, session. Including cash plus $8,900,000 of revolver availability was $12,900,000 session. We expect our liquidity position to improve in the second half of the fiscal year based on the expected ramp in revenues.

Speaker 3

In addition, session. We are looking at additional ways to enhance our liquidity, primarily through a potential mortgage on our corporate headquarters. Session. As mentioned, in Q2, we started several larger projects and finalized a nationwide maintenance agreement. Session.

Speaker 3

In addition, our backlog sits at $21,100,000 at September 30. Session. All of these things and more contribute to our full year revenue outlook. Reflecting these and other factors, session. We have reiterated our expectation for revenue growth of 30% or more in fiscal 2024, implying total revenue of approximately 100,000,000 session.

Speaker 3

The achievement of this goal implies a meaningful revenue improvement in the second half of the year. Based on this growth expectation, session. We also expect solid improvement of our second half bottom line performance. With that, let's the operator to begin the Q and A session. Session.

Operator

Thank you. Our first question comes from the line of Eric Stine from Craig Hallum. Your line is open. Session.

Speaker 5

Hi, everyone. Thanks for taking the questions.

Speaker 2

Hi, Eric.

Speaker 5

Hey, so when thinking about the second half, so you called out session. The DoD project, which has already started, and the lighting project. So I guess want to clarify If that started or when you expect that to start. But just curious, are there any other large projects that you would point to, and Things that give you the confidence in that ramp, clearly, you're reiterating it, so you've got that confidence. So just trying to gauge that.

Speaker 2

Session. Sure. There are a number of things. So obviously, the DoD project, as we spoke about, we talked about an exterior project for our largest customer, session, which is all basically happening in the second half of this year moving forward. And that's a mid-seven figures kind of project and rollout.

Speaker 2

We do expect that our number 2 customer, which we've Disclosed, is a global logistics company and warehouse company. We expect that business to continue to scale session. As we move forward, which on a year on year basis will give us nice growth. And there are other the Global Technology project, which we spoke about. We do expect to recognize revenue on that moving into the second half of the year.

Speaker 2

So there are a number of nice projects, Which we expect activation shortly, some of which are already in flight and should scale.

Speaker 5

Got it. So the DoD one is already in that's already underway and the others, I mean, fair to say You're waiting on, but there you've gotten good visibility into those starting?

Speaker 2

That's right. Yes. In the DoD one, we would have session. We were anticipating a bit more revenue in Q2. I referenced in my comments that we did experience some start issues getting through EU regulatory bodies.

Speaker 2

So that we view that miss basically to be caught up in the second half of the year.

Speaker 1

Session. Yes.

Speaker 3

And just for the math, Eric, that we did say we recognized $1,200,000 of that in the second quarter. Session. The total project is in the $9,600,000 neighborhood. There was a few 100,000 recognized session in Q4 of fiscal 2023. So there's about $8,000,000 left that we expect the majority of that virtually all of that to be recognized in the second

Speaker 5

half. Okay. Got it. And then on the maintenance contracts, session. And I know you said you've renegotiated 3 of 4, but you've got some others out there.

Speaker 5

I'm curious If you can kind of quantify how many others might be out there that you would look to renegotiate. And then curious if you have session. The mechanisms that you've got in place now, whether there are some variability to the contracts based on market conditions, Or are they just short enough in nature that it would just be kind of an ongoing renegotiation whenever they come up? Session.

Speaker 2

Sure. Yes, as indicated on the last call, we were able to kind of off cycle address pricing on a couple of these contracts. We have session. We got renegotiated 3 out of our top 4. So we have one major contract, which is still out there that we need to work on.

Speaker 2

Session. The way it works is basically we've renegotiated pricing and then all these accounts have their normal kind of RFP cycle. Session. And so, we will be working through that and some of those are up as early as the beginning of our fiscal year session early in our fiscal year.

Speaker 3

And maybe Eric, a little more context. Four large contracts really are the bulk of the Piece of maintenance that is at Staylight. So there are other miscellaneous contracts, but Those 4 would represent the bulk of the revenue in that part of the segment.

Speaker 5

Okay. And so the last major one is that that's where You've kind of I mean to maybe simplify it, you've presented them with the new pricing and now they go through a process and hopefully in the RFP process if you would win.

Speaker 2

Yes. I mean, certainly, we're going through with all of them, and that's the one that's remaining. Session. So, yes, I mean, in principle, those are in having conversations right now.

Speaker 5

Yes, understood. Okay. Session. Maybe last one for me. Just on the EV opportunity, I think I've asked this before, but just curious, obviously, your customers, Many of them requested these capabilities from you.

Speaker 5

Do you expect this to be a decision that's By company over their footprint or is it more kind of a site by site decision?

Speaker 2

Session. I think it can work both ways. I think it really depends on how they run their businesses and how centralized or decentralized session. They are as a company. I think some will go basically across the country and we're Having some conversations with folks like that and others, it will really depend on whether or not they have a fleet location out of that facility, etcetera.

Speaker 2

So I think it's going to work both ways.

Speaker 5

Okay. Thank you.

Speaker 2

Session. Thank you, Art.

Operator

Thank you. One moment for our next question. Session. And our next question comes from the line of Amit Dayal from H. C.

Operator

Wainwright. Your line is open. Session.

Speaker 1

Thank you. Good morning, guys.

Speaker 4

Just on the EV topic, Is pipeline more sort of corporate and enterprise? Or is there some government related opportunities as well?

Speaker 2

Yes. There certainly are both private and public opportunities. We currently Do business with municipal governments, that's part of kind of the legacy of Voltrek as well as session with private companies. And so we see growth in both areas. We were recently at a federal government show, trade show, session.

Speaker 2

And there was a tremendous amount of conversation about the electrification strategy of the federal government for their own use and facilities. So session. I think downstream, we're going to see rapid adoption in both areas.

Speaker 4

Okay. Thank you. And then on the Vortic session. Arnold, could you remind us what remains to be paid out, etcetera?

Speaker 3

Yes. We made the payment I referenced in September of 1,500,000 Toward the fiscal 2023 earn out and then there was another $1,500,000 paid in October towards that $3,000,000 earn out. Session. There will then be the opportunity for a fiscal 2024 earn out. That amount would be paid session.

Speaker 3

In the Q2 of calendar 2nd calendar fiscal 2020 buyback to the extent it's earned, That is a $3,500,000 opportunity. And then the following year, there's a $4,000,000 opportunity plus a kicker session. For a cumulative on cumulative EBITDA earnings over the 1st 3 years of ownership, which could be a max Potential of an incremental $3,150,000 that would be paid at the same time as the fiscal 2025 earnout opportunity.

Speaker 4

Okay. Thank you for that. Appreciate it. And then maybe just session. The service maintenance segment, I know you're going for a lot of sort of renegotiations, etcetera.

Speaker 4

But are you also Actively trying to add new clients at this point or are you sort of trying to clear out your existing setup session. With the legacy contracts before you move to adding new customers?

Speaker 2

Sure. Well, we actually did add Quite a bit of new business with our number one customer, as we talked about, on the preventative side for 2,000 locations. So that was a big add to the team in terms of new volume. So right now, we're certainly digesting that. We're building out and shoring up session.

Speaker 2

Our resources around that and then at the same time focused on profitability for the legacy business. We do see growth opportunities out there, But we certainly want to approach this a bit step by step and address the profitability of the legacy business as our first order of priority right now.

Speaker 4

Once or if these if the service margin is normalized for you guys, how much of a lift Should we expect to the overall blended margin?

Speaker 3

Session. Well, I think if you look at the blend, think about the blend of the margin, we expect session to ultimately get back to what we've experienced as a more traditional service margin for that business. Session. So that's not going to happen over the next quarter or so as we continue to renegotiate these Contracts, but that's where we are certainly targeting that this business is headed.

Speaker 4

Okay. I'll follow-up on that one later. But that's all I have for now, guys. Thank you so much.

Speaker 3

Thanks, Amit. Thanks, Amit.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Alex Rygiel from B. Riley Securities. Your line is open.

Speaker 2

Hello, Alex.

Operator

Alex, if you could disconnect and try using the call me feature.

Speaker 4

I thought she just came through. No.

Operator

Alex, go

Speaker 6

ahead. Hi. This is Min Cho for Alex Rygiel. Can you hear me?

Speaker 2

Yes. Sure. Hi, Min. Session.

Speaker 6

Okay. That's so confusing because I logged in as myself. But okay, sorry about that. A couple of quick questions. Just session.

Speaker 6

Given the interest rate environment, are you seeing any kind of project delays or just slowdown in Fitting opportunities for some of the larger projects?

Speaker 2

At this point in time, we have not seen any substantial delays That we could attribute to that. None at all.

Speaker 6

Okay. Good to hear. Also in terms of your Boltrek business, session. Sounds like it's progressing fairly well here. Are you still on track to hit kind of that $10,000,000 to $12,000,000 in revenue for the full year?

Speaker 6

Can you talk a little bit about pipeline and maybe how big this business can get for you

Speaker 4

in the next couple of years?

Speaker 2

Session. Sure, sure. Yes, we did say earlier that we thought that between the Voltrac business and the maintenance business that it would be around a third of the business overall. Session. We still think we're on track for that plus or minus.

Speaker 2

The 10% to 12% that you referenced for Voltrek given our current run rate coming out of this session quarter. We definitely feel like that's achievable. And in terms of the longer view of, Voltrac in the EV space more broadly, session. As I referenced in my comments, the macro environment remains very strong towards EVs. It won't be perfectly linear, but it's directionally strong.

Speaker 2

Session. And we do see the opportunity to grow a business of $20,000,000 to $50,000,000 in the next couple of years.

Speaker 6

Session. Excellent. And then it's nice to see that you reiterated your revenue guidance for the full year. Session. Just any thoughts on EBITDA for the second half of this year?

Speaker 6

Can you exit on a positive EBITDA? And how do we get there?

Speaker 3

Session. Well, in my comment, I certainly mentioned that we expect our improved session. And increasing sales to transition to the bottom line results. So we do expect, as I mentioned, session. It would be free cash flow positive, which I think implicit in that.

Speaker 3

It's also being EBITDA positive session as we leave the year, but say that our year to date performance would indicate session. We have not finished the year with a net positive result.

Speaker 6

Session. Okay. And then just one final question. I believe you had a large DoD contract for your PureMotion product, session. And it was awaiting funding.

Speaker 6

Any update on that or any just update on some of your newer kind of, I guess, more value add products?

Speaker 2

So Pure Motion, the project that you referenced is still live. Session. It is still, but it's basically on a hold status right now with the DoD. So we do expect that that project will at some point move forward, But we don't have timing at this point in time.

Speaker 6

Okay, great. Thank you.

Operator

Thank you. Session. Session. Our next question comes from the line of Andrew Shapiro from Lawndale Capital Management. Your line is open.

Speaker 7

Session. Hi, thanks. Just trying to get drill down into this, The maintenance contract stuff and the losses. When you define a contract as a legacy contract, what do you mean and when was Staylight acquired?

Speaker 3

By legacy contract, we mean it was something that was an existing customer of Staylight, when they were acquired. We acquired Staylight effective January 1, 2020

Speaker 7

session. Okay. So fairly recent and all that. Now,

Speaker 3

so these contracts

Speaker 7

22, okay. And these contracts, I think you said in the last call when I asked questions, were around 3 years or so in duration. So I guess that maybe medium term to long term for this kind of business. What are you doing differently in your new maintenance contract bidding to share, session. I guess we'll call it margin risk or to mitigate this risk.

Speaker 7

Is it just that you're pricing it higher and hoping that You won't have another wave of inflation? Are you doing with a shorter duration on the pricing? How does it how are you approaching it differently?

Speaker 2

Yes. So each of the customers have their own specifics around how you can tender and go through an RFP session. We do is build in a reasonable level of escalation into our contracts given the inflationary environment that we've experienced over the last couple of years. Session. Where that's not possible, then we have to take those inflationary challenges that are anticipated over the future into account session when we go through the RFP process.

Speaker 7

Okay. And last call, session. I also had asked about and I think you said at the time you were negotiating improvements and it looks like you got 3 out of the 4. Session. And you said on the contracts that wouldn't amend, the furthest the runoff would take you is into The spring.

Speaker 7

So of those kind of contracts where they won't amend to allow for a price increase, etcetera, And that are going to expire later in the spring. Do you expect those customers to then renew at your Higher and better terms or that's going to be kind of annualized revenue that you were generating That will not be added back in. And can you kind of give a range to help quantify or get our arms around, session. I guess the amount of revenue from that sub segment that we wouldn't mind necessarily going away, but we shouldn't count on continuing?

Speaker 2

Yes. That is actually correct. The number of these contracts are going to naturally expire in spring, actually in quarter 1 of our next fiscal year. Some of them are at the end of April and in that timeframe. So the renegotiations that we've done are basically for the current contract period, then we'll go through the cycle for the next round of RFPs.

Speaker 2

At this point in time, those are active conversations which are starting and I really have no guidance to provide on any of that as those are active conversations for customers.

Speaker 7

Okay. And like how large in terms of revenue is the whole Staylight segment here that I guess includes a combination of profitable and and unprofitable.

Speaker 3

Yes. When we acquired Staylight, we disclosed that they were a $9,000,000 to $10,000,000 business.

Speaker 7

Okay. Session. And the renegotiated ones, the ones that you opened up your inter period, session. Was this just to get to breakeven on those contracts or the pricing would provide for profitability at your normal margin or somewhere in

Speaker 2

between. Yes. Moving forward, it is our Mandate to have these contracts be profitable, so not just breakeven.

Speaker 7

No, I understand that Bill in terms of the new ones. But right now, you've You've gotten some contracts amended inter period before they expire and you got some improvement. But the improvement you got, did you get just to breakeven? Did You get to your desired margin or did you get to somewhere in between?

Speaker 2

Session. All of these contracts, the pricing changes that we're making would allow for the company to be profitable on these contracts. Session. They are rolling out. So we don't recognize the change in all cases immediately because there's often a backlog And those types of things, so the full impact of these contract changes and pricing changes occur over time.

Speaker 2

But the goal and what we've implemented is for all these accounts to drive profitability.

Speaker 7

Session. Okay. And 2 other follow ups, not on the Staylight. Voltrek, when does that acquisition anniversary? And remind me, the session.

Speaker 7

Earn out targets are not just revenue based, but they're EBITDA based, right?

Speaker 2

So the anniversary of Ultrac Just occurred this past month in October. So we've just now anniversaried it and the earn out is based on EBITDA, not on revenue.

Speaker 7

Session. Okay. And the DoD contract profitability as you build that thing out, The accounting on that, that's not like some kind of completion of contract type of accounting or is it?

Speaker 3

Session. I mean, to some degree, that's a decent way to think about it. It's based on installation of the fixtures, which Yes. It's a decent analog for percentage of completion. So as we impact in multiple buildings on those bases.

Speaker 3

So it says we installed fixtures, we recognize the revenue.

Speaker 7

Session. Okay. Lastly, you made a comment about potentially seeking a mortgage on the headquarters building. Of course, this is not the optimal time to go lock in some kind of long term rate. When does your current bank line what's its maturity date?

Speaker 3

December of 2025. Session.

Speaker 7

Okay. And your pricing is what reference rate plus what? What's the margin on that?

Speaker 3

There's 3 bands that's so for plus 150 to 2.25.

Speaker 7

Session. Okay. And are we in the toughest band right now in light of the fact we're not generating positive EBITDA?

Speaker 3

Session. That is correct.

Speaker 1

Okay, great. Thank you.

Operator

Thank you. And with that, this concludes our Q and A session. I would now like session. The conference back to Mr. Jenkins for closing remarks.

Speaker 2

Thank you, and thanks to everyone for joining and listening to our call today. Session. I look forward to updating investors and stakeholders in coming months quarters as we execute on our growth objectives for fiscal 2024. Session. We continue to take opportunities to meet with investors in person or virtually.

Speaker 2

We are presenting at the Sidoti and Company Virtual Conference on November 15, session. And I encourage you to listen to our presentation and or to register for a 1 on 1 call. Session. For more information on our planned events or if you would like to schedule a call with management, you can contact our Investor Relations team, session whose information is in today's press release. Thank you very much.

Speaker 2

Have a good day.

Operator

Session. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

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