Orion Energy Systems Q1 2027 Earnings Call Transcript

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August 5, 2026

Key Takeaways

  • Positive Sentiment: Orion reported a strong fiscal 2027 first quarter, with revenue up 32% year over year to $25.7 million, gross margin expanding to 34.6%, net income reaching $2.0 million, and adjusted EBITDA increasing to $2.5 million. This marked the company’s seventh consecutive quarter of positive adjusted EBITDA.
  • Positive Sentiment: Management maintained its fiscal 2027 outlook for $95 million-$97 million of revenue and positive adjusted EBITDA, while citing an improving sales pipeline and approximately $24 million of backlog exiting Q1. Growth is expected across automotive, retail, public-sector, EV charging, and industrial electrification projects.
  • Positive Sentiment: Orion has begun shipping its lighting solution to an initial hyperscale data-center customer, with individual buildings potentially representing seven-figure opportunities. Management said the data-center pipeline is developing, though the larger revenue ramp is expected later in fiscal 2027 and into fiscal 2028, with minimal additional fixed-asset investment required.
  • Negative Sentiment: EV charging revenue rose to $4.0 million, but segment gross margin declined to 26.9% from 33.8% a year earlier amid continued uncertainty in the U.S. EV market. Overall Q1 gross margin also benefited by roughly 130 basis points from tariff changes and refunds, and management expects normalized full-year gross margin in the 30%-32% range.
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Earnings Conference Call
Orion Energy Systems Q1 2027
00:00 / 00:00

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Operator

Good morning, everyone, and welcome to Orion Energy Systems' Fiscal 2027 First Quarter Conference Call. At this time, all participants are in a listen-only mode. In this call, Sally Washlow, Orion's CEO, and Per Brodin, its CFO, will review the company's first quarter results as well as its fiscal 2027 outlook. Then we will open the call to investor questions. Today's call is being recorded. A replay will be posted in the investors section of the company's website, orionlighting.com. I will now turn the call over to Per Brodin, Orion's CFO.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Thank you, Steven. First, as a reminder, prepared remarks and answers to questions include statements that are forward-looking under the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally include words such as "anticipate," "believe," "expect," "project," or similar words. Any statements describing future objectives or goals, company plans, and outlook are also forward-looking. These forward-looking statements are subject to various risks that could cause actual results to differ materially from current expectations. Risks include, among other things, those that Orion has described in its press release issued this morning and in its SEC filings. Except as described therein, Orion disclaims any obligation to update or revise forward-looking statements made as of today. In addition, reconciliations of certain non-GAAP financial metrics to their nearest GAAP measures are also provided in today's press release. Now, I will turn the call over to Orion's CEO, Sally Washlow.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Thank you, Per. Good morning, everyone, and thank you for being with us today. I am pleased to report our results for Q1, our seventh consecutive quarter of positive adjusted EBITDA. The first quarter of fiscal 2027 represents an excellent start to the year. In Q1, we delivered on the growth we established in the previous year. Fiscal 2026 was a successful turnaround year for Orion, marking a return to growth in both revenue and profitability. Fiscal 2026 came in at $86 million in revenue and $2 million in positive adjusted EBITDA, results that outperformed our guidance. Fiscal 2026 was a year in which we put ourselves on a path of profitable growth. In the current fiscal 2027, we expect to achieve revenue of $95 million-$97 million and positive adjusted EBITDA for the full fiscal year.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

As to Q1 fiscal 2027, year-over-year, Orion recorded a 32% jump in revenue, coming in at $25.7 million. A 15% increase in gross margin, coming in at 34.6%. Net income of $2 million, up from -$1.2 million, and adjusted EBITDA of $2.5 million, up from $200,000 year-over-year. Today's earnings report is also further illustration of the improving quality of our sales funnel, the impact of our cost containment initiatives, and the continuous strengthening of our proprietary supply chain. Automotive, retail, and public sector engagements continue to show notable strength and continued growth. With customers like public bus fleets, the Orion Voltrek EV charging segment is recognized widely for its ability to complete complex EV charging infrastructure projects. We are focused on scaling this business across a broader customer base and geographic footprint.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

We are especially confident about this business with our recent appointment of industry leader, Karen Peck, to head EV charging infrastructure sales. Furthermore, the hyperscale data center market looks especially attractive now that we have made our initial entry into it. Our customers recognize that we meet them where they are, whether we deliver a product-only solution or provide complete turnkey, full-service electrical infrastructure powered by our own products that are designed, engineered, and made in Manitowoc, Wisconsin. Over the decades, Orion has built a well-earned reputation for quality products, on-site service, and an ability to scale no matter how big the customer or project. We have a reputation for unmatched reliability with a proprietary supply chain that includes a Made in America facility, enabling us to deliver on time and on budget.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

We are widely known for our unsurpassed ability to deliver turnkey installation and services for electrical infrastructure and EV charging stations. Today's Q1 fiscal 2027 earnings report is a further validation that Orion is prepared to meet this moment when we have a confluence of three growth drivers in the electrification of industrial America. Number one, the reshoring, refurbishment, and resurgence of U.S. industrial facilities, ranging from manufacturing to retailing to government. Number two is the electrification of vehicular fleets of major enterprises in both the private and public sectors, ranging from nationwide logistics to school districts. And number three, the building boom of AI-driven data centers, typified by the multimillion-dollar engagement we announced in Q1 with our multipurpose linear lighting fixture, designed specifically to integrate quickly and easily into the floor plan of data centers. Today's report also highlights several growth initiatives.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Our focus is on expanding opportunities and revenues within new and existing large customers in the automotive, retail, and public sectors, whether by deployment of LED lighting systems, electrical infrastructure, or EV charging infrastructure. Our focus on maximizing our service and maintenance to long-term EV charging customers. And our focus on adding capabilities such as data center lighting solutions, battery energy storage systems, electrical contracting, and a recently announced LED roadway lighting product. Delivering efficiency and cost-effective solutions at scale to industrial America at a time of unprecedented need, we believe that Orion is an emerging provider of choice for AI and IoT-driven electrification to Fortune 100 corporations and other global leaders. Orion designs, installs, and maintains LED lighting systems, EV charging stations, and the complete footprint electrical infrastructure for some of the largest enterprises in the U.S.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Whether deployed independently or in combination with our partners, Orion's discreet, bespoke, and turnkey solutions generate unrivaled ROI to industry facilities requiring the most demanding standards of efficiency, reliability, and compliance. Made in America for its fourth decade, Orion is meeting the moment for an industrial build-out that is reshoring, refurbishing, and reasserting leadership throughout the U.S. With that, let me turn to Orion's CFO, Per Brodin, to review our financial performance and outlook.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Thank you, Sally. Today we reported Q1 2027 revenue of $25.7 million as compared to $19.6 million in Q1 2026, an increase of over 30%. LED lighting segment revenue in Q1 2027 was $17.7 million compared to $12.9 million in Q1 2026. Q1 2027 lighting segment revenue performance reflected increased project activity and distribution channel sales, partially offset by a decrease in ESCO channel sales. Orion's expanded LED lighting project pipeline and efforts to drive growth in the distribution channel are continuing to contribute to higher expected revenues in fiscal 2027. Lighting achieved a Q1 2027 gross margin of 37.8% versus 31.8% in Q1 2026. Maintenance segment revenue was $4.1 million in Q1 2027, up from $4 million in Q1 2026. We achieved a maintenance segment gross margin of 28.3% in Q1 2027 versus 22.4% in Q1 2026.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

EV charging solutions revenue was $4 million in Q1 2027 compared to $2.7 million in Q1 2026, reflecting relative strength despite sector-wide uncertainty regarding the market environment in the U.S. EV achieved a gross margin of 26.9% in Q1 2027 versus 33.8% in Q1 2026. Our overall gross profit margin was 34.6% in Q1 2027 versus 30.1% in Q1 2026. Q1 2027 included a benefit of approximately 130 basis points for the net effect of tariff changes and refunds. We expect our overall gross margin to remain strong throughout fiscal 2027, though it will likely vary on a quarter-by-quarter basis due to revenue mix and volume changes. Total operating expenses were 6.8% in Q1 from $6.9 million in Q1 2026. Reductions in compensation costs in general and administrative expenses were mostly offset by increased commission expenses, including in sales and marketing costs.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Reflecting stronger gross margin and lower operating expenses, Orion's Q1 2027 net income was $2 million, or $0.47 per diluted share, or $0.48 basic per common share. Compared to a net loss of $1.2 million or $0.37 per share in Q1 2026. Adjusted EBITDA was+$2.5 million in Q1 2027 versus $200,000 in Q1 2026. As Sally noted, this was Orion's seventh consecutive quarter of positive adjusted EBITDA. Regarding our outlook, as Sally highlighted, we expect a continued increase in profitable growth in fiscal 2027, with positive adjusted EBITDA on revenue between $95 million-$97 million. This concludes our prepared remarks. Operator, would you please commence the question-and-answer session?

Operator

Thank you. At this time, we will conduct the question -and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will ask that you please limit it to two questions. At that time, please re-queue. Please stand by while we compile the Q&A roster. Our first question comes from the line of Amit Dayal of H.C. Wainwright. Your line is now open.

Amit Dayal
Amit Dayal
Analyst at H.C. Wainwright

Thank you. Good morning, everyone, and thank you for taking my questions. Congratulations on the win in the AI data center space. Looks like a pretty significant market has opened up for you over there. In that context, Sally, are you being conservative with the outlook for fiscal 2027 revenues?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Good morning, Amit, and thank you. I don't think we're being overly conservative with our revenue. We're certainly bullish on the year. With entry into the data center, as we announced, we worked with a customer to really build the right solution that we could scale to other customers as well. I think we're in the pretty early innings of data centers, we have conversations going on with others, we'll wait till later in the year to provide any further updates.

Amit Dayal
Amit Dayal
Analyst at H.C. Wainwright

Okay. Thank you. Can you talk about some of the pipeline that you are building for that market? What kind of activities are you undertaking? What kind of discussions are you having with potential customers? Just any color on how that sales pipeline is being built up, do you expect to convert some of that pipeline in the next few quarters? Will it take a little bit more time for you to start getting more momentum with orders from this space?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Particularly in this space, we think a lot of it will come in our next fiscal year in terms of revenue. We are starting to ship product. Oftentimes, how we're winning in this arena is you're winning building by building on a data center campus. As they grow, we're winning more and more. I'm not going to say we're single-sourced as well. Most have mitigated their risk. We believe that the pipeline will continue to grow as we continue to deliver in that channel.

Amit Dayal
Amit Dayal
Analyst at H.C. Wainwright

Just one follow-up on that. Should we assume the deployments at a single data center could be significantly larger or multiples of what a typical deployment for a single facility is usually for you guys?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Yes. Buildings often represent seven figures per building.

Amit Dayal
Amit Dayal
Analyst at H.C. Wainwright

Okay. Understood. I'll step back. Thank you. Thank you so much.

Operator

Thank you. Our next question comes from the line of Eric Stine, Craig-Hallum. Your line is now open.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Hi, Sally. Hi, Per. Good morning.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Hello.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Just curious, obviously, a pretty positive commercial environment on the demand side. I know last quarter you did provide a backlog number, and I also know that was because you were entering the fiscal year. Curious, whether it is being more specific about backlog or just commentary on where backlog stands exiting the quarter. The positive order trends that you saw end of fiscal 2026, presumably those have continued into the first quarter and what you are seeing here in the second quarter.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

As we exited the first quarter, our backlog was right around $24 million. As Sally mentioned, the strength of our pipeline we think continues to improve. We expect to see some significant conversions as we move forward. That is where we sit today.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Got it. I know that backlog at a point in time can be, there is a lot of timing to that specific number, but that is helpful. Maybe you talked about the guide $95 million-$97 million. I know that at least to this point, you have not been including anything from the potential opportunity with The Home Depot, the stores where you are doing the outside lighting, but there is that inside opportunity. Just curious where that stands. I know you had made progress. I think you were the only company that was really in the mix for that. It was more about dialing things in. Maybe where that stands, and could that still be fiscal 2027 revenue, or would that be more fiscal 2028?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

We're still in play on opportunities like that, quite frankly, some others as well. There's testing that goes on, and final product selection. We're still pretty positive about that opportunity.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Okay. Thank you.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Thanks.

Operator

Thank you. Our next question comes from the line of Gowshihan Sriharan of Singular Research. Your line is now open.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Good morning, guys. Can you all hear me?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Yes.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Yes.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Nice. My first question is on the exterior lighting program. You sized it at $14 million-$15 million, and it was supposed to be complete by the end of the first half. How much of that ran through Q4 and Q1, and what's left to deliver?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

You might be confusing two different announcements we had about our largest customer. The $45-ish million opportunity we mentioned with them was a three-year contract for the maintenance services that we provide. That will occur over fiscal years beginning April 1st, 2026, so fiscal 2027, 2028, and 2029.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

We had also discussed previously an exterior project, which we said was in the $15 million range, most of which has been recognized in Q4 and Q1. We're pretty much through most of that. To the previous caller's questions, we still have an opportunity that we've talked about for an interior project. We do not have that order yet, but do believe it's progressing and are optimistic that will come through, I'll call it in the relative near term.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Okay. On the gross margin sustainability, if we exclude the $300,000 of tariff benefit, as you guys have indicated that services are going to trend towards 50% of revenue as you indicated in your deck, where does the consolidated gross margin kind of actually settle end of fiscal 2027?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

We still foresee that it'd settle in the 30+ range. There are, to your comment and in my script, there was that 130 basis point benefit related to tariffs, and previous quarter had some, say, one-time type benefits in it. I think in that 30%-32% range is how we're thinking about things at this time.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Okay. I know you guys are still maintaining $95 million-$97 million, and with positive EBITDA, we are already in the positive terrain. What kind of drop should we assume on the roughly $70 million of revenue left in the air? What kind of risks are there?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I'm sorry, did you say risks?

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

No. What kind of, I suppose, pullback on the EBITDA numbers that'll drag it into just the negative territory for the $70 million?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I think it'd have to be some type of unexpected performance. Assuming we achieve the top-line guidance, then there'd have to be something that would happen from a negative basis on gross margin rate that would impact that, or some unexpected operating expense that we don't anticipate.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Okay. I'll just sneak in one last question. You said in June that the data centers, the distribution typically would be in the low margins. If we are to look at the CapEx that is required for these data center roadway volumes to come through as you hope, at what revenue level does the plan require any kind of investment?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

The investment required to support any of these programs would be very minimal. Would primarily come through as a component of gross margin because any related asset would be amortized over a period of time. We don't foresee any significant fixed asset investment needed for either of those programs that you mentioned, or at all.

Gowshihan Sriharan
Gowshihan Sriharan
Analyst at Singular Research

Okay. Thank you, guys. I'll get back in the queue.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Thanks.

Operator

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from the line of Bill Dezellem of Tieton Capital Management. Your line is now open.

Bill Dezellem
Analyst at Tieton Capital Management

Great. Thank you. I'm going to break the rules and ask a few more than the allotted questions. Cut me off if I go too far. First of all, relative to the data centers, have the shipments begun to that first data center customer? Where are you at in that delivery process?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Good morning, Bill. They have started, it is initial product going into the data centers. We don't expect the ramp until later in our fiscal year, into next year.

Bill Dezellem
Analyst at Tieton Capital Management

That's helpful. Tell us a little bit about the sales lead time to get the lead to close the order.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

I'm sorry, let me repeat. It got a bit broken up. Did you want insight into the sales and how we achieved this win?

Bill Dezellem
Analyst at Tieton Capital Management

No, I'm sorry, Sally. Hopefully the quality here is better. I was looking for just the regular sales cycle with data centers in terms of number of months to close a deal.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

I hate to answer a question with, "It can vary," but I will start with that. In terms of this product, we had in the works, working with this particular partner and end user, being the data center, for several months, fine-tuning the product and making sure it was easy to install. What could we take and do at our factory here in Wisconsin to make it easier to install as well? I think that cycle might have been a bit longer because of the product development involved in it. As we go to a wider array of customers, a lot of it's going to depend on their build-out schedule as well, which we know can vary.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

We have the product ready, and we can customize it to the data center needs. We're pretty flexible in that capacity. I think that most of the revenue ramp, all that being said, will be in the following years this year. It takes a bit to get them up and running.

Bill Dezellem
Analyst at Tieton Capital Management

That's helpful. Sally, relative to new data centers versus replacement data centers, excuse me, replacement product within the data centers, which do you see as a bigger opportunity? I guess the spirit of the question is the lighting that's in existing data centers outdated enough, or you are enough more efficient that there's a whole other opportunity in the replacement arena?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

We see most of the opportunity in the new build-out right now. Many of the data centers are relatively new, they're not ready for that replacement cycle yet. Most of what we are pursuing is new build-out.

Bill Dezellem
Analyst at Tieton Capital Management

Great. That's helpful. I'm going to shift, if I may, to the maintenance side of the business. The gross margin improvement that you have experienced there, is that structural, or was there something special in this quarter?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I would say it's relatively structural. There will always be some variance because you have within the segment, a quarter-to-quarter basis, the mix between product and service does vary. In that segment, product margins are higher than the service margins themselves. I would say there was nothing unusual in the quarter other than just probably more, I'll say, continued gains in efficiencies as well as mix impact.

Bill Dezellem
Analyst at Tieton Capital Management

That's helpful, Per. I know that you have been working for a couple of years now to improve that gross margin. Is there more structural improvement still to come, or are we essentially in the range at this point?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I think we're pretty much in the range. I would consider this quarter a very good quarter for them from a rate standpoint.

Bill Dezellem
Analyst at Tieton Capital Management

Great. One additional question relative to maintenance. This comes from a point of ignorance. You had really good LED revenue growth. You had good EV charging revenue growth. The maintenance revenue was essentially flat to $4.1 million versus $4 million. The question is: Is there a timing issue here where maintenance revenue follows product revenue by, whether it be one year or some period of time before you all start seeing some maintenance activity on product that you had sold?

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I don't think there's a real true correlation to be made there.

Bill Dezellem
Analyst at Tieton Capital Management

Great. Thank you for helping clear that up, and congratulations on a great quarter. Actually, I'm going to ask one more question, if I may before I hop off. How would you characterize the typical seasonality of the business at this point?

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

There's not a lot of seasonality. Some of our businesses get a bit more impacted by weather. If you think snowy days in the Northeast and subzero temperatures can encounter some timing shifts of things, which could affect a quarter, but not a lot of seasonality. It's more the projects.

Bill Dezellem
Analyst at Tieton Capital Management

Part of where I'm going with that question is, over the last few years, you have seen revenues ramp over the course of the year, first quarter being close to the lowest quarter, and then ramping as the fiscal year move forward. Relative to your guidance, I guess I'm trying to relate those two factors which seem a little bit at odds with each other.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

I think maybe the thing to keep in mind for the recent quarter is, as we had disclosed, we had a significant project that had a pretty fair amount of revenue associated with it, this exterior lighting project we've talked about. That helped bolster the first quarter. We had other projects that are also helping. I think that's to Sally's point. There's not necessarily an overall seasonal pattern you can look to. It really depends on the timing of projects, when the customers want to complete those projects, when they can commence, and bring them to completion. There will always be some variability on a quarter-to-quarter basis. I think as we even said on the previous call, we're not expecting that ramp in the current fiscal year that we've seen in previous years.

Bill Dezellem
Analyst at Tieton Capital Management

Great. That is helpful clarification. Once again, congratulations on a terrific quarter.

Per Brodin
Per Brodin
CFO at Orion Energy Systems

Thanks, Bill.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

Thank you.

Operator

Concludes the question-and-answer session. I'll now turn the conference back to Sally Washlow for concluding remarks.

Sally Washlow
Sally Washlow
CEO at Orion Energy Systems

I want to thank everyone again for taking the time to join us today. We look forward to updating investors on our Second Quarter Fiscal 2027 Call in November. We also look forward to meeting with many of you, whether in person or virtually, between now and then. We will be presenting at a number of conferences, so please watch for our forthcoming announcements regarding scheduling. Please also reach out to our Investor Relations team to set up a meeting or for any other information. Their contact information is at the bottom of today's press release. Many thanks again for your interest in Orion. I look forward to continuing to update you on our progress. Operator, back to you.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

Executives
    • Per Brodin
      Per Brodin
      CFO
    • Sally Washlow
      Sally Washlow
      CEO
Analysts
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