Orion Energy Systems: Key Insights from the Investor Call and Revealing Q&A Session
Orion Energy Systems continues expansion into the EV charger market while growing their LED business. Orion is a small-cap stock with a market value of $38 million and limited trading activity, so we don’t track it closely. However, their successful expansion into the EV charger market has made it worth tuning into their investor calls occasionally.
After listening to Orion Energy Systems’ latest investor call on 6 NOV, I found the Q&A session especially revealing. Here, the CEO, Mike Jenkins fielded pointed questions from investors. His responses offered insight into Orion’s current challenges and plans in LED lighting and EV charging infrastructure. Let’s unpack what I learned from both the call and the Q&A.
Project Delays and Market Challenges
Jenkins first addressed significant project delays, particularly within the ESCO channel. These delays, combined with a slowdown in new construction and the completion of a major European retrofit project last year, weighed on this quarter’s results.
Yet, Orion’s LED lighting project pipeline remains robust, supported by high quoting activity from new and returning clients. The company recently secured a multi-year contract with a distributor operating over 500 locations, projected to bring in over $10 million. Work on this project is expected to begin soon, with more updates to follow.
Major Contracts and Expanded Partnerships
One major win for Orion is a five-year, $25 million contract with its largest customer, a national retailer. This contract, which supports new store construction, builds on a solid relationship. Additionally, Orion has seen increased activity in the automotive sector and anticipates more projects soon.
Regulatory Opportunities: State Bans on Fluorescent Lighting
With several states banning fluorescent lighting, Orion anticipates significant growth. These bans, set to take effect in 2025 in states like California, aim to reduce waste and promote energy efficiency. Orion is already working with clients to help them comply, expecting these regulations to drive substantial business in the latter half of fiscal 2025.
Orion Continues Expansion in EV Charger Market: A Strong Growth Driver
Orion’s EV charging business, led by its subsidiary Voltrek, delivered strong results, thanks to contracts within Eversource Energy’s EV Make-Ready program and additional projects with Boston Public Schools. Voltrek’s project pipeline remains steady at $45-50 million, and the company expects continued growth as more public and private entities prioritize EV infrastructure. Federal programs, such as the $5 billion National Electric Vehicle Infrastructure (NEVI) initiative, further strengthen Voltrek’s position in this expanding market.
Streamlining the Maintenance Services Division
Orion’s maintenance services segment returned to profitability after a recent restructuring. The company opted not to renew several unprofitable maintenance contracts, lowering revenue but significantly increasing margins. Total restructuring costs, including severance and facility lease expenses, reached $300,000 this quarter. With these changes, Orion expects its maintenance division to stabilize and create synergies with its LED and EV segments.
Q&A Insights: Where the CEO is Put on the Spot
One analyst asked about the recurring issue of project pushouts, and Jenkins explained that these delays often stem from clients revising timelines due to internal decisions.
Another key question addressed Orion’s growth outlook across different segments. When pressed, management confirmed a strong rebound in LED sales, especially in the fourth quarter. They also indicated that the EV charging business could exceed its projected $18 million target for the fiscal year.
One pointed question underscored how challenging it can be to predict project timing in Orion’s business. Jenkins admitted that while they aim for conservative forecasts, project delays are inevitable when clients shift timelines for financial or operational reasons.
Key Industry Trends Supporting Orion’s Strategy
Several industry trends are creating favorable conditions for Orion’s growth over the next five years:
- Energy Conservation: Rising energy demand is increasing the focus on conservation, making Orion’s LED lighting solutions more valuable.
- Sustainability and ESG Goals: Companies are intensifying their commitments to reducing carbon emissions. Orion’s LED lights, which cut energy use by up to 60% compared to fluorescent lighting, align with these goals.
- EV Market Expansion: As EV adoption grows, the need for charging infrastructure increases. Orion’s EV segment is well-positioned to meet this demand.
- State-Level LED Bans: New regulations banning fluorescent lighting are expected to accelerate LED adoption, presenting Orion with a unique growth opportunity.
- Buy American Initiatives: Orion’s U.S.-based manufacturing gives it an edge as federal and state entities prefer American-made products.
Lower interest rates could also boost Orion’s business. While the recent federal rate cut is encouraging, Orion expects the full impact to be gradual.