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OE

ORION ENERGY SYSTEMS, INC. (OESX)·Q2 2026 Earnings Summary

Executive Summary

  • EPS beat with narrower loss than Wall Street: diluted EPS of $(0.17) versus consensus of $(0.77), aided by 790 bps gross margin expansion to 31.0% and fourth straight positive adjusted EBITDA . Revenue of $19.9M was slightly below the $20.3M consensus, a modest miss .
  • Management reiterated FY’26 guidance: ~5% revenue growth to ~$84M and at/near positive adjusted EBITDA, with LED and Maintenance modest growth and EV flat-to-slightly down .
  • Operating discipline continues: total OpEx fell to $6.4M from $7.7M YoY; YTD operating cash flow of $1.3M and revolver reduced to $5.75M as of 9/30 .
  • Business development momentum: $8.5M in EV charging work in Massachusetts, an up to $11M Super ESCO government engagement, and up to $7M for North American auto customers; a major retail preventative maintenance renewal of $42–$45M over three years starts March 2026 .
  • Near-term stock narrative: EPS beat and margin expansion vs modest revenue miss; reiterated guidance and recurring-maintenance visibility are positives, while EV funding cadence and Voltrek earnout arbitration remain watch items .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 31.0% (+790 bps YoY) on pricing, mix, and cost improvements; fourth consecutive positive adjusted EBITDA ($0.5M) .
  • Maintenance revenue grew 18% YoY to $4.5M despite lapsing an unprofitable contract; segment gross margin improved versus prior-year restructuring impact .
  • EV charging margin strengthened sharply to 45.8% vs 23.7% YoY on mix; bookings included $8.5M in Massachusetts, with clarity on the availability of $5B in federal EV funds .
  • CEO tone confident: “we see continuing growth, increasing profitability and expanding opportunity for Orion,” reiterating FY’26 outlook .

What Went Wrong

  • Revenue was modestly below consensus as EV revenues remain near flat and LED revenue down ~2% YoY in Q2 *.
  • EV segment guidance cautious (flat to slightly lower for FY’26) given funding and timing uncertainties despite improving visibility; limits top-line upside near term .
  • Ongoing arbitration over the Voltrek earnout and liquidity considerations remain risk factors to monitor .

Financial Results

Core P&L and Profitability (quarterly)

MetricQ2 2025Q1 2026Q2 2026
Revenue ($USD Millions)$19.4 $19.6 $19.9
Gross Profit ($USD Millions)$4.5 $5.9 $6.2
Gross Margin (%)23.1% 30.1% 31.0%
Net Loss ($USD Millions)$(3.6) $(1.2) $(0.6)
Diluted EPS ($)$(1.10) $(0.04) $(0.17)
Adjusted EBITDA ($USD Millions)$(1.4) $0.2 $0.5

Q2’26 vs Wall Street Consensus

MetricConsensus Q2 2026Actual Q2 2026
Revenue ($USD Millions)$20.3*$19.9
Primary EPS ($)$(0.77)*$(0.17)
EBITDA ($USD Millions)$0.8*$0.269

Values with * retrieved from S&P Global.

Segment Revenues (quarterly)

Segment Revenue ($USD Millions)Q2 2025Q1 2026Q2 2026
LED Lighting$10.8 $12.9 $10.7
EV Charging$4.7 $2.7 $4.8
Maintenance$3.8 $4.0 $4.5
Total$19.4 $19.6 $19.9

Segment Gross Margins (%)

Segment Margin (%)Q2 2025Q1 2026Q2 2026
LED Lighting25.4% 31.8% 27.5%
EV Charging23.7% 33.5% 45.8%
Maintenance15.3% 22.4% 23.7%
Company Gross Margin23.1% 30.1% 31.0%

Operating and Cash Metrics

KPIQ2 2025Q1 2026Q2 2026
Total Operating Expenses ($USD Millions)$7.7 $6.9 $6.4
Cash from Operating Activities ($USD Millions)n/a$(0.5) $1.3 (six months YTD)
Revolving Credit Facility Outstanding ($USD Millions)n/a$5.25 (6/30) $5.75 (9/30)
Cash & Equivalents ($USD Millions)n/a$3.6 (6/30) $5.2 (9/30)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2026~5% growth to ~$84M Reiterated ~5% to ~$84M Maintained
Adjusted EBITDAFY 2026Approach/achieve positive Approach/achieve positive Maintained
LED Lighting revenueFY 2026Modest growth Modest growth; distribution rebuild Maintained/clarified
Maintenance revenueFY 2026Modest growth Modest growth; strong recurring pipeline Maintained/clarified
EV Charging revenueFY 2026Flat to slightly lower Flat to slightly lower Maintained
OpExH2 FY 2026n/aApproximate Q2 levels per quarter New specificity
Gross MarginFY 2026Remain strong; quarterly variability Remain strong; vary by mix/volume Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025 & Q1 2026)Current Period (Q2 2026)Trend
EV funding cadence (NEVI/utility/state)Limited direct NEVI tailwind; one project cancelled; utility/state funding primary drivers $8.5M MA wins; federal clarity on $5B; FY’26 EV flat-to-down Improving visibility; cautious near term
Electrical infrastructure initiativeEarly-stage roadmap; initial project/bids Positioning bundled offerings; “connective tissue” across segments Expanding efforts
Maintenance recurring revenueTurnaround; expansion within existing customers 18% YoY growth; major retail renewal $42–$45M over 3 years Strengthening
Distribution channel/Triton ProNew value-based products; leadership hire Continued traction; focus on rebuilding ESCO/distribution Rebuilding/investment
Tariffs impactPlan to manage to net-neutral via domestic manufacturing/diversified sourcing No material change; margin resilience guided Stable management approach

Management Commentary

  • CEO highlight: “Q2 featured solid accomplishments in our three business lines…we reiterate our full-fiscal-year expectation of 5% revenue growth — to $84 million — coming in at or near positive adjusted EBITDA.”
  • Strategy emphasis: Orion sits “in the confluence of…megatrends, and it has solutions to not just serve them but to accelerate them,” with electrical infrastructure integrating LED, EV and maintenance .
  • Segment wins: “$11 million in public sector lighting and up to $7 million in LED lighting for…automotive industry…booking $8.5 million in EV charging work in Massachusetts” .
  • Cost/margin progress: “Q2’s 31% [gross margin] represents a one-third YOY jump — and the fourth straight quarter of positive adjusted EBITDA.”

Q&A Highlights

  • EV outlook and bundling: Management sees bundled offerings (lighting + EV + infrastructure) driven by customer requests; despite early-year uncertainty, expects EV FY’26 flat-to-slightly down with regained momentum in H2 .
  • Electrical infrastructure: Early innings with customer-led expansion; leveraging national network and project management; exploring energy storage opportunities .
  • Maintenance: Growth beyond largest customer; maintenance serves as lead generator for product sales; Q2 headwind from lapsed contract was “less than $500,000” .
  • Margins and OpEx: Near-term gross margins guided to high-20s to ~30% (not mid-30s); OpEx to approximate Q2 levels for next two quarters .
  • Voltrek earnout: $1.0M stock and $0.875M cash paid; remaining balance subject to arbitration; accrued appropriately .

Estimates Context

  • Q2’26 EPS beat: $(0.17) actual vs $(0.77) consensus*, reflecting stronger gross margin and lower OpEx; estimates likely to revise EPS higher (less negative).
  • Revenue modest miss: $19.9M actual vs $20.3M consensus*; mix-driven margins offset top-line shortfall, suggesting limited impact on revenue trajectory.
  • EBITDA miss: $0.269M actual vs $0.8M consensus*; variance reflects mix and timing of projects; adjusted EBITDA positive continues narrative of disciplined execution.
    Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Margin-led EPS beat despite slight revenue miss supports near-term rerating on execution and cost discipline; watch for sustained 28–31% gross margins through H2 .
  • Recurring revenue visibility improved via $42–$45M retail maintenance renewal starting March 2026; underpins Maintenance growth and multi-year cash conversion .
  • EV narrative stabilizing: MA bookings and federal clarity help, but FY’26 EV revenue still guided flat-to-down; strength lies in margins and backlog quality .
  • LED pipeline healthy with government/auto engagements; distribution channel rebuild (Triton Pro, leadership hire) is a medium-term growth lever .
  • Liquidity improving (YTD CFO + revolver paydown); monitor Voltrek earnout arbitration resolution and any capital needs .
  • Near-term trading: EPS beat and reiterated FY’26 guide are positives; any incremental contract announcements or EV funding cadence updates could be catalysts .
  • Medium-term thesis: Scaling electrical infrastructure alongside LED/EV and deepening managed services relationships position Orion for higher-quality, more visible cash flows .