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OE

ORION ENERGY SYSTEMS, INC. (OESX)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 revenue was $20.87M, down 21% year over year; gross margin expanded 170 bps to 27.5% on pricing and cost actions, with second consecutive quarter of positive adjusted EBITDA .
  • Versus S&P Global consensus, revenue modestly missed ($21.08M est.) while EPS materially beat (-$0.60 est. vs -$0.09 actual); EBITDA missed vs consensus unadjusted EBITDA estimate (-$0.10M est.) due to earnout and severance/financing costs .
  • FY26 outlook set to 5% revenue growth ($84M), down from prior “double-digit” commentary, with EV charging expected flat-to-slightly down given funding uncertainty; additional ~$1.5M overhead cuts targeted .
  • Pipeline momentum: LED lighting wins and multi-year contracts imply ~$100M–$200M five-year revenue potential; reorganization into Solutions and Partners aims to accelerate execution and cross-selling .

What Went Well and What Went Wrong

What Went Well

  • Margin execution: gross margin rose to 27.5%, “third highest quarterly rate in seven years,” driven by price and cost actions across segments .
  • Profitability progress: positive adjusted EBITDA in Q3 and Q4, and FY25 operating cash flow turned positive; cash up to $6.0M with revolver reduced by $3.0M to $7.0M .
  • Pipeline strength: bookings late Q4 and early FY26 with aggregate five-year potential of $100M–$200M; multi-year contracts include major retail new store builds ($23M–$30M) and U.S. Government agency work (> $5M) .

What Went Wrong

  • Top-line headwinds: total revenue fell 21% YoY; LED lighting down 33% YoY as larger projects paused and ESCO/distribution activity slowed; maintenance revenue down 21% YoY following intentional exit of unprofitable contracts .
  • OpEx variance: Q4 OpEx was $8.4M vs $5.0M prior year, primarily due to $0.5M Voltrek earnout accrual in Q4’25 vs a $3.0M reversal in Q4’24, plus severance and deferred financing write-offs .
  • EV uncertainty: despite a strong backlog (~$7M at FY25 year-end), management expects EV revenue to be flat to slightly lower in FY26, citing scope, pace, and funding uncertainty; one government EV project was canceled mid-project .

Financial Results

Consolidated Results vs Prior Periods and S&P Global Consensus

MetricQ4 2024Q3 2025Q4 2025Consensus Q4 2025
Revenue ($USD Millions)$26.41 $19.58 $20.87 $21.08*
Gross Profit ($USD Millions)$6.80 $5.75 $5.74 —
Gross Margin (%)25.8% 29.4% 27.5% —
Net Income ($USD Millions)$1.61 $(1.51) $(2.91) —
Diluted EPS ($USD)$0.05 $(0.05) $(0.09) $(0.60)*
EBITDA ($USD Millions)$2.42 $(0.67) $(1.94) $(0.10)*
Adjusted EBITDA ($USD Millions)$0.40 $0.03 $0.23 —

S&P Global disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global.

  • Beat/miss highlights: Revenue modest miss (-1.0% vs consensus); EPS strong beat (less negative than consensus by ~$0.51); unadjusted EBITDA missed vs consensus. Drivers include improved product and maintenance margins offset by lower LED volumes and earnout/severance costs .

Segment Revenue and Margin Details

SegmentQ4 2024 Revenue ($M)Q3 2025 Revenue ($M)Q4 2025 Revenue ($M)Q4 2024 GM%Q4 2025 GM%
LED Lighting$16.3 $13.2 $10.9 —28.4%
EV Charging$4.9 $2.4 $5.8 21.5% 27.9%
Maintenance$5.2 $3.9 $4.1 15.6% 24.6%
Total$26.4 $19.6 $20.9 25.8% 27.5%

KPIs and Balance Sheet

KPIQ4 2024Q3 2025Q4 2025
Cash and Equivalents ($M)$5.16 $7.50 $5.97
Revolver Borrowings ($M)$10.00 $7.50 $7.00
Financial Liquidity ($M)$15.3 $15.6 $13.0
Working Capital ($M)—$10.5 $8.7
Total Operating Expenses ($M)$5.00 $7.00 $8.38
Cash from Operations ($M, FY)$(10.09) $1.30 (YTD) $0.60 (FY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY26“Double digit revenue growth” commentary ~5% growth to ~$84M Lowered
EV Charging RevenueFY26Sequential rebound in Q4’25; long-term growth potential Flat to slightly lower vs FY25 Lowered
LED LightingFY26Delayed projects to start late Q4’25/Q1’26 Pipeline expanded; multi-year retail and government (> $5M) Visibility improved
Maintenance Revenue/ProfitabilityFY26Expect strong profitability; rebuild post exit of unprofitable contracts Expect positive comparisons (rev and profit) Maintained/Improving
Adjusted EBITDAFY26Positive Adjusted EBITDA anticipated Approach/achieve positive Adjusted EBITDA for full year Maintained
Overhead ReductionFY26Additional $1.5M annualized savings planned Implement additional $1.5M annual savings in FY26 Maintained

Earnings Call Themes & Trends

TopicQ2 FY25 (Nov 2024)Q3 FY25 (Feb 2025)Q4 FY25 (Jun 2025)Trend
LED project timingDelays in larger projects; expected 2H start; fluorescent bans support demand Customer delays; expect starts late Q4’25/Q1’26 Strengthening bookings; multi-year contracts across retail/government Improving visibility
EV funding/NEVIGrowth via utility/state programs (Eversource, Boston schools) Expect Q4 rebound; long-term potential Conservative FY26 outlook; one gov’t project canceled; NEVI tailwind scuttled Cautious near-term
Maintenance profitabilityRestructuring/repricing; margin rebound Margin rebounded materially; sequential rev improvement GM 24.6% vs 15.6% prior; expect positive comps FY26 Sustained turnaround
Cost actions/OpExCost reductions; margin improvements >$4M overhead cuts; breakeven lowered to $78–$85M Further $1.5M cuts in FY26; continued margin discipline Ongoing discipline
Organization structure—Reorg into Solutions and Partners Implemented; focus on cross-selling; add veteran to channel Execution phase
Tariffs/macroPrice pressures/competition Macro uncertainty affecting quarter weighting Tariff impacts unknown; manage neutral; broader macro funding uncertainties Monitoring risk

Management Commentary

  • “We have substantially expanded our LED lighting project pipeline…with aggregate five-year revenue potential of $100M to $200M.” — CEO Sally Washlow
  • “Our company-wide operating overhead was reduced by more than $4M in FY’25…[and we] plan to implement an additional $1.5M in annual savings in FY’26.” — CEO Sally Washlow
  • “In order to pay Orion's Voltrek earn-out obligations, we…issue $1M of common stock in July, make an $875,000 cash payment on August 1, and repay the remaining balance with a two-year 7% subordinated note.” — CFO Per Brodin
  • “We expect quarters to play out relatively consistently…not back-end loaded as in prior years.” — CFO Per Brodin

Q&A Highlights

  • Orders/backlog cadence: Strong start to Q1 FY26, with April strongest; backlog conversion improving; expect continued progress .
  • EV outlook: Pipeline intact but funding/timing uncertainty; one government EV project canceled mid-project; focus on utilities/state programs .
  • Voltrek earnout: Final structure mixes cash, stock, and subordinated note; no further earnout opportunity beyond FY25 .
  • Margin sustainability: Expect improvements mainly via lighting/services; EV margins to remain consistent; pricing and sourcing support .
  • Channels and leadership: Returning industry veteran hired to rebuild partner/channel sales; aim to accelerate distribution traction .

Estimates Context

  • Q4 FY25 vs S&P Global Consensus: Revenue $20.87M vs $21.08M*, EPS $(0.09) vs $(0.60), EBITDA $(1.94)M vs $(0.10)M .
  • Forward consensus snapshot: Q2 FY26 Revenue ~$20.30M*, EPS ~$(0.77); Q3 FY26 Revenue ~$20.81M, EPS ~$(0.28)* (context only) — consistent with modest growth trajectory and ongoing profitability improvements targeted .

S&P Global disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-led margin resilience: Despite lower LED volumes, pricing/sourcing and maintenance repricing expanded gross margins; sustained margin discipline is central to FY26 adjusted EBITDA target .
  • Pipeline-to-revenue conversion is critical: Multi-year retail/government wins and $100M–$200M five-year potential need timely execution to offset EV funding uncertainty .
  • Guidance reset to “prove-it” year: FY26 revenue growth ~5% and flat-to-slightly down EV outlook de-risk near term; watch quarterly cadence and backlog conversion .
  • Balance sheet improvements but liquidity vigilance warranted: Reduced revolver, improved CFFO; monitor liquidity vs earnout settlements and OpEx trajectory .
  • Organizational retooling as catalyst: Solutions/Partners structure and channel leadership should enhance cross-selling and ESCO/distribution traction; evidence should appear in LED/maintenance run-rate .
  • Watch risk factors: NASDAQ minimum bid compliance, tariffs, competitive pricing pressures, and EV incentives could affect demand/margins .
  • Trading implications: Near-term moves likely keyed to quarterly backlog conversion and EV funding clarity; medium-term thesis hinges on LED project execution, sustained margin improvements, and OpEx discipline .