OESX Gross Margin Jumps to 30%

Key Points

• Gross margin (GAAP) rose sharply to 30.1% in Q1 fiscal 2026, marking the company’s highest quarterly level in six years.

• Net loss per share (GAAP) improved to $(0.04) for Q1 fiscal 2026, representing a year-over-year gain of $0.08 per share.

• Revenue (GAAP) fell slightly to $19.6 million in Q1 fiscal 2026, with the EV charging segment down 30% and LED lighting revenue up 1%.

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Orion Energy Systems (NASDAQ:OESX), a provider of energy-efficient LED lighting and electric vehicle (EV) charging solutions, released its results for the quarter ended June 30, 2025, on August 6, 2025. The most notable news from the release was a record gross margin of 30.1%, up from 21.6% in the prior year, both on a GAAP basis, driven by improved product mix and cost controls. Revenue (GAAP) was $19.6 million, nearly flat compared to Q1 fiscal 2025’s $19.9 million (GAAP). While there were no analyst estimates to compare against, the company’s results aligned with management's own forecast. Net loss per share (GAAP) narrowed to $(0.04), compared to $(0.12) in Q1 fiscal 2025. Overall, the quarter showed solid improvement in profitability measures but highlighted ongoing challenges in growing the top line, particularly in the EV charging segment.

Overview of Orion Energy Systems and Business Focus

Orion Energy Systems designs and manufactures energy-efficient LED lighting systems and related Internet of Things (IoT) controls for commercial and public-sector customers. The company also offers turnkey installation and ongoing support for EV charging infrastructure, following its acquisition of Voltrek. Its maintenance division provides ongoing facility services, mainly focused on electrical and lighting systems.

In recent periods, Orion has concentrated on expanding its distribution network, introducing new value-based lighting products like the TritonPro line, and targeting government and commercial retrofit projects. Key success factors include the ability to deliver cost-effective, high-quality LED lighting solutions, grow EV charging project wins, manage customer concentration risk, and sustain improved operational margins through cost controls and process efficiencies.

Quarter in Review: Notable Metrics and Developments

The period brought a mix of progress and ongoing challenges. Revenue dipped 2.0% year over year on a GAAP basis, reflecting continued softness in EV charging sales. LED lighting product sales (GAAP) grew 1.0% year-over-year, buoyed by new products and a rebound in large project activity. Management cited initial success in the distribution channel through the introduction of value products but noted persistent weakness in that channel. Maintenance revenue climbed 21% (GAAP), supported by new customer contracts and the expansion of existing relationships.

Gross margin (GAAP) reached 30.1%, the highest level for the company in six years. This improvement resulted from a combination of better pricing, a favorable mix of higher-margin products, and continued cost discipline across the manufacturing process, as reflected in Orion's GAAP results. Net loss per share (GAAP) improved by $0.08 to $(0.04). Adjusted EBITDA turned positive for the third consecutive quarter, reaching $0.2 million, a swing of $2.0 million in adjusted EBITDA year-over-year.

Within segment results, LED lighting revenues held firm despite distribution challenges. The company’s new TritonPro fixtures, which are designed for competitive pricing and efficiency, have entered the market with early momentum. However, the EV charging business delivered a significant revenue decline, falling 30% year-over-year (GAAP), attributed by management to shifts in project timing and a “tough comparison” with larger customer rollouts in the prior year (specifically Q1 fiscal 2025). An $8 million EV charging backlog as of quarter-end could support future results, but near-term demand remains uncertain given volatility in project funding and federal incentive programs.

Management highlighted improvement in cost structure, as total operating expenses (GAAP) dropped to $6.9 million, down 10% from Q1 fiscal 2025. This continued focus on overhead reduction, along with product reengineering and sourcing improvements, contributed to the gross margin (GAAP) performance. There were no material one-time items impacting the quarter’s figures, other than $0.6 million related to executive sign-on and severance, compared to $0.7 million in earnout and restructuring costs in Q1 fiscal 2025.

Looking Ahead: Guidance and Investor Focus

Orion’s management reiterated its guidance for fiscal 2026, aiming for revenue growth of approximately 5% to $84 million and for adjusted EBITDA (non-GAAP) to approach breakeven. The revenue target for fiscal 2026 assumes modest gains in both LED lighting and maintenance services, with flat or slightly lower contributions expected from the EV charging segment. Key project pipelines include large public-sector contracts, a multi-year retrofit with a building products distributor, and expanded automotive sector work. However, pipeline conversion and timing remain critical risks for the outlook.

Management did not provide detailed quarterly forecasts but suggested that business trends should remain consistent through the upcoming quarters, with moderate improvement required to meet annual goals. The company’s liquidity position warrants monitoring, as cash reserves decreased to $3.6 million at period end (GAAP) with financial liquidity reported at $9.8 million as of period end. Investors should also watch for further pipeline conversion, margin sustainability, and diversification of the customer base, given ongoing customer concentration risk and volatility in EV charging project funding. OESX does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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