Good day, ladies and gentlemen, and welcome to the Orion Energy Full Year 2020 Fourth Quarter Conference Call. At this time, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Bill Jones. Sir, you may begin.

Thank you and good morning. Orion’s CEO Mike Altschaefl will open today's call with an update on current events, overview of the Company, some highlights and a review of the Company's business strategy. Orion’s CFO, Bill Hull will then review some additional financial items. And we will open the call to questions. An archived replay of this call will be available later today in the Investor Relations section of Orion's corporate website, investor.oriones.com. This call is taking place on Thursday, June 4, 2020. Remarks that follow and answers to questions include statements that the Company believes to be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements will generally include words such as believe, anticipate, expect, or words of similar import. Likewise, statements that describe future plans, objectives or goals are also forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different than anticipated. Such risks include among other matters that the Company has described in its press release issued this morning and in its filing with the Securities and Exchange Commission. Except as described in these filings, the Company disclaims any obligation to update forward-looking statements. And with that, let me turn the call over to Mike.

Thanks, Bill. Good morning, everyone. And thank you for joining today's call to review a truly transformational year for our Company. First, I want to thank the entire Orion team for their hard work and dedication over the past 15 months, first, helping us to achieve record results for fiscal 2020, and then working together in recent months, as we continue to navigate the COVID-19 pandemic. I will begin today's call providing an overview of how Orion has been managing through the COVID-19 pandemic. Our primary concern has been and will continue to be the safety and wellbeing of our people, our customers, and our suppliers. Orion has implemented numerous safety precautions and protocols to address the related risks. These measures continue to change and evolve as more information becomes available. We have been adversely impacted by the actions taken by various government entities to control the spread of COVID-19 pandemic beginning in March. Like most companies, our near-term business prospects have been substantially impacted by actions being taken across North America to control the spread of the global COVID-19 pandemic. Since we were designated an essential business, our U.S.-based manufacturing operations were allowed to remain open. We also took steps beginning early in our fourth quarter to firm up our supply chain. These actions were successful, allowing us to meet our promise to our customers to deliver product on a timely basis. Nonetheless, we experienced the curtailment of activity in the last few weeks of our fiscal year. Existing and new potential customers are delaying, postponing or changing projects for a range of reasons, including travel restrictions and mandated work stoppages, CapEx spending freezes, financial constraints, strategy updates, and in some cases where business activity has escalated to avoid possible disruptions. As a result, approximately $5 million of previously…

Thank you, Mike. Orion’s fourth quarter revenue increased 15% to $25.9 million compared to $22.4 million in Q4 of 2019. That's primarily due to increased product sales and services related to turnkey LED lighting and controls installations for a major national account of customer. Product revenue rose 9% to $19.6 million and service revenue increased 39% to $6.3 million. Fourth quarter gross margin increased to 22.3% compared to 19.5% in Q4 2019, but was below our Q3 of 2020 gross margin of 24.2%. Q4 ‘20 gross margin was positively impacted by revenue mix and volume compared to Q4 2019, the decline versus our third quarter, mainly due to the margin impact of lower revenue relative to our fixed manufacturing costs. Operating expenses were $6.1 million in Q4 of ‘20 compared to $5.8 million in the third quarter, and $5.1 million in the fourth quarter of 2019. The year-over-year increase reflects higher sales and marketing expenses, including increased commissions based on higher sales volume. Reflecting higher revenue, higher gross profit and operating leverage, Orion’s fourth quarter net loss improved to $0.5 million or $0.02 per share versus a net loss of $900,000 or $0.03 per share in Q4 ‘19. For the full-year, Orion’s revenue rose 129% to $150.8 million compared to fiscal 2019, also primarily due to the increase in national account, led and retrofit activity. In fiscal 2020, net income improved to $12.5 million or $0.40 per diluted share versus a loss of $6.7 million or $0.23 per share in fiscal 2019. Orion generated EBITDA of $14.7 million in fiscal 2020, compared to an EBITDA loss of $4.3 million in fiscal 2019, an improvement of $19 million. Cash from operating activities increased to $20.3 million in fiscal 2020 versus a use of $5.1 million in fiscal 2019, principally due to…

Thank you. [Operator Instructions] First question comes from the line of Marc Wiesenberger with B. Riley FBR. Your line is now open.

Good morning. Thank you for taking my question. Can you talk about your exposure throughout the U.S.? Remind us maybe kind of where the primary activity is taking place and kind of the different trends you're seeing across the country?

Sure. There certainly are differences across the country, obviously with how different states or local communities are reacting and taking actions and putting procedures and restrictions in place. We're really very broadly impacted across the United States, because of our activities with national accounts. And so, it's been different in different areas of the country. A lot of it is really beginning to open back up, which is optimistic. And so, we had certain situations, where there may have been some short-term closures or perhaps a facility we were working in had a COVID-19 situation, which closed it temporarily. So, I'd say, generally, things are opening back up, Marc. But, we do operate across North America. And so, there's impact, both little bit Canada and Mexico, but mostly within the United States.

Got it. With a number of schools and government facilities empty as a result of COVID have you seen any increased demand to retrofit these types of facilities? And maybe, are there any factors that are preventing you from executing on those types of projects?

We have seen some limited activity where because facilities are now available, as you mentioned, that gave the opportunity to go in and do additional retrofit activity where things have previously been approved and they might move timelines forward. We have not had any issues being able to supply product and our installation teams where that has -- opportunity has presented itself, it has not been overwhelmingly substantial Marc, but there have been some situations where we have been able to do that.

Understood, thank you. And just one more for me. Can you talk about the type of investments that are going to be needed to build the Orion service and maintenance division? And how much of this will be taken care of kind of in-house vertically integrated, and how much are you looking to partner with outside providers?

Sure. We're still working through our final business plan, as we launch this new division. And we currently believe that the investments needed in this are very able to be achieved and financeable from the standpoint of the financial strength that we're sitting at right now. It's a fair amount of people additions as business volume grows, and as things develop, some additional capital. But, we don't see as being overly material for us. From a execution standpoint, it really would probably be a mixed approach that for maintenance companies, sometimes you might self perform, sometimes we might use some of the great partners that we’ve had in the past that manage installations for us on a nationwide basis. So, we'll probably be doing some of both, but over time would most likely be migrating towards more and more performance on our own markets as the business grows. The good part is, we've always done some of this work with existing national accounts. It's not a big part of our services business right now, but we know how to do it, have done it and can either do some self performance or some leveraging of our supply chain that we have.

And our next question comes from the line of Craig Irwin with Roth Capital Partners. Your line is now open.

I really appreciated the significant amount of detail you gave us on I guess your first major customer that we avoid naming, I guess. But the store [ph] detail and the revenue split, and fact that they did basically put a pause on installs was all very helpful to understand the mechanics in the quarter. I was pleasantly surprised to see that the remaining 500 stores that had not been previously contracted right that you didn't already have scope awarded for you, but you’re very confident that this will get done over the next number of quarters. Can you maybe describe for us what gives you that confidence, you're going to do these as the customer communicated this directly, and will the revenue per store be very similar to what the 880 have been so far?

Sure. Thanks, Craig. Great question. First of all, we just felt it was appropriate given that we recognized, like many companies, providing near-term financial visibility is very, very challenging. And so, what we wanted to do is provide people with as much information as we can have and longer term vision and potential strategy and business operations to help all of our investors understand our business and the great optimism we see going forward. And we see this temporary pause in our success. So, for that particular customer, what I can explain to you first, maybe no particular order, we would expect the average location revenues to be about the same on those future 600 locations as they have been the past locations. So, I think if you took like at that for estimates of where we think the revenue potential is. From a customer standpoint, as I said in my comments and in our press release, the 100 remaining from the announcement we did back in January, our contracted relationships that we expect to do at some point, we have a high level of confidence in the additional 500 locations. Our customer is not contractually obligated, but we believe the performance we have performed for them, the very significant energy savings they've achieved and the service levels we've given them that we feel a high level of confidence that when they choose and decide to move forward with additional retrofits of those last remaining locations, that we have a very high probability of doing that business.

Excellent. Thank you for that. So, another detail from your press release mentions your global internet retailer customer, where I guess you had about $7 million in orders to-date. You specifically you expect a meaningful revenue contribution going forward. How meaningful? What's your definition of meaningful? Can this be as big as the other anchor customer out there? You’re probably acutely aware. I'm talking about a customer that may be worth $150 million a year that I’d heard you had made very significant progress with. I mean, is this something that's similar to your lead customer now?

Let me kind of talk about this customer a little bit. First, I would say, Craig, I don't think it would be appropriate for us to infer that this new customer relationship is going to be of the magnitude of the large customer relationship that we talked about quite a bit today. So, I think that would look at it more that what we are seeing today for that customer, what we've announced is something that could go on for some additional years. So, I don't want to imply and should not that it's going to be like the first one. Why we are excited about is number one, it is a new customer relationship; number two, it is new construction. And in my comments today, if you -- as you listened to them, these are new warehouse distribution centers being built for that global online retailer as things continue to expand. So, one thing that we -- there's certainly lots of reasons to be concerned about the economy and what's going on, but when we step back and look at our customer base, we have I think some great verticals and that we are in some big box retailers that we think are surviving this very well. We've always been heavily and continue to be heavily involved in distribution centers, warehouse centers, logistics companies, which are doing very strong during this situation and probably will continue in the future. And automotive continues to be strong for us, even though I didn't talk about lot today, we see some good promise for that during our fiscal -- later fiscal ‘21 and going forward. And finally, the public sector, we are very bullish about and we expect to have continued good news in that area that we can share as things become more definitive for us. And so, we think that verticals we are in are going to do well, even through this difficult period we have right now.

So, just, if I can ask another question about this customer, you mentioned that you would be primarily serving their new construction. Would you expect to maybe be a share of the business there, right? I'm assuming that you're an approved supplier there, but sometimes there are similar fixtures being offered by others. Would it be kind of an all or nothing situation for each new facility, as far as your fixtures, or is it possible that your fixtures can represent a portion of the related high bays in a new distribution center or warehouse?

I'm not sure we totally know the answer to that yet. Craig, I think that the projects that we are doing, we are -- and I hope I'm understanding your question correctly, but the projects we are doing for them, we are doing all of the highway type lighting in those facilities for them and certainly other pieces of some of the offices and things. I think that given the nature of that business and the global nature, we're not saying that we expect to be the sole provider of lighting fixtures that entity going forward. But frankly, because it's such a large global entity, having some piece of their business could be quite substantial for us going forward.

Excellent. That's really good to hear. So, another elephant. So, talk to us a little bit about the other elephants in the grass. So, you've got some very high profile customers on board already. I think, it's very well understood by people in the lighting market, maybe not the equity markets as well. But, you've got a couple of really attractive things that you could point to. Are you seeing many more of these elephants sort of migrating their direction, saying there has to be something special at Orion for banner customers to be doing business? I mean, what's going on, on the big side?

Sure. We feel confident and encouraged by the pipeline of activity that we are seeing across our business. And it's not only our larger national accounts but also in some of our other bread and butter business from the activity that we're seeing. And the sales cycle always takes some time. And in some respects, this current environment in some situations has sped things up because people have had time to focus on some of these activities. In some cases, it might slow it down. So, I think what I would say is, not to be too repetitive is that we do see some tremendous opportunity in the public sector side of things because those projects take a really long time to mature. And so, often they continue to move forward, even through difficult periods of time, maybe some delays, but as they keep going, they get more and more momentum. So, we do think we will have some positive situations there. Also, as I stated in my comments, we had several other opportunities that were very close or ready to launch with some national scale type operations that just were somewhat delayed or suspended. What I really would like to emphasize is that we have not had any significant cancellations of business. And so, that has been some encouragement in a difficult period and that things have been delayed or postponed for a little period of time, but we have not seen significant cancellations of projects. And so, we think as the country continues to open back up and it’s primarily kind of an access situation and perhaps companies being careful from a capital standpoint. But as those two things start to clear up, we do feel confident that we'll be able to announce and talk about some other significant wins for the Company.

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

Good morning. So, wondering if we could just talk about the new sales hires. I know, this is undertaken a couple quarters ago and I understand the COVID. It may be a little difficult to tell. But, how do you feel like that's progressed? I know your goal has been to feel like -- you're getting a full look at the opportunities out there. So, as best you can tell, in light of the current situation as you think longer term, I mean, how do you think that's developing today?

I feel really good about how it's developing so far, Eric. We've brought up some talented people who are making progress. And you kind of hit the nail on the head, it gets a little bit difficult, because some of that progress literally was starting to kind of hit and how it was postponed somewhat or delayed somewhat, because of the COVID-19 situation. So, we do think we're getting a broader look at more opportunities. And particularly larger opportunities take quite a while to develop and they tend to be somewhat, I’m going to say, cyclical and that they're tied into company’s annual CapEx budgets. And so, it takes a little time for these relationships to fully develop. But, we feel good about where we are at with not only our great and existing sales team, people that we added to help build that part of our business to give us more opportunities. So, we feel very good about it.

Maybe just turning to the maintenance and services side. I mean, presumably you're doing this in part, because of conversations and feedback you've gotten from customers. So, just curious how you think about that and whether COVID -- I mean, is it something that potentially helps that business longer term as your customers think about a single point of contact or limiting the number of people in their facility at all times when things normalize going forward?

No, a great question. I think, I really can't stress too much that we do feel very strongly that our most significant differentiator from a capability standpoint is that one point of contact, turnkey capability to handle a larger project for a company. And so, it may not just be the installation services, but it's really that just program management and the people processes and systems you need to do that very, very well. I believe, if any of you had the opportunity to sit with some of our largest customers, and ask us -- ask them why do you use Orion, I think that they would say that we make life easy for them. And that's the top state, but behind that is great fixtures, high quality fixtures, which is the whole implementation process, commissioning of controls, everything that we can do. So, with that, it just seems to us because we have with some of our larger accounts gotten appropriately pulled into doing some maintenance services for them, it's an area we never really fully put our attention to, to expand our services side of our business. And so, it seems like a very natural extension. We understand the ceiling, we understand the electrical side, we understand the lighting side. And I think companies will continue to evolve into having more and more -- want more capabilities and more preventative maintenance. And we think we're really set up well to have some nice opportunities in that area. So, we're very optimistic that it's something that could bring some nice revenues for us over the next couple of years.

[Operator Instructions] Our next question comes from the line of Amit Dayal with H.C. Wainwright. Your line is now open.

With this large customer, the one you have 100 locations, remaining, with that customer, do you have any maintenance contracts in place already or are you looking to get into that sort of agreement with them in the near-term?

We do not currently have maintenance contracts in place with that customer. But, it's a natural opportunity for us to provide these types of services, and we would expect to have conversations with that customer.

Understood. With sort of the weakness expected over the next one or two quarters, what kind of impact on the gross margin front should we be looking at? I mean, do we think the levels we saw in the fourth quarter are sort of -- what we should expect to play out for the next few quarters and then see some improvements post that?

I think, on the gross margin side, let me kind of cover that a little bit of a higher level and -- but Bill will add a little bit more color to that, Amit. I think, part of what we saw happen last year, which we indicated would happen is that because we've chosen strategically to have a significant U.S. based manufacturing operations, which allows us to do some great things for our customers with customized products on a very short delivery timeframe, that does create some fixed costs. So, during fiscal 2021, you could see that in certain quarters where our volumes went up significantly and much of that volume was manufacturing going through our facilities, you get that incremental impact. So, likewise, as we go in the next couple of quarters, we're likely going to see that impact and gross margin in the other direction, as you have the reality of a great skilled workforce and assembly facility that’s [Technical Difficulty] not going to be used up to its capacity, but we kind of view as kind of short term in nature. And as we go through that, we've scaled appropriately where we should and those things will kind of come back around. But, I'll let kind of Bill maybe just add a little bit more to that answer for you, Amit.

Yes. As we mentioned in the call, we took about a $400,000 charge, based on some cutbacks we had to make. So, we did some deep cuts and some of those came out of SG&A and some of those came out of, call it a cost of product, or cost of goods sold. And this all happened during the pandemic in March. We had to react quickly to get our costs down. But -- so that'll help us out. However, the volume plays such a significant role, and if you look at the past periods where we have lower sales volumes and the impact that has on our gross margins. But also as Mike said, we view that as temporary. And when we get back to the second half of the year or so, we see strength come back.

And as you mentioned, potentially entering the horticultural lighting space by the end of the next fiscal year, do you already have products or are you working on developing products for that market?

We are in the product development phase right now and have some product that is closed that was related more specifically to our customers' needs, but we expect to build off of that over the rest of the year and we'll have product available as we continue through fiscal 2021. We just think that frankly everyone gets maybe appropriately excited about what could be done from a cannabis side, but it's really much broader than cannabis. We just think there's going to be a future in horticultural, vertical farming and other applications that, again, it just seems like a natural extension to move into this product line. And we think it's now getting mature enough of an industry, but still lot of opportunity in the United States that it makes sense for us to enter that market.

Just one last one for me. From an M&A perspective, are you looking for more distribution type of opportunities or technology and product type of opportunities?

The product side, from a distribution standpoint, is certainly important. And we feel really good about the product, a pipeline we have right now under product development, as I talked a little bit on the call, and we're just -- we have the ability internally to develop really, really good product. But, we also look globally for products that we think are going to meet the needs of our customers and are high quality and at the right competitive place for our customers. So, we're not myopic about it. We think about both, U.S. based manufacturing but also sourcing product on a global basis where it makes sense for us. The developed Star Line product we talked about earlier, we're very optimistic about as well as our IP rated UFO High Bay. The one we didn’t talk about a lot on the questions is I do think the area of both the violet white light and the UV area is going to have some huge potentials for this industry over the coming years. And we're well-positioned we think to participate in that. We've been active in the violet white light area for several years and have product ready to go. And the UV side has additional potential for different types of uses with customers. So, we feel good about that. So, I think from a standpoint of looking at internally, we're probably well-positioned from a product standpoint.

Thank you. And this concludes today's question-and-answer session. I will now turn the call back to Mike Altschaefl for closing remarks.

Great. Thank you, Chris. Once again, I want to thank the Orion team for their hard work and dedication that yielded a tremendous performance for our business in fiscal 2020. I also would like to thank our shareholders who continue to support us. While it is unfortunate that the COVID-19 situation will be a temporary interruption to our success, I am confident your Company will regain momentum. During the current period of social distancing and travel constraints, we've not been able to visit face to face with our investors, but if you would like to ask questions or schedule a call with management, please contact our IR team whose contact information is on today's release. Thank you again for your time today. We look forward to updating investors on our fiscal 2021 Q1 call in August. Thank you everybody. Have a good day.

This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.