# Orion Energy Systems, Inc.: Form 10-Q for the period ended Dec 31, 2023

- Company: [Orion Energy Systems, Inc.](/companies/oesx.md) (CIK 1409375)
- Form: 10-Q
- Filed: 2024-02-07
- Accepted by EDGAR: Feb 7, 2024, 21:14 ET
- Period: 2023-12-31
- Accession: 0000950170-24-012204
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1409375/000095017024012204/oesx-20231231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1409375/000095017024012204/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-10-01 to 2023-12-31 | $26.0m | us-gaap:Revenues |
| Revenue | 9 months, 2023-04-01 to 2023-12-31 | $64.2m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-10-01 to 2023-12-31 | $19.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-04-01 to 2023-12-31 | $50.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-10-01 to 2023-12-31 | $6.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-04-01 to 2023-12-31 | $14.1m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-10-01 to 2023-12-31 | $349.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-04-01 to 2023-12-31 | $1.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-10-01 to 2023-12-31 | −$2.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-04-01 to 2023-12-31 | −$12.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-10-01 to 2023-12-31 | $1.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-04-01 to 2023-12-31 | $58.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-10-01 to 2023-12-31 | −$2.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-04-01 to 2023-12-31 | −$13.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-10-01 to 2023-12-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-04-01 to 2023-12-31 | −$0.41 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-10-01 to 2023-12-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-04-01 to 2023-12-31 | −$0.41 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-10-01 to 2023-12-31 | 32,531,563 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-04-01 to 2023-12-31 | 32,460,398 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-04-01 to 2023-12-31 | −$10.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-04-01 to 2023-12-31 | $868.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-12-31 | $5.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-12-31 | $45.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-12-31 | $65.4m | us-gaap:Assets |
| Current liabilities | at 2023-12-31 | $30.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-12-31 | $44.8m | us-gaap:Liabilities |
| Long-term debt | at 2023-12-31 | $10.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-12-31 | $7.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-12-31 | $20.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,172 characters.

*The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and related notes included in this Form 10-Q, as well as our audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.*

### Cautionary Note Regarding Forward-Looking Statements

Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to several risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.

### Overview

We provide state-of-the-art light emitting diode (“LED”) lighting systems, sourced wireless Internet of Things (“IoT”) enabled control solutions, commercial and industrial electric vehicle (“EV”) charging infrastructure solutions and maintenance services. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We sell our products and services into many vertical markets within the broader commercial and industrial market segment. Primary verticals include: big box retail, manufacturing, warehousing/logistics, commercial office, federal and municipal government, healthcare and schools. Our services consist of turnkey installation and system maintenance. Virtually all of our sales occur within North America.

Our lighting products consist primarily of LED lighting fixtures, many of which include sourced IoT enabled control systems. Our principal lighting customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies (“ESCOs”). Currently, most of our lighting products are manufactured at our leased production facility located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties in order to provide versatility in our product development.

We differentiate ourselves from our competitors through offering comprehensive project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration. In addition, we began to offer lighting and electrical maintenance services in fiscal 2021 which enables us to support a lifetime business relationship with our customer (which we call “Customers for Life”). We completed the Stay-Lite Lighting acquisition on January 1, 2022, which has allowed us to further expand our maintenance services capabilities. We completed the acquisition of Voltrek on October 5, 2022, which has allowed us to further expand our turnkey services capabilities as well as capitalize on the rapidly growing market for EV charging solutions.

We believe the market for LED lighting products and related controls continues to grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other lighting technologies. Our LED lighting technologies have been the primary component of our revenue as we continue to strive to be a leader in the LED market.

In fiscal 2022, we continued to successfully capitalize on our capability of being a full service, turn-key provider of LED lighting and controls systems with design, build, installation and project management services, as we continued a very large project for a major national account. As a result of this success, we have evolved our business strategy to focus on further expanding the nature and scope of our products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including providing lighting and electrical maintenance services and utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We also are pursuing the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to our customers. While we currently intend to primarily pursue these expansion strategies organically, we also may explore potential additional business acquisitions, like our acquisition of Stay-Lite Lighting and Voltrek, which have more quickly added these types of expanded and different capabilities to our product and services offerings.

We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. However, our maintenance services contracts usually consist of multi-year arrangements. We typically generate substantially all of our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements we are required to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if the agreements or a substantial volume of purchase orders under the agreements are delayed or terminated. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.

We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a "retrofit". We frequently engage our customer’s existing electrical contractor to provide installation and project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors and ESCOs to sell to their own customer bases.

The gross margins of our products can vary significantly depending upon the types of products we sell, with margins typically ranging from 10% to 50%. As a result, a change in the total mix of our sales among higher or lower margin products can cause our profitability to fluctuate from period to period.

Our fiscal year ends on March 31. Our current fiscal year ends on March 31, 2024 and is referred to as “fiscal 2024”. We refer to our just completed fiscal year, which ended on March 31, 2023, as "fiscal 2023", and our prior fiscal year which ended on March 31, 2022 as "fiscal 2022". Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31 and our fiscal fourth quarter ends on March 31.

Reportable segments are components of an entity that have separate financial data that the entity's CODM regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. Previously, we had four reportable segments: Orion Services Group Division, Orion Distribution Services Division, Orion U.S. Markets Division and Orion Electric Vehicle Charging Division (the “EV Segment”). Effective during the first quarter of fiscal 2024, we began to evaluate and report the business using three segments: Orion Lighting Division, Orion Maintenance Division and Orion Electric Vehicle Charging Division.

### Acquisition

#### Acquisition of Voltrek

Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek LLC, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. The initial purchase price consisted of $5.0 million cash and $1.0 million of stock. We also paid an additional $3.0 million based on Voltrek's performance in fiscal 2023 and could pay up to an additional $3.5 million and $7.15 million in compensatory consideration if Voltrek exceeds certain earnings targets in fiscal 2024 and 2025, respectively. The acquisition was funded from existing cash and credit resources and has been operating as Voltrek, a division of Orion Energy Systems.

### Results of Operations - Three Months Ended December 31, 2023 versus Three Months Ended December 31, 2022

The following table sets forth the line items of our Condensed Consolidated Statements of Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):

|  | Three Months Ended December 31, 2023 Amount | 2022 Amount | % Change | 2023 % of Revenue | 2022 % of Revenue |
| --- | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $17,007 | $15,399 | 10.4% | 65.5% | 75.9% |
| Service revenue | 8,964 | 4,889 | 83.4% | 34.5% | 24.1% |
| Total revenue | 25,971 | 20,288 | 28.0% | 100.0% | 100.0% |
| Cost of product revenue | 12,302 | 11,480 | 7.2% | 47.4% | 56.6% |
| Cost of service revenue | 7,302 | 4,027 | 81.3% | 28.1% | 19.8% |
| Total cost of revenue | 19,604 | 15,507 | 26.4% | 75.5% | 76.4% |
| Gross profit | 6,367 | 4,781 | 33.2% | 24.5% | 23.6% |
| General and administrative expenses | 4,910 | 5,484 | (10.5)% | 18.9% | 27.0% |
| Acquisition related costs | — | 493 | NM | — | 2.4% |
| Sales and marketing expenses | 3,170 | 2,983 | 6.3% | 12.2% | 14.7% |
| Research and development expenses | 349 | 409 | (14.7)% | 1.3% | 2.0% |
| Loss from operations | (2,062) | (4,588) | 55.1% | (7.9)% | (22.6)% |
| Other income | 25 | — | NM | 0.1% | — |
| Interest expense | (193) | (64) | 201.6% | (0.7)% | (0.3)% |
| Amortization of debt issue costs | (25) | (16) | 56.3% | (0.1)% | (0.1)% |
| Loss before income tax | (2,255) | (4,668) | 51.7% | (8.7)% | (23.0)% |
| Income tax expense | 1 | 19,391 | 100.0% | 0.0% | 95.6% |
| Net loss | $(2,256) | $(24,059) | 90.6% | (8.7)% | (118.6)% |

\* NM - Not Meaningful

*Revenue, Cost of Revenue and Gross Margin.* Product revenue increased 10.4%, or $1.6 million, for the third quarter of fiscal 2024 versus the third quarter of fiscal 2023. Service revenue increased 83.4%, or $4.1 million, for the third quarter of fiscal 2024 versus the third quarter of fiscal 2023. The increase in total revenue was due to anticipated growth in contract activity for larger customers and a new three-year preventive maintenance contract. Cost of product revenue increased by 7.2%, or $0.8 million, in the third quarter of fiscal 2024 versus the comparable period in fiscal 2023. Cost of service revenue increased by 81.3%, or $3.3 million, in the third quarter of fiscal 2024 versus the comparable period in fiscal 2023. Gross margin increased to 24.5% of revenue in the third quarter of fiscal 2024 from 23.6% in the third quarter of fiscal 2024 due primarily to increased sales covering fixed costs and increased volume on higher margin service projects, partially offset by inflationary cost pressures related to subcontractor costs and maintenance technician costs on fixed price contracts.

#### Operating Expenses

*General and Administrative.* General and administrative expenses decreased 10.5%, or $0.6 million, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. This comparative decrease was primarily due to the decrease in the expected Voltrek earn-out payment and prior year acceleration of stock-based compensation expense due to retirement-related modifications of existing restricted stock awards, partially offset by increased employee compensation costs.

*Sales and Marketing.* Sales and marketing expenses increased 6.3%, or $0.2 million, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. This comparative increase was primarily due to increased employee compensation costs.

*Research and Development.* Research and development expenses decreased 14.7% or $0.1 million, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. This comparative decrease was primarily due to the reduction of product certification testing costs.

*Interest Expense.* Interest expenses increased 201.6% or $0.1 million, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. This comparative increase was primarily due to the interest on increased outstanding borrowings and a higher incremental interest rate on existing borrowings.

### Lighting Division

Our lighting division develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. Our lighting division provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers. Our lighting division sells mostly through direct sales and also through manufacturer representative agencies and to the wholesale contractor markets through ESCOs and contractors.

The following table summarizes our lighting division operating results (dollars in thousands):

|  | Three Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $18,545 | $14,151 | 31.1% |
| Operating income (loss) | $951 | $(632) | NM |
| Operating margin | 5.1% | (4.5)% |  |

\* NM - Not Meaningful

Lighting division revenue in the third quarter of fiscal 2024 increased by 31.1%, or $4.4 million, compared to the third quarter of fiscal 2023. The increase in lighting division revenue was due to growth in contract activity for larger customers. The increase in corresponding operating income in this segment is a result of increased sales covering fixed costs.

### Maintenance Division

Our maintenance division provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.

The following table summarizes our maintenance division operating results (dollars in thousands):

|  | Three Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $4,608 | $3,307 | 39.3% |
| Operating loss | $(1,060) | $(722) | (46.8)% |
| Operating margin | (23.0)% | (21.8)% |  |

25

Maintenance division revenue in the third quarter of fiscal 2024 increased by 39.3%, or $1.3 million, compared to the third quarter of fiscal 2023, primarily due to a new three-year preventive maintenance contract for a large customer. Operating loss in this segment increased as a result of a decrease in gross margin primarily due to inflationary cost pressures related to subcontractor costs and maintenance technician costs on fixed price contracts.

### Electric Vehicle Charging Division

Our EV division offers leading electric vehicle charging expertise and provides EV turnkey installation solutions with ongoing support to all commercial verticals.

The following table summarizes our EV segment operations results (dollars in thousands):

|  | Three Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $2,818 | $2,830 | (0.4)% |
| Operating loss | $(1,454) | $(1,669) | 12.9% |
| Operating margin | (51.6)% | (59.0)% |  |

EV segment revenue in the third quarter of fiscal 2024 was relatively flat compared to the third quarter of fiscal 2023. Operating loss in this segment was primarily a result of the allocation of corporate expenses and the earn-out expense included in general and administrative costs. The improvement in operating loss in fiscal 2024 was primarily due to increased margin.

### Results of Operations - Nine Months Ended December 31, 2023 versus Nine Months Ended December 31, 2022

The following table sets forth the line items of our Condensed Consolidated Statements of Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):

|  | Nine Months Ended December 31, 2023 Amount | 2022 Amount | % Change | 2023 % of Revenue | 2022 % of Revenue |
| --- | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $46,266 | $41,715 | 10.9% | 72.1% | 74.8% |
| Service revenue | 17,904 | 14,039 | 27.5% | 27.9% | 25.2% |
| Total revenue | 64,170 | 55,754 | 15.1% | 100.0% | 100.0% |
| Cost of product revenue | 33,258 | 31,152 | 6.8% | 51.8% | 55.9% |
| Cost of service revenue | 16,805 | 11,832 | 42.0% | 26.2% | 21.2% |
| Total cost of revenue | 50,063 | 42,984 | 16.5% | 78.0% | 77.1% |
| Gross profit | 14,107 | 12,770 | 10.5% | 22.0% | 22.9% |
| General and administrative expenses | 15,689 | 13,183 | 19.0% | 24.4% | 23.6% |
| Acquisition related costs | 56 | 840 | (93.3)% | 0.1% | 1.5% |
| Sales and marketing expenses | 9,778 | 8,521 | 14.8% | 15.2% | 15.3% |
| Research and development expenses | 1,211 | 1,374 | (11.9)% | 1.9% | 2.5% |
| Loss from operations | (12,627) | (11,148) | (13.3)% | (19.7)% | (20.0)% |
| Other income | 37 | — | NM | 0.1% | — |
| Interest expense | (561) | (97) | 478.4% | (0.9)% | (0.2)% |
| Amortization of debt issue costs | (74) | (47) | 57.4% | (0.1)% | (0.1)% |
| Interest income | 2 | — | NM | 0.0% | — |
| Loss before income tax | (13,223) | (11,292) | (17.1)% | (20.6)% | (20.3)% |
| Income tax expense | 58 | 17,933 | 99.7% | 0.1% | 32.2% |
| Net loss | $(13,281) | $(29,225) | 54.6% | (20.7)% | (52.4)% |

26

*Revenue, Cost of Revenue and Gross Margin.* Product revenue increased 10.9%, or $4.6 million, for the first nine months of fiscal 2024 versus the first nine months of fiscal 2023. Service revenue increased 27.5%, or $3.9 million, for the first nine months of fiscal 2024 versus the first nine months of fiscal 2023. Total revenue increased due to growth in contract activity for larger customers, a new three-year preventive maintenance contract and a full nine months of revenue from Voltrek versus three months in the prior year. Cost of product revenue increased by 6.8%, or $2.1 million, in the first nine months of fiscal 2024 versus the comparable period in fiscal 2023. Cost of service revenue increased by 42.0%, or $5.0 million, in the first nine months of fiscal 2024 versus the comparable period in fiscal 2023. Gross margin decreased from 22.9% of revenue in the first nine months of fiscal 2023 to 22.0% in the first nine months of fiscal 2024, due primarily to inflationary cost pressures related to subcontractor costs and maintenance technician costs on fixed price contracts, partially offset by increased sales covering fixed costs and increased volume on higher margin service projects.

#### Operating Expenses

*General and Administrative.* General and administrative expenses increased 19.0%, or $2.5 million, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023. This comparative increase was primarily due to the increased accrual of the expected Voltrek earn-out payment, partially offset by prior year acceleration of stock-based compensation expense due to retirement-related modifications of existing restricted stock awards.

*Acquisition Related Costs.* Acquisition related costs decreased 93.3%, or $0.8 million, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 due to reduced acquisition activity.

*Sales and Marketing.* Sales and marketing expenses increased 14.8%, or $1.3 million, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023. This comparative increase was primarily due to increased employee compensation costs.

*Research and Development.* Research and development expenses decreased 11.9%, or $0.2 million, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023. This comparative decrease was primarily due to the reduction of employee compensation costs.

*Interest Expense.* Interest expenses increased 478.4% or $0.5 million, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023. This comparative increase was primarily due to the interest on outstanding borrowings and a higher incremental borrowing rate.

### Lighting Division

The following table summarizes our lighting division operating results (dollars in thousands):

|  | Nine Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $44,739 | $42,118 | 6.2% |
| Operating loss | $(1,777) | $(3,932) | 54.8% |
| Operating margin | (4.0)% | (9.3)% |  |

Lighting division revenue in the first nine months of fiscal 2024 increased by 6.2%, or $2.6 million compared to the first nine months of fiscal 2023. The increase in lighting division revenue was due to growth in contract activity for larger customers. The improvement in corresponding operating loss in this segment was a result of a decrease in under absorption of fixed costs.

### Maintenance Division

The following table summarizes our maintenance division operating results (dollars in thousands):

|  | Nine Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $11,996 | $10,806 | 11.0% |
| Operating loss | (4,660) | (1,807) | (157.9)% |
| Operating margin | (38.8)% | (16.7)% |  |

Maintenance division revenue in the first nine months of fiscal 2024 increased by 11.0%, or $1.2 million, compared to the first nine months of fiscal 2023, primarily due to a new three-year preventive maintenance contract with a large customer. Operating loss in this segment increased as a result of a decrease in gross margin primarily due to inflationary cost pressures related to subcontractor costs and maintenance technician costs on fixed price contracts.

### Electric Vehicle Charging Division

The following table summarizes our EV segment operations results (dollars in thousands):

|  | Nine Months Ended December 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $7,435 | $2,830 | 162.7% |
| Operating loss | (4,417) | (1,669) | (164.6)% |
| Operating margin | (59.4)% | (59.0)% |  |

EV segment revenue in the first nine months of fiscal 2024 increased by 162.7%, or $4.6 million, compared to the first nine months of fiscal 2023. Operating loss in this segment was primarily a result of the earn-out expense included in general and administrative costs and the allocation of corporate expenses. The increase in revenue and corresponding operating loss was due to nine months of activity in fiscal 2024 compared to three months in fiscal 2023.

### Liquidity and Capital Resources

### Overview

We believe our existing cash and operating cash flow provide us with the financial flexibility needed to meet our capital requirements, based on our current cash flow forecast, including to fund our budgeted capital expenditures and working capital needs for at least one year from the date of this report, as well as our currently anticipated longer-term capital requirements for periods beyond at least one year from the date of this report.

We had approximately $5.0 million in cash and cash equivalents as of December 31, 2023, compared to $16.0 million at March 31, 2023. Our cash position decreased as a result of an operating loss and an overall use of working capital during the first nine months of fiscal 2024.

Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management and capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements for at least the next 12 months based on our current cash flow forecast, if we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash. We are also currently pursuing other potential supplemental liquidity sources.

### Cash Flows

The following table summarizes our cash flows for the nine months ended December 31, 2023 and 2022 (in thousands):

|  | Nine Months Ended December 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(10,267) | $(5,248) |
| Investing activities | (750) | (6,090) |
| Financing activities | (8) | 5,014 |
| Decrease in cash and cash equivalents | $(11,025) | $(6,324) |

*Cash Flows Related to Operating Activities.* Cash used in operating activities primarily consisted of net loss adjusted for certain non-cash items, including depreciation, amortization of intangible assets, stock-based compensation, amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.

Cash used in operating activities for the first nine months of fiscal 2024 was $10.3 million and consisted of our net loss of $13.3 million adjusted for non-cash expense items and net cash used in changes in operating assets of $3.0 million, the largest of which was a benefit from a $5.5 million accounts payable.

Cash used in operating activities for the first nine months of fiscal 2023 was $5.2 million and consisted of our net loss of $29.2 million adjusted for non-cash expense items and net cash used in changes in operating assets of $24.0 million, the largest of which was a $17.9 million decrease in deferred income tax assets as a result of the valuation allowance.

*Cash Flows Related to Investing Activities*. Cash used in investing activities of $0.8 million in the first nine months of fiscal 2024 consisted primarily of purchases of property and equipment, partially offset by proceeds from the sale of property and equipment.

Cash used in investing activities of $6.1 million in the first nine months of fiscal 2023 consisted primarily of cash paid for the acquisition of Voltrek and purchases of property and equipment.

*Cash Flows Related to Financing Activities.* Cash used in financing activities of $8 thousand in the first nine months of fiscal 2024 consisted primarily of payment of long-term debt.

Cash provided by financing activities of $5.0 million in the first nine months of fiscal 2023 consisted primarily of proceeds from our Credit Agreement, which was drawn down to pay the cash purchase price to acquire Voltrek.

### Working Capital

Our net working capital as of December 31, 2023 was $15.0 million, consisting of $45.7 million in current assets and $30.7 million in current liabilities. Our net working capital as of March 31, 2023 was $25.9 million, consisting of $50.4 million in current assets and $24.5 million in current liabilities.

We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages and supply chain interruptions.

### Indebtedness

### Revolving Credit Agreement

On December 29, 2020, we entered into a new $25 million Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”). The Credit Agreement replaced our prior $20.15 million secured revolving credit and security agreement (the “Prior Credit Agreement”).

The replacement of the Prior Credit Agreement with the Credit Agreement provides us with increased financing capacity and liquidity to fund our operations and implement our strategic plans.

The Credit Agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of December 31, 2023, the borrowing base of the Credit Facility supported $22.5 million of availability, with $12.5 million of remaining availability net of $10.0 million borrowed.

The Credit Agreement is secured by a first lien security interest in substantially all of our assets.

Effective November 4, 2022, we, along with the Lender, executed Amendment No. 1 to the Credit Agreement. The primary purpose of the amendment was to include the assets of our acquired subsidiaries, Stay-Lite Lighting and Voltrek as secured collateral under the Credit Agreement. Accordingly, eligible assets of Stay-Lite and Voltrek are now included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the Credit Agreement. The amendment also clarified that the earn-out liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement and that the expenses recognized in connection with those earn-outs should be added back in the computation of EBITDA, as defined, under the Credit Agreement.

### Backlog

Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed purchase orders. Backlog totaled $20.6 million and $17.2 million as of December 31, 2023 and March 31, 2023, respectively. We generally expect our backlog to be recognized as revenue within one year. Backlog does not include any amounts for contracted maintenance services.

### Inflation

We have experienced increases in various input costs including labor, components and transportation in the past two years. In response, we have implemented multiple price increases, and we have substantially mitigated the inflationary pressures, such that our results from operations have not been materially affected to date by inflation.

### Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, stock-based compensation and income taxes. The estimates of forecasted cash flows are used in the assessment for impairment of long-lived assets and the realizability of deferred tax assets. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, 2023. For the quarter ended December 31, 2023, there were no material changes in our accounting policies.

### Recent Accounting Pronouncements

For a complete discussion of recent accounting pronouncements, refer to Note 2 in the Condensed Consolidated Financial Statements included elsewhere in this report.

## Market risk

As filed, 272 characters.

Our exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10-K for the year ended March 31, 2023. There have been no material changes to such exposures since March 31, 2023.

## Controls and procedures

As filed, 1,234 characters.

### Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2023, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of December 31, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for the quarter ended December 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 721 characters.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I - Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, which we filed with the SEC on June 12, 2023 and in Part 1 - Item 2 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q.

Filed Feb 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-012204. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.