ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included in this Annual Report on Form 10-K for the fiscal year ended March 31, 2025. See also “Forward-Looking Statements” and Item 1A “Risk Factors”.
Overview
We provide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, project engineering, energy project management design and maintenance services and electric vehicle (“EV”) charging infrastructure solutions. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We research, design, develop, manufacture, market, sell, install, and implement energy management systems consisting primarily of high-performance, energy-efficient commercial and industrial interior and exterior LED lighting systems and related services. Our products are targeted for applications in the following primary market segments: commercial office and retail, area lighting, industrial applications and government, although we do sell and install products into other markets. Our services consist of turnkey installation and system maintenance. Virtually all of our sales occur within North America or for the US Department of Defense's military bases operating in foreign countries.
Our lighting products consist primarily of LED lighting fixtures, many of which include 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 interior 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 and offerings.
We differentiate ourselves from our competitors by 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 offer lighting and electrical maintenance services which enables us to support a lifetime business relationship with our customer (which we call “Customers for Life”). We completed the acquisition of Voltrek on October 5, 2022, which further expanded our turnkey services capabilities as well as capitalized on the rapidly growing market for EV charging solutions. We completed the Stay-Lite Lighting acquisition on January 1, 2022, which further expanded our maintenance services capabilities.
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 become the primary component of our revenue as we continue to strive to be a leader in the LED market.
We see opportunity to cross-sell our three platforms of lighting, maintenance services and EV charging installation systems to our commercial and industrial customer base. We are pursuing opportunities to cross-sell to direct customers, as well as through select partners. We also see opportunity for further integration of our service capabilities to expand our geographic reach and we currently intend to pursue growth organically.
Other than our multi-year maintenance service contracts, we generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. 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 make substantial working capital expenditures and advance inventory purchases that we intend to recoup through the completion of these or similar projects.
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. We refer to our just completed fiscal year, which ended on March 31, 2025, as "fiscal 2025", and our prior fiscal years which ended on March 31, 2024 and March 31, 2023 as "fiscal 2024" and “fiscal 2023”, respectively. 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 chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. Effective during the first quarter of fiscal 2024, we began to evaluate and report the business using three segments: lighting segment, maintenance segment and EV segment. Previously, we had four reportable segments: Orion Services Group Segment, Orion Distribution Services Segment, Orion U.S. Markets Division and Orion Electric Vehicle Charging.
Recent Developments
Replacement of our CEO
On April 14, 2025, Michael Jenkins’ employment was terminated by Orion, with our Board appointing Sally A. Washlow as our new Chief Executive Officer, effective as of Mr. Jenkins’ termination date.
As a result of the termination, Mr. Jenkins will receive approximately $633 thousand in severance and the acceleration of approximately 322 thousand restricted stock awards. Mr. Jenkins forfeited approximately 646 thousand performance shares along with approximately $170 thousand in tandem cash awards. Additionally, Mr. Jenkins forfeited restricted stock awards not vesting within two years from the termination date, which was a forfeiture of approximately 78 thousand shares.
On April 14, 2025, we entered into an Executive Employment and Severance Agreement with Ms. Washlow (the “Employment Agreement”). The Employment Agreement provides Ms. Washlow with the following compensation arrangements: (i) an annual base salary of $382,500, provided that if our other named executive officers’ base salaries are returned to their pre-reduction levels, then Ms. Washlow’s base salary will also be similarly adjusted up to $425,000; (ii) a target annual bonus of 100% (threshold 80% and maximum of 200%) of her base salary upon our relative achievement of executive incentive plan performance targets for each fiscal year; (iii) a special bonus of $100,000 if we achieve a stretch goal of $100 million in revenue for fiscal 2026; (iv) a cash signing bonus of $500,000, approximately $300,000 of was required to be used by Ms. Washlow to purchase shares of our common stock directly from us; (v) a pre-change of control severance multiplier of 1.5x and a post-change of control severance multiplier of 2.0x; (vi) an initial equity grant consisting of a non-qualified stock option exercisable for a total of 500,000 shares of our common stock; and (vii) certain other benefits and perquisites. On May 29, 2025, our board and Ms. Washlow mutually agreed to defer Ms. Washlow’s cash signing bonus and related direct purchase of common stock for up to one year, with the timing of such cash signing bonus and related direct purchase of our common stock to be reviewed quarterly and mutually agreed upon by the compensation committee and Ms. Washlow.
Voltrek Earn-Out
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, 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 common stock. We also paid $3.0 million in initial earn-out payments based on Voltrek’s financial performance in fiscal 2023. We may owe additional material earn-out payments based on Voltrek’s financial performance in fiscal 2025. We have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our future liquidity.
Replacing Reduced Revenue from Primary Customer
In fiscal 2025, 2024 and 2023, one customer accounted for 24.3%, 25.2% and 16.2% of our total revenue, respectively. In fiscal 2026, we expect that our customer concentration will continue at the approximate range experienced in fiscal 2025 and 2024. We continue to attempt to diversify our customer base by expanding our reach to national accounts, ESCOs, the agent driven distribution channel, lighting maintenance customers and the EV market.
Selected Financial Data
The selected historical consolidated financial data are not necessarily indicative of future results.
Fiscal Year Ended March 31,
(in thousands, except per share amounts)
Consolidated statements of operations data:
Product revenue
Service revenue
Total revenue
Cost of product revenue (1) (2) (8)
Cost of service revenue (1) (3) (8)
Total cost of revenue
Gross profit
General and administrative expenses (1) (4) (8)
Impairment of assets (5)
Acquisition related costs
Sales and marketing expenses (1) (5) (8)
Research and development expenses (1)(6) (8)
(Loss) income from operations
Other income
Interest expense
Amortization of debt issue costs
Loss on debt extinguishment
Dividend and interest income
(Loss) income before income tax
Income tax expense (benefit) (7)
Net (loss) income
Net (loss) income per share attributable to common
shareholders:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, as follows:
Fiscal Year Ended March 31,
(in thousands)
Cost of product revenue
Cost of service revenue
General and administrative expenses
Sales and marketing expenses
Research and development expenses
Total stock-based compensation expense
Fiscal 2025 and Fiscal 2024 includes expense of $295 thousand and $26 thousand related to restructuring, respectively.
Fiscal 2025 and Fiscal 2024 includes expense of $176 thousand and $48 thousand related to restructuring, respectively.
Fiscal 2025 and Fiscal 2024 include expenses of $442 thousand and $28 thousand related to restructuring, respectively.
Fiscal 2025 and Fiscal 2024 includes expense of $26 thousand and $21 thousand related to restructuring, respectively.
Fiscal 2025 and Fiscal 2024 includes expense of $109 thousand and $0 related to restructuring, respectively.
Fiscal 2021 includes tax benefit of $20.9 million related to the release of the valuation allowance on deferred tax assets. Fiscal 2023 includes tax expense of $17.8 million related to the recording of the valuation allowance on deferred tax assets.
Fiscal 2022 includes an offset to payroll expenses of $1.6 million related to the anticipated employee retention payroll tax credit (“payroll tax credit”), as expanded and extended by the American Rescue Plan Act of 2021, as follows:
Fiscal Year Ended March 31, 2022
(in thousands)
Cost of product revenue
Cost of service revenue
General and administrative expenses
Sales and marketing expenses
Research and development expenses
Total payroll tax credit
Results of Operations: Fiscal 2025 versus Fiscal 2024
The following table sets forth the line items of our 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 (in thousands, except percentages):
Fiscal Year Ended March 31,
Amount
Amount
Change
Revenue
Revenue
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
General and administrative expenses
Impairment on Intangibles
Acquisition related costs
Sales and marketing expenses
Research and development expenses
(Loss) income from operations
Other income
Interest expense
Amortization of debt issue costs
(Loss) income before income tax
Income tax expense
Net (loss) income
* NM = Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased by 14.1%, or $8.9 million, for fiscal 2025 versus fiscal 2024. Service revenue decreased by 7.0%, or $1.9 million, for fiscal 2025 versus fiscal 2024. The decrease in product revenue was primarily due to the execution of a significant government retrofit lighting segment project that ended in the second quarter of the current fiscal year. The decrease in service revenue was due to multiple customers in our maintenance segment that chose not to renew their contracts for fiscal 2025. Cost of product revenue decreased by 16.1%, or $7.1 million, in fiscal 2025 versus the comparable period in fiscal 2024. Cost of service revenue decreased by 12.1%, or $3.0 million, in fiscal 2025 versus fiscal 2024. The decreases were primarily because of decreases in revenue described above. Gross margin increased to 25.4% of revenue in fiscal 2025 from 23.1% in fiscal 2024, due primarily to a more favorable sales mix along with better overall margins in the maintenance segment.
Operating Expenses
General and Administrative. General and administrative expenses increased 7.6%, or $1.3 million, in fiscal 2025 compared to fiscal 2024. This comparative increase was primarily due to increased earn-out compensation costs along with incurred severance expenses, which were partially offset by a reduction in workforce related to restructuring that occurred in the first half of fiscal 2025.
Acquisition Related Costs . In fiscal 2025, we did not incur any acquisition expenses. In fiscal 2024, we incurred acquisition expenses of $56 thousand relating to the acquisition of Voltrek.
Sales and Marketing. Our sales and marketing expenses decreased 10.7%, or $1.4 million, in fiscal 2025 compared to fiscal 2024. The decrease was primarily due to an decrease in commission expense on lower sales volume.
Research and Development. Research and development expenses decreased 17.8%, or $0.3 million, in fiscal 2025 compared to fiscal 2024 primarily due to a decrease in testing costs.
Interest Expense. Interest expense in fiscal 2025 increased by $0.3 million to $1.0 million primarily because the term loan that was entered into in the first quarter of fiscal 2025 and a higher interest rate on our credit facility.
Results of Operations: Fiscal 2024 versus Fiscal 2023
The following table sets forth the line items of our 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 (in thousands, except percentages):
Fiscal Year Ended March 31,
Amount
Amount
Change
Revenue
Revenue
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
General and administrative expenses
Impairment on intangibles
Acquisition related costs
Sales and marketing expenses
Research and development expenses
(Loss) income from operations
Other income
Interest expense
Amortization of debt issue costs
(Loss) income before income tax
Income tax expense (benefit)
Net (loss) income
* NM = Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue increased by 10.7%, or $6.1 million, for fiscal 2024 versus fiscal 2023. Service revenue increased by 35.2%, or $7.1 million, for fiscal 2024 versus fiscal 2023. The increase in product and service revenue was primarily due to the execution of a significant government retrofit lighting segment project along with increased EV segment revenues. Cost of product revenue increased by 3.5%, or $1.5 million, in fiscal 2024 versus the comparable period in fiscal 2023. Cost of service revenue increased by 49.2%, or $8.3 million, in fiscal 2024 versus fiscal 2023. The increases were primarily because of increases in revenue described above along with higher cost in our maintenance segment. Gross margin increased to 23.1% of revenue in fiscal 2024 from 22.6% in fiscal 2023, due primarily to improved absorption of fixed costs on increased revenue volume and mix.
Operating Expenses
General and Administrative. General and administrative expenses decreased 14.1%, or $2.7 million, in fiscal 2024 compared to fiscal 2023. This comparative decrease was primarily due to a reduction in estimate of $0.9 million of earn-out compensation costs recorded in fiscal 2023 related to the Voltrek acquisition, partially offset by a full year of cost at Voltrek.
Acquisition Related Costs . In fiscal 2024, we incurred acquisition costs of $56 thousand, primarily relating to the Voltrek acquisition. In fiscal 2023, we incurred acquisition expenses of $0.8 million relating to the acquisition of Voltrek.
Sales and Marketing. Our sales and marketing expenses increased 14.0%, or $1.6 million, in fiscal 2024 compared to fiscal 2023. The increase was primarily due to an increase in commission expense on higher sales volume.
Research and Development. Research and development expenses decreased 19.3%, or $0.4 million, in fiscal 2024 compared to fiscal 2023 primarily due to a decrease in testing costs.
Interest Expense. Interest expense in fiscal 2024 increased by $0.4 million to $0.8 million primarily because of a full year of borrowings in fiscal 2024 and a higher interest rate on our credit facility.
Income Taxes. Income tax expense decreased $18.0 million, or 99.9%, to $41 thousand compared to fiscal 2023. The fiscal 2023 expense included a one-time $17.8 million non-cash charge to increase the valuation allowance on a significant portion of our deferred tax assets. We do not expect to remit significant cash taxes for the next several years.
Lighting Segment
Our lighting segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. Our lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers. Our lighting segment sells through ESCOs, Lighting Agents, Distributors and direct (turnkey) to end users.
The following table summarizes our lighting segment operating results (dollars in thousands):
Fiscal Year Ended March 31,
Revenues
Operating (loss) income
Operating margin
Fiscal 2025 Compared to Fiscal 2024
Lighting segment revenue decreased in fiscal 2025 by 21.9%, or $13.4 million, and operating loss increased $1.4 million, compared to fiscal 2024, due to decreased project volumes in fiscal 2025. This decrease in revenues led to a corresponding operating loss increase in this segment, along with decreased project margins.
Fiscal 2024 Compared to Fiscal 2023
Lighting segment revenue increased in fiscal 2024 compared to fiscal 2023 by 8.0%, or $4.6 million, and operating income decreased $3.8 million, compared to fiscal 2023, due to increased project volume on a government retrofit project. This increase led to a corresponding operating loss decrease in this segment, along with improved project margins.
Maintenance Segment
Our maintenance segment 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 segment operating results (dollars in thousands):
Fiscal Year Ended March 31,
Revenues
Operating (loss) income
Operating margin
Fiscal 2025 Compared to Fiscal 2024
Maintenance segment revenue decreased $2.0 million, or 11.4%, in fiscal 2025 compared to fiscal 2024 primarily due to some legacy customers not renewing their contracts in fiscal 2025 due to increased project costs to improve segment margins. As a result,
operating loss decreased $4.3 million, or 78.5%, in fiscal 2025 compared to fiscal 2024 primarily due to better project margins throughout the segment.
Fiscal 2024 Compared to Fiscal 2023
Maintenance segment revenue increased $2.6 million, or 17.8%, in fiscal 2024 compared to fiscal 2023 primarily due to increased volume at a major customer. Operating loss increased $3.3 million, or 148.6%, in fiscal 2024 compared to fiscal 2023 primarily due to increased costs on fixed price contracts.
EV Segment
Our EV segment 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):
Fiscal Year Ended March 31,
Revenues
Operating loss
Operating margin
Fiscal 2025 Compared to Fiscal 2024
EV segment revenue increased 36.4%, or $4.5 million, in fiscal 2025 compared to fiscal 2024 primarily due to increased sales to municipalities. EV segment operating loss increased $0.8 million, or 50.7%, in fiscal 2025 compared to fiscal 2024 primarily due to increased earn-out amounts, which were partially offset by increased revenue volume in the segment, along with increased gross margins.
Fiscal 2024 Compared to Fiscal 2023
EV segment revenue increased 96.5%, or $6.1 million, in fiscal 2024 compared to fiscal 2023 primarily due to a full year of Voltrek results being included in segment results. EV segment operating loss decreased $2.6 million, or 62.4%, in fiscal 2024 compared to fiscal 2023 due to increased revenue volume in the segment, partially offset by reduced gross margins.
Liquidity and Capital Resources
Overview
We had $6.0 million in cash and cash equivalents as of March 31, 2025, compared to $5.2 million at March 31, 2024. Our cash position increased due to the results in our operations, sales of property and equipment, and proceeds from the mortgage loan entered into at the beginning of fiscal 2025. These increases were partially offset by payments made on our revolving credit facility.
As of March 31, 2025, our borrowing base supported $15.0 million of availability under our credit facility, with $7.0 million drawn against that availability. As of March 31, 2024, our borrowing base supported $20.1 million of availability under our credit facility, with $10.0 million drawn against that availability.
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. We may owe additional material earn-out payments based on Voltrek’s financial performance in fiscal 2025. While we have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our liquidity.
Additional information on our Credit Agreement can be found in the “Indebtedness” section located below.
In March 2023, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we currently have the flexibility to publicly offer and sell from time to time up to $100 million of debt and/or equity securities. The filing of the shelf registration statement may help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.
In March 2021, we entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which we may offer and sell shares of our common stock, having an aggregate offering price of up to $50 million from time to time through or to the Agent, acting as sales agent or principal. In March 2025, the ATM was terminated.
In April 2024, we executed Amendment No.2 to our Loan Security Agreement to add a $3.5 million term loan to the credit facility. The amendment also expanded the pool of eligible receivables to include government receivables in the calculation of the borrowing base. See Note 12 - Long-Term Debt to our accompanying audited consolidated financial statements for more information.
In October 2024, we executed Amendment No.3 to our Loan Security Agreement to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
We regularly explore various alternative sources of liquidity to help ensure that we will have the best allocation of invested capital to satisfy our working capital needs.
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, 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, including our negotiated Voltrek acquisition earn-out payment obligations, during the next 12 months and beyond based on our current cash flow forecast, there can be no assurance to that effect, particularly if our Voltrek earn-out amounts are in excess of the liability we have currently accrued. 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.
Cash Flows
The following table summarizes our cash flows for our fiscal 2025, fiscal 2024 and fiscal 2023:
Fiscal Year Ended March 31,
(in thousands)
Operating activities
Investing activities
Financing activities
(Decrease) increase in cash and cash equivalents
Cash Flows Related to Operating Activities. Cash (used in) provided by 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 provided by operating activities for fiscal 2025 was $0.6 million and consisted of our net loss of $11.8 million adjusted for non-cash expense items and net cash provided by changes in operating assets of $12.4 million, the largest of which was a decrease of $6.1 million in inventories, a $5.1 million decrease in accounts payable, and an increase of $1.9 million in accrued expenses.
Cash used in operating activities for fiscal 2024 was $10.1 million and consisted of our net loss of $11.7 million adjusted for non-cash expense items and net cash used in changes in operating assets of $1.6 million, the largest of which was a $5.0 million increase in accounts payable, an increase of $3.2 million in revenue earned not billed, and a $2.3 million decrease in accrued liabilities.
Cash used in operating activities for fiscal 2023 was $2.3 million and consisted of our net loss of $34.3 million adjusted for non-cash expense items and net cash used in changes in operating assets of $32.1 million, the largest of which was a $17.8 million decrease in deferred income tax assets as a result of the valuation allowance.
Cash Flows Related to Investing Activities. Cash provided by investing activities in fiscal 2025 was $0.1 million and consisted primarily of $0.2 million of sales of property and equipment and $0.1 million of purchases of property and equipment.
Cash used in investing activities in fiscal 2024 was $0.7 million and consisted primarily of $0.8 million of purchases of property and equipment.
Cash used in investing activities in fiscal 2023 was $6.2 million and consisted primarily of the $5.6 million acquisition of Voltrek and $0.6 million of purchases of property and equipment.
Cash Flows Related to Financing Activities. Cash provided by financing activities in fiscal 2025 was $0.1 million and consisted primarily of proceeds from the term loan that originated in the first quarter of fiscal 2025, which was partially offset by payments on the revolving credit facility.
Cash used in financing activities in fiscal 2024 was $14 thousand.
Cash provided by financing activities in fiscal 2023 was $10.0 million which consisted of proceeds from our revolving credit facility.
Working Capital
Our net working capital as of March 31, 2025 was $8.7 million, consisting of $35.5 million of current assets and $26.8 million of current liabilities. Our net working capital as of March 31, 2024 was $16.7 million, consisting of $44.8 million of current assets and $28.1 million of current liabilities. The change was primarily due to a decrease in inventories along with a decrease in accounts payable.
Our net working capital as of March 31, 2023 was $25.9 million, consisting of $50.4 million of current assets and $24.5 million of current liabilities. The change in our working capital in fiscal 2024 from our fiscal 2024 year-end was primarily due to a decrease in cash and cash equivalents and an increase in accounts payable, partially offset by an increase in revenue earned not billed.
We generally attempt to maintain 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 or supply interruptions.
Indebtedness
Revolving Credit Agreement
Our credit agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on June 30, 2027. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2025, the borrowing base supported approximately $15.0 million of availability under the Credit Facility with $7.0 million drawn against that availability. As of March 31, 2024, the borrowing base supported approximately $20.1 million of availability under the Credit Facility with $10.0 million drawn against that availability.
The credit agreement is secured by a first lien security interest in substantially all of our assets.
Borrowings under the credit agreement are permitted in the form of SOFR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the Credit Agreement. Among other fees, we are required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.
The credit agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below $4.0 million of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.
The credit agreement also contains customary events of default and other covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on our stock, redeem, retire or purchase shares of our stock, make investments or pledge or transfer assets. If an event of default under the credit agreement occurs and is continuing, then the lender may cease making advances under the credit agreement and declare any outstanding obligations under the credit agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the credit agreement will automatically become immediately due and payable.
Effective April 22, 2024, we, along with our lender, executed Amendment No. 2 (“Amendment No. 2”) to the credit agreement. The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the credit agreement secured by our office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the credit agreement. Quarterly installments of $88,125 are due on the first day of each fiscal quarter beginning October 1, 2024.
Effective October 30, 2024, we and our lender, executed Amendment No. 3 ("Amendment No. 3") to our Credit Agreement. The primary purpose of Amendment No. 3 was to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
Voltrek Earn-Out
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, 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 common stock. We also paid $3.0 million in initial earn-out payments based on Voltrek’s financial performance in fiscal 2023. We may owe additional material earn-out payments based on Voltrek’s financial
performance in fiscal 2025. We have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our future liquidity.
Capital Spending
Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.1 million in fiscal 2025, $0.8 million in fiscal 2024 and $0.7 million in fiscal 2023. Our capital spending plans predominantly consist of investments related to maintenance fleet vehicles, new product development tooling and equipment and information technology systems, exclusive of any capital spending for potential acquisitions. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our Credit Facility. As discussed in Item 1A. Risk Factors, we will be commencing implementation efforts of a new ERP system in fiscal 2026, with an expected go-live date in the first quarter of fiscal 2027. The expected cost for the project is approximately $1.4 million, which consists of $1.1 million of capital and $0.3 million of expense.
Critical Accounting 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, collectability of receivables, stock-based compensation, warranty reserves and income taxes. 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 estimates is set forth below.
Revenue Recognition. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or services. The amount of expected consideration includes estimated deductions and early payment discounts calculated based on historical experience, customer rebates based on agreed upon terms applied to actual and projected sales levels over the rebate period, and any amounts paid to customers in conjunction with fulfilling a performance obligation.
If there are multiple performance obligations in a single contract, the contract’s total transaction price per GAAP is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which we would sell such promised good or service separately to a customer. We use an observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin per GAAP approach when one is not available. When the expected cost-plus margin approach is used to determine the estimated stand-alone selling price it is based on average historical margins for that performance obligation in contracts with similar customers.
Revenue derived from customer contracts which include performance obligation(s) for the sale of lighting fixtures and components we manufacture, lighting fixtures we source, and EV charging stations and related software and warranty arrangements we source, are classified as product revenue in the Consolidated Statements of Operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.
Revenue from a customer contract which includes both the sale of Orion manufactured or sourced fixtures and the installation of such fixtures (which we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as we fulfill our obligation to install the light fixtures. We measure our performance toward fulfilling our performance obligations for installations using an output method that calculates the number of light fixtures completely removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed and installed under the contract.
Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Consolidated Statement of Operations.
The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Consolidated Statement of Operations.
Inventory. Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, Orion records, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Recoverability of Long-Lived Assets. We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents, for impairment whenever events or circumstances indicate that the carrying value of the assets recognized in our financial statements may not be recoverable. Factors that we consider include whether there has been a significant decrease in the market value of an asset, a significant change in the way an asset is being utilized, or a significant change, delay or departure in our strategy for that asset, or a significant change in the macroeconomic environment. Our assessment of the recoverability of long-lived assets involves significant judgment and estimation. These assessments reflect our assumptions, which, we believe, are consistent with the assumptions hypothetical marketplace participants use. Factors that we must estimate when performing recoverability and impairment tests include, among others, forecasted revenue, margin costs and the economic life of the asset. If impairment is indicated, we determine if the total
estimated future cash flows on an undiscounted basis are less than the carrying amounts of the asset or assets. If so, an impairment loss is measured and recognized.
Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, determining asset fair values, and estimating asset’s useful lives. To make these judgments, we may use internal discounted cash flow estimates, quoted market prices, when available, and independent appraisals, as appropriate, to determine fair value.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize future impairment losses which could be material to our results of operations.
Indefinite Lived Intangible Assets and Goodwill. We test indefinite lived intangible assets and goodwill for impairment at least annually on the first day of our fiscal fourth quarter, or when indications of potential impairment exist. We monitor for the existence of potential impairment indicators throughout the fiscal year. Our annual impairment test may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If our qualitative assessment reveals that asset impairment is more likely than not, we perform a quantitative impairment test by comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, we may bypass the qualitative test and initiate impairment testing with the quantitative impairment test.
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2025. These qualitative assessments considered our operating results for the first nine months of fiscal 2025 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, we determined a quantitative assessment was necessary for our maintenance segment reporting unit. We concluded that the undiscounted cash flows exceeded the carrying value for the indefinite lived intangibles and goodwill, and therefore no impairment charge was recorded.
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2024. These qualitative assessments considered our operating results for the first nine months of fiscal 2024 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 plan. As a result of the conditions that existed as of the assessment date, we determined a quantitative assessment was necessary for our maintenance segment reporting unit. We concluded that the undiscounted cash flows exceeded the carrying value for the indefinite lived intangibles and goodwill, and therefore no impairment charge was recorded. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not in the lighting and EV segments and a quantitative analysis was not required.
Stock-Based Compensation. We currently issue time-based and performance-based restricted stock awards to our employees, executive officers and directors. Prior to fiscal 2015, we also issued stock options to these individuals. We apply the provisions of ASC 718, Compensation - Stock Compensation , to these restricted stock and stock option awards which requires us to expense the estimated fair value of the awards based on the fair value of the award on the date of grant. Additionally, it is necessary to estimate the achievement of the performance-based awards to ensure the expense remains accurate. Compensation costs for equity incentives are recognized in earnings, on a straight-line basis over the requisite service period.
Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expenses, together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in our statements of operations.
Our judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We continue to monitor the realizability of our deferred tax assets and adjust the
valuation allowance accordingly. During fiscal 2023, we established a full valuation allowance on our net deferred tax assets due to end of the period of sustained profitability. In making these determinations, we considered all available positive and negative evidence, including projected future taxable income, tax planning strategies, recent financial performance and ownership changes.
We believe that past issuances and transfers of our stock caused an ownership change in fiscal 2007 that affected the timing of the use of our net operating loss carry-forwards, but we do not believe the ownership change affects the use of the full amount of the net operating loss carry-forwards. As a result, our ability to use our net operating loss carry-forwards attributable to the period prior to such ownership change to offset taxable income will be subject to limitations in a particular year, which could potentially result in increased future tax liability for us.
As of March 31, 2025, we had net operating loss carryforwards of approximately $85.4 million for federal tax purposes, $76.1 million for state tax purposes, and $0.7 million for foreign tax purposes.
We also had federal tax credit carryforwards of $1.2 million and state tax credit carryforwards of $0.2 million, which are reserved for as part of our valuation allowance. Of these tax attributes, $36.2 million of the federal and state net operating loss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $126.0 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 2025 and 2045.
We recognize penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest were immaterial as of the date of adoption and are included in unrecognized tax benefits.
By their nature, tax laws are often subject to interpretation. Further complicating matters is that in those cases where a tax position is open to interpretation, differences of opinion can result in differing conclusions as to the amount of tax benefits to be recognized under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes. ASC 740 utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. Consequently, the level of evidence and documentation necessary to support a position prior to being given recognition and measurement within the financial statements is a matter of judgment that depends on all available evidence. As of March 31, 2025, the balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would reduce our effective tax rate if recognized. We believe that our estimates and judgments discussed herein are reasonable, however, actual results could differ, which could result in or that could be material.
Recent Accounting Pronouncements
See Note 3 – Summary of Significant Accounting Policies to our accompanying audited consolidated financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on results of operations and financial condition.
Item 7A. Quantitative and Qualita tive Disclosure About Market Risk
Market risk is the risk of loss related to changes in market prices, including interest rates, foreign exchange rates and commodity pricing that may adversely impact our consolidated financial position, results of operations or cash flows.
Inflation. We have experienced increases in various input costs including labor, components and transportation in the past year. 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 by inflation. We are monitoring input costs and cannot currently predict the future impact to our operations by inflation.
Foreign Exchange Risk. We face minimal exposure to adverse movements in foreign currency exchange rates. Our foreign currency losses for all reporting periods have been nominal.
Interest Rate Risk. We do not believe that we are subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. It is our policy not to enter into interest rate derivative financial instruments. As a result, we do not currently have any significant interest rate exposure.
As of March 31, 2025, we had $10.3 million of outstanding debt with floating interest rates.
Commodity Price Risk. We are exposed to certain commodity price risks associated with our purchases of raw materials, most significantly our aluminum purchases. During fiscal 2025, we have experienced commodity price increases; however, as of the date of this report, we are not able to predict the future impact of on this risk. A hypothetical additional 20% increase in aluminum prices would have had a negative impact of $0.7 million on our net income in fiscal 2025.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Number
Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; Milwaukee, WI ; PCAOB ID# 243 )
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Orion Energy Systems, Inc.
Manitowoc, Wisconsin
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Orion Energy Systems, Inc. (the “Company”) as of March 31, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2025 , in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory - Valuation
As described in Note 2 to the Company’s consolidated financial statements, the Company reports inventory using the first-in, first-out (FIFO) method. The Company records the amount required to reduce the carrying value of its inventories to net realizable value as a charge to cost of product revenue. As of March 31, 2025, the Company had inventory of approximately $11.4 million.
We identified Inventory Valuation as a critical audit matter. The principal considerations for this determination were management’s
significant judgments utilized to determine the net realizable value of inventory, specifically the assumptions related to the recent historical sales activity (including usage in the preceding 9 to 12 months) and expected demand for the products. Auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address this matter.
The primary procedures we performed to address this critical audit matter included:
Assessing the reasonableness of management’s assumptions over historical sales activity, including testing the completeness and accuracy of underlying data and corroborating management’s considerations of usage trends during the preceding 9 to 12 months, on a sample basis.
Assessing the reasonableness of management’s assumptions over expected demand for products, by comparing parts identified for substitutions when applicable and testing usage subsequent to year-end and other subsequent transactions, on a sample basis.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2011.
Milwaukee, Wisconsin
June 26, 2025
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED B ALANCE SHEETS
(in thousands, except share amounts)
March 31,
Assets
Cash and cash equivalents
Accounts receivable, net
Revenue earned but not billed
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Other long-term assets
Total assets
Liabilities and Shareholders’ Equity
Accounts payable
Accrued expenses and other
Deferred revenue, current
Current maturities of long-term debt
Total current liabilities
Revolving credit facility
Long-term debt, less current maturities
Deferred revenue, long-term
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock, $ 0.01 par value: Shares authorized: 30,000,000 shares
at March 31, 2025 and 2024; no shares issued and outstanding at
March 31, 2025 and 2024
Common stock, no par value: Shares authorized: 200,000,000 at
March 31, 2025 and 2024; shares issued: 42,470,231 and
42,038,967 at March 31, 2025 and 2024; shares outstanding:
32,983,888 and 32,567,746 at March 31, 2025 and 2024
Additional paid-in capital
Treasury stock: 9,486,343 and 9,471,221 common shares at
March 31, 2025 and 2024
Retained deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERA TIONS
(in thousands, except share and per share amounts)
Fiscal Year Ended March 31,
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
Operating expenses:
General and administrative
Impairment on Intangibles
Acquisition related costs
Sales and marketing
Research and development
Total operating expenses
Loss from operations
Other income (expense):
Other income
Interest expense
Amortization of debt issue costs
Interest income
Total other expense
Loss before income tax
Income tax expense
Net loss
Basic net loss per share attributable to common shareholders
Weighted-average common shares outstanding
Diluted net loss per share
Weighted-average common shares and share equivalents
outstanding
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
STATEMENTS OF SHA REHOLDERS’ EQUITY
(in thousands, except share amounts)
Shareholders’ Equity
Common Stock
Shares
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
(Deficit)
Total
Shareholders’
Equity
Balance, March 31, 2022
Issuance of common stock for acquisition
Issuance of stock and shares for services
Exercise of stock options for cash
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2023
Issuance of stock and shares for services
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2024
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2025
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEM ENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended March 31,
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation
Amortization of intangible assets
Stock-based compensation
Impairment on intangibles
Amortization of debt issue costs
Deferred income tax benefit
Impairment of property and equipment
Loss on sale of property and equipment
Provision for inventory reserves
Provision for credit losses/bad debts
Other
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
Revenue earned but not billed
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue, current and long-term
Net cash provided by (used in) operating activities
Investing activities
Cash to fund acquisitions, net of cash received
Purchase of property and equipment
Additions to patents and licenses
Proceeds from sales of property, plant and equipment
Net cash provided by (used in) investing activities
Financing activities
Payment of long-term debt
Proceeds from revolving credit facility
Payment of revolving credit facility
Proceeds from long-term debt
Payments to settle employee tax withholdings on stock-based
compensation
Debt issue costs
Proceeds from employee equity exercises
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of non-cash investing and financing activities:
Operating lease assets obtained in exchange for new operating lease liabilities
Issuance of common stock in connection with acquisition
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion provides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and turnkey electric vehicle charging stations and related installation services to commercial and industrial businesses, and federal and local governments, predominantly in North America.
Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida and Lawrence, Massachusetts.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Orion Energy Systems, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of significant management estimates include revenue recognition, net realizable value of inventory, allowance for credit losses, accruals for warranty and loss contingencies, earn-out, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
Orion considers all highly liquid, short-term investments with original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Orion’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other, revolving credit facility and long-term debt. In addition, other long-term assets includes an equity investment of $ 0.5 million that is carried at cost less impairment, of which there has been no impairment as of March 31, 2025. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date.
The carrying amounts of Orion’s financial instruments approximate their respective fair values due to the relatively short-term nature of these instruments. Long-term debt and revolving credit facility are considered Level 2 and are reflected in the consolidated balance sheet at carrying value, which approximate fair value because the stated interest rates are similar to interest rates currently available to Orion for similar obligations.
Allowance for Credit Losses
Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for credit losses based upon the historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. See Note 4 – Accounts Receivable for further discussion of the allowance for credit losses.
Inventory
Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months ) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, Orion records, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Incentive Plan
Orion’s human capital management and compensation committee annually approves an executive annual cash incentive program. Based upon the results for the fiscal years ended March 31, 2025, 2024, and 2023, Orion accrued approximately $ 0.1 million, $ 0.2 million and $ 0 million expense related to these programs, respectively.
Revenue Recognition
Orion generates revenues primarily by selling commercial lighting fixtures and components, installing these fixtures in its customer’s facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components deployed in its customer’s facilities. Orion recognizes revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration that management expects to receive in exchange for those goods or services. Prices are generally fixed at the time of order confirmation, either for the contract as a whole or for the hourly rates that will be charged for the type of maintenance services delivered. The amount of expected consideration includes estimated deductions and early payment discounts calculated based on historical experience, customer rebates based on agreed upon terms applied to actual and projected sales levels over the rebate period, and any amounts paid to customers in conjunction with fulfilling a performance obligation.
If there are multiple performance obligations in a single contract, the contract’s total transaction price is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which Orion would sell such promised good or service separately to a customer. Orion uses an observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin approach when one is not available. When the expected cost-plus margin approach is used to determine the estimated stand-alone selling price it is based on average historical margins for that performance obligation in contracts with similar customers.
Revenue derived from customer contracts which include only performance obligation(s) for the sale of Orion manufactured or sourced lighting fixtures and components is classified as Product revenue in the Consolidated Statements of Operations. The revenue
for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.
Revenue from a customer contract, which includes both the sale of Orion manufactured or sourced fixtures and the installation of such fixtures (which Orion refers to as a turnkey project), is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Revenue from turnkey projects that is allocated to the sale of the lighting fixtures is recorded at the point in time when management believes the customer obtains control of the product(s) and is reflected in Product revenue. This point in time is determined separately for each customer contract based upon the terms of the contract and the nature and extent of Orion’s control of the light fixtures during the installation. Product revenue associated with turnkey projects can be recorded (a) upon shipment or delivery, (b) subsequent to shipment or delivery and upon customer payments for the light fixtures, (c) when an individual light fixture is installed and working correctly, or (d) when the customer acknowledges that the entire installation project is substantially complete. Determining the point in time when a customer obtains control of the lighting fixtures in a turnkey project is applied separately for each individual light fixture included in a contract. In making this judgment, management considers the timing of various factors, including, but not limited to, those detailed below:
when there is a legal transfer of ownership;
when the customer obtains physical possession of the products;
when the customer starts to receive the benefit of the products;
the amount and duration of physical control that Orion maintains on the products after they are shipped to, and received at, the customer’s facility;
whether Orion is required to maintain insurance on the lighting fixtures when they are in transit and after they are delivered to the customer’s facility;
when each light fixture is physically installed and working correctly;
when the customer formally accepts the product; and
when Orion receives payment from the customer for the light fixtures.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as Orion fulfills its obligation to install the light fixtures. Orion measures its performance toward fulfilling its performance obligations for installations using an output method that calculates the number of light fixtures removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed and installed under the contract.
Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Consolidated Statement of Operations.
Orion offers a financing program, called an Orion Throughput Agreement, or OTA, for a customer’s lease of Orion’s energy management systems. The OTA is structured as a sales-type lease and upon successful installation of the system and customer acknowledgment that the system is operating as specified, revenue is recognized at Orion’s net investment in the lease, which typically is the net present value of the future cash flows.
Orion also records revenue in conjunction with several limited power purchase agreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the generation of electricity. Orion’s last PPA expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of
electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for in ASC 606. Orion also recognizes revenue upon the sale to third parties of tax credits received from operating the solar facilities and from amortizing a grant received from the federal government during the period starting when the power generating facilities were constructed until the expiration of the PPAs; these revenues are not derived from contracts with customers and therefore not under the scope of ASC 606.
During the third quarter of fiscal 2023, Orion acquired Voltrek LLC ("Voltrek"), which sells and installs sourced electric vehicle charging stations and related software subscriptions and renewals. The results of Voltrek are included in the Orion EV segment and compliment Orion’s existing turnkey installation model.
The sale of charging stations and related software subscriptions, renewals and extended warranty is presented in Product revenue. Orion is the principal in the sales of charging stations as it has control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily software subscriptions, renewals and extended warranty, Orion is the sales agent providing access to the content and recognize commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes at the point in time upon providing access of the content to the customer.
The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Consolidated Statement of Operations.
From time to time, the EV segment enters into bill and hold arrangements, whereby the Company sells EV charging stations and the charging stations are warehoused at a Company location for a specified period of time in accordance with directions received from the Company's customers. Even though the charging stations are held at a Company location, a sale is recognized at the point in time when the customer obtains control of the product. Control is transferred to the customer in a bill and hold arrangement when: customer acceptance specifications have been met, legal title has transferred, the customer has a present obligation to pay for the product and the risk and rewards of ownership have transferred to the customer. Additionally, all the following bill and hold criteria have been met in order for control to be transferred to the customer: the reason for the bill and hold arrangement is substantive -the customer has requested the product be warehoused, the product has been identified as separately belonging to the customer, the product is currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or direct it to another customer.
See Note 10 – Accrued Expenses and Other for a discussion of Orion’s accounting for the limited warranty it provides to customers for its products and services.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis.
Shipping and Handling Costs
Orion records costs incurred in connection with shipping and handling of products as cost of product revenue. Amounts billed to customers in connection with these costs are included in product revenue.
Research and Development
Orion expenses research and development costs as incurred. Amounts are included in the Consolidated Statement of Operations on the line item Research and development.
Income Taxes
Orion recognizes deferred tax assets and liabilities for the future tax consequences of temporary differences between financial reporting and income tax basis of assets and liabilities, measured using the enacted tax rates and laws expected to be in effect when the
temporary differences reverse. Deferred income taxes also arise from the future tax benefits of operating loss and tax credit carryforwards. A valuation allowance is established when management determines that it is more likely than not that all or a portion of a deferred tax asset will not be realized. For the fiscal year ended March 31, 2025 and 2024, Orion recognized a valuation allowance for all of its net deferred tax assets.
ASC 740, Income Taxes , also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination. Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are immaterial and are included in the unrecognized tax benefits.
Stock Based Compensation
Orion’s share-based payments to employees are measured at fair value and are recognized against earnings, on a straight-line basis over the requisite service period.
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period. As more fully described in Note 16 – Restricted Shares, Orion currently awards non-vested restricted stock (and in some cases, in conjunction with associated cash award accounted for as a liability) to employees, executive officers and directors.
Acquisition Related Costs
Acquisition related costs includes legal fees, consulting and success fees, and other integration related costs.
Concentration of Credit Risk and Other Risks and Uncertainties
Orion’s cash is primarily deposited with one financial institution. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.
Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For fiscal 2025, 2024 and 2023, no supplier accounted for more than 10 % of total cost of revenue.
In fiscal 2025 , one customer accounted for 24.3 % of revenue. In fiscal 2024 , one customer accounted for 25.2 % of total revenue. In fiscal 2023 , one customer accounted for 16.2 % of total revenue. The revenue from this customer is recorded in Orion's lighting and maintenance segments.
As of March 31, 2025 , one customer accounted for 13.0 % of accounts receivable. As of March 31, 2024 , two customers accounted for 17.3 % and 11.7 % of accounts receivable.
Compliance with the Continued Listing Standards of the Nasdaq Capital Market (“NASDAQ”)
On September 20, 2024, the Company received written notice from NASDAQ that it was not in compliance with NASDAQ’s minimum bid price requirement for continued listing on NASDAQ, as the closing bid price of the Company’s common stock had been below $ 1.00 per share for 30 consecutive trading days, and the Company was granted 180-calendar days, or until March 19, 2025 to regain compliance with the minimum bid price requirement. On March 19, 2025, the Company submitted a formal request to NASDAQ for an additional 180-calendar day period to regain compliance with the minimum bid price requirement and provided written notice to
NASDAQ that it intends to effectuate a reverse stock split during the additional compliance period if necessary to regain compliance with the minimum bid price requirement.
On March 20, 2025, the Company received a letter from NASDAQ notifying it that the Company was eligible for an additional 180-calendar day period, or until September 15, 2025, to regain compliance with the minimum bid price requirement. If the Company does not regain compliance by September 15, 2025, then NASDAQ will notify the Company of its determination to delist the Company’s common stock from trading on NASDAQ. Although the Company would have an opportunity to appeal the delisting determination to a hearings panel, under NASDAQ rules, the Company’s delisting from NASDAQ would be effective on or about September 16, 2025.
The Company intends to monitor the closing bid price of its common stock and likely will need to seek to effect a reverse stock split of the Company’s common stock to regain compliance with NASDAQ’s minimum bid price requirement by September 15, 2025 in order to avoid delisting. There can be no assurance that the Company will be able to regain compliance with NASDAQ’s minimum bid price requirement, even if it maintains compliance with the other NASDAQ listing requirements.
Recent Accounting Pronouncements
Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). Orion considers the applicability and impact of all ASUs.
Recently Adopted Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Orion adopted this standard on April 1, 2024 and adoption had no impact on the financial statements, only the accompanying footnotes. See Note 17, Segment Data, for the updated segment disclosures as a result of adopting this ASU.
Issued: Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which modifies the disclosure and presentation requirements relating to expenses shown on the income statement. The amendments in the update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1 . Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities. 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4. Disclose the total amount of selling expense and, in annual reporting periods, an entity's definition of selling expenses. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2025. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
NOTE 3 — REVENUE
Revenue Recognition
See Note 2 – Summary of Significant Accounting Policies for a discussion of Orion’s accounting policies related to revenue recognition.
Contract Fulfillment Costs
Costs associated with product sales are accumulated in inventory as the fixtures are manufactured and are transferred to Cost of product revenue at the time revenue is recorded. See Note 5 – Inventories. Costs associated with installation sales are expensed as incurred.
Disaggregation of Revenue
The primary end-users of Orion’s lighting products and services are (a) the federal government, and (b) commercial or industrial companies.
The federal government obtains Orion products and services primarily through turnkey project sales that Orion makes to a select group of contractors who focus on the federal government. Revenues associated with government end-users are primarily included in the Orion lighting and EV segments.
Commercial or industrial end-users obtain Orion products and services through turnkey project sales or by purchasing products either direct from Orion or through distributors or energy service companies ("ESCOs"). Revenues associated with commercial and industrial end-users are included within each of Orion’s segments.
See Footnote 17 - Segment Data, for additional discussion concerning Orion’s reportable segments.
The following table provides detail of Orion’s total revenues for the year ended March 31, 2025, 2024, and 2023 (dollars in thousands):
Year Ended March 31, 2025
Year Ended March 31, 2024
Year Ended March 31, 2023
Product
Services
Total
Product
Services
Total
Product
Services
Total
Revenue from contracts with customers:
Lighting product and installation
Maintenance services
Electric vehicle charging
Solar energy-related revenues
Total revenues from contracts with customers
Revenue accounted for under other guidance (1)
Total revenue
(1) Revenue accounted for under other guidance is recognized as Product revenue in the consolidated statements of operations and includes $ 0.7 million, $ 0 and $ 2.8 million derived from sales-type leases for light fixtures for the fiscal years ended March 31, 2025, 2024, and 2023, respectively; $ 0 , $ 0.1 million, and $ 0.1 million derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy for the fiscal years ended March 31, 2025, 2024, and 2023, respectively; and $ 0.1 million derived from the amortization of federal grants received in 2010 and 2011 as reimbursement for a portion of the costs to construct the legacy solar facilities for the fiscal years ended March 31, 2025, 2024, and 2023.
Bill and hold revenue that had not shipped was $ 0.1 million and $ 0.8 million as of March 31, 2025 and 2024, respectively.
Cash Flow Considerations
Material only orders are short-term in nature generally having terms of significantly less than one year. We record revenue from these contracts when the customer obtains control of those goods, which is generally consistent with the payment due date. There is not a significant impact on the nature, amount, timing, and uncertainty of revenue or cash flows based on when control transfers.
Turnkey projects and repair services provided to commercial or industrial companies typically span between one week to three months. Customer payment requirements for these projects vary by contract. Some contracts provide for customer payments for products and services as they are delivered, other contracts specify that the customer will pay for the project in its entirety upon completion of the installation.
Turnkey projects where the end-user is the federal government typically span a three to six-month period. The contracts for these sales often provide for monthly progress payments equal to ninety percent ( 90 %) of the value provided by Orion during the month.
Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments of the contract price, plus interest, over a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations. The portion of the transaction associated with the sale of the multiple individual light fixtures is accounted for as sales-type leases in accordance with the guidance for leases. Revenues associated with the sales-type leases are included in Product revenue and recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified.
The payments associated with these transactions that are due during the twelve months subsequent to March 31, 2025 are included in Accounts receivable, net in Orion’s Consolidated Balance Sheets. The remaining amounts due that are associated with these transactions are included in Long-term accounts receivable in Orion’s Consolidated Balance Sheets. As of March 31, 2025 and 2024, there were no such transactions included in Long-term accounts receivable.
The customer’s monthly payment obligation commences after completion of the turnkey project. Orion generally sells the receivable from the customer to a financial institution either during, or shortly after completion of, the installation period. Upon execution of the receivables purchase / sales agreement, all amounts due from the customer are included in Revenues earned but not billed on Orion’s Consolidated Balance Sheets until cash is received from the financial institution. The financial institution releases funds to Orion based on the customer’s monthly acknowledgment of the progress Orion has achieved in fulfilling its installation obligation. Orion provides the progress certifications to the financial institution one month in arrears.
The total amount received from the sales of these receivables during the twelve months ended March 31, 2025, 2024, and 2023 was $ 1.8 million, $ 0 and $ 6.3 million, respectively. Orion’s losses on these sales aggregated to $ 0.1 million, $ 0 and $ 0.1 million for the fiscal years ended March 31, 2025, 2024, and 2023, respectively, and are included in Interest expense in the Consolidated Statements of Operations.
Practical Expedients and Exemptions
Orion expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Sales and marketing expense. There are no other capitalizable costs associated with obtaining contracts with customers.
Orion’s performance obligations related to lighting fixtures and EV charging stations typically do not exceed nine months in duration. As a result, Orion has elected the practical expedient that provides an exemption to the disclosure requirements regarding information about value assigned to remaining performance obligations on contracts that have original expected durations of one year or less.
Orion also elected the practical expedient that permits companies to not disclose quantitative information about the future revenue when revenue is recognized as invoices are issued to customers for services performed.
Other than the turnkey projects which result in sales-type leases discussed above, Orion generally receives full payment for satisfied performance obligations in less than one year. Accordingly, Orion does not adjust revenues for the impact of any potential significant financing component as permitted by the practical expedients provided in ASC 606.
Contract Balances
A receivable is recognized when Orion has an enforceable right to payment in accordance with contract terms and an invoice has been issued to the customer. Payment terms on invoiced amounts are typically 30 days from the invoice date.
Revenue earned but not billed represents revenue that has been recognized in advance of billing the customer, which is a common practice in Orion contracts for turnkey installations and repairs / replacement services. Once Orion has an unconditional right to consideration under these contracts, Orion typically bills the customer accordingly and reclassifies the amount to Accounts receivable, net. The change in contract assets is due to higher fiscal 2024 revenue and timing of project completions and invoicing.
Deferred revenue, current as of March 31, 2025 , includes $ 0.4 million of contract liabilities which represent consideration received from customers on which installation has not yet begun or is partially complete and Orion has not fulfilled its contractual obligations. The amount of revenues recognized in the period that were included in the opening deferred revenue balances were $ 0.1 million, $ 0.5 million, and $ 0 for the years ended March 31, 2025, 2024, and 2023 respectively. This revenue consists primarily of work performed on previous billings to customers. The difference between the opening and closing balances of Orion's deferred revenue primarily results from the timing of Orion's billings in relation to the performance of work.
The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of March 31, 2025, and March 31, 2024 (dollars in thousands):
March 31, 2025
March 31, 2024
Accounts receivable, net
Revenue earned but not billed (1)
Deferred revenue (2)
(1) Within the revenue earned not billed line on the condensed consolidated balance sheet, $0.4 million in fiscal 2025 is accounted for as a sales type lease under ASC 842, and therefore has been excluded from this table since it is not considered a "contract asset", which is an asset defined by ASC 606.
(2) Includes the unamortized portion of the funds received from the federal government in 2010 and 2011 as reimbursement for the costs to build the two facilities related to the PPAs. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.
NOTE 4 — ACCOUNT S RECEIVABLE
Orion’s accounts receivable are due from companies in the commercial, governmental, industrial and agricultural industries, as well as wholesalers. Credit is extended based on an evaluation of a customer’s financial condition. Generally, collateral is not required for end users; however, the payment of certain trade accounts receivable from wholesalers is secured by irrevocable standby letters of credit and/or guarantees. Accounts receivable are generally due within 30-60 days. Accounts receivable are stated at the amount Orion expects to collect from outstanding balances. Orion provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for credit losses based on its assessment of the current status of individual accounts. Balances that are still outstanding after Orion has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. Orion's accounts receivable and allowance for credit losses balances were as follows (dollars in thousands):
Accounts receivable, gross
Allowance for credit losses
Accounts receivable, net
Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):
Fiscal Year Ended March 31,
Beginning of period
Reserve adjustment
Credit loss/bad debt expense
Write-off
End of period
NOTE 5 — INVENTORIES
As of March 31, 2025 and 2024, Orion's inventory balances were as follows (dollars in thousands):
Inventories
As of March 31, 2025
Raw materials and components
Work in process
Finished goods
Total
As of March 31, 2024
Raw materials and components
Work in process
Finished goods
Total
Costs associated with the procurement and warehousing of inventories, such as inbound freight charges and purchasing and receiving costs, are also included in cost of product revenue.
NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses consists primarily of prepaid insurance premiums, debt issue costs, prepaid subscription fees and sales tax receivable. Prepaid expenses totaled $ 1.3 million as of March 31, 2025 and March 31, 2024.
Other current assets as of March 31, 2025 and March 31, 2024 consists primarily of $ 0.6 million and $ 1.6 million, respectively, of prepaid software and services.
NOTE 7 — PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. Properties and equipment sold, or otherwise disposed of, are removed from the property and equipment accounts, with gains or losses on disposal credited or charged to income from operations.
Orion periodically reviews the carrying values of property and equipment for impairment in accordance with ASC 360, Property, Plant and Equipment, if events or changes in circumstances indicate that the assets may be impaired. The estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition are compared to the assets' carrying amount to determine if a write down to market value is required.
Property and equipment were comprised of the following (dollars in thousands):
March 31, 2025
March 31, 2024
Land and land improvements
Buildings and building improvements
Furniture, fixtures and office equipment
Leasehold improvements
Equipment leased to customers
Plant equipment
Vehicles
Gross property and equipment
Less: accumulated depreciation
Total property and equipment, net
Depreciation is recognized over the estimated useful lives of the respective assets, using the straight-line method. Orion recorded depreciation expense of $ 1.3 million , $ 1.4 million and $ 1.4 million for the years ended March 31, 2025, 2024 and 2023, respectively.
Depreciable lives by asset category are as follows:
Land improvements
10 - 15 years
Buildings and building improvements
10 - 39 years
Furniture, fixtures and office equipment
2 - 10 years
Leasehold improvements
Shorter of asset life or life of lease
Equipment leased to customers under Power Purchase Agreements
20 years
Plant equipment
3 - 10 years
Vehicles
5 - 7 years
NOTE 8 — LEASES
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties. Leases are accounted for, and reported upon, following the requirements of ASC 842, Leases.
Whether it is the lessee or the lessor, Orion’s determination of whether a contract includes a lease, and assessing how the lease should be accounted for, is a matter of judgment based on whether the risks and rewards, as well as substantive control of the assets specified in the contract, have been transferred from the lessor to the lessee. The judgment considers matters such as whether the assets are transferred from the lessor to the lessee at the end of the contract, the term of the agreement in relation to the asset’s remaining economic useful life, and whether the assets are of such a specialized nature that the lessor will not have an alternative use for such
assets at the termination of the agreement. Other matters requiring judgment are the lease term when the agreement includes renewal or termination options and the interest rate used when initially determining the ROU asset and lease liability.
ROU assets represent Orion’s right to use an underlying asset for the lease term and lease liabilities represent Orion’s obligation to make lease payments arising from the lease. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. When available, Orion uses the implicit interest rate in the lease when completing this calculation. However, as most of Orion’s operating lease agreements generating ROU assets do not provide the implicit rate, Orion’s incremental borrowing rate under its line of credit, adjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the lease is generally used in this calculation. The lease term includes options to extend or renew the agreement, or for early termination of the agreement, when it is reasonably certain that Orion will exercise such option. ROU assets are depreciated using the straight-line method over the lease term.
Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.
Assets Orion Leases from Other Parties
On January 31, 2020, Orion entered into the current lease for its primary manufacturing and distribution facility in Manitowoc, WI. The lease has a 10 -year term, with the option to terminate after six years . As of January 31, 2025, Orion did not find it reasonable to exercise the early termination of the lease, causing a triggering event which led to a reassessment of lease assets and liabilities. The lease also has an option to renew for two additional successive periods of five years each. The renewal option is not in the calculation of the right of use asset or liability. Orion is responsible for the costs of insurance and utilities for the facility. These costs are considered variable lease costs. The agreement is classified as an operating lease.
In February 2014, Orion entered into a multi-year lease agreement for use of office space in a multi-use office building in Jacksonville, Florida. The lease has since been extended, most recently during the first quarter of fiscal 2024, and presently terminates on June 30, 2026 . The agreement is classified as an operating lease.
We lease office space in Lawrence, Massachusetts. The lease presently terminates in October, 2026 . The agreement is classified as an operating lease.
Additionally, we had a lease in Pewaukee, Wisconsin that was terminated early in August of the current fiscal year. The agreement was classified as an operating lease. Additional details regarding the early termination can be seen in Note 19 - Restructuring Expense and Other Related Costs.
Orion has leased other assets from third parties, principally office and production equipment. The terms of our other leases vary from contract to contract and expire at various dates in the next five years .
The weighted average discount rate for Orion’s lease obligations as of March 31, 2025 and 2024 is 6.8% and 5.3 %, respectively. The weighted average remaining lease term as of March 31, 2025 and 2024 is 4.5 years and 2.1 years, respectively.
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
Balance sheet classification
March 31, 2025
March 31, 2024
Assets
Operating lease assets
Other long-term assets
Liabilities
Current liabilities
Operating lease liabilities
Accrued expenses and other
Non-current liabilities
Operating lease liabilities
Other long-term liabilities
Total lease liabilities
Orion had operating lease costs of $ 1.2 million for the year ended March 31, 2025. This includes short-term leases and variable lease costs, which are immaterial.
The es timated maturity of lease liabilities for each of the future years is shown below (dollars in thousands):
Maturity of Lease Liabilities
Operating Leases
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
Total lease payments
Less: Interest
Present value of lease liabilities
Assets Orion Leases to Other Parties
Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments, at a fixed monthly amount, of the contract price, plus interest, over typically a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations under ASC 606.
While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. Therefore, the portions of the transaction associated with the sale of the multiple individual light fixtures is accounted for as a sales-type lease under ASC 842.
Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the Consolidated Statement of Operations. These amounts are recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified. The execution of the acknowledgment is considered the commencement date as defined in ASC 842.
The following chart shows the amount of revenue and cost of sales arising from sales-type leases during the year ended March 31, 2025, 2024 and 2023 (dollars in thousands):
March 31, 2025
March 31, 2024
March 31, 2023
Product revenue
Cost of product revenue
The Consolidated Balance Sheet as of March 31, 2025 includes a net investment of $0.4 million in sales-type leases as all amounts due from the customer associated with lighting fixtures that were acknowledged to be installed and working correctly prior to period end were not transferred to the financing institution prior to the balance sheet date. During fiscal 2025, Orion sold receivables having an aggregate face value of $2.6 million to the financing institution in exchange for cash proceeds of $2.4 million. Related servicing fees for the period were immaterial.
Other Agreements where Orion is the Lessor
Orion has leased unused portions of its corporate headquarters to third parties. The length and payment terms of the leases vary from contract to contract and, in some cases, include options for the tenants to extend the lease terms. Annual lease payments are recorded as a reduction in administrative operating expenses and were no t material in the years ended March 31, 2025, 2024 and 2023 . Orion has accounted for these transactions as operating leases.
NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS
Orion has $ 0.9 million of goodwill related to its purchase of Voltrek in the third quarter of fiscal 2023, which is assigned to the EV segment.
Orion has $ 0.6 million of goodwill related to its purchase of Stay-Lite Lighting during fiscal year 2022, which is assigned to the Orion maintenance segment.
See Note 18 – Acquisition for further discussion of the Voltrek acquisition.
The costs of specifically identifiable intangible assets that do not have an indefinite life are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized.
Amortizable intangible assets are amortized over their estimated economic useful life to reflect the pattern of economic benefits consumed based upon the following lives and methods:
Patents
10 - 17 years
Straight-line
Licenses
7 - 13 years
Straight-line
Customer relationships
5 - 8 years
Accelerated based upon the pattern of economic benefits
consumed
Vendor relationships
5 - 8 years
Accelerated based upon the pattern of economic benefits
consumed
Developed technology
8 years
Accelerated based upon the pattern of economic benefits
consumed
Tradename
5 - 10 years
Straight-line
Intangible assets that have a definite life are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable based primarily upon whether expected future undiscounted cash flows are sufficient to support the asset recovery. If the actual useful life of the asset is shorter than the estimated life, the asset may be deemed to be impaired and accordingly a write-down of the value of the asset determined by a discounted cash flow analysis or shorter amortization period may be required.
Indefinite lived intangible assets and goodwill are evaluated for impairment at least annually on the first day of Orion’s fiscal fourth quarter, or when indications of potential impairment exist. This annual impairment review may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If the qualitative assessment reveals that asset impairment is more likely than not, a quantitative impairment test is performed comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, the qualitative test may be bypassed and the quantitative impairment test may be immediately performed. If the fair value of the indefinite lived intangible asset exceeds its carrying value, the indefinite lived intangible asset is not impaired and no further review is performed. If the carrying value of the indefinite lived intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to such excess. Once an is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite lived intangible asset.
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets and goodwill as of January 1, 2025. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2025 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets as of January 1, 2024. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2024 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 plan. Orion determined a triggering event existed with the acquired intangible assets from the Stay-Lite acquisition, which represents the asset group, within the maintenance segment, resulting in the need for a quantitative assessment on the definite-lived intangible assets. The Company recognized non-cash
intangible impairment losses of $ 0.5 million in general and administrative expense in fiscal 2024 related to the acquired Stay-Lite trade name and customer list within the maintenance segment. We utilized the relief from royalty method and multi-period excess earnings method under the income approach to estimate fair value. The impairment charges are due to sustained expectations of declining revenue growth in future years and decreased margin expectations related to those acquired assets. After these impairments, the aggregate carrying amount of these intangible assets was $ 0 .
Orion performed a qualitative assessment in conjunction with its annual impairment test of its goodwill as of January 1, 2024. This qualitative assessment considered Orion segment's operating results for the first nine months of fiscal 2024 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 plan. As a result of the conditions that existed as of the assessment date, Orion determined a triggering event existed and a quantitative assessment was required for the goodwill within the maintenance segment. We utilized the multi-period excess earnings method under the income approach to estimate fair value. The quantitative assessment determined the undiscounted future cash flows exceeded the carrying value of the assets, and as such impairment conditions did not exist at the measurement date. No triggering event existed in the EV segment, and as such an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
The components of, and changes in, the carrying amount of other intangible assets were as follows (dollars in thousands):
March 31, 2025
March 31, 2024
Gross
Carrying
Amount
Accumulated
Amortization
Net
Weighted Average Useful Life
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amortized Intangible Assets
Patents
Licenses
Trade name and trademarks
Customer relationships
Vendor relationships
Developed technology
Total Amortized Intangible Assets
Indefinite-lived Intangible Assets
Trade name and trademarks
Total Indefinite-lived Intangible Assets
Total Other Intangible Assets
The estimated amortization expense for each of the next five years is shown below (dollars in thousands):
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
Thereafter
Amortizat ion expense is set forth in the following table (dollars in thousands):
Fiscal Year Ended March 31,
Amortization included in cost of sales:
Patents
Total
Amortization included in operating expenses:
Customer relationships
Vendor relationships
Tradename
Total
Total amortization of intangible assets
Orion’s management periodically reviews the carrying value of patent applications and related costs. When a patent application is probable of being unsuccessful or a patent is no longer in use, Orion writes off the remaining carrying value as a charge to general and administrative expense within its Consolidated Statements of Operations. In fiscal years 2025, 2024, and 2023 , write-offs were immaterial.
NOTE 10 — ACCRUED EXPENSES AND OTHER
As of March 31, 2025 and March 31, 2024, Accrued expenses and other included the following (dollars in thousands):
March 31, 2025
March 31, 2024
Accrued acquisition earn-out
Other accruals
Compensation and benefits
Credits due to customers
Accrued project costs
Warranty
Sales tax
Legal and professional fees
Sales returns reserve
Total
Orion generally offers a limited warranty of one to 10 years on its lighting products including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, ballasts, LED modules, LED chips, LED drivers, control devices, and other fixture related items, which are significant components in Orion's lighting products.
Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
March 31,
Beginning of year
Accruals
Warranty claims (net of vendor reimbursements)
Ending balance
Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek, an electric vehicle charging station solutions provider (the "Voltrek Acquisition"). The Voltrek Acquisition agreement provided that, depending upon the relative EBITDA growth of Voltrek's business in fiscal 2023, 2024 and 2025, Orion could pay up to an additional $ 3.0 million, $ 3.5 million and $7.15 million, respectively, in earn-out payments. These compensatory payments do not fall within the scope of ASC 805, Business Combinations, and have been expensed over the course of the earn-out periods to the extent they were earned. As of March 31, 2025, Orion has record ed $3 .3 million t o accrued acquisition earn-out that remains unpaid.
NOTE 11 — NET (LOSS) INCOME PER COMMON SHARE
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.
Diluted net (loss) income per common share reflects the dilution that would occur if stock options were exercised and restricted shares vested. In the computation of diluted net (loss) income per common share, Orion uses the treasury stock method for outstanding options and restricted shares. Net (loss) income per common share is calculated based upon the following shares:
Fiscal Year Ended March 31,
Numerator:
Net (loss) income (dollars in thousands)
Denominator:
Weighted-average common shares outstanding
Weighted-average effect of assumed conversion of stock options and restricted stock
Weighted-average common shares and share equivalents outstanding
Net (loss) income per common share:
Basic
Diluted
The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net (loss) income per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:
March 31,
Time-Based Restricted Shares
Performance-Based Restricted Shares
Total
NOTE 12 — LONG-TERM DEBT
Long-term debt including the revolving credit facility as of March 31, 2025 and 2024 consisted of the following (dollars in thousands):
March 31,
Revolving credit facility
Term loan
Equipment debt obligations
Total long-term debt
Less current maturities
Long-term debt, less current maturities
Revolving Credit Agreement
On December 29, 2020, Orion entered into a Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). The Credit Agreement provides for a five-year $ 25.0 million revolving credit facility (the “Credit Facility”) that matures on June 30, 2027. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2025, the borrowing base of the Credit Facility supports $ 15.0 million of availability, with $ 8.0 million remaining availability subject to a $1 million availability block, net of $ 7.0 million borrowed.
The Credit Agreement is secured by a first lien security interest in substantially all of Orion’s assets.
Borrowings under the Credit Agreement are permitted in the form of SOFR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to Orion’s availability under the Credit Agreement. Among other fees, Orion is required to pay an annual facility fee and a fee on the unused portion of the Credit Facility.
The Credit Agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below $ 4.0 million of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.
The Credit Agreement also contains customary events of default and other covenants, including certain restrictions on Orion’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on Orion’s stock, redeem, retire or purchase shares of Orion’s stock, make investments or pledge or transfer assets. If an event of default under the Credit Agreement occurs and is continuing, then the lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if Orion becomes the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.
Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, executed Amendment No. 1 to its Credit Agreement. The primary purpose of the amendment was to include the assets of the acquired subsidiaries, Stay-Lite Lighting and Voltrek, as secured collateral under the Credit Agreement and to document the conversion from LIBOR to SOFR based loans. Accordingly, eligible assets of Stay-Lite and Voltrek will be included in the borrowing base calculation for the purpose of establishing the monthly borrowing availability under the Credit Agreement. The amendment also clarifies 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.
Effective April 22, 2024, the Company, with Bank of America, N.A. as lender, executed Amendment No. 2 to its Credit Agreement (“Amendment No. 2”). The primary purpose of Amendment No. 2 was to add a $ 3.525 million mortgage loan facility to the Credit Agreement secured by the Company’s office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in the Company’s borrowing base calculation for the purpose of establishing the Company’s monthly borrowing availability under the Credit Agreement. Quarterly installments of $ 88,125 are due on the first day of each fiscal quarter beginning October 1, 2024.
Effective October 30, 2024, the Company, with Bank of America, N.A. as lender, executed Amendment No. 3 ("Amendment No. 3") to its Credit Agreement. The primary purpose of Amendment No. 3 was to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
As of March 31, 2025, Orion was in compliance with all debt covenants.
Aggregate Maturities
As of March 31, 2025, aggregate maturities of long-term debt, including the revolving credit facility were as follows (dollars in thousands):
Fiscal 2026
Fiscal 2027
Fiscal 2028
NOTE 13 — INCOME TAXES
The total provision (benefit) for income taxes consists of the following for the fiscal years ended (dollars in thousands):
Fiscal Year Ended March 31,
Current
Deferred
Total
Federal, Current
Federal, Deferred
Total Federal
State, Current
State, Deferred
Total State
Total
A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:
Fiscal Year Ended March 31,
Statutory federal tax rate
State taxes, net
State tax credits, net
Federal tax credit
Change in valuation reserve
Permanent items
Change in tax contingency reserve
Equity compensation cancellations
State return to provision
Other, net
Effective income tax rate
The net deferred tax assets reported in the accompanying consolidated financial statements include the following components (dollars in thousands):
March 31,
Deferred tax assets:
Inventory, accruals and reserves
Interest deduction carry-forward
Federal and state operating loss carry-forwards
Tax credit carry-forwards
Equity compensation
Deferred revenue
Lease liability
Intangible assets
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Lease ROU asset
Fixed assets
Total deferred tax liabilities
Total net deferred tax (liabilities) assets
For fiscal year ended March 31, 2025 , Orion’s deferred tax assets were primarily the result of U.S. NOL and tax credit carryforwards. Orion recorded a valuation allowance of $ 28.1 million and $ 25.4 million against its net deferred tax asset balance as of March 31, 2025 and March 31, 2024, respectively, due to the uncertainty of its realization value in the future. For fiscal years ended March 31, 2025 and March 31, 2024, the valuation allowance against Orion’s deferred tax assets increased by $2.7 million, primarily due to the current and prior year book losses.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the more or less of its deferred tax assets are able to be realized, an adjustment to the valuation allowance would be reflected in the company’s provision for income taxes.
As of March 31, 2025, Orion has federal NOL carryforwards of approximately $ 85.4 million, state NOL carryforwards of approximately $ 76.1 million, and foreign NOL carryforwards of approximately $ 0.7 million. Orion also had federal tax credit carryforwards of approximately $ 1.2 million and state tax credits of $ 0.2 million. All of Orion’s tax credit carryforwards and $ 126.0 million of its NOL carryforwards will begin to expire in varying amounts between 2025 and 2045. The remaining $ 36.2 million of its federal and state NOL carryforwards are not subject to time restrictions but may only be used to offset 80 % of adjusted taxable income. Orion believes it is more likely than not that the benefit from its state credit carryforwards, foreign NOL carryforwards, federal credit carryforwards, and state loss carryforwards will not be realized. In recognition of this risk, Orion has provided a net valuation allowance of $ 28.1 million on the deferred tax assets related to these carryforwards.
Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes as defined under Section 382 of the Internal Revenue Code. As a result, Orion's ability to use its net operating loss carryforwards, attributable to the period prior to such ownership change, to offset taxable income can be subject to limitations in a particular year, which could potentially result in increased future tax liability for Orion. There was no limitation of NOL carryforwards that occurred for fiscal 2025, fiscal 2024, or fiscal 2023.
Orion records its tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where Orion believes that a tax position is supportable for income tax purposes, the item is included in their income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations.
Orion files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years beginning April 1, 2020 or later are open. For states in which Orion files state income tax returns, the statute of limitations is generally open for tax years beginning April 1, 2020 or later.
State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any federal changes remains subject to examination by various states for a period of up to two years after formal notification to the states. Orion currently has no state income tax return positions in the process of examination, administrative appeals or litigation.
Uncertain tax positions
As of March 31, 2025 , the balance of gross unrecognized tax benefits was approximately $ 0.2 million, all of which would affect Orion’s effective tax rate if recognized.
Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are included in the unrecognized tax benefits. Accrued interest and penalties for such unrecognized tax benefits as of March 31, 2025 and 2024 were $ 0.1 million. Orion had the following unrecognized tax benefit activity (dollars in thousands):
Fiscal Year Ended March 31,
Unrecognized tax benefits as of beginning of fiscal year
Additions based on tax positions related to the current period positions
Additions for tax positions of prior years
Unrecognized tax benefits as of end of fiscal year
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Purchase Commitments
Orion enters into non-cancellable purchase commitments for certain inventory items in order to secure better pricing and ensure materials on hand. As of March 31, 2025 , Orion had entered into $ 3.6 million of purchase commitments related primarily to inventory purchases. Orion expects the purchase commitments to be fulfilled during fiscal 2026.
Retirement Savings Plan
Orion sponsors a tax deferred retirement savings plan that permits eligible employees to contribute varying percentages of their compensation up to the limit allowed by the Internal Revenue Service. This plan also provides for discretionary contributions by Orion. In fiscal 2025, 2024 and 2023 , Orion made matching contributions of approximately $ 0.1 million, $ 0.2 million, and $ 0.2 million, respectively.
Litigation
Orion is subject to various claims and legal proceedings arising in the ordinary course of business. As of the date of this report, Orion does not believe that the final resolution of any of such claims or legal proceedings would have a material adverse effect on its future results of operations.
NOTE 15 — SHAREHOLDERS’ EQUITY
Employee Stock Purchase Plan
In August 2010, Orion’s Board of Directors approved a non-compensatory employee stock purchase plan, or ESPP. The ESPP authorizes 2,500,000 shares to be issued from treasury or authorized shares to satisfy employee share purchases under the ESPP. All full-time employees of Orion are eligible to be granted a non-transferable purchase right each calendar quarter to purchase directly from Orion up to $ 20,000 of Orion’s common stock at a purchase price equal to 100 % of the closing sale price of Orion’s common stock on The NASDAQ Capital Market on the last trading day of each quarter.
Sale of shares
In March 2023, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to publicly offer and sell from time to time up to $ 100 million of debt and/or equity securities. The filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.
In March 2021, Orion entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which Orion may offer and sell shares of common stock, having an aggregate offering price of up to $ 50 million from time to time through or to the Agent, acting as sales agent or principal. In March 2025, the ATM was terminated.
NOTE 16 — RESTRICTED SHARES
At Orion’s 2023 annual meeting of shareholders, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). Approval of the Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 3,500,000 shares to 6,000,000 shares (an increase of 2,500,000 shares). As of March 31, 2025 , the number of shares available for grant under the Amended 2016 Plan was 219,782 .
The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.
Prior to the Amended 2016 Plan, the Company maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “2004 Plan”). No new awards are being granted under the 2004 Plan; and no awards granted under the 2004 Plan remain outstanding. Forfeited awards originally issued under the 2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Plan.
Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program. The Amended 2016 Plan also permits accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.
Orion historically granted stock options and restricted stock under the 2004 Plan. Orion did not issue stock options from fiscal 2015 through fiscal 2025 and instead has issued restricted stock.
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period. Orion recognizes forfeitures as they occur.
Orion added performance conditions to a portion of the annual long-term incentive grants for Orion's executive compensation program. The performance-vesting restricted stock will vest to the extent Orion achieves revenue growth targets over a three-year period. Orion recognizes performance-vesting restricted stock expense ratably over the requisite service period based on the likelihood of meeting the performance conditions. As of March 31, 2025, 2024, and 2023 Orion recognized $ 0.0 million, $ 0.3 million, and $ 0.0 million in stock-based compensation expense for performance-vesting restricted stock, respectively.
The following amounts of stock-based compensation expense for restricted shares were recorded (dollars in thousands):
Fiscal Year Ended March 31,
Cost of product revenue
General and administrative (1)
Sales and marketing
Research and development
(1) As discussed in Note 20 - Subsequent Event, the termination of Michael Jenkins on April 14, 2025, led to the acceleration of approximately $251 thousand in relation to approximately 322 thousand restricted shares. Mr. Jenkins forfeited approximately 646 thousand performance shares and approximately 78 thousand shares of restricted stock in connection with his termination. The expense was recognized as of March 31, 2025 as it was determined estimable. The shares were accelerated and forfeited as of the termination date, April 14, 2025.
The following table summarizes information with respect to performance-vesting restricted stock and time vesting-restricted stock activity:
Time-Based
Restricted Shares
Performance-Based
Restricted Shares
Shares
Weighted
Average
Fair Value
Price
Shares
Weighted
Average
Fair Value
Price
Balance at March 31, 2024
Shares issued
Shares vested
Shares forfeited
Shares outstanding at March 31, 2025
Per share price on grant date
During fiscal 2025 , Orion recognized $ 1.2 million of stock-based compensation expense related to restricted shares.
As of March 31, 2025, 2024 and 2023 , the weighted average grant-date fair value of restricted shares granted was $ 1.07 , $ 1.42 and $ 2.16 , respectively. The total fair value of shares vested during fiscal years ended March 31, 2025, 2024 and 2023 are $ 0.9 million, $ 0.8 million and $ 1.0 million, respectively.
Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 2025 is expected to be recognized as follows (dollars in thousands):
Fiscal 2026
Fiscal 2027
Fiscal 2028
Total
Remaining weighted average expected years
NOTE 17 — SEGMENT DATA
Orion evaluates and reports its business using three segments: Orion lighting segment, Orion maintenance segment and Orion electric vehicle charging segment. Orion configured its fiscal 2025 budget in order to compare actual performance to plan performance for these segments. Orion's CODM is the chief executive officer. The Company's CODM focuses primarily on each segment's ability to generate sufficient revenues and manage cost of services along with operating expenses. As such, the CODM measures operating performance at the segment level based on operating income or loss, including evaluation of budget to actual variances. Reportable segments are components of an entity that have separate financial data that the CODM regularly reviews when allocating resources and assessing performance.
Lighting Segment
The lighting segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. The lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers. The lighting segment sells mostly through direct sales, but it also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through energy service companies and contractors.
Maintenance Segment
The maintenance segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.
EV Segment
The EV segment offers leading electric vehicle charging expertise, sells and installs sourced electric vehicle charging stations with related software subscriptions and renewals and provides EV turnkey installation solutions with ongoing support to all commercial verticals.
Corporate and Other
Corporate and other is comprised of operating expenses not directly allocated to Orion’s segments and adjustments to reconcile to consolidated results.
For the Year Ended March 31, 2025
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of Sales - Product
Cost of Sales - Service
Total cost of sales
Gross profit
Operating Expenses:
General and Administrative
Sales and Marketing
Research and Development
Total operating expenses
Operating loss
Other Income (Expense):
Other income
Dividend and Interest Income
Interest Expense
Amortization of Debt Issuance Cost
Loss on Debt Extinguishment
Other income (expense)
Earnings before tax
For the Year Ended March 31, 2024
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of Sales - Product
Cost of Sales - Service
Total cost of sales
Gross profit
Operating Expenses:
General and Administrative
Impairment of assets
Sales and Marketing
Research and Development
Acquisition-Related
Total operating expenses
Operating loss
Other Income (Expense):
Other income
Dividend and Interest Income
Interest Expense
Amortization of Debt Issuance Cost
Loss on Debt Extinguishment
Other income (expense)
Earnings before tax
For the Year Ended March 31, 2023
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of Sales - Product
Cost of Sales - Service
Total cost of sales
Gross profit
Operating Expenses:
General and Administrative
Sales and Marketing
Research and Development
Acquisition-Related
Total operating expenses
Operating income (loss)
Other Income (Expense):
Dividend and Interest Income
Interest Expense
Amortization of Debt Issuance Cost
Loss on Debt Extinguishment
Other income (expense)
Earnings before tax
Depreciation and Amortization
Capital Expenditures
For the year ended March 31,
For the year ended March 31,
(dollars in thousands)
Segments:
Lighting Segment
Maintenance Segment
EV Segment
Corporate and Other
Total Assets
(dollars in thousands)
March 31, 2025
March 31, 2024
Segments:
Lighting Segment
Maintenance Segment
EV Segment
Corporate and Other
Orion’s lighting segment revenue outside the United States in Germany was $ 1.8 million, $ 6.4 million and $ 0.2 in for the fiscal years ended March 31, 2025, 2024 and 2023, respectively. All other revenues are generated from the United States. Orion attributes revenues from external customers to individual countries based on the geographic location in which the work is performed. Orion has no long-lived assets outside the United States.
NOTE 18 — ACQUISITION
Acquisition of Voltrek
Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek, an electric vehicle charging station solutions provider for a purchase price of $ 5.0 million in cash and $ 1.0 million of shares of common stock of Orion, subject to normal and customary closing adjustments of $ 0.9 million (the “Voltrek Acquisition”). In addition, depending upon the relative EBITDA growth of Voltrek’s business in fiscal 2023, 2024 and 2025, Orion could pay up to an additional $ 3.0 million, $ 3.5 million and $ 7.15 million, respectively, in earn-out payments. These compensatory payments do not fall within the scope of ASC 805, Business Combinations, and will be expensed over the course of the earn-out periods to the extent they are earned. As of March 31, 2025, Orion paid $ 3.0 million related to the fiscal 2023 earn-out opportunity and recorded $3.3 million to accrued expenses for the fiscal 2024, 2025, and cumulative earn-out opportunities. The Voltrek Acquisition was funded with cash and Orion shares. Voltrek operates as Voltrek, an Orion Energy Systems business. The Voltrek Acquisition leverages Orion’s project management and maintenance expertise into a rapidly growing sector.
Orion accounted for the Voltrek Acquisition as a business combination. Orion preliminarily allocated the purchase price of approximately $ 6.9 million to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. The purchase price and closing adjustments were paid in cash and 620,067 shares of common stock with a total fair market value of $ 1.0 million, which was recorded in the opening balance sheet at fair value of $ 0.8 million, the discount on which is due to lock-up requirements on the shares.
The following table summarizes the purchase price allocation for Voltrek:
(in thousands)
Opening Balance Sheet
Cash
Accounts receivable
Revenue earned but not billed
Inventory
Prepaid expenses and other current assets
Property and equipment
Goodwill
Other intangible assets
Other long-term assets
Accounts payable
Accrued expenses and other
Other long-term liabilities
Net purchase consideration
Goodwill recorded from the Voltrek Acquisition is attributable to the skillset of the acquired workforce. The goodwill resulting from the Voltrek Acquisition is expected to be deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name, vendor relationship and customer relationships.
The tradename intangible asset was valued using a relief from royalty method. The significant assumptions used include the estimated revenue and royalty rate, among other factors.
The vendor relationship intangible asset was valued using the income approach - excess earnings method. The significant assumptions include estimated revenue, cost of goods sold, and probability of renewal, among other factors.
The customer relationship intangible asset was valued using the income approach - with-and-without method. The significant assumptions include estimated cash flows (including appropriate revenue, cost of revenue and operating expenses attributable to the asset, retention rate, among other factors), and discount rate, reflecting the risks inherent in the future cash flow stream, among other factors.
The categorization of the framework used to measure fair value of the intangible assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used.
The following table presents the details of the intangible assets acquired at the date of Voltrek Acquisition (dollars in thousands):
Estimated
Fair Value
Estimated Useful Life (Years)
Tradename
Vendor relationship
Customer relationships
Voltrek's post-acquisition results of operations since October 5, 2022 are included in Orion’s Consolidated Statements of Operations. The operating results of Voltrek are included in the EV segment. See note 17 - Segments, for results.
Transaction costs related to the Voltrek Acquisition are recorded in acquisition related costs in the Consolidated Statements of Operations. Transaction costs totaled $ 0.1 million in the twelve months ending March 31, 2024 and $ 0.8 million in the twelve months ended March 31, 2023.
NOTE 19 - RESTRUCTURING EXPENSE AND OTHER RELATED COSTS
As part of Orion's restructuring effort, a further reduction in workforce was completed in the fourth quarter of fiscal 2025. Total severance expense for fiscal 2025 was approximately $595 thousand. In addition, an inventory write-off of approximately $197 thousand was recognized in the first quarter of fiscal 2025 for inventory related to a customer Orion no longer does business with due to the restructuring, along with a lease breakage fee of $125 thousand that occurred in the second quarter of fiscal 2025 due to the closing of the Pewaukee office. Orion's restructuring expense and other related costs for the 12 months ended March 31 2025, 2024 and 2023 are reflected within its consolidated statement of operations as follows (dollars in thousands):
Fiscal Year Ended March 31,
Cost of product revenue
Cost of service revenue
General and administrative
Sales and marketing
Research and development
Total restructuring expense and other related costs by segment was recorded as follows (dollars in thousands):
Fiscal Year Ended March 31,
Segments:
Lighting
Maintenance
Corporate and Other
NOTE 20 — SUBSEQUENT EVENT
Replacement of our CEO
On April 14, 2025, Michael Jenkins’ employment as the Chief Executive Officer was terminated by Orion with the Board appointing Sally A. Washlow as Orion’s new Chief Executive Officer, effective as of Mr. Jenkins’ termination date.
As a result of the termination Mr. Jenkins will receive approximately $633 thousand in severance and the acceleration of approximately 322 thousand restricted stock awards. Mr. Jenkins forfeited approximately 646 thousand performance shares along with approximately $170 thousand in tandem cash awards. Additionally, Mr. Jenkins forfeited restricted stock awards not vesting within two years from the termination date, which was a forfeiture of approximately 78 thousand shares. All expenses were recognized as of March 31, 2025 as they were estimable as of that date. The acceleration and forfeiture of shares were recognized as of the termination date, April 14, 2025.
On April 14, 2025, we entered into an Executive Employment and Severance Agreement with Ms. Washlow (the “Employment Agreement”). The Employment Agreement provides Ms. Washlow with the following compensation arrangements: (i) an annual base salary of $382,500, provided that if our other named executive officers’ base salaries are returned to their pre-reduction levels, then Ms. Washlow’s base salary will also be similarly adjusted up to $425,000; (ii) a target annual bonus of 100% (threshold 80% and maximum of 200%) of her base salary upon our relative achievement of executive incentive plan performance targets for each fiscal year; (iii) a special bonus of $100,000 if we achieve a stretch goal of $100 million in revenue for fiscal 2026; (iv) a cash signing bonus of $500,000, approximately $300,000 of was required to be used by Ms. Washlow to purchase shares of our common stock directly from us; (v) a pre-change of control severance multiplier of 1.5x and a post-change of control severance multiplier of 2.0x; (vi) on the 15th trading day after the Company announces its fiscal 2025 financial results, an initial equity grant consisting of a non-qualified stock option exercisable for a total of 500,000 shares of our common stock; and (vii) certain other benefits and perquisites. On May 29, 2025, our board and Ms. Washlow mutually agreed to defer Ms. Washlow’s cash signing bonus and related direct purchase of common stock for up to one year, with the timing of such cash signing bonus and related direct purchase of our common stock to be reviewed quarterly and mutually agreed upon by the compensation committee and Ms. Washlow.
Voltrek Earn-Out
On June 23, 2025, Orion entered into a binding term sheet (the “Term Sheet”) with Final Frontier, LLC (“Final Frontier”) and its owner, the prior owners of Voltrek, with respect to its remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, Orion will pay Final Frontier $875,000 in full and final payment of its fiscal 2024 Voltrek acquisition earn-out obligations. Orion also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. Orion agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i)
$1.0 million in common stock issuable 14 trading days after Orion’s fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to an anticipated senior subordinated second lien note maturing on July 15, 2027 (the “Senior Subordinated Note”). Orion agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. Orion will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. Orion has the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of its common stock. The anticipated Senior Subordinated Note will be subordinated to Orion’s senior credit facilities with Bank of America and will be secured by a second lien on all of Orion’s assets. Orion and Final Frontier agreed to use their respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
