Orion Energy Systems [OESX] Conference call transcript for 2023 q2
2022-08-03 14:58:05
Fiscal: 2023 q1
Operator: Good morning and welcome to the Orion Energy Systems Fiscal 2023 First Quarter Conference Call. Todayâs conference is being recorded. I would now like to turn the call over to Per Brodin, Investor Relations. Sir, you may begin.
Bill Jones: Hi, this is Bill Jones, Investor Relations. Thank you and good morning. Mike Altschaefl, Orionâs CEO and Board Chair will open todayâs call with an overview of Orionâs results and strategy. Mike Jenkins, Orionâs COO will then provide more perspective on the business, including sales and operations. Per Brodin, Orionâs CFO will review the companyâs financial position and financial results. Mike Altschaefl will then conclude with an overview of Orionâs outlook for the year and the CEO transition plan announced today. We will then open the call to your questions. An archived replay of this call will be available after today in the Investor Relations section of Orionâs website. Remarks that follow and answers to questions, includes statements that maybe forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally include words such as anticipate, believe, expect or similar words. Additionally, any statements that describe future plans, objectives or goals are also forward-looking. These forward-looking statements are subject to various risks that could cause actual results to be materially different than currently expected. Such risks include among others matters that the company has described in its press release issued this morning and its filings with the SEC. Except as described therein, the company disclaims any obligation to update forward-looking statements that are made as of todayâs date. Reconciliations of certain non-GAAP financial metrics to the corresponding GAAP measures are also provided in todayâs press release which is available at the Investor Relations section of the companyâs website, www.orionlighting.com. And now, with that, I will turn the call over to Mike Altschaefl. Mike?
Mike Altschaefl: Thanks, Bill. Good morning and thank you for joining todayâs call. This morning, we reported our first quarter results and updated our full year revenue outlook. From a high level, our first quarter reflected a continuation of the trends that impacted the performance of our last two quarters, namely ongoing delays in the initiation of large LED lighting projects as our customers navigate a range of shifting economic, supply chain and other external factors. Importantly, we continue to expect most of those projects will move forward in the next few quarters, providing a strong project pipeline. In addition, our new project quoting activity has been at near record levels across the business for the past quarter, providing further confidence in our market position and long-term outlook. We strongly believe that Orion has the right mission for todayâs macro environment. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. Now, I would like to turn the call over to Mike Jenkins to provide some commentary on our business today.
Mike Jenkins: Thanks Mike. First, Iâd like to briefly discuss where we stand today with the overall business. While Orionâs history is rooted in the manufacture of energy-efficient LED lighting solutions with a focus on retrofit projects both through our turnkey capabilities as well as through our valuable ESCO and distribution partners, we have been expanding our vision and capabilities to provide a broader set of solutions that brings even greater long-term value to our customers. With a growing emphasis on energy efficiency, alternative power sources, electric vehicles, Internet of Things solutions, and other next generation technologies, our customers are faced with an expanding base of exciting options and growing complexity. We believe helping customers navigate these opportunities with customized solutions and services and the highest levels of customer service provides a very compelling and competitive offering that can support our continued growth and success. We are now differentiating Orion through our customers for life mission, which envisions a growing range of value-enhancing capabilities, products and services to meet our customersâ evolving needs. Orion wants to provide platforms and services for our customers throughout their journey towards sustainability, energy efficiency, safety, environmental and other business goals. Our customers for life mission is visible in our product development efforts, such as the introduction of our PureMotion air movement and filtration products designed to create healthier indoor spaces, the launch of our lighting and electrical maintenance business and it will also be a key driver in our M&A strategy moving forward. Our customers for life commitment starts with the highest quality, smart design and most energy efficient LED lighting solutions to deliver long-term reliability and ROI to our customers. Building on that fundamental commitment, we have created a customized turnkey solutions capability for large national accounts. Our turnkey solutions allow us to quickly and efficiently assess our customer specific needs, develop custom solutions for these needs, and then manufacture and install solutions all with one point of contact and accountability. These integrated customized capabilities are unique in our industry. The launch of our maintenance services business builds on our customer for life mission by enabling Orion to provide ongoing service and support across our clientsâ electrical maintenance needs, while creating a growing base of recurring services revenue. Maintenance services builds on Orionâs strength and project management, implementation and customer service. We expect to also provide meaningful cross-selling opportunities and other synergies throughout our business as we are able to better understand our customersâ needs and leverage our product and service capabilities. Looking at the sales and marketing efforts last month, we participated in LIGHTFAIR, our industryâs largest annual global showcase held this year in Las Vegas. This was our first return to LIGHTFAIR since 2019 prior to the COVID pandemic. Although the show was scaled down, Orion had a very good booth traffic and excellent conversations with many existing and potential customers and channel partners that really bodes well for our future. We are also rapidly building out the digital marketing capabilities of our organization. We have raised nice awareness for our PureMotion product in quarter one through our social media campaigns and we will be launching a new website in fiscal Q3. Stay tuned. In terms of the lighting industry in general trends, despite the compelling cost savings of LED retrofit projects, the macro backdrop over the past few quarters has resulted in some customers delaying projects as they address other issues in their business. We are seeing a gradual movement back to more normal conditions. And overall, the interest and quoting level remains at high watermarks for the last several years in our business. With respect to supply chain, the challenges have moderated somewhat, but we continue to actively manage these areas. In the past, we have relied on one or two vendors for key components. Now, we are interacting with a dozen or more vendors to secure needed supplies, which of course takes substantially more time and resources to manage. Secondly, we have made the strategic decision to invest more deeply in inventory to ensure access to key materials and components. And we are fortunate to have the balance sheet flexibility to do this. Due to proactive management within Orion, we have been able to meet most ordered demands within our normal stated lead times of around 2 weeks or less. Our U.S. based manufacturing facility enables us to achieve such industry-leading timelines. Most of the supply chain impacts we have felt have actually been on the customer side, with projects moving more slowly due to the lack of certain building supplies etcetera. Our turnkey project and maintenance capabilities, industry leading responsiveness and high levels of customer service put us in a strong competitive position in this environment. This has resulted in our winning some business from our competitors who are unable to meet customer lead times given their offshore sourcing. In terms of inflationary impacts on input costs, we have been able to mitigate the bulk of these factors through proactive sourcing efforts and offsetting price adjustments. Over the past few months, we have successfully updated most of our products to comply with recently updated DesignLights Consortium or DLC standards. DLC is the utility industry standards body that provides product qualifications required to earn utility industry rebates for the installation of energy efficient lighting solutions. While the standards are only relevant for securing utility rebates, more and more customers view DLC compliance as an important sign of efficiency. Finally, in the first quarter, Orion issued its first environmental, social and governance or ESG report. While it was our first formal effort, Orionâs history and culture have long been deeply rooted in energy efficiency, environmental stewardship, community support involvement, and sound corporate governance, policies and actions. We are proud of the progress we have made in these areas and are committed to further improvements as we move forward in support of all of our stakeholders. I encourage you to review our ESG report, which is accessible from our homepage at www.orionlighting.com. But I would like to provide a few highlights. In fiscal year 2022, by our internal calculations, Orion helped its customers reduce carbon-dioxide emissions by 240,000 tons or the equivalent of planting nearly 100,000 acres of trees by implementing our more energy-efficient LED lighting solutions. Orion currently produces 10% of our energy needs through onsite renewable solar and wind turbine energy sources. And in 2022, we recycled approximately 92% of the materials used in our manufacturing process that otherwise would have gone to landfill. We are also very proud of our workforce. 44% of our employees are female, which is significantly above the manufacturing average of approximately 30%. Further, 34% of our company management positions are held by women and diverse groups and following our shareholder meeting tomorrow, 2 of our 5 directors will be female. We have made significant strides in advancing our ESG goals and plan to make further progress in the years ahead. With that overview, I will turn the call over to Per Brodin to provide an overview of our Q1 financial results. Per?
Per Brodin: Thank you, Mike. Fiscal â23 first quarter revenue was $17.9 million versus $35.1 million in Q1 â22, reflecting the completion of a large project in Q4 â22, ongoing delays in the startup of several new larger LED lighting projects and general slowness in approval of projects by new and existing customers due to the current economic environment. The prior year quarter benefited from strong business activity, including from several large national projects enabled by the easing of work and travel restrictions after the onset of the pandemic. Our gross profit percentage was 19.8% in Q1 â23 as compared to 29.1% in Q1 â22 and 23.8% last quarter Q4 â22. The biggest driver here is the impact of less fixed cost absorption because of lower revenue. In general, we are able to flex direct production labor up and down as business volume fluctuates. However, we are not able to flex fixed plant and indirect production labor costs when volumes are lower, resulting in lower margins. Through the similar dynamic in our service operations, there are some costs that flex up and down with the business volumes, but there is a component that is fixed. Given that, we do expect our gross profit percentage to improve due to operating leverage as volumes increase in subsequent quarters during the year. If you remove the absorption impact from gross profit percentage, and just look at the other input costs or components and raw materials, our product margin was essentially flat compared to the prior year. First quarter fiscal â23 operating expenses were $7.2 million versus $6.8 million in Q1 â22 with the increase attributable to higher general and administrative expenses partially offset by lower sales and marketing costs. The addition of Stay-Lite costs following the January 2022 acquisition accounted for most of the increase in overall G&A cost. We reported a net loss of $2.8 million or minus $0.09 per share in Q1 â23 as compared to net income of $2.5 million or $0.08 per share in Q1 â22. At quarter end, our net working capital improved to $29.5 million from $29.4 million in Q1 â22. Our working capital includes $18.8 million of inventory investment, which positions us well to execute on our expected increases in volume. Orion remains in strong financial position, with approximately $25 million of liquidity, including cash and cash equivalents of $9.4 million and $15.8 million of availability on our credit facility and no bank debt outstanding. As we manage the business in the current environment, we intend to be vigilant in managing our cash position and overall liquidity. Our aim at a minimum is to be free cash flow neutral for the full fiscal year. Therefore, we believe we have the financial flexibility to continue to consider strategic tuck-in acquisitions on an opportunistic basis in the current environment. And with that, I will turn the call back over to Mike Altschaefl to comment on our outlook and CEO transition plan.
Mike Altschaefl: Thanks, Per. Despite near-term customer delays and the economic impacts, we continue to feel very good about our long-term market position and our three primary paths to market. We recently added 5 new agents to our electrical contractor distribution channel, as we continue to strengthen our national footprint and market position. We also continue to add sales resources dedicated to the ESCO market, which is a particular strength for Orion given its focus on delivering tangible energy efficiency benefits. The ESCO market was our fastest growing business segment in fiscal â22 and we expect it will continue to provide significant growth again in fiscal â23 and going forward. As for our national accounts business, we continue to expand and diversify our base of active customers as well as the products, services, customization and turnkey capabilities we offer. Orion is recognized for our unique ability to execute very large customized national LED retrofit programs on a turnkey basis. We believe this provides a very exciting long-term growth opportunity for our company. We are seeing signs that large national account project activity will rebound over the next few quarters providing an outlook for improving results as we progress through fiscal â23. I do think it is important to put some context around our revenue growth. In fiscal â22, we grew revenues by 6.5% to $124.4 million. Excluding our largest customer, we actually grew our fiscal â22 revenues by nearly 25% over the prior year. Our Q1 â23 revenue was impacted by the expected reduction in revenue from our largest customer. In addition, our large global online retail customer has made public announcements that is unexpectedly needed to greatly reduce its planned addition of warehouse and fulfillment centers, which impacted both Q1 â23 and our fiscal â23 outlook. Our Q1 â22 included significant revenue from this customer. Excluding our largest customer and our global online retail customer, our Q1 â23 revenue grew 18% over Q1 â22 revenue. This gives us confidence in the sales and marketing activities that we continue to use. While fiscal â23 is off to a slower start than expected, we have a steadily expanding pipeline of projects with existing clients in automotive, the public sector, logistics and retail. Several of these projects have the potential to generate $10 plus million in revenue and are expected to start later this year. Given recent delays in the pace of order activity, we updated our revenue outlook for fiscal â23 in todayâs release. We expect second quarter revenue will be a modest sequential improvement over the first quarter and now anticipate full year fiscal â23 revenue of between $90 million and $110 million. This range principally reflects the potential variability in the timing of several large customer projects as well as other factors we outlined in todayâs release. Assuming we achieved the midpoint of this range, we would grow our revenue more than 25% over last year exclusive of our largest customer. We feel we are in a strong position financially to support our growth initiatives, including potential accretive acquisition opportunities, such as the Stay-Lite acquisition, which closed in January. In terms of further M&A, we have a strong pipeline of opportunities we are reviewing. We will remain extremely prudent in this environment, focusing on businesses that offer significant value, growth potential and synergies with our existing businesses and customer base. I will now review todayâs CEO transition announcement, which is the product of more than a year of planning by Orionâs board and management team. We believe our transition plan, along with the separation of the CEO and Board Chair roles, which will go into effect in conjunction with our Annual Shareholder Meeting being held tomorrow, provides a clear and smooth leadership transition for Orion and further aligns our corporate governance with best practices. Our planning now enables me to act on my personal decision to step down from day-to-day management responsibilities at Orion and move into retirement after we report our second quarter results on about November 10 this year. We have been building Orionâs board, leadership team and structure over the past 2 years to prepare the business for future growth and the inevitable shift in our leadership. I am proud of the team and management structure we have built and extremely confident in its ability to lead Orion into the future. As we announced this morning, our Chief Operating Officer, Mike Jenkins will take over as Orionâs next CEO and join our Board of Directors following my retirement in November. Mike joined Orion in his current role as Executive Vice President and Chief Operating Officer last November and has quickly become a valued and trusted leader in our organization. As we had hoped, Mikeâs performance, leadership and talents confirmed that he is well suited to lead Orionâs long-term growth initiatives. Our Board is confident Mike has the right skill set to lead Orion going forward, not only in operations and general management, but his significant sales and marketing skills and prior P&L responsibility for several $100 million business. Additionally, Mike has significant experience in the M&A process having evaluated, acquired and successfully integrated a number of businesses during his career. And with that, letâs turn the call back to the operator for our Q&A session. Operator?
Operator: Our first question comes from Eric Stine with Craig-Hallum. Your line is now open.
Eric Stine: Good morning, everyone.
Mike Altschaefl: Good morning, Eric.
Eric Stine: Hey, so maybe just starting you are obviously talking about a strong pipeline and then starting to see things potentially normalize when you think about the future of the business. Maybe talk about how you feel it plays out balancing on one side diversification, but whether there are any large Home Depot-like contracts out there that you potentially see?
Mike Altschaefl: Sure. Thanks, Eric. First of all, we think that it was important to highlight today when we look back at where our growth has been that there was the reality that we needed to work through our largest customersâ eventual wind down to that very large project. And as we have talked back in January and February, prior to that, we had a handful of projects that we are fairly confident we are going to fill that gap just as that large customer rolled off. And the reality is some of those projects have been delayed. And so we want to again reiterate that the growth in the non-large customer business has been there over the last year and in this quarter. Of the projects that we still are looking at that have been pushed back, we mentioned in the release today and in my comments that some of those are $10 million plus opportunities. And I would say within those, Eric, there are some possibility as some could be quite large, not really ready to say they are going to be the size of that largest customer where we had previously said about $250 million of business for the last 2.5 to 3 years, but there are some projects of significant size out there that we are in discussions with.
Eric Stine: Okay, thatâs helpful. And then on the maintenance side, I know a lot of the business has been with that large customer. Just curious what type of diversification you are seeing in that business?
Mike Altschaefl: We are continuing to see diversification in that business, because with the acquisition of Stay-Lite Lighting back in January that brought with it obviously a book of business that has continued to perform well for us. In total, our maintenance business was roughly $4 million in this Q1 of â23. And that business is split between our existing customer base with the Stay-Lite acquisition as well as with our largest customer we are providing certain maintenance services. So, there is diversification in that number and we would see that continuing as we add customers for service and operating maintenance going forward.
Eric Stine: Got it. And maybe last one for me, just you are talking about some potential M&A. I mean, are there â as you can speak to that you are hearing from your customers that they would like you to be involved in? And are you â Is it too early to say that given market conditions that that started to be reflected in valuations out there?
Per Brodin: Hi, great question. The way I would describe it is that we are allowing what we are hearing for needs from our customers and desires for expanded products or services from our customers to be a strong guiding factor in our M&A activity. So, as we execute on our M&A activity, one could expect that itâs going to be in an area that we think we can very quickly bring to our existing customer base, because we are hearing from them that they need assistance in those areas versus something completely foreign in a different sort of vertical.
Mike Altschaefl: And Eric, it would be consistent with the comments we have highlighted in the past of our key priorities for M&A.
Eric Stine: Okay, thank you.
Mike Altschaefl: Thank you, Eric.
Operator: Our next question comes from Amit Dayal of H.C. Wainwright. Your line is now open.
Amit Dayal: Thank you. Good morning, everyone. Just from an M&A perspective, is there potential financing needs to execute on any decent size M&A opportunities you maybe pursuing?
Mike Altschaefl: Well, we first look at it in terms of the fact that we continue to have a significant amount of cash on our balance sheet. And secondly, we would look to acquisitions that are of a size that we think fit the risk that we think is prudent to take at this time from a capital structure standpoint. And part of what I mean by that, Amit, is that we are not real excited about using our stock as currency right now. Because we have such confidence in our future and the growth that we are going to see in the future that we would like to wait. And so we would see it most likely coming from a combination of cash perhaps some seller financing and also the fact that we have an unused line of credit with our bank and no term debt outstanding from a financing standpoint.
Amit Dayal: Understood. Thank you for that. In terms of product launches, etcetera, I know you guys have been relatively active on that front the last few years with sort of the delays and push-outs in this economic environment is how is that playing out for you? Are you pushing out on any new product launch efforts, etcetera? Are you trying to save costs on that side? Any color on that would be helpful?
Mike Jenkins: Amit, this is Mike Jenkins. I can address that. So obviously, we have talked a little bit about the launch of our PureMotion product, which was last year. That product is gaining traction. Currently, we do have a nice pipeline of opportunities for that. And we have invested significantly in marketing and demand creation activities, which is helping boost that. We have spent a lot of resources as indicated in the commentary earlier on our DLC compliance, which really was a necessary activity to make sure that we could maximize the value for our customers with utility rebates. And so that was a big body of work that has taken place over the last 6 months. And as we pivot now and shift to the second half of the year and beyond, we do have a number of new industry leading products which we plan to release.
Amit Dayal: Okay. Thatâs all I have. I will take my other questions offline. Thank you.
Mike Altschaefl: Thank you, Amit.
Operator: Our next question comes from Alex Rygiel with B. Riley Securities. Your line is now open.
Alex Rygiel: Thank you. Good morning, gentlemen.
Mike Altschaefl: Good morning.
Alex Rygiel: I am still trying to get my hands around understanding the full year guidance, which obviously suggests pretty strong pickup over the next couple of quarters. So are you seeing that evidence in your backlog that is suggesting that real strong kind of fiscal third quarter and fourth quarter pickup, what is the risk to additional project delays in that? And then I have a follow-up.
Mike Altschaefl: Sure. I mean, yes, when you looked at our comments about our outlook for the year and letâs just â first, our comment was that we expect our second quarter to be a modest sequential improvement. And so when you then look at that and look at our range, it certainly suggests a strong second half of the year, which we believe is going to be the case. The reason we come to that conclusion is that one, our backlog remains fairly strong, itâs a little bit over $8 million going into this next quarter and usually that backlog will work its way off usually during a quarter. Number two, we have some projects that are confirmed that we expect to start over the next couple of quarters. And then as we have been talking about and I realize itâs been a few quarters of talking about it, but back in January and February, some of the significant projects have been delayed are still very much in the forefront and we now think are getting much closer to being signed up and kicking off this year. And so with all of those things we do have confidence in the second half of the year and your risks to that would be could customer slowdown in some of these, but some are getting nearer to being signed contracts and some look quite definitive. And we are not overly concerned about things being pushed back further.
Mike Jenkins: Yes, maybe â this is Mike Jenkins. Just to add to those comments, in addition to the known projects, which we are working on, we also have deployed a number of growth activities in both the ESCO and distribution market segments. Mike indicated earlier that we have added 5 new distributor agents so far this year. We plan to continue to add and broaden our coverage in that market segment. And on the ESCO side, where we have had great momentum through last year and already this year into Q1, with some growth, we have new programs, which we are launching and plan to again add significantly to that market segment in terms of the number of ESCOs that we parse them out. So, those are the things that are leading us to the guidance in the second half.
Alex Rygiel: That is helpful. And then I think you mentioned that backlog was $8 million, it looks like thatâs down from about $10 million three months ago. And maybe down from a peak of $16 million two quarters ago. Have you seen any cancellations in backlog or have you only seen delays in backlog?
Mike Altschaefl: For us in backlog, we feel we are consistent and conservative of what we put into backlog. So, usually nothing goes in the backlog, Alex, unless itâs signed contract appeal thatâs been received and its known business and even in such a and itâs known business. And even in situations we have explained in the past, and letâs use our largest customer as an example, we may have had a contract with them to do a lot of business over a period of time, but until they actually issue their purchase orders for specific locations that does not go into backlog. So, there are times when that backlog can be more or less indicative of whatâs coming in the future. What I can tell you is the mix in that backlog has changed such that the backlog related to our non-largest customer is staying nice and steady. And so we think itâs a good indication in just the near-term. But we take internally we look much more at our pipeline in terms of contracts that we are negotiating, projects that we are quoting on. Mike and I both mentioned that our quoting activity which we track both in quantity of quotes, as well as dollars of quotes are near record levels. And so we look at all of those things as a mix when we think through what the rest of the year might look like for us.
Alex Rygiel: Itâs very helpful. Thank you.
Mike Altschaefl: Thank you, Alex.
Operator: The next question comes from Bill Dezellem with Tieton Capital. Your line is now open.
Bill Dezellem: Alright. Thank you. I would like to start by following up, Mike it was something you said in response to an M&A question, which was that, you are following kind of what your customers are expressing that they would like you to add in terms of products and/or services. So, the question is, are you hearing a wide range of new capabilities that your customers are wanting, or is it is it much more narrow and focused? What are you seeing there?
Mike Altschaefl: Yes. Bill, I think what I had expanded a little bit there and we have said this on several occasions, in either releases or in our calls, that the types of things we are hearing from customers are things in the area of EV charging station capabilities, both product as well as service and maintenance related to that. We have had customers asking us about our capabilities to look and help them on solar projects, perhaps on rooftops, and we have a customer base, existing customer base that has lots of rooftops. We have thought about control technology as it continues to evolve for our customers. And then there are certain products that might be helpful to fulfill our breadth of our product portfolio. So, I think in the past, we had â I know in the past, we have said our priorities probably kind of head down that line. And then the other one I failed to mention in that list is Horticultural Lighting has been of interest to us also somewhat from a customer standpoint, but also just looking at the macro environment over the next few years in vertical farming and other aspects. So, EV, Horticultural Lighting, solar, product expansion and controls, technology would probably â would be the five things that we are looking at the most in terms of expanding. And some of those are being driven by our customer base.
Bill Dezellem: Great. Thank you. And then relative to your comments, that you are seeing customers affected by economic uncertainty, what industries would you say that you are seeing your customers are most impacted by that economic uncertainty and secondarily, the opposite those that are seem to be least impacted?
Mike Altschaefl: The starting point I will be is just to double back on my comments earlier that we have talked over the 1.5 years approximately that we had a very nice global online retail customer that was a new construction for us as they added warehouses and fulfillment centers. And it was a very substantial amount of business for us in fiscal 2022, and also business with them in fiscal 2021. And rather abrupt change, they have publicly announced that they feel they have somewhat excess capacity in warehousing and fulfillment centers, and they put a quick hold on some projects that were expected to come through. So, it would be one example, but a very specific example. Maybe a little bit more general of areas that we are seeing some changes in that. I will let Mike comment on that also.
Mike Jenkins: Yes. I donât know that we could really pin it down to specific industries. Itâs really been more of a customer-by-customer situation where they have given us feedback. And obviously, some of that has to do with the rest of the dynamics going on in their business. So, not sure we can provide anything from an industry standpoint. Itâs just been an individual-by-individual situation. I will also add Bill, the interesting counter to that is the automotive area, which was really impacted during COVID due to access issues and challenges in that industry. We are seeing that industry vertical for us coming back very, very nicely. And so we are having some great conversations with our largest customers that we have talked about in the past, and expect some very nice business from them during the remainder of fiscal 2023. So, itâs never a one size fits all. And as Mike has said, itâs a very customer-specific sometimes on their decision basis.
Bill Dezellem: Thatâs quite helpful. And then lastly, had your price increase has been fully reflected in the first quarter results, or is there still more to go? And if there is more to go kind of when do you expect it to be fully felt and I suppose then all tied to that is do you anticipate the need for an additional price increase?
Mike Altschaefl: As we went through some of the inflationary times, I have made the past comment that one of our goals was to protect our gross margin profit percentage as we went through this with prudent and well thought-out price increases and at the same time watching the market and watching our competitors. I am going to come back to comment that pyramid earlier today to make sure everybody can hear it perhaps one more time. We certainly have been impacted by the lower couple of quarters of volume going through our manufacturing facility. We continue to think having U.S. based manufacturing facility is a great advantage. But at the same time, when you go through some lower volumes, your fixed costs do impact it for a while. If we peel away that impact, our gross margins have stayed rather steady. So, we feel fairly confident that our price increases have been able to cover the inflationary pressures that we have seen on labor and component costs and logistics over the last period of time. We donât have any near-term plans for price increases, because we think we are on top of the situation right now. But we will keep watching it. And we would feel that most of those price increases have probably been reflected up through this period of time. And there still may be some more to be implemented. But for the most part, I would say most of our price increases have probably taken effect through this quarter.
Bill Dezellem: Alright. Thank you for the thorough answers.
Mike Altschaefl: Thanks Bill.
Operator: Please standby for the next question. Our next question comes from Steve Rudd with Black Wall Millennium .
Unidentified Analyst: Hi. This is a question for Mike Jenkins. Like, as you are looking forward to the back half of the year with the hope for increase in revenues. Have you begun to give thought to how to adjust your internal cost structure to return the company to profitability, should those revenues not come â come about and we face future disappointment is a conflict here between talking about economic uncertainty, growth, and yet diminished revenues. There is a disconnect and I wonder if you are thinking of getting into the CEO position says okay, here is what I can do to cut our internal cost structure. And I am not talking about your sourcing, but rather your personnel?
Mike Altschaefl: Sure. Steve, thank you for the question. Absolutely, in managing businesses, we have to always be vigilant on our costs and recognize the contingency plans that need to be in place. So, we will continue as we look to the future for growth, to also be prudent and cautious and make sure that we have plans in place should those strategies not realize the kind of growth that we are anticipating we will be in a position to safeguard the company and maintain profitability.
Unidentified Analyst: Okay. And then just to follow-up briefly, at what point we have had quarter, the last few quarters have been one after another of disappointment and promise of just temporary. At what point in your own head as the new CEO, you say, now itâs time for you to act and I am going to act decisively you wait past third quarter, fourth quarter. Should that continue? Whatâs your own thinking of how quickly you will act?
Mike Altschaefl: Well, I think we â again, as we have indicated, I think that the plans and strategies that we have in place today, the customers for life, which we highlighted today, marks transition to broadening our view of the services and platforms that we can offer customers. Part of that may be through acquisitions as well. And so I think the company is already moving down that path. We are already taking actions today that should bear fruit in the future. So, I â those to me are under our belt down the path. And obviously is always in strategy, in business, we will make modifications, should we find that those things are necessary.
Unidentified Analyst: Okay.
Operator: That concludes the Q&A session. I will now turn the call over to Mike Altschaefl for closing remarks.
Mike Altschaefl: Thank you, Michelle and thanks again to everyone who joined us today for your interest in Orion. We expect to present at the H.C. Wainwright Global Investment Conference in mid-September. If you have any questions or would like to schedule a call with the management, please contact our IR team, and their contact information is included in the todayâs press release. We always welcome your interest. Thank you. We have recognized itâs been a bit of a tough quarter and we are very committed to continue to improve this company. And we look forward to talking with our investors as we go forward. And we will talk with you, if not before during our second quarter call in November. Thanks everyone.
Operator: This conference has now concluded. Thank you. You may now disconnect.
