Orion Energy Systems, Inc. Q4 FY2021 Earnings Call

Good day, everyone, and welcome to the Orion Energy Systems Fiscal 2021 Fourth Quarter Conference Call. As a reminder, today's call is being recorded. I will now turn the call over to Bill Jones. Please go ahead, sir.

Thank you, and good afternoon, everyone. Michael Altschaefl, Orion's CEO and Board Chair, will open today's call with an overview and discuss the current business outlook. Orion's CFO, Per Brodin, will then review additional financial items, after which we will open the call to questions. An archived replay of this call will be available later today in the Investor Relations section of Orion's corporate website. This call is taking place on Tuesday, June 1, 2021. Remarks that follow and answers to questions include statements that the company believes to be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally include words such as anticipate, believe, expect, or words of similar importance. Likewise, statements that describe future plans, objectives or goals are also forward-looking statements. These statements are subject to various risks that could cause actual results to be materially different than expected. Such risks include, among other matters, matters that the company has described in its press release issued this morning and in its filings with the Securities and Exchange Commission. Except as described, the company disclaims any obligation to update forward-looking statements, which are made as of today's date only. Reconciliations of certain non-GAAP financial metrics to the corresponding GAAP measures are also provided in today's press release. This is available on the Investor Relations section of Orion's website, www.orionlighting.com. With that, let me turn the call over to Mike. Mike?

Thanks, Bill. Good afternoon, everyone, and thank you for joining us today. Orion executed a strong finish to fiscal '21 with nearly $117 million in revenue and improved gross margin; net income of $5.2 million, exclusive of a tax benefit; solid operating cash flow; and a very strong balance sheet. It was really a tale of 2 halves of the year, with the first half severely impacted by the COVID-19 pandemic, and the second half demonstrating a return to the true strength of the business platform we have built. Revenue in the second half of fiscal '21 rose 33% over the year-ago period to nearly $80 million, driven by pent-up project demand, as many customers returned to pre-COVID levels of activity. Our strong rebound and full year performance was possible as a result of the hard work and dedication of the entire Orion team. The perseverance of our people throughout the pandemic has been amazing. The commitment of our people enabled us to successfully navigate the pandemic challenges and to emerge as a stronger and more diversified company with a broader set of growth opportunities and long-term potential. Our people are clearly what makes Orion a successful company. During fiscal '21, we worked to expand and diversify our customer base and our business pipeline. As a result of these efforts, our largest customer represented about 56% of fiscal '21 revenues as compared to 74% in fiscal '20, our first full year of business with this customer. We believe this customer will remain an important but smaller part of our business in the coming years, with its share of our annual revenue expected to be about one-third of our total revenue in fiscal '22. We achieved this progress through our success in developing significant new national account relationships and our efforts to broaden our product and service offerings. Our primary differentiator in our markets is our turnkey business model with its single source of accountability. Our fiscal '21 performance was largely driven by strength in providing these solutions to national accounts. Orion's turnkey solutions begin with an in-depth dialogue regarding a customer’s needs and objectives, followed by individual lighting and energy audits at each customer site. We then custom engineer products and services to achieve specific customer goals, following with rapid order production via U.S.-based manufacturing, supported by global sourcing experience with on-time delivery to each site. Orion then oversees installation and commissioning of lighting systems and controls, providing overall project management every step of the way. In addition, we are now able to offer the option of ongoing maintenance services. Customers with extensive national operations appreciate the value and efficiency of centralizing their LED lighting retrofit or new construction process with one highly experienced point of contact. They also value Orion's proven commitment to the highest levels of customer service, including on-time delivery, high-quality components, industry-leading energy efficiency as well as our ability to incorporate a wide range of technology, not only for lighting controls, but also IoT data systems, which together provide a very strong and compelling product offering and an even more attractive ROI to our customers. The primary value proposition of energy-efficient LED lighting is reducing our customers' ongoing energy costs, which drive their ROI economics. At the same time, we help our customers meet their environmental goals by reducing their carbon footprint. Our growth opportunities and future success also depend on our ongoing investment in new product development and continued enhancement of the design, performance and capabilities of our LED lighting fixtures. Innovation and smart product design are core to our strategy and competitive position. We strive to develop new and custom products that deliver improved performance, including reduced energy consumption, better quality of light and safer work environments to meet the evolving needs of our customers. In fact, helping our customers achieve environmental, safety and operational goals is core to what we do at Orion and also key to enhancing our overall margin profile. Successful new product introductions over the past year included our next-generation Starline high-bay LED fixtures, several new LED linear fixtures and a new line of exterior fixtures that combine smart design, excellent illumination and energy efficiency in a competitively priced product line. In an effort to expand our healthy, safe and sustainable product offerings, we recently launched our new PureMotion product line, which provides airflow solutions for healthier indoor spaces. The PureMotion line is designed for standard drop ceiling panel systems and offers enhanced air flow solutions, including a stand-alone airflow solution, an airflow plus LED lighting solution and an airflow plus UVC solution that circulates air through a sealed UVC light ray chamber in the ceiling to safely kill viruses, germs, bacteria and mold. Air circulation also helps to eliminate hot cold spots, providing greater comfort, along with energy savings. These products further enhance our ability to provide safer and healthier work environments and are ideal for almost all indoor applications, including health care, education, commercial and community facilities. We expect the PureMotion line to build on our reputation for healthy, safe and sustainable workplace solutions. During fiscal '21, we launched Orion Maintenance Services, a lighting, electrical and other services business. We identified both the need and the opportunity for this business through the execution of our turnkey solutions for major national accounts, and we gathered supportive feedback for the concept from several customers. Fiscal '22 will be the first full year of operations for this new division, and though it will start off small in scope relative to our other business lines, we are optimistic about its potential synergies and the long-term opportunity to build a recurring maintenance revenue stream. We expect fiscal '22 to benefit from a growing base of large national account customers and projects, particularly large enterprises interested in the unique turnkey capabilities, industry-leading products, growing base of service and commitment to customer service that Orion provides. Backing this up is our expanding track record of success in rolling out large national installation programs, both on time and on budget. We remain very encouraged by new and existing customer dialogues and our developing pipeline of opportunities, particularly for energy-efficient LED lighting retrofit and new construction projects planned or contemplated over the next year or two. Given our strengths as a company, we expect our business could also benefit from the new administration's focus on clean energy and infrastructure as well as Orion's overall focus on healthy, safe and sustainable solutions that are of increasing interest to our customers. With all of these tailwinds benefiting our business, we nonetheless are facing a couple of headwinds. We are experiencing some challenges in our supply chain. Worldwide electronic shortages, domestic and international logistics delays and other raw material and component shortages as well as general inflationary price pressures are creating some obstacles. In addition, like many other businesses, we are experiencing some labor shortages. However, the Orion team continues to effectively work through these challenges, meeting the needs of our customers. I will now turn to our future. Orion's vision is helping our customers to achieve energy savings with healthy, safe and sustainable solutions that enable them to reduce their carbon footprint and digitize their business. Our mission is to provide energy-efficient LED lighting systems and turnkey project implementation, including installation and commissioning of fixtures, controls, IoT systems as well as ongoing system maintenance and program management. Our strategic plan has 5 initiatives: first, we will focus on direct sales with an emphasis on large opportunities in all of our market channels. Our single source of accountability, turnkey project and program management capabilities are our most valued differentiators in the marketplace. We have strong credentials and have the people, systems and processes in place to be successful. In addition, there remains tremendous market opportunity. Second, we plan to build our new Orion Maintenance Services division. We already have strong credentials in place with our existing customers. We believe this new division provides us with the opportunity to generate significant recurring revenue streams with the possibility of multiyear contracts. Third, we intend to expand our control and IoT capabilities. We are positioning Orion for a leadership role in the substantial long-term growth opportunity that we anticipate from the increasing digitization of business through IoT-enabled systems. We believe that we are well situated to be a one-source solution for our customers' entire system, including system design, engineering, installation of lighting fixtures and controls, commissioning controls, integrating IoT technology, linking lighting, energy management and operational controls into management's dashboard systems and providing ongoing service. In this role, we intend to remain technology-agnostic and qualified to work with many of the leading IoT solutions in the market. We believe this strategy is a competitive advantage as our customers can utilize different technologies at different locations, where they may have a specific solution preference or where they simply seek an impartial introduction to new possible solutions. We have the opportunity to own the technology landscape. Fourth, we intend to continue to develop higher-margin products and services. We believe we have the ability to continue to develop healthy, safe and sustainable products for our customers. In addition, since our business model is to be close to the end user of our products and services, we are able to listen and understand their future needs and develop products and services to meet them. The fifth and final initiative of our strategic plan is to actively pursue potential business acquisitions, which would add expanded and unique capabilities to our product and service offerings, potentially transforming our business. We believe the current business climate in our industry could create some attractive acquisition opportunities. The goals of our potential acquisitions include adding recurring revenue streams, accelerating the ramp-up of our maintenance services business, adding new products and services and entering new markets, such as solar, EV charging and energy storage. We are aggressively pursuing opportunities that fit with our existing customer base and leverage the strength of our turnkey capabilities. To date, we have extended a number of indications of interest in proposed letters of intent and term sheets to acquire certain companies that we believe fit our expansion and growth criteria. We expect to continue doing so, although we don't plan to publicly announce any of these ongoing efforts unless and until we enter a definitive purchase agreement. In an initial modest step, we recently completed a $500,000 strategic investment in ndustrial, a provider of IoT software and services that provide new levels of data, analytics and business insights used to optimize industrial performance. Its software enables customers to better aggregate, access, analyze and act on data. We see synergies with what ndustrial is doing and the connected capabilities that our lighting systems provide to host sensors and controls. We believe this investment will help Orion to extend our customer value proposition and enhance the potential return on investment of our LED lighting systems and controls. As a result of these factors and initiatives, we believe that Orion is well-positioned for fiscal '22 revenue growth of at least 28% to a range of $150 million to $155 million, excluding any recurrence of COVID-19 business impacts or significant worsening of our supply chain or labor shortage challenges. This view is based on the strength of our new and existing product offerings, our turnkey design, build install capabilities and our expanded portfolio of solutions and services. In addition, we are also progressing efforts to identify and pursue potential strategic acquisition and partnership opportunities that can accelerate our growth. Underscoring our optimism is the enormous untapped market for LED lighting and controls upgrades at facilities that have yet to be updated. Based on a U.S. Department of Energy study, the domestic LED retrofit opportunity in Orion's key markets is estimated to be in excess of $20 billion today and growing to over $80 billion by 2035. To pursue this substantial market potential, Orion's Board and management team have updated the company's strategic plan to help guide our organic and inorganic growth initiatives, with a long-term target of building Orion into a company generating up to $500 million in annual revenue in approximately 5 years. To achieve this long-term target, our plan envisions organic growth of at least 10% per year, augmented by external growth initiatives, including the active pursuit of strategic acquisitions and business partnerships. We set these financial goals to provide our stakeholders with a vision of what we believe Orion can become. Now let me turn the call over to Per Brodin, Orion's CFO, for additional perspective on our financial results. Per?

Thanks, Mike. Orion's fourth quarter fiscal '21 revenue increased $9.6 million or 37% to $35.5 million from $25.9 million in Q4 fiscal '20, supported by strong national account activity as businesses rebounded from pandemic-related disruptions earlier in the year. Q4 '21 benefited from several large national retrofit projects, including projects for a large national retailer and a specialty retail customer with minimal COVID-19 impacts. We achieved full year fiscal '21 revenue of $116.8 million, despite the significant challenges presented by COVID-19 work stoppages and project delays that began last March and continued through mid-August. Orion's gross profit improved to $9.2 million in the fourth quarter fiscal '21 from $5.8 million in the fourth quarter fiscal '20, and our gross profit percentage improved to 26% from 22.3%. For the full year, gross profit was $30.1 million in fiscal '21 versus $37.1 million in fiscal '20, primarily related to lower revenue. Our gross profit percentage increased 120 basis points to 25.8% in fiscal '21 from 24.6% in fiscal '20 due to improved product margin as well as supply chain and input cost management. Fourth quarter fiscal '21 operating expenses were $6.7 million versus $6.1 million in the prior year period, improving to 18.8% of sales versus 23.7% in the respective periods because of the impact of significantly higher business volume. Total operating expenses declined to $23.3 million in fiscal '21 versus $24 million in fiscal '20. Orion generated EBITDA of $2.9 million in the fourth quarter of fiscal '21 compared to zero in the fourth quarter of fiscal '20, reflecting higher revenue and gross margin. Fiscal year '21 EBITDA was $8.4 million versus $14.7 million in fiscal year '20 and reflecting lower year-over-year business volume. The fourth quarter and fiscal year '21 included a noncash tax benefit of $20.9 million or $0.67 and $0.66 per share, respectively, for the release of valuation allowances or reserves previously recorded against our deferred tax assets. Including this benefit, Orion reported fiscal fourth quarter '21 net income of $22.1 million or $0.71 per share compared to a net loss of $0.5 million or $0.02 per share in the year-ago period. Orion's full year net income was $26.1 million or $0.83 per share compared to prior year net income of $12.5 million or $0.40 per share. These results will make future direct comparisons difficult without adjustment. I'll repeat that this tax benefit is a noncash item. The upshot of recording this item is that our future tax provisions will likely be more reflective of actual statutory rates in place at the time. Those provisions will not indicate that we are generating a cash tax liability under current tax laws. Rather, we plan to utilize our approximately $70 million of tax NOL carryforwards to offset future tax liabilities. Our press release includes a reconciliation of net income and EPS to net income and EPS, excluding the tax benefit for your reference. Fourth quarter '21 net income, excluding the tax benefit, improved to $1.2 million or $0.04 per share versus a net loss of $0.5 million or $0.02 per share in the fourth quarter of fiscal '20. Also, excluding the tax benefit, fiscal year '21 net income was $5.2 million or $0.17 per share compared to $12.5 million or $0.40 per share in fiscal '20. Orion's balance sheet as of March 31, 2021, remains strong, with net working capital of $26.2 million, including $19.4 million of cash and cash equivalents and no balance outstanding on our new expanded $25 million revolving credit facility. This compares to net working capital of $27.8 million at March 31, 2020, which included $10 million drawn on the company's revolving line of credit as a precautionary measure at the outset of the COVID-19 pandemic. And with that, I'll turn the call back over to the operator for the Q&A session.

Our first question comes from Amit Dayal from H.C. Wainwright.

Mike, with respect to the services business, could you give us some color on how this is tracking for you in terms of maybe customers that you have signed up for this? Or what portion of revenues this was in the fourth quarter?

Sure. The revenue so far for our Maintenance Services division has been rather modest. We've not reported actual numbers for it. It is a growing business that we invested in during fiscal '21. And as I mentioned during my comments, we expect it to grow into a significant business for us in the future. So I'm not quite prepared to talk about actual customers at this time. But if we would enter into any substantial contracts that require disclosure, we would do that. But I will tell you that we're having fruitful conversations with some of our existing larger national accounts about how to work into some of their service opportunities and also talking with new customers about opportunities. So we're optimistic about it. We think we're in the right space. We think there's opportunity, and we expect to be able to talk more about it in the future.

No, that's understandable. And then when we think about the services opportunity for you, should we think about it in terms of this tracking against new deployments? Or do you have an opportunity to offer this to older customers or prior deployments as well?

Sure. We absolutely have the opportunity to offer this to past deployments also. So we see it as an opportunity to bring it to the table when we are talking with a new customer about their installation needs of having these ongoing maintenance capabilities for them. But we certainly are also going to be going back to our existing customers where we've got installations in place to talk with them about our ability to provide lighting, electrical as well as some other maintenance services to them. So it's really as wide open for us of both new and prior installations. It also is open to us for customers we have not done installations for in the past. So there really are several different areas that provide opportunity for us for the services business.

Okay. And then with respect to the outlook for fiscal '22, the $150 million to $155 million in revenues, is the majority of that already in backlog or contracted? How should we think about how much of that is sort of already in the pipeline for you?

Sure. We can discuss our pipeline status. At this early stage, I won't confirm that everything is in backlog or contracted. It's typical for our business to receive a significant amount of work during the fiscal year that we both sell and execute. We feel optimistic about our revenue goals for next year based on customer discussions. Our planning is grounded in specific talks with customers, especially larger national accounts, and includes insights about our distribution and contractor business. We are confident in our current position. We have existing contracts announced earlier for some major national accounts, and discussions in the public sector, as well as in automotive and healthcare, are looking very promising. That's my perspective, Amit.

Our next question comes from the line of Alex Rygiel from B. Riley.

Any chance you could quantify the headwinds as it relates to sort of your revenue guidance?

Well, I think maybe the way I would suggest we think about that is that we have laid out this revenue range of $150 million to $155 million, knowing that there are certain headwinds out there for us. And we just felt it was important, given what we assume many investors understand is going on, not only in our industry, but just generally in the manufacturing businesses that there are some challenges with the supply chain for a variety of reasons that I mentioned on the call today. And so we think that if there is not a significant worsening of what we're facing right now, we feel very comfortable with that. But we just felt it was important to at least say that either the recurrence of significant COVID-19 pandemic impacts, which we, at this point, do not see, or if some of the supply chain challenges or labor shortages could get much worse, it could have an impact. So I'm really not prepared to kind of give a specific dollar amount or percentage to it. And right now, we continue to feel that we have laid out a number that we are comfortable with for $150 million to $155 million.

And then regarding your M&A, please proceed.

Alex, I just thought I'd add something, too. If you look at our balance sheet, I think you'll see that we've made some strategic investments from an inventory standpoint. So we are doing what we can to mitigate those headwinds, and we'll continue to do that as part of our managing of this risk as much as possible.

Great, if I could just add one more thing, Alex, sorry to interrupt. We actually see that some of these challenges are part of doing business. We view them as an opportunity to outperform our competitors because we believe we can make agile decisions. As Per mentioned, we have the financial strength to take on more physical inventory and place orders further in advance. Therefore, we take these challenges in stride and feel very confident in our ability to continue performing well despite some of these difficulties.

And then with regard to your pipeline of projects for larger customers, obviously, it appears to be very strong. Can you talk about how these may roll in or roll out over the next few quarters? And should we be at all concerned about sort of the timeline of rollout and any potential delays?

At this point, we do not anticipate any delays related to the factors I mentioned that could affect our business. Our customers continue to perform well. We often encourage shareholders to consider the full year, noting that we operate a project-based business alongside our services business, which includes recurring revenues. However, with repeat customers on several projects, there may be fluctuations between quarters for various reasons. For instance, a customer might not be ready for us at a facility and may need to postpone for a few weeks, which can affect quarter-to-quarter results. We urge people to focus on our sales goals and guidance for the full fiscal year to understand our performance. We are optimistic about the latter half of fiscal '21, as it aligned with our earlier forecasts from November and February. We have a track record of making accurate predictions and providing a reasonable range for where we expect to be.

Our next question comes from the line of Eric Stine from Craig-Hallum.

So focusing on the outlook for fiscal '22, I understand that previously you believed fiscal '22 would surpass fiscal '20, with both EBITDA and EPS projected to be better than fiscal '20. Regarding EBITDA, was this caution a reflection of the uncertainties tied to certain costs and supply chain challenges? Or should we still expect that if you meet that revenue range, you are likely to exceed fiscal '20 from an EBITDA standpoint?

Yes, I think that if we come in at the $150 million, we should be right around that same EBITDA range as 2020. The EPS is obviously going to be different because of the fact that we're now going to book tax provision, so yes.

Got it. Okay. So you're basically just assuming, I guess, both revenues and EBITDA, if things stay as is, do you feel good about that level?

Yes.

Okay. Good. Maybe just on the acquisitions, the pipeline there. I mean, as you think about that, I mean, do you envision those more as bolt-on acquisitions? Or are you actually looking at some large acquisitions? And then I'm also curious, is this a result of some feedback that you've gotten from customers to add this to your turnkey offering in some of these applications? Any thoughts there would be great.

Absolutely. We actually previously have looked at both opportunities of some small or mid-sized bolt-on acquisitions. And we've looked at some situations that one could say we would be a little bit more transformative of a larger size, Eric. And we feel we have the financial strength and the ability to raise money if we need to through debt markets, perhaps equity to look at something larger if it really makes sense for our company and for our shareholders. So we are not limiting ourselves to any direction of large versus small, but want to be open to all opportunities. But certainly, from a management team and a Board standpoint, we understand that as opportunities get larger, the risk needs to be more clear and the opportunity needs to be something that we think really can be good for our company and good for all of our stakeholders. Secondly, we do have some conversations with customers when they say, are you getting into these areas? Can you help us in some of these areas? So some of these things that I've mentioned have been driven by customers asking about our ability to help them in different areas. Maintenance Services is certainly one of those we've talked about, which is one of the goals we could perhaps ramp up with an acquisition. But we also think that there could be some interesting opportunities when we think things like solar, maybe EV charging stations. We've got a very large retail big box customer base over the years. And we expect some of those may be looking down, continuing to look at some of those options, some probably have solar already and some might have it. And EV charging stations might be more prevalent in some of these areas in the future. So part of it, we look at it as we have excellent project management capabilities. And if we can find something that fits with our customer base, fits with those core skills that we have, is around the electrical, energy saving, energy storage area, these are just things that we want to look at. So we wanted to make it clear that we are more active than we had been in the past. That's partly because we've been successful, and we feel we have a strong balance sheet and a good vision of where we want to go as a company.

Got it. And then the Maintenance Services, I mean, I would assume that, that would fit pretty well with expanding in these other areas: solar, EV charging, storage, wherever it may be.

It really would. And part of it for us is that we are a company that physically keeps things installed. And so whether it's installing light fixtures or installing lighting controls or starting to install sensors, one, somebody has to do the installation for some of these things. And again, that goes back to your program management capabilities and project management capabilities. And number two, all of those things we've talked about do require ongoing maintenance services. And so it's a great full complement of things we can bring to the table for potential customers to not only help them upfront but then be with them in the future with those systems to keep them well maintained.

Our next question is come from the line of Cliff Rakowski as a private investor.

It’s challenging to assess the seasonality of your company because last year was quite atypical, and your revenues have increased. Would you say that in the upcoming year, it will be more concentrated at the beginning or the end, or will it be more consistent throughout? Are you anticipating any supply chain challenges this quarter that you plan to compensate for in the following quarters?

Sure. Well, I think that I would go back a little bit to what I commented in one of the earlier questions that we would encourage people to think about an annual basis for us when we are laying out our revenue guidance for the year. We had last fiscal year provided some quarterly information just because it was such an unusual year with COVID and things got delayed and then came back very strong. We thought it was helpful to tell people that the second half of our year is going to be very strong. So to say that it is going to be straight linear, we don't think we can say that. We continue to feel confident about the revenue range we're laying out for fiscal '22 of $150 million to $155 million. We don't see some of the challenges we've talked about having a significant initial impact on us. And we'll see how things progress. We've kind of baked in some of those challenges right now into what we've laid out for our revenue goal for this year, Cliff, and we'll see how things kind of develop as we go along. So I think, again, just ask shareholders to keep in mind that we are project-based and repetitive customers that sometimes we can be a little bit lumpy from quarter to quarter as things kind of move around. But often if not because things were canceled, they simply are delayed and they might flow into the next quarter for us.

Okay, that's understandable. Regarding gross margin, it looks like in the last quarter, you were already surpassing the fiscal year '20 gross margin. I believe you are forecasting EBITDA to be around the fiscal year '20 level. Are you suggesting that gross margin might decrease next year? If so, would that be due to the semiconductor shortages, or is this just a cautious approach?

This is Per. I think the way we look at it is we've been working on expanding margins, particularly gross margin over time. I think that will still be an objective for us. If we're able to do that, we certainly would outperform fiscal '20 at the gross margin line. I think one thing you need to keep in mind, probably from a fiscal '20 standpoint, is that it was a year of significant growth. And so the company probably hadn't made all the infrastructure investments that were necessary to support a $150 million business. And so as it ramped up from a business volume standpoint, it was also necessary to add some more resources internally that show up now in the operating expenses section to accommodate that level of revenue.

Our next question will come from David Dorette, a private investor.

Mike, can you hear me?

Yes.

I have a medical background that spans several years, so my three questions will specifically focus on the PureMotion product and your efforts in that area. Since it was a bit premature to ask when you announced the product, I believe you have now had the opportunity to gather feedback in the field. My first question is about competition. While you were developing this technology, which competitors did you identify as comparable to your product? Are there any out there? That's my first question.

Let me do my best to answer those. I might refer back and forth between the three points. First of all, UVC has been used for a long time to treat air through air systems and water systems, so there is competition in the market. We explored other technologies and found some units that provide both air movement and UVC capabilities. Ultimately, we chose to partner with an existing business partner for their air movement technology because it offered a good balance of solid design and intellectual property that protected the air motion aspect. Their initial work in the market gave us confidence that this could be an excellent product. We collaborated with them to develop this into a product we could launch as the PureMotion product. When comparing it to competitors, we evaluated design and serviceability, considering how to service the product in the long run. Safety was also a key aspect, as UVC light cannot directly impact people. We designed the UVC chamber in this fixture, which has undergone UL testing and passed. When we sell it, it does not need to be labeled as dangerous since the light is entirely contained within the fixture chamber. These were some factors we considered competitively, and we felt very confident that this product would work well for us and fit into the market we were targeting.

We see a lot of different opportunities. You might consider fitness centers, locker rooms, or professional teams, among others. There are numerous areas where this could be applied. We have had discussions with many partners in airports. We find the UVC aspect of PureMotion to be a fascinating idea in certain locations. On a scale of 1 to 10, I would estimate that people are generally very interested in this product, leaning toward the higher end of the scale. Many individuals are considering safe building solutions to enhance comfort for their employees as they return to the workplace, and this product could assist them in achieving that. And I also would just quickly digress and say we've had a product for a number of years that is in the 405-nanometer spectrum of the light wave, which has an impact on viruses also. It has the ability on the surface side to kill viruses, bacteria and mold. And so we actually have a dual solution where this PureMotion could help in the air movement, and the 405-nanometer product, which incorporates some technology from one of our partners could handle that on the surface side of things. So we really have 2 products at this point that we would bring to the marketplace. So our initial feedback has been good. Like any new product, it tends to be a little bit longer sales cycle, and so we're starting that, and we'll keep people informed as we make some progress. But we feel really good about the feedback so far. And then to your last question, if we got a big order, we feel very good that we could ramp up to manufacture and assemble a product that would be needed if we received some larger orders. We, as we mentioned earlier, have put certain inventory in place to manage against supply chain issues. And so we feel comfortable we could manage a certain level of manufacturing. If things got huge, there could be some future delays due to just supply, particularly the UVC boards that are needed for this. And we have incorporated our product around the product because we felt it was more of the best proven in the industry right now. So we're very optimistic about this, and we look forward to being able to talk about it more as we make some headway with their products. So thank you very much for your questions, David.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to Mike Altschaefl for any closing remarks.

All right. Thank you, Victor, and thanks again to everyone who joined us today for our call, and we appreciate your interest in Orion. We will be participating in the Craig-Hallum Virtual Investor Conference tomorrow, June 2, and we will also be participating in the LD Micro Invitation on June 8, which is also virtual. During the period of social distancing, we have participated in several other virtual conferences, which are recorded and available on our website. And as always, you can contact our IR team with any questions or to schedule a call with management, and their contact information is included in today's press release. Well, thanks again. We look forward to updating all of you on our fiscal '22 Q1 call. Have a good rest of the evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.