Q2 2024 Orion Energy Systems Inc Earnings Call
Participants
Michael H. Jenkins; CEO & Director; Orion Energy Systems, Inc
John Per Brodin; Executive VP, CFO, CAO & Treasurer; Orion Energy Systems, Inc.
William Jones
Eric Stine; Analyst; Craig-Hallum Capital Group LLC
Amit Dayal; Analyst; H.C. Wainwright & Co.
Alexander John Rygiel; Analyst; B. Riley Securities, Inc.
Andrew Evan Shapiro; Analyst; Lawndale Capital Management LLC
Presentation
Operator
This is a fiscal 2024 second quarter conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Bill Jones, Investor Relations.
William Jones
Thank you, and good morning, everyone. Thank you for joining today's call. Mike Jenkins, Orion's CEO, will begin with an overview of Orion's business, strategy, and outlook, followed by Per Brodin, Orion's CFO, who will discuss second quarter and year-to-date results. The company's financial position. We will then open the call to investor questions. Today's conference call is being recorded, and a replay will be posted on the Investor Relations section of Orion's website, orionlighting.com.
Remarks that follow and answers to questions include statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally include words, such as anticipate, believe, expect, project, or similar words. Also, any statements that describe future objectives and goals, plans, or outlook are also forward-looking.
Such forward-looking statements are subject to various risks that could cause actual results to differ materially than currently expected. These risks include, among others, matters that the company has described in its press release issued this morning, as well as in its filings with the Securities and Exchange Commission. Except as described therein, the company disclaims any obligation to update forward-looking statements, which are made as of today's date.
Reconciliations of certain non-GAAP financial metrics to GAAP measures are also provided in today's press release. I will now hand the call to Mike Jenkins.
Michael H. Jenkins
Thanks, Bill. Good morning, everyone, and thank you for joining our call today. As anticipated in our last call, Orion's business progressed in the second quarter with both sequential and year-over-year revenue growth of 17%, reflecting the revenue momentum we anticipated building as we progressed through fiscal '24. September was our strongest month of the year, and within our top three months since the start of fiscal '23, for both our lighting business and our overall total.
The pair will discuss our Q2 performance and financial gains, guidance a bit later in the call. Now I'd like to start by providing an overview of our strategy and performance across the business segments. Within our lighting business, the $9.6 million Department of Defense European LED Retrofit project began in earnest in Q2 with revenues of approximately $1.2 million, and we expect to complete the bulk of this project in the fiscal year.
This project experienced some unexpected startup issues working its way through the EU regulatory bodies, but is now in full swing, and we expect to catch up in the second semester of fiscal '24. We anticipate several other larger retrofit projects to contribute to the balance of this fiscal year, including a project for a global technology customer, as well as continued growth from a long-term global warehouse logistics sector customer.
We also expect meaningful revenue to come from an outdoor lighting project for Orion's largest customer. We feel good about our growing pipeline of lighting business. We also anticipate solid full-year growth in LED lighting revenue from our ESCO and electrical contractor distribution channels. In fact, the technology customer retrofit project I just mentioned was sourced through a relatively new ESCO partner.
By their nature, ESCOs are a relatively new and well-established company, and they are focused on delivering energy savings and environmental benefits to their customers. LED lighting retrofits are right in the sweet spot of their value proposition as they provide significant, quantifiable long-term energy savings and generally a full return on investment within two to five years. Our ESCO business was up 43% in Q2 and 38% for the first six months, which includes our expanded relationship with our local energy distribution company.
We are also a large warehousing logistics customer, but excludes the DoD project, which was sourced through an international ESCO. We are continuing to build our base of productive agent and distribution channel relationships, focusing on partners who recognize the value of our high product quality, leadership and energy efficient performance, and our commitment to the highest levels of customer service.
To extend our penetration in our distribution channels, we recently launched a new line of more value-oriented products that incorporate the industry-leading design, quality and energy efficiency for which Orion is known within the trade. These new products include TritonPro LED retrofit high bay and other interior fixtures, as well as an expanded line of Harris-branded exterior LED lighting products. They were developed in response to requests for more competitively priced LED contractor-grade fixtures that incorporate Orion's strong design and product quality.
Feedback has been very positive, and we've recorded over $1 million in revenue from these new products in Q2, their first quarter of availability. Our quoting activity has been strong, and we look to accelerate sales of these products in the second half of fiscal '24. Importantly, these products also provide a solid margin contribution. Also on the product front, we recently debuted several new products that are compliant with the Build America, Buy America, or BAA Act, and we expect that they will be well-received by those customers who prefer US manufactured products.
BABA is a certification which requires 55% or greater of material content in products to come from U.S. sources. The BABA. standard was created as part of the federal IRA bill, and it stipulates state, municipal, and schools to use BABA products, when possible, in order to receive federal funds. Orion is uniquely positioned to provide this product due to our US based manufacturing facility and capabilities.
As you may know, over the past 24 months, we have diversified our business into two new complementary areas, which include electrical maintenance services, as well as providing turnkey electric vehicle or EV charging station solutions. These new areas are well aligned with our core mission of helping customers achieve their business and sustainability goals while providing Orion with exciting cross-selling opportunities. Many of our customers had previously asked us about our ability to help them in these areas, which was a key factor in our decision making to enter these spaces.
We entered the commercial industrial EV charging solutions market in our third quarter of last year with the acquisition of Voltrek. We had a large bus project in quarter four of last year and then saw revenue dip sequentially in Q1 this year as we managed through Voltrek's integration and the build-out of its sales and project management teams to support expanding revenues and a broader geographic reach.
Our EV segment rebounded strongly in quarter two, delivering $3.4 million of revenue versus no contribution in the year prior. We anticipate continued growth at Voltrek in the coming periods as the business capitalizes on its long-term track record of success, growing market interest in EVs throughout the US, and our ability to cross-sell these solutions with our strong base of customers and partners.
Projections are that 50% of the new vehicle fleet will be EVs by 2030 and 80% by 2040. Businesses everywhere are now considering their electrification and EV charging. This is an exciting and rapidly evolving strategy to support their employees, customers, and their own fleet needs. Orion is well-positioned to help our customers and partners through this exciting and rapidly evolving journey. Our maintenance services business also delivered both sequential and year-over-year revenue growth.
We acquired Star-lite Lighting in quarter one of last year, and with the acquisition came a number of multi-year contracts, some of which are now no longer profitable. We have a range of cost increases, including higher subcontractor costs, that have occurred over the past several years.
To address these inflationary pressures, we have updated our pricing for new and existing customers to better reflect our current cost structure. We've been working to renegotiate contracts as they came up for renewal, and we are making progress. We have renegotiated three out of four of our most significant legacy contracts and believe this effort will be a success. We will return maintenance to solid profitability as these new price levels continue to impact our results in the second half of fiscal '24.
We recognize our pricing effort could result in the loss of some business and could therefore provide a modest near-term revenue headwind for the segment. Nonetheless, there are plenty of growth opportunities in this space, and we believe that we can restore profitability while delivering high standards of service and great value to our customers. We recently finalized a three-year Preventative Maintenance Agreement with our historically largest customer.
Orion will provide LED lighting and light electrical preventative maintenance services to our customers' approximately 2,000 retail stores nationwide. The agreement formalizes and builds upon services we initiated in February and scaled through July. Overall, I am pleased with the progress we are making, though we still have work to do in terms of integrating our lines of business and pursuing expanded revenue opportunities.
We are excited about our expanded array of solutions to offer customers and partners, and are encouraged by their interest. We have already secured product sales and new projects through our cross-selling initiatives between all three of our segments. This remains an area of focus for the business that we believe we can deliver growth synergies as we move forward.
In summary, we believe we are building a strong and resilient business, building a strong and diverse business for long-term success. We expect to see our total revenue accelerate across the business in the second half of fiscal '24, and as such, have reiterated our $100 million revenue guidance for fiscal '24. Now I'll pass the call to Per Brodine to discuss our financials and fiscal year outlook in more detail.
John Per Brodin
Thanks, Mike. Orion's Q2' 24 revenues improved 17% to $20.6 million from $17.6 million in Q2 �23, primarily reflecting Voltrek activity in the current quarter and maintenance revenue growth, which was partially offset by lower lighting revenues. Revenue also grew 17% on a sequential basis compared to the first quarter of fiscal '24. As discussed previously, we have several larger lighting projects, including the European DoD project and a large outdoor project, which we expect to ramp meaningfully in the second half of fiscal '24.
We recognized $1.2 million of revenue on the Department of Defense project in Q2'24, which leaves approximately $8 million of remaining revenue to complete this project. Our first half revenues, which rose 8% to $38.2 million from $35.5 million in the first half of fiscal '23. Our gross profit grew to $4.6 million from $4.4 million in Q2 '23, in spite of a decline in gross profit percentage.
Notably, our gross profit margin improved on a sequential basis, reflecting the improved terms on three significant maintenance contracts and better absorption of fixed costs across all businesses. As Mike discussed, our gross profit percentage is being impacted by inflationary challenges over the past several quarters on legacy contracts in our maintenance business. During the quarter, we renegotiated pricing on three of four of our most significant legacy contracts, and we are working to update other legacy contracts as well.
Our maintenance business also began benefiting from a new three-year agreement to provide preventive maintenance services for our largest customer. In Q2, our efforts led to an improvement in service margin from negative 11.2% in Q1. Although it's still slightly negative, we expect further margin benefits in the back half of this fiscal year, driven by the rollout of our new pricing. Gross margin on products improved approximately 250 basis points to 30.1% in Q2 '24 from 27.6% a year ago.
This increase is attributable to new product sales and overall higher volumes benefiting fixed cost absorption, reflecting the steps taken in our maintenance business and our expectation of growing sales volume in the business overall. We expect our blended gross margin to improve further in the second half of this fiscal year. Our Q2 operating expenses increased to $8.7 million from $7.4 million in Q2 '23, mainly due to the addition of Voltrek operations, included $1.1 million of earn-out accrual and $200,000 of intangible amortization related to the acquisition.
Operating costs declined sequentially from $9.6 million in Q1 '24 due to lower compensation-related costs and a large credit write-off that occurred in Q1 '24. We recorded a Q2 '24 net loss of $4.4 million, or $0.14 per share, including the Voltrek earn-out, versus a net loss of $2.3 million, or $0.07 per share, in Q2 '23.
Cash used in operations was $4 million in Q2 '24, reflecting operating results in a $1.5 million Voltrek earn-out payment, partially offset by positive net worth and capital effects. We achieved positive free cash flow in September and expect positive free cash flow over the balance of this fiscal year.
At September 30, we had current assets of $45.3 million, which included inventory of $20.2 million, accounts receivable of $16.1 million, and cash of $4 million. Working capital was $16.2 million at the close of Q2 '24. Total current liquidity, including cash plus $8.9 million of revolver availability, was $12.9 million. We expect our liquidity position to improve in the second half of the fiscal year, based on the expected ramp in revenues.
In addition, we are looking at additional ways to enhance our liquidity, primarily through a potential mortgage on our corporate headquarters. As mentioned, in Q2, we started several larger projects and finalized a nationwide maintenance agreement.
In addition, our backlog sits at $21.1 million in September 30. All of these things and more contribute to our full-year revenues outlook. Reflecting these and other factors, we have reiterated our expectation for revenue growth of 30% or more in Q2 '24, complying total revenue of approximately $100 million.
The achievement of this goal implies a meaningful revenue improvement in the second half of the year. Based on this growth expectation, we also expect a solid improvement of our second-half bottom-line performance. With that, we'll ask the operator to respond.
Question and Answer Session
Operator
Thank you. (Operator Instructions) Our first question will come from the line of Eric Stein from Craig Halem.
Eric Stine
Hi, everyone. Thanks for taking the questions. So, when thinking about the second half, you called out the DoD project, which has already started, and the lighting project. So, I guess I want to clarify if that started or when you expect that to start. But just curious, are there any other large projects that you would point to and, you know, things that give you the confidence in that ramp? Clearly, you're reiterating it, so you've got that confidence. I was just trying to gauge that.
Michael H. Jenkins
Sure. There are a number of things. So, obviously, the DoD project, as we spoke about, we talked about an exterior project for our largest customer, which is all basically happening in the second half of this year moving forward. And that's a mid-seven figures kind of project and rollout. We do expect that our number to customer, which we've disclosed, is a global logistics company.
Logistics company and warehouse company, we expect that business to continue to scale as we move forward, which on a year-on-year basis will give us nice growth. And there are other, the global technology project, which we spoke about, we do expect to recognize revenue on that moving into the second half of the year. So, there are a number of nice projects which we expect activation shortly, some of which are already in flight and should scale.
Eric Stine
Got it. So, the DoD one is already in, that's already underway, and the others, I mean, fair to say you're waiting on, but they're, you know, you've got good visibility into those starting.
Michael H. Jenkins
That's right. Yeah. And the DOD one, we would have, we were anticipating a bit more revenue in Q2. I referenced in my comments that we did experience some startup issues getting through EU regulatory bodies. So, that, we view that missed basically to be caught up in the second half of the year?
Eric Stine
Okay.
John Per Brodin
And just for the math, Eric, that, you know, we did say we recognize $1.2 million of that in the second quarter. The total project is in the $9.6 million neighborhood. There was a few hundred thousand recognized in Q4 of fiscal '23. So, there's about $8 million left that we expect the majority of that, virtually all of that, to be recognized in the second half.
Eric Stine
Okay. Got it. And then on the maintenance contracts, and I know you've, you said you've renegotiated three of four, but you've got some others out there. I'm curious if you can kind of quantify, you know, how many others might be out there that you would look to renegotiate. And then curious if you have, the mechanisms that you've got in place now, whether there are some, there's some variability to the contracts based on market conditions. Or are they just short, short enough in nature that it would just be kind of an ongoing renegotiation, whenever they come up?
John Per Brodin
Sure. Yeah, as indicated on the last call, we were able to kind of off-cycle address pricing on a couple of these contracts. We have fully got, renegotiated three out of our top four. So, we have one major contract which is still out there that we need to work on. The way it works is basically we've renegotiated pricing, and then all these accounts have their normal kind of RFP cycle.
And so, we will be working through that, and some of those are up as early as the beginning of our fiscal year, early in our fiscal year.
Michael H. Jenkins
And maybe, Eric, a little more context. Four large contracts really are the bulk of the piece of maintenance that is at Stay-lite. So, there are other miscellaneous contracts, but those four would represent the bulk of the revenue in that part of the segment.
Eric Stine
Okay. And so, the last major one is that that's where you've kind of, I mean, maybe to simplify it, you've presented them with the new pricing, and now they go through a process, and hopefully in the RFP process, you would win.
Michael H. Jenkins
Yeah. I mean, certainly we're going through with all of them. And that's the one that's remaining. So, yes. I mean, in principle, those are having conversations right now.
Eric Stine
Yep. Understood. Okay. Maybe last one for me. Just on the EV opportunity, I think I've asked this before, but just curious, you know, obviously your customers, many of them requested these capabilities from you. Do you expect this to be a decision that's, you know, by company over the years? Is it a company over their footprint, or is it more kind of a site-by-site decision?
Michael H. Jenkins
I think it can work both ways. I think it really depends on how they run their businesses and how centralized or decentralized they are as a company. I think some will go basically across the country, and we're having some conversations with folks like that. And others, it will really depend on whether or not they have a fleet location out of that facility, et cetera. So, I think it's going to work both ways.
I think it can work both ways. I think it really depends on how they run their businesses and how centralized or decentralized they are as a company. I think some will go basically across the country and we're and having some conversations with folks like that and others, it will really depend on whether or not they have a fleet location out of that facility, et cetera. So, I think it's going to work both ways.
Eric Stine
Okay. Thank you.
Michael H. Jenkins
Thank you, Eric.
Operator
Thank you. (Operator Instructions) And our next question comes from the line of Amit Dayal from H.C. Wainwright. Your line is open.
Amit Dayal
Thank you. Good morning, guys. On the EV topic, is Pipeline more sort of corporate and enterprise, or is there some government-related opportunities as well?
Michael H. Jenkins
Yeah, there certainly are both private and public opportunities. We currently do business with municipal governments. That's part of kind of the legacy of Pipeline. That's part of the legacy of Voltrek, as well as with private companies. And so, we see growth in both areas. We were recently at a federal government trade show.
And there was a tremendous amount of conversation about the electrification strategy of the federal government for their own use and facilities. So, I think downstream we're going to see rapid adoption in both areas.
Amit Dayal
Okay. Thank you. And then, on the Voltrek earn out, could you remind us, what remains to be paid out, et cetera?
John Per Brodin
We made the payment I referenced in September of $1.5 million toward the Fiscal '23 earn out, and then there was another $1.5 million paid in October towards that $3 million earn out. There will then be the opportunity. For a Fiscal '24 earn out, that amount would be paid in the second quarter of calendar, second calendar fiscal '25 to the extent it's earned. And that is a $3.5 million opportunity.
And then, the following year, there's a $4 million opportunity plus a kicker for a cumulative --on cumulative EBITDA earnings over the first three years of ownership, which could be a max potential of an incremental $3.15 million. That would be paid at the same time as the fiscal '25 earn out opportunity.
Amit Dayal
Okay. Thank you for that. I appreciate it. And then, maybe just on the service maintenance segment. I know you're going through a lot of sort of renegotiations, et cetera, but are you also actively trying to add new clients at this point, or are you sort of trying to, you know, clear out your existing setup with the legacy contracts before you move to adding new customers?
Michael H. Jenkins
Sure. Well, we actually did add quite a bit of new business with our number one customer, as we talked about, on the preventative side for 2,000 locations. So that was a big add to the team in terms of new volume. So right now, we're certainly digesting that. We're building out and shoring up our resources around that, and then at the same time focused on profitability for the legacy business.
We do see growth opportunities out there. But we certainly want to approach this a bit step-by-step and address the profitability of the legacy business as our first order of priority right now.
Amit Dayal
Once, or, you know, if the service margin is normalized for you guys, how much of a lift should we expect, you know, to the overall blended margin?
Michael H. Jenkins
Well, I think if you look at the blend, think about the blend of the margin. We expect to ultimately get back to what we've experienced as a more traditional service margin for that business. So that's not going to happen over the next quarter or so as we continue to renegotiate these contracts. But that's where we are certainly targeting that this business is headed.
Amit Dayal
Okay. I'll follow up on that one, later. But that's all I have for now, guys. Thank you so much.
Michael H. Jenkins
Thanks, Amit.
Operator
Our next question comes from the line of Alex Rygiel from B. Reily Securities. Your line is open.
Michael H. Jenkins
Hello, Alex.
Operator
Alex, your line is open. You may be on mute. Alex, if you could disconnect and try using the call me function.
Michael H. Jenkins
I thought she just came through. Alex, go ahead.
Alexander John Rygiel
Hi. This is Min Cho for Alex Rygiel. Can you hear me?
Michael H. Jenkins
Yes. Sure. Hi, Min.
Alexander John Rygiel
Okay. That's so confusing because I logged in as myself. But okay. Sorry about that. A couple of quick questions. Just given the interest rate environment, are you seeing any kind of project delays or just slowdown in fitting opportunities for some of the larger projects
Michael H. Jenkins
At this point in time, we have not seen any substantial delays that we could attribute to that. None at all.
Alexander John Rygiel
Okay. Good to hear. Also, in terms of your Voltrek business, sounds like it's progressing fairly well here. Are you still on track to hit kind of at $10 million to $12 million in revenue for the full year? Can you talk a little bit about the pipeline and maybe how big this business can get for you in the next couple of years?
Michael H. Jenkins
Sure, sure. Yeah, we did say earlier that we thought that between the Voltrek business and the maintenance business that it would be around a third of the business overall. We still think we're on track for that plus or minus. The $10 million to $12 million that you referenced for Voltrek, given our current run rate coming out of this quarter, we definitely feel like that's achievable.
And in terms of the longer view of Voltrek in the EV space more broadly, as I referenced in my comments, the macro environment remains very strong towards EVs. It won't be perfectly linear, but it's directionally strong. And we do see the opportunity to grow a business of $20 million to $50 million in the next couple of years.
Alexander John Rygiel
Excellent. And then it's nice to see that you reiterated your revenue guidance for the full year. Just any thoughts on EBITDA for the second half of this year? Can you exit on a positive EBITDA and how do we get there?
John Per Brodin
Well, in my comment, I certainly mentioned that we expect our improved and increasing sales to translate into the bottom line. So we do expect, as I mentioned, to be free cash flow positive, which I think implicit in that is also being EBITDA positive as we leave the year. But I'd say that our year-to-date performance would indicate we probably will not finish the year with a net positive result.
Alexander John Rygiel
Okay. And then just one final question. I believe you had a large DoD contract for your PureMotion product, and it was awaiting funding. Any update on that, or any update on some of your newer kind of, I guess, more value-add products?
Michael H. Jenkins
So PureMotion, the project that you referenced is still live. It is still, but it's basically on a hold status right now with the DoD. So we do expect that that project will, at some point, move forward, but we don't have timing at this point in time.
Alexander John Rygiel
Okay. Great. Thank you.
Operator
Thank you. (Operator Instructions) Our next question comes from the line of Andrew Shapiro from Lawndale Capital Management. Your line is open.
Andrew Evan Shapiro
Hi. Thanks. Just trying to get drilled down into this, the maintenance contract stuff, and the losses. When you define a contract as a legacy contract, what do you mean, and when was Stay-lite acquired?
Michael H. Jenkins
By legacy contract, we mean it was something that was an existing customer of Stay-lite when they were acquired. We acquired Stay-lite effective January 1, 2023.
Andrew Evan Shapiro
Okay. So fairly recent and all that. Now, so these contracts --
Michael H. Jenkins
Sorry, 2022.
Andrew Evan Shapiro
Okay. And these contracts, I think you said in the last call when I asked questions, were around three years or so in duration. So I guess that may be median term to long term for this kind of business. What are you doing differently in your new maintenance contract bidding to share, I guess we'll call it margin risk, or to mitigate this risk?
Is it just that you're pricing it higher and hoping that you won't have another wave of inflation? Are you doing it with a shorter duration on the pricing? How are you approaching it differently?
Michael H. Jenkins
Yeah, so each of the customers have their own specifics around how you contender and go through an RFP process. So we are, you know, confined by some of those protocols from the customers. Clearly, what we would like to do is built in a reasonable level of escalation into our contracts, given the inflationary environment that we've experienced over the last couple of years.
Where that's not possible, then we have to take those inflationary challenges that are anticipated over the future into account when we go through the RFP process.
Andrew Evan Shapiro
Okay. And last call, I also had asked about, and I think you said at the time you were negotiating improvements, and it looks like you got three out of the four, and you said on the contracts that wouldn't amend, the furthest their runoff would take you is into the spring. So, of those kinds of contracts where they won't amend to allow for a pricing increase, et cetera.
And that are going to expire later in the spring, do you expect those customers to then renew at your, you know, higher and better terms? Or that's going to be kind of annualized revenue that you were generating that will not be added back in? And can you kind of give a range to help quantify or get our arms around, I guess, the amount of revenue from that subsegment that, we wouldn't mind necessarily going away, but we shouldn't count on, you know, continuing?
Michael H. Jenkins
Yeah, that is directionally correct. The number of these contracts are going to naturally expire in spring, actually in quarter one of our next fiscal year. Some of them are the end of April and in that time frame. So the renegotiations that we've done are basically for the current contract period. Then we'll go through the cycle for the next round of RFPs.
At this point in time, those are active conversations which are starting, and I really have no guidance to provide on any of that as those are active conversations with customers.
Andrew Evan Shapiro
Okay. And, like, how large in terms of revenue is the whole Stay-lite segment here? That, I guess, includes a combination of profitable and unprofitable.
Michael H. Jenkins
Yeah, when we acquired Stay-lite, we disclosed that they were a $9 million to $10 million business.
Andrew Evan Shapiro
Okay. And the renegotiated ones, the ones that you opened up your inter period, was this just to get to break even on those contracts, or the pricing would provide for profitability at your normal margin or somewhere in between?
Michael H. Jenkins
Yeah, moving forward, you know, it is our mandate to have these contracts be profitable. So not just to break even.
Andrew Evan Shapiro
No, I understand that. No, I understand that, Bill, in terms of the new ones. But right now, you've gotten some contracts amended interperiod before they expire, and you got some improvement. But the improvement you got; did you get just to break even? Did you get to your desired margin, or did you get to somewhere in between?
Michael H. Jenkins
Yeah, most all of these contracts, the pricing changes that we're making, would allow for the company to be profitable on these contracts. They are rolling out, so we don't recognize the change in all cases immediately, because there's often a backlog and those types of things.
So the full impact of these contract changes and pricing changes occur over time. But the goal and what we've implemented is for all of these accounts to drive profitability.
Andrew Evan Shapiro
Okay. And two other follow-ups, not on the stay-lite. Voltrek, when does that acquisition and anniversary end? Remind me, the earn-out targets are not just revenue-based, but they're EBITDA-based, right?
Michael H. Jenkins
So the anniversary of Voltrek just occurred this past month in October. So we've just now anniversaried it. And the earn-out is based on EBITDA, not on revenue.
Andrew Evan Shapiro
Okay. And the DoD contract profitability? As you build that thing out, the accounting on that, that's not like some kind of completion of contract type of accounting, or is it?
John Per Brodin
I mean, to some degree, that's a decent way to think about it. It's based on installation of the fixtures, which is a decent analog for percentage of completion. So as we're impacting multiple buildings, on those bases, so it's as we install the fixtures, we recognize the revenue.
Andrew Evan Shapiro
Okay. Lastly, you made a comment about potentially seeking a mortgage on the headquarters building of course, this is not the optimal time to go lock in some kind of long-term rate. When does your current bank line, what's its maturity date?
Michael H. Jenkins
December of 25.
Andrew Evan Shapiro
Okay. And your pricing is what reference rate plus what? What's the margin on that?
Michael H. Jenkins
There's three bands. It's silver plus 150 to 200 and a quarter.
Andrew Evan Shapiro
Okay. And are we in the toughest band right now in light of the fact we're not generating positive EBITDA?
Michael H. Jenkins
That is correct.
Andrew Evan Shapiro
Okay. Great.
Operator
Thank you. And with that, this concludes our Q&A session. I want to like to turn the conference back to Mr. Jenkins for closing remarks.
Michael H. Jenkins
Thank you, and thanks to everyone for joining and listening to our call today. I look forward to updating investors and stakeholders in coming months and quarters as we execute on our growth objectives for fiscal '24. We continue to take opportunities to meet with investors in person or virtually.
We are presenting at the Sidoti & Co. virtual conference on November 15, and I encourage you to listen to our presentation and or to register for a one-on-one call. Thank you. For more information on our planned events or if you would like to schedule a call with management, you can contact our investor relations team whose information is in today's press release. Thank you very much. Have a good day.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
