Q3 2024 Orion Energy Systems Inc Earnings Call
Participants
Bill Jones; IR; Orion Energy Systems, Inc.
Mike Jenkins; CEO & Director; Orion Energy Systems, Inc.
Per Brodin; CFO, EVP & CAO; Orion Energy Systems, Inc,
Amit Dayal; Analyst; H.C. Wainwright & Co.
Eric Stine; Analyst; Craig-Hallum Capital Group LLC
BJ Cook; Analyst; Singular Research
Andrew Shapiro; Analyst; Lawndale Capital Management LLC
Steve Rohde; Analyst; BlackRock, Inc.
Presentation
Operator
Good morning, everyone, and welcome to Orion Energy Systems Fiscal 2020 Fourth, third quarter conference. At this time, all participants are in a listen only mode. I would now like to turn the call over to Mr. Bill Jones, Investor Relations.
Bill Jones
Thank you, operator. Good morning, everyone, and thank you for joining today's call. Mike Jenkins, Orion CEO. and Per Brodin, Orion's CFO, will review the company's third quarter results, financial position and outlook, and then we will 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, Orion lighting.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 other matters 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 turn the call over to Mr. Mike Jenkins.
Mike Jenkins
Thank you, Bill. Good morning. Thank you all for joining today's call. As previewed last month, Orion's third quarter revenue rose 28%, reflecting an anticipated acceleration in contract activity on large LED lighting projects and the government sector projects secured through energy service company or Esco partners and projects with our largest customer. Q3 also saw growth in our electrical maintenance services business, which is benefiting from a new three year agreement with Orion's largest customer, our Volterra EV charging solutions revenue was flat with year-ago period and down on a sequential basis, principally due to the variability and timing of larger projects. We are, however, seeing very encouraging progress in the build-out of our longer-term EV charging project pipeline as we engage with new and existing customers to address their EV charging requirements.
Our business development progress makes us optimistic about our growth prospects across the business in quarter four and fiscal 25 in LED lighting, we have several larger retrofit projects that are underway and should contribute to growth over the next few quarters. These include the remaining $6 million in revenue from our European retrofit project for the US Department of Defense, several million dollars in annual revenue for external lighting for the next several years to support our largest customer as well as other potential projects with them ongoing retrofits for a large global warehouse and logistics customer, which we expect to range from 8 million to 9 million per annum for the next few years and a large multimillion dollar project for a global technology customer, which we expect to begin in the first half of fiscal 25.
In our LED business, we see continued expansion through our Esco channel partners who continue to focus on our industry-leading high-efficiency lighting products as well as our new line of value-oriented fixtures, including our Tritan Pro retrofit, high bay lighting fixtures and our Harris exterior LED lighting products. These products strike a balance between our commitment to high-quality components, design and energy efficiency and the budget limitations of some end customers these new products expand our total addressable market within the Esko and distribution channels. As an example, we recently won and are implementing a project for a national specialty retailer through Enesco partner using Trident Pro due to the customer specifications. Tryton Pro was the appropriate product to meet their needs. This project should generate revenue of $3 million to $4 million for Orion over the next 24 months.
We continue to work on our electrical contractor channel to increase our value proposition by adding the right partners, products and pricing to meet their needs. We have seen excellent quoting and pipeline build in this channel since we launched the Tritan Pro in our exterior Harris line, reflecting the strategic benefits of our U.S. manufacturing facility here in Manitowoc, Wisconsin. In the third quarter, Orion released a full line of new LED Lighting Fixtures compliant with the Build America Buy America or BABA. Act. These include energy-efficient LED high base LED strips and LED troffers. These fixtures exceed the requirements of both the earlier Buy America Act and the new BABA. Act, which mandates at least 55% of material content come from US sources that the BABA. Act stipulates that states municipalities and schools use BABA. compliant products when possible in order to receive federal funding. Certainly it's important to us to be a leader in American manufacturing in the lighting industry, but it also unlocks federal funding opportunities for customers that can significantly increase their ROI and support their sustainability goals.
In November, we attended the federal Small Business Conference in Texas to showcase our BABA. compliant products. We have received great interest from customers in our quoted pipeline is already over $1 million and growing. One additional area that should be noted is that there are now seven states which are banning fluorescent fixtures for commercial and industrial use over the next several years. Our understanding is that these states, including California, will prohibit new fluorescent fixtures from being sold as well as prohibit replacement fluorescent tubes. We have heard from several customers that these requirements are motivating them to accelerate their timings on retrofit projects into the next 12 to 18 months.
Turning to our EV charging solutions business. We have made good progress in building out the Volterra team and its geographic reach to meet the needs of large national customers. We are now engaged with a broader base of customers and opportunities which are contributing to growth in our project pipeline, which is now in excess of $50 million quarter three revenue of $2.8 million matched prior year quarter three, but was down slightly from last quarter due to project timing. We do anticipate some variability in quarter over quarter performance of this segment due to the timing of what we expect will be larger regional and national projects. As you probably know, there has been some recent reporting on potential pushback in the EV space by auto dealers and rental car companies as well as questions about the forecast of EV growth, reaching 50% of the new vehicle fleet by 2030 or 80% by 2040 while some of the earlier projections might prove to be a bit bullish. It is clear that EVs shipments are continuing at a significant rate in our communities, and enterprises are very much behind in building out the needed infrastructure to support the current and future needs of EVs, full-track with its over 14 years of experience and impressive track record of EV charging station deployments is extremely well positioned to serve customers in this area. Both direct experience and capabilities are even more compelling when compared to many industry newcomers with little or no technical or EV charging deployment experience required to plan, deploy safe, successful and reliable EV charging solutions.
Now turning to our maintenance services business, which achieved solid revenue growth year over year and sequential margin improvement in the third quarter. The improvement was attributable to the contribution of a new three year agreement to provide preventative lighting maintenance services for our largest customers, approximate 2000 retail locations nationwide. Our performance also reflects the benefit of our effort to secure price increases with key customers given a range of significant inflationary pressures over the past several quarters many of these older contracts were no longer profitable in response to higher costs. We have raised our pricing to bring our profit margin more in line with our overall business over the past few quarters, we have worked to reprice legacy contracts and we have successfully converted three of our four customers to our new pricing structure with it within contracted periods because of our committed because we are committed to returning this business to a solid margin profile. We are prepared to exit relationships where we are and unable to secure adequate pricing and margins. Many of our stabilized legacy customers have their three year maintenance RFP processes in our current Q4 period. So we do expect some revenue headwinds as we move into fiscal 25 in our Maintenance segment as we continue to focus on profitability. Overall, we believe that maintenance services offers key accounts additional value and provides Orion with recurring revenue. We are active in our business development efforts and have new business in our pipeline that we believe could come to fruition in the first half of our fiscal '25.
Having touched on each of our product and service offerings. I want to reiterate Orion's focus on delivering the highest quality energy efficiency and value to our customers with the highest levels of customer service. Our complementary go-to-market approaches of working with SCO.s and distribution partners, along with our unique turnkey solutions, allow us to participate in a broad segment of the overall market. Our turnkey approach starts with visits to each site and progresses to custom project and product designs, configuration and project planning, including utility and government rebates. We then can manufacture the LED fixtures are procure the EV charging hardware from industry leading partners in managed delivery, permitting, installation and commissioning at hundreds or even thousands of sites, all with just one point of contact and accountability our initiatives to diversify the business over the past two years are starting to make meaningful contribution contributions to our growth from both new and existing customers. We continue to see significant cross-selling opportunities, particularly with long-standing large national account customers with potential needs across each of our three areas of operation. A priority in coming quarters is to effectively market each of our capabilities across our combined customer base. As a result of these initiatives, we expect our expanded array of solutions to support meaningful long-term growth in fiscal 25 in the years to come.
Now I'll turn the call to Per Brodin to discuss our financials and financial outlook in more detail.
Per Brodin
Thank you, Mike.
As noted in today's press release, our Q3 '24 revenue of $26 million grew 28% year over year and 26% sequentially from Q2 of this year, driven by anticipated strength in LED lighting and maintenance services and prior calls, we noted several larger projects that we expected to ramp meaningfully in the second half and began began to benefit from that ramp in Q3. One of those projects is the $9.6 million Department of Defense project in Europe, which we had expected to complete this fiscal year. At this point, we have approximately $6 million remaining on this contract and think approximately $1 million or more of that amount could roll over into early fiscal '25.
Maintenance Services revenue rose to $4.6 million in Q3 '24, which compared favorably to $3.3 million in Q3 '23 and $3.6 million in Q2 '24. A significant portion of this growth came from our three-year agreement for preventative lighting maintenance services for our largest customers, roughly 2000 retail locations nationwide. So those were the growth drivers in the quarter in terms of profitability. Our gross profit percentage or gross margin increased 95 basis points to 24.5% in Q3 '24 from 23.6% in Q3 '23 due to the achievement of a more favorable sales mix of products, the impact of higher sales volume on fixed cost absorption and improved margin on services, gross margin on services rebounded sharply to 18.5% in Q3 from slightly negative in Q2 '24 and 17.6% in Q3 '23. We expect further margin benefits driven by the continued impact of new pricing on renewing contracts in coming quarters.
Gross margin on Orion products improved approximately 220 basis points to 27.7% in Q3 '24 from 25.4% a year ago. The increase is attributable to new product sales as well as the benefit of higher volumes on fixed cost absorption, reflecting steps taken in the maintenance business and our expectations for the business. Overall, we expect there blended gross margins to remain strong in Q4. Operating expenses declined to $8.4 million in Q3 '24 versus $9.4 million in Q3 '23 and $8.7 million last quarter. The year-over-year variance is primarily due to a lower earn-out accrual in the current quarter and two acquisition expenses that occurred in the prior year period.
Looking at the bottom line, we reported a Q3 '24 net loss of $2.3 million or $0.07 per share as compared to a net loss of $24.1 million or $0.75 per share, which included a 56 per share non-cash tax charge to record a valuation allowance on deferred tax assets in Q3 '23. On a comparable basis, last year's net loss would have been approximately $6.3 million or $0.19 per share. Excluding the adjustment, cash generated from operations was approximately $1 million in Q3 '24, reflecting improved operating results and net positive working capital changes. On December 31, we had current assets of $45.7 million, which included inventory investments of $20.8 million. Accounts receivable of $15.7 million and cash of $5 million. Net working capital was $15 million, and our financial liquidity, defined as cash and revolver availability was $17.5 million and as such, we believe we are in a good position to fund our operations and growth goals moving forward.
As a reminder, last month, we updated our revenue expectations for fiscal 2024 to a range of $90 million to $95 million, representing growth in the range of 16% to 23%. On a preliminary basis, we are targeting growth of 10% to 15% for fiscal '25. And we will update this outlook when we report our full year results in June.
Question and Answer Session
Operator
And with that, I'll ask the operator to begin the Q&A session and they give as a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced to withdraw your question, please press star one one. Again, please standby. We will compile the Q&A roster and we do ask that you limit yourself to three questions and then queue back up. If you have any more.
Thank you. And one moment first question.
And our first question comes from Amit Dayal from H.C. Wainwright. Your line is now open.
Amit Dayal
Thank you.
Good morning, everyone.
Hey guys, on the EV side, you know, the little bit of a drop sequentially. Was it seasonality or are there any other factors driving our you know some of our quarterly variance from that segment.
Mike Jenkins
Yes, good question. It was just really how the projects laid out in the quarter project timing. Overall, we continue to see as I referenced in the comments, our project pipeline continues to build now north of $50 million in the overall pipeline, and we really haven't seen any substantial push-outs or anything out or anything along those lines due to concerns about the broader EV market.
So.
Amit Dayal
Okay. The $50 million pipeline you mentioned on, you know, is this all northeast or is it spread across the US.
Mike Jenkins
So it's spread across the U.S., it's out of the Northeast. So we're beginning a we've got our cross-selling work with our existing lighting customers, and we're gaining traction in multiple states around the country.
Amit Dayal
Okay.
And then your comments on, you know, focusing on higher margin customers and high-margin revenues. What how much of the sort of lower margin revenues could be impacted by this shift in strategy? Or is it a small amount that is not very meaningful. Loans are on margin number that we should sort of see and it can make an impact on the model projections.
Mike Jenkins
As specifically we're referring to the maintenance business, the legacy maintenance business, which was acquired with daylight.
And so right now, we're working yes, that's the focus. We're working through those RFPs in this quarter. So we really don't have any specifics in terms of what that could look like, but it's isolated really to the to the business that we acquired with satellite in the maintenance side.
Amit Dayal
Okay.
So thank you for that. Maybe just last one from me. For fiscal '25, what kind of revenue mix between lighting, maintenance and EUV should be I'd be looking for.
Mike Jenkins
Well, we're we projected 10% to 15% guided in terms of growth for the year. We're expecting continued growth in lighting and stronger performance in EV and the maintenance business will be we'll see how things kind of play out with these couple of customers through the RFP process. But certainly the growth in lighting and strong growth in EV.
Amit Dayal
Okay.
I I'll take my other questions offline, guys.
Thank you so much.
Mike Jenkins
Thank you.
Operator
Thank you. And one moment Our next question and our next question comes from Eric Stine from Craig-Hallum.
Your line has now.
Eric Stine
I'm Mike Kemper.
Thanks for taking the questions.
Hey, so curious, I know with your large customer will know who it is because large customers, you've clearly expanded beyond the retrofit and the footprints on to the maintenance. Now I know that they are very interested on the EPC side I'm just curious if you're seeing that dynamic with other national accounts where you are starting to see that expansion beyond just your I'm going to I guess it's your legacy business of the core LED retrofit?
Mike Jenkins
Yeah. Great question, Eric. Yes, we are. I mean, I think that there's there's interest on certainly the EV front with a broad swath of our customers and all of those, particularly our large public cum customers. A lot of those are considering their electrification strategy moving forward to support their guests, their cut their employees and in some cases electrifying their fleets. So we are having conversations with a broad group of them. Some of them the maintenance services might apply to particularly retail customers who don't have maintenance staffs in their locations. And that's really where our value proposition probably is strongest. And so there are conversations happening there as well. So we see all three of these pillars continuing to work moving forward from a cross-selling standpoint.
Eric Stine
Got it.
And then just coming back to the initial outlook here for fiscal 25. So I mean, basically, it's your implied fourth quarter at the midpoint and you're annualizing that. But if you dig down into that, I mean, you say you expect to be done largely done with the DoD project and is it fair to say that you are not assuming on the renewal at better pricing with that fourth customer on the maintenance side?
Mike Jenkins
Yeah, we certainly agree that our projections are that we'll be substantially complete with the DoD project on the maintenance side, we feel like we've taken reasonable considerations into the forecast.
Eric Stine
Okay.
And then as we think about that, the project I mean, correct me if I'm wrong, but you are kind of qualified. I know that you still have to go through the of the RFP process, but maybe talk about that pipeline as well, whether it's something that there are things out there that could could replace the project completed as you get into 25 or this more about the long-term outlook?
Mike Jenkins
Sure. Absolutely. The federal space is one that's of keen interest to us. We do have a significant pipeline that has been built over the years and continues to be accelerating newly built right now, both on the lighting side as well as on the EV front. And that's both, you know, working with with partners like we are in the DoD situation and in some cases on a direct basis.
Got it. I mean, is there a way to think about what's the most typical form partners where it's typically we're working through and yes, typically we're working through at Asco partner who would look at would do kind of the entire project, including HVAC and other elements. And we are the lighting specialists who basically manage that and we often manage that in a turnkey fashion.
Eric Stine
Okay. Does that do anything to your kind of visibility into what's out there? I suspect that's something where you're working with certain partners and you kind of I would think would have a view of what the potential is and get it.
Mike Jenkins
Yes, we're these are long-term projects, and we have a significant pipeline that's built up with core partners.
Okay. Thanks a lot.
Thanks, Eric.
Operator
And, thank you. And one moment for our next question.
And our next question comes from BJ cook from Singular Research.
Your line is now.
BJ Cook
Hey, guys.
Thanks for taking my call.
Mike Jenkins
Sure
BJ Cook
Just a couple of things here. I wanted to touch on the TV segment for just a sec on you mentioned it here in the short term that the timing of some of their larger projects could you expect Are some of those projects kind of simply move to the next QUARTER?
Yes, I think it's the next quarter and maybe the quarter after that in on both near term, these some of these things have been moved out a little bit. Again, I want to stress that we're not seeing any kind of broad reaction in the marketplace. Any of the headlines that we've seen about the rental car companies or anything like that, this is just normal kind of project pushouts that I that's the way I would describe them at this point.
Bill Jones
Now.
A couple of things, BJ., that can impact timing as some of these customers are waiting for permitting and sometimes they're waiting for final grant approvals and they can't move forward without that. So there's couple of things that just are kind of gatekeepers to certain projects that you can push things a part of a month, but it will cross over quarters. Those are the kind of dynamics we're dealing with.
BJ Cook
Got it. Thanks.
Appreciate that I guess you also talked about the $50 million-plus pipeline and EB. That's pretty impressive. I guess I'm kind of wondering if some of that comes from the infrastructure bill? Or is it maybe that's further down the road? Glad you had a benefit in addition to what you guys are doing internally?
Mike Jenkins
Yes, good question. We're seeing that product build that pipeline build rather is coming from the organic full-track business. It's coming from cross-selling opportunities with our lighting customer. It's also coming from strategic partners like equipment providers that we work with in a true kind of partnership format and chairs opportunities there. So we've rapidly built that pipeline from several quarters back. It was approximately $30 million. So we've seen nice build on that. And again, the team is very focused on driving those through that converting those to wins and execution.
BJ Cook
Fantastic, thanks. Just one more quick one, guys. Chatted about running off and renegotiating some of the legacy unprofitable maintenance business.
Appreciate that. Can you at least give us a glimpse of what segment market segment margins might look like on a normalized basis?
Per Brodin
Yes, I think that's probably hard to say to it. A lot of it depends on sales volumes, but we expect over time that things will be at fairly normalized rate.
BJ Cook
Great.
Thanks.
I appreciate it, guys.
Mike Jenkins
Thank you.
Operator
And thank you. And one moment by next Quest.
Yes.
And our next question come from Bill Dezellem on Team Capital Management.
Your line is now I think you back in January in the middle of the month, I believe that the government awarded something like [$]150 million to repair your existing EV charging stations. What was full-track involved in that process in and out, if not, why?
Mike Jenkins
Hi, Bill, nice to hear from. You know, we have not seen that money flow through at this point in time, a lot of the funding from the federal government does take quite some time to work its way through the Navy funds, as an example, were approved probably about 18 months ago, 18 to 24 as that funding is going to the states and now just kind of beginning to hit the street. So we have not benefited from that funding at this point in time.
My impression, Mike, was these were actual awards that had taken place today.
Did I misread the announcement,
Per Brodin
Bill, I don't know that the specifics of the announcement. I would have to go back and check on that.
Okay.
Thank you. Let me continue down the Easy Pass. The [$]50 million of pipeline that you referenced, how does that compare to one year ago?
Mike Jenkins
Yes, we were probably, I would say, around 30 a year ago, maybe maybe a little less actually less.
Yes.
So it's built substantially.
Congratulations. And that and then you'd referenced in the release and in your opening remarks that 10% to 15% growth anticipated next year, what do you currently see as as the trajectory of how the year and how the year looks and really much as much thinking rate of change. Are you anticipating that each quarter is going to be roughly up 10% to 15% is our front front-end weighted back-end weighted? And what's your your general early read on that?
Mike Jenkins
Yes, good question, Bill. Typically or this year and the years prior we tend to be more back end loaded as a company. It's the way kind of the timings of some of the projects and the capital cycle tends to work out. So I think that the growth rate would be applied, let's say, at this point in time, and we haven't really have you given any specifics on on this, but I would see quarter-over-quarter growth throughout the year, but we're probably going to still the way the quarters lay out be a bit back-end loaded.
Mike, just to make sure I understand what you're what you're saying there is that that the rate of change that 10% to 15% probably similar for each of the quarters. However, in an absolute dollar sense, the year will be back-end loaded, just like it was this year and and that's how we get the math to be up 10% to 15% in each of the quarters.
Mike Jenkins
Yes, good summary, Bill, absolutely.
Thank you. And one additional question, please. You've referenced the large accounts and their interest in all three business segments. Talk a little bit more about that, if you would please and including including to what degree this is new customers that are wanting to do a bundle of all three versus existing customers primarily and and any additional insights you can share would be appreciated.
Mike Jenkins
Sure.
I could use two examples of customers right now. One is a customer that we did a very large EV installation for our team as they've worked with this customer has made them aware of our new exterior lighting products, which are available, the new Harris ones that we launched this past year. And so we were we're in the process. We quoted three-quarters of $1 million project lighting project for that. So that's an example of cross-selling working from an EV standpoint to lighting.
On the other side, we have a long-standing manufacturing customer of ours, a public company, multiple sites throughout the US. They're now getting through their strategy on electrification, which will include fleet for them. And we're engaging actively engaging with them in terms of helping them design their layouts and requirements as they move forward and then obviously hope to move that to execution.
So those are two examples of some of the cross-selling
And relative to the new customers versus existing, what you described is primarily existing. Do you have any new customers that are coming to you or that you're finding that are kind of right out of the gate wanting to talk about doing all three of all three parts of your business, lighting, maintenance and EV?
Mike Jenkins
I think the reality is that new customers typically come to us about a pressing need in one of the three areas. And that once the customer comes into the ecosystem, let's say we cross-sell from there that's typically the way it works.
That's helpful.
Thank you for the time
Mike Jenkins
You're welcome. Thanks Bill.
Operator
And thank you and one moment, if I may question. And our next question comes from Andrew Shapiro from Lawndale Capital management.
Your line is now open
Andrew Shapiro
I thank you you mentioned in your script three of four.
Yes, legacy customers and the maintenance sites have been converted to have their service contracts up market prices rather than the money losing lower price level on this last customer's contract, it runs off when was it during the current fourth quarter or some time thereafter?
Per Brodin
at the end of April.
Andrew Shapiro
Okay.
At the end of April.
And are there other margins at a loss in this or have you recognized like a fixed-price defense contract, you know, remaining estimated loss in the revenues generated from this contract going forward are just at zero margin or there is some embedded loss?
Per Brodin
Yes, now there is an embedded loss, and we do not have a reserve for future losses on that contract based on the nature of that contract. So as we work through contract on that least the completion of the current contract, we would anticipate there's additional losses as netting against the other results within maintenance,
Andrew Shapiro
right, right.
Yes, no, no, we're already seeing the improvement and somebody had asked you the question. Maybe we're just hesitant to provide a numerical range of sorry, someone asked you the question on what the normalized margins would be. And from this segment once the money-losing contract job burns off and I didn't know, are you comfortable or you able to provide a range or that was just something that, you know, you'd rather not for whatever competitive reason that provides?
Per Brodin
Full transparency.
I didn't quite hear the full question before. So we anticipate that business operating in the 20% margin range.
Andrew Shapiro
Okay, excellent.
Thank you on? And then are there any other smaller customers that you have in that segment that are also with these kind of fixed rate terms that have to burn off?
It's smaller amounts of money loss or this is it?
Mike Jenkins
we've addressed all the situation we have and are addressing all the situations big or small that need to be addressed from a margin standpoint.
Andrew Shapiro
Okay, excellent. Thank you, guys.
Mike Jenkins
Thank you.
Operator
And thank you and one moment by next question.
And our next question comes from Steve Rohde from BlackRock. Your line is now open.
Steve Rohde
I wanted to just focus on your last statement that you've addressed. You are addressing all the margin issues. And I appreciate the prior caller's question is a clarification on the fourth customer on the three of the four customers that have not been that have been converted to the new pricing model with our better margins. What I wanted to understand is are there contracts now fully the negative margin contracts fully done, just like you said in April and fourth customers' lost contract will be done. Is it that there's those other three customers there are no more contracts with them that have these negative margins or is it simply that they are accepting prospectively on new contracts, better margins, but there's still contracts with them that have yet to work off with the negative margin?
Mike Jenkins
Yes, very good question and good as for clarification. So we have to be clear, we have gone to these customers within contract periods, and we have really successfully repriced three out of the four, as also indicated in my comments earlier, this is the RFP season, let's say, for the majority of these accounts so the majority of the RFPs are taking place now in our Q4. And so therefore, we are as we suggested, some of these RFPs may not renew because of the profitability concerns that we have.
Steve Rohde
It's interesting --
Per Brodin
that another way we yet. I was just going to put another way to think about it while they are three of the four open the contract mid contract, we did not extend those contracts, so they went back to the regular RFP cycle.
Steve Rohde
Okay. And what I wanted to clarify here, it's interesting, and I'm glad you guys reached out to these three of the four customers. What are the four four, but you had success with this three of the four. What's interesting to me was their willingness to reprice the existing contracts. And I think the implication there is that those contracts are no longer unprofitable. Is that first of all, the correct implication that these existing contracts with them are no longer unprofitable?
Mike Jenkins
correct.
The ones that have been repriced are profitable.
Steve Rohde
And then the second half of that is with the customers' willingness to reprice those existing contract. There's what I hear in your answer is an implication that the we probably won't be doing much more with it with a number of them. And that's kind of a strange outcome where yes, we understand that we need to reprice. But no, we really don't see we don't see a model going forward. And I just don't I don't know how that lines up, you see what I mean we need we need to reprice our contracts. But going forward, we really don't see ourselves doing much more business. And yes, I don't know how those two line up just follow the conflict, I'm trying to resolve?
Mike Jenkins
Sure, sure. I understand. I would say that they understood the inflationary environment and therefore, we negotiated our way to pricing within contract periods. Anytime you get into an RFP situation, it's a competitive situation. And so therefore, there's a lot of unknowable. So what we do know is that we're not going to take on business, which is not profitable. And if we end up shedding some revenue because of its unprofitable nature and in especially for one of these situations that will benefit us in the long term.
Steve Rohde
Okay.
And a and that's obviously the way to go. I would do want to ask you one thing, though, have you or do you have any ability in the marketplace to go forward on a cost-plus model because it seems to me that we got squeezed on our like, like everybody did on margins during the pandemic. And the bottlenecks, et cetera. But your particular business, I think, might lend itself to a cost-plus model so that we reduce the risks that either we get our pricing wrong or that other exogenous events, which are floating around in massive, a possibility whack us yet again?
Mike Jenkins
(multiple speakers) unfortunately, that's not the way the industry works. And so it's basically a fixed price three year and the customers are all use the same methodology. So we have to subscribe to that if we're going to end up doing business with them. So again, we feel like we've had some wins. We've had some contracts which have been won in some RFPs, which we've gotten pricing through which we feel good about. And but we do have some that we're in the midst of right now, which are unknowable, except for the fact that we're not going to take on unprofitable business. So that's what we've committed to.
Per Brodin
And this.
Steve Rohde
Okay, let me check.
Per Brodin
We are pretty deep into the weeds. If you want to have a detailed conversation sometime maybe you can reach out to the IR group and we could schedule a separate call for them.
Steve Rohde
Okay. We can do that. I appreciate it. Thanks, guys.
Mike Jenkins
Thank you.
Operator
That concludes the Q&A session. I'll now turn the conference, Mr. Jenkins for concluding remarks.
Mike Jenkins
Thank you all for joining our call today. We look forward to updating you when we report our full year results and as we progress through fiscal 25, we also hope to speak with you at upcoming investor events, including Cingular's research, Emerging Growth and Value leaders webinar on February 22nd for to meet with you in person at the LD Micro Invitational in New York City, April eight and nine. Please contact our Investor Relations team with any questions or to schedule management call or meeting the IR team whose contact information is in today's press release. Thank you again.
Operator
Thank you. This concludes today's call.
