Orion Adds Behind-the-Meter Storage to a Lighting Retrofit Business as Stem Reports $27 Million of Contracted Backlog

Orion Energy Systems reported $25.7 million of revenue for the quarter ended June 30, its fiscal first quarter of 2027, a 32 percent increase year over year. Gross margin was 34.6 percent. Net income was $2.0 million, against a $1.2 million loss in the same quarter a year earlier, and the company recorded a seventh consecutive quarter of positive adjusted EBITDA. Management held full-year fiscal 2027 guidance at $95 million to $97 million.

Orion sells LED lighting retrofits. It is now also installing batteries. The first three of ten on-site battery energy storage deployments are underway in California, for industrial, commercial and public-sector customers, part of a stated diversification beyond lighting into electrical contracting and behind-the-meter storage.

The channel. What distinguishes the entry is not the product but the route to the customer. Orion arrives in these buildings holding the lighting contract and the electrical work, which means the storage sale is an addition to an existing scope rather than a new account acquisition. That is a different cost of sale from a storage vendor cold-calling a facilities director, and it is a characterisation of the channel rather than a claim about margins, which Orion has not broken out.

Stem’s quarter. Stem, the closest listed pure-play in commercial and industrial storage, reported second-quarter results on August 12. Revenue was $33.7 million, down 12 percent from $38.0 million a year earlier and up from $29.0 million in the first quarter. GAAP gross margin improved to 41 percent from 33 percent, and non-GAAP gross margin to 55 percent from 49 percent. Bookings rose 39 percent sequentially to $36.8 million. Annual recurring revenue stood at $62.4 million. Total contracted backlog was $27.1 million. Full-year revenue guidance was reaffirmed at $140 million to $190 million.

The arithmetic. First-half revenue therefore totals roughly $62.7 million. Reaching the low end of the reaffirmed range requires approximately $77 million in the second half, against $27.1 million of contracted backlog. The balance has to be originated and delivered inside the same year. The margin expansion is the clearer signal in the release: gross margin moved up eight percentage points on a revenue base that contracted.

The shared pattern. Read together, the two disclosures point the same way, though neither company frames it as strategy. Stem is producing better margins on less revenue, with recurring software revenue attached to an installed fleet and a thin book of contracted work ahead of it. Orion is adding storage inside a contracting relationship it already holds, without reporting it as a business. In both cases the commercial storage box is being sold as an attachment to something else: software and services in Stem’s case, a facility retrofit in Orion’s.

The non-battery costs. Three developments this week sit on the same side of the ledger, and none of them concern the cell.

Aaroh Kharaya, director of engineering at the utility-scale developer Primergy Solar, published an outlook on August 13 stating that the 2026 edition of NFPA 855 now requires installation-level Large-Scale Fire Testing alongside UL 9540A certification to demonstrate non-propagation between units. That is a per-project engineering expense, borne by whoever assembles and installs the system. The same piece argues that the modular outdoor container has become the industry standard form factor and that building-based storage is finished, a claim written from a utility-scale vantage point where site constraints are not binding.

New York City’s Department of Buildings energy storage rules, at 1 RCNY §§ 101-19 and 3616-07 and effective October 26, 2025, require peer review of most site-specific installations by New York State-licensed engineers with fire protection experience. Projects must also clear a two-step sequence: a Conditional Acceptance Letter before permit approval and a Final Acceptance Letter after certification. All new systems must be registered before operation, and existing systems face an October 2028 registration deadline. The rules reference UL 9540, UL 9540A and a DOB-modified version of NFPA 855. Each of those steps is a soft cost and a schedule line, billed to the installer.

The federal credit that underwrites the economics has also become harder to convert into cash at building scale. Latitude Media reported that credits below roughly $10 million require nearly the same diligence as nine-figure transfers, so traditional buyers pass on them, and that insurance wrappers on small transactions run 7 to 8 percent of the credit’s value. Platforms including Giraffe Financial, Ever.green and Concentro are standardising underwriting and bundling projects to spread that cost, with the buyer pool skewing toward first-time corporates, family offices and foreign-parented firms with limited United States tax liability.

None of those costs fall on the battery. All of them fall on the party standing in the building with a permit application, which is precisely the position an incumbent electrical contractor already occupies.

Where the evidence stops. Orion has not reported storage revenue, has not disclosed system sizes, and has not established storage as a reported segment. Ten sites in one state is a pilot, and the company’s headline growth story remains lighting, electrical contracting and adjacent facility work. Stem, for its part, has reaffirmed a full-year range that the current backlog does not cover.

The testable question for Orion is whether battery storage appears as a reported line in its fiscal 2027 disclosures or stays folded inside contracting revenue as an accessory to a lighting job. The testable question for Stem is whether second-half origination closes a roughly $50 million gap between contracted work and the bottom of guidance. Both answers arrive within two quarters.

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