Welcome to the Orion Energy Systems’ third quarter 2009 earnings conference call. (Operator Instructions). I will now turn the call over to Mr. Erik Birkerts, Chief Operating Officer.

Thank you for joining us for Orion Energy Systems’ Fiscal 2009 Third Quarter Conference Call. With me on the call today are Neal Verfuerth, President and CEO, and Scott Jensen, CFO. Before we begin, I will read the Safe Harbor Statement. Our remarks that follow, including answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified as such because the context of such statements will include words such as “believe,” “anticipate,” “expect,” or words of similar import. Similarly, statements that describe future plans, objectives, or goals are also forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in our press release issued this afternoon and furnished to the Securities and Exchange Commission on Form 8-K and Form 10-K filed with the SEC on June 27, 2008, and other filings we have made with the SEC. Except as described in these filings, we disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all. Now, I'd like to turn the call over to Neal.

I'd also like to welcome everyone to our Orion Energy Systems Fiscal 2009 Third Quarter Conference Call. After I make a few opening comments, I’ll ask Erik to provide some highlights from the quarter as well as describe progress within our business. Scott will then provide financial detail in the third quarter, and I will conclude with comments on Orion’s strategic direction and long-term vision. We’re pleased with the results our business delivered in the third quarter despite navigating through the worst global recession seen in decades. These results demonstrate the strong fundamentals of our business, the value of our technology that we deliver to our customers, and most importantly the hard work and commitment of our people. Additionally our results during the quarter nearly reached the record levels we achieved in last year’s third quarter, a time when the economy was healthier and business confidence was high. For the third quarter of fiscal 2009, we reported revenues of $22.4 million, net income of $1.2 million, and earnings per share of $0.04. During the third quarter we installed our high-performance energy-efficient lighting known as Phase 1 in over 344 facilities, an increase of over 300 facilities that we completed in the second quarter. Our installed base of our customer facilities in total now numbers 4387 facilities and represents over 725 million square feet of space retrofitted. Our projects have a positive impact on grid capacity and since late 2001, we’ve delivered permanent base load reduction of over 422 megawatts of base load. Furthermore, we’ve made significant progress in delivering new and innovative solutions to our customers with strong shipments and installations of our products, which include in addition to our Phase 1 offering a specialty freezer fixture and we continue to gain traction on our phase 2 and phase 3…

Before jumping some details around our sales organization, I’d like to take a quick moment to update on our new venture, the Orion Virtual Power Plant. We have seen positive traction since officially launching the Orion Virtual Power Plant in October 2008. It has allowed our salespeople to capture deals that would not otherwise have occurred due to capital constraints. To remind everybody, the Orion Virtual Plant is an energy supply contract in which Orion commits to deliver a set amount of megawatts of essentially energy savings at a fixed rate lower than the customer’s rate to acquire power from the utility. As the Orion Virtual Power Plant is structured to qualify as an operating expense, customers benefit from cost savings, incremental cash flows, and Orion’s technology without having to make upfront investments or capital outlays. As of December 31, 2008, we had twelve contracts to deliver over 27.5 million MW and we expect to continue to build further momentum with the Orion Virtual Power Plant in the future. As we discussed in our last call, we have the option of selling the recurring MW payments to a third party and recognizing the value of the deal upfront. The current present value of the 27.5 MW we have on our contracts is roughly $750,000. Alternatively, we may also elect to hold these contracts and recognize the recurring revenue on a monthly basis as we deliver across the MW delivery period. From an accounting and reporting standpoint, this option may lessen near-term revenue but may lead to more stable revenue streams over time. Moving to our sales force, we finished Q3 with 62 people in our sales organization. We have resumed our recruitment efforts, and we are now looking to selectively hire the good talent that is increasingly available, and we…

Our reported revenues for the third quarter were $22.4 million, compared to revenues of $23.3 million in the same period of fiscal 2008. $20.7 million or approximately 92% of the quarter revenue was driven by product sales, while service revenue accounted for the remaining 8%. As Erik mentioned, our partner sales continued to remain strong which impacts our overall level of service revenue. We also had several projects still in process at year end for which we did not record the related service revenues. Our gross margin for the quarter was 33.2% versus 35.4% in the comparable prior year. Gross profit dollars for the quarter were $7.4 million compared to $8.3 million in fiscal 2008. Product margins were negatively impacted by incremental manufacturing costs incurred as a result of increasing volumes of our enclosure, freezer, and recently launched wet-rated fixtures. These product lines are more complicated to manufacture and require more production time for both fabrication and assembly. Due to customer project timelines, we incurred an additional $300,000 in added personal costs, overtime costs, and any efficiencies resulting in an overall margin impact of 1.3% for the quarter. Over the past several weeks, we’ve re-engineered our assembly process for enclosure fixtures, eliminated the additional staffing, and reduced material handling costs. We believe that we are now better positioned to improve our gross margin on these important product lines. G&A expenses for our third quarter were $2.4 million or 10.9% of revenue versus the prior year of $3.3 million or 14.1% of revenues. Additionally, this was a $455,000 decrease versus our most recent quarter. For the quarter, we scaled back or eliminated areas of discretionary spending and implemented a corporate cost reduction program. For example, we eliminated our year-end employee and management bonuses. We also reduced travel, supply, and consulting expenses…

Although we are realistic about the challenges we face in the coming year, we are optimistic about our value proposition and competitive advantage in the market. In fact, we believe our strong financial position coupled with the power of the Orion Virtual Power Plant to get deals over the top in tough time would allow us to aggressively pursue the $9 billion retrofit opportunity at a time when many other companies may be retrenching, particularly those who have franchises built around the new construction market. Keep in mind that we have a grater than 10-year record of successful execution in the retrofit market. The most recent evidence of our experience and success is the prestigious Facility Supplier of the Year Award we received from Sysco Corporation, a global leader in the food service industry. This is the second straight year we’ve received this award, and we were chosen by the popular vote of the Sysco broad line distribution companies in the US and Canada. We’ve retrofitted over 60 facilities, many years ago, and the fact that we still received the popular vote goes to show that the benefits of energy efficiency keep giving over time. I would also like to highlight that we believe Orion’s integrated energy management system is a preeminent solution in the market place. In December, Orion received the coveted Platts Global Energy Award for sustainable technology innovation of the year. According to Platts, the award is given to the company that has made the single most innovative technology advance in the area of green technology. At the end of day, however, what really matters are results. To this end, let me highlight what Coca-Cola Enterprises has achieved in California. Orion has retrofitted more than 4000 lights with our Phase 1 solution at 24 Coca-Cola Enterprises facilities…

(Operator Instructions) Our first question will come from Eric Prouty with Canaccord Adams. Eric Prouty – Canaccord Adams: I was wondering if you could provide a little more detail about what you’re currently seeing out in the market now. If you could compare and contrast what your customers are doing or potential customers are doing and thinking now as compared to a year earlier.

The desire is still there. They are dealing with the same uncertainties we’re all dealing with in terms of what to expect in the overall economy. What we’re seeing is essentially a lengthening of the sales cycle, and that could consist of having to revisit the same deal as it’s going through the process additional times. In several locations, we’re actually having to go back and talk to a new group of individuals that have responsibility for the project, whether our initial sponsors were downsized out of organization or even in the case where our sponsors have additional workload because others of their team members were displaced. Lastly of course after we get through all of that gaunt, we have to get the capital freed up. If they don’t want to participate with our virtual power plant and they want to pay cash, many times it takes even CEO intervention to go in and pull the Orion deal out of the frozen CapEx budget because the fact of the matter is even when times are slow, the lights stay on and our value proposition is still compelling, even more compelling now than in the past.

Eric, as we’ve talked about on earlier calls, about a year ago what we were seeing was we were able to really affect some quick hit deals where we would go in and just based on the payback period, we were able to get decisions from customers very quickly, and as we’ve talked about before, at the time we were seeing as much 40% of the deals closing within 60 days. That quick hit opportunity is not out there right now. That doesn’t mean that we don’t get the deals. It’s just taking a lot longer, and when we’re looking at our data, now we’re seeing maybe only 10% of the deals closing within 60 days. So customers are taking more time than they were in the past. Eric Prouty – Canaccord Adams: What was the depreciation and amortization in the quarter?

Eric, in the quarter, the depreciation and amortization was $480,000.

We’ll take our next question from Eric Stine with Northland Securities. Eric Stine – Northland Securities: I was wondering if you could break down the gross margin between product and service.

On the product side, gross margins were 34%, and as I mentioned there was some cost in the quarter that impacted that margins around some of our fixture lines that we feel we’ve addressed and very optimistic about our opportunities to grow gross margin on those product lines. Our service margins for the quarter were 23%, Eric, and a big reason for that decrease was that we had some legacy project costs recorded in this quarter based on some estimating issues, so that’s not something that I expect to recur. I view that more as an aberration. Eric Stine – Northland Securities: So we should think about the service gross margin returning to somewhat of a more normal level?

Correct. Eric Stine – Northland Securities: You guys did a good job last quarter when you talked about the remainder of the year and guidance. Could you break out this quarter what the revenue was between the national account base, the VAR channel, and also your pipeline?

National accounts were a little over $9 million. VARs were right around $4 million, and then pipeline conversion was $8.5 million. Eric Stine – Northland Securities: Switch gears if you could and just talk a little bit, I know Neal did some, just on the competitive environment. I know over the last few weeks, and this has been going on for quarters that a number of your larger competitors have talked about weakness in the commercial construction market and for that reason, they are going after the retrofit market. Have you seen any difference in how they’ve acted or are there any pricing pressures as a result?

As I see it, nothing has changed. We continue to go head to head with the normal cast of characters out there, the large multibillion dollar players like the Hubbells, and we continue to win business, and if anything, we’re seeing some of the less established competitors out there being more challenged than they were in the past just due to what’s going on today in the marketplace and their access to capital and technology, so I think you’ll probably see a shaking out of some of the smaller ones on a go-forward basis. Lastly, I just want to comment, as it relates to comparing HIF technology to LED, we’re seeing a lot of change in overall sentiment in LED looking at lumens per watt and just overall performance. The HIF technology is proving itself to be far superior to the LED in so many ways. Eric Stine – Northland Securities: The LED is being shown to more niche applications?

What’s interesting is you’re seeing a lot of press out there and industry magazines and white papers done that are talking about a drastic reduction in the overall longevity of the LED, and I saw them probably as recent as 18 months ago at 150,000 hours, went down to 100,000, and now they’re saying 50,000 hours. Conversely, the linear fluorescent guys are now north of 40,000 hours in life, and just on a lumens per watt basis, you can’t beat the high-frequency balance and triphosphor lamps on a lumens per watt basis. The meter exceeds the LED, so the LED, part of their story was historically longevity, now they’re getting down very close to what the fluorescent guys are at. The difference being there even if you assume all things are equal, they are five times the cost.

As a foot note, Eric, they have an issue with lumen maintenance, so even across those 50,000 hours, they may not burnout per se, but lumen depreciation sets in. What we are talking about are white LEDs, not colored LEDs, and white LEDs are the technology that would be most suitable to general illumination. Eric Stine – Northland Securities: Just on the cost side, if I recall correctly, you had your aluminum hedged through the end of ’08. Should we expect to start seeing some benefit from that now that prices have come down in you’re un-hedged?

Yes Eric. We did lock up new pricing for this year, had a nice benefit, so our anticipation is that that will flow through gross margin line.

The next question comes from Glenn Wortman with Sidoti & Company. Glenn Wortman – Sidoti & Company: For the G&A expense, do you expect that lower level of about $2.5 million to repeat in the fourth quarter or should we expect that to move up a little bit?

I’d anticipate that that will move up a little bit in the fourth quarter. Some of our discretionary spending had to do with holiday functions, year-end bonuses. Obviously that won’t recur at the same level. Having said that though, we have implemented a corporate cost reduction program, and we’re very cognizant of our spending right now and driving profitability to the bottom line. Glenn Wortman – Sidoti & Company: With respect to the sales and marketing, I know you said you were adding or looking to add eight new sales people, so I guess we should tick that up a little bit as well, right?

Yes. Glenn Wortman – Sidoti & Company: federal:

We have done projects with some military bases in the past, but by and large, we are focused on commercial and industrial in the private sector. Glenn Wortman – Sidoti & Company: Just on the tax rate, that looks like that jumped up to about 47%. Just a little help on what maybe what we should be modeling there going forward.

It’s just a little over 46% right now. I would anticipate that that’s where that rate is going to end up at year end. We continue to be challenged with the non-deductible ISO stock option expense, and we do get a benefit when somebody might exercise and sell those on the same day, but it’s very difficult to forecast that. We had some higher exercise activity coming out of the lock-up period around those, and in the most recent quarter based on the share price, there was very minimal option exercise activity, so from a modeling standpoint what you see is what you are going to get right now for the balance of this year.

The next question comes from Tom Spiro with Spiro Capital Management. Tom Spiro – Spiro Capital Management: You mentioned in your commentary that the sales cycle has lengthened, and you attributed that largely to the economic weakness the country is suffering these days. I was curious whether you think that another factor might be moderation in the price of electricity, in fact, perhaps it has even gone down in certain places?

I haven’t heard of any place where that has taken place. Natural gas of course has gone down. I see a $7 one-time credit or something for home owner for electricity, but on the C&I side, I haven’t seen any significant movement downward on the price of a KW hour especially the daytime. Tom Spiro – Spiro Capital Management: On the utility side, are they now looking at reserve capacity that appears to be much more adequate than it appeared a year ago?

Absolutely. When we’re producing less goods, the overall demand is going to go down on a somewhat linear bases, but having said that, the base load requirements of the utilities are still something that they are short on and they need to shore up, so our solutions offer significant base load reduction, so they will continue to have value to utilities, and if anything, we gain more traction every passing month as utilities recognize that we are the least cost alternative, we’re clean, and we free up any issues that are plaguing their distribution infrastructure locally because we go right to the load center. It’s almost like distributed generation in many ways, but it’s load reduction.

The next question comes from Jeff Osborne with Thomas Weisel Partners. Jeff Osborne – Thomas Weisel Partners: I was wondering if you could discuss what your outlook is over the next couple of quarters, not just next quarter or this current quarter, but the mix shift that you are seeing in terms of the VAR channel versus the direct channel and how you are realigning that.

I am hesitant to front run our discussions on what fiscal year 2010 will look like, but in terms of the mix, we are investing in our partner network, and I think you are going to continually see that number in terms of percentage of revenue contributed from wholesale move upwards, and that really reflects the fact that we realize that our partners give us that geographic reach, cost-effective geographic reach, to start penetrating into those smaller and mid size customers that we just can’t cost effectively target and service with a direct sales force. Jeff Osborne – Thomas Weisel Partners: I understand you don’t want to comment about the upcoming fiscal year, but just generically speaking, can you talk about what the margin impact is with that kind of secular shift in terms of gross margins? I understand OpEx would be a little bit lower as you referenced you’re more cost effective, but is it a lower gross margin business, perhaps a higher operating margin business versus your historical direct model? Can you just comment on that?

Historically our gross margins with our whole business have actually been higher than our direct business. Jeff Osborne – Thomas Weisel Partners: And what about on an operating basis, any type of commentary there?

Very similar. Generally on an operating basis, you don’t have the direct cost either, Jeff. Jeff Osborne – Thomas Weisel Partners: I understand that the megawatts rollout, and the strategy there, but can you just talk about more of the classic financing need that you are seeing from your customer, either existing installed base or new customers and their ability to get financing and move through with purchases.

Is the question regarding whether they make a cash/CapEx purchase versus Orion Virtual Power Plant purchase? Jeff Osborne – Thomas Weisel Partners: I think at the time of the IPO, you folks had partnered with a relatively small Minnesota bank for financing, and I was just curious if you have any new type of financing partners that you can detail.

Well, we are still working with that bank that you referenced. We also recognize that at this point, in the grand scheme of things, the Orion Virtual Power Plant represents a small portion of our business, but looking forward, we realize it’s going to become a larger percentage of our business, so we are currently talking to other partners that will provide both capital and credit writing expertise so that we can offload some of that from our shoulders.

That does conclude our question and session. At this time I would like to turn the call back over to Mr. Neal Verfuerth for closing remarks.

I think we are through, and we thank everybody for joining us on this call, and have a good evening.