Q1 2022 Pioneer Power Solutions Inc Earnings Call

Thank you Paul.

Good day, ladies and gentlemen, and welcome to the pioneer power solutions 2020 to first quarter.

Financial results conference call at this time, all participants are in a listen only mode. Following this this discussion the coal we open for questions. If you have a question. Please press the star followed by the one.

And if he really isn't a speaker equipment. Please lift the handset before making your selection I would now like turn the conference over to Mr. Brett Maas of Hayden IR. Please go ahead.

Thank you and welcome the call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer, Walter Mechanic, Chief Financial Officer, and also on the call today is Jim Brickman President of the company's recently launched pioneer power mobility, I'm, sorry mobility business unit. Following this discussion there will be a Q&A session open to participants on the call. We appreciate the opportunity.

To review the first quarter of 2022 financial results as well as discuss recent business highlights before we get started let me remind you. This call is being recorded and webcast. During this call management make forward looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding.

Forward looking statements contained in the earnings release issued earlier today and the poster version of these prepared remarks, both of which apply to the contents of the call I would now like to turn the call right Nathan Magic Chairman and CEO Nathan. Please go ahead.

Thank you Brad good afternoon, and thank you all for joining us today for our conference call.

2022 is off to an excellent start following the sale of our transformer business in August of 2019, we shifted our strategy to focus on two significant durable secular tailwind distributed generation and electric vehicle charging infrastructure.

This shift was deliberate and calculated designed to leverage our engineering technical and marketing capabilities. Most profitably within the electrical equipment landscape. This business shift has indeed unfolded as we had anticipated.

The opportunities related to distributed generation in electric vehicle charging are both significantly manifesting themselves as reflected by our vastly improved financial results for the first quarter of 2022, our revenue for the quarter was up more than 70% year over year.

And sequentially as well in addition, our backlog increased sequentially and year over year to the highest level in more than 30 months, even as we grew our top line by over 70%.

This growth reflects only the initial phase for our new solutions, we believe that demand continues to grow and combined with our current backlog. We are confident that we will increase our revenue by at least 50% in 2022 with E boosting E block, becoming increasingly reber.

Relevant to our consolidated results as the year progresses. In addition in the first quarter. The increased volume combined with improved manufacturing productivity resulted in gross margins expanding to over 14% from four 5% last year final.

The increases in revenue and margin were achieved despite continued supply chain challenges in both pricing and availability. These headwinds compressed our ability to achieve even higher sales and margins in the first quarter.

As I mentioned earlier, our strategic shift was predicated on two durable secular catalyst.

The first trend is the exponential growth in the last 10 years of distributed generation resources, our customers want to add secondary power sources like natural gas engines and fuel cells utilize green energy resources like wind and solar all combined with continued access to the till.

The grid battery backup all in order to create better control over their energy infrastructure control costs and reduce their carbon footprint. Our E block power system makes this possible, enabling customers to efficiently engage and powered peak shaving and peak skimming.

Improve resilience through battery storage and afford the optionality to use renewable energy sources to address ESG goals.

R E block can be deployed quickly.

Often with little or no permitting or interconnect requirements and usually with no interruption to the current operations and we can and indeed have done easily add EV charging infrastructure to this solution.

Sales of Evs continue to increase but there has been a serious lag in building out the necessary charging infrastructure, creating opportunity for us retailers restaurants hotels casinos concerts trade shows sports venues workplaces, all want to move quickly to add charging solution.

The biggest hurdle in this process is often the grid capacity and the word the necessary power infrastructure to handle new large electrical loads generated by the EV charging.

R E block solution addresses these two opportunities during the fourth quarter of last year. We were awarded our largest E block order to date valued at approximately $12 million for 62 E block units to be installed at 62 separate store locations of one of the nation's largest.

Mass retailers. This retailer has approximately 5000 total locations in the United States. These.

These units will improve the electrical resiliency redundancy and power capacity at these locations and also potentially provide EV charging capabilities for employees and customers.

We expect to begin shipping the first of these 62 units towards the end of the current quarter the second quarter.

Please note that this is just one single retailer and just the first phase of deployment. So we see this as an area of significant growth potential for us at pioneer.

Our focus now is to leverage this initial success to bring E block to a much wider group of energy developers and users such as senior living centers supermarket chains warehouse fulfillment centers and many others.

The other secular trend I mentioned earlier is EV charging and specifically anytime anywhere E b type charging.

To address the need for EV charging on a temporary basis like at concerts or festivals or any off grid mobile type requirement, we created a new business unit pie.

Pioneer power mobility law.

Last November 2021, and launched a new suite of solutions for this market called E. Boost E. Boost is a self contained high capacity.

<unk> powered mobile charging solution, we have created three delivery platforms for.

E boost first E boost go G O a T which stands for generate around a truck. This is a truck mounted EV charging solution.

Which is fully mobile indeed provides the highest form of mobility and can provide high speed charging anywhere.

Second eat boosts mobile is a trailer mounted or skid mounted portable solution that provides multiple options for towing or forklift relocation and can be available at specific businesses large sports and cultural events and can be relocated with minimal effort and on short notice.

Yes.

Third E boost part is primarily a stationary EV charging solution with as needed mobility that can provide EV charging to multiple vehicles. This is the ideal solution for gas stations hotels and other retail locations.

That utilized or thinking about installing EV charging to increase customer traffic and retention or is it brand differentiator or for any customer hesitant to invest and commit long term capital and pure physical space to a more permanent E beam solution.

All three <unk> platforms are designed to provide on the manpower needs. In addition to its primary task of high speed charging.

So in emergency situations like a power outage and the like E. Boost can serve as a backup power source with convenient power connectors and outlets available on board, we have already booked and shipped their first sale a significant order of nearly $800000 being deployed at hotel and casino.

Robert C. In addition, we received and delivered this this order in the first quarter. We also won a second order for two units from Navistar, a leading manufacturing solutions provider of trucks and buses.

These two IPU skid mounted solutions are to be used for recharging navistar as electric trucks and buses and have already been delivered in the current second quarter. In fact these units were displayed by Navistar only last week at the 2022 advanced clean <unk>.

Rotation Expo the largest advanced transportation technology, and clean fleet fleet event in North America.

Market reception for E. Booster is strong and growing rapidly we enjoyed significant interest and attention at the a C. T Expos and many internet attendees like electric truck and bus manufacturers and others found the E boost suite of solutions quite compelling.

We believe we are the only company offering a high capacity fast charging mobile solution powered by transportable and available propane.

Allowing greater charging capacity and faster charging than any other mobile solution.

We expect E booster represent as much as 10% of our annual revenue in 2022, and we expect <unk> revenue to double in 2023 from 'twenty to 'twenty two levels.

We are reiterating our outlook for full year revenue growth of at least 50% in 2022 compared to 2021 levels. We are indeed ahead of that pace through Q1.

We expect the second quarter results to be similar to the first quarter, including significant year over year revenue growth and improve margins and expect the second half of the year to result in even stronger results as we benefit from our continued investments to support E boost and the revenue from our new.

<unk>.

With that let me turn the call over to Walter Mahalik, Our Chief Financial Officer to discuss our financial results. Thank.

Thank you Nathan and good afternoon, everyone.

Revenues were $6 million in the first quarter of 2022 up 72, 4% year over year and up approximately 72% sequentially compared to the fourth quarter of 2021.

As Nathan indicated the first quarter results benefited from the significant contribution of E block sales as well as our first E boosters.

Continued supply chain disruptions are having an impact on our results, but we were successful in mitigating the impact during the first quarter.

Gross profit for the first quarter of 2022 was 875000.

We're a 14, 5% gross margin.

Compared to 159000 or four 5% gross margin for the year ago period.

The increase in gross profit and improvement in gross margin was primarily due to higher volume, enabling greater capacity utilization.

Overall improvements in productivity.

And the delivery of our first you boost unit.

This was partially offset by higher input costs as a result of the global supply chain challenges.

Tighter labor market and inflationary pressures.

Selling general and administrative expenses of $1 7 million were 21, 29% of revenues for the first quarter of 2022.

An increase of 481000, when compared to $1 3 million in the year ago quarter.

Operating loss during the first quarter of 2022 narrowed by 235000 to 871000 as compared to an operating loss of $1 1 million during the same period in 2021.

Even as the company increased selling general and administrative expenses to support its expected continued growth.

Net loss for the first quarter of 2022, with 788000 or negative <unk> eight per share.

Compared to net income of 351000 or 4% or four cents per share.

During the first quarter of 2021.

Please note during the first quarter of last year, we recognized a $1 $4 million gain and other income on the forgiveness of our PPP loan.

Adjusting for this one time gain and a small amount of other expense.

Our net loss would have been approximately $1 million and a year ago period.

Turning to the balance sheet and statement of cash flows we had cash including restricted cash of $13 6 million and zero debt at March 31 2022.

Compared to cash of $11 7 million at December 31st.

2021.

This represents cash and restricted cash per share of approximately $1 41 per share at March 31 2022.

As a reminder, we expect to receive approximately six and a half million dollars in cash.

Of 2022 from the maturity of two promissory notes, which relate to the sale of our transformer business in August of 2019.

For the first quarter of 2022, our cash provided by operating activities was $2 1 million compared to cash used in operating activities of 941000 during the first quarter of last year.

As Nathan said.

<unk> 2022 as of Europe's growth and margin expansion.

Based primarily on our backlog as well as the significant and accelerating demand for our new solutions. We believe we can grow revenue by at least 50% in 2022, when compared to 2021 and further we expect meaningful margin expansion.

This concludes my remarks, I'll now turn the call back to the operator for any questions from investors.

We will now begin the question and answer session at this time.

To ask a question press Star then one on your telephone keypad Fury isn't a speaker phone. Please pick up your handset before pressing issues.

Charlie a question. Please press Star then two.

At this time, we will pause momentarily there with some of our author.

Our first question comes from Amit Dayal of H C. Wainwright. Please go ahead.

Good afternoon, everyone. Thank you for taking my good afternoon Amit.

Hi, Nathan so yeah with respect to the 62 E blocks.

What's the deployment timeline can you remind us please and you know has there been any change to this I think you'll start to see maybe this quarter or are.

Are you looking to complete this by the end of the year or will that go into maybe early 'twenty two 'twenty three.

So our plan is to I don't want to say, 100%, but pretty much 100% completed this year the user the the ultimate destination was you know, it's a little slower receiving or being ready to receive the product than they had originally anticipated.

Probably the bulk of them will go in the third quarter. The B may be some hangover into the fourth quarter, but I would be very surprised if there was anything for 2023.

Understood and then the sort of timeline you know how should we think about.

Totally revenue performance, I guess sort of a sequential perspective.

Like video could be stronger for you compared to maybe two Q or even for Q.

Yeah.

Yes.

Go ahead, I'm, sorry, Yeah, I was just trying to get sort of a sense of the cadence.

Yeah, I think I think the cadence the cadence is going to be that are you know as best as I can tell second quarter would be similar.

Somewhat.

Over the first quarter, but it's similar performance for the first quarter and with the third and the fourth quarter.

With more outsized.

Type performance.

Okay.

Hum.

And then just from a preparedness perspective, given all these supply chain issues are you comfortable with how you have you ever sort of inventory et cetera.

These 62.

Yeah I mean, we we were we secured you know all the prime materials in advance, especially for the large the large contracts that we have been in the users. There were extremely helpful. In advancing funds. So they were able to we were able to you know whether by deposit or buy outright purchase have almost everything but like everybody is.

Planing about you know it's a it's a 300 dollar you know current transformer or or some sort of push button that that's delays the larger jobs, but we we've been managing through it and I think it compressed us a little bit in the first quarter and will compress a little bit in the second quarter.

I don't see you know any other big big changes for the rest of the 2022.

And then just last one Nathan.

Yes.

I'm totally of deliveries into the end of the year should we expect gross margin improvements to also start coming through that.

That's that's you know you should expect it because we expect that so yes.

Okay perfect.

I'll ask one on it. Thank you very much alright take care.

As a reminder, if you have a question. Please press Star then one.

Yeah.

At this time it appears that we have no further questions.

I'd now like to turn it back.

Excuse me back over to Mr. Macerich for any closing remarks.

Alright. Thank you Ian Thank you all for your time and support this was an exciting start to the year and we believe we have significant opportunities to further grow in 2022, we look forward to updating you again on our next call.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Yeah.