Q3 2022 Pioneer Power Solutions Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the pioneer power solutions incorporated third quarter 2022 earnings results call. Today's conference is being recorded at this time I turn the conference Brett Maas. Please go ahead.

Thank you and welcome the call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer, Walter But Taylor Chief Financial Officer. Following this discussion there will be a Q&A session open to participate on the call. We appreciate the opportunity to review the third quarter 2022 financial results as well as discuss recent business highlights before we get started let me remind you this call's being recorded and webcast.

During this call management will make forward looking statements. These statements are based on the current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially.

As you've heard to the cautionary text regarding forward looking statements contained in the earnings release issued earlier today and in the posted version of these prepared remarks, both of which apply to the content of the call I'd now like to turn the call over to 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. This was an important quarter for US with continued strong orders and significant revenue growth and we believe that this sequential progress will accelerate in the fourth quarter and continue into 2023 based on our backlog and confirm.

Delivery schedules, we are confident that projected fourth quarter revenue will enable us to meet our full year target of 50% year over year revenue growth. This guidance, obviously signals that we expect to end the year in a very strong revenue note and indeed, we fully expect that momentum to continue into 'twenty.

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Significantly in the third quarter, we also expanded our gross margins as evidenced by the 130 base increase in gross margins as compared to the third quarter last year on an operational level. It's important to note that excluding the ongoing investments to support our new strategic <unk>.

Initiatives and associated overhead our divisions delivered more than $200000 in positive EBIT EBITDA.

Contribution margins.

From a sales and marketing perspective demand for both our E block and he boost product suites continues to accelerate as these two new solutions are directly addressing application issues empowered challenges in the distributed energy generation and EV charging verticals both of these maher.

<unk> segments are enjoying strong secular tailwind in our solutions directly address the opportunities. These catalysts create let me start with the distributed generation market in E block.

<unk> generation is the concept of integrating multiple energy inputs, including zero emission options like solar wind battery indoor hydrogen and traditional sources such as direct utility connections E block allows the user to effectively manage control and protect all of these inputs.

Facilitating peak shaving peak skimming and general resilience. In addition E block provides these solutions in a compact outdoor competitive skid mounted package in December of 2021 we announced a 12 million dollar order for our E block distributed generation platform from the major.

You're a big box retailer.

During the second quarter as a reminder, shipments were delayed to this customer based on the customers receiving schedule as expected revenues accelerated in the third quarter and we believe this pace will accelerate further in the fourth quarter driving a significant portion of 2022 sales revenue.

We also anticipate similar sized follow on orders from the same customer for additional stores in 2023 and beyond.

Beyond this large big box retailer additional customers in other market verticals are also deploying E. Block. For example, this past July we announced the large data center order integrating E block.

To efficiently control the various energy sources as part of this particular energy developers zero net zero initiative. This was eat blocks first entry point into the data center market and we believe it represents a very large market opportunity for us over the next several years as data centers.

Philip or as an owners continue to push for a more diversified resilience package and a lower carbon footprint.

In fact, we expect additional orders both with the end user and with the Prime contractor, who brought us into this particular market.

Finally in October we announced that one of the largest automakers in the world awarded as an 8 million dollar order for our E. Black systems as part of their cutting edge power delivery infrastructure for a new massive manufacturing campus, which will focus on their electric vehicle and battery production.

Our focus now is to leverage this early success of the block and bring E block to a much wider group of energy developers and users.

Our current backlog includes $13 $8 million of E block orders to be delivered over the next 12 to 18 months, including scheduled shipments under 12 million dollar order from the major big box retailer deliveries to the data center and new auto plant as well, we expect to benefit from continued E.

Block order growth over the next several years.

Turning to our E boost mobile charging platform, we continued to see growing interest in our anytime anywhere mobile EV charging solution to review.

One year ago, only one year ago, we created the E boost mobile charging business comprised of three delivery platforms.

First he boost goat G U G O a T which stands for generate around a truck. This is a truck mounted EV charging solution, which is fully mobile and can provide high speed charging anywhere.

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

Todd is a primarily stationary EV charging solution with as needed mobility that can provide EV charging to multiple vehicles. This is the ideal solution for gas stations hotel hotels, and other retail retail locations that utilize EV charging to increased customer traffic.

<unk> retention or as a brand differentiator all three he boost platforms are designed to provide under manpower needs. In addition to the primary task of high speed electrical vehicle charging in emergency situations, such as a power outage E boost can serve as a backup power source with convenient.

Our connectors and outlets available on board in the last year, we booked almost $2 million of <unk> business and delivered almost $1 million of value product year to date initial adopters had been casino electric tuck electric truck in school bus manufacturers and electric passenger vehicle manufacturer.

As we are realizing our strongest sales traction with a wider group of truck and bus manufacturers dealers and fleet operators. We are also actively working with electric aviation businesses roadside assistant businesses and logistics provides their providers on additional E boost units.

The need is clear sales of electrical vehicles have significantly outpaced the charging infrastructure retailers restaurants hotels casinos concert trade shows and other sports venues workplaces want to move quickly to add charging solutions during.

During the quarter, we added new case, new use cases, including the ability to rapidly recharge E. B says they are decent parked from oceangoing freight carriers.

As more and more fleets are electrified mobile and on demand charging will become increasingly important and he boost fills this unique niche we fully expect <unk> to represent dynamic growth and profits for us in 2023 Lastly, we also expect the inflation.

<unk> Act to expand consumer incentives for electric vehicles that provide financial support and incentives for electric vehicle charging renewable energy and energy storage in particular, the goal of converting federal state and local government vehicle fleets to Evs will help grow the size and velocity of this changing landscape.

And create near term demand for fixed and mobile charging these developments will accelerate the demand for our E block and E boost products and services.

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

Thank you Nathan and good afternoon, everyone.

Third quarter revenues were $6 3 million up 10% year over year.

The third quarter benefited from increased sales of our E block power systems as it relates to the $12 million order from the major big box retailer.

Gross profit for the third quarter of 2022 was $861000 or 13, 8% of revenues compared to 713000 or 12, 5% of revenues for the same period in 2021.

The higher margin was due to increased revenue during the third quarter driving greater cost absorption.

Selling general and administrative expenses of $2 $3 million were approximately 37% of revenues for the third quarter of 2022.

An increase of 87% when compared to $1.2 million of selling general and administrative expenses in the year ago quarter.

Approximately 143000 of the quarterly SG&A was related to noncash stock based compensation expense.

Collecting incentive options and grants issued to employees and consultants during the year.

SG&A also includes 781000 and incremental investments in sales marketing personnel and product development costs for our E block and E boost solutions.

Ongoing investments played a key role in the higher SG&A expense.

This is intentional and targeted spending designed to drive demand for these new solutions.

We expect investments in 2022 to continue through 2023, as we build and scale of these two new business lines as they grow.

Finally, higher wage costs, including salaries and benefits also played a role and higher SG&A expense.

Operating loss for the third quarter of 2022 was $1 4 million compared to an operating loss of 519000 in the year ago quarter.

Net loss for the third quarter of 2022 was $1 3 million.

Our net loss per basic and diluted share of <unk> 13 cents compared to a net loss of 434000 or negative five cents per share during the third quarter of 2021.

It's important to note that most of our losses during the third quarter were due to ongoing investments in our E block and <unk> solutions noncash stock based compensation and corporate expenses.

Put another way, excluding these investments and corporate expenses, our operating business units generated positive EBITDA during the third quarter.

Turning to the balance sheet and statement of cash flows we had cash on hand of $7 $2 million and zero debt at September 30th 2022, compared to cash and restricted cash of $11 7 million at December 31, 2021.

This represents cash per share of approximately 75 cents at September 30th 2022.

As a reminder, we expect to receive approximately $6 2 million in cash by the end of this year from the maturity of two notes related to the sale of our transformer business.

Accordingly, we are confident that we are sufficiently capitalized to address our near term investments.

As Nathan said, we view 2022, as a year of growth and margin expansion.

Based primarily on our backlog as well as the significant and accelerating demand for our new solutions.

We believe we are on track to grow full year 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.

Thank you, ladies and gentlemen, if you like to ask a question you may do so by pressing star one on your telephone keypad star one for questions.

Just to make sure that mute function on your phone is turned off the signal can be read by our equipment.

Darwin for questions, we'll pause a moment to assemble the phone.

We'll take our first question from Amit.

With H C. Wainwright. Please go ahead.

Thank you good afternoon, everyone can you hear me okay.

In a minute.

Yes, we can hear you clearly.

Okay. Thank you Nathan.

Congrats on the execution so far.

Just curious about before.

The fourth quarter coming in maybe a little higher than the rest of the year or is it just supply chain issues or anything else that is causing you know smoke you talked a little bit.

I guess then it was really on that large order that <unk> did not want to they were not ready to receive all the units that they had contracted for you know now. We're you know we're in the middle of the fourth quarter now in real terms and that's been the big turnaround you know, there's they're receiving every week so that.

That gives us the confidence for the fourth quarter and that's why it's Gonna look you know literally two outsized frankly as compared to the rest of the year.

Okay understood and then you commented I don't know if I caught this correctly.

A similar sized follow on from this customer for 'twenty three so you've got 62 additional blocks go into this retail customer.

That's what they're talking about these kinds of chunks. We went in we would announce it if we actually got a hard P. O for it you know, we only announce heart P. O's and you know that that's the only thing that's in the backlog for US you know heart pose that are noncancelable. So we haven't gotten there yet, but that's that's what they're discussing you know from the beginning they were talking about.

The targeted 400 stores.

The end of this year or maybe a little bit drip into next year in January a few more units we will complete the first 62, but that's that's ultimately their plan to convert all 400, so that that will go on for a while hopefully.

Okay understood.

And then the backlog you have currently Nathan is this do we feel in the next 12 months.

Yes, we typically you know for us backlog, although given given how busy everything is maybe we should expand the scope of typically for US backlog is noncancelable appeals that we expect to deliver within 12 months.

Okay understood just one last one for me.

With respect to the Iot.

Are you having conversations that.

Stemming from incentives and D I b.

Or is that something that you haven't seen it.

Peter Leys yet.

Okay.

It's definitely it's definitely out there you know different parts of it of course is the key.

Credit part as far as projects go, though it's not that high per project.

But the incentives you know at different pilot for example, you know most specifically for US is the school bus incentive that's a very serious that's a serious financial impacts and that really does accelerate.

For the school bus manufacturers ultimately, but the for the school districts and so forth that accelerates the adoption of electric school buses, that's all good for us.

Okay.

Thank you so much.

Youre very welcome Amit.

As a reminder, star one for questions or comments. Please star one will pause a moment to assemble the queue.

Yeah.

Okay.

Okay.

Darwin for questions or comments please.

Yeah.

Okay.

We will take our next question from Anthony of carry.

Mr. <unk>. Please go ahead.

Hi, I was wondering about.

The used market.

I guess the vessel Neil so theres not a huge market.

Did you forecast.

Yes.

Where when there would be a huge market.

What impact that would have on sales in the future or is it too early.

It's probably <unk> <unk>.

Boost.

Yeah.

Yeah, it's way way too early.

You know, but we we'd be the right address for that we're the only solution like this in the market. So you know, we'll see what happens, but right now with this.

This is a this is completely nascent are early stage adoption. So there really is no used the market yet.

Great. Thanks.

Youre welcome.

Sure one for questions, we'll pause a moment to assemble the queue.

Thank you.

It appears to be.

No further questions in the queue I'd like to turn the conference back to your presenters for any additional or closing remarks.

Okay. Thank you all for your time and support we look forward to updating you again on our next call.

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Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.

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