Q4 2022 Pioneer Power Solutions Inc Earnings Call

Speaker 1: such as retailers and supermarkets.

Speaker 1: as well as power in tents and uptime sensitive facilities like data centers, water utilities, hospitals, senior living facilities, and prisons. The distributed generation initiative is really just getting started for all these verticals, and e-block squarely addresses their expected demand. In December of 2021, we announced a $12 million order for our e-block power system from a major big box retailer. Other retailers, as well as data centers and manufacturing facilities, among others, are evaluating the e-block solution as well. During 2022, we won our first order from the data center market, and we believe this represents a significant market opportunity for us over the next several years as data center developers and owners continue to push for a more diversified resilience package and a lower carbon footprint.

Speaker 1: In October of last year, we announced that one of the largest automakers in the world awarded us an $8 million order to integrate e-block as part of their innovative power delivery infrastructure for a new massive manufacturing campus in the United States, which will focus on their electric vehicle and battery production. Finally, we want an order for a U.S. water utility of more than $5 million during the fourth quarter of 2022. This order is our first for a water utility, significantly expanding our backlog and representing an exciting new use case. We will be providing multiple e-block units to the water utility authority to be deployed as part of a sophisticated distributed energy system.

Speaker 1: This mini is a skid-mounted version that provides high-capacity EV charging in our smallest footprint. It brings on-demand charging of electric vehicles to any location within a facility with just a forklift and anywhere else on board a trailer. This gives an easy and convenient way for dealerships and depots to charge their first EV.

Speaker 1: E-Boost GOAT GOAT generator on a truck is a truck mounted option that brings ultimate mobility with high capacity EV charging. It enables on-demand charging of EV vehicles at any convenient location, providing EV truck and car owners the convenience of the...

Speaker 1: dispatchable charging services and thereby helping eliminate range anxiety.

Speaker 1: eBoost Mobile is a trailer mounted solution that balances the need for mobility and higher capacity of EV charging such as that the solution can be relocated with minimal effort and on short notice. The following is a trailer mounted solution that balances the need for mobility and higher capacity of EV charging such as that the solution can be relocated with minimal effort and on

Speaker 1: eBoost Mobile provides multiple options for towing and can be available at specific businesses, large sports and cultural events, or other gatherings to fulfill the elevated demand for high speed charging.

Speaker 1: E-Boost POD is a mostly stationary EV charging solution with customizable higher capacity and can be moved if necessary. The POD can provide high speed DC fast charging to four or more vehicles simultaneously.

Speaker 1: Like all eBoost solutions, it can also service other power needs, especially in emergency situations such as a power outage serving as a backup power source with convenient power connectors and outlets available on board. To date, target customers for eBoost have included electric trucks, truck and bus manufacturers.

Speaker 1: their associated dealers, fleet management companies, package delivery providers, school bus operators and the like. Other active e-boost markets include electric vertical takeoff and landing aircraft or EFTOL, primarily the future of air taxis.

Speaker 1: eSports and off-road vehicles, e-boats, e-jets, skis, snowmobiles.

Speaker 1: even off highway agricultural and mining equipment like e-tractors and sprayers.

Speaker 1: Beyond the obvious environmental and economic tailwinds, state and federal policies are accelerating demand and ultimate adoption. The National Electric Vehicle Infrastructure, or NEVI, Program is the latest example, providing incentives and federal grant funding to U.S. companies that provide charging.

Speaker 1: associations that are bidding to provide this charging infrastructure. Our e-boost solution is an especially appealing solution in rural and underserved parts of our nation's highways where permanent infrastructure solutions are just uneconomical.

Speaker 1: Demand and excitement regarding the eBoost platform has continued to grow in 2023. In January , we announced that Merchants Fleet, the nation's fastest growing fleet management company ordered two trailer-mounted eBoost solutions.

Speaker 1: to serve as benchmark products for Merchant Fleet's larger EV charging offering.

Speaker 1: Merchants Fleet selected e-Boost because it delivers an off-grid mobile direct current fast charger with built-in resiliency. Our e-Boost system is sustainably powered using a propane fuel generator and a solar-powered battery storage system.

Speaker 1: This order is yet more evident.

Speaker 1: that those on the leading edge of EV adoption, of the EV adoption movement, represent ideal customers for us as they have unique and regular EV charging needs and the existing infrastructure simply is not sufficient. We fill that void.

Speaker 1: In February , we also announced additional purchases by a leading electric school bus manufacturer. These units are skid mounted and join units we have already built and sold to this particular bus manufacturer in 2022.

Speaker 1: The need is clear. Sales of EVs have significantly outpaced the charging infrastructure. This is particularly true in the industrial and commercial sectors, where electrification has reached warehouses and delivery options as a way to reduce the environmental impact as well as fuel costs.

Speaker 1: Many organizations are moving quickly to add charging solutions for customers, employees, and company fleets.

Speaker 1: As we move through 2022, we continue to add new use cases, including the ability to recharge EVs as they are disembarked from overseas shipments, as well as airport authorities that invested in EV passenger shuttles and buses, but are waiting for permanent EV infrastructure to arrive. To wit, we delivered two large e-boost units to the Port of San Francisco in January .

Speaker 1: fulfill it. As fleets are electrified, mobile and on-demand charging will become increasingly important and E-Boost fills this unique niche.

Speaker 1: As a result, we expect EBOOS to continue to drive significant growth and profit generation for us in 2023. With that, let me turn the call over to Walter Mihalik, our CFO , to discuss our financial results.

Speaker 2: Thank you, Nathan, and good afternoon, everyone. First, before we dive into the numbers, I'd like to note that these financial results, along with the earnings release that was issued earlier today, discloses unaudited financial results.

Speaker 2: Pioneer's fourth quarter revenues were $9.5 million, up $6 million or 172% year-over-year.

Speaker 2: Sequentially, fourth quarter revenue increased 52%.

Speaker 2: Revenue from our T&D solution segment, which manufactures our e-block solution, increased nearly 400% to $7.4 million.

Speaker 2: And our critical power segment, which manufactures e-Boost, was up marginally 9% to 2.2 million.

Speaker 2: Gross profit for the fourth quarter was $2.8 million.

Speaker 2: or a 29% gross margin compared to a gross profit of $25,000.

Speaker 2: or a 0.7 gross margin in the fourth quarter of last year.

Speaker 2: Sequentially, gross margin more than doubled compared to a gross margin of 13.8% during the third quarter.

Speaker 2: The increase in our gross margin was due to higher revenue, driving improved manufacturing utilization, and a favorable sales mix of high-margin e-block power systems and ATS equipment.

Speaker 2: Selling, general and administrative expenses of $2 million were 21% of revenues for the fourth quarter of 2022, a decrease of 32% when compared to $1.5 million in the year ago quarter.

Speaker 2: Approximately 150,000 of the quarterly SG&A was related to stock-based compensation.

Speaker 2: SG&A also includes...

Speaker 2: approximately $500,000 in incremental investments in sales, marketing, personnel, and prototypes for our e-block and e-boost solutions.

Speaker 2: This is intentional and targeted spending designed to drive demand for these new solutions.

Speaker 2: We expect investments in 2022 to continue through 2023 as we build these two new business lines and as they grow.

Speaker 2: Finally, higher wage costs, including salaries and benefits, played a key role in SG&A.

Speaker 2: Turning to the full year results, revenue was $27 million, up 48% from $18.3 million in 2021.

Speaker 2: Revenue from our T&D Solutions segment increased 83%.

Speaker 2: for the year to 17.4 million.

Speaker 2: while revenue from our critical power segment increased 9% to 9.6 mil.

Speaker 2: Gross profit was $4.6 million.

Speaker 2: or 17.1% of sales, compared to gross profit of $1.4 million, or a 7.6% gross margin.

Speaker 2: Our operating loss was 4 million in 2022 compared to 3.9 million last year.

Speaker 2: Net loss was 3.6 million or...

Speaker 2: 37 cents per share, compared to a net loss of 2.2 million, or 24 cents per share last year.

Speaker 2: per share compared to a net loss of 2.2 million or 24 cents per share last year. Turning to the balance sheet.

Speaker 2: We had cash of $10.3 million and zero bank debt at December 31, 2022, compared to cash, including restricted cash, of $11.7 million at December 31, 2021. This represents cash per share of approximately $1.06 at December 31, 2022. This balance reflects the receipt of $6.2 million in cash.

Speaker 2: based primarily on our backlog, as well as the significant and accelerating demand of our new solutions.

Speaker 2: We believe we can grow revenue by at least 50% in 2023 when compared to 2022.

Speaker 2: We also expect to generate positive full-year net income and earnings per share.

Speaker 2: This concludes my remarks. I now turn the call back to the operator for any questions from investors.

Speaker 3: Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session.

Speaker 3: If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker 3: You may press star 2 if you would like to remove your question from the queue.

Speaker 3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker 3: Our first question comes from the line of Samir Josie with HC Wainwright. Please proceed with your question.

Speaker 4: Hey guys, thanks for taking my questions and congratulations on a strong quarter.

Speaker 4: My first question is related to the e-block orders and order flow. What is the major retailer that you mentioned in your preferred remarks?

Speaker 4: Should we expect additional orders from that customer during 2023?

Speaker 1: We expect additional orders in 2023. They have, you know, the units that we've produced for them. They're monitoring, they're seeing how it goes. They've targeted, you know, hundreds of stores. We did 63. They're targeting almost a thousand, inclusive of the 63, over the next several years. We expect.

Speaker 1: more orders, frankly. I don't expect any of those orders before mid-year, which would, depending on their schedule and so forth, which would make these a 2024 shipping, you know, delivery revenue item for us. We're not including any of that in our projections for 2023.

Speaker 4: Got it, understood. And on the e-boost front, I know you're seeing a lot of traction, but in terms of, at least in the pipeline, in terms of orders,

Speaker 4: How do you look at it? Should we expect 2Q, 3Q deliveries against these orders?

Speaker 1: what should we be expecting for eBoost? Right, so most of the deliveries for eBoost are gonna be third and fourth quarter. Really for eBoost itself, it's gonna be, I'd say the majority of it is gonna be in the fourth quarter we should be announcing some very exciting orders soon. But if we're gonna announce it in April or May, the third quarter is almost not.

Speaker 1: of what this will look during the year. Yeah, I think that we're gonna have some volatility. The problem is, especially on the e-block side, if these jobs are getting larger and larger, even if we think something's gonna leave on March 31st, it doesn't always happen exactly that way. Sometimes.

Speaker 1: So if I'm looking out, I would say that probably the first quarter will be the lightest. Again, not anywhere close to the light quarters that we had in 2022, and then sort of almost stable for the second, third, fourth quarter.

Speaker 4: Got it. And I guess this also, the lumpiness may also explain the accounts receivable, which is quite high sequentially. I guess it's just because of timing of delivery and now receivables are due in the next quarter. Correct. Yeah. So it's all about timing.

Speaker 1: And also, you know, and I would say also with the receivable, most of, I don't want to say most, but a large portion, if not more on the e-block side, you know, we're dealing with large projects, there's a lot of progress billings that go on with them. So it's kind of...

Speaker 1: It doesn't even tell the tale of the full job.

Speaker 4: Got it. And gross margins came in really impressive. Was there any special one-time boost here, or was it just data utilization and just the sales mix that you talked about?

Speaker 1: The question is, should we expect these levels going forward or maybe slightly muted from here? Yeah, I would say, thank you for picking up on that. Yeah, it was a super efficient product mix for smaller units that went fast, less labor hours than...

Speaker 1: some of the larger jobs that tend to sometimes just accumulate more hours because they're sitting for so long. So it was super, super favorable. That being said, yeah, it'd probably be a bit muted, at least for the first few quarters, but it's definitely not far away from what we did.

Speaker 1: in the fourth quarter. Oh, we got it. And I'm gonna borrow your word muted is the right way to think about it. Thank you.

Speaker 4: And just the last one on operating expense, Graham, H-G-N-D was actually lower sequentially, of course, year over year it was higher. So when you say you're going to continue to invest, should we expect just about two million or north of two million?

Speaker 4: in FTSE during the next four quarters or should we expect even...

Speaker 1: more pronounced and previous. Yeah, and thank you for noting that too. So, you know, internally, you know, as we're looking through everything, you know, we're assuming about two million a quarter, more or less.

Speaker 4: Okay, that's actually good to know because that provides you quite a good operating leverage and that probably explains your bottom line positive EPS guidance. Good luck on that. Thank you.

Speaker 4: Can you hear me?

Speaker 4: Yes or maybe it related to accounts receivables, but the deferred revenue item also has increased.

Speaker 4: It's a counting question, but just was curious about that.

Speaker 2: Okay, Walter, I think you're... Sure. Thank you, Samir. Great question. You're absolutely right. It's all really due to the progress billings that we issue out for these large orders on the e-block side.

Speaker 4: Got it. Okay. That's all from me. Good luck, and thanks for taking my questions.

Speaker 3: You're welcome, Samir. Thank you. As a reminder, ladies and gentlemen, it is star one to ask a question.

Speaker 1: There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. Thank you all for your time and support. And as always, we look forward to updating you all again on our next call. Have a great evening.