Q2 2023 Pioneer Power Solutions Inc Earnings Call
Good afternoon, and welcome to the powers, a pioneer power solutions 2023.
Second quarter financial results conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Kim Rogers.
With Hayden IR. Please go ahead.
Thank you.
Welcome joining us on todays call well be Nathan Mazurek, Chairman and Chief Executive Officer, Walter Mahalik, Chief Financial Officer, and she'll Moura can precedent of pioneer power E mobility.
Following managements prepared comments, a Q&A session will be open to the call participants. We appreciate the opportunity to review second quarter 2023 financial results and discuss our recent business highlights before we get started let me remind you that this call is being recorded and webcast during the <unk>.
<unk> management will 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.
Hey, which applies to the content of today's call as well I would now like to turn the call over to Nathan Mazurek, Chairman and CEO Nathan. Please go ahead.
Thank you Kim and good afternoon, and thank you all for joining US today. This was a great quarter for us with both divisions delivering strong performance, resulting in record revenue that was up nearly 150% year over year for the second quarter and a bottom line that was solidly profitable excluding noncash.
Cash one time charges relating to stock based compensation the.
The revenue growth reflects growing demand across both our business segments and the profitability reflects better operating leverage manufacturing efficiencies and a more optimal product mix, notably we are delivering better profitability profitability, even as we continue to invest significant monies pri.
Merely an R E boost business, even with these large investments we essentially generated approximately bikes cents per share and GAAP net income if not for noncash stock based compensation charges and we still expect to generate positive net net income for the full year 'twenty two.
<unk> three.
Both of our segments are executing to plan so far our T&D solutions unit, which includes our E block power system and related products grew revenue, 263% to $9 2 million compared to 2.5 million for the second quarter of last year, Indeed year to do.
18, DRAM revenue was up 140% at $15 million versus last year's $6 3 million.
Our critical power segment, which includes our E boost mobile charging platform grew quarterly revenue, 25% and year to date revenue, 14% compared to last year in.
In addition, 100% of Pioneer's ramping your growth has been entirely organic.
Gross margins in both segments have improved exponentially since a year ago, notably our T&D segment is now delivering consistent positive GAAP EBITDAR, specifically $1.8 million in the second quarter up from a loss of $432000 in the second quarter of <unk>.
Last year and positive EBITDA of $3 $1 million year to date.
Paired to a loss of $332000 in the first six months of last year. In addition, our critical power segment has narrowed its losses and is moving towards positive operating margin, which we fully expect to achieve for the full year of 'twenty 'twenty four.
Our innovative and highly flexible E block solution has been and will continue to be a key driver in our strong performance. We now have hundreds of eat block installations around the country ranging from retail locations, helping hospital manufacturing facilities EV charging.
And solar based micro grids, we continued to see new enlarge use cases for E. E. Block. These include water utilities like the one we are delivering this year in California, where your black systems are being deployed as part of this sits at this Takeda distributed energy system, enabling the water.
To better manage its power utilization improve resiliency better control costs and reduce its carbon footprint.
Another growing market for us as data centers, where power consumption and resiliency are critical issues. This is a massive market that is just beginning to embrace distributed generation and turn away from traditional diesel powered solutions.
Emergence of the AI has not only increased the demand for data centers, but more relevant to pioneer a substantial increase in the raw power required by each data center, we secured our first E block data Center order last year and expect to deliver on that priority on that project.
Towards the end of 'twenty 'twenty four carrying over to the beginning of 2025.
We expect that a successful flagship type installation of this particular project will serve as a model and leading to additional data center deployments with this particular customer their construction partners and hopefully other data center owners and developers as well.
In addition, prior customers are returning especially in the retail market in the ordering additional units for additional stores because E. Block works is providing the specific and is providing the specific benefits that they had to bargain for the distributed generation market continues to grow as.
Central customers seek to utilize solar and other renewable sources combined with battery storage to make energy resources more reliable cost effective and environmentally friendly.
As it stands today the U S cannot expect to produce enough power over the next 10 years to satisfy to satisfy anticipated demand, making distributed generation a requirement not an option for many enterprises. We're also delivering growth from our E boost mobile charging platform and we continue to Sigma.
Typically invest in this business with expectations of further.
Revenue acceleration what.
What started as a concept two years ago and a prototype only first the only in November of 'twenty 'twenty. One has become a rapidly growing product platform that is addressing a market that indeed did not even exist several years ago to date our E. Boost wins include most recently the.
City of Fairfield, California Order didn't you boost trailer mounted unit to service the electric portion of Fairfield Public bus fleet. This is our first award of dressing the municipal transportation market with government grants supporting the bus fleet electrification.
The growing environmental concerns we fully expect this market to continue to grow free boost.
The autonomous driving division of a major global automaker ordered multiple eat boosts units to support the initial rollout of their autonomous electric vehicles and separately in several cities.
More and more cities are approving autonomous vehicles, including driverless taxis. This geographic expansion will lead to more demand for EPS.
To support these rollouts merchants fleet large fleet management business took delivery of two trailer mounted <unk> solutions to be integrated into merchants fleets electric vehicle charging offering.
We expect other fleet management companies to embrace E books as well in order to facilitate the electrification of their fleets.
A major north Eastern Transportation Agency acquired a 75 kw E books mobile trailer for their fleet of in Dutch.
But they are internal fleet of buses and cars we.
We have provided to propane powered mobile charging eboue systems can be deployed at a port in the state of California to fast charge electric vehicles imported from overseas manufacturing facilities.
While the market for electric cars trucks and buses in many ways was the first and most obvious application of our <unk> system.
Yeah, well we have learned.
From the experience of the last two years that the opportunities don't stop there for example, almost airlines had almost all airlines have internal mandates to convert their ground service equipment from diesel to electric over the next several years. This could mean that each airline needs on demand mobile charging.
And almost every airport that they serve additionally, construction mining equipment are transitioning to all electric as well as watercraft and electric vertical takeoff and landing offerings, where mobile charging option is particularly important each of these trends require flexible cha.
<unk> solutions each of these areas represent meaningful additional opportunities for us to fill the gap in the EV charging infrastructure over the next several years.
We also continued to innovate with E boost with the goal of Supercharging unintended are revenue and expanding our addressable market.
This includes developing new variations of IPU, specifically, we are building smaller units.
For emergency slashed tow truck type applications.
We are designing less expensive lower powered options, the concierge charging and similar deployments and for certain users that absolutely demand a zero emission mobile charging solution. We are working on battery only configurations of eat boost we expect to unveil most of.
These product extensions before the end of 2023 Ulf.
Ultimately we believe these additional offerings all based on the successful on prior successful versions. We have already built will give us access to more use cases, and many more potential customers.
Based on our pipeline of be boost opportunities. We believe we will generate incremental growth in the second half compared to the first half of this year.
And in addition, we expect <unk> to begin contributing positive EBITDA for the full year of 2020 for our addressable markets are massive and almost every day.
New use cases from current and new customers emerge.
The energy transition ear is real and pioneer is at the edge of it offering proven competitive solutions with.
That let me turn the call over to Walter our Chief Financial Officer to discuss our financial results for the second quarter.
Thank you Nathan and good afternoon, everyone.
As Nathan mentioned this was a great quarter for pioneer with both divisions delivering strong performances pioneers second quarter consolidated revenue was $12 1 million up $7.3 million or approximately 150% when compared to $4 9 million of revenue during.
The same period last year.
Revenue from our T&D solutions segment, which manufacturers and integrates our E block power systems increased 263% to $9 2 million during the second quarter.
As compared to revenue of two and a half million during the same period last year.
Revenue from our critical power segment, which manufacturers and integrates our E boost mobile charging solutions was up 25% to $2 9 million during the comparable periods.
Consolidated gross profit for the second quarter was $2 7 million or a 22% gross margin.
Compared to gross profit of 63000 were essentially breaking even during the second quarter of last year.
The significant improvement to our gross profit and margin was due to higher revenue driving improved manufacturing utilization a favorable sales mix of higher margin E block power systems, and a T S equipment and margin expansion in both segments as we continue to scale revenue.
Selling general and administrative expenses of $3 1 million or 25% of revenue for the second quarter of 2023, an increase of 20% when compared to $2 6 million in the year ago quarter.
Approximately 819000 of the quarterly SG&A expense was related to onetime noncash stock based compensation.
<unk> also includes approximately 750000 and incremental investments in sales marketing personnel and prototypes for our <unk> solutions.
It is intentional and targeted spending designed to drive demand for these new solutions.
We expect these investments to continue through 2023 as we built these new business lines and as they grow.
Finally, higher wage costs, including salaries and benefits contributed to the increase in SG&A expense.
Our operating loss, which again includes onetime noncash stock based compensation expense of 819000 was 319000 for the second quarter of 2023.
A positive swing of more than $2 1 million compared to an operating loss of two and a half million dollars in the second quarter of last year.
If we back out the one time noncash stock based compensation.
And your generated operating income of approximately 440000 during the second quarter compared to an operating loss of approximately $2 million in the same period last year.
Net loss for the second quarter of 2023 was 319000 or <unk>.
Three cents per basic and diluted share compared to a net loss of $2 5 million or negative <unk> 26 cents per basic and diluted share during the second quarter of 2022.
It is important to note that the company has 14.2 million and NOL carry forwards as of June 30th 2023 <unk>.
<unk> future income from federal income taxes.
So.
Backing out the onetime noncash stock based compensation expense of 819000 pioneer generated net income of approximately 500000 or five cents per share during the second quarter compared to a net loss of approximately $2 million were negative <unk> 20 per share.
In the second quarter of last year.
Looking briefly at the year to date results.
Total consolidated revenue for the six months ended June 30th 2023 was 20.6 million an increase of 84% compared to $11 2 million during the first six months of last year.
Revenue from the T&D solutions segment increased approximately 140%.
Revenue from the critical power segment increased 14% during the first half 2023 as compared to the same period last year.
Total gross profit for the first six months of the year was four 9 million or a 24% gross margin.
Compared to gross profit of 986000 or approximately 9% of revenues for the same period in 2022.
Loss from operations for the first six months of the year was 322000 as compared to a loss from operations of more than $3 3 million during the first half of 2022.
One time noncash stock based compensation for the first six months of the year and for the first six months of last year was 962000 and 716000, respectively.
Excluding stock based compensation pioneer generated income from operations of approximately 640000 during the first half of 2023 compared to a loss from operations of $2 6 million during the first half of 2022, a positive swing.
Swing of more than $3 million.
Our net loss for the first six months was 197000 or negative two cents per basic and diluted share.
Compared to a net loss of $3 3 million or negative 34 cents per basic and diluted share during the same period of 2022.
Once again backing out the stock based compensation expense by pioneer generated approximately eight cents and positive EPS were $765000. During the first six months of this year.
Turning to the balance sheet.
We had cash on hand of approximately $9 6 million and zero bank debt at June 32023, compared to cash of $10 3 million and zero bank debt at December 31, 2022.
This represents cash per share of approximately 98 cents at June 30th 2023.
Accordingly, we are confident that we are sufficiently capitalized to address our near term investments and cash needs.
We expect to deliver continued growth in the second half of 2023 with margin expansion and positive net income.
<unk>, primarily on our backlog.
Well as a significant and accelerating demand for our new solutions. We believe we can grow revenue by at least 50% in the current year. Additionally, we expect to generate positive full year net income and earnings per share.
This concludes my remarks, I'll now turn the call back over to the operator for any questions.
We will now begin the question and answer session.
To ask a question. Please press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Sameer Joshi with H C. Wainwright. Please go ahead.
Great. Thank you and good afternoon.
And Walter Congratulations on the excellent quarter.
Was there any surprises on the positive side on the topline in terms of some deliveries getting expedited Ah also.
Just wanted to understand what made this quarter.
Yeah I mean this was a thank you Samir for your comments.
It was kind of unfolded the way we thought it was the the quarter Thankfully there were no real surprises there was a little bit of hangover from the first quarter. If you remember there was one larger or not really sell large but there was one job that.
Kind of couldn't ship the last day of the first quarter and that hung over into the into the second quarter of this year, but you know we we stand by the guidance that we gave for the year. So I mean, you know you can all do the math you can you know the second half of the year will come in at what it will come in in the you know we fully expect to.
Neat or hopefully even exceed a little bit the guidance for the year.
Yeah.
That's what it looks like but specifically on the backlog and your guidance recently that didn't have.
What proportion of this.
Our expected revenues would come from E block and boost.
Yeah. So the the vast majority is coming from from the block, especially the second half of this year as we've said in the prepared remarks or incrementally.
EPS will have a better second half than it had the first half so that's sort of a little bit of a of a wildcard.
<unk> that you know, we generally don't have such good visibility as to when those things the end up shipping and realizing the revenue so that should it should be make even the second half a little bit stronger.
But that's that's that mix E block as is driving it very hard here for 2023, we expect it to drive it hard for 2024, but we expect then you know where it's too early to talk about 2024, but you know I hope that in the prepared remarks that camera crossed that we're expecting yet.
Substantially stronger year on the EPS side in 2024.
Yeah Yeah.
Would you remind us if.
Is going to be our largest product.
And maybe as the revenues.
Revenues increased profitability to improve.
Yeah, I mean, it should track that way, we definitely get better.
The issue with E boosted its all new so theres some on our part there's some there's some missteps every single one is custom you know there is no model for how to price a lot of these things in and so far it's been all over the place you know good you know better than sometimes expected and then sometimes worse.
So we don't I I really we just don't have enough, we don't have enough units under our belts yet to projected margin.
We go in with great expectations, but you know.
We've never we've never for the plus or minus hit exactly what we thought.
Yeah, Yeah, no that's fair.
Oh on the boost you identified.
Newmark goods.
Airlines mining construction the veto.
Are you already do you have leads into this or are you already receiving orders from these are sectors, where we haven't received any orders from those segments, but we're in now where we're in serious discussions with all of these are segments that.
You know I didn't know anything about months ago either.
Merged and you know through the hard work of the G O and his team in and through you know getting the proper word out and trying to make E booths.
Synonymous with the with the mobile charging solution. That's how these that's how these opportunities are coming our way.
Okay.
In terms of capacity.
And also some of the others.
For our call.
He boost.
If there's any additional incremental capex and opex.
R&D dollars.
In the second half.
That's where we're hopefully spending less in R&D on <unk>.
And more and more towards capital expenditures that expand the actual capacity for for equals.
Because where we're coming to the limits. This year will test the limits of what we need to deliver in Minneapolis. So in order for that business to really grow we just physically can't can't do it I don't think it's going to be we're not doing heavy work. So it's not.
You know I don't think that we don't we don't have a budget for it but it should not be you know outside our reach and in the case of eat block you know each year. We think we're at statistical 100, we're trying to do everything possible to to enhance and be more efficient.
And the current facility in Los Angeles, because the operating you know where we're getting the benefit now of the fixed overhead and so forth and you know just to expand physically and in a loose some of that advantage from a profitability you know I'm I'm alone.
To do that right away.
Okay.
And then just last one on the on the SG&A.
SG&A expense GAAP expense side.
In the last Ah in 2022, we saw this stock based comp in Q being higher and then Q4 again, a normalized should we expect the same cadence of our stock.
Stock based comp for the next.
Hum.
I'm not expecting it. So you know I guess the answer is no. Yeah was done you know again, it's all fully disclosed last year was a it was an arrangement we made to keep our CFO incentivize to stay with us for the long term and.
I was granted a.
Stock our stock grant by the board a couple of months ago and that manifests itself in the second quarter. So I don't we don't we don't know of any other awards.
Yeah, Yeah. So so it's opex on a GAAP basis will be coming down in the second half.
Correct.
Got it okay. Thanks, a lot for taking my questions and congrats and good luck. Thank you Samir.
Again, if you have a question. Please press Star then one.
The next question is from Scott Weiss with.
Semi cole capital excuse me if I mispronounced.
Hey, guys congrats on a great quarter well done.
One question on the demand side, we talk about all of these newer opportunities and new vertical is there something that happened in the last quarter or two quarters that has caused this inflection that you are seeing in demand and then related to that which vertical are you most excited.
It is about as you look out over the next 12 to 18 months.
Yeah. So I mean, you know we still think of the business in two parts both are experiencing strong demand or you know on the.
On the E block side that the men you know the big markets I think I flagged them that we expect to to to get greater volume and profit from our water and and data centers, that's where we see a we see them matched to what's going on with distributed generation and and people that are taking their power.
It's extremely seriously on every level.
On the boost side you know, what's really going on you know, what's really going to drive it in the next year or so it's still going to be the traditional mobile Charlie it's traditional it's not traditional but the initial thought the reasons, we launched E booths, which is gonna be cars buses and trucks those electric offerings.
But there is a there's a push you know and I don't think we will get one order from a from an airline in 2023 or maybe not even you know for most of 2024.
Their transition to electric is going to definitely take them longer but.
It's you know, it's pushing against the it's pushing against the fence.
And they're taking it very seriously they won't they won't make that move as quickly as the vehicle market yet, but we see this kind of has a long tail. When I went to believe the construction equipment is going to go this way, but it is.
Is it going to do it next year is not going to do it next year, but it is going to make this transition over the next several years.
Can you dig into the data center side on E block for a second going back a couple of years, where data centers using this kind of technology and what inning are we aim in penetrating the data centers and who else is providing this technology into the data center market. Besides you yeah.
The technology exists who's doing it in a compact.
You know simple structure that has proven to work in in in critical applications, where there is no. There's no room for error that I can't answer.
As they get away from thinking of of just regular regular power from the grid and backup power from from diesel sets as they start integrating other power sources into what Theyre doing for variety of reasons. We're hoping that this first project really serves as our.
As you know planting the flag on that beach here. It is and it works you know everybody wants to see it so what's gonna happen. They went away from diesel they're using gas and they're using that whatever the whatever this particular user that using a combination of several sources did everything switch in nanoseconds was there any failure was there any of that.
What was the service.
I think that's a you know then they don't have a choice after that you know they they don't Wanna be they don't Wanna be people that are using diesel, but they don't have to.
Okay, great. Thank you appreciate it.
Alright, Scott see you in a few weeks in Chicago.
Very good.
The next question is from David Crane Berg with Globus capital. Please go ahead.
Good afternoon, congratulations on the fantastic quarter, just a quick.
Quick question for locked retailer that you had last year I think was $12 million.
Correct.
Revenues expected from them in the guidance this year.
No.
No. If we went out right we went out without any expected revenue from them right. So so if I look at last year, I think $12 million out of 27 million was from that one customer so if I back that out.
Without the and Youre actually going from 15, Youre almost tripling the business.
Ex that one customer this year is that right.
It almost 100% right some of it some of it hung over into the first quarter Oh, Okay. Yeah.
Okay. So there is a little bit of revenue there is a little bit up this year correct.
Okay.
So the potential is a you know we've said you know they are targeted at almost 500 stores you know we delivered 63.
I can't speak if anything else is going on but I'm expecting hopefully some more good news from them sometime this year, which would mean that we would deliver it sometime in 2020 for it but you know I don't have anything in my hand today to announce.
Okay, great. Congratulations again, thank you David.
Yes.
Yeah.
Yes.
This concludes the question and answer session I'd like to turn the conference back over to Nathan, Missouri for any closing closing remarks.
Thank you operator, thank you all for your time and support and we look forward to updating you again on our next call.
The conference has now concluded.
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