Q3 2023 Pioneer Power Solutions Inc Earnings Call
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Greetings and welcome to Pioneer's 20 trend discrete third quarter financial results.
All participants are in listen only mode. A brief question and answer session will follow the formal presentation, if anyone should require operator assistance during.
The conference. Please press Star Zero on your telephone keypad. That's a reminder, this conference is being recorded it is now my pleasure to introduce your host Brett Maas from Hayden IR. Thank you. Mr. Mas you may begin.
Thank you and welcome the call today is being hosted by Nathan Mazurek, Chairman and Chief Executive Officer, and Walter Mcgowan Chief Financial Officer. Following this discussion there will be a formal Q&A session open to participants on the call. We appreciate the opportunity to review the third quarter financial results and discuss recent business highlights before we get started let me remind you this call's being recorded and webcast call management.
May 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. Please refer to the cautionary text regarding forward looking statements contained in the earnings release issued earlier today, which applies to the contents of the call I would like to now turn the call over Nathan Magic Chairman and CEO Nathan. Please go ahead.
Thank you Brad good morning, and thank you all for joining US today. We also have a G M. Rick <unk> President of pioneers E mobility business, essentially our EP business on the call as well.
The quarter's financial results included a doubling of revenue and strong profitability.
Demonstrating the value of pioneer's products and services as well as a reflection of the underlying strength of our target markets revenue of $12 4 million for the third quarter is a record since divesting our transformer business in 2019 higher sales lower input costs and a favorable product mix.
Drove net earnings to 10 cents a share up from a loss of 13 cents a share a year ago in the third quarter of 2022 we expect to achieve or achieve our full year revenue guidance as well as positive net income for the full year 2023.
We also expect to enter 'twenty 'twenty, four with accelerating momentum and a record backlog and plan to announce more formal guidance for 2024 early in the new year.
Our outdoor compact E block power solution for the distributed generation market and our E boost high speed mobile electric charging suite of products continued to penetrate new markets and gain additional traction in currently served markets.
First E.
E block continues to benefit from the rapid growth of the distributed generation market raw demand for electricity continues to grow and the grids ability to satisfy this growth continues to decline. The result is accelerating power usage higher power costs and reduce reliability and supply is.
Power the E block product platform at its core integrates an automatic transfer switch circuit protection scheme and programmable controls into a compact outdoor unit. This allows the user to protect and control two or more sources of power.
Concurrently potentially even in parallel located in one unit type piece of equipment.
This limits the user's installation cost avoids expensive and disruptive indoor upgrades and direct them to one point of responsibility for the seamless flow of power to date pioneer has provided E block solutions to a multitude of fortune 500 companies are cross vertical.
Such as retail data centers electric vehicle charging station automotive and aerospace. In addition, pioneer has provided dozens of E block units to electric and water utilities as they supplement their operations with alternative sources of power.
These long term trends will continue to support our growth for the next three to five years with clear annual visibility.
Next our second major product growth driver is E boost which provides mobile high speed electric charging.
We deliver this mobility by our trucks skid trailer or pod type physical platform to date, we have provided units ranging from 30 kilowatts to 400 kilowatts with up to four power dispensers per unit.
We believe our recent commercial successes for example, the city of Fairfield, California to support that municipal fleet of electric buses or a big three automaker to support the rollout of there are 10 autonomous taxi business foreshadows, a massive energy transition market intended to be in.
<unk> over a long period of time.
Customers. In addition customers who ordered single units early on in our commercialization have already placed follow on orders.
Additionally, the market for E boost keeps expanding.
Municipalities are electrifying Street sweepers garbage trucks police and fire vehicles Airlines are going electric transitioning their ground service equipment to all electric and mining and construction companies are demanding electric options for the equipment. They use as well all these users.
Wire mobile powerful rapid non grid connected charging solutions and he boost is perfectly positioned to support these electric transitions.
Year to date E. Boost is charged over 12000 vehicles and provided more than 200 megawatts of charging to electric vehicles.
Additionally, at a major East Coast Airport authority, they have been charging on average three electric buses slashed cars a day for the last nine months.
As the revenue and backlog for <unk> continues to grow it is clear that equals just come a long way from the truck mounted prototype, we unveiled exactly 24 months ago E. Booster is no longer a concept, but rather a proven solution for growing need all this positive momentum will carry us into 2024.
More specifically, we fully expect to quadruple E boost revenue in 2024 with that let me turn the call over to Walter our CFO to discuss our financial results.
Thank you Nathan.
And good morning, everyone.
Pioneers revenue during the third quarter was a record since divesting its transformer business in August of 2019.
Third quarter revenues were $12 4 million up $6 2 million or 99% when compared to the same period of last year.
Revenue from the T&D solutions segment, which manufacturers our E block power systems and related equipment increased 156% to $9 7 million.
And revenue from the critical power segment, which manufacturers our mobile high speed electric charging solution E. Boost was up nearly 13% to $2 8 million in the comparable period.
Gross profit for the third quarter was $3 7 million or nearly 30% of revenues compared to a gross profit of 861000 or approximately 14% of revenues during the third quarter of last year.
This significant improvement to gross profit was primarily due to the increase in sales of our E block power systems and related equipment lower input costs and improved productivity.
Total operating expenses or SG&A overhead was $2 7 million or 22% of revenues during the third quarter of this year, an increase of 20% when compared to $2 3 million in the year ago quarter.
It is important to note that SG&A expense includes approximately 600000 and incremental investments in sales marketing product development and personnel expense for our <unk> solution, a drag of about <unk> <unk> per share on EPS.
This is intentional and targeted spending designed to drive demand for this new solution we.
We expect these investments to continue through the remainder of the year as we build and scale this new business line.
Finally, higher wage costs, including salaries benefits and stock based compensation costs SG&A expense to increase during the third quarter of this year when compared to the same period of last year.
Operating income for the third quarter of this year was 953000, a positive swing of nearly $2 4 million when compared to an operating loss of $1 4 million during the third quarter of last year.
Our T&D solution segment, which manufacturers E block is delivering consistent positive operating income to the tune of $2 7 million during the third quarter of this year, an increase of two and a half million when compared to the third quarter of last year.
Net income for the third quarter of 2023 was over $1 million or 10 cents per basic and diluted share compared to a net loss of $1 3 million or negative <unk> 13 per basic and diluted share during the third quarter of 2022.
A $2 $3 million increase to the bottom line or <unk> 23 per basic and diluted share the comparable periods.
Excluding noncash stock based compensation expense of approximately 285000 net income per basic and diluted share during the third quarter of this year was 13.
Looking briefly at the year to date results.
Total revenue during the first nine months of the year was $33 1 million, an increase of approximately $15 6 million or 89% when compared to 17 and a half million during the first nine months of last year.
Revenue from the T&D solutions segment increased approximately 145%.
And revenue from the critical power segment increased approximately 14% and the comparison periods.
Gross profit for the first nine months of the year was $8 6 million or 26% of revenues compared to a gross profit of $1 8 million or 15, 5% of revenues during the first nine months of last year.
We generated net income of 827000 during the first nine months of 2023.
That's a positive swing of $5 4 million or 54 cents per basic and diluted share when compared to a net loss of $4 6 million during the first nine months of 2022.
Again, excluding noncash stock based compensation expense of $1 2 million during the first nine months of the year pioneer generated net income of 20 cents per basic and diluted share.
Including stock based comp our net income per basic and diluted share for the first nine months of the year was eight sets. This is compared to a net loss per basic and diluted share a 47 for the first nine months of 2022.
Turning to the balance sheet, we had cash of $7 6 million and zero bank debt as of September 32023, compared to $10 3 million of cash as of December 31, 2022.
Our cash balance at the end of the third quarter represents cash per share of approximately 76 sets.
Accordingly, we are confident that we are sufficiently capitalized to address our near term investments and cash needs.
This concludes my remarks, I'd like to now turn the call back over to Nathan.
Thank you Walter.
Our addressable markets are massive and almost everyday new use cases from current and potential customers emerge the energy transition era is real and pioneers at the forefront of it all offering proven and competitive solutions with that I'll now turn the call over to the operator for any questions from investors.
Thank you.
We'll now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue human stop too if you would like to move your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please pull for questions.
The first question comes from the line of Amit Dayal with Etsy Greenbrier. Please go ahead.
Thank you good morning, everyone and thank you for taking my questions.
Amit.
The available capacity.
Congrats on the strong quarter by the way you know you did go up one 1 million last quarter to $12 4 million this quarter.
Is this indicating you know you guys put density.
Yeah.
These revenue levels.
You know.
You you know what the guidance we gave for the balance of the year, it's going to be I think somewhere in the nine to $9 million to $12 million range. It really depends we're not we're not deep enough in the quarter yet.
It depends who's who's taking who's not some stuff that we move up then we constantly are are in flux with certain customers, especially electrical utilities, but that's a that's a decent range you know we haven't come out with guidance for 2020 for yet.
And and that I think will give it more you know our fourth quarter will be done by then and we'll also be looking early in 2024 out for the whole year. So we'll get a little bit of of of a better look you know we're still a small company. So you know one or two jobs at $2 million plus each.
Slipping or accelerating make a difference I I wouldn't short answer is I wouldn't read that much into it we kind of try to do our best job on an annual basis in the quarter is that gonna be a little bit.
Uneven still.
Understood.
I appreciate that.
On the E book side, Nathan you don't use it you said you potentially could quadruple revenues.
This so this segment.
Will that potentially come on the sacrifice of any E block capacity or revenues.
Or is this basically on a standalone basis, you could you know.
Quadruple from these levels on the yeah yeah.
Yeah. Good question I mean, they've made into different facilities to the E. Boosters is done in our facility in Minneapolis and that can be done without any additional space.
Or without any additional capital investment.
That would probably take us to the Max they are for calendar 2024, and during the course of 'twenty four even now we're trying to figure out what happens afterwards.
That doesn't do it that doesn't affect the E block business. The E block business this year or its related product out of the facility in Los Angeles, Let's say by the end of the year, we'll have ship.
In product I don't know 35 ish million give or take.
That's pushing the capacity to almost statistic of 100% and we get asked all the time.
What are we going to do for 2024, so we're already in the process of.
It really sub contracting the lowest value processes that we do basic sheet metal or standardized sheet metal even bus bar.
Without making a large capital investments so that we can use that facility in the personnel in its highest and best use which is really too to engineer wire and assemble and test.
E block type product.
Okay. Thank you and just last one again on maybe the Eagle side. What these customers are the folks who are coming back to you for repeat orders.
Is that okay.
Larger runway within these existing customers as you know before you would need to maybe you know.
Find new buyers for these brands.
Yeah, I mean, the again, we're gonna do more formal guidance at the beginning of 2024, but on the EPS side, it's really.
From three big buckets, it's repeat it's customers that are repeating and those are typically a truck and electric bus manufacturers. They have a long way to go there runways are very large you're talking about with most of the ones that we deal with don't have.
You know anywhere upwards of 100 to 250 dealers.
Around the United States and Canada, So there's a long way to go with units just with them.
It's coming from new use cases that we really don't anticipate that's the other bucket whether it be in electrical utility that's got a rural remote issues and theyre being tasked with charging or in the case that we've announced earlier you know it's been fast that's bringing in thousands and thousands of vehicles from you.
Vietnam and need mobile charging at the various ports that they bring them in and we started with them in the port at the San Francisco, It's moved to the Port of Los Angeles, They expect to be bringing in material into the port of Jacksonville and in other ports as well and continue to love and need the solution and.
Then it really comes from fleets are fleet management companies to a large extent and you know they they made orders of initial sizes and so forth of what they thought and that's getting traction among the fleets that they are managing or hoping to manage so that's all.
So a long runway for follow on orders.
Thank you Nathan that's all I have I'll get back in queue.
Okay pleasure Amit.
Thank you next question comes from the line of Manish to Baucus with Julian Mitchell. Please go ahead.
Hey, I'm, sorry, I jumped on a little late maybe you already addressed it but back to the guidance for the rest of the year.
I think you touched on the revenue side, but I believe that the way the guidance is given EPS could still be a loss for Q4.
Is that what.
What youre expecting or do we expect to be positive on the EPS side.
Right. So the short answer is we expect it to be positive how positive I really don't know until the you know the revenue and the mix plays itself out and of course, you are technically correct. You know we guided towards positive EPS for the year. So theoretically at this point, we could lose seven cents since there'll be positive for the year.
<unk>, which is a great position to be in but but thank you for bringing this up and teasing. This out we don't have any intention of being a negative.
Negative in the fourth quarter.
Okay, Alright, thank you and with your 2024 guidance that you talked about will you be giving EPS guidance when you guys give out.
That's the plan yes.
Okay, Alright, thank you very much youre very welcome.
Thank you a reminder to all the participants that in my press Star one to ask a question next question comes from the line of Scott.
Scott.
But simple capital. Please go ahead.
Thanks for taking my call great quarter.
Thank you Scott.
I have a question on the gross margin, 29% was terrific and I think it's the best you've ever done is that number sustainable going forward.
That's a that's a great question Scott.
You know, it's definitely something you know once we you know it's like tasting forbidden waters, you know one with once we've tasted. It you know we don't want to move backwards.
We shoot for 25, that's you know that's how we base a lot of the analysis and guidance going forward for 'twenty five.
But we definitely see that we have the ability to stretch in certain cases, it's really going to depend on.
The continued spend on the boost and win IPU stops being a drag on earnings and breakeven and then hopefully you know be a contributor so that that's the long winded answer to your question.
Okay, well that's a good segue into my next question at what point do you expect E boost to stop being a drag and start to contribute can you give us some color on the timeline.
So I think I think it should it should I you know stop being a drag as you know what's the drag, but I think I think it should.
Mitigate a lot of the of the loss in the spend.
Somewhere in the second quarter of 2024 and start contributing in the second half of the year I think the first quarter will be.
Some advance in that area not not enough to say that it's you know close to breakeven until little bit later.
Okay.
And then my last question is.
After the Q2 call you called out water utilities and data centers as highlights of your end markets and can you comment on your end market growth that you saw in the Q3 and how those two end markets, specifically and then some.
Prices to the upside or the negative side.
Yeah, I mean, it's only to the positive side. They continue to you know I I, probably didn't do a good job and in the comments I made earlier, but at this point we're across so many verticals you know when we called them out then everybody's thinking okay. What about this one that one and so forth. It's everywhere data continues to.
Strong EV charging stations are super strong water utility, though that is the heart the water utility and the large automotive project that we did where the heart of the third quarter.
And we fully expect that especially on the water side, we expect that to continue that's a large large untapped market with with a customer that is is ready to spend and it is not sort of bound by they have different they have different spend considerations than are than a more commercial customer.
Great. Thank you very much.
Youre very welcome Scott can't wait to see you again soon.
Thank you.
Next question comes from the line of Albert Jones with Jones Capital Management. Please go ahead.
Thanks, a very nice quarter.
Quickly on the.
Gross profit of 29.8% of revenue.
I imagine that was.
A lot of it was.
Going by sales mix.
Can you tell me if the sales mix for the fourth quarter is a training differ than the third quarter.
Yeah.
It's it's trending sort of sort of the same you know part of it is you know as far as the type of product.
Every day, you know we live in a dynamic human world. So how well did we execute that we hit the hours that we make a mistake on some components from a material point of view. So I don't have all that data the product mix is still a beneficial you know is a good product mix something I would hope overall continues.
Through 'twenty.
'twenty 'twenty four as far as product mix, but I don't have I don't have a more a drill down view on the profitability of the jobs yet in the fourth quarter is not over yet.
Yeah. Okay. Thanks, one more quick one as far as.
So revenues were.
Good I'm good.
All orders get shipped out or did any possibly move into a slight delay to being shipped fourth quarter or first quarter.
That you can't talk about.
Yeah, I mean, that's every quarter for us. So if you ask me every quarter the things get shipped out that things get pushed out some things get exciting pulled in happens all the time, so I'm not sure where you want to.
Go with it you know that's that's the nature of the business you know the quarter customers.
Especially the larger ones in noninterest that you know that September 30th at the end of our quarter and whatever that means so.
I'm not sure what youre trying to uncover.
Well you know.
The talk on the macro side of some of the U S car companies are making delays to their orders on the EV side because of the slow uptake supposedly hearing with every day on the business news so yeah.
My question was kind of related to that are you know as far as a macro thing you know on that side.
Yeah. So I understand your question better now sorry, Yeah, we are not seeing in our space and in the markets that we're after them for the most part we're not seeing any slowdown whatsoever doesn't mean, it won't happen and it doesn't mean that we're immune from anything that's happening, but even I mean, even order.
Or is that we took from the autonomous vehicle division of the certain automaker and so forth and despite what we read that some of those businesses are incurred in incurring bumps in the road.
The opposite they they are.
I'll call to make sure that we're full steam ahead in that they have.
They've invested a lot of money into these businesses and they have every intention of giving it a you know giving it their all for the next several years.
Alright, thanks for clearing that up for me I appreciate it one quick one in a row.
In our prepared remarks.
You mentioned some larger solutions.
I know you had a huge install in Las Vegas that you've talked about in the past as far as that goes are we talking to even larger or something on that size scale. What are what are the newer customers are talking about as far as our largest solutions from you.
Yeah, again, I'm not I'm not sure specifically I don't remember anything and in Las Vegas, We have ship you know a couple of jobs there try to rack my brain, but I'm not sure specifically, what you're referring to.
The order mix is been going especially on the block side, you know with the.
Ticket sizes get bigger and bigger the projects get bigger and bigger you know we announced earlier when we received the order from the large automotive business you know of $9 million I mean, that's that's the largest that we've ever taken you know post the selling of the transformer business, probably even before that.
So the year. This year has been anchored by some large orders like that and then a lot of orders more in the I guess, you know 200000 dollar range and everything in between so I don't know if that helps at all or if there's something more specific and we expect the same in 2024, it's going to be anchored.
By some very large projects and then.
A lot of the smaller ones are repeats of certain units if that your retailer or somebody else with multi locations.
Alright, that's all I got thanks.
That'd be great.
Alright, you too.
Thank you a reminder to all the participants that in my press Star one to ask a question next.
Our next question comes from the line of Bruce Galloway of Galloway Capital. Please go ahead.
Gratulation is on a good quarter.
Just trying to delve into the numbers a little more.
It looks like.
E boost is probably going to do about eight ish million. This year eight to 10 and you set a quadrupling next year, so that does that imply about $30 million to $40 million.
And also.
On your capacity issues.
<unk> E block.
It looks like maybe $35 million to $40 million is full capacity and how much more can you squeeze out from that plant in.
I guess the demand is way more than that for next year.
What do you think you could.
Increase those sales by like 30%, 40%.
Yeah and Mike.
My second my second question is the share count went up by like four or 500000 is that mostly.
Yeah.
Compensation for our for the executives.
Okay.
I mean, what we'll I'll answer the first two and then I'll, let Walter go through the <unk>.
Third the options, but I think that you are correct on stock based compensation and some other awards that we gave to to employees.
But from the Oh go.
Go backwards and then from a capacity point of view I think we talked about it a little earlier on E. Booths, Yeah, we'll do about 35 million more or less this year out of the Los Angeles facility and that's what I call Statistical, 100%, We've said several times.
But I will say it more formally now you know we're in the process of sub contracting out certain I guess lower value added processes.
That we performed there like some of the metal bending some of the copper bending that we'd do we traditionally group just doing everything.
We expect that to probably increase the capacity they are more than 50% I don't know exactly how much you know if it works out amazingly well you know it would be closer to a 100% if it doesn't work out so well, maybe it'll be a little bit below 50%, we will see as 'twenty 'twenty four unfold.
Even though we're sort of at the beginning of that right.
Right now, yeah and E boost yet the little trick there with E boost so he boost sales.
You know I'm I'm doing it by units a lot of what you see in critical power is some of its not related to boost a lot of it is not a lot of it is pure service work that we still do so lets use them I'm glad you raised it because we should have actually had it in the remarks <unk> been more formal and maybe next call and next.
<unk> will be more formal but.
E boost sales this year will be somewhere over $1 billion now that includes rental income as well. So there's you know a more expensive unit behind the a longer term lease.
When we say quadruple quadruple is easy frankly that would be $4 million.
Again, we havent done the formal guidance, but we're kind of using rental income and product sales of about $10 million additional sales.
Sales next year related to boost so maybe that that helps a little at least be more clear to you.
Alright.
Yes, yes, that's good.
Okay. Thank you Bruce.
Yeah.
Thank you.
There are no further questions at this time I would now like to turn the floor over to Nathan Mazurek for closing comments.
Alright. Thank you all for your time and support we look forward to updating you as we win additional projects and more formally update you on our next earnings call.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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Okay.
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Yeah.
Yeah.
Yeah.
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