Q4 2023 Pioneer Power Solutions Inc Earnings Call
Please standby we're about to begin.
Good afternoon, everyone welcome to today's pioneer power in 2023 fourth quarter and year end financial results Conference call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing star one on your telephone keypad.
And you may withdraw yourself from the queue by pressing star two.
Also today's call is being recorded and I will be standing by if anyone should need any assistance now at this time I'll turn things over to Mr. Brett Maas, managing partner of Hayden Investor Relations. Mr. Mas. Please go ahead.
Thank you and welcome the call today will be hosted by Nathan Maverick, Chairman and Chief Executive Officer, Walter Mechanic, Chief Financial Officer, and Jim Brickman, President and CEO of pioneer power mobility immobility, sorry. Following this discussion will be a Q&A session open to participants on the call. We appreciate the opportunity to review the fourth quarter and full year 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 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 tax regarding forward looking statements contained in earnings release issued earlier today, which applies to the content of the call.
I'd like to now turn the call over to Nathan Maverick, Chairman and CEO Nathan. Please go ahead.
Nathan Maverick: Thank you Brad good afternoon, and thank you all for joining us today before I begin please be aware that the financial results that we reported earlier today, we'll be discussing during this call are unaudited preliminary results.
[noise] pioneers on the forefront of the energy transition in North America as evidenced by our banner 2023 we delivered revenue growth of more than 50% in full year positive net income more importantly, we are well positioned for another year of impressive organic growth and increasing.
Nathan Maverick: Net income our backlog surged to 46 million as of the end of 'twenty two 'twenty three a sequential increase of 36% over the prior quarter, our innovative new products and solutions continued to gain traction in the marketplace and highly favorable secular tailwind or creating an environment.
Nathan Maverick: Mint a supercharged demand. Indeed, 2023 was an inflection point in our business with revenues continuing to increase in fixed overhead remaining close to constant positive operating leverage has taken hold and going forward. We believe we will be able to sustain and increase our positive.
Net income through calendar 'twenty 'twenty four.
For 'twenty 'twenty four we are providing guidance of full year revenue of between 52 and $54 million and fully diluted E. P. S.
<unk> 31, and 34 cents importantly, we believe this guidance is conservative and anticipates measured investments in our E block and eat boost product platforms to stay ahead of the innovation curve as well as investments in sales and marketing to increase brand.
And product awareness.
This full year guidance also anticipates, a certain number of customer directed deliveries.
Originally we're currently scheduled for 2024 that will probably be moving into 2020. Five. In addition, as of the end of 2023, we had approximately $14 $6 million of net operating loss carry forwards available to shelter taxable net income while we may see.
Still experienced quarter to quarter volatility. This volatility is most often driven by delivery accommodation requests from our customers and not pioneers ability to manufacture or deliver our solution.
Nathan Maverick: Over the course of 'twenty to 'twenty three we had a notable list of new use cases and purchase orders for both E block and E boost from a diverse set of vertical markets demand for electric power is growing rapidly and market trends indicate this will continue for the foreseeable future the accelerating adoption of electric vehicles.
Increased computing power consumption from AI proliferation, and advanced technology solutions require more power than ever before.
An existing utility power is becoming more expensive less available and increasingly unreliable greater efficiencies are needed to get maximum power output from existing infrastructure.
And new distributed energy resources need to be brought online our products, specifically support hearten and accelerate these efforts.
Turning first to E block E block as an integrated compact outdoor transfer switch scheme circuit protection and power control system integrated specifically designed for users of more than one source of electrical power.
Customers can add additional energy sources like solar battery storage fuel cells natural gas engines without doing any internal upgrades to existing electrical systems, all in a compact outdoor skid mounted package.
Nathan Maverick: Since the initial launch of the block and its success several years ago. We have designed several additional variations that extend the E block product line and open new and larger market opportunities for pioneer.
Our solar Microgrid version of E block as a smaller and more economical version of the original we developed it specifically in response to requests from several national solar and Microgrid developers.
Nathan Maverick: And this product expansion was met with immediate purchase orders.
Small portion of that initial demand was shipped at the end of 2023 and we expect the solar micro grid market to be a big growth driver for us in 'twenty 'twenty, four and indeed in 'twenty to 'twenty five.
Nathan Maverick: Another extension with your regional E block design as our new E block charge ports series. This product was born out of a customer specific need to protect the electrical and the integrity of <unk>.
E V Chargers and related equipment and to help support the rollout of EV charging stations. It resulted in the immediate in the immediate purchase order orders of more than $2 million.
Nathan Maverick: Several weeks ago and has opened up a new market opportunity that we believe will include additional units.
Beginning in the second half of this year and through 'twenty 'twenty five and indeed 2026.
Finally, we introduced our package substation platform, which integrates a high voltage protection system liquid or dry type transformer and a low voltage protection system to provide users with a compact unitize indoor or outdoor substation installation is more economic.
Oh, and more expeditious compare compared to installing individual components from a number of disparate vendors again opening a new large and growing market opportunity for pioneer.
Turning to our E boat E boost mobile charging platform.
As we've reiterated many times he booth provides anytime anywhere EV charging and is comprised of several platforms, including E. Boost many a skid mounted version that provides high capacity EV charging in the smallest footprint, we have the available bringing on demand charging of electric.
Nichols to any location IPU.
E boost goat G O a T generate around a truck a truck mounted option that brings ultimate mobility with high capacity you'd be charging IPU smokable.
Trailer mounted solution that balances the need for mobility and higher capacity EV charging and finally, EPS pod and mostly stationary EV charging solution with customizable higher capacity than can be and can be moved if necessary. The first E. Boost product was conceived just a short time ago in June.
<unk> of 2021 we unveiled our first prototype a truck mounted unit a few months later in November of 2021 and shipped our first unit a trailer mounted unit in March of 'twenty to 'twenty two.
In the full year of 2022 E boost deliberate 7.5 megawatt hours of power over approximately 350 charging stations sessions.
In 'twenty two 'twenty three we delivered 220 megawatt hours at mobile charging power over approximately 7500 charging sessions. In addition in 2023, we've booked more than $4 million and new E booster orders across the first end markets ranging from the major.
Retention agency, a major automaker municipalities several enterprises operating bus and truck fleets in North American utility a truck dealership as well as many others. We plan to deliver a record number of mobile off grid EV charging solutions in 'twenty, 'twenty, four which we will.
Which we expect will make a significant contribution to our revenue and operating margin, we continue to aggressively market E boost and as education and awareness.
E boost increases orders have similarly searched similar to the market backdrop related to E block the pursuit of more green alternatives in sustainability and the increasing adoption of electric vehicles by school districts and municipalities and other organizations provide.
Nathan Maverick: A strong tailwind for continued growth in this portion of our business.
Enterprises are trying to move quickly to add charging solutions for their customers employees and fleets as the electrification of things continues mobile and on demand charging will become increasingly important and IPU squarely meets that demand.
Before I turn the call over to Walter our Chief Financial Officer for a more detailed discussion of our financial results I'd like to leave you with this 2023 was a highly successful and pivotal year for pioneer in terms of our financial results. The solutions, we brought to market and customer wins ever.
He wanted to pioneer is excited about the prospects and opportunities that are ahead of us and looks forward to doing their best to deliver another record year for the company in 2024.
With that I'll turn the call over to Walter.
Walter: Thank you Nathan and good afternoon, everyone.
Pioneer fourth quarter revenue was $7 7 million compared to $9 5 million in a year ago quarter, a decrease of about 19%.
The decrease was primarily due to the timing of certain orders shifting from the fourth quarter of 2023 into calendar year 2024 per customers requests.
Had it not been for these delays we estimate that our Q4 2023 revenue would have been approximately $12 million.
Revenue from our electrical infrastructure segment, which manufactures our E block solution decreased 31% to five mode.
And revenue from our critical power segment, which sells power generation equipment and manufacturers E boost was up 23% to $2 7 million.
Gross profit for the fourth quarter was $1 8 million or a gross margin of nearly 23% compared to gross profit of $2 8 million or 29% of revenue in the fourth quarter last year.
The decrease again was primarily due to the shift in timing of certain orders from 2023 to 2024, which resulted in reductions to revenue and gross profit.
Selling general and administrative expenses of $2 1 million increased modestly from 2 million in the fourth quarter of last year.
And are down significantly or 23% on a sequential basis from $2 8 million in the third quarter of 2023.
Approximately 225000 of the quarterly SG&A expense was related to stock based compensation.
We expect investments in our products and solutions to continue in 2024, albeit at a more moderate level as we build and scale our business lines.
We also believe there's a great amount of operating leverage in our business model, meaning as we continue to grow we expect a greater portion of our gross margin will fall to the bottom line and drive an increase in GAAP profitability.
Loss from operations for the fourth quarter of 2023 was $1 2 million.
Compared to operating income of 760000 in the fourth quarter of last year. The decline once again was primarily related to delays in the delivery of certain orders at the request of our customers and R&D expense related to our solutions.
Net loss for the fourth quarter of 2023 with 689000 or.
Walter: We're seven cents per basic and diluted share.
<unk> to net income of 948000 or 10 cents per basic and diluted share during the fourth quarter of 2022.
As Nathan mentioned, we had $14 6 million in federal NOL carry forwards as of December 31, 2023, and $11 3 million of deferred tax assets on which we are taking a full valuation allowance sheltering a significant portion of future taxable income from fair.
Walter: It all taxes.
Turning to the full year results.
For 2023 revenue was $40 8 million up over 51% from $27 million in 2022.
Exceeding our guidance of at least 50% growth for the full year.
Revenue from our electrical infrastructure segment increased 71% for the year to $29 7 million, while revenue from our critical power segment increased 16% to $11 1 million.
Walter: Had it not been for the customer request to delay shipments during the fourth quarter of 2023, we estimate our full year 2023 revenue would have been approximately $45 million.
Gross profit was $10 four minute or a gross margin of 25, 5% compared to gross profit of $4 6 million or 17% of revenue during 2022.
Walter: We expanded our gross margin due to the significant increase in sales of our products and solutions as well as improved productivity from our manufacturing facility.
Loss from operations was 617000 in 2023 compared to an operating loss of over 4 million. During 2022. This is a tremendous improvement of more than $3 4 million.
Walter: Net income was 138000 or one cents per share.
This compares to a net loss of $3 6 million or negative 37 per share in 2022.
Turning to the balance sheet, we had cash of $7 $5 million and zero bank debt at December 31, 2023, compared to $10 3 million.
At December 31, 2022.
This represents cash per share of approximately 75 at December 31 2023.
None: We remain confident.
None: That we are sufficiently capitalized to address our near term investments and cash needs.
As Nathan mentioned, we expect to deliver continued growth in 2024 with revenue of $52 million to $54 million and positive EPS between 31, and 34 cents per share for the full year.
This concludes my remarks, I'll now turn the call back over to the operator for any questions from investors.
Thank you very much ladies and gentlemen at this time. So do you have any question simply press star one on your telephone keypad and you may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question and we will pause for just one moment to allow questions to queue.
Okay.
We'll go first afternoon to Rob Brown of Lake Street capital markets.
None: Yeah.
Good afternoon.
Good afternoon, Rob.
Just wanted to get a little more color on the shift of revenue in the quarter did you have a customer I guess, we're sort of seeing the requested a timing delay in shipments, but but what sort of drove that and was the with the products manufactured in and they are pushed out deliveries or what happened there I guess.
Yeah in both cases, the product was pretty much manufactured to one one.
Just went into the first quarter that actually left this.
This quarter. The other has been pushed out into towards the end of 'twenty 'twenty four.
Whatever there whatever the reasons are they were not ready to accept it for the contracted delivery dates whether it's other vendors you know these are typically in the in these two particular cases.
They're complicated large projects you know, we're only a small piece of what's going on and you know for one it was just a couple of months that affected of course, you know where we capture revenue on our revenue on an annual basis. The other is somewhere deep, but we have it scheduled for late 'twenty four right now.
Got it okay great.
Great.
And then on the the demand environment overall, I guess, specifically the E block business. How are you seeing the order activity there and.
And really what what sort of areas are our active at this point in terms of market vertical.
Yeah, I mean, the most active for us and that's where we're seeing most of the purchase orders and where at least a big portion of it is is solar micro grid and a lot of charging.
That's driving our E block I think that some of the other you know E. Block is also you know the original eat block has evolved into a very big project kind of a business.
Like we delivered this past year, but you know large automotive project large I E. A large a water project.
We see more of those shipping and 25 and 26 as they take a very long time now to get to to come together and yeah. I mean, it's a lot of solar it's a lot of the strip shopping centers that are being are going solar plus battery plus or minus charging.
It does make a difference really as long as they go solar plus battery.
So it's everybody from Chick Fil a Jersey Mike's you know these are the names on the P. O is in N out Burger and places like that that are putting that in and then we the the specifically the E block.
Microgrid solution that we developed this is apparently a big hit with these solar developers.
None: Okay, Great and west last questions on the home boost product announcement or introduction, how do you see that demand environment or who are you targeting there for customers and what's the I guess the opportunity that you see in a much better product.
Yeah. So so thank you for bringing that up.
We don't have any revenue budgeted for that for 2024, so that's not in our guidance at all.
And we're slowly where we're doing kind of a soft rollout of that and in regions that we feel that we're a little bit stronger that's gonna go through electrical wholesalers slashed distributors and and engine generator dealers ultimately their customer is that is the contractor and.
That product is really targeting the higher end home owner slash developer.
Somebody that really wants a prime rated unit that they can run their home you know in a large home a 100% of the time.
The grid, if they want if they want an island or in parallel and at the same time integrate to them, a where they're able to charge their vehicles are vehicles or electric vehicles.
Rapidly.
None: And by using converting the natural gas into a into power. So it's that it's it's the it's the larger a more expensive homeowner.
Okay, great. Thank Hilton.
Thank you Rob.
Yeah.
Thank you well go next to Amit Dayal at H C Wainwright.
Thank you al good afternoon, everyone and good afternoon Nathan.
Good.
Yes, Thank you Nathan well hold the revenue outlook for 2024.
How would you sort of break out so contribution expected from E block a new boost you said on boost is probably not going to do so much next two but between the block a new boost.
50, 50 split roughly or a different spread.
Yeah, I mean E block is still going to be a little bit ahead, but the big surge in in 'twenty 'twenty four the outsize growth I E. Booster will always I mean E block as is growing.
It continues to grow and we actually have and we're looking for even more kind of exponential growth in 'twenty five for this year. The big boost is going to come from from the boost product are the backlog is super strong there and finally, especially with the the programs for electric.
School buses in particular and so many are finally, taking delivery of electric school buses that that's a big driver for us for 'twenty, four and 'twenty five.
Understood.
And with revenue sort of hitting the low 50 million levels.
In 'twenty, 'twenty, four or unexpected too.
None: Gross margins were.
Where do you think you know gross margins would come in closer to 30% are still in the mid 20% levels.
We target you know we target at least 25.
On the block side, we are always being a we're always we're always doing better are the team. There is doing an amazing job from a productivity point of view also as we migrate to smaller projects that the margins tend to be a little bit higher.
But that being said you know something between 25% to 30% is what we you know you know where we are targeting the same thing so that that's what it is.
Okay. Thank you Nathan.
This home boost product is it a competitor to make a general thing or is it a different value proposition Nathan.
So it's a different value proposition you know, we don't pretend to compete with with somebody like Generale yeah.
Have a wide oh white product array and you know they have the tremendous market share, but they are selling a backup engine.
Nathan Maverick: Which which allows it to be a little bit less expensive you know what we're doing with this two differentiators. One. This is a prime rated engine. So you're not limited by the backup generator rules of whatever they are in different localities look look.
Different local groups have different rules, but whatever let's say, it's a maximum of 200 hours a year or whatever it is ours is unlimited is prime you're paying for that efficiency in the engine typically the emissions are super Super low because we're using natural gas as well.
And we're integrating a high capacity or not depending on the on the customer's choice.
Into it so that there's no additional installation if it's a new home or it's somebody that doesn't have a backup generator and they don't have an electric charger electric vehicle Chargers. They can get all that with one installation in one unit and if they want to save additional money.
They can even produce the power for their charger themselves from the natural gas as opposed to running it off.
Their utility connection or not.
That's completely the customer's choice. So it's a differentiated product in a very specific niche again, it's going to be this is this is starting for us. It's at 30 will probably go up to 60 kilowatt.
Hum.
You're talking about a very large home running a lot of a lot of power.
So Nathan.
With respect to solar deployments in a scene.
You know when folks.
All of these were their homes with respect to the subsidies.
When you combine it with the SGR interactive offering you know as a part of that.
Government and then you get subsidy and the whole team.
Right.
Well, that's why it is a part of the.
<unk> deployment, which includes solar plus my own boost.
We're we're not offering I mean, we're not integrating the solar to this so that's really going to be up to the contractor and the user an end there.
They're going to they're going to.
Pale themselves to that is that going to help you know of course that helps and then there are subsidies for that but.
But where we're just doing the simple we're not integrating it so we're not doing energy storage with it for the home or for anything like that we're giving them a special unit. The fact that it's a charger integrate it there may be subsidies more or less available whether they be federal or in other states, where theyre encouraging you very much.
<unk> added an electric vehicle charging to your home there may be subsidies available from the charge your point of view, but we're not we're not adding the solar.
Okay understood.
Contractor could you know work with that.
The customer, but it's not coming from your side at this point correct correct. Okay.
You you you indicated maybe you know are investing in sales and marketing and other sort of capex.
Needs.
How much in terms of dollars is it three to 5 million or you know are higher than you know that amount in terms of your investment plans for granite.
Yeah. So most of the investment is on the critical power side, almost all related to boosting the awareness and availability of E boost and Walter maybe you want to just give me a quick rundown, where do we spend in 2003 and what we expected to spend in 'twenty for sure. Yes. So on the EBIT business specifically the email.
<unk> Division.
Division there.
We invested about $3 million in the business for 2023.
Now for 2024.
Again, we don't expect the same some there are modest decrease but to nathan's point.
Additional investments in more personnel as we try to target other areas and additionally, as we build out more products and units.
Focusing on R&D work as well.
Alright, guys. That's all I have thank you so much.
Thank you Amit.
And just a reminder, ladies and gentlemen star one for questions. This afternoon, well go next now to Andrew Parker of Horizon kinetics.
Hi, Walter just one cost a lot. Thank you just addressable spoke I said, she didn't really speak to those sub humble in the call, but my sense is both our manufacturing capacity as one of the issues that you guys are facing.
Talk a little bit about that.
Now I'll turn it over to the chief here he knows much better on the capacity issue. So yeah. I mean, we were where we are we faced we're facing a little bit of a crunch on the E block side of the business, we've been addressing it I guess since our I don't know in the middle of last year started the program too.
Really move out some of the less value.
It added operations that we do we probably two vertically integrated in our facility near Los Angeles.
And that's what we're in the middle of we're trying to do it without spending I mean anybody could go and say, okay I need a new you know my my Rep and you know my order book is growing blah blah I need another facility I need more equipment I need this I need that so we're trying to be more judicious, we're trying to concentrate on what we're getting paid for which is.
Our unique engineering and unique design and complicated wiring are being able to.
Do complicated wiring of controls and components and things like that and not really we're not really compensated for.
Making a 90 inch door.
That's that's how we're addressing it we don't think that we're going to have a capacity issue. Although we're where we're shifting this year. So it's a little bit of a consolidation for us.
A little bit a little haywire, but we don't expect to have any we're not turning down any thing because of of.
Pasadena this year or we don't anticipate any issues next year either.
Alright, Thank you Nick.
Youre welcome Andrew.
And ladies and gentlemen, just a final reminder, star one please for any further questions today.
Yeah.
And gentlemen, it appears we have no further questions afternoon, so that will bring us to the conclusion of today's call we'd like to thank everyone for joining the pioneer power 2023 fourth quarter and year end financial results Conference call. We wish you all a great evening have a good day goodbye.
Nathan Maverick: Thank you thank you Bo.
Yeah.
Okay.
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Nathan Maverick: Hum.
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