Pioneer Power Solutions, Inc. (NASDAQ:PPSI) Q1 2023 Earnings Call Transcript

Pioneer Power Solutions, Inc. (NASDAQ:PPSI) Q1 2023 Earnings Call Transcript May 15, 2023

Pioneer Power Solutions, Inc. beats earnings expectations. Reported EPS is $0.01, expectations were $-0.03.

Operator: Good afternoon, and welcome to the Pioneer Power First Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Brett Maas with Hayden IR. Please go ahead.

Brett Maas: Thank you, and welcome. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; Walter Michalec, Chief Financial Officer; and Geo Murickan, President of Pioneer Mobility. Following this discussion, there will be a Q&A session open to participants on the call. We appreciate the opportunity to review the first quarter financial results as well as discuss recent business highlights. Before we get started, let me remind you this call is being recorded and webcast. During this call, 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, which applies to the content of the call. I’d like to now turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Nathan Mazurek: Thank you, Brett, and good afternoon, and thank you all for joining us today. We carried the strong momentum from last year’s fourth quarter into the first quarter of 2023, and this year is shaping up to be a record year for us, both in terms of revenue and profit. Demand for our unique solutions continues to grow at an outsized pace. We are adding new dynamic customers. Existing customers are providing us with new purchase orders and opportunities, and we continue to evolve our solutions to better serve the needs of our customers and expand the vertical markets for our solutions. After growing revenue nearly 50% in 2022, we anticipate 2023 to be another year of 50% growth. We also expect to be profitable for the full year.

This marks a significant turnaround in our business following our reset and the sale of our transformer business in August of 2019. Indeed, this was our second consecutive quarter with positive GAAP net income. We have essentially reached a point where our projected annual volume enables us to achieve improved operating leverage and sustainable EPS. While we continue to experience some quarter-to-quarter volatility in our results, we are projecting between $42 million and $45 million in annual revenue for 2023, representing a growth rate of at least 50%, similar to 2022. We also expect continued margin expansion and positive net income with much of our income sheltered from taxes due to our net operating loss carryforwards. As I noted on earlier earnings calls, our e-Bloc and E-BOOST solutions directly address 2 durable secular catalysts with both drivers inextricably linked to the generational energy transition our nation is experiencing.

Our e-Bloc suite of solutions is an integrated compact and outdoor automatic transfer switch scheme, circuit protection and power control system, specifically designed for users of more than one source of electrical power. e-Bloc allows facilities to add additional energy sources like solar, battery storage, fuel cells or natural gas engines without doing any internal upgrades to their existing electrical system. Additionally, e-Bloc allows the user to effectively manage, control and protect all these inputs, facilitating peak shaving, peak skimming and general resilience. As noted earlier, e-Bloc presents all these benefits in a compact outdoor competitive skid-mounted package. Our primary markets for e-Bloc are large multi-location businesses with a large physical footprint, such as retailers and supermarkets as well as critical power-sensitive facilities like data centers, water utilities, hospitals, senior living centers, prisons to name just a few.

The distributed generation initiative is growing rapidly as end users want to better control their energy inputs, including solar and wind, reducing their carbon footprint, lowering their costs and ensuring steady reliable supply. Large users of primary power like EV charging businesses are also understandably concerned about their ability to — for the current grid to continue to supply them with their ever-increasing power requirements today and in the future. Simply put, the market for e-Bloc is very strong and only getting stronger. Turning to our E-Boost Mobile charging platform. We continue to see increasing orders and ever-expanding use cases for our unique anytime, anywhere mobile EV charging solution. Our E-BOOST system is a sustainably powered propane-fueled high-speed charging system, providing the ultimate immobility and portability.

As a reminder, the E-BOOST portfolio is comprised of several platform, E-BOOST platforms. E-BOOST Mini is a skid-mounted version that provides high-capacity EV charging in the smallest footprint. It brings on demand charging of EV vehicles to any location within a facility with just a forklift and anywhere else on board with the trailer. This gives an easy and convenient way for dealerships and electrical depots to charge their EVs. E-Boost G.O.A.T. generator on a truck is a truck-mounted option that brings quintessential mobility and 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 dispatchable charging services and thereby eliminating any range anxiety.

E-Boost Mobile is specifically a trailer-mounted solution that balances the need for mobility and higher capacity of EV charging with minimal effort and on short-term notice. E-Boost 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. E-Boost Pod finally is the 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 4 or more vehicles simultaneously. Like all E-BOOST solutions, it can also service other power needs, especially in emergency situations such as a power outage. Serving as a backup power source and convenient power connectors and outlets are available on board.

Today, target customers have included electric truck and bus manufacturers, their associated dealers, fleet management companies, package delivery providers, school bus operators and the like. We recently provided additional units to a large manufacturer, a large domestic manufacturer of electric trucks and buses, new units to one of the country’s largest fleet management operators and new units to a transportation authority controlling some of the nation’s largest airports. Other active E-BOOST markets include the electric vertical take-off and landing aircraft or eVTOL market, which are the future of air taxis, eSports and E-off-road market for equipment, including things like e-boats, e-jetskis, electric snow mobiles, off-highway equipment, construction equipment, anything that encompasses farming equipment, e-tractors, e-sprayers and so forth, all along the lines of charging infrastructure for these particular pieces of equipment.

The National Electric Vehicle Infrastructure and NEVI program is also providing incentives and federal grant funding to U.S. companies that manufacture EV-charging stations or their components domestically in order to have a national charging network along our interstate highways. We expect the NEVI program to be a significant catalyst for us in 2024 and 2025 as state governments and authorities begin the funding and implementation of the NEVI program. 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. Unquestionably, sales of EV trucks, buses and cars have significantly outpaced the charging infrastructure. This is particularly true in the industrial and commercial sectors where companies with fleets of EVs, trucks, buses, warehouse equipment need to augment their charging infrastructure.

Many organizations are moving quickly to add charging solutions for customers, employees and company fleets. We have sold solutions directly to large EV car manufacturers to recharge vehicles as E-BOOST fills this unique niche. As a result, we expect E-BOOST to drive significant growth in profit generation for us in 2023 and beyond. With that, let me turn the call over to Walter, our CFO, to discuss our financial results of the first quarter.

Walter Michalec: Thank you, Nathan, and good afternoon, everyone. As Nathan mentioned, Pioneer carried a strong momentum from the fourth quarter of last year into the first quarter of 2023, and this year is shaping up to be a record year for us, both in terms of revenue and profit. Pioneer’s first quarter revenues were $8.5 million, up $2.1 million or 34% year-over-year. Revenue from our T&D Solutions segment, which manufactures our e-Bloc solution, increased 55% to $5.8 million when compared to $3.7 million during the same period last year. And our Critical Power segment, which integrates E-BOOST was up 4% to $2.7 million. Gross profit for the first quarter was $2.2 million or a 26% gross margin compared to a gross profit of $923,000 or a 14.5% gross margin during the first quarter of last year.

The significant increase to our gross profit margin was primarily due to increased sales of our e-Bloc Power Systems, a favorable sales mix and improved productivity from our manufacturing facility. Selling, general and administrative expenses of $2.2 million were 25% of revenues for the first quarter of 2023, an increase of 24% when compared to $1.7 million of selling, general and administrative expenses in the year ago quarter. Approximately $150,000 of the quarterly SG&A was related to stock-based compensation. And SG&A also includes approximately $600,000 in incremental investments in sales, marketing, personnel and prototypes for our E-BOOST solutions. This is intentional and targeted spend designed to drive demand for this new solution.

We expect these investments to continue through 2023 as we build out this new ever-growing business line. Operating income for the first quarter of 2023 was $55,000, a positive swing of approximately $880,000 when compared to an operating loss of $823,000 during the first quarter of last year. Net income for the first quarter of 2023 was $122,000 or $0.01 per basic and diluted share. compared to a net loss of $740,000 or negative $0.08 per basic and diluted share during the first quarter of 2022. Turning to the balance sheet. We had $11.6 million of cash on hand and 0 bank debt at March 31, 2023 compared to $10.3 million of cash on hand at December 31, 2022. This represents cash per share of approximately $1.18 at March 31, 2023. Accordingly, we are confident that we are sufficiently capitalized to address our near-term investments and cash needs.

As Nathan said, we expect to deliver continued growth in 2023 with margin expansion and positive net income. Based primarily on our backlog, as well as the significant and accelerating demand for our new solutions, we believe we can grow revenue by at least 50% in 2023 when compared to 2022. We also expect to generate positive full year net income and earnings per share. This concludes my remarks. I now turn the call back to the operator for any questions.

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Q&A Session

Operator: [Operator Instructions]. Our first question will come from Amit Dayal with H.C. Wainwright.

Operator: [Operator Instructions]. Our next question will come from Shawn Boyd with Next Mark Capital.

Operator: Our next question will come from [indiscernible], a Private Investor.

Operator: Our next question will come from [indiscernible], a Private Investor.

Operator: Our last question will come from [indiscernible], a Private Investor.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Nathan Mazurek, for any closing remarks.

Nathan Mazurek: All right. Thank you all for your time and support, and we look forward to updating you again on our next call.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.