Pioneer Power Solutions, Inc. Price & Performance (PPSI)

Following this discussion, there'll be a Q and A session over the participants on the call. We appreciate the ability I'm sorry, we appreciate the opportunity to review the fourth quarter financial results and recent business highlights. Before we get started, let me remind you call is being recorded and webcast. During the call, management may 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. It applies to the content of this call. I'd like to now turn the call over to Nathan Masaryk, Chairman and CEO. Nathan, please go ahead. Thank you, Brett. Good afternoon, and thank you all for joining us today. 2024 was a watershed year for our business. In the fourth quarter, we sold our Pioneer custom electrical products unit, TCEP, including the eBlock Integrated Power System to Millpoint Capital for $50,000,000 in cash and equity. Sales consideration was comprised of a cash payment to Pioneer of $48,000,000 and an approximately 6% stake in Millpoint's new Volteris energy transition platform.

Concurrently, Millpoint also acquired Jefferson Electric, a storied electric transformer manufacturer from ERMCO, in order to expand Volteris into a key power solutions provider. We expect strong profitable growth for Volteris and are pleased to hold equity in this platform. Subsequent to the sale, our Board declared a one time special cash dividend of $1.5 a share payable on 01/07/2025, to shareholders of record as of 12/17/2024. Essentially returning $16,700,000 to our shareholders. Pioneer's remaining business is our critical power business. Which is anchored by our e Boost mobile charging platform. Indeed, most of our remarks this afternoon including the financial presentation, will be focused on this business.

Since launching our first truck mounted fast charging solution prototype, in November of twenty twenty one, we have grown e Boost to a multimillion dollar business with revenue reaching $22,900,000 in 2024. More than double the $11,100,000 we delivered in twenty three, and way more than the $1,000,000 of e Boost product we delivered in 2022. Through engineering enhancements and market driven innovation, we've expanded our product lineup beyond the original truck mounted unit to include eBoost Mini, a skid based DC fast charger, easily movable with a forklift, eBoost Mobile, our flagship trailer based engine powered DC fast charger, towable by a truck or tractor, EBUS GOAT, a truck integrated DC fast charger modeled after AAA's roadside assistance.

EBoost Pod, a containerized DC fast charger including engine, designed for rural extreme weather and semi permanent applications. With each solution, we have demonstrated our ability to innovate and adapt to a rapidly evolving market, customizing our units electrically and mechanically, to meet diverse user needs. Today, eBoost is recognized as a leader in reliable, sustainably powered off grid mobile EV charging. Indeed, eBoost is eponymous with mobile high capacity charging, in the electric truck and the electric bus market. To date, we've delivered over 22,000 charging sessions and supplied more than 700 megawatts of sustainable off grid power.

Importantly, this diverse portfolio positions eBoost as a leader in mobile and adaptable EV charging solutions. We remain committed to innovation and expansion, continuously bringing new products to market. By diversifying revenue streams, we aim to continue to drive sustained long term growth.

For the fourth quarter, this business delivered impressive year over year revenue growth of 25%.

And 106% for the full year of 2024. Importantly, the economics of our e Boost business are highly attractive. We narrowed the loss from continuing operations in 2024 by nearly 50% compared to 2023 And even more importantly, as Walter will detail in a few minutes, when we have a quarter with almost $10,000,000 in revenue, as we did in twenty twenty four's fourth quarter, how profitable the critical power segment becomes, and how well the operating leverage continues to play for us.

As of 2024, our critical power, I'm sorry, as of as of the end of twenty twenty four, our Critical Power segment inclusive of the e Boost had a total backlog of backlog of $19,800,000 an increase of 19% compared to the end of twenty twenty three.

This backlog provides the basis for our revenue guidance for 2025, and reinforces our confidence in achieving or surpassing our guidance for 2025. Important to note that our revenue guidance for 2025 does not include any revenue or profit from our [indiscernible] We announced the launch of our first residential offering, Home Boost, last year. Building on our innovative HomeBooth residential solution, we refined our design to meet evolving market needs in response to industry feedback, consumer demand we are indeed expanding our product line, to serve both high end residential and light commercial segments including medical centers and cafe type establishments. Our enhanced offering will provide whole home 100% whole home backup power and advanced EV charging capabilities. Essentially, a virtual power plant for the home or smaller light commercial user. We're on track to launch to launch the first units later this year, capitalizing on a growing market need for reliable flexible, power solutions.

In short, the market opportunities for our e Boost solutions are massive.

Robust demand is being driven by rapid expansion rapid EV adoption, increasing demand for mobile and off grid charging, and for clean energy infrastructure. Markets we are most active in at this time are transit bus, school bus, electric truck and van fleets large government, and corporate fleets. Submarkets to that that we concentrate on are sanitation, public works, construction equipment, and airport ground service equipment. With rising EV adoption, inability of users to secure ample power for their needs and infrastructure gaps, eBoost is well positioned to capitalize on the increasing need for flexible off grid charging solutions. Importantly, with proceeds from the sale of PSEP, and zero debt, We have the capital necessary to fund our growth plans over the next several years. Following the sale of PSEP, we are a more focused business. For 2025, we are reaffirming our revenue guidance of 27,000,000 to $29,000,000 We expect the quarter by quarter cadence to be between 6,000,000 and $8,000,000 per quarter throughout 2025. We expect this revenue will be primarily driven by e Boost product sales and rentals along with service and maintenance. Revenue, specifically approximately $17,000,000 from equipment sales and rentals, including approximately $2,500,000 from long term lease slash rental agreements.

And more than $10,000,000 in 2025 from service and maintenance agreements. With that, I will turn the call over to Walter.

Thank you, Nathan, and good afternoon, everyone. As Nathan mentioned earlier, on 10/29/2024, we sold our California business, P STEP. For $50,000,000 in a cash and equity transaction primarily cash.

As we received total gross cash proceeds of $48,000,000 leaving our balance sheet in a very strong position.

Our Critical Power segment, which includes Pioneer eMobility, or e Boost is the sole operating business unit that remains after the sale.

Please be advised that we have included a non GAAP financial measure of operating income from continuing operations.

Which excludes corporate overhead expenses research and development expenses, and non recurring professional fees. Please refer to our press release issued earlier today for further information. Including a reconciliation between GAAP and non GAAP financial measures. The press release can be found on our website at www.pioneerpowersolutions dot com. /investors/newsroom. Such non GAAP measures should not be used as substitute [indiscernible] or alternative to any measure of financial performance calculated and presented accordance with U. S. GAAP. Instead, we we believe this non GAAP measure should be used to supplement our financial measures derived in accordance with U. S. GAAP. In order to provide a more complete understanding of the trends affecting the business. Fourth quarter revenue from continuing operations was 9,800,000.0 compared to $2,700,000 in the year ago quarter. An increase of 265%. The increase was primarily due to the significant growth our Pioneer e mobility business. [indiscernible] Fourth quarter gross profit from continuing operations was 2,800,000.0 or a gross margin of 29%. Compared to gross profit of $610,000 23% of revenue. In the fourth quarter of last year. The increase once again was primarily due to the significant growth in our e Boost business. During the fourth quarter of twenty twenty four, our Critical Power segment incurred an operating loss from continuing operations of $1,100,000 a significant improvement from a loss of $1,900,000 in the fourth quarter of last year.

The improvement was primarily due to the large increase in revenue from the sale of our e Boost solutions and the higher margins we are seeing from that business. During the fourth quarter of twenty twenty four, our Critical Power segment generated $1,600,000 of non GAAP operating income. From continuing operations, which again excludes corporate overhead expenses R and D expense, non recurring professional fees. As compared to $100,000 of non GAAP operating income from continuing operations for the same quarter in 2023. A year over year improvement of approximately $1,500,000 Net income from continuing operations for the fourth quarter of twenty twenty four seven hundred and fifty nine thousand compared to a net loss from continuing operations of 1,400,000.0 during the fourth quarter of twenty twenty three. A year over year improvement of approximately $2,100,000 Turning to our full year results. Full year 2024 revenue from continuing operations was $22,900,000 compared to 11,100,000.0 in 2023. An increase of 106%. The increase was once again primarily due to the growth in our Pioneer eMobility business, [indiscernible] a large increase in shipments and rentals of our e Boost equipment. Full year 2024 gross profit from continuing operations was 5,500,000.0 a gross margin of 24%.

Compared to gross profit of $2,200,000 or 20% of revenue in 2023. The increase to our gross profit and margin during 2024 was primarily due to the increase in sales of e Boost equipment from the company's Pioneer e mobility business. During twenty twenty four, our Critical Power segment incurred an operating loss from continuing operations of $5,200,000 compared to $7,000,000 in 2023. A year over year improvement of 1,800,000.0 During 2024, our Critical Power segment generated 1,700,000.0 of non GAAP operating income from continuing operations. Again excludes corporate overhead expenses R and D expense, and non recurring professional fees. As compared to a non GAAP operating loss from continuing operations of 1,300,000.0 for the year ended 12/31/2023. A significant year over year improvement approximately $3,000,000 Net loss from continuing operations for 2024 three point three million dollars compared to a net loss from continuing operations of $6,300,000 in 2023. That's a year over year improvement of approximately $3,000,000 Taking a look at our balance sheet, We had cash on hand of 41,600,000.0 and zero bank debt, as of 12/31/2024. Compared to $3,600,000 of cash on hand and zero bank debt as of 12/31/2023. The cash on hand as of 12/31/2024 represents cash per share of approximately $3.74 as of 12/31/2024.

Also, as Nathan mentioned earlier, subsequent to year end, we paid a one time special cash dividend of $16,700,000 in aggregate to shareholders of record as of 12/17/2024. Today, we are reaffirming our guidance for revenue of $27 to 29,000,000 for the full year of 2025. This concludes my remarks. I will now turn the call back over to the operator for any questions.

Great, thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself 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, while we pull up for questions. First question here is from Rob Brown from Lake Street Capital Markets. Please go ahead. Good afternoon.

Hey. Good afternoon, Rob. On the strong backlog and growth in eBooster or outlook, what's sort of the driving that? Where are the customer segments you're seeing the activity? And how's the look at this point in the year in terms of new demand coming in? Yeah, new demand is always coming in, but it's coming really the biggest bucket right now is some form of government, state, county, city, town, and it's usually related to transit or school bus sometimes fleets as well. That's the biggest segment for us now.

If you look at the more recent announcements, with the city of Portland, it's gonna be more government, quasi government type groups ports transit authorities, people like that.

Okay, great.

Great. And you talked a little bit about the service equipment mix. How how is that mix looking for 25? Are you seeing a fair amount of rental revenue in that $25,000,000 Yes. So we kind of budgeted $2,500,000 in in lease and rental type revenue for 2025. And I think that's what we'll do. We might exceed it by a little, but that's kind of that's the thinking. We look to continue to grow that. Obviously, with quality, quality type counterparties. But that seems to be for a lot of the large users, that seems to be something that speaks more to them. And since they have the creditworthiness to make it worth our while, that's it's good for everybody. It's a more lucrative business but we have to front it.

So that's really that's the only downside for us.

And then on the Homeboost product, think you talked a little bit about a redesign effort there. Could you kinda give us some color there and and maybe how the, like, commercial I guess, how that expands into, commercial? Yeah, I mean, HomeBoost, we put together a special team. My goal was to have the team together by the end of twenty twenty four, which we did. It was me. It's on me. I kind of pulled it back in February not because the product wasn't really ready for prime time, but the product itself is beautiful, but didn't appear, it didn't cosmetically look as beautiful as I would have liked. It's a premium [indiscernible] To sort of a premium user.

So we went back into make it make it look and feel that the person's getting, not just in functionality, they're getting aesthetically. A value for the money that they're spending. And yeah, it's targeted to the high end residential somebody that's willing to spend call it, 50,000, dollars 60,000 to have full home backup. You're talking about homes that will typically be 3,000 square feet plus probably more.

And they want the full backup prime rated engines as opposed to just the backup engine, the ability to to produce their own electricity off their gas line. Twenty four hours a day if they choose to, to switch back and forth between the grid as they choose to. And initially, when we we launched this, especially the generator dealers and distributors were really the ones that almost in unison sort of designated the product for the medical center small business that really wants super resilience and to be able to integrate charging for really just spending a little bit more than they do on a backup plan. That gives them twenty four hour 100% resilience.

That's where we're going to be headed with it. Great. Thank you. I'll turn it over. As a reminder, if you'd like to join the queue, it is star one. Next question here is from Samir Joshi from h c win rate please go ahead Hey good afternoon Nathan. Good afternoon Samir.

Thanks for taking my questions. On the gross margin front, I think your fourth quarter gross margins were around 29%. On a nice revenues Should we expect these levels going forward? Or was there something onetime in this fourth quarter? That resulted in the gross margins?

Yeah. I mean, the 9,800,000.0, more than 50% was e Boost product. Less than 50% was service.

That's a really nice mix for us.

The gross margins on the product are higher than we get on service. Especially for customers that are in a lot of different places. So we end up subbing some of the service and adding a surcharge so we can make something that definitely compresses gross margins on the service side. When the product sales continue to grow, if leasing continues to grow, so the gross margins are going the overall gross margin picture should be there or maybe a little bit better.

Understood. So then juxtaposing your fourth quarter revenues, with your 2025 guidance, seems like a run rate of 6 to 8,000,000 versus 10,000,000, which you realized in April Is there a reason for this, or was there as I think you mentioned, more than 50% of revenues were from product this quarter and you are expecting around 17%, 18,000,000 from product next year.

Yeah, we had one, it was for the Los Angeles Department of Transportation. That's the city of Los Angeles' transit buses, the buses, the inter city buses that move humans. It was one particular project of a little bit over $5,000,000 that needed to be delivered in November. That was their window. The team did an amazing job to do it. At first, maybe they weren't so happy. But I'm talking about our own people, not that Department of Transportation. But we did it in a very short period of time and successfully. Met the internal markers and really came in at the gross margin that we expected. So that was a nice thing complete. All in one. We don't have any We have large projects that split between the first quarter and the second quarter of twenty twenty five. But we don't have any one the size of DOT yet. But the year for us, I neglected to kind of, or I think maybe Rob had asked and I didn't answer this part of his question, we're projecting almost an even $6,000,000 to $8,000,000 per quarter depending on a few jobs moving here and there, but more or less 6,000,000 to 8,000,000 Our year is I'd say, 80% baked in already.

In the strength of the pipeline and orders that we hope to be announcing soon support really not so much a little bit to finish 2025, but essentially my head is already in 2026. Most of the efforts now are building the first half of twenty twenty six.

Yeah, understood. Thanks, sir. Because I was going to ask that confidence in 2025 top line given already strong backlog? Thanks for answering that. You're very well. I think now you have around 25,000,000, or just like forty one point seven minuteus 16.6. Or something like that.

Yeah, something something like that.

Would you be looking for some strategic opportunities, or would you rather do some organic in house product?

Yeah, so we're open to all of it.

Really. We're seeing off me personally, I'm a serial acquirer. Prices are better now. Than they were a year ago or even six months ago. But there's a reason for that as well. Mean, one thing that we're not going to do is I can't go backwards financially. I can't take on a bleeder. Unfortunately, a lot of [indiscernible] businesses or enterprises that would maybe make a good fit on the charging side come with with risks and built in losses that were not even in an egomaniacal day, I don't we could turn around in time.

And would not be in the best interest of the shareholders. So we're kind of looking for for ancillary, a little bit more in power, a little bit more special forms of power, whether mobile or permanent, in distributed generation, appetite for power is endless. We were able to come up with something clever where we married the charging and unitized it within a serpent certain package and made it mobile. But But the essence of what we do is deliver on-site power.

So that would really be the way we would go.

Understood. And then just one last one, stepping back at the macro level. I do understand your backlog and engagement with the pipeline customers seem very strong, but do you think any macroeconomical events or tariffs or any other uncertainties could have an impact on your outlook for 2025?

Yeah, I mean, it's baked into the outlook. I mean, so the change in administration was not a positive for charging, frankly.

Most of the customers and clients we're dealing with, again, these are city, states, whatever you want to call them, quasi governmental agents they made certain decisions, and they've crossed that Rubicon already. They're going electric and they make massive investments or have already, they're already deeply pregnant. There's not a turning back, and that's where we're spending most of our time. From a tariff I guess chaos or uncertainty, even at worst, it wasn't going to have a major effect on us. The effect would be anybody's macro effect, any receding of GDP or any slowdown in the economy is not good for anybody.

So, you know, we're not immune to to that.

But nothing specifically, nothing of real important, nothing of note from an increase that we would see.

Makes sense. Thanks for that. Thanks, Anshul again.

You're welcome, Samir.

This concludes the question and answer session. Like to turn the floor back to management for any closing comments.

All right. Thank you all for your time and support. And we look forward to updating you again on our next call, which will hopefully be right after the time to file the Q. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.