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spk01: Good day, and welcome to the Pioneer Power Solutions, Inc. fourth quarter and year-end 2021 earnings results call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brett Moss from Hayden IR. Please go ahead.
spk03: Thank you, and welcome. The call today will be hosted by Nathan Masaryk, Chairman and Chief Executive Officer, Walter Michalik, Chief Financial Officer, and also on the call today is Gio Rickens. President, this company has recently launched Pioneer Power Mobility Business Unit. Following this discussion, there will be a Q&A session over the 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 that this call is being recorded in 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 in different materially. Please refer to the cautionary text regarding forward-looking statements containing the earnings release issued earlier today and in the posted version of these prepared remarks, both of which apply to the content of the call. I now like to turn the call over to Nathan Masaryk, Chairman and CEO. Nathan, please go ahead.
spk00: Thank you, Brett. Good afternoon, and thank you all for joining us today for our conference call. This was a watershed quarter for the company. We have successfully repositioned Pioneer as a valued provider of equipment and services to the rapidly growing technology distributed generation, and electric vehicle markets. The shift in strategic direction that has taken place in the last 18 months is in direct response to specific customer demand and is predicated on two durable secular catalysts. The first reality is the intense focus of many larger power users to utilize multiple power sources in order to reduce electric power costs. provide resiliency, and decrease their carbon footprint. Sole reliance on the grid is no longer acceptable from a reliability or sustainability point of view. The episode in Texas in the winter of 2021 demonstrated this challenge, as has the multiple brownouts and rolling blackouts in California and other locations during the summer months. For data centers, call centers, refineries, industrial facilities, and retailers with perishable inventory, even a brief power interruption is a business challenge that cannot be tolerated. For others, it is the never-ending increase on their power bill relating to demand charges. Backup generation, peak shaving, peak skimming, battery storage, and the use of renewable energy sources is a matter of business continuity and profitability. Achieving these objectives, however, can be challenging. The second secular tailwind is the growing popularity of electric vehicles. The charging infrastructure for electric vehicles has not kept up with their demand, and there is a growing need for high-capacity off-grid charging solutions. Retailers, restaurants, hotels and casinos, concerts, trade shows, and sport venues and workplaces are moving quickly to add charging solutions. These additions are not simple. requiring city, county-type permits, civil and electrical and architectural engineering, and third-party approvals like utilities and facility owners. All of this takes time, usually more than a year, and occurs additional cost that is slowing down the necessary EV charging infrastructure build-out, impacting the EV vehicle adoption. The biggest hurdle in this process is often the grid capacity itself, and the necessary power infrastructure to add the large demand from EV charging in locations like older apartments and condo complexes, rendering these locations with no solution for EV charging and those building residents with no option to adopt electric vehicles. This has been driving the demand for a decarbonizing off-grid mobile solution for EV charging. Our E-block solution provides a critical system for expanded distributed energy generation. Our grid-on-a-skid e-block is a rapidly deployable, customized product that enables easy connection of on-site solar, wind, peak shaving, energy storage, or backup generation. It is skid-mounted, outdoor rated, can be deployed almost anywhere, and can manage almost any type of energy resource. With this, customers can utilize solar, wind, or any other renewable energy source while maintaining their traditional connection to the grid. More specifically, during the fourth quarter, we were awarded our largest e-block order to date, valued at approximately $12 million. The order comprises 62 e-block units destined to be installed at 62 different store locations of one of the nation's largest mass retailers. These units will improve the electrical resiliency, redundancy, and power capacity at these locations and are expected to begin shipping in the second quarter this year. In addition, these units represent only the initial phase of this retailer's target of approximately 500 additional store locations over the next few years. I'd note this retailer has several thousand locations overall, and this is just one of many large retailers that we are targeting. In addition, during the fourth quarter, we also received a $500,000 order for eBlock to be deployed as part of a Southern California Utilities hydrogen fuel cell residential demonstration project. Our eBlock solution will provide a packaged electrical solution tasked with integrating and controlling the various distributed energy resources, including a hydrogen fuel cell, photovoltaic solar, and energy storage to form an islanded microgrid that can support the power needs of the prototype two-story model home. This system eliminates the need for connectivity to a public utility grid. We expect to ship this system in the second quarter of this year. These two wins for eBlock validate our development of this innovative product. Our focus now is to leverage this initial success to bring eBlock to a much wider group of energy developers and users. eBlock is a compelling solution to a persistent problem. It makes distributed generation easy, affordable, and fast. Customers are seeking energy independence, or at least grid independence. To utilize more than one energy source, including solar and wind and insulate businesses from the issues of an aging energy grid. In addition, many customers are looking to add charging system for EVs to their infrastructure. We make both possible much more rapidly and cost effectively than historical solutions. More importantly, they represent just a tiny portion of a much larger opportunity and an opportunity that is growing quickly. During 2022, We will be delivering e-block to senior living centers, supermarket chains, and warehouse fulfillment centers. These are just some of the orders already committed and in our backlog. Again, our focus is on expanding the addressable market, and we are making steady progress in achieving this goal. The other secular trend I mentioned was EV charging, and we have created a new business unit, Pioneer Power Mobility, and launched a new suite of solutions for this market in November called eBoost. eBoost is a self-contained high-capacity mobile charging solution sustainably powered through a green fuel with low GHG emissions and designed for roadside event and quick charge logistics. The rapid growth of EVs has made on-demand off-grid charging a priority. We are poised to meet this demand. We have created three delivery platforms of eBoost in order to better serve varied user requirements. First is eBoost GOAT, which stands for generator on a truck. This is a truck-mounted EV charging solution, which is fully mobile and can provide high-speed charging anywhere. Second, eBoost Mobile is a trailer-mounted solution that provides multiple options for towing and can be available at specific businesses, large sports and cultural events, and can be relocated with minimal effort and on short notice. Finally, there is eBoost Pod, a primarily stationary pod and skid-based EV charging solution with as-needed mobility that can provide EV charging to multiple vehicles. This is an ideal solution for gas stations, hotels, and other retail locations that utilize EV charging to increase customer traffic and retention or as merely a brand differentiator. All eBoost platforms are designed to provide on-demand power needs, especially in emergency situations such as a power outage, serving as a backup power source with convenient power connections and outlets available onboard. We have already booked and shipped our first sale, a significant order of nearly $800,000 being deployed at a hotel and casino, and will recognize meaningful revenue from eBoost in the first quarter, our current quarter. Just recently, we won a second order from a turnkey EV fleet charging infrastructure solutions provider and a Pioneer-authorized channel partner. The sale is for two of our eBoost skid-mounted pod solutions, to be used for recharging trucks at the customers' dealerships and electrical school buses at the bus depot. The selection of e-boost was made on the basis that it was off-grid, sustainable, portable, and could be delivered to the EV manufacturer in a timely fashion and support their dealerships with subsequent sales of these products. We expect these units to be delivered during the second quarter this year. These two orders were won soon after we launched the suite of e-boost products in November of last year. Market reception is overwhelming. We believe we are the only company offering a high-capacity, fast-charging mobile solution powered by transportable and available liquid propane. This allows a greater... a user greater charging capacity and faster charging than any other solution. In fact, for 2022, we expect eBoost to represent as much as 10% of our annual revenue. Not our pipeline or our backlog, but recognized revenue in 2022. Further, we expect eBoost revenue to double in 2023 from 2022 levels. The progress we've made is reflected in our backlog. During the fourth quarter, our backlog more than doubled from $10.9 million at September 30th to $22.8 million as of December 31st. Again, our backlog is not a pipeline. Our backlog represents firm, non-cancellable orders, most of which are expected to be delivered over the next 12 months. Based on this backlog and the accelerating demand for these solutions, we expect year-over-year revenue to grow by more than 50% this year. The underlying trends are strong, and the market opportunity is significant. We do not see any slowdown in these trends. Our focus is to capitalize on them to the best of our ability, benefiting from our first mover advantage. In addition, we expect significant margin expansion. The growth is exciting and validates our strategy. We have developed differentiated solutions that meet a large and growing demand, but more importantly, these products will enable us to expand our margins as well. You should expect to see steady year-over-year improvements in our margins as we move through this year. Over the coming weeks and months, I am confident you will hear more from us about new deployments of eBoost and eBlock and the positive impacts our solutions are having for our customers. With that, let me turn the call over to Walter, our CFO, to discuss our financial results.
spk02: Thank you, Nathan, and good afternoon, everyone. Revenues were $3.5 million for the fourth quarter of 2021. down 35% year-over-year, compared to $5.4 million in the fourth quarter of 2020. As Nathan indicated, we are just beginning to see the significant contribution of eBlock sales, and the first eBoost sale was booked during the current quarter. Additionally, our fourth quarter results were impacted by supply chain disruptions, pushing a significant amount of revenue into 2022. Selling, general, and administrative expenses of $1.5 million during the fourth quarter were 43% of revenues, an increase of approximately $300,000 when compared to $1.2 million in the year-ago quarter. Operating loss for the fourth quarter of 2021 was $1.5 million compared to an operating loss of $900,000 in the year-ago period. Net loss for the fourth quarter of 2021 was $1.4 million, or negative 16 cents per share, compared to a net loss of $744,000, or negative 9 cents per share during the fourth quarter of 2020. Now, turning to the full-year financial results. Total revenue was $18.3 million, down 6% compared to $19.5 million for the same period last year. Pioneer's gross profit increased 58% to $1.4 million, or 8% of revenue, from $881,000, or 5% of revenue, for the same period last year. The significant increase in gross profit was the result of strict management of overhead costs and pricing power in our end market. Additionally, the company recognized a $546,000 write-down of inventory during 2020 as a result of management's strategic decisions to rationalize its traditional product offerings and focus on higher margin equipment sales. And there was no comparable write-off during 2021. Full-year SG&A expenses were up 2% to $5.3 million. or 29% of revenues compared to 5.2 million or 27% of revenues during 2020. Operating loss during 2021 decreased 10% to $3.9 million from $4.3 million during 2020. Net loss was 2.2 million or negative 24 cents per share compared to a net loss of 3 million or negative 34 cents per share last year. That's approximately a 30% improvement to our bottom line. Turning to the balance sheet and statement of cash flows. We had cash, including restricted cash, of $11.7 million and zero debt at December 31st, 2021, compared to cash of $7.6 million and debt of $1.4 million at December 31st, 2020. During the fourth quarter, the company sold 888,500 shares of common stock under the ATM program at an average price of $10.13 per share for net proceeds of approximately $8.7 million. We plan to use the net proceeds to advance our e-block and eBoost mobile charging businesses, working capital needs, and other general corporate purposes. For the year ended December 31st, 2021, our cash used in operations decreased to $2.4 million compared to 2022 when we used cash in operations of $3.6 million. I also think it's worth noting that as part of the sale of our transformer business units, the second half of 2019, we received two subordinated promissory notes. We expect to receive approximately $6.5 million in cash from the maturity of those notes by the end of this year, 2022. As Nathan said, we view 2022 as a year of growth and margin expansion. 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 2022 when compared to 2021. And further, we expect meaningful margin expansion. This concludes my remarks, and now I turn the call back over to the operator for any questions. Thank you all for your time.
spk00: Okay, I'm sorry. Operator.
spk01: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1. If you would like to signal with questions, star 1. Our first question today will come from Ahmed Vail with HC Wainwright.
spk04: Thank you. Good afternoon, everyone. Nathan, just on the gross margin outlook, are we expecting margin improvements primarily to come from the T&D segment or the critical power segment?
spk00: Both. On the T&D segment, it's going to come mostly really from the volume. So, you know, we get the leverage there. on the volume, and on the critical power segment, that's where the e-boost sales are being segmented, and they are good margin profitable sales for us. Thank you.
spk04: So can you maybe set a range of what we could potentially expect from, you know, these improvements? Is it, you know, 10% to 15% standard margins? Yeah.
spk00: Yeah, we hesitated to do it until we get at least one quarter under our belts, you know, at a different volume than we've been used to the last two years with the different mix. So we're really going to wait. You know, we of course know what the revenues are already for the first quarter. We're going to wait and see, you know, what kind of improvement we had, what was it due to, what can we really expect, and that we hope maybe on the call we do in mid-May that we can kind of give an outlook for what we expect the year, you know, the year contribution margin to look like.
spk04: Okay, understood. This, you know, the 50% year-over-year growth you're expecting, could you sort of give us the cadence of quarterly revenues that you're expecting? Is this going to be way more towards the second half of the year? Or are you expecting sort of an even distribution given that, you know, your backlog has grown pretty strongly?
spk00: Yeah, I would say that definitely the second half of the year, the cadence is going to be even higher. But I think that you will see already not just a small amount, but you'll see quite strong gains, you know, year over year, both sequentially into the first quarter of 2021. in 2022 compared. Those will be evident already in the first quarter.
spk04: Okay. And the relationship with the national retail customer, have you started deliveries for them already in 2022?
spk00: No. The first deliveries are slated for the end of the second quarter, assuming everything goes according to oil. So far, so good. Anything could happen, but that's what we're expecting. Deliveries start at the very end in June, and the bulk of them, the bulk will probably be in the third quarter, and they'll probably be a little bit left over into the fourth quarter.
spk04: Okay, thank you. Any issues from supply chain-related challenges in terms of meeting these delivery and deployment schedules?
spk00: All day long. We've tried on both sides of the business. We've tried to be ahead of it. We're holding a lot of critical and more difficult components, long lead items as early as we can, like circuit breakers and other kinds of control components. We're holding engine inventory so that we're able to meet some of these. Frankly, if we wouldn't have had the inventory today, We wouldn't have sold the e-boost unit that we sold two weeks ago. We wouldn't have taken the order that we just did for this trucking slash electrical bus business. It just wouldn't happen. So having the inventory is great, and we're trying to be judicious about it.
spk04: How is the e-boost performing for customers so far?
spk00: So far, so good. You know, very few call to tell you how great you are. They only call to complain. So, I mean, no complaints. So that's good. Good to hear that.
spk04: Thank you so much. That's all I have.
spk00: Thank you, Ahmed. Pleasure to hear you.
spk01: Once again, if you would like to signal with questions, please press star 1 on your touchtone telephone. Again, that is star 1 if you would like to signal with questions. We'll pause for just a moment. At this time, there are no further questions. I'll now turn the conference back over to you for any additional or closing remarks.
spk00: Thank you, Operator. Thank you all for your time and support. We believe that this will be a milestone year for Pioneer Power. as we emerge and transition into a recognized leader in the distributed generation and EV charging marketplace. We look forward to updating you again on our next call.
spk01: Well, thank you. And that does conclude today's conference. We do thank you for your participation. Have an excellent day.
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