Pioneer Power Solutions, Inc.

Afternoon and welcome to the Pioneer Power Solutions 2023 Second Quarter Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kim Rogers with Hayden IR. Please go ahead.

Thank you and welcome. Joining us on today's call will be Nathan Mazurek, Chairman and Chief Executive Officer Walter Mahalitz, Chief Financial Officer, and Gio Muraken, President of Pioneer Power eMobility. Following management's prepared comments, a Q&A session will be open to the call participants. We appreciate the opportunity to review second quarter 2023 financial results and discuss our recent business highlights. Before we get started, let me remind you that this call is being recorded and webcast. During the call, management will 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 content of today's call as well. I would now like to turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Thank you, Kim. Good afternoon, and thank you all for joining us today. This was a great quarter for us, with both divisions delivering strong performance, resulting in record revenue that was up nearly 150% year over year for the second quarter, and a bottom line that was solidly profitable, excluding non-cash one-time charges relating to stock-based compensations. The revenue growth reflects growing demand across both our business segments, and the profitability reflects better operating leverage, manufacturing efficiencies, and a more optimal product mix. Notably, we are delivering better profitability even as we continue to invest significant monies primarily in our e-boost business. Even with these large investments, we essentially generated approximately $0.05 per share in GAAP net income, if not for non-cash stock-based compensation charges. And we still expect to generate positive net income for the full year 2023. Both our segments are executing to plan so far. Our T&D solutions unit, which includes our e-block power system and related products, grew revenue 263% to $9.2 million. compared to $2.5 million for the second quarter of last year. Indeed, year-to-date T&D revenue was up 140% to $15 million versus last year's $6.3 million. Our critical power segment, which includes our eBoost mobile charging platform, grew quarterly revenue 25% and year-to-date revenue 14% compared to last year. In addition, 100% of Pioneer's revenue growth has been entirely organic. Gross margins in both segments have improved exponentially since a year ago. Notably, our T&D segment is now delivering consistent positive gap EBITDA, specifically $1.8 million in the second quarter, up from a loss of $432,000 in the second quarter of last year. and positive EBITDA of $3.1 million year-to-date, compared to a loss of $332,000 in the first six months of last year. In addition, our critical power segment has narrowed its losses and is moving towards positive operating margin, which we fully expect to achieve for the full year of 2024. Our innovative and highly flexible eBlock solution has been and will continue to be a key driver in our strong performance. We now have hundreds of e-block installations around the country, ranging from retail locations, health and hospital, manufacturing facilities, EV charging, and solar-based microgrids. We continue to see new and large use cases for e-block. These include water utilities, like the one we are delivering this year in California, where e-block systems are being deployed as part of a sophisticated distributed energy system, enabling the water utility to better manage its power utilization, improve resiliency, better control costs, and reduce its carbon footprint. Another growing market for us is data centers, where power consumption and resiliency are critical issues. This is a massive market that is just beginning to embrace distributed generation and turn away from traditional diesel-powered solutions. The emergence of AI has not only increased the demand for data centers, but more relevant to Pioneer, a substantial increase in the raw power required by each data center. We secured our first e-block data center order last year and expect to deliver on that project towards the end of 2024 carrying over to the beginning of 2025. We expect that a successful flagship type installation of this particular project will serve as a model and leading to additional data center deployments with this particular customer, their construction partners, and hopefully other data center owners and developers as well. In addition, prior customers are returning. especially in the retail market and ordering additional units for additional stores because e-block works, is providing the specific and is providing the specific benefits that they had all bargained for. The distributed generation market continues to grow as potential customers seek to utilize solar and other renewable sources combined with battery storage to make energy resources more reliable, cost-effective, and environmentally friendly. As it stands today, the U.S. cannot expect to produce enough power over the next 10 years to satisfy anticipated demand, making distributed generation a requirement, not an option for many enterprises. We're also delivering growth from our e-boost mobile charging platform, and we continue to significantly invest in this business with expectations of further revenue acceleration. What started as a concept two years ago and a prototype, first only in November of 2021, has become a rapidly growing product platform that is addressing a market that indeed did not even exist several years ago. To date, our e-boost wins include, most recently, the City of Fairfield, California ordered an e-boost trailer-mounted unit to service the electric portion of Fairfield's public bus fleet. This is our first award addressing the municipal transportation market. With government grants supporting the bus fleet electrification and the growing environmental concerns, we fully expect this market to continue to grow for e-boost. The autonomous driving division of a major global automaker ordered multiple e-boost units to support the initial rollout of their autonomous electric vehicles in several cities. More and more cities are approving autonomous vehicles, including driverless taxis. This geographic expansion will lead to more demand for eBoost to support these rollouts. Merchants Fleet, a large fleet management business, took delivery of two trailer-mounted eBoost solutions to be integrated into Merchants Fleet's electric vehicle charging offering. We expect other fleet management companies to embrace eBoost as well, in order to facilitate the electrification of their fleet. A major northeastern transportation agency acquired a 75 kW e-boost mobile trailer for their fleet of, their internal fleet of buses and cars. We have provided two propane powered mobile charging e-boost systems to be deployed at a port in the state of California to fast charge electric vehicles imported from overseas manufacturing facilities. While the market for electric cars, trucks, and buses in many ways was the first and most obvious application of our IBU system, we have learned from the experience of the last two years that the opportunities don't stop there. For example, almost all airlines have internal mandates to convert their ground service equipment from diesel to electric over the next several years. This could mean that each airline needs on-demand mobile charging capabilities at almost every airport that they serve. Additionally, construction, mining equipment are transitioning to all electric, as well as watercraft and electric vertical takeoff and landing offerings, where a mobile charging option is particularly important. Each of these trends require flexible charging solutions. Each of these areas represent meaningful additional opportunities for us to fill the gap in the EV charging infrastructure over the next several years. We also continue to innovate with eBoost with the goal of supercharging, pun intended, our revenue and expanding our addressable market. This includes developing new variations of eBoost, specifically our building smaller units for emergency slash tow truck type applications. We are designing less expensive, lower powered options for concierge charging and similar deployments. And for certain users that absolutely demand a zero emission mobile charging solution, we are working on battery only configurations of eBoost. We expect to unveil most of these product extensions before the end of 2023. Ultimately, We believe these additional offerings, all based on prior successful versions we have already built, will give us access to more use cases and many more potential customers. Based on our pipeline of e-boost opportunities, we believe we will generate incremental growth in the second half compared to the first half of this year. And in addition, we expect e-boost to begin contributing positive EBITDA to the full year of 2024. Our addressable markets are massive and almost every day new use cases from current and new customers emerge. The energy transition era is real and Pioneer is at the edge of it, offering proven competitive solutions. With that, let me turn the call over to Walter, our Chief Financial Officer, to discuss our financial results for the second quarter.