Pioneer Power Solutions, Inc.

Greetings and welcome to the Pioneer Solutions conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Maas, with Hayden Investor Relations. Thank you. You may begin.

Thank you, Operator. The call today will be hosted by Nathan Masaryk, Chairman and Chief Executive Officer, Walter Michalik, Chief Financial Officer, and Gio Marikian, President and CEO of Pioneer Power Mobility. Following this discussion, there will be a Q&A session open to participants on the call. We appreciate the opportunity to discuss the recent sale of the company's TCEP business unit, as well as our enthusiasm for the remaining critical power and e-mobility business. 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 materially. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release contained in our 10-K or 10-Q in our filings, which applies to the context of the call. I'd like to now turn the call to Nathan Mazurick, Chairman and CEO. Nathan, please go ahead.

Nathan Mazurick Thank you, Brett. Good afternoon, and thank you all for joining us today. As we disclosed in a press release this morning, we sold our pioneer custom electrical products core business, PCEP, to Millpoint Capital, a private equity firm located in New York City, for essentially $50 million in cash and the assumption of certain liabilities. We will talk more about the transaction during this call, our rationale for the sale, what it means for our business going forward, and provide investors with an opportunity to ask questions about the transaction. For some time now, Pioneer has been on the forefront of the energy transition in North America with two fast-growing divisions, PCEP, primarily eBlock, an integrated power and control system originally developed for the distributed generation market, and Critical Power, primarily our eBoost mobile power and charging system we initially unveiled in November of 2021. Both these businesses are enjoying similar secular tailwinds, and the opportunities for continued growth for each are robust and varied. Importantly, though, the products in each of these lines of business are different in terms of product scope and the markets they serve. And as a result, in our opinion, value for each has been somewhat constrained. We determined that divesting PCEP primarily the e-block business, will enable each entity to operate more nimbly and unlock additional value for their shareholders. Consequently, we sold our e-block business yesterday, which had already achieved significant scale earlier and had matured earlier than our e-boost business for $50 million in cash to Millpoint. This sale enables us to, one, focus on our e-mobility business, which we believe has a significantly higher ceiling than the e-block business. Two, finance the growth of that business without any near or medium term shareholder dilution or the assumption of any external debt or bank financing. Three, return, potentially return capital slash value to shareholders in the near term via share buyback and or a special dividend. And finally, four, concurrently engage in an acquisition and or business combination that we believe will be accretive to earnings and continue to enhance shareholder value. As detailed in the press release issued this morning, the terms of the agreement are simple and clear. Pioneer sold its PCEP subsidiary base in Los Angeles for $50 million. In addition, Pioneer invested $2 million in Millpoint's new Volterras, power equipment platform in exchange for about 6% of the new entity. The $2 million equity investment allows us to participate in the future value and appreciation of the PSET business. Pursuant to a separate press release issued by Millpoint this morning, Voltaire has already added another business to this platform. the Jefferson transformer business sold to it from Bermco, the larger utility transformer manufacturer. As we noted earlier, what remains in Pioneer Power Solutions is one, zero debt. Since August of 2019, we have self-funded all our R&D capital expenditures and increased working capital needs essentially via our own cash generation. Two, it leaves us with cash, both the cash that we had on hand and the additional cash we received from the PCEP sale. Today, this is a little bit north of $50 million. And three, the critical power business, which is essentially our legacy engine generator service business. And since 2021, the eBoost high performance mobile charging business. Quick review of the genesis of the eBOOST platform. We introduced our first eBOOST prototype in November of 2021. It was one truck mounted 60 kW fast charging solution powered by 150 kilowatt propane fueled engine mounted on the same truck. This product line, which has grown significantly since then, in sales and installation base has been scaled on four main platforms. eBoost Mini, a skid-based fast charging solution that could be moved utilizing a forklift. eBoost Mobile, a trailer-based fast charging solution that can be pulled by a truck or tractor depending on size. eBoost Goat, G-O-A-T, a truck-integrated DC fast-charging solution that invokes the AAA-type model. And finally, four eBoost Pods, a high-capacity charging system integrated into a shipping container for rural and extreme weather regions. To date, the vast majority of the eBoost units delivered and ordered have been skid or trailer-based units. In the last three years, These grid gap solutions have helped catapult the sales and rental of eBoost units across the U.S. and have made eBoost an industry synonym for reliable and sustainably powered off-grid mobile EV charging solutions. To date, eBoost has delivered more than 19,000 unique vehicle charging sessions and more than 600 megawatts of sustainable off-grid power. We have delivered e-boost units to electric truck and bus manufacturers, transit authorities, municipalities, charging as a service providers, the gaming industry, robo taxi providers, and many, many others. We expect the critical power division to generate a bit over $20 million in revenue this year and look forward to sharing more specific financial information with you on our third quarter earnings call coming up in just about two weeks. Since 2021, Pioneer has also been consistently investing in the eBoost business to broaden its suite of solutions and allow us to penetrate even wider markets. In the last year, we have introduced Home eBoost, the first residential market-focused solution that runs on existing natural gas lines to homes. Unlike the majority of backup generators in the market, which are designed to run for minimal hours per day and constricted hours per year, the Home eBoost is powered by an EPA-rated prime generator, which can operate 24-7 and comes with all the major components required to build a backup system for a home, including options for a Level 2 or Level 3 charger, with simple, all-inclusive delivery and installation that any local contractor can install. The Home eBoost owner unit allows the user to generate their own electric power using their own natural gas connection. As I noted, Pioneer has designed Home eBoost with options for Level 2 or Level 3 fast charging, And this complete backup and level three EV charging option can also address the emerging demand from the mini-mall segment, commonly referred to as neighborhood mini-marts or corner retail centers. These small businesses can utilize the same solution to meet business uptime needs, and at the same time with one unit and one installation, provide EV charging for their customers. Pioneer eMobility is deploying additional resources to focus on and capitalize on this growing market. We expect our initial market entry with the home e-boost product will be made through targeted regional distributors and dealers early in 2025. In 2024, we also introduced our e-boost pure power units. With the growth of large battery energy storage systems and deployment of on-site hydrogen fueling stations. There is an increasing demand for mobile, flexible power to recharge these battery energy storage systems and power the hydrogen refuelers where reliable and powerful grid connections are not available today or expected to be available in the near future. eBoost Pure Power offers quickly deployable, more sustainably powered large power units to support the on-site power needs for the battery energy storage systems and hydrogen customers. Indeed, we expect to deliver over 50 of these units in 2025, up from five or six in 2024. Finally, in 2024, we unveiled our ZEB unit, a zero emissions e-boost, a variation that provides an e-boost variation that provides up to one megawatt of zero-emission battery-based mobile power for customers and their locations that absolutely must have a zero-emission solution for their mobile charging needs. Finally, backlog. In our business, backlog is a key indicator of future performance. To wit, on December 31st, 2023, our critical power division backlog was $16.7 million. On September 30th, 2024, total backlog for critical power alone was $24 million, an increase of about 45%. We look forward to discussing eBoost financial performance in 2024 and more specific revenue and profit guidance for 2025 on our third quarter call in only a couple of weeks. With that, we will open the call to questions.