Pioneer Power Solutions, Inc.

Greetings and welcome to the Pioneer Power Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Brett Moss of 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 Morican, President of Pioneer Power eMobility. Following this discussion, there will be a Q&A session open to participants on the call. We appreciate the opportunity to review the third quarter financial results and recent business highlights. Before we get started, let me remind you this call is being recorded in webcast. During this 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 containing 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 Masaryk, Chairman and CEO. Nathan, please go ahead.

Thank you, Brett. Good afternoon, and thank you all for joining us today. As you are likely aware by now, on October 29th, we sold our pioneer custom electrical products, PSET Business Unit, whose primary product line is the E-Block Integrated Power System. to Millpoint Capital, a New York-based private equity group, for $50 million in a cash and equity transaction. More specifically, Pioneer received approximately $48 million in cash proceeds from the sale, and in addition received an approximately 6% equity stake in Millpoint's new Volteris electrical products platform. Concurrently with the purchase of our eBlock business, Millpoint also purchased the Jefferson Electric dry-type transformer business from ERMCO as part of its efforts to build Volteris into a significant provider of power solutions supporting the generational energy transition going on in the United States right now. We expect the e-block business to continue to grow rapidly and profitably as part of Volteris, and we are pleased to be original equity owners of this platform. Finally, on November 14th, we announced that Pioneers Board of Directors declared a one-time special cash dividend of $1.50 per share to be paid on January 7th, 2025 to shareholders of record as of December 17th, 2024. Our critical power business is the sole operating business unit that remains in Pioneer after the sale to Millpoint and will indeed be the focus of our prepared remarks. This business is anchored by our eBoost mobile charging platform, first introduced in November 2021. In addition, related service revenue and some traditional on-site and mobile power sales. During the third quarter of 2024, this business delivered outstanding year-over-year revenue growth of 130% and generated positive operating income for the first time since the introduction of the eBoost platform in November of 2021. As of the end of the third quarter, our critical power segment, inclusive of eBoost, had a total backlog of approximately $24 million, an increase of about 45% compared to the year-end 2023. And in fact, this backlog provides the basis for our revenue guidance for 2025. What began with one truck-mounted fast charging solution in November 2021 has evolved into a 2024 Revenue projected at $20 million plus for this year. A high growth business unit. Product scope expansion over the last three plus years have taken that single truck mounted unit and spawned eBoost Mini, a skid-based DC fast charging solution that can be moved, utilizing usually a forklift. eBoost Mobile. The most prominent and the most active of the e-boost platform are trailer-based DC fast charging solution that can be pulled by a truck or tractor. e-boost GOAT, a truck integrated DC fast charging EV charging solution that invokes the AAA model. And finally, e-boost POD, a DC fast charging system integrated into a shipping container for rural, extreme weather regions, and or semi-permanent applications. With each of these solutions, we have proven our ability to innovate and address a rapidly evolving market and to customize our units electrically and or mechanically to suit the needs of our diverse base of users. eBoost has become synonymous in the industry for reliable and sustainably powered off-grid mobile EV charging solutions. To date, eBoost has delivered over 20,000 unique vehicle charging sessions and over 400 megawatts of sustainable off-grid power. Innovation has not been limited to product design either. In August this year, we announced a groundbreaking collaboration with Spark Charge, the original and to date the largest charging as a service provider in the United States. Through this collaboration, we aim to drive wider adoption of mobile EV charging, integrating battery energy storage with our eBoost system and SparkCharge's mobile battery energy storage systems. Together, we believe we can unlock new value in the mobile EV charging market and accelerate technological advancements as we work towards economical and scalable net zero charging solutions. Since August, We have delivered two e-boost units to Spark Charge and expect to deliver approximately 10 more e-boost units in 2025. In addition, we have identified tremendous opportunities for growth across a variety of vertical markets and diverse use cases, including bus fleets, ports, airports, municipalities and utilities that are proceeding with the electrification of their vehicle fleet. We continue to believe the opportunities for growing our e-mobility business are massive, and with proceeds from the sale of PCEP and zero debt, we have the capital necessary to fund our growth plans over the next several years. We are initiating guidance for 2025 of revenue between $27 and $29 million. As a result of the PCEP sale, we are a smaller business and will likely see some variability quarter to quarter. However, looking across the full year of 2025, we are confident in our ability to meet this guidance. We expect our revenue for 2025 to be primarily derived from sales and rental of our eBoost product line, as well as service and maintenance of said equipment. Breaking it down a bit further, we expect to generate approximately $17 million in revenue from the sale and rental of our equipment and approximately 10 million plus from our service and maintenance business. Of the approximately $17 million, we expect about $2.5 million to be the subject or be produced by longer term lease slash rental type agreements. We remain committed to continually innovating to bring new products to the market and expand our streams of revenue for consistent longer-term growth. To that point, we plan on launching our Home eBoost product in early 2025 through targeted regional distributors and dealers. This product is our first solution focused on the residential and smaller commercial markets. Home eBoost addresses the resiliency needs of millions of homeowners across the United States, during adverse climate events, which are now too common and frequent, and simultaneously addresses the growing need for EV charging at home, especially fast charging, and especially during power outages. It was developed to run on existing natural gas lines, and unlike the majority of backup generators currently on the market that are designed to run for minimal or constricted hours per day and per year, It is powered by an EPA-rated prime engine that can operate 24-7. This product line also includes a fast charging option that can address the emerging demand for small businesses, mini-mall segment of the market, retail centers that can utilize the same solution to meet their business uptime needs and additionally provide EV charging to their customers. We are deploying additional commercial resources to focus on and capitalize on this growing market. Another dynamic market that has developed for us is the sale and rental of our e-boost pure power units. With the growth of large battery energy storage systems, BES, and deployment of onsite hydrogen fueling station, there has been increasing demand for power raw power to recharge the battery units and to power the hydrogen reformers, where reliable and powerful grid connections are not available today or will in the near future. eBOOTH Pure Power offers large, quickly deployable, more sustainably powered units to support the onsite power needs for BESS and hydrogen customers. We will be exploring additional application opportunities for our units as commercial enterprises, particularly businesses that do not have a massive electrical footprint, look to diversify away from a single, usually expensive utility connection. Specifically, we are marketing those power solutions to medical-slash-dental-type offices and facilities, small surgery centers, restaurants, and the like. Finally, in terms of strategic transactions, while there is nothing imminent, We plan to be opportunistic with any acquisitions that we might pursue. We are looking primarily for sizable businesses with at least $25 million in revenue that are indeed complementary to our current eBoost platform and would be immediately accretive to our earnings. With that, I will turn the call over to Walter.