Earnings Call Transcript - PPSI Q2 2025

Operator, Operator

Greetings, and welcome to the Pioneer Power Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Maas of Hayden Investor Relations. Please go ahead.

Brett Maas, Investor Relations

Thank you, operator. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; Walter Michalec, Chief Financial Officer; and Geo Murickan, President of Pioneer eMobility. Following this discussion, there'll be a Q&A session open to participants on the call. We appreciate the opportunity to review the second quarter financial results and recent business highlights. Before we get started, let me remind you this call is being recorded and 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 contained in the earnings release issued earlier today, Thursday, August 14, which applies to the content of the call. I would now like to turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Nathan J. Mazurek, Chairman and CEO

Thank you, Brett. Good afternoon and thank you all for joining us today. I am pleased to report that we delivered strong financial results for the second quarter of 2025, continuing a trend that really began midyear last year, 2024. Specifically, revenue increased 150% year-over-year to $8.4 million, and our non-GAAP operating income from continuing operations was a positive $218,000. A significant driver of the second quarter revenue growth and profitability improvement was continued execution on the 25-unit e-Boost order for one of the largest public school districts in the United States. This landmark project is to date, the largest RFP ever awarded for a mobile charging system, which directly supports charging the school district's initial fleet of 200 electric school buses. After delivering the initial 10 units in the first quarter, we delivered the majority of the balance during the second quarter. While the early units carried higher costs due to the complexity of ramping up a project of this scale, our operations team achieved meaningful gains in productivity and cost optimization as the build-out progressed. As a result, gross profit on these units more than doubled in the second quarter. Additionally, this particular school district is scheduled to receive another 600 electric school buses over the next 2 years, and we expect to provide additional e-Boost units to support this ongoing program. In the second quarter, we also delivered initial units under our agreement with our channel partner, SparkCharge. The SparkCharge deal, potentially worth up to $10 million, is a direct result of Pioneer's collaborative relationship with this customer and more importantly, reflects the increasing demand for mobile, clean and rapidly deployable EV charging solutions. Strategically, we continue to be highly encouraged by the breadth and quality of the opportunities ahead. We are actively quoting and designing solutions for a host of government-type agencies, transit authorities, robotaxi enterprises, shipping ports and several major national package delivery providers as they all advance their commitment to electrifying their own fleet operations. The electric school bus market, in particular, continues to show strong momentum and remains a key focus area for us. These end customers are fully committed to a zero-emission future and typically have already ordered and received a significant number of either buses, vans and other fleet vehicles, making a return to traditional vehicles highly unlikely. We also see immediate and long-term growth potential in autonomous mobility, particularly the burgeoning robotaxi segment, which is essentially an all-electric market. As the adoption of robotaxis accelerates, the demand for flexible, scalable charging infrastructure is growing in parallel. We believe Pioneer's mobile charging platform is uniquely suited to meet the needs of this market, offering an ideal solution for decentralized on-demand EV charging. Simply put, the growth of robotaxis aligns directly with Pioneer's growth. At the end of the second quarter, our total backlog was approximately $18 million, representing a decline of 23% compared to the prior quarter, primarily due to the fulfillment of several larger orders that contributed to our strong revenue growth year-to-date. Beyond the current backlog, we are seeing continued momentum in our growing sales pipeline. We are actively engaged in discussions with dozens of municipalities, transit authorities, shipping ports, autonomous driving enterprises and several major national package delivery providers. In addition to our core e-Boost platform, we are preparing to launch our residential and light commercial power system, HOMe-Boost, in the second half of 2025. HOMe-Boost integrates a prime-rated natural gas engine with optional DC fast charging, giving homeowners and small facility owners the ability to generate 100% of their energy and charging needs 24/7 if desired or needed. HOMe-Boost essentially functions as a private power plant, operating independently or alongside the grid and is ideally suited for both residential and critical commercial loads such as medical facilities and small-scale manufacturers. Early feedback from prospective customers and partners has been overwhelmingly positive, and we believe this innovative product will be a key growth driver for 2026 and beyond. The introduction of HOMe-Boost is a significant expansion of our addressable market and product scope. In contrast to e-Boost, where e-Boost charging features lead the value proposition to the customer, HOMe-Boost's delivery of pure resilient power leads HOMe-Boost value proposition. Fast DC charging is an additional feature of the unit. In summary, the second quarter marked another meaningful step forward in our growth trajectory and path to profitability. Our performance reflects not only strong execution and increasing operational efficiency, but also the accelerating demand for innovative off-grid power solutions across multiple sectors. Looking ahead, we remain focused on scaling our core business, delivering on our backlog and planning the launch of HOMe-Boost. Our strong performance in the first half of the year, combined with increasing visibility into the second half, reinforces our confidence in both the strength of our business and the demand environment. With that, I will turn the call over to Walter.

Walter Michalec, Chief Financial Officer

Thank you, Nathan, and good afternoon, everyone. 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 costs, depreciation and amortization expense and nonrecurring professional fees. Please refer to our press release issued earlier today, August 14, 2025, 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.com/investors/newsroom. Such non-GAAP measures should not be used as a substitute or alternative to any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, 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. Second quarter revenue was $8.4 million compared to $3.4 million in the year-ago quarter, an increase of approximately 150%. The increase was primarily due to a significant increase in sales and rentals of our mobile EV charging platform, e-Boost. Second quarter gross profit was $1.3 million or a gross margin of approximately 16% compared to a gross profit of $641,000 or a gross margin of approximately 19% in the second quarter of last year. The increase in gross profit was primarily due to the significant increase in sales and rentals of the company's EBO equipment. Along with improved profitability from the delivery of most of the remaining units in the 25-unit e-Boost order for one of the largest public-school districts in the United States. These gains were supported by enhanced productivity and cost optimizations achieved by our operations team as the build-out advanced. During the second quarter of 2025, Pioneer incurred an operating loss from continuing operations of $1.7 million, unchanged from the $1.7 million operating loss from continuing operations recorded during the second quarter of last year. During the second quarter of 2025, Pioneer generated non-GAAP operating income from continuing operations of $218,000, which again excludes corporate overhead expenses, R&D expense, depreciation and amortization and nonrecurring professional fees as compared to a non-GAAP operating loss from continuing operations of $137,000 for the same quarter in 2024, a year-over-year improvement of $355,000. Net loss from continuing operations for the second quarter of 2025 was $1.2 million compared to a net loss from continuing operations of $1.7 million during the second quarter of 2024, an improvement of approximately $500,000. Taking a look at our balance sheet. As of June 30, 2025, we had cash on hand of $18 million, no bank debt and working capital of approximately $24 million compared to $41.6 million of cash on hand, no bank debt and working capital of $26.7 million as of December 31, 2024. The cash on hand as of June 30, 2025, represents cash per share of approximately $1.62. The decrease in our cash on hand during the first half of the year is primarily due to the payment of a one-time special cash dividend of an aggregate of $16.7 million in January and the payment of federal and state income taxes totaling approximately $4 million during the second quarter. Today, we are reaffirming our guidance for revenue of $27 million to $29 million for the full year of 2025. This concludes my remarks. I will now turn the call back over to Nathan.

Nathan J. Mazurek, Chairman and CEO

Thank you, Walter. Operator, you can open the lines for questions.

Operator, Operator

Our first question comes from Rob Brown of Lake Street Capital.

Robert Duncan Brown, Analyst

Congratulations on all the progress. First question is on the e-Boost order with the charging services company. I think you said it could be up to $10 million. Just a little color on kind of how that rolls out and what are the variables on the sizing there?

Nathan J. Mazurek, Chairman and CEO

The key factors are the sizes they require and the timing of their needs. There is a specific opening period we have, along with a designated window during which we have established pricing for purchases and leases, and we are maintaining certain inventory for them. Without going into too much detail, that outlines our approach. We aim to gather information on their anticipated usage over a 24-month timeframe, allowing us to set everyone within specific parameters.

Robert Duncan Brown, Analyst

Okay. Perfect. And then on the pipeline, I think there were several markets that were quite active and you said dozens of potential municipalities. But just a sense of how that pipeline matures, the timing on it? And how does that sort of build for orders that give you some visibility into next year?

Nathan J. Mazurek, Chairman and CEO

We will make announcements as significant developments occur, which will help guide us in the next couple of months. Government agencies operate at varying speeds, much like individuals do, often at a slower pace. The positive aspect is that many have committed to transitioning to electric and are now working to find the best solutions to support their charging needs. This sector is broad but moves slowly. In contrast, private businesses, whether they are privately held or publicly traded, have different motivations. Some of these factors help us, while others do not, but the pace in these markets is generally much faster. We're navigating these dynamics every day. The large school district is a part of a major metro area on the West Coast. SparkCharge primarily serves private, non-governmental businesses. The robotaxi market, which seemed dormant just three months ago, has made significant progress in investing and providing solutions, creating a competitive landscape that is now a much more important market for us moving forward. In fact, it is likely to be the quickest market in terms of response time for purchase orders.

Robert Duncan Brown, Analyst

Okay. And then I guess on the HOMe-Boost product, you're talking about a launch here in the second half. Could you give us a sense of some of the milestones you expect with the rollout and how you see that launch at this point?

Nathan J. Mazurek, Chairman and CEO

Yes, the launch has been slightly delayed. We initially planned to roll it out in July. The delay is my responsibility. I've been primarily experimenting with its mechanical and electrical aspects to ensure that its fit, form, and function are appealing, not overly large, and easily transportable. Additionally, I've made some electrical adjustments to enhance usability and cost-effectiveness for everyone involved. However, we are not anticipating any revenue from it in 2025; that would be a significant surprise. I don't expect that to happen. We do foresee orders starting in 2025, with a rise expected in the first quarter of 2026, and we hope it will contribute meaningfully to our revenue in 2026.

Operator, Operator

Our next question comes from Amit Dayal of H.C. Wainwright.

Amit Dayal, Analyst

Nathan, congrats on another strong quarter. Good to see the margins bounce back. On that front, should we expect margins to stay at these levels and maybe move higher given that initial buildup costs are now out of the way?

Nathan J. Mazurek, Chairman and CEO

Yes, we are consistently working to enhance our margins. I believe the margins should remain stable and hopefully improve in the third quarter, of which we are currently halfway through, and continue to advance in the fourth quarter. The extent of improvement is largely up to us, but we do not anticipate any further erosion of margins.

Amit Dayal, Analyst

Okay. Understood. And then it looks like your pipeline is really solid, Nathan. I mean lots of opportunities from new avenues that you probably were not anticipating earlier, like you said, the robotaxi stuff. On the other side of it, how are we going to manage this level of interest with the capacity we have? I'm just trying to get a sense of with the setup now or today, how much revenues can the company support with the available capacity, et cetera? And how are you thinking of managing that part of the business going forward?

Nathan J. Mazurek, Chairman and CEO

Yes, we are consistently discussing what we can achieve and need to respond quickly. For the large 25-unit order in the West, we utilized a contract manufacturer in Los Angeles for 22 of those units. Delivering that order on time from our Minneapolis facility would have been impossible. We expect to fulfill the remaining orders this year, benefiting from a mix of larger units that carry higher price tags. We've made the decision not to manufacture the HOMe-Boost unit ourselves and are working exclusively with a contract manufacturer in Minnesota. We anticipate significant growth in 2026 will primarily come from the HOMe-Boost product. As for handling additional orders like the 25-unit request, we will likely mix internal production with contract manufacturing. There are no plans to expand the Minneapolis facility's capacity, and there isn't a regional solution in place yet.

Amit Dayal, Analyst

Okay. No, that's understandable. From a revenue concentration perspective, is majority of the revenues right now coming from states like California? And how do you expect this to evolve as HOMe-Boost comes to the market and maybe other solutions you bring to the market?

Nathan J. Mazurek, Chairman and CEO

Yes, thank you. California is currently the leading market, and I don't anticipate that changing. The market is substantial, robust, and there are strong incentives for users to transition to electric, which benefits our solutions. The success of HOMe-Boost could significantly diversify our market presence. As I mentioned earlier, we're focusing on providing power solutions. While charging is important, it's just a feature and not essential for users. You've pointed out an important consideration; we are increasing our efforts, although we haven't fully emphasized it yet. We're guiding toward expanding our business to encompass more power-centric applications and custom distributed generation where we can leverage our expertise in generators, thus becoming less dependent on incentives to drive our business.

Amit Dayal, Analyst

Understood. So, Nathan, you won't be constrained by federal budget cuts because most of your customers are at the local and municipal state level. The rest are private or public companies. Is that the correct way to look at it?

Nathan J. Mazurek, Chairman and CEO

I would consider this with the understanding that federal budget cuts or the removal of certain incentives are not beneficial. Even wealthy states like California and others appreciate assistance from the federal government. Now that they have to rely on their own incentives, it’s true they are committed. However, in any market, easing up a bit is not favorable for that specific market. So, that's something to keep in mind. Yes, California is committed, as are Washington, Oregon, and Arizona, but they are on their own.

Operator, Operator

Our next question comes from Howard, a private investor.

Unidentified Analyst, Analyst

Congratulations on the great growth in the quarter. That's very impressive.

Nathan J. Mazurek, Chairman and CEO

Thank you, Howard.

Unidentified Analyst, Analyst

Great. I have a couple of questions about the gross margin, which is impressive going from 2% to 16% in one quarter. Looking ahead, I understand you mentioned it should increase further. However, when HOMe-Boost is introduced, will that temporarily impact gross margins, or will it lead to long-term improvements? How do you see the two products aligning?

Nathan J. Mazurek, Chairman and CEO

Yes. HOMe-Boost will not have manufacturing costs since we have already incurred engineering and design expenses, and we have minimal maintenance costs. Aside from the selling, general, and administrative expenses associated with it, we have a clear understanding of our costs. We plan to price the product in a way that will consistently improve our gross margins, especially as we increase volume.

Unidentified Analyst, Analyst

Okay. Great. Is there a target gross margin you see with your overall business? Are you shooting for 20% or 25%? Or is that 25% too much to ask in your product line?

Nathan J. Mazurek, Chairman and CEO

Yes. So if you take the full mix of the business, it really would depend on the success of HOMe-Boost. 25% is not too much. Internally, longer term, we're asking for more. We're asking for 30% plus because as e-Boost continues to grow for the most part when we want to, we're taking on service for those units as well and the service business is right there, and it's becoming a more significant piece of what we're doing. So plus 30 is really the more medium-term goals for us.

Unidentified Analyst, Analyst

Great. Great. And then I noticed the $1.4 million cash usage kind of listed as a sales-type lease origination. Could you explain what that was? Is that a onetime item? Or is that ongoing?

Nathan J. Mazurek, Chairman and CEO

That was with the customer. We did a capital lease with them. So that's the use for it. That's how we booked it.

Unidentified Analyst, Analyst

Okay. Is that a customary thing going forward? Or is that just a one-off?

Nathan J. Mazurek, Chairman and CEO

We're taking leasing opportunities kind of on a step-by-step basis. now that you mentioned, I mean, I'll say we have x, and I don't even remember off the top of my head, what we're expecting to do in lease or rental revenue for this year. But it is something that we would like to grow with the right customers under the right circumstances. If you have a good counterparty, leasing is a much more profitable business for us. It's a much higher return on assets for us.

Unidentified Analyst, Analyst

Okay. And then in terms of guidance, now in the first half, you've done a little over $15 million, and you're guiding to $27 million to $29 million for the year, which would mean a little bit less in the second half. And I can kind of guess at that based on that large order and lumpiness as you're ramping up. But could you just give a little bit more color on how you get to the second half guidance being down from the first half?

Nathan J. Mazurek, Chairman and CEO

Yes. The surprising part was that we were able to ship some units in June that I didn't anticipate. We don't typically hold back. If we can invoice it, we do. Did this increase our revenue slightly this quarter? It would be great if it were more consistent through 2025. But as long as we can apply the necessary labor and materials, and the customer is ready, we invoice it. Our size means that even $2 million makes a significant impact.

Unidentified Analyst, Analyst

Okay. That's what I thought. And then in terms of the backlog at $18 million, is all of that $10 million order in your backlog or how do you define one defines backlog differently, but...

Nathan J. Mazurek, Chairman and CEO

Yes. So we define it the same way for at least 10 years. It's actually non-cancelable purchase orders that we expect to deliver in less than 12 months. So it's still the same.

Unidentified Analyst, Analyst

Okay. All right. And then finally, on the competitive side, just in general terms, is there anything new in the competition on either the e-Boost or the HOMe-Boost product lines that you see out there? Or how do you see your stacking up against the competition now?

Nathan J. Mazurek, Chairman and CEO

Yes, with e-Boost, there is actually less competition. Charging has been challenging. Some companies that have tried to replicate our efforts or similar solutions, whether it's with battery technology or diesel alternatives, have not made a significant impact. There simply isn’t enough demand for everyone to succeed, which has been unfortunate for those involved but has worked to our advantage. Regarding HOMe-Boost, we haven't made any announcements yet. We're being strategic and waiting until we are fully prepared to launch, as we want to gain the benefits of being a first mover without inviting competition prematurely. Most competition we encounter for e-Boost comes from battery products, which we do not directly compete with since they are low power, have low power density, and are more expensive. We can potentially offer these types of solutions for those customers who specifically want them, just to keep them engaged in our business.

Unidentified Analyst, Analyst

Congrats on an excellent quarter.

Nathan J. Mazurek, Chairman and CEO

Thank you, Howard.

Operator, Operator

Our next question comes from Bruce Galloway of Galloway Ventures.

Bruce R. Galloway, Analyst

Do you see any potential application for your product to provide backup power to the data center market?

Nathan J. Mazurek, Chairman and CEO

Yes, that's an important question. I don't want to dive deep into the specifics of data centers and power right now. Currently, pure backup power for a data center is undersized, even the largest units we offer are comparable to data center standards from 1992. We're closely connected to that sector through our Voltaris business and the switchgear business we sold, and we continue to keep an eye on it since we hold equity there. The power demands are high, with backup requirements starting at 1 megawatt, and diesel sets, primarily large diesel reciprocating engines, are still used 99% of the time.

Bruce R. Galloway, Analyst

Got you. To the point you just made, what's the company's remaining equity stake in that business?

Nathan J. Mazurek, Chairman and CEO

It's about 6% in that platform, and the business is doing extremely well. We hope to benefit from that value one day.

Operator, Operator

Our next question comes from Chris Lukawski, who's a private investor.

Unidentified Analyst, Analyst

Congratulations on the great results from me as well. My question was already asked and answered. I also had the data center question. So thank you for addressing that. So I would just like to say good luck to ourself.

Nathan J. Mazurek, Chairman and CEO

Thank you, Chris. Thank you for calling in.

Operator, Operator

Ladies and gentlemen, with no further questions in the question queue. I will now hand over for closing remarks.

Nathan J. Mazurek, Chairman and CEO

Pioneer is exceptionally well positioned to lead in the rapidly evolving power and electric mobility landscape. Thank you all for joining. Thank you all for your continued support, and we look forward to updating you all on our next earnings call.

Operator, Operator

Thank you. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.