Earnings Call Transcript - PPSI Q1 2025

Operator, Operator

Greetings and welcome to the Pioneer Power First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Maas of Hayden Invest Relations. Thank you, you may begin.

Brett Maas, Host

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 E-Mobility. Following this discussion, there will be a Q&A session open to participants on the call. We appreciate the opportunity to review the first 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 last Thursday, May 15, which applies to the content of the call. I'd like to now turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Nathan Mazurek, CEO

Thank you, Brett. Good afternoon, and thank you all for joining us today. We are off to a strong start in 2025 with first quarter revenue more than doubling to $6.7 million. This growth is a clear reflection of the accelerating demand for our on-site power solutions and continued penetration of vertical markets for these solutions. Q1 revenue indeed validates the significant investments we have made to develop and expand the scope of our e-Boost solutions. The primary contributor to first quarter revenue was the initial completion of 10 e-Boost units to one of the largest public school districts in the United States. This order, which was announced in June of 2024, is for a total of 25 e-Boost mobile power units to charge the school district's first 200 electric school buses. Specifically, this order was a landmark order for Pioneer and represents the largest RFP ever administered and awarded for a mobile EV charging system. The balance of the 25 units are scheduled to be completed and delivered in the current quarter. The project was awarded after a short and intense competitive bidding process. At the time, we made the strategic decision to compete for the project at a highly competitive price in order to secure a marquee customer and prove the value of our technology at scale. As a result, our gross margins in Q1 reflected the early cost dynamic of such a large and complicated project. The first units that we developed and produced carried higher costs as we refined our processes and optimized production workflows. As we continue to execute on this order, we see improved efficiencies and benefits. We remain confident that the succeeding units will result in a better gross margin contribution for Pioneer in Q2. At the end of the first quarter, our total backlog was $23.2 million, an increase of 18% compared to the prior quarter. In addition to these current orders, our sales pipeline of potential new opportunities continues to expand. We are in active discussions with dozens of municipalities, transit authorities, shipping ports, and with several major national package delivery providers who have already committed to a multi-year electrical vehicle phasing in with the ultimate objective of 100% fleet electrification. In most instances, these delivery operators have already made the decision to transition to an all-electric fleet but lack the requisite charging infrastructure. E-Boost offers an off-grid, immediately deployable mobile solution that does not rely on extensive permitting, grid upgrades or long lead times. Beyond our core e-Boost charging platform, we have developed a residential/light commercial power system announced in March of 2024, tentatively named HOMe-Boost. This new platform is a game-changing power solution that will revolutionize the way homeowners and small facility owners address energy resilience and fast charging. This cutting-edge product integrates a prime-rated natural gas engine with optional DC fast charging, providing the facility owner with the ability to generate at their option, 100% of their energy and charging needs 24 hours a day. With its exceptional efficiency, compact and futuristic design, HOMe-Boost is perfectly positioned to meet the evolving and ever-increasing power demand from the residential and light commercial energy market. We are essentially providing the large home and the facility owner with a private power plant to operate independent of their grid connection or in tandem with such connection. Our confidence is reinforced by the enthusiastic reception we've already seen from potential customers and channel partners and additionally, in the residential sector and the light commercial market from medical-related businesses like MRI, dialysis, cataract-type centers to commercial bakeries and cement producers, where power needs and fast EV charging are critical and increased and reliable grid power availability is somewhat restricted. As we prepare for a dynamic launch in the second half of this year, we're confident that HOMe-Boost will be a major driver of growth and innovation for our company in 2026 and beyond. With that, I will turn the call over to Walter.

Walter Michalec, CFO

Thank you, Nathan, and good afternoon, everyone. Please be advised that we have included a non-GAAP financial measure of operating loss from continuing operations, which excludes corporate overhead expenses, research and development costs, and nonrecurring professional fees. Please refer to our press release issued on Thursday, May 15, for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website. 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 US GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with US GAAP in order to provide a more complete understanding of the trends affecting the business. First quarter revenue was $6.7 million compared to $3.3 million in the year-ago quarter, an increase of 103%. The increase was primarily due to a significant increase in sales and rentals of our suite of mobile EV charging solutions, e-Boost. First quarter gross profit was $148,000 or a gross margin of approximately 2% compared to gross profit of $535,000 or a 16% gross margin in the first quarter of last year. The decrease is primarily due to what Nathan alluded to earlier regarding the completion of the initial 10 units from the large 25-unit order we received in June of 2024. The first unit that we deployed and produced carried higher costs as we refined our processes and optimized production workflows. As we continue to execute on this order, we will see improved production efficiencies. We remain confident that the remaining units will result in more positive gross margin contributions for Pioneer. During the first quarter of 2025, Pioneer incurred an operating loss from continuing operations of $2.3 million compared to an operating loss from continuing operations of $1.7 million in the first quarter of last year. The variance was primarily due to the decrease in our gross profit and an increase in selling, general, and administrative expense. During the first quarter of 2025, Pioneer generated a non-GAAP operating loss from continuing operations of $989,000, which again excludes corporate overhead expenses, R&D expense, and nonrecurring professional fees, as compared to a non-GAAP operating loss from continuing operations of $319,000 for the same quarter in 2024. Net loss from continuing operations for the first quarter of 2025 was $2.1 million compared to a net loss from continuing operations of $1.7 million during the first quarter of 2024. Taking a look at our balance sheet. As of March 31, 2025, we had cash on hand of $25.8 million, zero bank debt and working capital of $26.2 million compared to $41.6 million of cash on hand, zero bank debt, and working capital of $26.7 million as of December 31, 2024. The cash on hand as of March 31, 2025, represents cash per share of approximately $2.32. The decrease in our cash on hand during the first quarter is primarily due to the payment of a one-time special cash dividend of an aggregate of $16.7 million on January 7, 2025. 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 for any questions.

Nathan Mazurek, CEO

Operator, you can open the lines for questions, if you will.

Operator, Operator

First question is from Rob Brown from Lake Street Capital Markets. Please go ahead.

Rob Brown, Analyst

Good afternoon.

Nathan Mazurek, CEO

Good afternoon, Rob.

Rob Brown, Analyst

On the margin in the quarter, I understand the start-up kind of margin issue. How do you see margins recovering? And as this sort of goes forward, where do you think you can get the margins to for this product line?

Nathan Mazurek, CEO

Yes. So, I mean, the last quarter was more indicative of where we strive to be, especially with the e-Boost product. It's a super high-value integrated specialized product. On this particular job, when you start with a lower sales price, only perfect execution will give you any kind of good contribution; less-than-perfect execution starts to hurt worse. So I think that the second half of the year, where we're not so overwhelmed by these units, which is a lot. I don't know of any other RFP or award of this size for this type of system. They've recovered already for the second quarter. They're not going to be the outsized or outstanding margins that we produced in the fourth quarter, but at least they'll be making better contributions. And as the other products in the third and fourth quarters come through so the margin should recover to something similar to the fourth of last year.

Rob Brown, Analyst

Okay. Great explanation. Thank you. And then on the, I guess, e-Boost pipeline, in particular, I think you said dozens of quotes and activity. But how do you kind of characterize that as these come in? Is that really building for 2026 revenue? And when do you sort of need to close those to get into '26 bookings?

Nathan Mazurek, CEO

Yeah. Probably by the end of June. It's a little arbitrary, but something like that then we're really just talking about '26 afterwards. Of course, there are exceptions. We happen to have everything in stock, and it's on the smaller side, and so forth, less customization, but those also don't produce the same revenue that the larger units do. So, the end of June is kind of a reasonable cutoff. After that, everything is '26 oriented.

Rob Brown, Analyst

Okay. Good. You mentioned that there has been significant progress with HOMe-Boost in terms of the channel and product interest. How is the pipeline developing? Are you able to accept orders, or is the product still launching later this year, which is when you expect to see order flow?

Nathan Mazurek, CEO

It's still launching in the second half of the year. I take full responsibility for redesigning its appearance, mechanical fit and form, and colors, while also making significant cost reductions that we believe were necessary. At the same time, we intend for it to be a premium product, both in appearance and user functionality. I believe we are nearly finished with this process and are preparing internally for a very strong and dynamic launch in the latter half of the year. As I've mentioned in previous calls, it's worth reiterating that HOMe-Boost is not included in any of our guidance for 2025. We are hoping for a successful order rate in the second half of 2025, with deliveries occurring in 2026. Thus, the rollout for 2025 does not impact our guidance.

Rob Brown, Analyst

Okay, great. Congratulations on the progress. I’ll turn it over.

Nathan Mazurek, CEO

Thank you, Rob.

Operator, Operator

Next question here is from an unidentified private investor. Please go ahead.

Unidentified Analyst, Analyst

Good afternoon, and thank you for taking my question. I appreciate your responses regarding the margins. I wanted to ask about HOMe-Boost. Would it be suitable for individuals with solar panels who want to completely disconnect from the grid?

Nathan Mazurek, CEO

If they chose to do that, whether they have solar panels or not, they would be able to go on island mode, they'd be able to disconnect if that's what they wanted to do. It has the logic and the control to move loads back and forth between this unit and the utility feed that the person might be getting. But if they wanted to go on to island mode, yes, they can go off the grid completely as long as they have a natural gas connection.

Unidentified Analyst, Analyst

But would it be able to kind of do the, I guess, the variable production that's required for solar panels, the fact that solar panels will kind of drop off in the evenings and so on. Will it be able to intermittently start and stop?

Nathan Mazurek, CEO

It can intermittently start and stop, yes.

Unidentified Analyst, Analyst

I wanted to ask you about an ongoing debate I have with my investors regarding your company. Some argue that e-Boost might just be a temporary solution for those who aren’t yet connected to the grid, suggesting that no one switches to electric just to produce power using a propane engine. What’s your perspective on this? How long do you think this market will remain viable? I know you’re performing well at the moment, but does it have long-term potential?

Nathan Mazurek, CEO

The ultimate question is about the duration of this gap. Initially, people thought this period would not exceed three years, but it now seems to be extending for at least the next five years. This trend is largely due to the challenges businesses face in securing these connections. As we deploy more units and reach additional school districts and municipalities, they recognize the value and flexibility of mobile solutions. They often question the need to invest heavily in fixed infrastructure when a mobile option is available for a similar cost, allowing for the possibility of relocation. Even when connections are possible, some major cities struggle with power availability. For instance, one school district is facing this challenge; they can't get enough power despite being in a big city, meaning they can't efficiently charge their buses, which would require them to sit for 40 hours to recharge. This is not a feasible solution. They need to be able to fast-charge multiple buses quickly, and in this case, our system allows for eight buses to charge at once with a large unit providing power in a mobile, off-grid manner. This means they are not dependent on the utility company.

Unidentified Analyst, Analyst

Okay. Yeah, that does answer it. And just to be clear, I think I know the answer to that, but I want you on the record. I mean even if they do have your solution that has an internal combustion engine, there's still significant savings compared to diesel, right? I mean natural gas is just cheaper in terms of energy per dollar.

Nathan Mazurek, CEO

We rarely compare our solution to diesel since it's typically assessed in relation to what it would cost if connected to the grid, which is still much cheaper. Generating your own power on-site with gas eliminates transmission and delivery charges, making it definitely more cost-effective. Those who consider this solution find that using diesel undermines its purpose. If I invest in an electric bus or van to cut emissions, it seems somewhat contradictory to rely on diesel for charging.

Unidentified Analyst, Analyst

Well, what I meant is that it's cheaper than having diesel trucks and putting diesel in the trucks.

Nathan Mazurek, CEO

Yeah, it's cheaper than having diesel trucks, that's correct, by far.

Unidentified Analyst, Analyst

And diesel buses and so on.

Nathan Mazurek, CEO

Correct. You are 100% correct. Yes. Thank you for clarifying.

Unidentified Analyst, Analyst

You’ve answered all my questions, and good luck.

Nathan Mazurek, CEO

Thank you.

Operator, Operator

Next question is from an unidentified private investor. Please go ahead.

Unidentified Analyst, Analyst

Good afternoon, and congratulations on the impressive progress. I have two questions. One concerns the distribution network. I find it remarkable how quickly you've secured large orders right after launching the new product. This suggests that you have built credibility. It seems like your distribution model is complex, involving various distributors and others outside the company. Can you share your thoughts on how you see that expanding and evolving with the introduction of the HOMe-Boost?

Nathan Mazurek, CEO

Thank you, Howard. That's correct. We have evolved too. I wouldn't say it's impossible, but it's nearly impossible for us to cover everything with our sales team. We wouldn't reach the city of X on our own due to a lack of personnel. Therefore, we rely heavily on channel partners and distributors to help us in the field. We also engage in direct sales, especially with municipalities and states, using various distributors. Sometimes, it's the bus and truck dealers that partner with us, backed by their corporate approval and confidence in the solutions we provide, which helps them sell more electric trucks and buses. For investor-owned businesses, our approach has been more direct, but we do need additional intermediaries and channel partners focusing on energy development and charging solutions. Our current resources are limited, and unless we hire a lot more personnel, we can’t cover everything. Regarding our home initiatives, we have some ideas in progress. Our team has already tested the product from a marketing standpoint with different distributors and dealers in that sector. Similar to the original HOMe-Boost product, the market will likely guide us in ways I can't currently predict regarding distribution.

Unidentified Analyst, Analyst

Okay. Thanks. That's helpful. Then my second question is kind of looking into 2026, and I know it's early, and you guys got a lot of stuff on your plate. But as you look, you've got this rapidly growing e-Boost product line out there. And then you're adding something that I would say has even more potential with HOMe-Boost, and you've got pinch points all along the process from manufacturing, management time, marketing sales, all of that. How do you see your focus in 2026? How big do you see HOMe-Boost being as a percentage of your attention or a percentage of your kind of your push in next year's efforts?

Nathan Mazurek, CEO

That's a great question. We're constantly working through that. To clarify, we envision HOMe-Boost being available in four versions, making it a more standard product compared to what we typically have with the traditional e-Boost line. We've already partnered with a nearby manufacturer to produce these initially at the right size and scale without unnecessary duplication. This arrangement helps us manage capital expenditures and allows us to offer favorable price points as we bring the product to market. Our focus will be on design engineering, marketing, and selling this product. Regarding management attention, it's a significant priority for me, Walter, and Geo Murickan, taking up about 50% of our focus right now. We believe, as you pointed out, that this could become an even larger and more profitable product for us. We're very enthusiastic about it, but we know the real results will come from our efforts.

Unidentified Analyst, Analyst

Great. Thank you, and I appreciate you taking my question. Thanks.

Nathan Mazurek, CEO

Of course.

Operator, Operator

This concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

Nathan Mazurek, CEO

Thank you all for joining. Thank you all for your support, and we look forward to updating you all on our next earnings call. Thank you.

Operator, Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.