Pioneer Power Solutions, Inc. Q3 FY2024 earnings call

• Sold PCEP business unit for $50 million in cash and equity transaction, receiving $48 million in cash proceeds and a 6% equity stake in Volterra’s electrical products platform.
• Critical power business is the focus, with e-Boost platform showing 130% y-o-y revenue growth in Q3 2024 and positive operating income since 2021. Backlog of critical power segment inclusive of e-Boost was ~$24 million as of end of Q3, up 45% y-o-y.
• Product expansions: e-Boost Mini, Mobile, GOAT, POD; collaboration with Spark Charge to drive mobile EV charging adoption; plan to launch home e-Boost in early 2025; e-Boost pure power for BESS and hydrogen customers.
• Strategic transactions: Opportunistic with acquisitions of complementary businesses with at least $25 million in revenue that are immediately accretive to earnings.

The critical power business, which includes the e-Boost solutions, is the sole operating unit remaining after the sale of PCEP. Third quarter revenue for the Critical Power Business segment was $6.4 million, compared to $2.8 million in the year-ago quarter, an increase of approximately 130%. The increase was primarily due to growth in the e-Boost business. Third quarter gross profit for the critical power segment was $1.5 million, or a gross margin of approximately 24%. Revenue from the e-Boost business was approximately $1 million in total for all of 2023, and in the third quarter of 2024, a single contract with a Canadian customer contributed approximately $3 million to revenue from e-Boost.

• 2024 revenue from continuing operations expected between $21 million and $23 million.
• 2025 revenue guidance $27 million to $29 million, primarily from e-Boost sales/rental and service/maintenance. Expect $17 million from equipment sale/rental, ~$10 million+ from service/maintenance, $2.5 million from long-term lease/rental.

• Market uncertainties impacting demand for products.
• Dependence on key customers and potential delays in orders.
• Risks associated with potential acquisitions not meeting expectations.

Q: Could you provide more detail on demand drivers, new customer wins vs repeat, and pipeline activity?

A: Demand is driven by government/quasi-government segments like states, cities, municipalities for electric buses, school buses; package carriers are also active. Some customers are repeats, some are new. Geo Murickan added on municipality, utility, sanitation, and off-highway equipment electrification.

Q: Preference between rental vs product sale business model?

A: Prefer long-term leasing but depends on customer creditworthiness; municipalities often buy, package carriers often lease.

Q: Production capacity for the business?

A: Working with subcontractors to expand capacity, with focus on maintaining current facilities in Champlain and exploring partners in other regions.

Q: Gross margins on the $3 million e-Boost order?

A: Blended gross margin of ~35% on that order, better than expected due to improved expertise in wiring and electrification, and better material and hour budgeting as experience grows.

Q: Customer diversity and backlog cadence?

A: Backlog components include school bus related and fleet related (municipal or private). Agreements are 1-3 years.

Q: M&A intentions and SG&A outlook?

A: Open to opportunistic acquisitions, but they must be accretive and complementary. SG&A for critical power business expected around $1 million, with corporate overhead aiming for ~12% of revenue.

Q: Profitability on 2025 revenue guidance?

A: Expect profitable on 2025 guidance. Backlog growth is goal.

Q: Comment on large bonuses paid?

A: Largest bonus was $2 million, due to successful sale of PCEP business with low legal fees and prior experience with Mill Point.