Good afternoon, and welcome to the Pioneer Power First Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Brett Maas with Hayden IR. Please go ahead.

Thank you, and welcome. 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 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 as well as discuss recent business highlights. Before we get started, let me remind you this call is being recorded and 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 to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in 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 Mazurek, Chairman and CEO. Nathan, please go ahead.

Thank you, Brett, and good afternoon, and thank you all for joining us today. We carried the strong momentum from last year's fourth quarter into the first quarter of 2023, and this year is shaping up to be a record year for us, both in terms of revenue and profit. Demand for our unique solutions continues to grow at an outsized pace. We are adding new dynamic customers. Existing customers are providing us with new purchase orders and opportunities, and we continue to evolve our solutions to better serve the needs of our customers and expand the vertical markets for our solutions. After growing revenue nearly 50% in 2022, we anticipate 2023 to be another year of 50% growth. We also expect to be profitable for the full year. This marks a significant turnaround in our business following our reset and the sale of our transformer business in August of 2019. Indeed, this was our second consecutive quarter with positive GAAP net income. We have essentially reached a point where our projected annual volume enables us to achieve improved operating leverage and sustainable EPS. While we continue to experience some quarter-to-quarter volatility in our results, we are projecting between $42 million and $45 million in annual revenue for 2023, representing a growth rate of at least 50%, similar to 2022. We also expect continued margin expansion and positive net income with much of our income sheltered from taxes due to our net operating loss carryforwards. As I noted on earlier earnings calls, our e-Bloc and E-BOOST solutions directly address 2 durable secular catalysts with both drivers inextricably linked to the generational energy transition our nation is experiencing. Our e-Bloc suite of solutions is an integrated compact and outdoor automatic transfer switch scheme, circuit protection and power control system, specifically designed for users of more than one source of electrical power. e-Bloc allows facilities to add additional energy sources like solar, battery storage, fuel cells or natural gas engines without doing any internal upgrades to their existing electrical system. Additionally, e-Bloc allows the user to effectively manage, control and protect all these inputs, facilitating peak shaving, peak skimming and general resilience. As noted earlier, e-Bloc presents all these benefits in a compact outdoor competitive skid-mounted package. Our primary markets for e-Bloc are large multi-location businesses with a large physical footprint, such as retailers and supermarkets as well as critical power-sensitive facilities like data centers, water utilities, hospitals, senior living centers, prisons to name just a few. The distributed generation initiative is growing rapidly as end users want to better control their energy inputs, including solar and wind, reducing their carbon footprint, lowering their costs and ensuring steady reliable supply. Large users of primary power like EV charging businesses are also understandably concerned about their ability to -- for the current grid to continue to supply them with their ever-increasing power requirements today and in the future. Simply put, the market for e-Bloc is very strong and only getting stronger. Turning to our E-Boost Mobile charging platform. We continue to see increasing orders and ever-expanding use cases for our unique anytime, anywhere mobile EV charging solution. Our E-BOOST system is a sustainably powered propane-fueled high-speed charging system, providing the ultimate immobility and portability. As a reminder, the E-BOOST portfolio is comprised of several platform, E-BOOST platforms. E-BOOST Mini is a skid-mounted version that provides high-capacity EV charging in the smallest footprint. It brings on demand charging of EV vehicles to any location within a facility with just a forklift and anywhere else on board with the trailer. This gives an easy and convenient way for dealerships and electrical depots to charge their EVs. E-Boost G.O.A.T. generator on a truck is a truck-mounted option that brings quintessential mobility and high-capacity EV charging. It enables on-demand charging of EV vehicles at any convenient location, providing EV truck and car owners the convenience of dispatchable charging services and thereby eliminating any range anxiety. E-Boost Mobile is specifically a trailer-mounted solution that balances the need for mobility and higher capacity of EV charging with minimal effort and on short-term notice. E-Boost Mobile provides multiple options for towing and can be available at specific businesses, large sports and cultural events or other gatherings to fulfill the elevated demand for high-speed charging. E-Boost Pod finally is the mostly stationary EV charging solution with customizable higher capacity and can be moved if necessary. The pod can provide high-speed DC fast charging to 4 or more vehicles simultaneously. Like all E-BOOST solutions, it can also service other power needs, especially in emergency situations such as a power outage. Serving as a backup power source and convenient power connectors and outlets are available on board. Today, target customers have included electric truck and bus manufacturers, their associated dealers, fleet management companies, package delivery providers, school bus operators and the like. We recently provided additional units to a large manufacturer, a large domestic manufacturer of electric trucks and buses, new units to one of the country's largest fleet management operators and new units to a transportation authority controlling some of the nation's largest airports. Other active E-BOOST markets include the electric vertical take-off and landing aircraft or eVTOL market, which are the future of air taxis, eSports and E-off-road market for equipment, including things like e-boats, e-jetskis, electric snow mobiles, off-highway equipment, construction equipment, anything that encompasses farming equipment, e-tractors, e-sprayers and so forth, all along the lines of charging infrastructure for these particular pieces of equipment. The National Electric Vehicle Infrastructure and NEVI program is also providing incentives and federal grant funding to U.S. companies that manufacture EV-charging stations or their components domestically in order to have a national charging network along our interstate highways. We expect the NEVI program to be a significant catalyst for us in 2024 and 2025 as state governments and authorities begin the funding and implementation of the NEVI program. Our E-BOOST solution is an especially appealing solution in rural and underserved parts of our nation's highways where permanent infrastructure solutions are just uneconomical. Unquestionably, sales of EV trucks, buses and cars have significantly outpaced the charging infrastructure. This is particularly true in the industrial and commercial sectors where companies with fleets of EVs, trucks, buses, warehouse equipment need to augment their charging infrastructure. Many organizations are moving quickly to add charging solutions for customers, employees and company fleets. We have sold solutions directly to large EV car manufacturers to recharge vehicles as E-BOOST fills this unique niche. As a result, we expect E-BOOST to drive significant growth in profit generation for us in 2023 and beyond. With that, let me turn the call over to Walter, our CFO, to discuss our financial results of the first quarter.

Thank you, Nathan, and good afternoon, everyone. As Nathan mentioned, Pioneer carried a strong momentum from the fourth quarter of last year into the first quarter of 2023, and this year is shaping up to be a record year for us, both in terms of revenue and profit. Pioneer's first quarter revenues were $8.5 million, up $2.1 million or 34% year-over-year. Revenue from our T&D Solutions segment, which manufactures our e-Bloc solution, increased 55% to $5.8 million when compared to $3.7 million during the same period last year. And our Critical Power segment, which integrates E-BOOST was up 4% to $2.7 million. Gross profit for the first quarter was $2.2 million or a 26% gross margin compared to a gross profit of $923,000 or a 14.5% gross margin during the first quarter of last year. The significant increase to our gross profit margin was primarily due to increased sales of our e-Bloc Power Systems, a favorable sales mix and improved productivity from our manufacturing facility. Selling, general and administrative expenses of $2.2 million were 25% of revenues for the first quarter of 2023, an increase of 24% when compared to $1.7 million of selling, general and administrative expenses in the year ago quarter. Approximately $150,000 of the quarterly SG&A was related to stock-based compensation. And SG&A also includes approximately $600,000 in incremental investments in sales, marketing, personnel and prototypes for our E-BOOST solutions. This is intentional and targeted spend designed to drive demand for this new solution. We expect these investments to continue through 2023 as we build out this new ever-growing business line. Operating income for the first quarter of 2023 was $55,000, a positive swing of approximately $880,000 when compared to an operating loss of $823,000 during the first quarter of last year. Net income for the first quarter of 2023 was $122,000 or $0.01 per basic and diluted share. compared to a net loss of $740,000 or negative $0.08 per basic and diluted share during the first quarter of 2022. Turning to the balance sheet. We had $11.6 million of cash on hand and 0 bank debt at March 31, 2023 compared to $10.3 million of cash on hand at December 31, 2022. This represents cash per share of approximately $1.18 at March 31, 2023. Accordingly, we are confident that we are sufficiently capitalized to address our near-term investments and cash needs. As Nathan said, we expect to deliver continued growth in 2023 with margin expansion and positive net income. Based primarily on our backlog, as well as the significant and accelerating demand for our new solutions, we believe we can grow revenue by at least 50% in 2023 when compared to 2022. We also expect to generate positive full year net income and earnings per share. This concludes my remarks. I now turn the call back to the operator for any questions.

[Operator Instructions]. Our first question will come from Amit Dayal with H.C. Wainwright.

With respect to the guidance, Nathan, can we now expect sequentially stronger quarters through the rest of 2023?

That's the expectation, correct, both in terms of revenue and in terms of EPS.

Understood. And then can you give us maybe some granularity on what's in the backlog right now?

Most of it -- most of the backlog itself is comprised of the e-Bloc product. Several large -- I mean, we don't detail the customers and so forth. But I'd say the large project, there's one is a large EV campus/manufacturing facility for one of the large car manufacturers in the south of the United States, two, our water utilities, one in California and one elsewhere. Some of these things we've detailed out separately. One is for a large project for an aircraft manufacturer and the projects, I guess, the trend is that they're getting larger and larger as opposed to sort of one-offs. So that's what the backlog is about this year.

Understood. And then as you get to the $45 million, $50 million level of revenues, are we close to getting at full capacity now? How do we sort of grow from these levels in terms of capacity availability?

Right. So that's been kind of what we've been dealing with the last month in earnest because from our point of view, 2023 is done. The facility in Los Angeles, especially is booked at statistical 100. So the issue is how do we do more out of the same facility next year. And the only way we're going to do it is some of it is going to be product mix, which helps. Some of it is going to be by maybe us not doing everything that we do today. The value for us is mostly the engineering, the wiring, testing and the assembly itself, maybe taking out subcontracting out some less critical operations that from a legacy point of view, we still do today. We think that could probably -- and we're actively engaged in getting that done. That can add probably about 30%, 40% capacity, still on one shift. So that's the first order of business. How do we increase the volume and the profits in 2024 out of that facility without making sort of cross the rubicon type capital expenditures.

And just last one for me. The supply chain side, are you comfortable with how everything is set up for you to deliver against this outlook?

So I would say that we're relatively comfortable. On the e-Bloc side, it's not as great as it used to be. It's not terrible anymore, and we're kind of all living with it. We're not into the crazy price increases anymore. It's very stable from that point of view. The lead times are manageable. Obviously, unless you're ordering exotic types of components of which you still have that. On the E-BOOST side, engines are still a problem. If they say 40 weeks, that means 52. So most engines are a year out. So we've been getting ahead of that by really ordering and holding inventory that we think we're going to use as the E-BOOST product continues to take root. And frankly, that without the inventory that we invested in already last year, we wouldn't be able to deliver anything this year. So we've been constantly re-upping ahead a little bit. We have the cash and we were able to use it. And obviously, we don't want to just keep inventory that doesn't do us any good either, but we try to be judicious about it and with all that and with all the spending that we're doing below the line for primarily E-BOOST, I think the greatest testimonial test that the cash went up in the first quarter from the fourth quarter. So something is going right.

[Operator Instructions]. Our next question will come from Shawn Boyd with Next Mark Capital.

Afternoon, you hear me okay?

We can, Shawn.

Great. Just want to go back to that comment regarding the capacity expansion. If I heard it correctly, the optimization and the potential outsourcing of certain processes would add 30% to 50%, that's increasing the revenue capacity. So take your guidance from $42 million to $45 million and then add 30% to 50% beyond that. Is that the way we should think about it?

Right. The first part of your statement is correct. The second part is a little inaccurate because that business doesn't represent 100% of our revenues. It represents, I don't know, 65% of our revenues. So however, that's an increase of that. On the E-BOOST side, the Minneapolis-based business, we're not really facing a capacity constraint right now. We hope that we do. That would be great to deal with that challenge on the E-BOOST side. But right now, we're able to service and for the balance of '23, we're confident we can get out of all the units that we need to get out this year.

Got it. Okay. Great point there. So this is on just the T&D Solutions side, that 30% to 50%...

That Correct. Correct. Correct.

And on -- I hear you on the E-BOOST and that, just to be clear, that was a couple of million last year and is hopefully $3 million to $4 million this year.

Correct, correct.

Correct. That clarifies. So now if I could, let's move to gross margin, 26% is substantial. So -- and I know that you gave a little bit of clarity in the script, but can you elaborate a little bit more on the biggest drivers to keep that gross margin at that level?

Yes. I mean it's product mix. I mean, that's what it is. The -- and I don't want to get too detailed on it, but the more -- I don't know, the more classic e-Bloc product that we do, the better the margin is. Sometimes that's lumped together with kind of other pieces of equipment, other things that we need to furnish and that slows down the margin expansion. We just can't get enough -- that we're not adding enough value to get the margin that we're shooting for. But yes, it's almost 100% mix.

Okay. All right. And then also on -- well, so I'd be remiss to not go ahead and through this out. But if you can keep -- how does that backlog -- you've got $37 million in backlog. You've made the comment that 2023 is largely booked. So you've pretty much got this scheduled as to how you can get it out the door. Is most of the -- rest of that business at this kind of margin? Can we hold that 26% in the fourth quarter...

Yes. I mean that's -- we would love to shoot for that. It's -- it never works out exactly the way we want. But I mean those are the gross margins that we've gone for. We were able to -- given with the right mix, we achieve it, given the right scale, we achieve it. The higher volumes helped in every respect, from a productivity point of view, from a purchase price point of view. So that's what we're doing -- that's what we're expecting to do going forward.

Got it. Okay. And just last thing for me for now is the order cadence. So -- and this is probably just my experience with the company, but if I'm looking at this correctly, kind of implied orders were $8 million to $9 million in the quarter. Down after a great big quarter and fourth quarter. But can you just talk about -- is that typically the way it works, you kind of ramp throughout the year and then we drop off into March and start ramping again? Or just anything you can give me on the general order cadence for your business?

Yes. The cadence is -- the projects and the jobs are getting bigger and bigger. So from a timing point of view, and we've also stopped maybe it's good and maybe it's bad. We sort of stopped like in the second quarter. We don't announce large orders that have come in. You kind of have to wait till the end of the second quarter, and then you'll see the backlog go up or down and what was the book-to-bill and what were the revenues. I would say that the dynamic is unbelievably active. But given their size, so if something comes in on April 15, so that dramatically kind of changes. But the cadence of the orders is still very strong.

Our next question will come from [indiscernible], a Private Investor.

My question has to do with the SG&A expenses from the first quarter 2022 to 2023 Q1. What were the factors or what contributed to the increase from the $1.7 million to the $2.2 million quarter-over-quarter?

Sure. I can take that one, Jonathan. Yes. So the $2.2 million increase, majority of that really was our continued investment -- incremental investments in our E-BOOST and e-Bloc initiatives. Roughly $600,000 or so in the quarter was attributable to that. So if you were to remove those investments, which are going to continue throughout 2023, but as we scale and ramp up, they are going to kind of normalize there. But without those in the first quarter, SG&A would actually be down.

You also said in your remarks earlier that in 2022, you had employee stock-based compensation that was expensed in 2022. Do we see that kind of expense is going to take place in 2023? And is that part of the Q1 SG&A number?

Yes. So I'm sorry, my comment was that about $150,000 of the current quarter SG&A is related to stock-based compensation. So both quarters did have roughly -- Q1 of 2023 had about $150,000 and Q1 of 2022, had roughly $60,000.

Do we see the SG&A expenses going forward in 2023 to be comparable to the quarters in 2022?

For the most part, I would say, yes, but our goal is to take control over SG&A, do more of a scrub and see where we can save on costs as well. But relatively speaking, we don't expect any significant swings up or down.

Our next question will come from [indiscernible], a Private Investor.

My question is about the fact that your Los Angeles factory that makes the e-Bloc is fully booked for the year, and your e-Bloc sales seem to be the fastest growing. Is there -- after you go through the plans you have to kind of outsource some of the simpler tasks. Are you planning to increase production or to build another factory? Do you have those plans yet? Or is it the case that you just take only the orders you can build in Los Angeles?

Yes. So that's -- we struggle with this every day, Chris. That's really -- it's a great challenge to have. So the first goal is how do we meet growth -- continued growth in 2024. It's not just the manufacturing, but we have to be able to engineer it. We have to be able to shepherd these through complicated project management stories that these kinds of customers demand on any of these jobs. So it's more than just the facility. It's the right personnel to continue to go forward. If we don't continue to deliver an excellent solution on every level, we're not going to achieve a lot of growth. We don't get a lot of second chances in this market. So yes, that's the first. The first step is how do we continue to have a reasonable and exciting growth in 2024. You're right. And then the situation becomes do we expand? Is it assembly only? Is it more? Of course, we want to do the best solution. So off the cuff, we think of the terms that we look at it so that hope this informs your view is that the big value that we have is engineering, the value that we have is custom bus stuck work. The big value that we have is the very complicated wiring and testing that goes into a lot of these units. So those are things that if we're not doing them, we're kind of -- I'm not sure what we're doing exactly for the customer. Other functions are less critical or more vanilla-type functions that we continue to need make. Do we have to make back pans? we have to make end walls? Do we have to make corner posts all the time? We do them all right now. So that would be any kind of expansion would focus again on the facility that does the value-added parts of our process that we think that we need to have in order to move forward. It doesn't -- that expansion doesn't necessarily have to be in Los Angeles as well. I'm sorry, I cut you off, Chris.

No, no worries. So is e-Bloc customer engineered for each piece?

So I mean that's a longer answer. I mean, every use case is different. Every customer is different. If you're less user. If you're -- I don't know if you're a supermarket chain, many of yours will be similar. But even there, you're going to have variations based on the size of the store and what kind of service they're receiving and what kind of additional points of power they want, does it lend themselves more to solar? Does they lend themselves? Do they have a gas line? So the short answer is that sort of every job is custom engineered, but clearly, there are things that are very, very similar, especially among the same customer. Every water utility is going to be different. Every hospital is going to be different. Every senior living center is going to be different. So in that respect, there's very little to glam-off.

Okay. Well, good to see you have some kind of technological multiple...

Close to 500 sort of in a more immediate way. Our backlog right now reflects 0 additional stores. They haven't come out with any yet. We expect as they've received all the units, but as they monitor the data and as they get comfortable, this was a big move for them, 63, we hope we don't hear from them, which is great. It means everything is working perfectly. We only hear -- normally, we only hear complaints. So we definitely expect more units to be released. There are rumors and whispers among them and their engineers and so forth, there are certain things. None of that's in 2023, even if they release something tomorrow with all expectations and given their internal submittal process, all of that would be in 2024.

So 1,000 stores, if I take the average that you sold on the initial order was just about $200,000 per unit -- per store. So 1,000 stores, you're talking about a $200 million opportunity?

Correct. And obviously, those prices would be higher over time as things tend to go up. I mean they don't typically go down, but that's correct. In a realistic time frame is they laid out internally that they were going to do this in 5 years. The first part of the order is any indication, 5 really means it's going to be spread out over 10 years.

Our last question will come from [indiscernible], a Private Investor.

Yes. Nathan, thank you for the good quarter. My congratulations on that.

Thank you, Ray.

I heard that you mentioned some things about the supply of engines, the propane engines that you need to for generation. Is there an interaction between e-Bloc and E-BOOST with respect to the engines -- and any comments on -- further comments on the availability thereof. Thanks again for a good quarter and congratulations.

Yes. Thank you, Ray, and I'll thank you on the call here. I'll thank you separately for only me sending me interesting information and making me stay on my technological toes as far as what other technologies and processes might be out there that might help pioneer. So thank you for that, Ray. Yes, there's not a lot of interaction. I always expect it to be more. There's not a lot of interaction between or cross-selling or cross technological pollination between e-Bloc and E-BOOST. On the e-Bloc side, we don't furnish the engines on the particular job. We're kind of agnostic as to what the user wants to use. They're using engines, they're using 1, they're using 3, they're using 10. I don't care. It only determines the size of the project for us. On E-BOOST, of course, we are using an engine. We're adding an alternator and a controller and the charger and the tanks and mechanically doing it in a way, fitting it in a way for the customer's application. So the engines do affect us there. That's the heart of what's going on. Everything else is frankly passive or dump on the E-BOOST. The engine is the one generating the power.

This concludes our question-and-answer session. I would like to turn the conference back over to Nathan Mazurek, for any closing remarks.

All right. Thank you all for your time and support, and we look forward to updating you again on our next call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.