FORT LEE, N.J., Nov. 8, 2018 /PRNewswire/ — Pioneer Power Solutions, Inc. (Nasdaq: PPSI) (“Pioneer” or the “Company”), a company engaged in the manufacture, sale and service of electrical transmission, distribution and on-site power generation equipment, today announced its financial results for the third quarter and year-to-date periods ended September 30, 2018.

On May 2, 2018, Pioneer signed a definitive agreement to sell its switchgear business, and as a result this business unit has been reclassified as discontinued operations. Accordingly, the results presented in this press release reflect continuing operations.

Third Quarter 2018 Results and Recent Business Highlights from Continuing Operations:

  • Third quarter revenue of $26.0 million, up 1.8% compared to $25.5 million in Q3 2017 and up 5.5% sequentially compared to $24.6 million in Q2 2018
  • Third quarter gross margin of 19.8% up 14 basis points compared to 19.7% in Q3 2017 and down 135 basis points sequentially compared to 21.2% in Q2 2018
  • Net income from continuing operations in the third quarter of $788,000, up $1.0 million compared to a net loss from continuing operations of $219,000 in Q3 2017 and an improvement of $866,000 compared sequentially to a net loss from continuing operations of $78,000 in Q2 2018
  • Adjusted EBITDA* of $3.0 million, down 11.0% compared to $3.3 million in Q3 2017 and up 66.5% compared sequentially to $1.8 million in Q2 2018
  • Backlog from continuing operations as of September 30, 2018 was approximately $41.0 million, the highest in company history, up 13.0% compared to $36.3 million at June 30, 2018 and up 33.7% compared to $30.6 million at September 30, 2017

Nathan Mazurek, Pioneer’s Chairman and Chief Executive Officer, said, “This quarter clearly demonstrates the progress we have made in rationalizing costs, focusing on profitable projects and effectively managing our product mix. The third quarter benefited from a more typical mix of projects and product types, driving Adjusted EBITDA* well in-line with our annual guidance. In particular, our Critical Power segment contributed $510,000 to EBITDA compared to $140,000 in the second quarter, completing a turnaround for an important strategic component of our business.”   

“Our backlog and profit continue to grow, and a rebound in the oil, gas and mining sectors, as well as long-awaited infrastructure spending, would be incremental to this progress,” added Mr. Mazurek. “Our results also overcame foreign currency headwinds related to the strength of the U.S. dollar relative to other currencies. We continue to enjoy broad-based demand for our solutions, resulting from favorable economic conditions in the United States and Canada. In particular, the recent legislation legalizing cannabis in Canada has spurred significant demand for sophisticated power solutions to help the burgeoning industry meet newfound demand. Data center business, cryptocurrency mining and general construction are all contributing to continued demand for our equipment and services.”

“We have scheduled to close the sale of our switchgear business for January 1, 2019, enabling us to book the one-time gain and payment of the resulting tax implications in a single tax year,” added Mr. Mazurek. “Based on CleanSpark’s stock price at the close of business yesterday, the totality of the transaction would result in more than $16 million in value being immediately added to our balance sheet. Clearly, this value is not reflected in Pioneer’s current share price. We continue to believe CleanSpark can more effectively grow this business, creating additional long-term value for all its shareholders, including Pioneer. Once the six-month lockup expires, it remains our intent to distribute these shares to our shareholders in an appropriate manner, taking into account tax obligations and market conditions.”

Third Quarter Financial Results

Revenue from Continuing Operations

Total revenue for the three-month period ended September 30, 2018 was $26.0 million, up 1.8% compared to $25.5 million for the third quarter of 2017. The increase was driven by higher sales of the Company’s liquid filled transformer products and increased service revenues, which were partially offset by lower equipment sales resulting from a reduced focus on this revenue stream. On a sequential basis, revenues increased 5.5% compared to $24.6 million in the second quarter of 2018. For the nine months ended September 30, 2018, total revenue was $74.0 million compared to $77.8 million for the nine months ended September 30, 2017, a decrease of 4.9%. For the three months ended September 30, 2018, service revenue increased by $219,000, or 8.2%, as compared to the same period in the prior year. For the nine months ended September 30, 2018, service revenue increased by $511,000, or 7.2%, compared to the same period in 2017.

Gross Margin from Continuing Operations

For the three months ended September 30, 2018, Pioneer’s gross profit was $5.1 million, or 19.8% of revenues, compared to $5.0 million, or 19.7% of revenues, for the year-ago period. The increase in gross profit was driven primarily by the unfavorable impact of a write-off of raw materials inventory not relocated from Canada for the three months ended September 30, 2017. On a sequential basis, gross margin decreased 135 basis points compared to 21.2% in the second quarter of 2018. For the nine months ended September 30, 2018, Pioneer’s gross profit was $14.8 million, or 20.0% of revenues, down 9.9% compared to $16.4 million, or 21.1% of revenues, for the year-ago period.

Operating Income / (Loss) from Continuing Operations

For the three months ended September 30, 2018, income from operations was $1.9 million compared to $1.1 million for the same period last year. On a sequential basis, income from operations represented an improvement of $1.1 million compared to $857,000 in the second quarter of 2018. For the nine months ended September 30, 2018, operating income was $3.0 million compared to $4.0 million for the prior year.

Income Taxes from Continuing Operations

Pioneer’s effective income tax rate on income from operations for the third quarter of 2018 was 34.5% of earnings before income tax compared to 170.4% for the same quarter last year. For the nine months ended September 30, 2018, the effective income tax rate was 81.1% of earnings before income tax compared to 19.0% for the same period last year. The decrease in the income tax rate for the three-month period ended September 30, 2018 and the increase in the income tax for the nine-month period ended September 30, 2018 was primarily due to changes made to taxation of foreign earned income pursuant to the U.S. tax code changes enabled in December 2017.

Net Income (Loss) from Continuing Operations

The Company generated net income of $788,000, or $0.09 per basic and diluted share, for the three months ended September 30, 2018 compared to a net loss of $219,000, or $(0.03) per basic and diluted share, during the three months ended September 30, 2017. On a sequential basis, net income improved by $866,000 compared to a net loss of $78,000 in the second quarter of 2018. Net income for the nine months ended September 30, 2018 was $128,000, or $0.01 per basic and diluted share, compared to net income of $1.7 million, or $0.19 per basic and diluted share, for the nine months ended September 30, 2017.

Net Income (Loss)

The Company generated net income of $58,000, or $0.01 per basic and diluted share, for the three months ended September 30, 2018 compared to a net loss of $795,000, or $(0.09) per basic and diluted share, for the three months ended September 30, 2017. On a sequential basis, net income improved by $854,000 compared to a net loss of $796,000 in the second quarter of 2018. Net loss for the nine months ended September 30, 2018 was $1.3 million, or $(0.16) per basic and diluted share, compared to net income of $599,000, or $0.08 per basic and diluted share, for the nine months ended September 30, 2017.

Adjusted EBITDA*

Among other add backs for this calculation, the third quarters of 2018 and 2017 included non-cash expenses consisting of depreciation, amortization of acquisition intangibles, and stock-based compensation for employee and director stock options of $713,000 and $1.1 million, respectively.

The Company’s Adjusted EBITDA* for the quarter ended September 30, 2018 was $3.0 million compared to $3.3 million in the same quarter last year. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP measures.

* Note: Pioneer has presented non-GAAP measures such as Adjusted EBITDA because many of our investors use these non-GAAP measures to monitor the Company’s performance. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the Company’s operating performance.

Generally, a non-GAAP financial measure is a quantitative assessment of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP measures.

Backlog

Sales backlog (reflecting continuing operations) at September 30, 2018 was a record $41.0 million compared to $36.3 million at June 30, 2018. Backlog is based on orders expected to be delivered in the future, most of which is expected to be delivered during the next 12 months and excludes the backlog from discontinued operations.

2018 Outlook

Management reaffirms its expectations for the Company to generate high-single-digit growth in revenues from continuing operations and to increase Adjusted EBITDA for the full year of 2018 compared to 2017. 

Conference Call Information

Management will host a conference call at 4:30 p.m. ET on November 8, 2018, to discuss the results with the investment community. Details are as follows:

A replay will be available until November 15, 2018 which can be accessed by dialing 1-844-512-2921 if calling within the United States or 1-412-317-6671 if calling internationally. Please use passcode 2572152 to access the replay.

About Pioneer Power Solutions, Inc.

Pioneer Power Solutions, Inc. manufactures, sells and services a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. The Company’s principal products and services include custom-engineered electrical transformers, low and medium voltage switchgear and engine-generator sets and controls, complemented by a national field-service organization to maintain and repair power generation assets. Pioneer is headquartered in Fort Lee, New Jersey and operates from 12 additional locations in the U.S., Canada and Mexico for manufacturing, centralized distribution, engineering, sales, service and administration. To learn more about Pioneer, please visit its website at www.pioneerpowersolutions.com.

Safe Harbor Statement:

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) the Company’s ability to expand its business through strategic acquisitions, (ii) the fact that many of the Company’s competitors are better established and have significantly greater resources, and may subsidize their competitive offerings, (iii) the Company’s dependence on a few large customers for a material portion of its sales, (iv) the potential loss or departure of key personnel, (v) the fact that fluctuations between the U.S. dollar and the Canadian dollar will impact the Company’s results, (vi) market acceptance of existing and new products, (vii) restrictive loan covenants or the Company’s ability to repay or refinance debt under its credit facilities that could limit the Company’s future financing options and liquidity position and may limit the Company’s ability to grow its business, (viii) general economic and market conditions, (ix) unanticipated increases in raw material prices or disruptions in supply, (x) the fact that the Company’s Chairman controls a majority of the Company’s combined voting power, and may have, or may develop in the future, interests that may diverge from yours, (xi) reported material weaknesses in the Company’s internal control over financial reporting, and (xii) the fact that future sales of large blocks of the Company’s common stock may adversely impact the Company’s stock price. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual and Quarterly Reports on Form 10-K and Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s web site at www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

Contact: 
Brett Maas, Managing Partner 
Hayden IR 
(646) 536-7331 
brett@haydenir.com

Tables Follow


 


PIONEER POWER SOLUTIONS, INC.

Consolidated Balance Sheets

(In thousands, except share data)

September 30,

December 31,

2018

2017

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

659

$

218

Accounts receivable, net

14,956

13,432

Inventories, net

26,010

23,192

Income taxes receivable

447

743

Prepaid expenses and other current assets

2,688

2,803

Current assets of discontinued operations

6,066

7,073

Total current assets

50,826

47,461

Property, plant and equipment, net

5,889

6,335

Deferred income taxes

3,047

2,729

Other assets

5,204

4,281

Intangible assets, net

3,913

4,922

Goodwill

8,527

8,527

Total assets

$

77,406

$

74,255

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Bank overdrafts

$

2,600

$

833

Revolving credit facilities

19,580

17,814

Short term borrowings

3,170

5,430

Accounts payable and accrued liabilities

20,882

16,873

Current maturities of long-term debt and capital lease obligations

1,316

782

Income taxes payable

900

1,164

Current liabilities of discontinued operations

3,791

3,856

Total current liabilities

52,239

46,752

Long-term debt, net of current maturities

3,127

4,153

Pension deficit

291

283

Other long-term liabilities

3,946

3,853

Deferred income taxes

1,575

1,665

Total liabilities

61,178

56,706

Stockholders’ equity

Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued

Common stock, $0.001 par value, 30,000,000 shares authorized;
8,726,045 shares issued and outstanding on September 30, 2018 and December 31, 2017

9

9

Additional paid-in capital

23,961

23,801

Accumulated other comprehensive loss

(5,967)

(5,798)

Accumulated deficit

(1,775)

(463)

Total stockholders’ equity

16,228

17,549

Total liabilities and stockholders’ equity

$

77,406

$

74,255

 

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Revenues

$

25,956

$

25,494

$

74,024

$

77,835

Cost of goods sold

Cost of goods sold

20,815

19,609

59,253

60,559

Restructuring and integration

873

873

Total cost of goods sold

20,815

20,482

59,253

61,432

Gross profit

5,141

5,012

14,771

16,403

Operating expenses

Selling, general and administrative

4,081

4,151

12,426

12,676

Restructuring and integration

156

Foreign exchange gain

(889)

(194)

(617)

(465)

Total operating expenses

3,192

3,957

11,809

12,367

Income from continuing operations

1,949

1,055

2,962

4,036

Interest expense

727

632

2,126

1,792

Other expense

19

112

158

165

Income before taxes

1,203

311

678

2,079

  Income tax expense

415

530

550

396

Net income (loss) from continuing operations

788

(219)

128

1,683

Loss from discontinued operations, net of income taxes

(730)

(576)

(1,440)

(1,084)

Net income (loss) 

$

58

$

(795)

$

(1,312)

$

599

Earnings (loss) per share:

Basic and diluted

  Income (loss) from continuing operations

$

0.09

$

(0.03)

$

0.01

$

0.19

  Loss from discontinued operations

(0.08)

(0.06)

(0.17)

(0.11)

Net income (loss) 

$

0.01

$

(0.09)

$

(0.16)

$

0.08

Diluted

  Income (loss) from continuing operations

$

0.09

$

(0.03)

$

0.01

$

0.19

  Loss from discontinued operations

(0.08)

(0.06)

(0.17)

(0.11)

Net income (loss) 

$

0.01

$

(0.09)

$

(0.16)

$

0.08

Weighted average common shares outstanding:

  Basic

8,726

8,725

8,726

8,713

  Diluted

8,734

8,725

8,726

8,727

 

 

PIONEER POWER SOLUTIONS, INC.

Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Reconciliation to Adjusted EBITDA and EPS

Net earnings / (loss) (GAAP measure)

$

58

$

(795)

$

(1,312)

$

599

Addbacks:

Loss from discontinued operations, net of income taxes

730

576

1,440

1,084

Interest expense

727

632

2,126

1,792

Income tax expense

415

530

550

396

Depreciation and amortization

699

942

2,150

2,481

Restructuring and integration

156

Non-recurring expenses from strategic changes 

873

873

Corp OH allocated to discontinued operations

297

308

776

888

Stock-based compensation

14

148

160

319

Other non-operating expenses

19

112

158

165

Adjusted EBITDA (Non-GAAP measure)

2,959

3,326

6,048

8,753

Tax effects – 21% rate

(621)

(698)

(1,270)

(1,838)

Non-GAAP net earnings

$

2,338

$

2,628

$

4,778

$

6,915

Non-GAAP net earnings per diluted share

$

0.27

$

0.30

$

0.55

$

0.79

Weighted average diluted shares outstanding

8,734

8,725

8,726

8,727

 

Tax Rate changed to 21% pursuant to US Tax Reform enacted in December 2017

Note: Pioneer has presented non-GAAP measures such as non-GAAP net earnings and Adjusted EBITDA because many of our investors use these non-GAAP measures to monitor the Company’s performance. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the Company’s operating performance.

Non-GAAP net earnings is defined by the Company as net earnings before interest, income tax expense, depreciation and amortization, non-cash compensation and non-recurring acquisition costs and reorganization expenses and other non-recurring or non-cash items and any tax effects related to these items. The Company defines Adjusted EBITDA as net earnings before interest, income tax expense, depreciation and amortization, non-cash compensation and non-recurring acquisition costs and reorganization expenses and other non-recurring or non-cash items.

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net earnings is set forth in the table above.

Amounts may not foot due to rounding.

Pioneer Power Solutions, Inc. (PRNewsFoto/Pioneer Power Solutions, Inc.)

 

 

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SOURCE Pioneer Power Solutions, Inc.