Good day and welcome to the Pioneer Power Solutions Third Quarter Fiscal 2014 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brett Maas of Hayden IR. Please go ahead.

Thank you. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer, and Andrew Minkow, Chief Financial Officer. Following this discussion, there will be a formal Q&A session open to participants on the call. We appreciate having the opportunity to review the 2014 Third Quarter Financial Results. Before we get started let me remind you that this call is being broadcast over the Internet and that a recording of the call and the text of Management's prepared remarks will be available on the company's Web site. During this call, Management will make forward-looking statements. These statements are based on current expectations and assumptions that are subject to risk 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 today, and in the posted version of these prepared remarks, both of which apply to the content of this call. I would now like to turn the call over to Nathan Mazurek, Chairman and CEO for opening comments. Nathan?

Thank you, Brett. Good afternoon everyone and thank you for joining us today for the conference call. This was a strong quarter for Pioneer Power, validating our expectations that the second half of the year would be stronger than the first half. More importantly, the strength of our performance was broad-based with essentially all of our business operating on track and this essentially reinforces our confidence in 2015. In the third quarter we delivered solid results by most any financial metric, including double-digit percentage increases in revenue, EBITDA and EPS. At just over $27 million, our order backlog is not only more diverse than it has ever been before, but it is very robust in absolute terms, giving us a high level of visibility into our expected revenue over the next several months. As of September 30, 2014, our backlog is up 13% as compared to $24.4 million at the start of the year. As compared to the same quarter of last year in September 2013, our backlog is up a full 29%. The same trend is evident in our order rate. During the quarter we received approximately $22.8 million in customer purchase orders as compared to $18.9 million in the third quarter of 2013, an increase of 20%. We expect that 2015 will be a very strong year for us on several levels, particularly as it relates to our year-over-year growth anticipated on our top and bottom lines. This expectation was made possible by our investments in the last 18 months to elevate our core earnings power through the integration of two acquisitions, the broadening of our addressable markets and the expansion of our sales and engineering teams in order to capitalize on previously unavailable sales opportunities. I believe that the combination of these activities have significantly enhanced Pioneer's…

Thank you, Nathan. I will first review the results for the September quarter and year-to-date in a little more detail and then I will review our 2014 guidance. Third quarter revenues were $26.1 million up 16.3% from $22.4 million in the third quarter of 2013. More specifically, the $3.7 million year-over-year increase was driven by approximately $1 million in higher sales of electrical transformers, up 4.4% over last year, and the $2.7 million sales increase of circuit protection and control equipment sold by our Pioneer Critical Power and Pioneer CEP business units. The increase in circuit protection and control equipment, or CPC, represents a $2.7 million or 318% increase compared to the September quarter of last year. From time-to-time, our sales figures are negatively impacted by the effect of foreign currency translation when comparing our results to prior year periods, as was the case this quarter. But on that subject we achieved an important milestone this quarter which was that for the first time our sales to U.S. customers exceeded sales to Canadian customers. We expect this reversal to become the new norm starting in 2015 and that foreign currency translation will become a more muted factor in evaluating our results. Turning to our gross profit for the third quarter it was up to $6.7 million or 25.7% gross margin compared to a $5.9 million gross profit or 26.3% gross margin in the third quarter of 2013. The gross margin percentage on sales of transformers decreased by 1.5% during the quarter, driven mostly by a less favorable sales mix in our liquid filled product categories, which was partially offset by slightly higher gross margin on increased sales of dry-type transformers compared to the prior year quarter. Critical Power, our highest gross profit margin business was the driving force behind the…

Okay. Thank you, Andrew. Operator, it would be my pleasure to open the call for questions.

Thank you. [Operator Instructions] And we will take our first question from William Bremer with Maxim Group.

Good evening, Nathan, Andrew. Nice quarter.

Hey, William.

Hello.

So first off, first question I have is you spoke a little bit about your CapEx or what you're seeing in CapEx from your clients. Can you get a little more granular? Some industries, your end markets seem to be holding quite well, others maybe just slightly coming back. Can you get a little more granular there for us?

Yes, I mean we don't break down to a lot of different segments. Oil and gas has definitely been weaker this year that's traditionally a very, very strong market for us. Mining has been weak already starting last year already. The datacenter market, any data driven kind of projects, have been super strong, and the general industrial conditions has been stable, if not maybe something, whatever it is, slightly better than stable. More granular than that I can't tell you. We don't serve enough to talk about deal or any of those markets or petrochem and the like.

Right, right. Your backlog figure, quite impressive. Is it safe to assume that the pricing or the mix of that backlog is better than it was say a year ago at this time?

It's probably a little bit better only because it includes much more Critical Power, so that's the highest gross margin business that we have that is in the backlog. Those margins should be up somewhat, but still that business is – still the backlog is driven primarily by the liquid-filled business.

Right, right. And then my final question and then I will turn it over, can you give us an idea what was the largest order that was realized during this quarter?

Yes, I mean I don't want to give out customer names but it was, the largest order realized in the quarter was the –

Even the monetary value would be fine. Would it be Georges, Idaho?

Because I am thinking October is not this quarter. That's a good question. It's probably – yes, it probably would have been a Critical Power order about a $1 million or so.

A little more, it was about a $1.3 million that we shipped in the third quarter, one order.

Okay, quite impressive. Nice quarter, gentlemen.

Thank you.

Thank you, William.

[Operator Instructions] And we will take our next question from Matt Koranda with ROTH Capital.

Hey, good afternoon, Nathan and Andrew. Thanks for taking my questions.

Hi, Matt. Pleasure.

Yes, so I just wanted to start out with your guidance. The implied guide for Q4, taking the midpoint, that $90 million midpoint, seems to imply that revenues could be down sequentially in Q4. Are you expecting maybe just a little bit of sequential weakness? I mean just talk to us about the factors that kind of swing it around in that $88 million to $92 million range that you provided before.

Yes, I would definitely expect to see if you are comparing to the third quarter I would expect down in the fourth quarter, because we are not a business that necessarily grows on a constant quarterly slope. It's driven so much by what projects we expect to ship. So while I think you can expect down from the third quarter, you should expect up from the fourth quarter of the prior year. On that basis, it should become a little bit more clear how we fall within our revenue guidance.

Okay, that's helpful. Then could you – just a housekeeping one, could you give us the breakdown between liquid filled and dry-type transformers during the period?

Yes. It's – our Q is up online, if you would like to see it and you will definitely find it there. But, for the meantime during the quarter we did $11.7 million in liquid filled during the quarter, September as compared to dry type $10.9 million.

Okay, great. That's helpful. I didn't get to look at the Q just yet. Okay, and then talk about some of the drivers behind the really strong Critical Power and CEP segment, I mean you guys are – it looks like you are doing a really nice job growing revenue there. How much of it do you attribute to the end market improving? How much is attributed to the new sales force additions? Just talk about some of the dynamics there and what's driving it.

Yes, I mean everything is driving that market, but for us but it is really the sales and engineering people who are driving it. We are starting at such a low level and in such a large market, it's being driven by our people going out there, by pushing Pioneer, by referencing the growing list of projects that CEP, the Critical Power business has done in the history and being successful. I mean you see the numbers. Critical Power did a million bucks for us last year in sales, this year it's going to do five. Their goals for 2015 are well beyond that. Their infrastructure is in place and we push hard because we are rewarded in that segment with the kind of pricing that gets us excited.

Great, that's helpful. Then I know you guys haven't given an outlook yet for 2015, but with the Critical Power and CEP segment up pretty substantially this year, could you just talk about kind of the growth rate, the trajectory moving into 2015?

Yes, I mean we normally give that kind of next time, but overall, I would say the liquid filled business is looking for a strong, definitely equal to or better than this coming year, only because I know what the first quarter is already and how the year is shaping up. It is not the kind of business you can catch up quarters, so if your first quarter is not strong it's hard to make -- you can't make it up. So that's going strong. Jefferson, I think is going to be the big surprise. It has been very healthy this year and we are expecting a super stellar year from them next year, and then the continued growth of CEP and Critical Power. So we are very, very upbeat. We haven't come out with – we haven't done our own internal budgeting except kind of on one page. So we should come out with 2015 guidance in a couple of months.

Yes. I mean, without giving too much away, and we haven't decided on much. If you look at our Investor presentation, we talk about one of our constant goals is 10% plus organic growth, and sitting where we are here today in November, I would say that's very likely for next year.

Great, great, that's very helpful guys. Then maybe you could just talk about – I think this is the stock question that we always ask, but I think it's important – so acquisitions, what are you seeing out there? Anything kind of in the near time pipeline, what gets you excited that's out there and the opportunities that are available?

Right, I mean we have 2/3 that we're actively engaged in and that we expect to complete in the next -- hopefully not all at same time, but over the next several months. One is significant and it's pretty much based all on Critical Power. The other is based would be broadening our scope within Jefferson and being more of a power quality business, less of just a magnetic solution, and that's a very exciting opportunity. The other would be a real to enhance the product suite and reach of our CEP business. So the pipeline is full. We have to bring them home.

Okay, excellent. That's helpful. I'll jump back in queue here, guys. Thanks.

At this time there are no further questions over the phone lines. I would now like to turn the conference back to Management for any additional or closing remarks.

Okay, thank you very much for your time and attention. I look forward to updating you all again in our next call. And thank you all for your continued interest, and more importantly, your continued support of Pioneer. Thank you.

This now concludes the presentation. Thank you for your participation.