Good day, and welcome to the Pioneer Power Solutions Inc. Fourth Quarter and Year End 2021 Earnings Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brett Maas from Hayden IR. Please go ahead.

Thank you and welcome. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; and Walter Michalec, Chief Financial Officer, and also on the call today is Geo Murickan, President of the company’s recently launched Pioneer Power Mobility Business Unit. Following the discussion, there will be a Q&A session open to participants on the call. We appreciate the opportunity to review the fourth quarter and full year financial results as well as discuss the 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 the 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 and in the posted version of these prepared remarks, both of which apply to the content of this call. I'd now like to turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Thank you, Brett. Good afternoon and thank you all for joining us today for our conference call. This was a watershed quarter for the company. We have successfully repositioned Pioneer as a valued provider of equipment and services to the rapidly growing distributed generation and electric vehicle markets. The shift in strategic direction that has taken place in the last 18 months is in direct response to specific customer demand and is predicated on two durable secular catalysts. The first, reality is the intense focus of many larger power users to utilize multiple power sources in order to reduce electric power costs, provide resiliency, and decrease their carbon footprint. Sole reliance on the grid is no longer acceptable from a reliability or a sustainability point of view. The episode in Texas in the winter of 2021, demonstrated this challenge as has the multiple brownouts and rolling blackouts in California and other locations during the summer months. For data centers, call centers, refineries, industrial facilities, and retailers with perishable inventory, even a brief power interruption is a business challenge that cannot be tolerated. For others, it is a never-ending increase on their power bill relating to demand charges. Backup generation, peak shaving, peak skimming, battery storage, and the use of renewable energy sources is a matter of business continuity and profitability. Achieving these objectives, however, can be challenging. The second secular tailwind is the growing popularity of electric vehicles. The charging infrastructure for electric vehicles has not kept up with their demand and there is a growing need for high-capacity off-grid charging solutions. Retailers, restaurants, hotels and casinos, concerts, trade shows and sport venues, and workplaces are moving quickly to add charging solutions. These additions are not simple, requiring city, county-type permits, civil and electrical and architectural engineering, and third-party approvals…

Thank you, Nathan, and good afternoon, everyone. Revenues were $3.5 million for the fourth quarter of 2021, down 35% year-over-year compared to $5.4 million in the fourth quarter of 2020. As Nathan indicated, we are just beginning to see the significant contribution of E-Bloc sales, and the first E-Boost sale was booked during the current quarter. Additionally, our fourth quarter results were impacted by supply chain disruptions, pushing a significant amount of revenue into 2022. Selling, general and administrative expenses of $1.5 million during the fourth quarter were 43% of revenues, an increase of approximately $300,000 when compared to $1.2 million in the year ago quarter. Operating loss for the fourth quarter of 2021 was $1.5 million compared to an operating loss of $900,000 in the year-ago period. Net loss for the fourth quarter of 2021 was $1.4 million or negative $0.16 per share compared to a net loss of $744,000 or negative $0.09 per share during the fourth quarter of 2020. Now, turning to the full year financial results. Total revenue was $18.3 million, down 6% compared to $19.5 million for the same period last year. Pioneer's gross profit increased 58% to $1.4 million or 8% of revenue from $881,000 or 5% of revenue for the same period last year. The significant increase in gross profit was the result of strict management of overhead costs and pricing power in our end markets. Additionally, the company recognized a $546,000 write-down of inventory during 2020 as a result of management's strategic decisions to rationalize its traditional product offerings and focus on higher margin equipment sales, and there was no comparable write-off during 2021. Full year SG&A expenses were up 2% to $5.3 million or 29% of revenues compared to $5.2 million or 27% of revenues during 2020. Operating loss during 2021…

Thank you. Our first question today will come from Amit Dayal with H.C. Wainwright.

Thank you. Good afternoon everyone. Nathan, just on the gross margin…

Good afternoon Amit.

Hey, Nathan. Just on the gross margin outlook, are we expecting margin improvements primarily to come from the T&D segment or the Critical Power segment?

Both.

Okay.

On the T&D segment, it's going to come mostly really from the volume. So we get the leverage there on the volume. And on the Critical Power segment, that's where the E-Boost sales are being segmented and they are good margin, profitable sales for us.

And just so can you maybe set a range of what we could potentially expect from these improvements? Is it 10% to 15% net gross margin?

Yes. Yes. We hesitated to do it until we get at least one quarter under our belts at a different volume than we've been used over the last two years with the different mix. So we're really going to wait --we, of course, know what the revenues are already for the first quarter. We're going to wait and see what kind of improvement we had. What was it due to? What can we really expect and that we hope maybe on the call we do in mid-May that we can kind of give an outlook for what we expect the year contribution margin to look like.

Okay. Understood. This -- the 50% year-over-year growth you're expecting, could you sort of give us the cadence of quarterly revenues that you're expecting. Is this going to be weighted more towards the second half of the year, or are you expecting sort of an even distribution given that your backlog has grown pretty strongly?

Yes. I would say that definitely the second half of the year, the cadence is going to be even higher, but I think that you will see already not just a small amount, but you'll see quite strong gains year-over-year, both sequentially into the first quarter of 2021, in 2022 compared those will be evident already in the first quarter.

Okay. And your -- the relationship with the national retail customer, have you started deliveries further already in 2021?

No. The first deliveries are slated for the end of the second quarter, assuming everything goes according to Hoyle, so far, so good. Anything could happen. But that's what we're expecting. Deliveries start the very end in June. And the bulk of them -- the bulk will probably be in the third quarter and they'll probably be a little bit left over into the fourth quarter.

Okay. Thank you. Any issues from supply chain related challenges in terms of meeting this delivery and deployment schedules?

All day long. We've tried on both sides of the business. We've tried to be ahead of it. We're holding a lot of critical and more difficult components, long lead items as early as we can, like circuit breakers and other kinds of control components. We're holding engine inventory so that we're able to meet some of these. Frankly, if we wouldn't have had the inventory, we wouldn't have sold the E-Boost unit that we sold two weeks ago. We wouldn't have taken the order that we just did for this trucking/electrical bus business. It just won't happen. So having the inventory is great. And that's -- we're trying to be judicious about it.

How is the E-Boost performing for customers so far?

So far, so good. Very few call to tell you how great you are. They only called the complaint. So I mean no complaints. So that's good.

Okay. All right. Good to hear that. Thank you so much. That’s all I have.

Thank you, Amit. Pleasure to hear you.

At this time, there are no further questions. I'll now turn the conference back over to you for any additional or closing remarks.

Thank you, operator. Thank you all for your time and support. We believe that this will be a milestone year for Pioneer Power, as we emerge and transition into a recognized leader in the distributed generation and EV charging marketplace. We look forward to updating you again on our next call.

Well, thank you. And that does conclude today's conference. We do thank you for your participation. Have an excellent day.

Thank you.