Greetings and welcome to Pioneer Power's Q4 and Full Year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce your host, Brett Maas of Hayden IR. Thank you. You may begin.

Thank you, operator. 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 Power e-Mobility. Following this discussion, there'll be a Q&A session open to participants on the call. We appreciate the opportunity to review the fourth quarter financial results and recent business highlights. Before we get started, let me remind you this call is being recorded and webcast. During the call, management may 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 containing the earnings release issued earlier today, which applies to the content of this call. I'd like to now 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. 2024 was a watershed year for our business. In the fourth quarter, we sold our Pioneer Custom Electrical Products unit, PSEP, including the E-Bloc integrated power system to Mill Point Capital for $50 million in cash and equity. Sales consideration was comprised of a cash payment to Pioneer of $48 million and an approximately 6% stake in Mill Point's new Volterra's energy transition platform. Concurrently, Mill Point also acquired Jefferson Electric, a storied electric transformer manufacturer from ERMCO in order to expand Volterra's into a key power solutions provider. We expect strong profitable growth for Volterra's and are pleased to hold equity in this platform. Subsequent to the sale, our Board declared a one-time special cash dividend of $1.50 a share payable on January 7th, 2025, to shareholders of record as of December 17th, 2024, essentially returning $16.7 million to our shareholders. Pioneer's remaining business is our Critical Power business, which is anchored by our e-Boost mobile charging platform. Indeed, most of our remarks this afternoon, including the financial presentation, will be focused on this business. Since launching our first truck mounted fast charging solution prototype, in November of 2021, we have grown e-Boost to a multimillion dollar business with revenue reaching $22.9 million in 2024, more than double the $11.1 million we delivered in '23 and way more than the $1 million of e-Boost product we delivered in 2022. Through engineering enhancements and market driven innovation, we have expanded our product lineup beyond the original truck mounted unit to include e-Boost Mini, a skid-based DC fast charger, easily movable with a forklift e-Boost Mobile, our flagship trailer based engine powered DC fast charger towable by a truck or tractor. e-Boost GOAT, a truck integrated DC fast…

Thank you, Nathan, and good afternoon, everyone. As Nathan mentioned earlier, on October 29th, 2024, we sold our California business, PSEP for $50 million in a cash and equity transaction, primarily cash, as we received total gross cash proceeds of $48 million, leaving our balance sheet in a very strong position. Our Critical Power segment, which includes Pioneer e-mobility, where e-Boost is the sole operating business unit that remains after the sale. Please be advised that we have included a non-GAAP financial measure of operating income from continuing operations, which excludes corporate overhead expenses, research and development expenses and nonrecurring professional fees. Please refer to our press release issued earlier today for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website at www.pioneerpowersolutions.com/investors/newsroom. Such non-GAAP measures should not be used as a substitute or alternative to any measure of financial performance calculated and presented in accordance with US GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with US GAAP in order to provide a more complete understanding of the trends affecting the business. Fourth quarter revenue from continuing operations was $9.8 million compared to $2.7 million in the year ago quarter, an increase of 265%. The increase was primarily due to the significant growth in our Pioneer e-Mobility business or e-Boost. Fourth quarter gross profit from continuing operations was $2.8 million or a gross margin of 29% compared to gross profit of $610,000 or 23% of revenue in the fourth quarter of last year. The increase once again was primarily due to the significant growth in our e-Boost business. During the fourth quarter of 2024, our Critical Power segment incurred an operating loss from continuing operations of $1.1 million,…

Great. Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] First question here is from Rob Brown from Lake Street Capital Markets. Please go ahead.

Hi. Good afternoon.

Hey, good afternoon, Rob.

On the strong backlog and growth in e-Boost or outlook, what's sort of the driving that? Where are the customer segments you're seeing the activity? And how is the visibility look at this point in the year in terms of new demand coming in?

Yes. New demand is always coming in, but it's coming really the biggest bucket right now is some form of government, state, county, city, town. And it's usually related to transit or school buses, sometimes fleets as well. That's the biggest segment for us now. If you look at the more recent announcements with the City of Portland, it's going to be more government, quasi government-type groups, ports, transit authorities, people like that.

Okay. Great. And you talked a little bit about the service equipment mix. How is that mix looking for '25? Are you seeing a fair amount of rental revenue in that [indiscernible]?

Yes. So we kind of budgeted $2.5 million in lease and rental type revenue for 2025. And I think that's what we'll do. We might exceed it by a little, but that's kind of the -- that's the thinking. We look to continue to grow that, obviously, with quality-type counterparties. But that seems to be for a lot of the large users that seems to be something that speaks more to them. And since they have the creditworthiness to make it worth our while, that's it's good for everybody. It's a more lucrative business, but we have to front it. So that's really -- that's the only downside for us.

Understand. Okay. And then on the HOMe-Boost product. I think you talked a little bit about a redesign effort there. Could you kind of give us some color there and maybe how light commercial, I guess, how that expands in light commercial?

Yes. I mean HOMe-Boost, we've put together a special team. My goal was to have the team together by the end of 2024, which we did. It was me. It's on me. I kind of pulled it back in February, not because the product wasn't really ready for prime time, but the product itself is beautiful, but it didn't appear, it didn't cosmetically look as beautiful as I would have liked. It's a premium product to sort of a premium user. So we went back into make it look and feel that the person is getting not just in functionality, but they're getting aesthetically a value for the money that they're spending. And, yes, it's targeted to the high-end residential, somebody that's willing to spend, call it, $50,000, $60,000 to have full home backup. You're talking about homes that will typically be 3,000 square feet plus, probably more. And they want the full backup, prime rated engines as opposed to just a backup engine, the ability to produce their own electricity off their gas line 24 hours a day if they choose to, to switch back and forth between the grid as they choose to. And initially, when we launched this, especially the generator dealers and distributors were really the ones that almost in unison sort of designated the product for the medical center, small business that really wants super resilience and to be able to integrate charging for really just spending a little bit more than they do on a backup plan that gives them 24 hour 100% resilience. So that's where we're going to be headed with it.

Okay, great. Thank you. I'll turn it over.

[Operator Instructions] Next question here is from Sameer Joshi from H.C. Wainwright. Please go ahead.

Hey, good afternoon, Nathan and Walter.

Good afternoon, Sameer.

Thanks for taking my questions. On the gross margin front, I think your fourth quarter gross margins were around 29% on nice revenues. Should we expect these levels going forward or was there something onetime in this fourth quarter that resulted in these gross margins?

Yes. I mean $9.8 million more than 50% was e-Boost product, less than 50% was service. That's a really nice mix for us. The gross margins on the product are higher than we get on service especially for customers that are in a lot of different places. So we end up subbing some of the service and adding a surcharge, so we can make something that definitely compresses gross margins on the service side. When the product sales continue to grow, if leasing continues to grow, so the gross margins are going to -- full gross margin picture should be there or maybe a little bit better.

Understood. So then juxtaposing your fourth quarter revenues with your 2025 guidance, it seems like a run rate of $6 million to $8 million versus $10 million, which you realized in the fourth quarter. Is there a reason for this or was there -- as I think you mentioned more than 50% of revenues were from product this quarter and you are expecting around $17 million, $18 million from product next year.

Yes. We had one -- it was for the Los Angeles Department of Transportation. That's the city of Los Angeles, these transit buses, the buses, the inner city buses that move humans. It was one particular project of a little bit over $5 million that needed to be delivered in November. That was their window. The team did an amazing job to do it. At first, maybe they weren't so happy. But I'm talking about our own people, not the Department of Transportation. But we did it in a very short period of time and successfully met the internal markers and really came in at the gross margin that we expected. So that was a nice thing to complete all in one. We don't have any -- we have a large project that's split between the first quarter and the second quarter of 2025. But we don't have any one the size of DOT yet. But the year for us, I neglected to kind of where I think maybe Rob had asked and I didn't answer this part of his question. We're projecting almost an even $6 million to $8 million per quarter, depending on a few jobs moving here and there, but more or less $6 million to $8 million. Our year is, I'd say, 80% baked in already and the strength of the pipeline and orders that we hope to be announcing soon will support really not so much a little bit for to finish 2025. But essentially my head is already in '26. Most of the efforts now are building the first half of 2026.

Yes, understood. Thanks, sir. Because I was going to ask that confidence in 2025 top line, given already strong backlog. Thanks for answering that.

You're very welcome.

I think now you have around 25 million or just like 41.7 million minus 16.6 million or something like that.

Yes, something like that.

Would you be looking for some strategic opportunities or would you rather do some organic in-house product mix?

Yes. So, yes, we're open to all of it, really. We're -- me, personally, I'm a serial acquirer. Prices are better now than they were a year ago or even six months ago. And there's a reason for that as well. I mean one thing that we're not going to do is I can't go backwards financially. I can't take on a bleeder. Unfortunately, a lot of businesses or enterprises that would maybe make a good fit on the charging side come with risks and built-in losses that we're not -- even in an egomaniacal day, I don't think we could turn around in time and would not be in the best interest of the shareholders. So we're kind of looking for ancillary, a little bit more in power, a little bit more in special forms of power, whether mobile or permanent in distributed generation. The appetite for power is endless. We were able to come up with something clever where we married the charging and unitized it within a certain package and made it mobile. But the essence of what we do is deliver on-site power. So that would really be the way we would go.

Understood. And then just one last one like stepping back at the macro level. I do understand your backlog and engagement with the pipeline customers seeing very strong. But do you think any macro economical events or tariffs or any other uncertainties could have an impact on your outlook for 2025?

Yes. I mean it's baked into the outlook. I mean so the change in administration was not a positive for charging frankly. Most of the customers and clients we're dealing with, again, these are city states, whatever you want to call them, quasi-governmental agencies. They made certain decisions and they've crossed that Rubicon already. They're going electric. And they're making massive investments or have already -- they're already deeply pregnant. You can't, there's not a turning back, and that's where we are spending most of our time. From a tariff, I guess, chaos or uncertainty, even at worst, it wasn't going to have a major effect on us. The effect would be anybody's macro effect. Any receding of GDP or any slowdown in the economy is not good for anybody. So we're not immune to that. But nothing specifically or nothing of real -- nothing of note from an increase that we would see.

Makes sense. Thanks for that. Thanks for answering again.

You're welcome Sameer.

This concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

All right. Thank you all for your time and support and we look forward to updating you again on our next call which will hopefully be right after the time to file the Q. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.