IMG_0095-rev2

Pioneer Announces Fourth Quarter 2015 Results

Management Increases Full-Year 2016 Adjusted EBITDA Guidance from $8 to $9.5 Million

Fort Lee, NJ, March 29, 2016 / 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 fourth quarter and full-year periods ended December 31, 2015.

Fourth Quarter Results:

  • Revenue of $26.3 million, up 5.3% sequentially and 8.8% year-over-year
  • Gross margin percentage of 22.6% up sequentially compared to 19.4% in Q3 2015 and compared to 9.7% in Q4 2014
  • Operating loss narrowed by $1.4 million to $(1.2) million compared to $(2.6) million in Q4 2014
  • Net loss narrowed by $1.6 million to $(1.3) million for Q4 2015 compared to $(2.9) million in Q4 2014
  • Adjusted EBITDA* of $1.9 million, up 92.1% sequentially and a $2.7 million improvement compared to Q4 2014

Full Year 2015 Results:

  • Revenue of $106.5 million, within the guidance range of $105 and $109 million and up 15.5% year-over-year
  • Gross margin percentage of 19.8%, up year-over-year from 19.7%
  • Adjusted EBITDA* of $3.8 million, exceeding guidance of $3.0 to $3.5 million, and compared to $5.0 million in 2014

Nathan Mazurek, Pioneer's Chairman and Chief Executive Officer, said, “We entered 2016 in a far stronger position from where we were just 90 days ago, with a streamlined cost structure driving improved gross margins and greater adjusted EBITDA generation. We began to see the partial benefit of our cost reduction efforts in the fourth quarter, and we expect incremental benefit in the first quarter, driving greater profitability as we move through 2016. This initiative, including the consolidation of six manufacturing facilities to three and the rationalization of our Canadian dry-type transformer operations, was completed during the first quarter. Even without the full benefit of these cost reduction efforts, our adjusted EBITDA for the fourth quarter puts us ahead of the run-rate necessary to meet our 2016 guidance, and we expect further improvements in 2016, particularly in the second-half of 2016.”

"As part of our business strategy, we also have been looking carefully at our project pipeline and turning down certain lower-margin projects that do not offer the growth potential or the profitability of the majority of our business,” added Mr. Mazurek. “In addition, we have been selectively raising prices on certain lower-margin, low-volume business. As a result, we have adjusted our revenue expectation for 2016, but expect higher profit margins. Accordingly, we are narrowing our range for full-year 2016 outlook for adjusted EBITDA, and expect $8 to $9.5 million in Adjusted EBITDA for 2016. This represents growth of 110% to 150% compared to 2015 levels.”

Revenue

Total revenue for the three month period ended December 31, 2015 increased to $26.3 million, up 8.8% compared to the $24.1 million for the fourth quarter of 2014. For the year ended December 31, 2015, total consolidated revenue increased by $14.3 million, or 15.5%, to $106.5 million, from $92.2 million for the year ended December 31, 2014.

Gross Margin

For the fourth quarter, the gross margin percentage was 22.6% of revenues, as compared to 9.7% during the fourth quarter of 2014. The fourth quarter last year included $900,000 in expenses related to the first through third quarters of 2014.

For the year ended December 31, 2015, Pioneer’s gross profit was $21.1 million, or 19.8% of revenues, up 15.9% compared to the $18.2 million, or 19.7% gross margin, for the year-ago period.

Operating Income and Adjusted EBITDA

The fourth quarter operating loss was $1.2 million, inclusive of $2.1 million in restructuring charges incurred for the plant closings and consolidations, compared to an operating loss of $2.6 million for the same period past year. For the year, operating loss was reported as $5.3 million, inclusive of $5.6 million in restructuring charges and impairment charges, as well as the impact of penalties and interest for not filing and paying the Company’s payroll tax liabilities in a timely manner, compared to operating income of $1.8 million for the prior year.

Approximately $2.9 million and $1.9 million for the quarters ended December 31, 2015 and 2014 of the Company’s operating expenses consisted of non-cash expenses including depreciation, amortization of acquisition intangibles, restructuring, integration and impairment charges, and stock-based compensation for employee and director stock options. Without the effect of these non-cash expenses, the Company’s Adjusted EBITDA for the quarter ended December 31, 2015 was approximately $1.9 million compared to a loss of $800,000 in the same quarter last year. For the 12 months ended December 31, 2015, the Company’s Adjusted EBITDA was $3.8 million, as compared to $5.0 million during the same period last year. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results and guidance.

Net Earnings (Loss) and Per Diluted Share

The Company generated a net loss of $(1.3) million and $(5.9) million for the three and 12 months ended December 31, 2015, respectively, as compared to $(2.9) million and $(268,000) during the three and 12 months ended December 31, 2014. Net loss per basic and diluted share for the three and 12 months ended December 31, 2015 were $(0.15) and $(0.76), respectively, as compared to $(0.41) and $(0.04) for the three and 12 months ended December 31, 2014.

On a non-GAAP basis, the Company reported net earnings of approximately $1.4 million in the fourth quarter of 2015, or $0.16 per diluted share, as compared $(1.3) million, or $(0.18) per diluted share, for the quarter ended December 31, 2014. For the 12 months ended December 31, 2015, non-GAAP earnings were $1.5 million, or $0.19 per diluted share, down from $1.8 million, or $0.25 per diluted share, for the 12 months ended December 31, 2014. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results and guidance.

The Company entered into a binding commitment to extend its credit facilities with the Bank of Montreal until July 31, 2017. This binding commitment replaces the waiver that was to expire on April 30, 2016. This commitment contains revised covenants and funding amounts that finance our cash requirements for anticipated operating activities, restructuring and integration plans, capital improvements and scheduled principal repayments of long-term debt. Management believes this extension will provide sufficient liquidity and enable the company to resolve the previously announced delinquency in payment of federal payroll tax obligations. Management remains in discussion with the IRS regarding that situation, and the Company is making regular payments in anticipation of a final resolution.

Backlog

Order backlog at December 31, 2015 was $28.7 million, as compared to $36.0 million at December 31, 2014. As of February 28, 2016, the backlog had grown to $34.7 million with additional expansion during March. Backlog is based on orders expected to be delivered in the future, most of which is expected to occur during the next nine months.

2016 Outlook

The Company provided full-year 2016 guidance based on expected business trends and the current composition of the order backlog. The guidance excludes the impact of any potential acquisitions, as their timing and investment levels cannot be known with certainty. In addition, this outlook excludes any significant fluctuations in foreign currency exchange rates. In 2016, the Company expects:

  • Revenue between $117 and $127 million
  • Adjusted EBITDA between $8.0 and $9.5 million
  • Non-GAAP diluted EPS between $0.55 and $0.66 based on 8.7 million shares

“We continue to see strong demand for our solutions, as evidenced by recent orders for data center and oil and gas customers, and this diverse, broad-based growth potential supports our revenue outlook,” added Mr. Mazurek. “We believe that our improved cost structure and a focus on higher margin revenue will help us at least meet our expectations for adjusted EBITDA.”

Tom Klink, Pioneer’s Chief Financial Officer, added, “As more of our income shifts to the United States from Canada, we expect to experience a higher effective tax rate. This guidance accounts for that estimate."

Conference Call Information

Management will host a conference call at 4:30 p.m. Eastern Time today, March 29, 2016, to discuss results with the investment community. Details are as follows:

A replay will be available until April 5, 2016 which can be accessed by dialing 1-877-870-5176 if calling within the United States or 1-858-384-5517 if calling internationally. Please use passcode 5710499 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 13 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 has been delinquent in payment of its federal payroll tax obligations and may not be successful in its requests for the abatement of penalties and payment of past due amounts over an extended period, (ii) the Company's ability to expand its business through strategic acquisitions, (iii) the Company's ability to integrate acquisitions and related businesses, (iv) the fact that many of the Company's competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services, which may make it difficult for the Company to attract and retain customers, (v) the Company's dependence on Hydro-Quebec Utility Company and Siemens Industry, Inc. for a large portion of its business, and the fact that any change in the level of orders from Hydro-Quebec Utility Company or Siemens Industry, Inc. could have a significant impact on the Company's results of operations, (vi) the potential loss or departure of key personnel, including Nathan J. Mazurek, the Company's Chairman, President and Chief Executive Officer, (vii) the fact that fluctuations between the U.S. dollar and the Canadian dollar will impact the Company's revenues, (viii) the Company's ability to generate internal growth, (ix) market acceptance of existing and new products, (x) the Company's dependence on a distributor agreement with Generac Power Systems through which it derives a significant portion of its revenues, (xi) operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk, (xii) 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, (xiii) general economic and market conditions in the electrical equipment, power generation, commercial construction, industrial production, oil and gas, marine and infrastructure industries, (xiv) the impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in the Company's markets and the Company's ability to access capital markets, (xv) the fact that unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect the Company's profitability, (xvi) 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, (xvii) material weaknesses in the Company's internal control over financial reporting that could have an adverse effect on the Company's business and common stock price, and (xviii) 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

 

PIONEER POWER SOLUTIONS, INC.
Consolidated Balance Sheet
(In thousands)
 December
31,
2015
December
31,
2014
ASSETS  
Current assets:  
Cash and cash equivalents$648$3,832
Accounts receivable, net14,22313,101
Inventories, net17,66314,429
Income taxes receivable576474
Prepaid expenses and other current assets1,7591,671
Total current assets34,86933,507
Property, plant and equipment, net7,34911,195
Deferred income taxes3,6427,596
Other assets1,0551,143
Intangible assets, net9,9569,791
Goodwill10,0689,606
Total assets$66,939$72,838
   
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current Liabilities  
Bank overdrafts$1,923$-
Revolving credit facilities9,8746,860
Accounts payable and accrued liabilities20,03014,396
Current maturities of long-term debt and capital lease obligations6,2442,483
Income taxes payable237523
Total current liabilities38,30824,262
Long-term debt, net of current maturities219,539
Pension deficit63351
Other long-term liability372-
Noncurrent deferred income taxes7817,852
Total liabilities39,54542,004
Stockholders’ Equity  
Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued--
Common stock, par value $0.001; 30,000,000 shares authorized;97
8,699,712 and 7,405,962 shares and issued and outstanding  
Additional paid-in capital23,15318,370
Accumulated other comprehensive loss(5,669)(3,325)
Retained earnings9,90115,782
Total stockholders’ equity27,39430,834
Total liabilities and shareholders’ equity$66,939$72,838

 

PIONEER POWER SOLUTIONS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)

 Three Months
Ended
December 31,
Twelve Months
Ended
December 31,
 2015201420152014
Revenues$26,251$24,122$106,522$92,191
Cost of goods sold23,31321,77085,41774,022
Gross profit5,9382,35221,10518,169
Operating expenses    
Selling, general and administrative5,0383,67321,19415,222
Restructuring, integration and impairment2,1381,4025,5771,402
Foreign exchange (gain)(40)(96)(366)(205)
Total operating expenses7,1364,97926,40516,419
Operating (loss) income(1,198)(2,627)(5,300)1,750
Interest expense242175748582
Other expense1,0027422,535913
Income (loss) before income taxes(2,442)(3,544)(8,583)255
Income tax (benefit) expense(1,154)(602)(2,702)523
Net Loss$(1,288)$(2,942)$(5,881)$(268)
     
Net Loss per common share:    
Basic$(0.15)$(0.41)$(0.76)$(0.04)
Diluted$(0.15)$(0.41)$(0.76)$(0.04)
     
Weighted average common shares outstanding:    
Basic8,6927,2227,7467,185
Diluted8,6927,2227,7467,185

 

PIONEER POWER SOLUTIONS, INC.
Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except per share data)
(Unaudited)
 Three Months
Ended
December 31,
Twelve Months
Ended
December 31,
 2015201420152014
Reconciliation to Non-GAAP Net Income (Loss) and EPS:    
Net Loss per share (GAAP measure)$(0.19)$(0.41)$(0.76)$(0.04)
Net Loss (GAAP measure)$(1,288)$(2,942)$(5,882)$(268)
Amortization of acquisition intangibles518791,819317
Stock-based compensation expense5763231226
Restructuring, integration and impairment charges2,1381,4025,5771,402
Acquisition and related costs13742323913
Titan Northeast discontinuation46-168-
Other non-recurring expenses990-2,212-
Tax effects(1,085)(666)(2,994)(767)
Non-GAAP net income (loss)$1,389$(1,322)$1,454$1,823
Non-GAAP net income (loss) per diluted share$0.16$(0.18)$0.19$0.25
Weighted average diluted shares outstanding8,6927,2227,7467,185
     
Reconciliation to Adjusted EBITDA:    
Net Loss (GAAP measure)$(1,288)$(2,942)$(5,882)$(268)
Interest expense242175748582
Income tax (benefit) expense(1,154)(602)(2,702)524
Depreciation and amortization8104023,1641,600
Restructuring, integration and impairment charges2,1381,4025,5771,402
Acquisition and related costs13742323913
Titan Northeast discontinuation46-168-
Other non-recurring expenses990-2,212-
Stock-based compensation expense5763231226
Adjusted EBITDA (Non-GAAP measure)$1,854$(760)$3,839$4,979

 

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 amortization of acquisition-related intangibles, stock-based compensation, non-recurring acquisition costs and reorganization expense, impairments, other unusual gains or charges 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 income is set forth in the table above.

Amounts may not foot due to rounding.