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Pioneer Announces 13.1% Revenue Growth, Record Backlog for Second Quarter of 2016

Record Backlog of $37.8 Million; Net Earnings of $0.2 Million; Management Reiterates Full-Year Guidance

Fort Lee, NJ, August 11, 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 second quarter and year-to-date periods ended June 30, 2016.

Nathan Mazurek, Pioneer's Chairman and Chief Executive Officer, said, “This represents the third consecutive quarter that we have delivered results that reflect the underlying sales and earnings power of Pioneer. We achieved a double-digit increase in sales in the second quarter, and our strong backlog supports our expectations for continued growth. Our operating income and Adjusted EBITDA both improved by $2.1 million compared to the second quarter of 2015. This improvement over the past year is the direct result of specific actions to eliminate losses at two divisions, putting us back on the right path for growth and improved profitability. As a result, we continue to advance towards achieving our full-year 2016 guidance.”

"We ended the second quarter with a record $37.8 million backlog,” continued Mr. Mazurek. “Demand for our solutions is strong, and we are encouraged by the level of sales activity that has continued into the start of the third quarter. Our primary focus is on expanding profit margins, improving overall efficiency and increasing our profitability and cash flows. We are increasingly well positioned to deliver on these goals.”

Second Quarter Results:

  • Revenue of $29.9 million, up 13.1% year-over-year
  • Gross margin percentage of 20.5%, up compared to 19.2% in Q2 2015
  • Operating income of $1.4 million compared to an operating loss of $(687,000) in Q2 2015
  • Net earnings of $194,000 compared to a net loss of $(817,000) in Q2 2015
  • Adjusted EBITDA* of $2.2 million, a $2.1 million improvement compared to Q2 2015
  • Backlog increased 15.3% year-over-year to $37.8 million

Six Months Ended June 30, 2016 Results:

  • Revenue of $56.5 million, up 2.1% vs. the first six months of 2015
  • Gross margin percentage of 21.3% vs. 19.2% in the first six months of 2015
  • Operating income of $2.5 million compared to an operating loss of $(770,000) in the year-ago period
  • Net earnings of $0.8 million compared to a net loss of $(1.0) million in the year-ago period
  • Adjusted EBITDA* of $4.2 million, a $3.2 million improvement over the year ago-period

Revenue

Total revenue for the three-month period ended June 30, 2016 increased to $29.9 million, up 13.1% compared to $26.5 million for the second quarter of 2015. The increase was the result of increased sales of our US Dry type transformer products and our low voltage switchgear products. For the six months ended June 30, 2016, total consolidated revenue increased by $1.2 million, or 2.1%, to $56.5 million, up from $55.3 million for the six months ended June 30, 2015.

Gross Margin

For the second quarter of 2016, gross margin was 20.5% of revenues, as compared to 19.2% during the second quarter of 2015. For the six months ended June 30, 2016, Pioneer’s gross profit was $12.0 million, or 21.3% of revenues, up 13.2% compared to the $10.6 million, or 19.2% gross margin, for the year-ago period.

Operating Income and Adjusted EBITDA*

The second quarter operating income was $1.4 million compared to an operating loss of $(687,000) for the same period last year. For the six months ended June 30, 2016, operating income was $2.5 million compared to an operating loss of $(770,000) for the prior year.

Approximately $1.0 million for the quarters ended June 30, 2016 and 2015 of the Company’s operating expenses consisted of non-cash expenses including depreciation, amortization of acquisition intangibles, restructuring and integration charges, and stock-based compensation for employee and director stock options plus non-recurring other (income) expenses consisting of penalties and interest on delinquent payroll tax obligations and acquisition transactions and other expenses.

Pioneer’s effective income tax rate for the quarter was 75.7% of earnings before tax, as compared to 22.3% for the same quarter last year. The higher rate was due to tax penalties accrued related to the previously disclosed tax issues which are not deductible for tax purposes and loans made by Pioneer’s Canadian operations to its United States operations, which are subject to a dividend tax. If these items were not included in this quarter, the effective income tax rate would have been 29.8%.

Without the effect of these (income) expenses, the Company’s Adjusted EBITDA for the quarter ended June 30, 2016 was approximately $2.2 million compared to $95,000 in the same quarter last year. For the six months ended June 30, 2016, the Company’s Adjusted EBITDA was $4.2 million, as compared to $931,000 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.

*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 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. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results.

Net Earnings and Per Diluted Share

The Company generated net earnings of $0.2 million and $0.8 million for the three and six months ended June 30, 2016, respectively, as compared to net losses of $(817,000) and $(1.0) million during the three and six months ended June 30, 2015. Net earnings per basic and diluted share for the three and six months ended June 30, 2016 were $0.02 and $0.09, respectively, as compared to net losses per basic and diluted share of $(0.11) and $(0.14) for the three and six months ended June 30, 2015.

On a non-GAAP basis, the Company reported adjusted net earnings of approximately $0.7 million in the second quarter of 2016, or $0.08 per diluted share, as compared to a net loss of $(0.4) million, or $(0.05) per diluted share for the quarter ended June 30, 2015. For the six months ended June 30, 2016, non-GAAP earnings were $1.7 million, or $0.19 per diluted share, up from non-GAAP losses of $(0.1) million, or $(0.02) per diluted share, for the six months ended June 30, 2015. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results and guidance.

Backlog

Order backlog at June 30, 2016 was $37.8 million compared to $32.8 million at June 30, 2015 and $28.7 million at December 31, 2015. Backlog is based on orders expected to be delivered in the future, most of which is expected to occur during the next 12 months.

2016 Outlook

The Company reaffirmed its full-year 2016 guidance which is 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

Conference Call Information

Management will host a conference call at 10 a.m. Eastern Time Friday, August 12, 2016, to discuss results with the investment community. Details are as follows:

A replay will be available until August 19, 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 9677224 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, except share data)
 June 30,
2016 (Unaudited)
December
31,
2015
ASSETS  
Current assets:  
Cash and cash equivalents$3,452$648
Accounts receivable, net18,96914,223
Inventories, net25,86917,663
Income taxes receivable692576
Prepaid expenses and other current assets2,2071,759
Total current assets51,18934,869
Property, plant and equipment, net7,2537,349
Deferred income taxes4,7833,642
Other assets1,0771,055
Intangible assets, net9,0889,956
Goodwill10,06810,068
Total assets$83,458$66,939
   
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current Liabilities  
Bank overdrafts$3,407$1,923
Revolving credit facilities16,8859,874
Short term borrowings4,919-
Accounts payable and accrued liabilities17,64520,030
Current maturities of long-term debt and capital lease obligations7426,244
Income taxes payable715237
Total current liabilities44,31338,308
Long-term debt, net of current maturities5,05321
Pension deficit18063
Other long-term liability2,994372
Deferred income taxes2,304781
Total liabilities54,84439545
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;99
8,699,712 shares issued and outstanding  
Additional paid-in capital23,15323,153
Accumulated other comprehensive loss(5,218)(5,669)
Retained earnings10,6649,901
Total stockholders’ equity28,61427,394
Total liabilities and shareholders’ equity$83,458$66,939

 

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

(Unaudited)

 Three Months
Ended
June 30,
Six Months
Ended
June 30,
 2016201520162015
Revenues$29,930$26,460$56,500$55,538
Cost of goods sold23,80321,39244,45944,713
Gross profit6,1275,06812,04110,635
Operating expenses    
Selling, general and administrative4,7245,6769,47211,497
Restructuring and integration62-181-
Foreign exchange (gain) loss(43)79(90)(92)
Total operating expenses4,7435,7559,56311,405
Operating income (loss)1,384(687)2,478(770)
Interest expense310179595333
Other expense275186290263
Income (loss) before income taxes799(1,052)1,593(1,366)
Income tax expense (benefit)605(235)830(324)
Net income (loss)$194$(817)$763$(1,042)
     
Net income (loss) per common share:    
Basic$0.02$(0.11)$0.09$(0.14)
Diluted$0.02$(0.11)$0.09$(0.14)
     
Weighted average common shares outstanding:    
Basic8,7007,4068,7007,406
Diluted8,7067,4068,7067,406

 

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

(In thousands, except per share data)
(Unaudited)
 Three Months
Ended
June 30,
Six Months
Ended
June 30,
 2016201520162015
Reconciliation to Non-GAAP Net Earnings and EPS:    
Net earnings (loss) per share (GAAP measure)$0.02$(0.11)$0.09$(0.14)
Net earnings (loss) (GAAP measure)$194$(817)$763$(1,042)
Amortization of acquisition intangibles423435877869
Stock-based compensation expense(47)576118
Restructuring and integration charges62-181-
Acquisition and related costs5218693233
Titan Northeast discontinuation-(68)-5
Other non-recurring expenses223-19830
Tax effects(212)(170)(450)(350)
Non-GAAP net earnings (loss)$695$(377)$1,668$(137)
Non-GAAP net earnings (loss) per diluted share$0.08$(0.05)$0.19$(0.02)
Weighted average diluted shares outstanding8,7067,4068,7067,406
     
Reconciliation to Adjusted EBITDA:    
Net earnings (loss) (GAAP measure)$194$(817)$763$(1,042)
Interest expense310179595333
Income tax (benefit) expense605(235)830(324)
Depreciation and amortization expense7537931,4941,578
Restructuring and integration charges62-181-
Acquisition and related costs5218693233
Titan Northeast discontinuation-(68)-5
Other non-recurring expenses223-19830
Stock-based compensation expense(47)576118
Adjusted EBITDA (Non-GAAP measure)$2,152$95$4,160$931

 

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.