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Pioneer Reports Double-Digit Revenue Growth, Improved Profitability for Third Quarter of 2016

Record Backlog of $41.5 Million at September 30, 2016; Management Reiterates Full-Year Guidance

Fort Lee, NJ, November 14, 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 third quarter and year-to-date periods ended September 30, 2016.

Third Quarter Results:

  • Revenue of $29.4 million, up 17.9% year-over-year
  • Gross margin percentage of 22.2%, up compared to 20.2% in Q3 2015
  • Operating income of $1.2 million compared to an operating loss of $(3.3) million in Q3 2015
  • Net income of $322,000 compared to a net loss of $(3.6) million in Q3 2015
  • Adjusted EBITDA* of $2.1 million compared to $1.1 million in Q3 2015
  • Backlog increased 38.3% year-over-year to $41.5 million

Nine Months Ended September 30, 2016 Results:

  • Revenue of $85.9 million, up 7.0% vs. the first nine months of 2015
  • Gross margin percentage of 22.0% vs. 19.5% in the first nine months of 2015
  • Operating income of $3.7 million compared to an operating loss of $(4.1) million in the year-ago period
  • Net income of $1.1 million compared to a net loss of $(4.6) million in the year-ago period
  • Adjusted EBITDA* of $6.2 million compared to $2.0 million in the year-ago period

Nathan Mazurek, Pioneer's Chairman and Chief Executive Officer, said, “The operational improvements we made in recent quarters to expand the profitability of our business drove a $4.5 million improvement in operating income, and a $2.1 million in Adjusted EBITDA. We are focused on further improving the profitability of the company and have identified additional efficiencies to deliver on this initiative. We are relocating our remaining dry type transformer manufacturing business operation in Canada to our lower-cost facility in Mexico, which will improve both gross and operating margin and expand our opportunities to drive revenue growth in this product line as well. Simultaneously, we are focusing on higher margin opportunities, and working to further improve efficiency, capacity utilization and overall operations in our other divisions, to drive further profit enhancement. We expect to recognize the benefits of these initiatives in 2017 and beyond.”

“In the third quarter, we drove double-digit revenue growth and added $3.7 million to our record backlog, further demonstrating the strength of our competitive market position,” continued Mr. Mazurek. “Demand for our solutions within the distributed generation sector, and data center deployments, along with continued expansion of our service business, is driving our growth and we are steadily identifying new opportunities within each of these sectors. Our record backlog of nearly $42 million provides us with a clear path to continue on this trajectory and further expand our margins and cash flows.”

Revenue

Total revenue for the three-month period ended September 30, 2016 increased to $29.4 million, up 17.9% compared to $24.9 million for the third quarter of 2015. The increase was the result of increased sales of our dry type transformer products and medium voltage switchgear products. For the nine months ended September 30, 2016, total consolidated revenue increased by $5.6 million, or 7.0%, to $85.9 million, up from $80.3 million for the nine months ended September 30, 2015.

Gross Margin

For the third quarter of 2016, gross margin was 22.2% of revenues, as compared to 20.2% during the third quarter of 2015. For the nine months ended September 30, 2016, Pioneer’s gross profit was $18.9 million, or 22.0% of revenues, up 20.6% compared to the $15.7 million, or 19.5% gross margin, for the year-ago period.

Operating Income and Adjusted EBITDA*

For the third quarter of 2016, gross margin was 22.2% of revenues, as compared to 20.2% during the third quarter of 2015. For the nine months ended September 30, 2016, Pioneer’s gross profit was $18.9 million, or 22.0% of revenues, up 20.6% compared to the $15.7 million, or 19.5% gross margin, for the year-ago period.

Approximately $0.9 million for the quarter ended September 30, 2016 of the Company’s operating expenses consisted of non-cash expenses, including $19,000 in restructuring and integration charges. Approximately $4.3 million for the quarter ended September 30, 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.

Without the effect of these (income) expenses, the Company’s Adjusted EBITDA for the quarter ended September 30, 2016 was approximately $2.1 million compared to $1.1 million in the same quarter last year. For the nine months ended September 30, 2016, the Company’s Adjusted EBITDA was $6.2 million, as compared to $2.0 million during the same period last year. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results.

*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

Pioneer’s effective income tax rate for the quarter was 17.9% of earnings before tax, as compared to 25.6% for the same quarter last year. For the nine months ended September 30, 2016, the effective income tax rate was 45.3% of earnings before tax, as compared to 25.2% for the same period last year.

The Company generated net income of $322,000 and $1.1 million for the three and nine months ended September 30, 2016, respectively, as compared to net loss of $(3.6) million and $(4.6) million during the three and nine months ended September 30, 2015. Net income per basic and diluted share for the three and nine months ended September 30, 2016 were $0.04 and $0.12, respectively, as compared to a net loss per basic and diluted share of $(0.48) and $(0.62) for the three and nine months ended September 30, 2015.

On a non-GAAP basis, the Company reported net earnings of approximately $0.9 million in the third quarter of 2016, or $0.10 per diluted share, as compared to $0.2 million, or $0.03 per diluted share for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, non-GAAP earnings were $2.5 million, or $0.29 per diluted share, up from $67,000, or $0.01 per diluted share, for the nine months ended September 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 September 30, 2016 was $41.5 million compared to $30.0 million at September 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 Tuesday, November 15,2016, to discuss results with the investment community. Details are as follows:

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)
 September 30,
2016 (Unaudited)
December
31,
2015
ASSETS  
Current assets:  
Cash and cash equivalents$837$648
Accounts receivable, net18,36314,223
Inventories, net26,89117,663
Income taxes receivable412576
Prepaid expenses and other current assets2,2761,759
Total current assets48,77934,869
Property, plant and equipment, net6,9197,349
Deferred income taxes4,7373,642
Other assets804827
Intangible assets, net8,7179,956
Goodwill9,97210,068
Total assets$79,928$66,711
   
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current Liabilities  
Bank overdrafts$1,008$1,923
Revolving credit facilities16,2569,874
Short term borrowings4,919-
Accounts payable and accrued liabilities17,77220,030
Current maturities of long-term debt and capital lease obligations1,4326,037
Income taxes payable950237
Total current liabilities42,33738,101
Long-term debt, net of current maturities4,079-
Pension deficit11163
Other long-term liability2,461372
Deferred income taxes2,091781
Total liabilities51,07939,317
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 capital23,18723,153
Accumulated other comprehensive loss(5,333)(5,669)
Retained earnings10,9869,901
Total stockholders’ equity28,84927,394
Total liabilities and shareholders’ equity$79,928$66,711

 

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

(Unaudited)

 Three Months
Ended
September 30,
Nine Months
Ended
September 30,
 2016201520162015
Revenues$29,389$24,924$85,889$80,272
Cost of goods sold23,85419,88566,98664,598
Gross profit6,5355,03918,90315,674
Operating expenses    
Selling, general and administrative5,3565,16615,15616,663
Restructuring and integration193,4391993,439
Foreign exchange (gain) loss(52)(234)(142)(326)
Total operating expenses5,3238,37115,21319,776
Operating income (loss)1,212(3,332)3,690(4,102)
Interest expense5561731,151506
Other expense2641,2705541,533
Income (loss) before income taxes392(4,775)1,985(6,141)
Income tax expense (benefit)70(1,224)900(1,548)
Net income (loss)$322$(3,551)$1,085$(4,593)
     
Net income (loss) per common share:    
Basic$0.04$(0.48)$0.12$(0.62)
Diluted$0.04$(0.48)$0.12$(0.62)
     
Weighted average common shares outstanding:    
Basic8,7007,4688,7007,427
Diluted8,7087,4688,7087,427

 

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

(In thousands, except per share data)
(Unaudited)
 Three Months
Ended
September 30,
Nine Months
Ended
September 30,
 2016201520162015
Reconciliation to Non-GAAP Net Earnings and EPS:    
Net earnings (loss) per share (GAAP measure)$0.04$(0.48)$0.12$(0.62)
Net earnings (loss) (GAAP measure)$322$(3,551)$1,085$(4,593)
Amortization of acquisition intangibles4314321,3081,301
Stock-based compensation expense285734175
Restructuring and integration charges193,4391993,439
Acquisition and related costs1777110310
Titan Northeast discontinuation-117-122
Other non-recurring expenses2471,1924461,222
Tax effects(206)(1,559)(656)(1,909)
Non-GAAP net earnings (loss)$858$204$2,526$67
Non-GAAP net earnings (loss) per diluted share$0.10$0.03$0.29$0.01
Weighted average diluted shares outstanding8,7087,4688,7087,427
     
Reconciliation to Adjusted EBITDA:    
Net earnings (loss) (GAAP measure)$322$(3,551)$1,085$(4,593)
Interest expense5561731,151506
Income tax (benefit) expense70(1,224)900(1,548)
Depreciation and amortization expense8237772,3172,355
Restructuring and integration charges193,4391993,439
Acquisition and related costs1777110310
Titan Northeast discontinuation-117-122
Other non-recurring expenses2471,1924461,222
Stock-based compensation expense285734175
Adjusted EBITDA (Non-GAAP measure)$2,082$1,057$6,242$1,988

 

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.