Pioneer Reports Fourth Quarter and Full-Year 2018 Financial Results
Fort Lee, NJ, March 28, 2019 / 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, 2018.
Full-Year 2018 Results:
- Revenue of $106.4 million, down 7.0% compared to $114.4 million in 2017
- Gross margin of 18.1% compared to 15.5%, inclusive of $873,000 of non-recurring charges in 2017
- Net loss of $5.7 million compared to a net loss of $9.2 million in 2017
- Cash provided by operating activities of $2.2 million compared to $1.7 million in 2017
- Adjusted EBITDA* of $7.7 million, down 24.1% compared to $10.1 million in 2017
Fourth Quarter 2018 Results and Recent Business Highlights:
- Revenue of $26.5 million, compared to $26.4 million in Q4 2017
- Gross margin of 16.0% up significantly compared to 0.7% in Q4 2017
- Net loss of $4.4 million, a narrowing of 55.7% compared to a net loss of $9.8 million in Q4 2017
- Adjusted EBITDA* of $1.6 million compared to Adjusted EBITDA* of $1.4 million in Q4 2017
- Backlog as of December 31, 2018 was approximately $47.5 million, up 1.4% compared to $46.8 million at September 30, 2018 and up 34.9% compared to $35.2 million at December 31, 2017
Nathan Mazurek, Pioneer’s Chairman and Chief Executive Officer, said, “Subsequent to the end of the fourth quarter, Pioneer completed the sale of our wholly owned subsidiary, Pioneer Critical Power, Inc., to CleanSpark, Inc. for approximately $4.4 million in CleanSpark shares and warrants, advancing our efforts to monetize undervalued assets. Based on the current share price at March 26, 2019, this transaction is now worth approximately $8.2 million to Pioneer and its shareholders. Operationally, for the full course of 2018, we continued to produce positive adjusted EBITDA and generated more than $2 million in cash from operations. The weaker fourth quarter primarily reflects the impact of several large projects that were pushed into the first half of 2019. We finished the year with a backlog of $47.5 million, and the timing of these large projects further supports our optimism for 2019.”
“Additionally, in the last 120 days, we have made significant progress in our efforts to create greater shareholder value through strategic alternatives, moving well beyond identifying buyers and evaluating interest in certain Pioneer assets,” added Mr. Mazurek. “Indeed, I expect to have material announcements in this regard during the second quarter of 2019, and by the end of 2019, we expect to complete the sale of several business units and currently plan to dividend the proceeds to shareholders subject to legal and market conditions.”
On May 2, 2018, Pioneer signed a definitive agreement to sell its PCEP switchgear business. As a result, this business unit had been reclassified as discontinued operations for the year ended December 31, 2017. This agreement pertaining to the sale of PCEP ultimately expired and was mutually terminated by the parties in January 2019. Consequently, at December 31, 2018, due to the change of circumstance, the Company has presented the results of PCEP within continuing operations and included results of the switchgear reporting unit in the T&D Solutions Segment for all periods presented.
“The consequence of not selling the entirety of the PCEP business, as we initially intended, resulted in the reclassification of this business as continuing operations for all periods, and contributed to our net loss,” added Mr. Mazurek. “We continue to explore strategic alternatives related to the PCEP business with the goal of monetizing this asset as soon as possible.”
Summary Financial Results
Total revenue for the three-month period ended December 31, 2018 was $26.5 million, up slightly compared to $26.4 million for the fourth quarter of 2017. Excluding PCEP, which had previously been classified as discontinued operations, total revenue was $23.6 million, essentially flat versus the year-ago period. For the 12 months ended December 31, 2018, total revenue was $106.4 million compared to $114.4 million for the 12 months ended December 31, 2017, a decrease of 7.0%. Excluding PCEP, revenue was $97.6 million, a decline of 3.7% over the prior year. For the three months ended December 31, 2018, service revenue increased by $138,000, or 6.8%, as compared to the same period in the prior year. For the 12 months ended December 31, 2018, service revenue increased by $535,000, or 5.7%, compared to the same period in 2017.
For the three months ended December 31, 2018, Pioneer’s gross profit was $4.2 million, or 16.0% of revenues, compared to $175,000, or less than one percent of revenues, for the year-ago period. The increase in gross profit was driven primarily by improved performance in our T&D segment. Excluding PCEP, gross profit was $4.1 million, or 17.5% of revenues, compared to $3.6 million, or 15.4% of revenues for the prior-year period. For the 12 months ended December 31, 2018, Pioneer’s gross profit was $19.3 million, or 18.1% of revenues, compared to $17.7 million, or 15.5% of revenues, for the year-ago period. Excluding PCEP, gross profit was $18.9 million, or 19.4% of revenues, versus $20.0 million, or 19.8% of revenues, in the prior-year period.
Operating Income / (Loss)
For the three months ended December 31, 2018, operating loss was $3.6 million compared to an operating loss of $6.7 million for the same period last year. These results were negatively impacted by an unfavorable currency variance on the Canadian Dollar of $377,000 in the fourth quarter of 2018 compared to an unfavorable variance of $141,000 for the same period last year. Excluding PCEP, operating loss was $706,000, compared to an operating loss of $593,000 for the prior year period. For the 12 months ended December 31, 2018, operating loss was $1.9 million compared to an operating loss of $3.3 million for the prior year. Excluding PCEP, operating income was $2.3 million versus $3.4 million in the prior-year period.
Pioneer’s effective income tax rate for the fourth quarter of 2018 was (3.2)% of earnings before income tax compared to (36.8)% for the same quarter last year. For the 12 months ended December 31, 2018, the effective income tax rate was (5.7)% of earnings before income tax compared to (49.1)% for the same period last year. The decrease in the income tax rate for the three and 12-month periods ended December 31, 2018 was primarily due to a review of the deferred tax assets and liabilities of Pioneer, including the impact of the U.S. tax code changes from December 2017.
The Company’s net loss was $4.4 million, or $(0.50) per basic and diluted share, for the three months ended December 31, 2018 compared to a net loss of $9.8 million, or $(1.13) per basic and diluted share, during the three months ended December 31, 2017. Net loss for the 12 months ended December 31, 2018 was $5.7 million, or $(0.65) per basic and diluted share, compared to a net loss of $9.2 million, or $(1.06) per basic and diluted share, for the 12 months ended December 31, 2017.
Among other add backs for this calculation, the fourth quarters of 2018 and 2017 included non-cash expenses consisting of depreciation, amortization of acquisition intangibles, and stock-based compensation for employee and director stock options of $907,000 and $1.0 million, respectively.
The Company’s Adjusted EBITDA* for the quarter ended December 31, 2018 was $1.6 million compared to $1.4 million in the same quarter last year. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP measures.
* 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 quantitative assessment 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 measures.
Sales backlog at December 31, 2018 was $47.5 million compared to $46.8 million at September 30, 2018. Backlog is based on orders expected to be delivered in the future, most of which is expected to be delivered during the next 12 months. Approximately $9.5 million of this backlog at December 31, 2018 is related to the PCEP business, and excluding this amount, the backlog increased by $797,000, or 2.1%, compared to the backlog at September 30, 2018.
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 11 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’s ability to expand its business through strategic acquisitions, (ii) the fact that many of the Company’s competitors are better established and have significantly greater resources, and may subsidize their competitive offerings, (iii) the Company’s dependence on a few large customers for a material portion of its sales, (iv) the potential loss or departure of key personnel, (v) market acceptance of existing and new products, (vi) 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, (vii) general economic and market conditions, (viii) unanticipated increases in raw material prices or disruptions in supply, (ix) 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, and (x) 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.
Brett Maas, Managing Partner