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Pioneer Reports Fourth Quarter and Full-Year 2018 Financial Results

FORT LEE, N.J., March 28, 2019 /PRNewswire/ -- Pioneer Power Solutions, Inc. (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

Revenue

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.

Gross Margin

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.

Income Taxes

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.

Net Loss

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.

Adjusted EBITDA* 

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.

Backlog

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.

Contact:
Brett Maas, Managing Partner
Hayden IR
(646) 536-7331
brett@haydenir.com

Tables Follow

 

PIONEER POWER SOLUTIONS, INC.

Consolidated Balance Sheets

(In thousands, except share data)



December 31,


2018


2017

ASSETS

(unaudited)


(audited)

Current assets






Cash and cash equivalents

$

211


$

218

Accounts receivable, net


16,327



15,000

Inventories, net


27,310



26,113

Income taxes receivable


566



743

Prepaid expenses and other current assets


2,510



3,017

Total current assets


46,924



45,091

Property, plant and equipment, net


5,284



6,858

Deferred income taxes


2,971



2,729

Other assets


5,222



4,651

Intangible assets, net


3,584



6,399

Goodwill


8,527



8,527

Total assets

$

72,512


$

74,255







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities






Bank overdrafts

$

1,769


$

1,181

Revolving credit facilities


20,755



17,814

Short term borrowings


-



5,430

Accounts payable and accrued liabilities


27,845



20,381

Current maturities of long-term debt and capital lease obligations


1,174



782

Income taxes payable


873



1,164

Total current liabilities


52,416



46,752

Long-term debt, net of current maturities


2,619



4,153

Pension deficit


148



283

Other long-term liabilities


3,786



3,853

Deferred income taxes


1,592



1,665

Total liabilities


60,561



56,706

Stockholders' equity






Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued


-



-

Common stock, $0.001 par value, 30,000,000 shares authorized;
8,726,045 shares issued and outstanding on December 31, 2018 and 2017


9



9

Additional paid-in capital


23,966



23,801

Accumulated other comprehensive loss


(5,897)



(5,798)

Accumulated deficit


(6,127)



(463)

Total stockholders' equity


11,951



17,549

Total liabilities and stockholders' equity

$

72,512


$

74,255







 

 

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



Three Months Ended


For the Years Ended


December 31,


December 31,


2018


2017


2018


2017

Revenues

$

26,508


$

26,438


$

106,390


$

114,391

Cost of goods sold












Cost of goods sold


22,268



26,263



87,139



95,779

Restructuring and integration


-



-



-



873

Total cost of goods sold


22,268



26,263



87,139



96,652

Gross profit


4,240



175



19,251



17,739

Operating expenses












  Selling, general and administrative


7,535



6,719



21,465



21,158

  Restructuring and integration


-



59



-



219

  Foreign exchange loss (gain)


277



140



(341)



(325)

    Total operating expenses


7,812



6,918



21,124



21,052

Operating loss


(3,572)



(6,743)



(1,873)



(3,313)

  Interest expense


539



675



2,662



2,462

  Other expense (income)


105



(236)



826



411

Loss before taxes


(4,216)



(7,182)



(5,361)



(6,186)

  Income tax expense


136



2,643



303



3,039

Net loss

$

(4,352)


$

(9,825)


$

(5,664)


$

(9,225)













Net loss per common share:












  Basic

$

(0.50)


$

(1.13)


$

(0.65)


$

(1.06)

  Diluted

$

(0.50)


$

(1.13)


$

(0.65)


$

(1.06)













Weighted average common shares outstanding:












  Basic


8,726



8,717



8,726



8,717

  Diluted


8,726



8,717



8,726



8,717













 

 

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Cash Flows

(In thousands, except per share data)



For the Year Ended


December 31,


2018


2017


(unaudited)


(audited)

Operating activities






Net loss

$

(5,664)


$

(9,225)

Depreciation


1,222



1,285

Amortization of intangible assets


1,460



1,774

Amortization of right-of-use assets


622



535

Amortization of debt issuance cost


75



205

Deferred income tax (benefit) expense


(329)



2,201

Change in receivable reserves


(350)



239

Change in inventory reserves


241



(102)

Inventory write off


-



2,642

Accrued pension


(55)



(8)

Stock-based compensation


165



466

Loss on disposition of fixed assets


21



40

Intangible asset impairment


1,350



-

Goodwill impairment 


-



1,445

Foreign currency remeasurement loss (gain)


42



(27)

Changes in current operating assets and liabilities:






Accounts receivable


(1,373)



2,594

Inventories


(2,118)



(1,975)

Prepaid expenses and other assets


(708)



(256)

Income taxes


(93)



(923)

Accounts payable and accrued liabilities


7,645



790

Net cash provided by operating activities


2,153



1,700







Investing activities






Additions to property, plant and equipment


(589)



(1,450)

Proceeds from sale of fixed assets


762



22

Net cash provided by (used in) investing activities


173



(1,428)







Financing activities






Bank overdrafts


699



(61)

Short term borrowings


(5,430)



1,457

Borrowing under debt agreement


40,599



40,481

Repayment of debt


(38,848)



(40,993)

Payment of debt issuance cost


(18)



(61)

Net proceeds from the exercise of options for common stock


-



120

Principal repayments of financing leases


(414)



(301)

Net cash (used in) provided by financing activities


(3,412)



642







(Decrease) Increase in cash and cash equivalents


(1,086)



914

Effect of foreign exchange on cash and cash equivalents


1,079



(942)







Cash and cash equivalents






Beginning of period


218



246

End of period

$

211


$

218

Supplemental cash flow information:






Interest paid

$

2,603


$

2,087

Income taxes paid, net of refunds


587



1,725

 

 

PIONEER POWER SOLUTIONS, INC.

Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except per share data)

(Unaudited)




Three Months Ended


For the Years Ended



December 31,


December 31,



2018

2017


2018


2017

Reconciliation to Adjusted EBITDA and EPS












Net earnings loss (GAAP measure)


$

(4,352)

$

(9,825)


$

(5,664)


$

(9,225)













Addbacks:












Interest expense



539


675



2,662



2,462

Income tax expense



136


2,643



303



3,039

Depreciation and amortization



902


852



3,303



3,593

Restructuring and integration



-


59



-



219

Non-recurring expenses from strategic changes 



1,098


610



1,098



1,483

Switchgear operations previously classified as discontinued operations



3,200


6,438



4,988



7,669

Stock-based compensation



5


148



165



466

Other non-operating expense (income)



105


(236)



826



411

Adjusted EBITDA (Non-GAAP measure)



1,633


1,364



7,681



10,117

Tax effects - 21% rate



(343)


(286)



(1,613)



(2,125)

Non-GAAP net earnings


$

1,290

$

1,078


$

6,068


$

7,992

Non-GAAP net earnings per diluted share


$

0.15

$

0.12


$

0.70


$

0.92

Weighted average diluted shares outstanding



8,726


8,717



8,726



8,717



Tax Rate changed to 21% pursuant to U.S. Tax Reform enacted in December 2017

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 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 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 earnings is set forth in the table above.

Amounts may not foot due to rounding.

 

Pioneer Power Solutions, Inc. (PRNewsFoto/Pioneer Power Solutions, Inc.)

 

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