Good day, ladies and gentlemen, and welcome to the Pioneer Power Solutions 2022 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following this discussion, the call will be opened for questions. [Operator Instructions]. I would now like to turn the call over to Brett Maas of Hayden IR. Please go ahead, sir.

Thank you and welcome. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; Walter Michalec, Chief Financial Officer, and Geo Murickan, President and CEO of Pioneer Power Mobility. Following this discussion, there will be a Q&A session over to participants on the call. We appreciate the opportunity to review the fourth quarter and full-year financial results as well as discuss recent business highlights. Before we get started, let me remind you that this call is being recorded and webcast. During this call, management may make forward looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward looking statements contained in the earnings releases issued earlier today, which applies to the content of the call. I would now like to turn the call over to Nathan Mazurek, Chairman and CEO. Nathan, please go ahead.

Thank you, Brett. Good afternoon and thank you all for joining us today. Throughout 2022, we have been highlighting our new products and solutions specifically conceived and produced for the rapidly growing distributed generation and electric vehicle markets. We laid out an aggressive growth target for 2022 and talked about strong demand, increased orders and widespread customer interest. These elements came together in the fourth quarter of 2022 as our revenue in the quarter nearly tripled to $9.5 million. We reported net income and earnings of $0.10 a share and backlog increased 33% in the last three months of the year to $37.2 million. The result was as we expected a strong end to a solid year of growth as full-year revenue increased 48% to $27 million. While the fourth quarter did indeed benefit from a favorable product mix and higher than expected operating efficiencies, we are projecting that we expect to extend 2022 fourth quarter performance and generate positive EPS for the full-year of 2023 ahead of the timetable we referenced last year and inclusive of continued cash investments in our E-Bloc and E-Boost product platforms. We have essentially reached a point where our projected annual volume enables us to achieve improved operating leverage and sustainable EPS on an annual basis. While we still expect some quarter to quarter volatility to influence both our top and bottom lines in 2023, for full year 2023, we are projecting between $42 million and $45 million in revenue, representing a growth rate of at least 50%, continued margin expansion and full-year positive net income. It is also important to note that as of December 31, 2022, we have approximately $14.3 million in net operating loss carry forwards available to shelter taxable net income in the near future. As I noted earlier, our…

Thank you, Nathan, and good afternoon, everyone. First, before we dive into the numbers, I'd like to note that these financial results along with the earnings release that was issued earlier today, discloses unaudited financial results. Pioneer’s fourth quarter revenues were $9.5 million up $6 million or 172% year-over-year. Sequentially, fourth quarter revenue increased 52%. Revenue from our T&D Solutions segment, which manufactures our E-Bloc solution, increased nearly 400% to $7.4 million. And our Critical Power segment, which manufactures E-Boost was up marginally 9% to $2.2 million. Gross profit for the fourth quarter was $2.8 million or a 29% gross margin compared to a gross profit of $25,000 or a 0.7% gross margin in the fourth quarter of last year. Sequentially, gross margin more than doubled compared to a gross margin of 13.8% during the third quarter, The increase in our gross margin was due to higher revenue, driving improved manufacturing utilization and a favorable sales mix with high margin E-Bloc power systems an ATS equipment. Selling, general and administrative expenses of $2 million or 21% of revenues for the fourth quarter of 2022, a decrease of 32% when compared to $1.5 million in a year ago quarter. Approximately, $150,000 of the quarterly SG&A was related to stock based compensation. SG&A also includes approximately $500,000 in incremental investments in sales, marketing, personnel and prototypes for our E-Bloc and E-Boost solutions. This is intentional and targeting spending designed to drive demand for these new solutions. We expect investments in 2022 to continue through 2023 as we build these 2 new business lines and as they grow. Finally, higher wage costs including salaries and benefits played a key role in SG&A. Turning to the full-year results. Revenue was $27 million up 48% percent from $18.3 million in 2021. Revenue from our T&D…

Thank you. Ladies and gentlemen at this time we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your question.

Hey, guys. Thanks for taking my questions and congratulations on a strong quarter. My first question is related to the E-Bloc orders and order flow. The major retailer that you mentioned in your prepared remarks should we expect additional orders from that customer during 2023?

We expect additional orders in 2023. They have the units that we produce for them. They're monitoring. They're seeing how it goes. They've targeted hundreds of stores. We did 63, they're targeting almost 1000 inclusive of the 63 over the next several years. So yes, we expect more orders. Frankly, I don't expect any of those orders before midyear, which would depending on their schedule and so forth, which would make these a 2024 shipping delivery revenue item for us. We're not including any of that in our projections for 2023.

Got it. Understood. And on the E-Boost front, I know you're seeing a lot of traction But in terms of -- or at least in the pipeline, in terms of orders, how do you look at it like should we expect 2Q, 3Q deliveries against these orders or what should we be expecting for E-Boost?

Right. So most of the deliveries for E-Boost are going to be third and fourth quarter. Really for E-Boost itself, it's going to be, I'd say majority of it is going to be in the fourth quarter. We should be announcing some very exciting orders soon. But if we're going to announce it in April or May, the third quarter is almost not doable for us from most units.

Understood. And in general cadence during the four quarters I think you mentioned there will be lumpiness during the fourth quarters, but I also heard the comment about sequential growth. Just wanted to understand how the quarters will look during the year.

Yes. I think that we're going to have some volatility. The problem is even if especially on the E-Bloc side, if these jobs are getting larger and larger, even if we think something is going to leave on March 31, it doesn't always happen exactly that way, sometimes through nobody's fault. I don't know the highway police were not available to escort that they for whatever reason then gets pushed, so that changes the quarter. Nowhere near the lumpiness that we had in 2022. So if I'm looking out, I would say that probably the first quarter will be the lightest again not anywhere close to the light quarters that we had in 2022. And then sort almost stable for the second, third and fourth quarter.

Got it. And I guess this also the lumpiness may also explain the accounts receivable, which is quite high sequentially. I guess it's just because of timing of delivery and now receivables are due in the next quarter?

Correct. Yes. So it's all about timing. And also -- and I would say also with the receivable most of -- I don't want to say most, but a large portion. It's not more on the E-Bloc side. We're dealing with large projects. There's a lot of progress, billings that go on with them. So it's kind of it doesn't even tell the tale of the full job.

Got it. And gross margins came in really impressive. Was there any special one-time boost here or was it just data utilization and just the sales mix that you talked about? The question is should we expect these levels going forward or maybe slightly muted from here?

Yes, I would say, I thank you for picking up on that. Yes, it was super-efficient product mix for smaller units that went fast, less labor hours than some of the larger jobs that tend to sometimes just accumulate more hours because they're sitting for so long. So it was super, super favorable. That being said, yes, it'd probably be a bit muted at least for the first few quarters, but it's definitely not far away from what we did in the fourth quarter.

Got it.

And I'm going to borrow your word muted is the right way to think about it. Thank you.

And just the last one on operating expense trend. SG&A was actually lower sequentially, of course, year-over-year, it was higher. So when you say you are going to continue to invest, should we expect like just about $2 million or north of $2 million in T&D during the next four quarters? Or should we expect even make more pronounced than previous.

Yes. And thank you for noting that too. So internally, as we are looking through everything, we're assuming about $2 million a quarter, more or less.

That should -- that's actually good to know because that provides you quite a good operating leverage to -- and that probably explains your bottom line positive EPS guidance. Good luck on that. Well, just one – I just had one more question. Maybe this is related to accounts receivables but the deferred revenue item also has increased, its accounting question, but just was curious about that.

Okay, Walter I think you take this one.

Sure. Thank you, Sameer. Great question. You're absolutely right. It's all really due to the progress billings that we issue out for these large orders on the E-Bloc side.

Got it. Okay. That's all from me. Good luck and thanks for taking my questions.

You're welcome Sameer.

[Operator Instructions]. Thank you. There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thank you all for your time and support. And as always, we look forward to updating you all again on our next call. Have a great evening.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.