Greetings, and welcome to the Pioneer Power Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Maas of Hayden Investor Relations. Please go ahead.

Thank you, operator. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; Walter Michalec, Chief Financial Officer; and Geo Murickan, President of Pioneer eMobility. Following this discussion, there'll be a Q&A session open to participants on the call. We appreciate the opportunity to review the second quarter financial results and recent business highlights. Before we get started, let me remind you 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 release issued earlier today, Thursday, August 14, 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. I am pleased to report that we delivered strong financial results for the second quarter of 2025, continuing a trend that really began midyear last year, 2024. Specifically, revenue increased 150% year-over-year to $8.4 million, and our non-GAAP operating income from continuing operations was a positive $218,000. A significant driver of the second quarter revenue growth and profitability improvement was continued execution on the 25-unit e- Boost order for one of the largest public-school districts in the United States. This landmark project is to date, the largest RFP ever awarded for a mobile charging system, which directly supports charging the school district's initial fleet of 200 electric school buses. After delivering the initial 10 units in the first quarter, we delivered the majority of the balance during the second quarter. While the early units carried higher costs due to the complexity of ramping up a project of this scale, our operations team achieved meaningful gains in productivity and cost optimization as the build-out progressed. As a result, gross profit on these units more than doubled in the second quarter. Additionally, this particular school district is scheduled to receive another 600 electric school buses over the next 2 years, and we expect to provide additional e-Boost units to support this ongoing program. In the second quarter, we also delivered initial units under our agreement with our channel partner, SparkCharge. The SparkCharge deal potentially worth up to $10 million is a direct result of Pioneer's collaborative relationship with this customer and more importantly, reflects the increasing demand for mobile, clean and rapidly deployable EV charging solutions. Strategically, we continue to be highly encouraged by the breadth and quality of the opportunities ahead. We are actively quoting and designing solutions…

Thank you, Nathan, and good afternoon, everyone. Please be advised that we have included a non-GAAP financial measure of operating income from continuing operations, which excludes corporate overhead expenses, research and development costs, depreciation and amortization expense and nonrecurring professional fees. Please refer to our press release issued earlier today, August 14, 2025, for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website at www.pioneerpowersolutions.com/investors/newsroom. Such non-GAAP measures should not be used as a substitute or alternative to any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with U.S. GAAP in order to provide a more complete understanding of the trends affecting the business. Second quarter revenue was $8.4 million compared to $3.4 million in the year-ago quarter, an increase of approximately 150%. The increase was primarily due to a significant increase in sales and rentals of our mobile EV charging platform, e-Boost. Second quarter gross profit was $1.3 million or a gross margin of approximately 16% compared to a gross profit of $641,000 or a gross margin of approximately 19% in the second quarter of last year. The increase in gross profit was primarily due to the significant increase in sales and rentals of the company's EBO equipment. Along with improved profitability from the delivery of most of the remaining units in the 25-unit e-Boost order for one of the largest public-school districts in the United States. These gains were supported by enhanced productivity and cost optimizations achieved by our operations team as the build-out advanced. During the second quarter of 2025, Pioneer incurred an operating loss from continuing operations of $1.7 million, unchanged from the $1.7…

Thank you, Walter. Operator, you can open the lines for questions.

[Operator Instructions] Our first question comes from Rob Brown of Lake Street Capital.

Congratulations on all the progress. First question is on the e-Boost order with the charging services company. I think you said it could be up to $10 million. Just a little color on kind of how that rolls out and what are the variables on the sizing there?

The real variables are what sizes they want when they want them. It covers -- there's a certain opening that they have. There's a window where we've fixed pricing for buying, we fixed pricing for leasing, and we're holding certain inventory for them. So without disclosing too much, that's kind of how that works. We try to get a -- together, we try to get a fix on what they think they'll be using over, call it, a 24-month period and locking everybody into certain parameters.

Okay. Perfect. And then on the pipeline, I think there were several markets that were quite active and you said dozens of potential municipalities. But just a sense of how that pipeline matures, the timing on it? And how does that sort of build for orders that give you some visibility into next year?

Yes. I mean we'll be making announcements as things happen of significance. So that will help guide, let's say, in the next couple of months. Government agencies or government themselves, whether it be state or local, work at different paces. Everybody is different. They're almost like people. So that's kind of a slower pace. Usually, the good is that they've made a commitment or they're halfway through a deep-seated commitment to going all electric and are trying now to come up with the best solutions or mixture of solutions to support their charging. That's a wide market, a very slow-moving market. Private business, whether -- however they're traded, whether they're privately held or they're publicly traded businesses are motivated differently. Some of that helps us, some of it doesn't. But the speed of those markets are much quicker. So it's kind of -- it's like what we're doing every day. It's a blend. The large school district is obviously that's part of a large metro city on the West Coast of the United States. SparkCharge is a privately held business that is mostly serving private businesses, non- governmental type businesses. The robotaxi market, which if you would have asked me 3 months ago, I would have said it's all talk, talk, talk, talk, and we don't see anything. But they're way down the road in spending money and providing solutions and rolling out in a competitive way with each other, which is -- which makes it a much more significant market for us going forward and frankly, probably the fastest as far as response time now to POs, it will be the fastest market for us.

Okay. And then I guess on the HOMe-Boost product, you're talking about a launch here in the second half. Could you give us a sense of some of the milestones you expect with the rollout and how you see that launch at this point?

Yes. So the launch has been a little bit delayed. I really -- we wanted to kind of roll out in July. All the delay is on me. We've been experimenting or me primarily experimenting with it mechanically and electrically to both make sure it's fit and form is super functional, attractive and not too big and easily transportable and made some electrical changes to make things a little bit easier and more cost-effective for everybody. But we're not factoring in any revenue for '25. That would be a big bonus. I really don't expect that at all to happen. We do expect orders to happen in 2025, accelerating in the first quarter of 2026 and then hope it's a meaningful part of our revenue for 2026.

Our next question comes from Amit Dayal of H.C. Wainwright.

Nathan, congrats on another strong quarter. Good to see the margins bounce back. On that front, should we expect margins to -- should we expect margins to stay at these levels and maybe move higher given that initial buildup costs are now out of the way?

Yes. I think that we're always trying to improve the margins. So I think that the margin -- the margins themselves should do no less than where they are and hopefully improve in the third quarter, of which we're halfway through, call it, and improve -- continuing to improve in the fourth quarter. How much is really on us, but that's -- there should be no more margin erosion.

Okay. Understood. And then it looks like your pipeline is really solid, Nathan. I mean lots of opportunities from new avenues that you probably were not anticipating earlier, like you said, the robotaxi stuff. On the other side of it, how are we going to manage this level of interest with the capacity we have? I'm just trying to get a sense of with the setup now or today, how much revenues can the company support with the available capacity, et cetera? And how are you thinking of managing that part of the business going forward?

Yes. So that's a discussion that we're having all the time in response to what we believe we can do. And then, of course, we have to respond in real time. So for the large order out West, the 25-unit order, we primarily for 22 out of those -- 22 out of 25 units, we used a contract manufacturer right there in Los Angeles. We would not have been able to deliver definitely not on time or not that amount in our current facility in Minneapolis. For the balance of the year, we believe that we can deliver the balance of the orders in the year. There, again, the mix helps. It's larger units with higher ticket prices, and we're able to do that in, I guess, a balanced and deliberate fashion. We will not be manufacturing this we decided a while ago, we won't be manufacturing the HOMe-Boost unit ourselves. We're dealing 100% with one contract manufacturer in Minnesota. So really, I think that would be the majority of the growth in 2026, hopefully, is going to come from the HOMe-Boost product. We kind of have that covered. What you're addressing is kind of the middle. We get another 25-unit type order, is it all the same, not all the same. And how we handle that we'll probably do the same. We'll handle with a mix of doing it internally and/or using contract manufacturers. There's no plan to expand the capacity in Minneapolis. And there's no reason to fix from a regional point of view on somebody yet.

Okay. No, that's understandable. From a revenue concentration perspective, is majority of the revenues right now coming from like states like California? And how do you expect this to evolve as HOMe-Boost comes to the market and maybe other solutions you bring to the market?

Yes. Thank you. That's a great. Right now, it's definitely -- California definitely is #1. And I don't see that really changing. The market is just too big, too strong, and there's too much incentive for the users to go electric and therefore, helps with our solutions. Listen, success of HOMe-Boost would be the greatest avenue for us, diversifies the market. It's really, as I said in the prepared remarks, it's leading with the power solution. charging is an important but a feature. It's not necessary for the user to actually need the charging. And you really touched on something because, again, we don't trumpet it yet because we haven't done enough, but we're doing more and more or guiding to expanding the business to address more pure power type applications, bespoke distributed generation where we can help with our expertise in the generator part of the business so that we're less -- I guess, less relying on incentives to fuel the business. No pun intended.

Understood. Also along those lines, Nathan, so you're not going to be sort of constrained by these federal budget cuts, et cetera, because most of your customers are local, municipal state level from -- for folks in that segment. And the rest of them are private or public companies. Is that how we should look at it?

I would look at it with -- yes, with the caveat that federal budget cuts or whatever you want to call it, abandoning certain incentives, that doesn't help. Even states as rich as strong as California and other states, everybody likes when the federal government helps them out. Now that they've got to do all these incentives on their own, and they are committed, yes, that's true. But in any market, you take your foot off the pedal a little bit. It's not a positive for that particular market. So that's the caveat to what you're saying. Yes, California is committed. Washington is committed. Oregon is committed. Arizona is committed in deep-seated ways. It's them on their own.

[Operator Instructions] Our next question comes from Howard [ Ruth ] who is a private investor.

Congratulations on the great growth in the quarter. That's very impressive.

Thank you, Howard.

Great. A couple of little questions first for me on the gross margin, impressive going from 2% to 16% in 1 quarter. But as you look forward, I see that you answered the prior question that should tick up, hopefully. But when you bring HOMe-Boost on, will that be a temporary drag on gross margins as you -- or is that going to improve it longer term? How do you see the 2 products matching?

Yes. HOMe-Boost, because we're not -- I mean, we have obviously engineering and design and onetime sunken costs and very little maintenance costs, but we're not going to be manufacturing the product. So we're pretty -- other than the SG&A associated with it, we have a very fixed idea of what it's going to cost us. We're going to be pricing at a level that is going to be a consistent -- should move, especially with more volume, should move the gross margins up.

Okay. Great. Is there a target gross margin you see with your overall business? Are you shooting for 20% or 25%? Or is that 25% too much to ask in your product line?

Yes. So if you take the full mix of the business, it really would depend on the success of HOMe-Boost. 25% is not too much. Internally, longer term, we're asking for more. We're asking for 30% plus because as e-Boost continues to grow for the most part when we want to, we're taking on service for those units as well and the service business is right there, and it's becoming a more significant piece of what we're doing. So plus 30 is really the more medium-term goals for us.

Great. Great. And then I noticed the $1.4 million cash usage kind of listed as a sales-type lease origination. Could you explain what that was? Is that a onetime item? Or is that ongoing?

That was with the customer. We did a capital lease with them. So that's the use for it. That's how we booked it.

Okay. Is that a customary thing going forward? Or is that just a one-off?

We're taking leasing opportunities kind of on a step-by-step basis. now that you mentioned, I mean, I'll say we have x, and I don't even remember off the top of my head, what we're expecting to do in lease or rental revenue for this year. But it is something that we would like to grow with the right customers under the right circumstances. If you have a good counterparty, leasing is a much more profitable business for us. It's a much higher return on assets for us.

Okay. And then in terms of guidance, now in the first half, you've done a little over $15 million, and you're guiding to $27 million to $29 million for the year, which would mean a little bit less in the second half. And I can kind of guess at that based on that large order and lumpiness as you're ramping up. But could you just give a little bit more color on how you get to the second half guidance being down from the first half?

Yes. The real flip was that there were some units that we were able to get out in -- really in June that I didn't expect that we'd be able to. We don't -- the one thing we don't -- there are many things that we don't do. But one of those is we don't sandbag it. If we could invoice it, we did it. Did it make the revenue a little higher this quarter? It would be nice if it was a perfect form up through '25? Yes. But I mean, if we can do it and we're applying the labor and material to it and the customer is ready to take it, we invoice it. So it's just -- I mean, we're so small that $2 million makes a big difference.

Okay. That's what I thought. And then in terms of the backlog at $18 million, is all of that $10 million order in your backlog or how do you define one defines backlog differently, but...

Yes. So we define it the same way for at least 10 years. It's actually non-cancelable purchase orders that we expect to deliver in less than 12 months. So it's still the same.

Okay. All right. And then finally, on the competitive side, just in general terms, is there anything new in the competition on either the e-Boost or the HOMe-Boost product lines that you see out there? Or how do you see your stacking up against the competition now?

Yes, e-Boost, if anything, there's less. Charging has been tough. Some of the people who have started or tried to imitate, whether it's us or somebody else or use a battery solution or even diesel-type solution, whatever it was, it doesn't really make a difference. There's not enough air in the tank for everybody to keep going. So that's been actually unfortunate for those people, the employees and investors in some of those businesses, but that's been a benefit to us. On the HOMe-Boost, we don't see anything yet. We're trying to be a little bit stealthy with it and not come out full force until we are actually ready to be full on it because we want to get the advantage of a first mover, but not really. Any competition to e-Boost is, I don't want to say all the time, but 99% of the time is around the battery type product which we don't really compete with that. We're not -- that's low power, low power density, much more expensive. And we -- I don't want to say in a dismissive way, we can do that too and are contemplating even offering those solutions for those customers who really, really want that as part of their solution, just to keep people out of this business.

Congrats on an excellent quarter.

Thank you, Howard.

Our next question comes from Bruce Galloway of Galloway Ventures.

Do you see any potential application for your product to provide backup power to the data center market?

Yes. So that's a big question. And I don't want to launch into a, I don't know, a silo on data centers today and power and so forth. But right now, pure backup power for a data center, these units are too small. Even the largest unit that we do is -- that would be data centers in 1992. That's the level you're talking. Seriously, through our -- through the Voltaris business, the switchgear business that we sold, we're intimately involved in that business. We were and continue to monitor that business because we have an equity stake in it. The amount of power that they're sucking and the amount per node of what backup is, the bottom is 1 megawatt already. And it's 99% of the time still diesel sets, monster diesel reciprocating engines.

Got you. To the point you just made, what's the company's remaining equity stake in that business?

It's about 6% in that platform, and it's doing -- the business is doing extremely well. And we hope to benefit one day from a value there.

Our next question comes from Chris [ Lukawski ], who's a private investor.

Congratulations on the great results from me as well. My question was already asked and answered. I also had the data center question. So thank you for addressing that. So I would just like to say good luck to ourself.

Thank you, Chris. Thank you for calling in.

Ladies and gentlemen, with no further questions in the question queue. I will now hand over for closing remarks.

Pioneer is exceptionally well positioned to lead in the rapidly evolving power and electric mobility landscape. Thank you all for joining. Thank you all for your continued support, and we look forward to updating you all on our next earnings call.

Thank you. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.