Item 1. Business
ITEM
1. BUSINESS.
Overview
Pioneer
Power Solutions, Inc. and its wholly owned subsidiary (referred to herein as the “Company,” “Pioneer,”
“Pioneer Power,” “we,” “our” and “us”) design, manufacture, integrate, service, and
sell distributed energy resources, on site and mobile power generation equipment and a platform of mobile electric vehicle
(“EV”) charging solutions. Our products and services are sold to a broad range of customers in the utility, industrial
and commercial markets. Our customers include, but are not limited to, Federal and State government entities, package delivery
businesses, school bus fleet operators, EV charging infrastructure developers and owners, and distributed energy developers. We are
headquartered in Fort Lee, New Jersey and operate from two (2) additional locations in the United States for manufacturing, service
and maintenance, engineering, and sales and administration.
U.S.
dollars are reported in thousands, except for share and per share amounts (unless otherwise noted).
Description
of Business Segment
In October 2024, we sold our Pioneer Custom
Electrical Products Corp. (“PCEP”) business unit to a buyer (the “PCEP Sale”) as a result of a strategic
change to the operations of our business. See Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Recent Developments for more information regarding the PCEP Sale. Following
the PCEP
Sale, we currently have one reportable segment - Critical Power Solutions (“Critical Power”).
● Our
Critical Power business provides customers with our suite of mobile EV charging solutions,
power generation equipment and all forms services, including but not limited to, preventative
maintenance, repairs, fuel polishing, and remote monitoring. These products and services
are marketed by our operations headquartered in Minnesota, currently doing business under
our Pioneer eMobility (“e-Boost”) and Pioneer Critical Power (“Titan”)
brand names.
Our
Critical Power business designs, manufactures and sells mobile EV charging solutions under our e-Boost suite of products, in addition
to distributing new power generation equipment, refurbishing and reselling used power generation equipment, and performing service and
maintenance on our customers’ existing equipment. Many of these systems are used to maintain reliable, primary, peak shaving or
emergency standby power at facilities where it is required or where the potential consequences of a power outage make it necessary, such
as at major national retailers, hospitals, data centers, communications facilities, factories, military sites, office complexes and other
critical operations.
Summary
of Critical Power Segment Product Offerings
Product
Category
Solutions
Suite
of
e-Boost Products
▪
e-Boost G.O.A.T. (Generator on a Truck) is a truck-mounted option that brings on-demand, high-capacity charging to EV truck and car
owners at any convenient location.
▪
e-Boost Mobile is a trailer-mounted solution that provides multiple options for towing and can be available at specific businesses,
large sports and cultural events and can be relocated with minimal effort on short notice.
▪
e-Boost Pod is a stationary EV charging solution with customizable higher capacity that can also service other power needs especially
in emergency situations, such as a power outage, serving as a back-up power source with convenient power connectors and outlets available
on board.
Power
Generation
Equipment
▪
Engine-generator sets: power generation equipment with up to 2 MW of power output per genset,
sourced from several manufacturers and available for install by our expert, licensed technicians.
▪
Available individually or in multi-unit paralleled configurations. Fuel options include liquid propane, natural gas, diesel and bi-fuel.
▪
Uninterruptible Power Supply (“UPS”) systems.
Service
▪
Scheduled preventative maintenance and 24/7 repair and support services provided for all
makes and models of power generation equipment under one- to five-year contracts.
▪
Regional service and maintenance: provided by our technicians in the Midwest and Florida.
▪
National service and maintenance: provided by our technicians and a network of field service providers throughout the United States
for multi-site, multi-state power generation equipment owners.
▪
UPS systems from major manufacturers.
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Power
generation systems represent considerable investments that require proper maintenance and service in order to operate reliably during
a time of emergency. Our power maintenance programs provide preventative maintenance, repair and support service for our customers’
power generation systems. To support our customers in managing their critical infrastructure, we maintain inventories of repair parts,
a fleet of service vehicles and a staff of certified field service technicians in the Midwest and Florida. To complete our geographic
coverage, we maintain a network of field service partners located in other regions, enabling us to provide a quick-response, 24/7 service
capabilities that can effectively repair and maintain any make and model of back-up power equipment. Our field service organization services
more than 2,400 generators owned by more than 900 customers located throughout the United States and its territories, including for multi-site,
multi-state customers.
We
recognize discrete revenue streams from service contracts, sales, installation, maintenance and repair services, and we offer service
contracts to all owners of power generation and related equipment, whether or not the equipment was originally sold by us. Our service
agreements have terms ranging from one to five years in duration, providing the Company with a recurring revenue stream.
Business
Strategy
We
believe we have established a stable platform from which to develop and grow our business lines, revenue, profitability and shareholder
value. We are focused on internal growth through operating efficiencies, new product development, customer focus and broadening and deepening
our market penetration.
We
intend to build our revenue and net income through internal growth initiatives. Accomplishing these financial goals will be dependent
on a number of factors, including our ability to execute the following strategies and actions:
● Establishing
a scalable organizational infrastructure to support our expected growth;
● Investing
in our capabilities to provide progressively more advanced equipment and service solutions;
● Continuously
applying our manufacturing and service resources to their highest and best uses;
● Combining
and streamlining our business unit supply chains and administrative functions; and
● Improving
business processes to deliver consistency, quality and value to our customers.
Within
our Critical Power business, we are actively marketing our preventive maintenance services to new national accounts including: major
national retailers, telecommunications companies, data centers, banks, hospitals and health care facilities, educational institutions
and property management companies. Since November 2021, we have been aggressively marketing our e-Boost mobile EV charging products to
electric bus and truck manufacturers, fleet management companies, municipalities and EV infrastructure providers.
Our
Industry
The
market for Electrical Infrastructure equipment and Critical Power solutions is very fragmented due to the range of equipment types, electrical
and mechanical properties, technological standards and service parameters required by different categories of end users for their specific
applications. Many orders are custom-engineered and tend to be time-sensitive since other critical work is frequently being coordinated
around the customer’s electrical equipment installation. The vast majority of North American demand for the types of solutions
we provide is satisfied by thousands of producers and service companies in the United States.
We
believe that several of the key industry trends supporting future growth in our industry are as follows:
● Aging
and Overburdened North American Power Grid — The aging and overburdened North
American power grid is expected to require significant capital expenditures to upgrade the
existing infrastructure over the next several years to maintain adequate levels of reliability
and efficiency. Significant capital investment will be required to relieve congestion, meet
growing demand, achieve targets for efficiency, emissions and use of renewable sources, and
to replace components of the U.S. power grid operating at, near or past their planned service
lives.
● Increasing
Long-Term Demand for Electricity and Reliable Power — The Department of Energy’s
Energy Information Administration, or EIA, forecasts that total electricity use in the United
States will increase by approximately 28% from 2011 to 2040. This increase is driven by anticipated
population growth, economic expansion, increasing dependence on computing power throughout
the economy and the increased use of electrical devices in the home. In order to meet growing
demand for electricity in North America, substantial investment in increased electrical grid
capacity and efficiency will be required, as well as the addition of specialized equipment
to help ensure the reliability and quality of electricity for critical applications. In response
to these challenges, there is an increasing trend among commercial and industrial companies
to invest in on-site power sources, both for standby purposes in the event of a catastrophic
power outage, or to reduce the amount of electricity they draw from the utility grid during
peak periods.
● Rapidly
Expanding EV and Charging Infrastructure Market — A report from Allied Market
Research in 2020 projected that the global electric vehicle market will reach $803 billion
by the year 2027, registering a compound annual growth rate (“CAGR”) of 22.6%.
North America is estimated to reach $194 billion by 2027, at a significant CAGR of 27.5%.
In 2010, only about 17,000 electric vehicles were on the world’s roads. By 2019, that
number had swelled to 7.2 million and is increasing rapidly according to the International
Energy Agency. Furthermore, in order for EV’s to grow at such a rapid pace, it is necessary
that infrastructure be built to allow for such growth. In 2019, there were about 7.3 million
chargers worldwide compared to an insignificant amount ten years ago, and the EV infrastructure
has become a global priority as major governments and corporations have committed to spending
billions of dollars towards building EV charging infrastructure.
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Customers
A
substantial portion of the products and services we offer are sold directly to customers by our marketing and sales personnel operating
from our office locations in the United States. Our direct sales force and authorized representatives market our products and services
to end users and third parties, such as original equipment manufacturers and their dealers, state and local governments, fleet management
companies, school bus operators and various intermediary selling groups.
For
the year ended December 31, 2024, 87% of our sales were to U.S. customers and 13% were to Canadian customers, compared to 100% of our
sales being to U.S. customers for the year ended December 31, 2023. This was largely driven by companies involved in distributed generation,
regulated and non-regulated utilities, and the industrial and wholesale sectors. During the years ended December 31, 2024, and 2023,
we sold our electrical equipment and services to over 875 individual customers, and our 20 largest customers represented approximately
74% and 47% of our consolidated revenue, respectively.
Approximately
22% and 13% of our sales during the year ended December 31, 2024, were made to INF Associates, LLC and British Columbia Hydro and Power
Authority, respectively. Approximately 14% of our sales during the year ended December 31, 2023, were made to Target Corporation. The
majority of our sales to customers were made pursuant to specific contract terms and conditions for each project.
Revenue
Backlog
Revenue
backlog, which consists of purchase orders and contracts from customers that we believe to be firm, reflects the amount of revenue that
we expect to realize in the future upon the satisfaction of customer orders for our products or services that are not yet complete or
for which work has not yet begun. Our revenue backlog as of December 31, 2024, was approximately $19,762, as compared to $16,668 as of
December 31, 2023. During the year ended December 31, 2024, we experienced a surge in orders and contracts for our mobile EV charging
solutions, e-Boost, which was the primary driver for the increase in our revenue backlog.
Competition
We
experience intense competition from generator manufacturers and from distributors and servicers of such equipment. The number and size
of our competitors varies considerably by product line and service category, with many of our competitors tending to be small, highly
specialized or focused on a certain geographic market area or customer. A representative list of our direct competitors includes EV Power
Pods LLC, DD Dannar LLC, Yoshi Inc., Caterpillar Inc., Cummins Inc. and Interstate Power Systems, Inc.
Raw
Materials and Suppliers
The
principal materials purchased by us are certain electrical and engine components such as generators, transfer switches, electric vehicle
chargers and related parts from a variety of suppliers. These components are available from and supplied by numerous sources at competitive
prices. Unanticipated increases in component prices or disruptions in supply could increase production costs and adversely affect our
profitability. Our largest suppliers during the year ended December 31, 2024, included Taylor Power Systems, Inc., Gillette Generators
Inc., Winco, Inc. and Kelly Generator & Equipment, Inc.
Research
and Development
Because
the industries in which we compete are characterized by rapid technological advances, our ability to compete successfully depends heavily
upon our ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. We continue
to develop new technologies to enhance existing products and services, and to expand the range of our offerings through research and
development (“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology. During
the years ended December 31, 2024 and 2023, we incurred $1,050 and $885, respectively, of R&D costs related to our mobile EV charging
solutions, e-Boost.
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Employees
As
of December 31, 2024, we had 60 employees consisting of 59 full-time employees and 1 part-time employee.
Environmental
We
are subject to numerous environmental laws and regulations concerning, among other areas, air emissions, discharges into waterways and
the generation, handling, storing, transportation, treatment and disposal of waste materials. These laws and regulations are constantly
changing and it is impossible to predict with accuracy the effect they may have on us in the future. Like many other industrial enterprises,
our manufacturing operations entail the risk of noncompliance, which may result in fines, penalties and remediation costs, and there
can be no assurance that such costs will be insignificant. To our knowledge, we are in substantial compliance with all federal, state,
provincial and local environmental protection provisions, and believe that the future compliance cost should not have a material adverse
effect on our capital expenditures, net income or competitive position. However, legal and regulatory requirements in these areas have
been increasing and there can be no assurance that significant costs and liabilities will not be incurred in the future due to regulatory
noncompliance.
Corporate
History
We
were originally formed in the State of Nevada in 2008. On November 30, 2009, we merged with and into Pioneer Power Solutions, Inc., a
Delaware corporation, for the sole purpose of changing our state of incorporation from Nevada to Delaware and changing our name to “Pioneer
Power Solutions, Inc”. On September 24, 2013, we completed an underwritten public offering, and our common stock began trading
on the Nasdaq Capital Market under the symbol “PPSI”.
Available
Information
Our
corporate website is located at www.pioneerpowersolutions.com. On the investor relations section of our website, we make available, free
of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports
as soon as reasonably practicable after we electronically file them with or furnish them to the Securities and Exchange Commission (“SEC”).
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, such
as us, that file electronically with the SEC at www.sec.gov.
Additionally,
we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events and press
and earnings releases as part of the investor relations section of our website. The contents of and the information on or accessible
through our corporate website, including the investor relations portion of our website, are not a part of, and are not intended to be
incorporated into, this report or any other report or document we file with or furnish to the SEC, and any references to our website
are intended to be inactive textual references only.
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