Polar Power (POLA) 12 Aug 192019 Q2 Earnings call transcript

Please standby. Good day. And welcome to the Polar Power’s Second Quarter 2019 Financial Results Conference Call. Today’s conference is being recorded.

At this time, I’d like to turn the conference over to Shawn Severson. ahead. go Please

today, good Luis for and for I’d to Chief The like Power’s Executive Power’s Thank Raj Chief Officer; the morning, Financial time you Masina, hosts call. conference taking quarter Officer; today Sams, to thank Polar second Chief and you, Operations XXXX everyone. Arthur Zavala, join Polar us Officer.

operational an then update, events in will This will be Arthur on by objectives, key provide well key will financial the after will as the an begin as updates which overview of by discuss who followed providing results. Raj, strategic quarter. the Luis

www.polarpower.com. detailing A Eastern release crossed it the this today the press at quarter’s Time, results the has quarter’s -- on is X:XX at available wire website company’s

we Following the prepared open questions. present call for -- comments, will up management’s

and everyone results I’d I the regarding today on you for begin, Before including and uncertainties industry call cause refer to information. that Please and future these number projections the subject in -- like and from described those to statements associated for on will webcast forward-looking to and a maybe the of financial risks made that remind materially website industry list differ call. risks we refer results SEC company’s of the the a more company’s to supporting actual filings to are could

over Sams, Polar Arthur to Power’s I’d call time, the this turn At to like CEO.

second conference And quarter Thank earnings to Power’s XXXX you, Shawn. welcome Polar everyone call.

for quarter, you an of with today’s markets. our each call, briefly provide will During before update I key would our the I discuss for highlights core

Luis during call. financial financial discuss later highlights I started, get will However, this before we to like details the for greater quarter. provide this would

million the the which year. XXXX for last quarter. $X.XX $X.XX increase, XX% second highlights million, quarter compared for to second Financial is a were Revenues

of the by to DC the to With the systems [Technical -- sales Tier-X growth driven our power of the Difficulty]. majority

$X.XX million at quarter our sales over increase to last primarily at last to Tier-X million, of year. driven the of year $X.XX backlog customers. compared end the level second was The telecommunications sales stood Our higher by

their I’d term as year. short second U.S. during Tier-X to for will add on transition the of companies. volatility short short-term also shifting times they visibility, This, budgets create term at markets prioritize longer of no And and the like but spending power to note have are with some improved we to that reliability this the infrastructure XG should telecom half the is impacting need lead the strong along impact fundamentals. backup telecom

$X.X second million, at stood end to end sales the Our first at and customers. the the year backlog driven $X.XX our sales backlog higher primarily compared was at levels year last quarter $XX of of by The XXXX. telecommunications $X.X increases of over of the to million Tier-X -- quarter last million

that we the Gross The equipment a million, mix overseas quarter quarter decrease $X.XX margins and $X.XX a made XX%. Gross was a profit stood year telecom at of more for in investments the shift the customers compared was primarily volume over last for to X% to higher production year. towards marketing. million due business, decrease in last XX%, and

XXXX. for in During the excuse year to, compared not quarter compared million profit to the saw second last $X.XX but cents, $X.XX million $X.XX of we and quarter, me, a million, million, same $X.XX, first the of quarter

in quarter. the per diluted share, basic a first we $X.XX compared basic and same $X.XX last quarter per to in diluted share earned and $X.XX of year basis, as On share and the

update provide Now I’d like a to review. and business

telecommunication into systems an customers we flexibility further expand to We diversify primarily areas. and have Tier-X sales increase in U.S. are up positive the to the revenue pleased the wrap and with in another now to to growing power quarter new due growth

to and moment a the spend key backlog our I’d dynamics. like discuss to

mentioned to range, million the manageable around million which need I believe telecommunications $X for I we our As is more bring $X a to into marketplace. backlog previously,

customers Given new more that front our well current our be manufacturing as as infrastructure, having achieved in needs, business our can we we have target pursue of to responsible backlog, us. now

to able people are accomplish target backlog We in our the over investing past by operations and year. our

in our discussed we Something last detail call. during

We both were customers and new to be in telecommunications growth excited demand able segments. to and facilitate our emerging

for to continued we power systems. in quarter, to property our order the increased During in and continue equipment invest demand and our meet expand to DC

that successfully be I seen a say this quarter. in provide his leveraging plan segment margins in will the pleased are made. how greater investments are am our detail executing our and on we have on But Raj we to we can that as profitability

of factors the that rollouts would One some have and had the new to products. address our we business is of today. impacting I like delays

We are months new support. scheduled between the resource conflict production releases. product and Delays of three engineering a approximately application sales behind our are result tooling development,

had programming We soon. HR hiring and coming management engineers personnel. electronic mechanical application drafting We up will for production start mechanical interviewing prioritized CAD and and again very

delays product our New had efforts. overseas affected

new waiting and part, the for clients For overseas hardware. embedded software most webpage our are

software and has We world application September has staff. see support the this from around travels application. a Military that with the can domestic controls with are my Polar launch overseas to U.S. doing our in I -- sales a increase power the Polar our and new webpage for hybrid early clearly

and our up products webpage of to and build and packages customers. PR, relations With public information its launch product upgrades, Polar our the also to its our new has

have us believe with a our remind which base broad incumbent growth. to in giving is business two that view power is growth technologies, like would and business new we I general of our telecom DC systems is over solution core that we better One emerging silos. two a opportunities. everyone I and

a you update However, I to segments. spend want few giving an on key minutes

having were international. we last -- Tier-X, categories, we and major telecom, mile, this review domestic as with domestic and Beginning segment three three,

and our Tier-X, are revenue. we The improving Tier-X reliability, driven in demand including in domestic the XG still factors, increase systems by DC key markets generator backlog DC reflected Regarding for network. power saw our from domestic an systems

to the Also, catch travel to the coming and and horizon data the sites, country Computing, saves for lot something across to new like else a ideas speeds its it the response upgrade we on audience. and requires and reach traffic local time have at XG, that’s power so see site’s the information. cell of the doesn’t Computing, the Edge This Edge targeted their requirements.

the least able to to of we on we Moving customers, domestic all are the last handle that mile occupied as to carriers. forward, these last Tier-X have the customers Tier-X resource. be our segment, sales But our resource moving at increasing are domestic mile

than small small urban the of generally need is the -- the too systems selling Tier-Xs. attention areas. communities, the in communities more to the catch ones typical the even are They major The areas power servicing rural greater for

were So before buying quantity. market were suppliers we the We Tier-X pursuing our some have from do market that us significant growth essentially segment. history in generators with see because they segment, buying that

regards services. I overseas their of In have time our gaining road amount time And -- a the with with customers, international to confidence move customers. time as telecom, potential as spending we we on and personally meeting with our been products forward are to more significant spend

lobster so as clearing very way. closing the close those goals accounts time goes out of to are we on of number We overseas, a are

in our vehicles. fueled gas specialty technology. prime Two a hybrid emerging we on for emerging situation propane power. One as growth a segment, DC and electric key our in have Moving to natural is focus growth is of hybrid four generators areas

three these be This have on, introducing or and to in current months in Toyota is market whereas a levels we or shows months pollutants. receiving, a will EPA possibly, as Bosch well see our U.S. that program over we the the testing now very from introduction The on low month within difficulty for markets. engines working the been next the year emissions and four headwind is on no we with two, which of approval, overseas or U.S. the

solar and solar DC our renewable new packs, our and energy lithium this hybrid of ion applications, support hand-in-hand will for gas battery diesel selling our and hybrid go with and systems. our generators new marketing units, units, for

mile everyone remind objectives share top key in that international our to increase our presence last markets. Lastly, strategic telecom and our like tier I the carriers are would with target providers, to market expand

product military, and production plant second comprehensive telecom to our to customer exposure markets, facilitate services customers increasing leading up roadmap. our To through to and power commercial, diversify more residential, technology including our capacity to and growth, our by opening industry providing our and and other and base R&D revenue technology by efficiency provide solutions

you call Raj. to like will our provide an on over He objectives. Now four operational to strategic update with the I’d hand

Arthur. Thank you,

four expand that Let just strategic Arthur objectives me mentioned. on those key

providers. the market share with one Tier-X is increase first U.S. The to telecom the

an saw the growing positive the sales U.S. and continue is earlier, So to quarter, momentum increase which we customers. mentioned and from then on result as last in we was Tier-X primarily to demand of the sales, build

of industry. in the happening I the want to dynamics on expand telecom some

Our and lead these competitive to goal programs get as more and qualified approved continues weeks a time to to for our and and more key with in reduce or driver business four Tier-X to is this less, get participate products more telecoms. within

market We us believe increase are will working to these we more leverage towards this give lead share our goal of times, reducing within which companies.

lead to across. demonstrate of progress for telecoms reminder, Tier-X year, our our programs multiple able This that will calendar so the year the in their outs participate the a quarter site following is us times. to enable the in critical the build is As third to reducing plan when it also customers

exposure base is customer our telecom our increasing comprehensive The and services to second customers globally. product our by applications and other markets and to diversifying more objective providing

grow XXXX. the telecom during to opportunities first of International continues half

in Our improved automation recent price markets. and our chain competitiveness investments in improves supply plant international

competitive business applications. we more solution customers’ countries new development in have a XX where we conducting are than believe for programs We

We are in cycle. of the sales various stages

cycles these different sales but long, stages be these Sometimes for we opportunities. have can

just technologies continues As applications. and opportunities marine, the also to we now believe our energy and force a the a category as at Arthur cater in stronger e-recharging us global more opportunities are beginning diversified to to market segments. to building emerging becoming allows growth company. pursue along markets diversified globally, capacity the military, covered expand Increased across with have capacity, earlier, the We significant products of and the renewable are sales our we production

go expanding Now objective, strategic third to the I capacity. will

on the the people, certainly not an with significant currently the we inflection done We the margins to we which in efficiencies have three made new we point contribution on achieving They to business believe modest capitalize are business short-term quarters, due a are tailwind our investments. the but markets. during to has investing investments created and the the reach in past

is I and will technology earlier our leading touch technology Arthur roadmap. power developments some to objective and them the last and technology provide on solutions here. R&D through industry The of detailed

along industry, lower telecom a new increased of the is more with battery storage one solutions. the storage compact First improved maintenance reliability, required. are and and need and types for In power solutions

modules and lithium development manage configurations we improved We ability electronics upgrades environmental are discharge. our systems introducing one-fourth to over-charge the lead developing and to controls cell have their to with are multiple ion temperatures our cell acid approximately with we acid battery management, market lead soon. them along be from for ion batteries They protection the will have -- battery in of space software significant -- adding and and standard chemistries. parallel Lithium along upgraded weight and storage

in this for of disruptions stored outages. in the Super The XXXX, for the integrated we need site. supply systems generators battery the backup Capacitors generator DC and energy for that supplies a fuel that with powered DC backup Super extended a the provides grid the to power energy needed Capacitors in the the in power supplied eliminate is introduced -- power cell power Also DC have our short-term

load, maintenance. up low Super and DC power load. to reliable The starts and very also takes provided Capacitors uninterrupted solution generator the over This the is electrical while compact, the has

Super solutions years been compact Capacitors as the three in This usage Super seven the energy has the years, reduction ago. of due storage Super significant cost reinvigorated last storage high EVs applications, companies DC devices, cost of we to Capacitors. backup from there and our of acceptance energy Capacitors a introduced have During has that in interest power market with the telecom reliable for together reduction

our fiscal half efforts during In as summary, we the of second XXXX. investments are the second move the quarter starting to results we and of into and see

a the regards all with a prices, new lead value company. issues, reducing to capacity, developing product -- products, of the the solving times, ticking of developing are our chain the our increasing thus supply sharpening and overall production We configuration boxes

Luis? now this turn CFO I the to will Luis, call over our financial for summary.

Thank you, Raj.

XX, for the $X.X months. months months XXXX, for ended three three Net and the totaled is performance quarter to an sales of June million, Now as financial increase compared I million for the result increase, last ended will Tier-X telecom to XX%, XXXX $X.X six ended a review the June XXXX. XX, which $XX The same period year. sales the $XX.X as to for in XX% sales six months a increase customers. of million is primarily more million, XX, the Net was compared June

backlog XX, XX, totaled June XXXX, compared at million XXXX, XXXX. June to sales at $X.X million XX, $X.X March million Our at and $XX.X as

Arthur we As to get more to giving mentioned flexibility. able earlier, been manageable down our have level, backlog a better

$X.X to XXXX. The the for percentage June attributable in higher the and same as June investments profit million net we XX, compared ended in profit profit the Gross million, leveraging Gross the during and XXXX, was was XX, business. the to to as made three sales compared $X.X in XXXX. ended quarter during XX.X% increased throughput, period to margin months period increase a the sales gross XXXX XX% in same XX% of in as

Gross the ended months six the increased months as June margin in to The XXXX XX% same for XX, the profit XX, during period XXXX. June in XXXX during million gross same XXXX. million compared $X.X million, the XX.X%, compared was to $X.X for to period ended as six $X.X

increase and Operating new customer The management expenses $X.X $X.X XX, in same expenses base. support compared for expenses increase QX six for million ended Operating rent of operating to part the during to activity, in our These million, XXXX. and office an QX, of XXXX strategy as for our production support XXXX, ramp-up in were million $X.X increase to production as added compared sales capacity June to addition to initiatives diversify the million were XXXX. $X.X ongoing the facility. period attributable year-over-year months our are related in our is our to

diluted $X.XX XXXX. and for XXXX. or per QX QX of is to a share, for when million the compared diluted diluted basic or totaled $X.X basic June the period income loss to ago. during negative net same $X.XX and per XXXX and in $X.XX shipments income in Net The ended share per totaled million to the compared basic to share same attributable improved or diluted XXXX during $X.X or a net per period Net year of income and compared million $X.X increase the income million production and share, basic $X.X efficiencies months six in XX, higher quarter net second $X.XX

Cash million XXXX at million, June $X.X XX, XX, totaled December at as $X.X compared XXXX. to

June -- inventory make cash production. XX, agreement During to under borrowings supplier our higher increase ended six operations funds Citibank. from a expenditures were operating used the we These of capital funded primarily and and our with to also level hand months support our on

had capital increase working As million, XXXX, working we of a June capital slight total XX, had XX, our $XX XXXX. $XXX,XXX at of which from December of

supplier Citibank the -- receivable the core During the made and AT&T to of to offer terms from sell time the executed certain with a affiliates. accounts company’s we of agreement invoices supplier QX agreement, related sales may to Under time Citibank. to XXXX, invoice its company

XX, of As XXXX, million were accounts Citibank company. discount $X.X of fees sold total for of the receivable June to $XX,XXX. was that Total by approximately transaction a

like to to would back Arthur. I Arthur? turn call Now, the

Luis, you, and Thank thank you, Raj. Yes.

we what multiyear have view emerging now cycle of patiently additional investing business telecom the growth and in we growth in as We and our opportunities. for been dimension preparing have a added

while building based balance have accomplish fundamentals. superior and product and tight We a our business to able on controls on keeping been this a cash

building you I again forward all growth to shareholders company and next for I’d am our with vision like profitable our sharing speaking quarter. a looking and to thank

to call I’d questions. this up to open Now, like Operator?

Irwin Instructions] our today [Operator will question you. Capital take from Thank first We Craig ROTH with Partners.

and questions. for taking evening thanks my Good

Do I that you wanted today? ask share you total a to So about backlog. backlog for total the number have can

No. We not. do

No.

number. is our since not an As it to unaudited us counselor advised share with the backlog has

point we comfortable this at only backlog So June of feel XXth. as time, releasing of Craig,

no in no backlog that backlog. thing number, of There is as cap because such part around there’s

Right.

I the am the bookings your of both number years you some revenue… to orders This a Can I your ‘XX have. flavor we give that quarter, near-term You with grand I below total some to for confidence you million. may about a in of three orders lowest When is expect at XQ looking counsel. us your review had number I that $X.X want that the see to quarter, see got have that book? maybe you or healthy revenue you have know but even

Yeah.

can see what … the there? continue, momentum us to and share bookings with you revenue

question. the for Thanks Sure.

or and of I where construction is one script think, three quarters Tier-X their start into And in the planning and for QX. -- typically building QX So, to that, us, the started the their quarter Arthur orders from telecoms QX rollouts QX and four QX mention typically start go QX next late they the their sites as builds quarters. in I the they and in it mid-to-late then

QX mid-QX, and orders lot typically a until orders. don’t lot of see don’t we a QX or So of see we

basically happened is for with what two which past has years the as consistent So, well.

problem Now has the the backlog as that But surfaced from being so that right so now the now. numbers number -- we last lower backlog numbers we such on are it a was deal high are are not visible, fulfilling the year, to seen with. backlog, had big because

bullish, forecasts we will years will where we companies for two a So -- that these we strong point building very share, year, be have forecast. which next very is the telecom still and the remains the to which to come

Okay.

expect… you do So

Yeah.

… the in September fast business turns quarter? contribution from

bleeped. get didn’t was I that, that

your -- fast ship book quarter? contribution Do you expect business and and in any book September from ship

do. Yeah. Yes. We

that, mentioned batteries, in have I the to to Raj’s also other competition as the XG one rollout, wanted response that, question, Craig, between systems, I before generators versus the add the to is your Yes. XG fiber my the the requirements budgeting the some of is rollout. power But speech there in quickly and read with there’s is thing radio

our So sets. our should much there they parts the little of on also confusion of to be as how generator a is customers size upgrading their

the sure So generator they of large they a are XG for their orders that One, delays and quantities. see But for the little away, rollout, two, the other need a are need we because market coming in answer how I Did factors. not their generator anticipated budgets DC will bit of that some we better? nor with hasn’t set two do competing or moment. at gone overall in on the

definitely Thank you, Yeah. No. That’s helpful. Arthur.

So is total in that press number is lands of backlog there quarter or how quarter you in then million the your shippable disclosed third fiscal ‘XX? release, component the $X.X that that the in fourth of maybe much in and a

XX%.

XX%. be that, this of will number, shipped majority A than be more a If quarter. it Craig, to were throw in would I

you taking Excellent. Okay. for questions. very Thank much my

Thank you.

you, Thank Craig.

We Penn now Marcin hear Capital. from with Robert

show the had see years haven’t and a over good on needed the are profitability seen a quarter, to Looks funnel. -- shareholders sales you International two productivity yet. of guys. like real ago enhancements Congratulations greater to you business, $XXX a starting that ratios. still some order million to I than

overseas a order to -- such do brought on and half years year to these to need So do that we need or go ago? do an to fanfare pay two change Thank round sales you. we all need to we we to out people get sell

Saturday traveling the know it’s am Okay, if don’t in week, last Sydney overseas information, you and people these if but Melbourne, -- meeting all just will Australia, customers. respond since into public I that’s back I was that, morning. don’t one and got to I I and I will and know town I

restructure support. would have is our that I we to do what say

from and crew We they do guidance we bit a overseas. to HQ the have customers reaching engineers. But great need got need to out push, directly our a with little sales more more

that overseas comfortable changing technologies. feel customers the their So we can about more make legacy

our more overseas. directors the put HQ, blame would on sales I than So,

Okay.

Yeah.

Okay.

really we to And products. need new our launch

new is features embedded webpage. products are Some customers of such our the in on, our what as counting these overseas

-- Okay,

there, add One Robert. more to thing

Sure. Sure.

lack thing give would also lot not more there guys of the to the our pursue of confidence add which capacity sales opportunities. is overseas far, capacity large so One to of a to

So, are resolving that too. we problem

inflection that reached have point. We

we said, more those I addressing comfortable As are needs.

Okay.

It’s the not and So of than order broad to A greater making or two-year rather progress, within ago, U.S. support. to really couple period, the abroad. pricing was revenues the abroad far dynamics are the opportunity it’s due you you need you years is said in that the from lack expected nature mentioned and industry in but significant expected on guys crossover competitive is of a a you three-year and than slower basis. a

revenue disquieting see So from markets? still no it to the significant is international very

that. more have agree to a close to to the say them you And support in do bring sales, with on I limited markets overseas too that pioneering We from fruition. at much would we HQ. I little into groups HQ on these order depended our bit with

right. Great. All Okay.

Okay.

much try skill it’s not You you to product all time any to to shuffle of set being me these the at much either, we to there new and business, but that continue the of in not sort with we as thing. are guys with markets. just sets grow? brings data know and too aren’t new the too seems for that’s into stretched are good as thin guys address worried But I then new you have of got kinds after. so introducing you so you have markets. what many lot don’t of back new the But which technology about a lost the specific same you good have long-term seeing that need -- mentioned, you you gotten going markets business, do chance to are you a going Is

that in currently need that thin, staff now in certain we to management is we too areas on and Let are the currently bring our infrastructure gaps that we in me question and right answer of to order have. additional fill

or products. public our Public attracting is engineering new great resource relations additional relations for gaps those talent. as and in also of help to introduce One marketing

groups, of the training sales training areas is our our in other training, documentation. some engineers, customers, And

So to side… little of on that. we still a have But ways on go bit the bright

All Okay. right.

talking to even of. and to few heard bright the markets, customers think talking side, I customers in countries that people I and have On am I am

The products profitability the will That’s that any use smaller field as two you far right. you business defense perfectly pay anybody they have. pursuing that as doesn’t and a the DC and the there the business power seems in business in offer a with in you? and That’s liability become for company feature to good. it years the the All set all attractive electronic seems the from to size Is that $XX three area the defense features business good be years and news. multiple you business guys million do with next have in that particularly for just reason set or

are Okay. from for currently In we That information doing the we with handle all September, hires the receiving we largest our country and which weeks, militaries, the of world. be in on DSEI our various four engineers over for list show, hooking shows in about was guests. world London, on are of responses military the to able up application is product some will the to the one be

are programs of NDA’s on have programs military is of place. militaries about like exactly never since long in to happen, that also they to exactly a Military of one discuss going going tied now. And that. because get fruition. But to are funded the know they to Military things programs when take hard going are you and the number when to stuff a are we politics, time reach

progress we see military batteries our lithium-ion But market do set. and the see a we new in huge with

-- mentioned military customer we new clients, we landed have domestically -- I foreign release, our a our power currently is overseas but -- embedded our webpage system not to first have. in As contract our for we hybrid to for going going a

time maybe very drum you right. DC Thank selling All what some you see year, much… Well, in up spend you in next the should here. can

you. Thank

good a on congratulations and … quarter.

you. Thank

remarks. conclude now today’s we over additional now [Operator Severson will I question-and-answer conference to Instructions] the for closing will And session. any Mr. turn

third today. again Great. Thank be the speaking you, on everyone, call. And you to us for to will forward joining conference looking we quarter

conference conclude call. That you. you does today’s Thank Thank your for participation.

now may disconnect. You