PPSI

Greetings. And welcome to the Pioneer Power Solutions, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star and then 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Corbin Woodall of Hayden HR. Thank you, and you may begin.

Thank you, Claudia. The call today will be hosted by Nathan J. Mazurek, Chairman and Chief Executive Officer, Walter Michalec, Chief Financial Officer, and Geo Murickan, President of Pioneer eMobility. On the call today, we will review the third quarter financial results and recent business highlights. Following this, there will be a Q&A session open to participants on the call. Before we get started, I would like to remind participants this call is being recorded. 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, November 13, which applies to the content of this call. I would now like to turn the call over to Nathan J. Mazurek, Chairman and CEO. Nathan, please go ahead.

Thank you, Corbin. Good afternoon, everyone, and thank you for joining us today. The third quarter was a highly successful period for Pioneer Power Solutions, Inc., highlighted by key equipment deliveries, strong order momentum, and significant penetration into the distributed power space. These achievements, combined with a robust project pipeline and Pioneer's continuing investment in product development, position us to realize our full year 2025 growth objectives and position us for accelerated growth in 2026. For the third quarter, we generated revenue of $6.9 million, an increase of 7.4% year over year, driven primarily by an increase in service sales from our critical power business. Year to date, revenue reached $22 million, up 68% compared to the same nine-month period last year, driven primarily by demand for our eBoost mobile charging solutions. These results reflect our ongoing success in expanding our product scope, broadening our customer base, and capitalizing on large new vertical markets. Specifically, in the third quarter, we completed delivery of the last five eBoost units of a 25-unit order for a landmark school district project totaling $1.3 million. This project represents one of the largest school bus fleet electrification initiatives in the country and underscores our ability to deliver turnkey mobile charging solutions for heavy-duty, high-utilization electric vehicles. This milestone strengthens our position as a leader in fleet electrification and highlights the growing demand for mobile, high-capacity energy solutions in the public sector. In the broader fleet electrification market, we delivered our eBoost Mobile OpenFlex unit to the city of Portland. This 175-kilowatt multifunctional unit features a level three fast charger, multiple level two chargers, and a grid-tie transfer switch. Pioneer Power Solutions, Inc.'s ability to design and implement the power-dense, flexible mobile power system further solidifies our reputation as a trusted vendor of complex, resilient, distributed power. Also in Q3, we received a $725,000 order from the city of Long Beach, California, for an eBoost mobile stretch unit, a specialized 250-kilowatt off-grid EV charging system, which is scheduled to ship before year-end. Securing this project also highlights Pioneer Power Solutions, Inc.'s ability to craft custom, complicated, and value-driven power charging solutions. The last mile delivery market continues to represent strong demand for eBoost equipment. Following a successful pilot during the peak holiday shopping season last year, one of the world's largest online retailers placed a follow-up order for new eBoost units, which were delivered in the third quarter and indeed confirms the success of the initial pilot last year. Based on current discussions with this retailer, we expect additional eBoost units to be deployed at many depots and distribution centers in 2026. Also, shortly after quarter-end, our strategic partner, SparkCharge, placed an additional order for four new eBoost pure energy 275-kilowatt units, valued at $1.6 million, as part of a multiyear purchase plan reinforcing eBoost's critical role in supporting rideshare and autonomous vehicle electrification. These units are also expected to be delivered by year-end. More importantly, Q3 marks the actualization of Pioneer Power Solutions, Inc.'s two most impactful growth initiatives. First, our natural expansion into the distributed power market and second, the technical completion of our residential power/charging unit originally known as HomeBoost, now rebranded as PowerCore. Pioneer's expansion into the distributed power market was validated in Q3 with over $700,000 in product deliveries and an additional $750,000 in new purchase orders. The expertise gained in designing and integrating complex mobile power solutions with the original launch and evolution of the eBoost platform enabled us to smoothly transition to a pure custom distributed power suite of solutions. Indeed, Q3 deliveries of our distributed power solutions cut across a swath of verticals, including a large shopping center, a large condominium tower, and a solid waste processing facility. The new $750,000 distributed power order we received is from one of the largest fitness chains in the United States for a peak shaving application at its flagship facility. Together, these wins underscore the increasing demand across various sectors for fast deployable flexible power solutions. Building on this early success, we are expanding our focus to serve the broader distributed power market and are excited to introduce a pre-engineered scalable power block system designed to meet the increasing energy requirements of large data centers, industrials, universities, and hospitals. Our 1.25-megawatt natural gas-fired, resilient, and modular power solution is engineered to provide reliable, redundant, efficient power for critical needs and the new surge in demand for on-premise compute power needs. We anticipate launching this innovative system by the end of 2025, exponentially expanding our ability to address the overall distributed power space. Secondly, within the broadened product portfolio, our HomeBoost power unit product is being rebranded as PowerCore and is on track to launch later this year on December 15 and December 17 at a scheduled event hosted by Pioneer Power Solutions, Inc. at our Miami, Florida facility. We initially introduced HomeBoost as a residential product that seamlessly integrates distributed generation with EV charging. In its original form, HomeBoost offered homeowners the ability to combine prime power generation, natural gas or propane, with advanced fast EV charging and an automatic transfer switch to manage utility outages or go into island mode during extended grid outages. With the transition to the PowerCore branding, the solution is positioned as a scalable, always-on power platform that integrates natural gas power generation and, at the user's discretion, combines fast DC charging into a single system architecture. This elevated design is not just aimed at the residential segment, but indeed also at light commercial and other resilience-demanding markets, where continuous reliable on-site power and EV charging are critical but not easily available. This offering essentially provides the user with their own natural gas-powered power plant. We continue to receive positive feedback from early customer demonstrations, and we believe that PowerCore will be a key growth driver for Pioneer Power Solutions, Inc. in 2026 and beyond. PowerCore materially expands Pioneer Power Solutions, Inc.'s addressable market, moving us beyond large fleets and municipal deployments to permanent high-value installations that demand both power generation and/or high-capacity EV charging. This product represents the next chapter in our evolution toward providing fully resilient distributed power solutions. Finally, there are several countries around the world that are currently experiencing a high EV growth market supported by policies and incentives similar to US policies back in 2021. Pioneer Power Solutions, Inc. is actively engaging with several charging businesses in these thriving international EV markets through an eBoost franchise-type model where we are able to leverage our existing engineering and development expertise to help local partners achieve similar success. These strategic alliances will enable faster adoption of EVs in those markets and provide Pioneer Power Solutions, Inc. an additional stream of revenue from licensing, technology transfer, and revenue share models. In summary, the third quarter reflects both continued operational execution and important strategic progress. We are expanding our reach, diversifying our revenue mix, and strengthening our foundation for long-term growth. Based on the momentum we have built and our visibility into the pipeline, we are reaffirming our full year 2025 revenue guidance of $27 million to $29 million, representing approximately 20% year-over-year growth. With that, I'll turn the call over to Walter for a detailed review of our financial results.

Thank you, Nathan, and good afternoon, everyone. Please be advised that we have included a non-GAAP financial measure of operating income or loss from continuing operations. This 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, November 13, 2025, for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website at 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 US GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with US GAAP in order to provide a more complete understanding of the trends affecting the business. Third quarter revenue was $6.9 million compared to $6.4 million in the year-ago quarter, an increase of approximately 7%. The increase was primarily due to an increase in service sales from our Critical Power Solutions business. Third quarter gross profit was $640,000 or a gross margin of approximately 9% compared to a gross profit of $1.5 million, a gross margin of approximately 20% in the third quarter of last year. The decrease in gross profit was primarily attributable to an unfavorable sales mix. During 2025, Pioneer Power Solutions, Inc. incurred an operating loss from continuing operations of $1.4 million compared to an operating loss from continuing operations of $714,000 in the third quarter of last year. Additionally, during 2025, Pioneer Power Solutions, Inc. incurred a non-GAAP operating loss from continuing operations of $196,000, which excludes corporate overhead expenses, R&D expense, depreciation and amortization, and nonrecurring professional fees, compared to a non-GAAP operating income from continuing operations of $865,000 for the same quarter in 2024. Net loss from continuing operations for 2025 was $1.8 million compared to a net loss from continuing operations of $738,000 during 2024. Taking a look at our balance sheet, as of September 30, 2025, we had cash on hand of $17.3 million, zero bank debt, and working capital of approximately $22.8 million, compared to $41.6 million of cash on hand, zero bank debt, and working capital of $26.7 million as of December 31, 2024. The cash on hand as of September 30, 2025, represents cash per share of approximately $1.56. The decrease in our cash on hand compared to the prior year-end is primarily due to the payment of a one-time special cash dividend of an aggregate of $16.7 million in January and the payment of federal and state income taxes totaling approximately $4 million during the second quarter. Today, we are reaffirming our guidance for revenue of $27 million to $29 million for the full year of 2025, which represents year-over-year growth of approximately 20%. This concludes my remarks, and I will now turn the call back over to Nathan.

Operator, you can open the lines for questions.

Thank you very much. At this time, we will conduct a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. Please limit your questions to one question and one follow-up question. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star key. One moment, please, while we poll for questions. The first question comes from Amit Dayal from H.C. Wainwright. Please proceed with your questions, Amit.

Thank you. Good afternoon, everyone. Thank you for taking my questions. Nathan, looks like another strong quarter. You know, what's interesting is your end markets are getting increasingly diverse. I'm just wondering, you know, how you are creating your marketing awareness to reach across, you know, multiple segments that you are now playing in?

So excellent question. So, I mean, we started turning our attention to it because so many of the applications that we've been working on end up, you know, the heart of the expertise is really delivering this power. Adding a charger is an expertise or a series of chargers. But not as complicated all the time. To date, we've been doing it almost in a haphazard way. People either it's you know, we're being recommended from others based on other projects that we've done, or the same contractor or the same engineering firm. And then we had some significant success already in the third quarter. Which really means that we need to put together a very, very focused team to focus on certain verticals. And that's what we plan on doing. One on the industrial side, and the other really focused on the on the larger modular edge computing type data center, where a 1.4 power block under the right circumstances that's quickly deployable you know, we should be benefiting from and offering some sort of a value proposition there.

Interesting. Thank you for that, Nathan. Then just one on the gross margin side. You attributed the softness this quarter to the sales mix. Do you expect some bounce back in the next quarter?

Yeah. So, I mean, we you know, we're already experiencing it, but, yes, we expect a bounce back. And you're right. You know, the issue was the gross margin. The last five units for the for the large school district that we did were were not good. Not good for us even below what we'd experienced earlier in the year for whatever those reasons were. And it's not important to discuss openly here. But that that hurt. City of Portland did achieve more or less the margins that we had set out for it, a little bit less against some execution issue, but overall okay, but not enough to command gross margins that we did the other quarter. Fourth quarter, the mix is much more favorable to us. And and we expect them to bounce back.

Okay. Thank you, Nathan. I'll get back in queue.

Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star and then 1. If you'd like to ask a question, please press star and then 1. The next question comes from Rob Brown from Lake Street Capital. Please proceed with your questions, Rob.

Good afternoon. Hey, Rob.

Hi. My first question is on the online retailer project and the expansion there. You talked sort of some opportunity in 2026. Could you kind of outline the scale of that relative to sort of what you've done or maybe the the planning steps that need to happen here and and how that might look next year?

Yeah. I mean, to date, what we've been doing with them is short term rentals. You know, we did a short term, a ninety day rental last year at the end of the year for the holiday period to help them with that and and let them sort of prove it out under the more intense part of their year. This year, it's it's it's a six month rental, so the revenue is is relatively small. And the discussions are, you know, pending, again, that these units work as we plan as the initial one did. They're talking about probably five to 20 units next year from a for a purchase.

Okay. And she's moving moving from rental to a purchase model.

Yeah. So okay. Great. Great. And then on the on the on the modular sort of data center project, you talked a little bit about here. But but that's how do you kinda see that opportunity? What what's sort of the the the ideal application there? And I guess, sort of that larger megawatt unit is I assume, a fairly large, ASP on that, but you can give a sense sort of the range of of what those units, sell for?

Yeah. So so we're gonna do a formal kind of unveiling of this before the end of the year. You know, with the with the team around it and its own sort of cache. But I'll let let Geo give you a little I don't know. Give give Rob a little you know, a a a concise teasing view of it now, if you can, for in in ninety seconds.

Yeah. Thank you, Nathan. Rob, so the what we have in the market engagement we've done we have seen in the data center market, the move to AI compute applications And one of the more immediate needs has been the need to test the AI compute loads because they are they have a very variant use compared to normal cloud compute load the data centers have today. So in order to test these, they need a lot of smaller systems on data center premises. That are behind the meter powered and can be actuated in a four to six months time frame. In order for them to scale and plan for the bigger data center cycles. Beyond that, there are also industrials who are adding critical power applications across different retail sectors. So those are some of the markets that we are addressing in the next one to three years.

Okay. Excellent. Thank you. I'll turn it over.

Thank you so much. Ladies and gentlemen, we have reached the end of the question and answer session. And now I'd like to turn the call back to Nathan J. Mazurek for closing remarks. Thank you, sir.

Thank you, Claudia. This quarter's results reflect strong execution and meaningful progress in expanding into new markets including distributed power. With a robust pipeline, strategic product launches like PowerCore, and continued operational momentum, we are well positioned to drive growth and achieve our full year 2025 objectives. Thank you for your continued support. We look forward to updating you on our next earnings call.

Thank you very much. Ladies and gentlemen, that does conclude today's call. Thank you very much for joining us. You may now disconnect your lines.

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 for a host of government-type agencies, transit authorities, robotaxi enterprises, shipping ports and several major national package delivery providers as they all advance their commitment to electrifying their own fleet operations. The electric school bus market, in particular, continues to show strong momentum and remains a key focus area for us. These end customers are fully committed to a zero-emission future and typically have already ordered and received a significant number of either buses, vans and other fleet vehicles, making a return to traditional vehicles highly unlikely. We also see immediate and long-term growth potential in autonomous mobility, particularly the burgeoning robotaxi segment, which is essentially an all-electric market. As the adoption of robotaxis accelerates, the demand for flexible, scalable charging infrastructure is growing in parallel. We believe Pioneer's mobile charging platform is uniquely suited to meet the needs of this market, offering an ideal solution for decentralized on-demand EV charging. Simply put, the growth of robotaxis aligns directly with Pioneer's growth. At the end of the second quarter, our total backlog was approximately $18 million, representing a decline of 23% compared to the prior quarter, primarily due to the fulfillment of several larger orders that contributed to our strong revenue growth year-to-date. Beyond the current backlog, we are seeing continued momentum in our growing sales pipeline. We are actively engaged in discussions with dozens of municipalities, transit authorities, shipping ports, autonomous driving enterprises and several major national package delivery providers. In addition to our core e-Boost platform, we are preparing to launch our residential and light commercial power system, HOMe-Boost, in the second half of 2025. HOMe-Boost integrates a prime-rated natural gas engine with optional DC fast charging, giving homeowners and small facility owners the ability to generate 100% of their energy and charging needs 24/7 if desired or needed. HOMe-Boost essentially functions as a private power plant, operating independently or alongside the grid and is ideally suited for both residential and critical commercial loads such as medical facilities and small-scale manufacturers. Early feedback from prospective customers and partners has been overwhelmingly positive, and we believe this innovative product will be a key growth driver for 2026 and beyond. The introduction of HOMe-Boost is a significant expansion of our addressable market and product scope. In contrast to e-Boost, where e-Boost charging features lead the value proposition to the customer, HOMe-Boost's delivery of pure resilient power leads HOMe-Boost value proposition. Fast DC charging is an additional feature of the unit. In summary, the second quarter marked another meaningful step towards a step forward in our growth trajectory and path to profitability. Our performance reflects not only strong execution and increasing operational efficiency, but also the accelerating demand for innovative off-grid power solutions across multiple sectors. Looking ahead, we remain focused on scaling our core business, delivering on our backlog and planning the launch of HOMe-Boost. Our strong performance in the first half of the year, combined with increasing visibility into the second half, reinforces our confidence in both the strength of our business and the demand environment. With that, I will turn the call over to Walter.

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 million operating loss from continuing operations recorded during the second quarter of last year. During the second quarter of 2025, Pioneer generated non-GAAP operating income from continuing operations of $218,000, which again excludes corporate overhead expenses, R&D expense, depreciation and amortization and nonrecurring professional fees as compared to a non-GAAP operating loss from continuing operations of $137,000 for the same quarter in 2024, a year-over-year improvement of $355,000. Net loss from continuing operations for the second quarter of 2025 was $1.2 million compared to a net loss from continuing operations of $1.7 million during the second quarter of 2024, an improvement of approximately $500,000. Taking a look at our balance sheet. As of June 30, 2025, we had cash on hand of $18 million, 0 bank debt and working capital of approximately $24 million compared to $41.6 million of cash on hand, 0 bank debt and working capital of $26.7 million as of December 31, 2024. The cash on hand as of June 30, 2025, represents cash per share of approximately $1.62. The decrease in our cash on hand during the first half of the year is primarily due to the payment of a onetime special cash dividend of an aggregate of $16.7 million in January and the payment of federal and state income taxes totaling approximately $4 million during the second quarter. Today, we are reaffirming our guidance for revenue of $27 million to $29 million for the full year of 2025. This concludes my remarks. I will now turn the call back over to Nathan.

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.