Management to Host Conference Call Today
at 4:30 p.m. EDT
Polar Power, Inc. (NASDAQ:POLA), a global provider of prime, backup
and solar hybrid DC power solutions, reported its financial results
for the first quarter ended March 31, 2018.
Key First Quarter 2018 and Subsequent
Highlights:
- Telecommunications Market
- Currently an approved vendor to all of the top 4 U.S. wireless
carriers and to 35 overseas wireless carriers.
- Executed a three-year commercial agreement with a Tier-1
wireless carrier customer in U.S. to deliver DC power systems
nationally.
- During Q1 2018, this new customer remained our largest
customer, generating 64% of our net sales.
- Added to national ordering system for another Tier-1 wireless
carrier and anticipate initial purchase orders in the second
quarter of 2018, following a successful six-month testing and
evaluation period.
- Maintained progress with our legacy Tier-1 wireless carrier
after completing internal sales personnel changes with customer.
- During Q1 2018, this customer remained our second largest
customer, generating 27% of our net sales.
- Maintained a strong international sales group covering major
telecom carriers and tower operators. Full time Polar Power sales
executives and support in: Singapore, Dubai, Australia, Dominican
Republic, Romania, Poland, South Africa and USA:
- Received $0.1 million initial purchase order in Namibia through
Polar Power’s local joint venture partner.
- Positions the company as a complete turn key site solutions
provider.
- Received initial purchase orders in Sri Lanka for two sites
covering bad grid and off grid applications.
- Customer now procuring requirements for additional sites.
- Completed field trials in Malaysia, Japan and added multiple
new customers to field trial roster.
- Increased manufacturing infrastructure to support future demand
from domestic and international Tier-1 wireless carrier customers
including:
- Leased a new 29,000 square foot production facility to ramp up
production.
- Added key production staff to reduce lead times and gain
efficiencies.
- Military
- Received a 20-unit purchase order for a light weight mobile DC
power system for the U.S. Army robotic mule project after receiving
Phase II approval in Q4 2017.
- Product will supply power to Army Robotic and Autonomous
Systems (RAS), a global military strategy to remotely provide
surveillance, transportation and reconnaissance over wide areas,
thereby increasing standoff distances, survivability and reaction
times in the battlefield.
- Received a $0.8 million purchase order from a major U.S.
defense manufacturer of military vehicles.
- Product Development
- Continued to invest in research and development to meet new
customer requirements.
- Commenced marketing for lower cost Summit Series Hybrid DC
power system for off-grid and bad grid applications in
international markets.
- Commenced marketing for lower cost, compact 15kW horizontal DC
generator to compete with AC generator in the telecom replacement
market.
- Revamped key supplier discussions and relationships to improve
future margin profile on products in anticipation of increased
demand for the company’s backup DC power solutions.
- First Quarter 2018 Financial Highlights
- Net sales decreased 2% to $4.9 million in Q1 2018, as compared
to $5.0 million in Q1 2017.
- Net sales increased 22% in Q1 2018 to $4.9 million, as compared
to $4.0 million in Q4 2017.
- Backlog increased to $2.5 million at March 31, 2018 and is
currently $4.3 million at May 11, 2018.
- Gross profit as a percentage of net sales declined to 30% in Q1
2018, as compared to 39% in Q1 2017.
- Operating expenses increased to $1.8 million in Q1 2018, as
compared to $1.0 million in Q1 2017.
- Net loss was $0.3 million in Q1 2018, or ($0.03) per basic and
diluted share, as compared to net income of $0.6 million, or $0.06
per basic and diluted share, in Q1 2017.
Financial Results for the Three Months Ended March 31,
2018
Net sales totaled $4.9 million in Q1 2018, a decrease of 2%, as
compared to $5.0 million in Q1 2017. The decrease in net sales was
primarily a result of a price reduction in the company’s DC power
systems. Of note, the number of DC power systems sold in the first
quarter was 15% greater than in the same period in 2017.
Backlog totaled $2.5 million at March 31, 2018, as compared to
$1.8 million at December 31, 2017 and $1.0 million at March 31,
2017. As of May 11, 2018, backlog totaled $4.3 million, a 72%
increase as compared to March 31, 2018. The increase in backlog at
the end of the first quarter of 2018 as compared to the end of 2017
was attributable to increasing sales to the company’s new largest
Tier-1 wireless telecommunications carrier customer, as well as
increasing sales to military customers.
Gross profit decreased 23% to $1.5 million in Q1 2018, as
compared to $1.9 million in Q1 2017. Gross profit as a percentage
of net sales declined to 30% in Q1 2018, as compared to 39% in Q1
2017. The gross profit in Q1 2018 was negatively affected due to
the price reduction in our DC power systems that took effect in
March 2017, coupled with an increase in cost of materials as a
result of volatility in the steel market and other raw materials
markets. The company made substantial improvements in its
production facility and product line during 2017 and continues to
believe that gross profit margin will improve to above 35% in
subsequent quarters as the volume of sales increases.
Operating expenses increased to $1.8 million in Q1 2018, from
$1.0 million in Q1 2017. The increase in operating expenses was
primarily due to an increase in sales and marketing as well as
research and development expenses.
Net loss in the first quarter of 2018 totaled $0.3 million, or
($0.03) per basic and diluted share, compared to a net income of
$0.6 million, or $0.06 per basic and diluted share, in the first
quarter of 2017. The decline in net income is attributable to a
price reduction in the company’s DC power systems, coupled with
higher operating expenses.
Cash at March 31, 2018 totaled $11.7 million, as compared to
$14.2 million at December 31, 2017 with no long-term debt
outstanding. The decrease in cash as of the comparative periods
ended March 31, 2018 and December 31, 2017 was the result of a $1.8
million quarter over quarter increase to our accounts receivable
caused by the timing of delivery of a large order late in the first
quarter of 2018. We expect accounts receivable and cash flow to
normalize as we move through 2018.
Management
Commentary
“The first quarter of 2018 was highlighted with continued
sequential revenue growth, improved backlog and increased
diversification among our telecom, international and military
segments,” said Polar Power CEO, Arthur Sams. “In fact, 25% of our
backlog today is represented by the military segment and our
largest wireless carrier customer in 2016 now represents less than
27% of our total net sales. I am also happy to report that our
newly signed Tier-1 wireless carrier customer continues to ramp
nicely and is one of the main drivers behind our sequential backlog
improvement.
“The steps taken in 2017 are now starting to bear fruit across
all of our key verticals and we are starting to see initial
purchase orders commence in our international segment. During the
first quarter we received new purchase orders in our Namibia
project and two Sri-Lanka project sites. We expect these orders to
expand in the comping quarters as the project size represents large
site rollouts by our customers in these territories. The rest of
the world continues to develop as field trials in Malaysia and
Japan are being completed and we are seeing the addition of
multiple new customers to our international field trial roster.
“On the financial front, we did experience some impact to our
gross margin profile during the first quarter as volatility in the
raw materials market elevated prices and we continued to invest in
our production infrastructure to reduce lead times and to achieve
higher efficiencies. Our decision to invest in capacity was largely
based upon conversations with our Tier-1 wireless carrier
customers, prospects and international sales team and the
confidence we have in converting those requirements into sales
opportunities. We do believe as our volume of sales increases our
gross profit margin will improve to above 35%,” continued Sams.
“Another key initiative made during the first quarter to improve
our gross margin profile was aligning our conversations directly
with key suppliers to some of our most critical components. In
fact, today I am in Japan negotiating with our core engine
suppliers as I have a clear line of sight into our future demand.
This clarity helps negotiate better pricing and should result in an
elevated gross profit margin for our prime and backup DC power
solutions.
“As we enter the midpoint of the second quarter of 2018 our
optimism is supported with the increase in our backlog and the
potential commencement of initial orders with our newly signed
Tier-1 wireless carrier customer. We believe the combination of an
improved revenue trajectory, a diverse customer base, a healthy
balance sheet and conservative cash management will create
shareholder value in the quarters to come. We look forward to
sharing more on our developing story at soon to be announced
upcoming investor conferences and roadshows in key cities across
the United States,” concluded Sams.
Conference Call Details
Polar Power CFO Luis Zavala and COO Raj Masina will host the
conference call, followed by a question and answer period. Due to
international travel, CEO Arthur Sams will be unable to make
today’s earnings call, however Raj Masina will read Mr. Sams’
prepared remarks.
To access the call, please use the following information:
Date: |
|
Monday, May 14,
2018 |
Time: |
|
4:30 p.m. ET, 1:30 p.m.
PT |
Toll-free dial-in
number: |
|
1-800-239-9838 |
International dial-in
number: |
|
1-323-794-2551 |
Conference ID: |
|
8981569 |
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact MZ Group at 1-949-491-8235.
The conference call will be broadcast live and available for
replay http://public.viavid.com/index.php?id=129556 and via the
investor relations section of the Company’s website at
www.polarpower.com.
A replay of the conference call will be available after 7:30
p.m. Eastern time through May 28, 2018.
Toll-free replay
number: |
|
1-844-512-2921 |
International replay
number: |
|
1-412-317-6671 |
Replay ID: |
|
8981569 |
About Polar Power, Inc. Gardena,
California-based Polar Power, Inc. (NASDAQ:POLA), designs,
manufactures and sells direct current, or DC, power systems,
lithium battery powered hybrid solar systems for applications in
the telecommunications market and, in other markets, including
military, electric vehicle charging, cogeneration, distributed
power and uninterruptable power supply. Within the
telecommunications market, Polar’s systems provide reliable and
low-cost energy for applications for off-grid and bad-grid
applications with critical power needs that cannot be without power
in the event of utility grid failure. For more information, please
visit www.polarpower.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995This news release contains
certain statements of a forward-looking nature relating to future
events or future business performance. Forward-looking statements
can be identified by the words “expects,” “anticipates,”
“believes,” “intends,” “estimates,” “plans,” “will,” “outlook” and
similar expressions. Forward-looking statements are based on
management’s current plans, estimates, assumptions and projections,
and speak only as of the date they are made. With the exception of
historical information, the matters discussed in this press release
including, without limitation, Polar Power’s belief that it is
positioned for substantial revenue growth in 2018 and beyond; Polar
Power’s expectation that sales to its customers will increase over
the course of the next several months; the expectation that Polar
Power’s gross profit as a percentage of net sales will return to
within a range of 36%-42%; Polar Power’s anticipation that it will
level the playing field in its sales to customers in Australia;
Polar Power’s expectation that U.S. military and federal government
will become a material driver of new revenue growth in the years to
come; and Polar Power’s belief that its strong balance sheet,
conservative cash management strategy, improved corporate
governance team and product approval by its key customers will
yield both short-term and long-term success are forward-looking
statements and considerations that involve a number of risks and
uncertainties. The actual future results of Polar Power could
differ from those statements. Factors that could cause or
contribute to such differences include, but are not limited to,
adverse domestic and foreign economic and market conditions,
including demand for DC power systems; raw material and
manufacturing costs; changes in domestic and foreign governmental
regulations and policies; and other events, factors and risks. We
undertake no obligation to update any forward-looking statement in
light of new information or future events, except as otherwise
required by law. Forward-looking statements involve inherent risks
and uncertainties, most of which are difficult to predict and are
generally beyond our control. Actual results or outcomes may differ
materially from those implied by the forward-looking statements as
a result of the impact of a number of factors, many of which are
discussed in more detail in our reports filed with the Securities
and Exchange Commission.
Media and Investor Relations:Chris
Tyson Managing Director MZ North AmericaDirect:
949-491-8235chris.tyson@mzgroup.us www.mzgroup.us
Company Contact:Polar Power, Inc.249 E. Gardena
Blvd.Gardena, CA 90248Tel:
310-830-9153ir@polarpowerinc.comwww.polarpower.com
POLAR POWER INC. |
CONDENSED BALANCE SHEETS |
|
March 31, 2018 |
|
December 31, |
|
(Unaudited) |
|
2017 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and
cash equivalents (including restricted cash of $1,001,551 and
$1,001,180 at March 31, 2018 and December 31, 2017,
respectively) |
11,711,172 |
|
14,201,163 |
Accounts
receivable |
4,803,925 |
|
3,058,266 |
Inventories, net |
5,429,747 |
|
5,487,053 |
Prepaid
expenses |
527,830 |
|
236,670 |
Refundable income taxes |
629,316 |
|
629,316 |
Total
current assets |
23,101,990 |
|
23,612,468 |
Other
assets: |
|
|
|
Property
and equipment, net |
802,789 |
|
824,076 |
Deposits |
88,496 |
|
87,496 |
Total
assets |
23,993,275 |
|
24,524,040 |
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities |
|
|
|
Accounts payable |
454,187 |
|
757,753 |
Customer deposits |
106,596 |
|
40,039 |
Accrued expenses and
other current liabilities |
613,952 |
|
586,391 |
Current portion of
notes payable |
102,483 |
|
110,237 |
Total current
liabilities |
1,277,218 |
|
1,494,420 |
Notes payable, net of
current portion |
107,338 |
|
126,818 |
|
|
|
|
Total liabilities |
1,384,556 |
|
1,621,238 |
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
Preferred stock,
$0.0001 par value, 5,000,000 shares authorized, no shares issued
and outstanding |
— |
|
— |
Common stock, $0.0001
par value, 50,000,000 shares authorized, 10,143,158 shares issued
and outstanding |
1,014 |
|
1,014 |
Additional paid-in
capital |
19,275,674 |
|
19,250,955 |
Retained earnings |
3,332,031 |
|
3,650,833 |
Total stockholders’
equity |
22,608,719 |
|
22,902,802 |
|
|
|
|
Total liabilities and
stockholders’ equity |
23,993,275 |
|
24,524,040 |
POLAR POWER INC. CONDENSED STATEMENTS
OF OPERATIONS |
(Unaudited) |
|
Three Months Ended |
|
|
March 31, |
|
|
2018 |
|
2017 |
|
Net
Sales |
$ |
4,871,912 |
|
|
$ |
4,966,981 |
|
|
Cost of
Sales |
|
3,388,274 |
|
|
|
3,050,251 |
|
|
Gross
Profit |
|
1,483,638 |
|
|
|
1,916,730 |
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
Sales and
marketing |
|
610,337 |
|
|
|
195,094 |
|
|
Research and
development |
|
464,101 |
|
|
|
76,003 |
|
|
General and
administrative |
|
727,786 |
|
|
|
671,425 |
|
|
Depreciation and
amortization |
|
8,731 |
|
|
|
7,734 |
|
|
Total operating
expenses |
|
1,810,955 |
|
|
|
950,256 |
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
from operations |
|
(327,317 |
) |
|
|
966,474 |
|
|
|
|
|
|
|
|
|
|
|
|
Other (expenses)
income |
|
|
|
|
Interest expense |
|
(3,010 |
) |
|
|
(4,776 |
) |
|
Other income
(expense) |
|
11,525 |
|
|
|
2,462 |
|
|
|
|
|
|
|
|
|
|
|
Total other
(expenses) income, net |
|
8,515 |
|
|
|
(2,314 |
) |
|
|
|
|
|
|
Income (Loss)
before income taxes |
|
(318,802 |
) |
|
|
964,160 |
|
|
Income tax
provision |
|
- |
|
|
|
371,280 |
|
|
Net Income
(Loss) |
$ |
(318,802 |
) |
|
$ |
592,880 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per
share – basic and diluted |
$ |
(0.03 |
) |
|
$ |
0.06 |
|
|
Weighted average shares
outstanding, basic and diluted |
|
10,143,158 |
|
|
|
10,143,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POLAR POWER INC.CONDENSED
STATEMENTS OF CASH FLOW(Unaudited) |
|
|
|
Three Months Ended |
|
March 31, |
|
2018 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
Net Income (Loss) |
$ |
(318,802 |
) |
|
$ |
592,880 |
|
Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities: |
|
|
|
Fair value of vested
stock options |
|
24,719 |
|
|
|
— |
|
Depreciation and
amortization |
|
76,350 |
|
|
|
59,174 |
|
Changes in operating
assets and liabilities |
|
|
|
Accounts receivable |
|
(1,745,659 |
) |
|
|
1,055,954 |
|
Inventories |
|
57,305 |
|
|
|
(719,104 |
) |
Prepaid
expenses |
|
(291,160 |
) |
|
|
(98,912 |
) |
Deposits |
|
(1,000 |
) |
|
|
— |
|
Deferred
tax assets |
|
— |
|
|
|
(62,656 |
) |
Accounts
payable |
|
(303,566 |
) |
|
|
306,949 |
|
Income
taxes payable |
|
— |
|
|
|
433,936 |
|
Customer
deposits |
|
66,557 |
|
|
|
96,250 |
|
Accrued
expenses and other current liabilities |
|
27,561 |
|
|
|
(67,960 |
) |
|
|
|
|
|
|
|
|
Net cash (used)
provided by operating activities |
|
(2,407,695 |
) |
|
|
1,596,511 |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
Acquisition of property
and equipment |
|
(55,062 |
) |
|
|
(55,957 |
) |
Net cash used in
investing activities |
|
(55,062 |
) |
|
|
(55,957 |
) |
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
Repayment of notes |
|
(27,234 |
) |
|
|
(31,979 |
) |
Net cash used in
financing activities |
|
(27,234 |
) |
|
|
(31,979 |
) |
|
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents |
|
(2,489,991 |
) |
|
|
1,508,575 |
|
Cash and cash
equivalents, beginning of period |
|
14,201,163 |
|
|
|
16,242,158 |
|
Cash and cash
equivalents, end of period |
$ |
11,711,172 |
|
|
$ |
17,750,733 |
|
|
|
|
|
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