Polar Power, Inc. (NASDAQ: POLA) reported Q1 EPS of ($0.03), $0.02 worse than the analyst estimate of ($0.01). Revenue for the quarter came in at $4.8 million versus the consensus estimate of $4.5 million.

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.

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.

For earnings history and earnings-related data on Polar Power, Inc. (POLA) click here.