Polar Power

Company Overview

Polar Power Inc. (NASDAQ: POLA) designs, manufactures, and sells direct current (DC) power systems, power generators, battery storage, renewable energy, and cooling systems for backup power and off-grid power generation applications, including telecom (the largest vertical at >90% of sales), auxiliary power generation for military vehicles, power generation for autonomous vehicles, electric vehicle rapid-charging, marine and RV, in addition to power for industrial and residential applications.

Through its DC power systems, Polar provides energy service to applications that do not have access to the utility grid (prime power applications) or have critical power needs and cannot be without power in the event of utility grid failure (backup power applications).

The Technology

DC power offers some unique advantages over alternating current (AC) power solutions. DC power is significantly more energy efficient than AC power, and DC motors and appliances have higher efficiency and power-to-size characteristics. DC power eliminates the 5% to 20% inherent loss when AC power is converted to DC power. DC power is naturally compatible with battery storage and renewable sources of energy such as solar and wind. Solar PV is inherently a DC energy supply as are batteries, telecom radios, and LED lighting, making DC a more naturally compatible interface.

According to ReportLinker, the DC power systems market size is expected to reach $5.5 billion in 2025 from $4.2 billion in 2019. In 2021, the telecom market is anticipated to post higher growth rates to recover from lower infrastructure construction during 2020 caused by pandemic. During 2021, increased investments in upgrading existing 4G sites combined with growth in 5G infrastructure development in the US markets is anticipated to be a key growth driver for the company.

End Markets and Applications

The company’s revenue today is dominated by the telecom sector. For the three months ended September 30, 2020, 41% and 27% of revenues were generated from Polar’s two largest customers, both being wireless telecommunications carriers. The primary exposure is with US carriers, although the company does have an international growth strategy in place.

Telecom: 5G networks demand higher network reliability, which in turn continues to drive demand for backup generators. Polar’s line of backup power generator products are available in various fuel types are designed to be 40% more compact than equivalent AC generators. Polar works with all major carriers.

EV Charging: With the rapid growth of the EV sector and anticipated investments by federal governments into charging infrastructure, the next four years may see increased demand for DC power systems for rapid-charge applications in both residential and public sector charging stations. Polar DC power systems configured for rapidcharge application can also be used for emergency roadside assistance applications assisting EV users and supporting stationary charging stations along remote stretches of highway. As the adoption of EVs reaches a critical mass, requirements for EV charging should grow rapidly. Additionally, Polar charges can operate off of natural gas or propane in weak grid or no grid areas as well as enabling peak shaving. Additionally, the waste heat can be used in CHP solutions increasing the energy efficiency further.

Nano/Microgrids: Distributed energy resources (DER) are seeing rapid growth around the world. A key componentof such a system is a generator that easily integrates into renewable and energy storage resources. Polar’s DC technology platform offers some distinct advantages, including footprint, reliability, and efficiency. This is a natural application for Polar, and it has already been used in this market. However, the company needs a much more formalized go-to-market strategy and is exploring a variety of options to break open this large commercial market. Polar is developing a 50kW followed by a 200-kW product that the company believes will be more competitive for larger power needs.

Financial Summary and Balance Sheet

Revenues for 3Q20 were $2,501, down 64% versus the same period last year. The decline was due to Covid-19 as well as Tier 1 telecommunications customers shifting their investments to the deployment of new 5G networks instead of investing in backup power generators. Backlog was $3,411, composed of 59% US telecommunications customers, 20% international telecom, 10% military, and 11% other. EPS loss for the quarter was $(0.42) compared to $0.00 last year. Available capital resources at the end of 3Q20 were $2,071 in cash and cash equivalents, plus the company has access to a credit facility based on receivables. In September 2020, Polar received net proceeds of $2,812 from a private placement of securities and $861 from warrants exercised.