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Pioneering Technology Corporation: THE INVESTMENT CASE

Pioneering Technology earnings take flight as customers line up for its life-saving innovations

Relationships with some of the housing industry's leading suppliers help drive sales, profit
Pioneering Technology earnings take flight as customers line up for its life-saving innovations
INVESTMENT OVERVIEW: PTE The Big Picture
SmartBurner is one of Pioneering Technology's top products

Pioneering Technology Corp. (CVE:PTE) is the type of company investors dream of owning.  With earnings picking up steam thanks to a management team that grows sales while keeping costs under strict control, the company’s shares have been climbing to new all-time highs, finishing October up 560% from their starting point at the beginning of 2016.

Best of all for shareholders both existing and prospective, President and CEO Kevin Callahan makes a compelling case for why the expansion in earnings and share value is only just beginning.

“We are a technology and innovation company, not a marketing organization, so as our sales grow our earnings can really race because we don’t need to add much in the way of costs,” Callahan explains.

That position was clear in the financial results for the third quarter of 2016, and confirmed in preliminary estimates for the fourth quarter and full year.

Sales in the third quarter were 35% higher than in the same period a year earlier, coming in at $1.62 million.  Net income, however, soared 201% to over $240,000, and adjusted EBITDA advanced 257% to just shy of $500,000.

Preliminary estimates for the fourth quarter, reported October 19, were even better, with sales of $2.6 million producing net income of $640,000 and adjusted EBITDA of $902,000.

The concern with companies in the technology space is always that they might misread the market or be outrun by a smarter, faster team that nobody sees coming.  But in the case of Pioneering Technology, product demand is fueled by a need that will never change – saving lives by preventing fires (in homes, apartment complexes, senior housing facilities, college dorms…it’s a long list).

The company’s SmartBurner cooking system is an easy-to-install upgrade for conventional electric coil stoves.  Built-in temperature regulators and a proprietary design ensure the attractive elements never get so hot that if left unattended they might hit sustained temperatures high enough to cause a fire.

Not exciting because it is not a threat to most people, you think?  Think again.  National Fire Protection Association (NFPA) records indicate that 474 cooking-related fires are reported in the United States every day (that’s over 170,000 per year, with the Consumer Product Safety Commission estimating that another 4.7 million go unreported).  In 2014, the NFPA blamed cooking-related fires for 580 deaths, 5,333 injuries and over US$1.2 billion in direct property damage.

The other mainline for Pioneering Technology is Safe T Sensor, which connects to microwave ovens and interrupts power at the first hint of smoke, thereby helping prevent false alarms.  Following the installation of 4,479 Safe T Sensors at Ohio University, fire department responses fell by 92%, as fewer alarms went off in student housing.  At an estimated cost of US$2,000 for each false alarm the fire department responds to, a reduction of close to 300 responses each year prevents a lot of precious funds from being wasted.

Acknowledgement from multi-residential building managers that Pioneering Technology’s energy-smart equipment can deliver an almost immediate return on investment is a major factor behind the surge in top-line growth.  The company services hundreds of apartment management groups in the United States, the most recent agreement announced on October 6 with a property manager that oversees some 10,000 units.

To date, Pioneering Technology burners have been installed on around 150,000 stoves in North America, and their efficacy rate is 100%, meaning no fires have been reported from any of the ranges.

The other growth driver is expansion of the sales force through recent agreements with three of the largest suppliers to multi-residential facilities in the US: STAPLES Advantage, Wilmar/Interline Brands (owned by Home Depot) and, in Canada, HD Supply Canada.

“A couple of years ago we had five people selling our products,” notes Callahan.  “These new agreements mean that we have about 600 people actively selling on our behalf.  We are just seeing the front of edge of what that potential is, and it is driving some of the preliminary numbers we put out for the fourth quarter.”

Separately this summer, for the first time in Pioneering Technology’s history, an insurance company recognized the value of SmartBurner by offering a 7% annual premium discount to multi-residential policyholders who install the system in their homes.

It is all coming together for Callahan and his team, but to borrow a well-worn cliché, Pioneering Technology is an overnight success story that was 10 years in the making.

“What we do is not super exciting to some people and I can remember going to trade shows in years past and having folks look at me as if I was chasing something unrealistic,” Callahan remarks.  “But we address a massive market and beyond that have a positive impact on quality of life.  We knew if we stuck to our guns the right people would eventually see what we saw.”

Callahan says he expects strong results in 2017 as the switch from direct sales to a “national accounts model” leads to more contracts for installations across multi-residential property portfolios.

Looking further ahead, Pioneering Technology has its eye on expansion into the European market and last month entered a partnership with Innohome OY, the market leader in fire prevention technology and products for Europe.  Facilitating sales of complementary products in each other’s home markets while also coordinating to reduce potential duplication on the research and development front fits with Callahan’s penchant for increasing sales and controlling related costs.

Pioneering Technology is keen on the China market as well, where it has partners with connections to appliance industry participants worldwide.

His schedule has never been busier but at this point “the heavy lifting part is done,” according to Callahan.  “Things are starting to take off now, but we are still just scratching the surface of where our technologies and products have the potential to take us.”



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