Power Solutions International, Inc. (PSIX) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Power Solutions International, Inc. It is now my pleasure to turn today's meeting over to Dr. Sun. The floor is yours.

Thank you. Good morning, and welcome to the 2020 Annual Stockholder Meeting of Power Solutions International. I'm Shaojun Sun, Chairman of the Board of PSI. It's my pleasure to welcome you here today for this meeting and to introduce John Miller, PSI's Chief Executive Officer and President, who will serve us our moderator today. John?

Thank you, Chairman, and welcome, everyone. Thank you for joining us today. We're excited to be hosting our virtual meeting which allows us to safely hold the annual meeting, while also being more inclusive in reaching a greater number of stockholders. During the business portion of our meeting, we will be providing some time for comments and for questions that you may have related to the proposals put forth in the proxy. So we may not be able to answer every question. We'll do our best to provide a response to as many as possible and welcome you to contact us after the meeting to address any unanswered questions. In keeping with the digital approach to this year's meeting, it's now shortly after 8:00 a.m. Central time on December 15, and this meeting is officially called to order. I would now like to introduce the members of PSI's Board of Directors. You've already heard from Dr. Sun. Dr. Sun has served as the company's Chairman since April 1, 2017. In addition, he is a member of the Compensation Committee and Nominating and Governance Committee. Dr. Sun is currently, Director of Weichai Group Holdings Limited, a multi-field and multi-industry international group, which owns 6 business segments: powertrain, intelligent logistics, automotive, construction, machinery, luxury yacht and finance and after services. Mr. He has served as a Director of the company since November 14, 2019. He is a member of the Audit and Nominating Committees and has served as a Director of Finance and reporting for Blackthorn Therapeutics, a clinical stage biotechnology company from June 2019 to December 2019, and is currently consulting as the Interim Senior Director of Finance for a biotechnology company. Mr. Ken Landini has served as a Director of the company since 2001 and assisted in the development and growth of the business of the company since 1985. On August 7, 2017, Mr. Landini was elected as Chair of the Compensation Committee. He's also a member of the Nominating Committee. Mr. Landini previously served as the Vice President of Finance for the company's subsidiary, Power Great Lakes from December 1985 to March of 1988. Mr. Landini is a partner and Co-founder of Landini, Reed and Dawson, certified public accounting and consulting firm in southeastern Michigan, which was established in 1988. Frank Simpkins, Mr. Simpkins has served as a Director of the company since July 13, 2017. He is a member of the Audit and Nominating Committees. Mr. Simpkins has over 25 years of executive management and financial experience, most recently from June 2016 to December of 2016, he served as Chief Financial Officer of Emerson Network Power, part of Emerson Electric Company, a publicly traded company on the New York Exchange. From 2016 to 2015, Mr. Simpkins served as Vice President and Chief Financial Officer of Kennametal, a publicly traded company on the New York Stock Exchange and a global leader in the design and manufacturer of engineered components, advanced materials and cutting tools. Mr. Wu has served as a Director of the company since August 20, 2019. He's a member of the Compensation Committee. He has served as the Chief Financial Officer, International Business of Weichai Group, an affiliate of Weichai America since 2014. Mr. Wu also serves as a member of the Board of Directors of Weichai America and a number of Weichai America Corp. affiliates. Mr. Jiang has served as a Director of the company since April 1, 2017. He is a member of the Compensation Committee and Chair of the Board's Nominating Committee. He currently serves as a General Manager of Shandong Heavy industry Group. A leading automobile and equipment manufacturing group. He's a supervisor of the KION Group AG, a publicly traded global leader in industrial trucks, related services and supply chain. He's also a Director of Ferretti International Holdings, a leader in the design, construction, and sale of motor yachts and pleasure craft. He's also Chairman of Weichai Ballard Hydrogen Energy Technology Company. He is also a Director of Ballard Power Systems, a publicly traded company on the NASDAQ and Toronto Stock Exchange that builds fuel cell products. Leslie Coolidge has served as a Director of the company since July 13, 2017. She is the Chair of the Audit Committee and a member of the Compensation Committee. Ms. Coolidge has over 35 years of public company financial expertise. She is a National Technical Director of Riveron [ professional ] services firm from 2016 to '17. From 2013 until 2015, Ms. Coolidge served as a Consultant and Chief Financial Officer Adviser for Resources Global Professionals [ services ] firm. From 1981 until 2009, Ms. Coolidge was employed by KPMG, where she retired as an Audit and SEC Reviewing Partner. Now it's my pleasure to introduce Mr. Donald Klein, acting Chief Financial Officer of the company. Mr. Klein will act as the Secretary of the meeting, I will turn to him with any procedural issues that may arise.

Thanks, Mr. Miller. We're joined here today by BDO, our independent auditors. They'll be available during the comment and question-and-answer session to respond to appropriate questions. Also, the company has appointed Broadridge Financial Services to act as inspector of election. Mr. Barry Shapiro, is with us today. He has taken the oath of inspector of election. As Mr. Miller mentioned, we'll provide time for questions related to the proposals on the table for both by shareholders. If you have any other questions, please reach out to us after the meeting. Only validated stockholders may ask questions in the designated field on the web portal. Out of consideration for others and in accordance with the rules of conduct, please limit yourself to 2 questions. Please note that this meeting is being recorded. However, no one attending via the webcast is permitted to use any audio recording device. The Board of Directors fixed October 16, 2020, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that either one, a notice of Internet availability to the notice of the meeting, the proxy statements and the 2019 annual report to stockholders; or 2, the documents themselves were mailed on or about November 5, 2020, to all stockholders as of the record date and will be incorporated into the minutes of this meeting. The stockholder list shows that as of the record date, there were 22,886,345 shares of common stock outstanding and entitled to vote this meeting. We are informed by the inspector of election that they are represented in person or by proxy shares of common stock representing 20,079,544 votes or approximately 87.73% of the voting power on the record date. Since this represents more than a majority of the voting power of all issued and outstanding stock entitled to vote on the record date, a quorum is present for purposes of transacting business. Now I will present the matters to be voted upon. Please note that we will give stockholders an opportunity to comment and ask questions on the proposals themselves after all proposals have been presented. Proposal One is the election of directors. The current Board has nominated Dr. Sun, Mr. He, Mr. Landini, Mr. Li, Mr. Shao, Mr. Simpkins, Mr. Wu for election as directors to hold office until the 2021 Annual Meeting of Stockholders or until their successors are duly elected and qualified. Ms. Coolidge and Mr. Jiang will not stand for reelection. We thank them for their service on the Board of Directors, Mr. Shao and Mr. Li are nominated for the first time to the Board of Directors. Mr. Shao is the President and Chairman of the Board of Directors of Weichai America Corp. from 2012 to 2018. Mr. Shao is President of Weichai Westport Inc., a joint venture between Weichai Power and Westport Fuel Systems, Inc., a publicly traded company on the NASDAQ and Toronto Stock Exchanges, that manufactures and sells alternative fuel engines for automobiles, heavy-duty trucks, power generation and shipping applications. Mr. Li is currently General Counsel and Head of Legal Affairs and Securities Department of Weichai Power and General Counsel and Head of Legal Affairs and Securities Department of the Weichai Group. He has both -- held both positions since January 2020. Previously, Mr. Li held the position of Secretary of the Board of Ferretti S.p.A., a multinational yacht building company from 2015 to 2019. He was also the Secretary of the Board of Directors of Ferretti International Holdings S.p.A., the parent company of Ferretti S.p.A. from 2015 to 2019. Their full biographies are included in the proxy materials. Proposal 2 is to ratify the appointment of BDO USA, LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. Proposal 3 is the advisory vote to approve the compensation of the company's named executive officers as described in the proxy statement. This vote, which often is called the say on pay vote, is now required as a result of the Dodd-Frank Act. It's a nonbinding vote, although the Compensation Committee and the Board will certainly take the results of the vote into account when making future compensation decisions. Proposal 4 is the advisory vote, whether stockholder vote to approve the compensation of the company's named executive officers should occur every 1, 2 or 3 years. The nonbinding vote, although the Compensation Committee and the Board will certainly take the results of the vote into account when making future compensation decisions. If any stockholder would like to make a comment or ask a question regarding any of the proposals, please submit your comments and questions through the web portal. We'll now pause for a minute to gather any relevant questions. There have been no questions submitted.

Okay.

One question, just popped up, John.

Okay are we going to read the question? I don't see it.

Yes. I'll read the question, John. How does the company intend to address the diversity initiatives outlined by NASDAQ, Glass Lewis and ISS in the coming years?

I think we'll have a follow-up later with our plan for that. And I've been reading about it as well. We want to -- on this meeting, we want to stick the -- stick to the questions related to the proposals in the proxy. So I think it's a great question, and we'd like to follow-up later with you. Okay.

That's it.

That's all the questions. It's now 8:13 a.m. Central Time on December 15. Any stockholder who hasn't yet voted or wishes to change your vote may do so by clicking on the voting button on the web portal and following the instructions there. It is important to note that any vote now on our proposal will void and replace any previous vote on proposal. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote do not need to take any further actions. So we'll pause for voting. [Voting]

Okay. Now that everyone has had the opportunity to vote. I now declare the polls for the 2020 Power Solutions International Inc. Annual Stockholder Meeting closed at 8:14 Central Time on December 15, 2020. Mr. Klein, do we have preliminary voting results?

We do. We've been informed by the inspector of election that the preliminary vote report shows that the nominees for election of the Board have been duly elected. The appointment of BDO USA, LLP as the company's independent registered public accounting firm for the fiscal year ended December 31, 2020 has been ratified. The compensation of the named executive officers has been approved by advisory vote and the stockholder vote to approve the compensation of the company's named executive officers should occur every year. We'll be reporting the final vote results in a Form 8-K to be filed within 4 business days.

Thank you, Mr. Klein. There being no further business to come before the meeting, the 2020 Annual Meeting of Stockholders of Power Solutions International, Inc. is now adjourned.

This concludes the meeting. You may now disconnect.

[indiscernible]

I'm sorry, Chairman, were you trying to ask a question? Okay. I move that we adjourn and close off the call. Thank you.

This concludes the meeting. You may now disconnect.