To the Shareholders of Hybrid Power Solutions Inc.
Over the past two years, I have had the pleasure of meeting many of you in person, online or over the phone. With a shared commitment to transparency, we’ve had candid conversations about what it means to build Hybrid Power Solutions into the powerhouse company we all believe it can be. You have trusted me with leading HPS to success, and it remains my privilege and responsibility to not only share our vision and achievements, but also lay bare the challenges we have and continue to face.
This ‘report’ intends to provide a comprehensive overview of the last year and our plans moving forward. As a shareholder, I understand you may not be privy to the day-to-day excitement of running a company but through this letter, I hope to answer some of your questions and paint a clearer picture of what’s ahead.
To quote Warren E. Buffet: “Mistakes – Yes, We Make Them”
Since starting HPS, I’ve made mistakes – from estimating the speed at which our team could close deals and determining where best to invest our resources to deciding which strategies would allow us to grow sustainably. Each mistake, while painful, has been an opportunity to learn, grow and evolve and I firmly believe that it is these same errors that have pushed us to become more innovative and competitive. In 2019, I put up a banner in our then-2200 sqft facility that read ‘punching above our weight since 2015’. This still rings true, though today I’d more readily describe us as ‘a storm gathering strength on the horizon’.
Highlights
As I reflect on the past year at HPS, I am proud to share the immense progress we have made in building a path, not only to profitability, but future accelerated growth. 2024/25 was filled with difficult decisions that ultimately affected our short-term performance in the spirit of long-term gains. Underperforming sectors that did not align with the long-term vision of the company were reshaped to cut costs and maximize the effectiveness of our team. With the vision of achieving a profitable future, we significantly lowered expenses and doubled down on markets resilient to economic turbulence. As a result, we now boast one of the highest pipelines the company has ever seen.
- ~12% increase in revenue over 2023/24
- ~50% decrease in expenses
- Purchase orders (confirmed but unshipped orders) backlog of ~$720,000 CAD
- Quoted sales pipeline $30M+
Challenges
We’ve had to overcome many challenges which have impacted our finances this year:
Being a publicly traded company costs a lot of time and money. When we first went public, I underestimated these costs and the time it would take for us to scale and break even. Since then, we’ve brought much of the outsourced, contracted work in-house to reduce costs over time and our CFO has built an achievable model to profitability that we are currently working towards.
After going public, we invested heavily in investor marketing and promotional strategies that ultimately proved ineffective and costly, pulling much needed funds away from serving and expanding our client base. While I made the decision to halt all campaigns earlier this year, the costs are still recorded in our quarterly expenses and some of our early investment groups disagreed with the decision. I’ve since worked tirelessly to rebuild my personal investor network.
Delivery of our pilot project for two Terra units for one of the largest general contractors in Canada has been delayed. This project, initially slated for delivery earlier this year, was the cornerstone of our sales pipeline, with many clients waiting on the anticipated data to make their own purchasing decisions. The Terra was originally a white labeled product from China customized for Canadian application. Despite our vetting process and due diligence, during the final factory visit, we discovered that the supplier had lied about meeting the certification requirements and we had to cancel the order a week before it was supposed to board a ship to Canada.
We’ve made the difficult and costly decision to reshore design and assembly of the Terra to Canada, a project that was originally planned for late 2026. While it will ultimately benefit both HPS and our customers, the short term impact includes higher than expected R&D costs, order delays and margin loss. We are incredibly fortunate that our customer has held the order, and we look forward to delivering in the coming months.
The residential solar industry has proven to be volatile and unreliable, lacking the required consistency to build a sustainable company. Over the last year, we’ve rebuilt our sales strategy and team to focus on more resilient, high-performing industrial sectors such as military, construction and vehicle fleets. This temporary, transitional period shows in our Q3 and Q4 financials and does not reflect the groundwork that has been put in to grow our pipeline.
Cash constraints remain a challenge. Without profitability, we continue to pull from reserves and often rely on the previous month’s sales to fund production. This limits our ability to improve margins and reduces production team efficiency.
Achievements
Despite the challenges we’ve faced, we have a lot to be proud of this year.
We’ve cut expenses by 50%. The high costs of ongoing public company fees we once saw have been trimmed back with strict control. Third-party firms costing close to $50,000 CAD a month are a thing of the past. We have consolidated redundant positions and new hires are optimized for efficiency and experience.
Our quoted sales pipeline exceeds over $30M CAD in opportunities. These span the following sectors: military/defense, emergency response, vehicle fleets, utilities, transits, mining, rental and construction.
Hiring for experience. When we first started out, we hired young guns with bright eyes, big ideas and limited experience. While this worked as a start up, what we need now are experienced professionals who can help drive the company to the next level. Each of our departments is now anchored by team leads who inspire innovation while creating structure.
In a time when more companies than ever are offshoring, we continue to proudly design and build in Canada. Our focus is on delivering the best possible product for our customers, and a big part of that is centered around our supply chain and in-house technical support.
Expanding into strategic partnerships. This year we’ve started to explore strategic partnership opportunities with key market leaders that would help propel HPS onto the national stage. By leveraging their brand, distribution and customer reach, we can accelerate our path to profitability. While nothing is a done deal, we’re excited about the potential of securing a custom development and production project with a premier US based industrial equipment manufacturer, and are working towards securing a long-term partnership with a well-established US manufacturer to provide our products in complement to their current battery lineup.
Looking Forward
This December, HPS celebrates 10 years in business. While nothing in life is guaranteed, my confidence is fueled with the knowledge that we’ve never had a sales pipeline like this. It’s not propped up by hopes and dreams – it is built on real quotations and proposals to some of the world’s largest organizations, with many opportunities exceeding the $1M CAD mark.
As I reflect back on 2024/2025, it’s clear to me that understanding your weaknesses is just as important as knowing your strengths. We know that we are small, with limited brand recognition, a guerilla style sales team and non-existent marketing budget. Beyond continuing to reinvest in our sales team, if we can also leverage partnerships with established brands, we can turbocharge our growth. It’s not about slapping a logo on a product and crossing your fingers, it’s about finding companies that have similar values, a customer base that hasn’t been tapped into yet and a strong desire to invest in the project. Whether it’s white labeling, co-branding or a custom development and supply project, we are picky about who we want to work with. Long term gain and a sustainable business is what we are after.
Honing in on our messaging has been another major milestone this year. Based on customer feedback, we have learned that in their eyes, we are a cost-cutting solution, not cleantech. We lower our customers’ operating costs while improving their uptime and increasing safety. “Green” is just a side effect to what we do (and typically only important when talking to a sustainability group).
One area we continue to excel in is innovation. From product features to cost savings measures, our team is constantly looking for ways to do things better. Our engineering team recently completed a study on our Batt Pack Energy and Batt Pack Pro, and we established that with minimal investment (roughly $75,000 CAD) we could increase our gross margin to over 50% on MAP prices while improving both performance and quality. As we continue to grow, it is incredibly important that we continue to invest in driving innovation.
Closing Remarks
You, the shareholders, are just as important to our journey as the people putting your hard-earned cash to work. I like to think that we have attracted a group of investors that share our vision for the future, with an understanding that small steps lead to big changes. Hybrid Power Solutions is not a fad or the latest trend on the stock exchange. We are a hard-working group of people building real things. We smile at challenges and wake up every day with the intent to better our products, our process, our service and ourselves. We’ve made mistakes and will no doubt do so again, but our relentless pursuit of innovation, growth and betterment requires us to learn and move forward.
I ask only two things of you. If you see an opportunity to discuss our company with another investor or better yet, a customer, feel free to reach out to me or my team anytime. Secondly, I hope that you remain an essential part of this journey as we shape the next chapter of our company’s story.
Thank you for being here, my door (or email inbox) is always open.
Francois Renaud-Byrne
CEO & Director
Forward looking statement
This letter contains forward-looking information, including statements regarding HPSS’s order backlog and expected future revenue. The order backlog disclosed is based on firm purchase orders as well as high-probability ongoing projects, and is net of estimated cancellations in line with our historical experience. These figures, projections, and statements are subject to known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially from those expressed or implied. The calculation method for backlog is not standardized, may differ from methods used by other issuers, and is described herein to ensure clarity for investors. Such forward-looking information is based on management’s current expectations, assumptions, and beliefs as of the date hereof and may prove to be incorrect. HPSS expressly disclaims any obligation to update or revise forward-looking statements, except as required by applicable law. Please refer to the Company’s most recent Management Discussion and Analysis (MD&A) and periodic filings for additional details, assumptions, risk factors, and definitions related to non-GAAP and supplementary financial measures included in this letter.
