Acorn Energy, Inc.

Good day and welcome to the Acorn Energy fourth quarter and year end 2020 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star then one on your touch tone phone. To withdraw your question, press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetric subsidiary. Please go ahead.

Thank you and welcome everyone to today's conference call. As a reminder, many of the statements made in today's prepared remarks or in response to your questions may be forward-looking. These statements are subject to various risks and uncertainties. For example, the operating and financial performance of the company in 2021 and future years is subject to factors such as risks associated with disruptions to business operations and customer demand resulting from the impact of the COVID-19 pandemic, executing the company's operating strategy, maintaining high renewal rates, growing our customer base, changes in technology, changes in the competitive environment, financial and economic risks, as well as having access to sufficient capital for growth. Forward-looking statements are based on management's beliefs as well as assumptions made using information currently available to management pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are no assurances that ACORN or Omnimetrics will be able to achieve their growth goals in 2021 nor in future years. The company also undertakes no obligation to disclose any revisions to these forward-looking statements to reflect events or circumstances after the date made. A full discussion of the risks and uncertainties that may affect the company is included in risk factors on ACORN's Form 10-K as filed with the Securities and Exchange Commission. Now I'll hand the call over to ACORN CEO, Jan Lopes. Jan?

Thank you, Tracy, and good morning to those joining our call. I'd like to start today by saying that I am very proud of the Omnimetrics team and grateful for how they rose to the challenges we faced over the past year. Despite significant business challenges posed by COVID-19, Acorn was able to achieve profitability on a net income basis in the fourth quarter and positive cash flow for the quarter and full year. These are very significant milestones for our company and ones that we have been working toward for several years. What's even more important is that we believe ACORN is on track to achieve profitability and positive cash flow on a consolidated basis for the full year 2021 and moving forward. This is particularly significant for ACORN because we have nearly $70 million of net operating loss carry-forwards, or NOLs. These NOLs will shelter our future net income from federal taxes for the foreseeable future, positively impacting our operating cash flow and benefiting our future cash balances and financial position. Further, we no longer have any debt as we paid off our line of credit last month. What this means for our shareholders is we now have a growing cash-generating and self-funding business with attractive margins and recurring revenue streams. This should make our public equity more attractive to a broader base of investors and puts us in a stronger position to pursue value-enhancing investments and opportunities. Importantly, throughout 2020 and the ongoing spread of the pandemic, we were able to remain fully operational without any employee furloughs. We did, however, experience an interruption in all business development dialogues, particularly within our corrosion protection or CP business, as prospective customers halted procurement discussions and in-person sales meetings. Nevertheless, the strength of our value proposition and business model enabled Acorn to achieve year-over-year gap revenue growth in 2020 and to maintain our cash basis sales at 2019 levels. We also further improved our gross margins to 69.8% in 2020 versus 65.4% in 2019, reflecting improvement in hardware margins and an increase in higher margin monitoring revenue as a percentage of total revenue. In addition, The personal challenges we all face with the spread of COVID, some also face the unpredictable damaging impacts of Mother Nature. 2020 and the beginning of 2021 has been another period of severe weather patterns from wildfires in California to extreme cold in Texas. Severe weather continues to disrupt and expose the national problem of aging power grids. This increasing incidence of power outages is a driver of backup generator power installations. even in places that historically have not been large markets for us. California, for example, has not historically been a big market for generators, which may now be a big market opportunity for generator OEMs, thereby growing the base of potential endpoints to offer our monitoring and control products and services. These trends combined with the very limited penetration of backup generator monitoring in both commercial, industrial, and consumer settings, as well as the growing base of people who work remotely are important demand drivers underlying our long-term growth outlook. It is estimated that as little as 15% of backup power generators are currently monitored, which supports our long-term growth view. In the near term, we believe we have a strong foundation upon which to achieve further top-line and bottom-line growth in fiscal 2021, as business conditions gradually return to a more normalized state, particularly in our dialogues with natural gas pipeline operators. In the latter part of 2020, we were able to begin re-engaging in sales dialogues with larger companies, and we are working to build on that activity this year. To that end, we recently added a new sales engineer to support business development efforts in our pipeline corrosion protection segment so that we were able to adequately support an expected increase in business development efforts. We also added an additional sales engineer in our larger power generation segment to support expected growth from our focus on the commercial and industrial market segments. Our growth prospects are also driven by Omnimetric's cutting-edge technology and solutions and our ongoing investment in new product development and innovation. During 2020, we launched our new smart enunciator solution, which revolutionized circuit enunciator monitoring by providing a 5-inch touchscreen LCD display on the device, which combined with our remote monitoring technology provides real-time status and alerts on mission-critical circuitry. In late 2020, we also upgraded and launched our next-generation OmniPro data management software used in our pipeline corrosion protection solutions. This software builds upon our prior capabilities to enhance the value and effectiveness of our HERO2 rectifier monitor and our Patriot test station monitors, while also allowing customers to import non-omnimetrics data. This value-added solution solves a key pain point for our pipeline customers by enabling the centralized tracking of critical data and assets on a hardware agnostic basis. We are excited to be reengaging with customer prospects regarding this important new solution. We are also focused on adding sales support behind our AirGuard air compressor monitoring solution, which is still in its early stages of commercialization, having been first launched in 2019. In order to deliver greater value to our customers and maintain our technology leadership position in the remote monitoring marketplace, we plan to continue our investments in R&D and new product development, and we expect to launch additional product enhancements and new products this year. Turning back to our financials, Acorn was successful in substantially strengthening our financial position in 2020, increasing cash by $816,000 to over $2 million at year end, reflecting $464,000 in operating cash flow and net paycheck protection program loan proceeds of $421,000, partially offset by investments in software and new products. Our strengthened balance sheet provides a solid foundation to support organic growth as well as partnerships or possible tuck-in acquisitions of a technology or product that would strengthen our remote monitoring solutions portfolio. In any scenario, we would closely evaluate any opportunity to ensure that it meets our criteria of being accretive to earnings, cash flow, and shareholder value, either immediately or certainly within a reasonable period of time. Having forged a strategy that focused Acorn's future on on the potential of our Omnimetrics business, we have been extremely pleased by its performance and resiliency, particularly over the past year. We believe this strength is due to the value, return on investment, and even the environmental benefits that remote monitoring solutions deliver versus resource-intensive physical inspection and the significant limits of periodic onsite evaluations. Our clear value proposition combined with Continued low levels of penetration for remote monitoring and IoT services in commercial and industrial markets continue to suggest there remain substantial long-term growth opportunities for our business. As our economy stabilizes and as our larger pipeline industrial customers get back to normal procurement dialogue cycles, we believe Acorn is poised to aggressively execute on growth opportunities across our expanding base of solutions. All of the reasons I've highlighted, our board and management team remain confident and the potential for Acorn to achieve an annual growth trajectory of at least 20% in 2021 and for years to come, while also maintaining positive operating cash flow and achieving profitability on an annual basis. Given the opportunities we have identified, our strong capital position, our knowledge and experienced team, and the tangible value we provide to our customers, I am very enthusiastic about our business and about our prospects going forward. We also think we are in somewhat of a sweet spot with the new administration in Washington. Firstly, because of our clean tech business model and the expected renewed focus on environmental issues and green policy incentives. And secondly, our large NOL position could become an even more valuable asset if corporate tax rates were to be increased. With that overview, I'll turn the call back to Tracy Clifford, our CFO, to review our financials in greater detail.