Acorn Energy, Inc.

Good day, ladies and gentlemen. Welcome to the Acorn Energy second quarter conference call. This time, all participants are in listen-only mode. Later, we'll conduct a question and answer session, and instructions will be given at that time. As a reminder, today's conference is being recorded. I'd like to turn the call over to Tracy Clifford, CFO of Acorn Energy and COO of its Omnimatrix subsidiary. Ms. Clifford, 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 in nature. These statements are subject to various risks and uncertainties. For example, the operating and financial performance of the company in 2021 and in future years is subject to factors such as risks associated with disruptions to business operations and customer demand resulting from executing the company's operating strategy maintaining high renewal rates, growing its customer base, changes in technology, changes in the competitive environment, financial and economic risks, and the impact of the COVID-19 pandemic, 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, nor Omnimetrics will be able to achieve their growth goals in 2021 or 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 turn the call over to ACORN CEO, Jan.

Thanks, Tracy. Good morning, and thank you for joining today's call. This morning, Acorn reported another strong quarter of improved results, continuing to build on the progress we are making in our remote monitoring business. In Q2 2021, we achieved revenue, gross profit, and net income growth in our third consecutive profitable quarter. Year to date, our revenue increased by over $500,000 to $3.3 million, and the majority of this increase fell directly to our bottom line, as net income improved to a small profit from a loss of $316,000 in the year-ago first half. Having moved the business into profitability, we are also well-positioned with a large net operating loss carry report of nearly $70 million to shield future taxable income and enhance our cash flows. Our year-to-date gap revenue growth of 18% is in line with our long-term goal of 20%. while our all-important cash basis revenue grew an impressive 25% to $3.5 million from $2.8 million in the first six months of 2021 versus a year ago. Cash basis revenue is a non-GAAP measure that we use to track our business progress. A reconciliation of cash basis revenue to GAAP revenue is provided in our press release, with the primary difference being that cash basis revenue includes deferred hardware and monitoring revenues that are amortized over future periods for GAAP. Gross profit grew 25% due to revenue growth and gross margin improvements. Gross margins have been improving over time due to a variety of ongoing initiatives, including the launch of next generation monitoring equipment and services that offer more value add to the customer, as well as the benefit of ongoing design improvements and cost controls. We continue to invest in new product initiatives for existing markets, as well as related industrial, IoT, and remote monitoring opportunities that can support revenue and margin improvements. For example, we launched a remote AC disconnect solution just last week at the NACE, National Association of Corrosion Engineers Conference, and it was received and it received excellent interest. Our product development efforts are led by our first-class design and engineering team, and our products are backed by our experienced and knowledgeable technical support and sales engineering staff. We added two new sales engineers late in the first quarter to support business development efforts. We have already seen benefits from these hires and expect more progress going forward, assuming business conditions continue to normalize. The deep experience and excellent customer service of our Omnimetrics team is a key component of our success and competitive advantage. We serve large-scale but substantially unpenetrated industrial markets with growing IoT needs, which present significant long-term growth opportunities to our company. Our financial position remains strong with cash of approximately $2 million and no outstanding credit line debt. This provides strong financial footing on which to continue to grow our business organically, as well as to consider value-enhancing growth opportunities such as partnerships, or possible tuck-in acquisitions to expand our product offerings and strengthen our market position. We are extremely disciplined in evaluating opportunities to ensure they fit with our business and make sense from a capital allocation, risk-reward, and shareholder value standpoint. Fundamentally, our solutions deliver substantial managerial, environmental, and cost-reduction benefits, criteria that are increasingly at the top of the list in corporate decision-making. The alternative to our remote monitoring is ongoing physical inspection of industrial equipment by roving teams and trucks, often working large territories and remote locations at substantial cost and environmental impact. Considering these factors and the current administration's focus on environmental issues and infrastructure spending, our market positioning seems particularly strong. Sales of new hardware units fueled our growth in the first half of 2021, partly due to our execution of expanding sales initiatives and the rebound of corporate equipment spend that had been restricted last year due to COVID-19 disruptions of customer activity. We are focused on continuing to expand our market share in monitoring equipment sales and the related high margin recurring monitoring revenue streams that follow. As we add new endpoints to the monitoring business, I should note that historically in a normal year, which I'm not sure 2021 will fit in that category, Omnimetric's first half revenues represent approximately 45% of full year revenues. With that overview, I'll turn the call to Tracy Clifford, our CFO, to review our financials in more detail. Tracy.