Acorn Energy, Inc.

Today, ladies and gentlemen, welcome to the Acorn Energy third quarter conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference operator by pressing star zero. Later, we will conduct a question and answer session, and instructions will be given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Tracy Clifford, CFO of Acorn Energy and COO of its Omnimetric 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 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 the 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 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 today's date. 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 Loeb, for an overview of our business performance and outlook. Jan?

Thanks, Tracy. Good morning and thank you to those joining today's call. ACORN reported its fourth consecutive quarter of revenue growth and improved results reflecting our progress in building our remote monitoring business. Through the first nine months of 2021, GAAP revenue has increased 16% and cash basis revenue has grown 24%. Cash basis revenue is a non-GAAP measure we use to measure our actualized sales growth as it reflects all sales revenue in the period in which the sale is invoiced. GAAP revenue reflects the amortization of deferred revenue over the applicable period, three years for equipment revenue, and the period of service for monitoring revenue, which can be one to 12 months. We provide a reconciliation of cash basis revenue to GAAP revenue in today's press release. Our gross profit grew 22% year to date, due to revenue growth and gross margin improvements. Gross margin has benefited from design improvements in our next-generation monitoring equipment and services that offer more value to the customer, customized products and accessories, which carry higher margins, as well as progress on increasing our penetration in commercial and industrial markets. We have an exceptional and proven design and engineering team, and we continue to invest in new product initiatives for commercial and industrial IoT and remote monitoring opportunities to support our competitive position and growth. In Q3, we announced beta testing of a remote AC disconnect, called RAD, for the pipeline market at the National Association of Corrosion Engineers Conference. This new solution has received keen initial interest and our sales teams are working to advance dialogues into trials. To support our business development and expansion efforts, particularly as business returns to more normal procurement activity, we added two new sales engineers in the first quarter of this year. In September, we announced that Omnimetrics has partnered with Texas-based power solution specialists to provide remote monitoring and control equipment and services for thousands of backup power generators over the next 12 months. PSS is a leading generator dealer and service provider in the Houston area and a prominent Briggs & Stratton distributor. Generator dealers are our primary customers, and we provide monitoring solutions and programs to meet their specific needs. We hope to build upon this relationship and other dealer relationships moving forward. We also have a strong financial position, including cash and no debt, which provides a solid base to grow our business organically and to consider other value-enhancing partnerships or growth opportunities. We continue to pursue potential acquisition opportunities to accelerate our growth and strengthen or expand our market position, but remain very disciplined in order to ensure any transaction will create shareholder value. Admittedly, this discipline in a period of lofty valuations creates challenges in finding appropriate deals, but we are confident it is in the company's best interest to remain disciplined in our specific deal objectives. In Q3 21 and through the nine months ending September 21, hardware revenue increased substantially, 20% and 33% respectively, over the comparable 2020 periods. Hardware sales have been robust due to lifting of COVID-19 restrictions on business meetings, travel, and trade shows, and hardware sales are also benefiting from the wireless operators' decision to sunset 3G monitoring technology in favor of LTE currently and 5G in the future. This sunsetting has positively impacted hardware sales as customers upgrade to next-generation units. while sunsetting also has a short-term negative impact on monitoring revenue growth as a result of disconnects by these customers who do not upgrade or potentially switch to competitors. We have seen some impact on our business from global supply chain issues, but we have been able to mitigate these issues through proactive management, internal planning, and by purchasing safety stock inventory, an option we can pursue given our solid financial position. We believe... In this supply chain constrained environment, there may be opportunities in future quarters to potentially acquire additional market share relative to competitors who may not have the financial means to purchase excess levels of safety stock inventory. To address inflationary pressures on input costs, we implemented a 15% to 20% hardware price increase effective September 1st. At the current time, we do not anticipate either supply issues or cost pressures to have a material adverse impact on our business, but we are tracking the changing supply chain issues on a daily basis to ensure we remain well positioned. Given the fact that we have had several quarters of profitability, I would like to remind investors that ACORN benefits from NOL carry forwards of nearly $70 million as of year end 2020. Our NOLs should largely shield the company from cash income taxes for the foreseeable future and therefore provide a significant benefit to cash flow. Accordingly, Acorn is neither accrued nor paid income tax expense through the first nine months of 2021. Stepping back to look at the bigger picture, our long-term value proposition to our customers and our confidence in Acorn's growth opportunity is really rooted in the substantial cost reduction, managerial benefits, and environmental benefits we deliver. These issues of increasing interest and importance for corporate decision-making and yet the market penetration for remote monitoring solutions remains substantially underpenetrated. Thus, we continue to see plenty of opportunities for continued growth, particularly in large industrial markets that we serve and in adjacent markets for remote monitoring, control, and related IoT services. We have a stated goal of 20% average annual growth, and we expect to exceed 20% growth for cash-based revenue in 2021, which is the primary metric we use to evaluate our growth. With that, I'll turn the call to Tracy Clifford, our CFO, to review our financials in more detail. Tracy?