Acorn Energy, Inc.

Good morning and welcome to the Acorn Energy 2023 fourth quarter conference call. At this time, all participants are in a listen-only mode. After some prepared remarks, we will conduct a question and answer session. As a reminder, today's conference is being recorded. Now, I'll hand the call over to Tracy Clifford, CFO of Acorn Energy and COO of its Omnimetrics Operating Subsidiary. Ms. Clifford, you may begin.

Good morning and thank you all for joining today's call. As a reminder, many of the remarks that follow and answers to questions may be forward looking. Such statements are subject to various risks and uncertainties. For example, the operating and financial performance of the company in 2024 and future periods is subject to risks associated with potential disruptions to business operations and customer demand. Risks related to the company executing its operating plan, maintaining high customer renewal rates and growing its customer base, as well as from changes in either technology, the competitive landscape, or the financial and economic environment. Such forward-looking statements are based on management's beliefs and the assumptions made using currently available data and information pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are no assurances that the company will be able to achieve its growth goals. The company undertakes no obligation to disclose revisions to forward-looking statements to reflect events or circumstances that occur after this call today. A full discussion of risks and uncertainties that may affect the company is included under risk factors in our 10-K, which is available online as filed with the Securities and Exchange Commission. I'll now turn the call over to Jan Loeb, CEO of Acorn and of our Omnimetrics Operating Subsidiary. Jan?

Thank you, Tracy, and thanks, everyone, for joining our call today. First, I want to congratulate the entire ACORN Omnimetrics team on another year of very solid progress for our company, particularly the achievement of profitability in both Q4 and for the full year, and $8 million of annual revenue. Reaching sustainable profitability has been a long-time goal. Let me touch on a few other key accomplishments in 2023. we were able to return monitoring revenues to a path of growth, increasing 9% in 2023, following a 3% decline in 2022, which is mainly due to the impact of the sunsetting of 3G wireless technology. We lost some revenue related to older monitoring units in 2022 and even into Q1 2023, with some customer churn related to sunsetting. However, we are now above the total number of monitoring endpoint connections that we had in 2021 before the impact of sunsetting. With that behind us, we now expect returns to double-digit monitoring revenue growth in 2024 as we continue to build our base of monitored endpoints. Given the high margin and recurring nature of monitoring revenue, we view it as a key value and cash flow driver for the business. The gross margin on monitoring revenue is approximately double that of our hardware sales and incremental revenue from new monitoring endpoints largely drops to our operating income line. Building on this annuity model, during 2023, we continue to advance the rollout of our demand response initiative. Demand response, or DR as we call it, is a new service that offers an offering that enables backup generator owners to sign up and receive compensation for making their generators available to grid operators to turn on automatically for brief periods to support the grid during peak demand. On the metrics, remote monitoring and control technology provides the critical links that enable DR functionality for generators. For this, we earn additional revenue on top of our conventional monitoring and control service revenue. Accordingly, we believe that DR further strengthens our value proposition and customer stickiness. providing the potential to double our profitability on each enrolled generator endpoint. We also expect that the DR business model could support overall generator sales and further incentivize dealers to promote our solutions. During 2023, we worked to test, formalize, and help market these programs, resulting in the enrollment late in the year of our first 100 demand response residential customers. These initial customers have now been approved by ERCOT the main grid operator in Texas, in time for a typical summer peak grid demand. Ideala Network continues to work on signing up customers with approximately 600 kilowatt hours in generator capacity in the program currently, and we expect the pace of this activity to pick up. We are expecting a modest revenue contribution from DR in 2024 based on a normal gradual adoption path for a new solution, particularly one that is linked to a meaningful asset purchase. The purchase and installation of next generation energy efficient backup generators required for demand response cost approximately $15,000 installed for residential units and substantially more for commercial units depending on size. We are very pleased to have completed all the work to launch this program and enroll our first customers. We believe DR represents an important growth and value driver for our business as we move forward. Beyond the demand response, we have been working to develop meaningful growth opportunities with large generator dealers and with commercial and industrial or CNI customers. In Q4, we executed a non-exclusive reseller agreement with one of the nation's largest multi-regional commercial generator dealers. We believe this agreement could generate a substantial number of new monitoring connections per year over time. The relationship as the potential to contribute annual hardware sales, startup fees, and initial monitoring revenue of $1 million annually or more once the program is fully operational. We have not yet started to receive any significant volume of orders under this agreement, as we expect it may take several quarters to fully train and optimize their dealer base on the program and its benefits. Turning to CMI customers who are facing rising costs, increasing environmental and reporting pressures, and budget constraints, OmniMetrics offers compelling solutions. Our monitoring and control solutions provide meaningful environmental and cost reduction benefits by reducing truck rolls and regular site visits to remote locations. We also provide environmental and air quality reporting that may be required for compliance with increasing state regulations. We believe that there is a very favorable backdrop for our commercial and industrial business development efforts, and we are working on some larger opportunities. Of course, these larger customer opportunities take time to work through layers of diligence and approvals. For that reason, it's hard to predict the timing of our success. But I did want to make it clear that we do see a potential for some large opportunities in 2024, and we will, of course, disclose any meaningful progress. Turning to our public equity, we successfully completed a one for 16 reverse stock split in September 2023 with the intention of raising our share price to make Acorn stock accessible to a broader group of potential investors. As you may know, many investors face increasing limitations on investing in low-priced stocks, particularly those below $1. We are pleased with the resiliency of our share price volume to reverse split and believe that the higher post split share price should help attract new investors to Acorn as we continue to build on our top and bottom line performance. As I said at the opening, I'm very proud that Acorn and Omnimetrics has achieved our goal of reaching profitability in 2023, despite the fact that our cash shares were down 3% year over year as a result of high interest rates and inflation and impacted our residential bureaus, and delayed capital purchases into 2024 by certain of our CNI customers. In any event, we believe we are well positioned to build upon our 2023 profitability into 2024 and beyond. Importantly, Acorn has net operating loss categories, or NOLs, of close to 70 million, which should largely shield future profits from tax liability over the next several years, enhancing future cash flows and shareholder value. Our long-term goal remains the achievement of 20% average annual top-line growth. We have a range of business development initiatives and opportunities currently in process that we believe should enable us to achieve that goal. And importantly, we will work hard to manage costs to grow the bottom-line impact of each incremental revenue dollar. With gross margins of approximately 75%, We believe that with our current operational infrastructure, 50% of each incremental revenue dollar can fall to the Omnimetrics EBITDA line. Omnimetrics EBITDA for 2023 was approximately $1.3 million. ACORN has a very solid financial position to support our growth initiatives. We closed 2023 with $1.45 million in cash and no debt and achieved approximately break-even cash flow in 2023, despite investments in the business and in inventory for expected expansion, which Tracy will address. Though we remain focused on organic growth, we continue to actively seek accretive bulk on acquisition opportunities. I would add value to our shareholders. We maintain very strict value and risk management criteria in this effort. As a result, we have not yet executed on any M&A opportunities to date, but we will continue to have discussions with attractive acquisition targets and seek including external growth opportunities. To close out my remarks, we're confident and excited about the business and its growth prospects, and we're grateful for the support of our investors. Our bullish outlook is rooted in the substantial efficiency, cost reduction, risk mitigation, and environmental benefits of our solutions, combined with the relatively limited market penetration. NAND response adds another potentially attractive revenue stream to our service offerings that we believe will further support growth and value creation for our shareholders. Now, let me turn the call over to Tracy for more details and insights on our financials and operational performance. Tracy?