Acorn Energy, Inc.

Good morning and welcome to Acorn Energy's third quarter 2025 earnings conference call. All participants are currently in listen-only mode. Following management's prepared remarks, we will open the call for questions. As a reminder, today's call is being recorded. I'll now turn the call over to Tracy Clifford, CFO of Acorn Energy and CEO of its Omnimetrics subsidiary.

Thank you, operator, and thank you all for joining our call today. Before we begin, I'd like to remind everyone that today's remarks, including responses to questions, contain forward-looking statements. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. Factors that may impact our future operating results and financial performance include general risks such as potential disruptions to business operations or changes in consumer or customer demand, as well as specific risks related to our ability to execute our operating plan, maintain strong customer renewal rates, and expand our customer base. Additional risks may arise from changes in technology, competition, or shifts in the macroeconomic and financial environment. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's current beliefs, assumptions, and information available as of today. There can be no assurances that the company will meet its growth targets or other strategic goals or objectives. The company undertakes no obligation to update or revise forward-looking statements to reflect future events or circumstances that occur after today's call. For a more detailed discussion of the risks and uncertainties that may affect our business, please refer to the risk factors section of our most recently filed Form 10-K, available online at www.sec.gov or on our own website. Now I'll turn the call over to Jan Loeb, CEO of Acorn and Omnimetrics, for further remarks. Jan?

Thanks, Tracy, and thank you, everyone, for joining this call. First, let me start by acknowledging that although monitoring and hardware revenue each grew over 20% for the first nine months, driving a 35% increase in net income, our Q3 2025 revenue was significantly lower than in Q3 2024 due to lower hardware revenue. The Q3 2025 revenue variance is largely due to the timing of hardware revenue from our large cell phone provider contract. Given the size and nature of our business, a contract of this magnitude, while highly beneficial to both our short-term and long-term cash generation, can create variability in our quarterly reporting, primarily due to the timing of hardware revenue. This contract was originally expected to roll out over two years, but the customer desired faster deliveries, which were largely fulfilled over the first 12 months. Final deliveries that we had expected to record in Q3 2025 have been pushed into Q4 2025 and possibly Q1 2026, resulting in no hardware revenue from this contract in Q3 2025 versus revenue of $724,000 from initial hardware deliveries in Q3 2024. Additionally, we recognize $215,000 of deferred hardware revenue in Q3 2025 versus $436,000 in Q3 2024, a difference of $221,000. Deferred hardware revenue reflects the non-cash amortization of hardware sales prior to September of 2023, which were deferred and amortized over three years. The amount of revenue recognized from the amortization of deferred revenue will continue to decrease as we have not deferred revenue from hardware sales since September 1, 2023. when we began selling hardware units that can be sold independently from our monitoring services. Hardware sales are recognized to revenue upon shipment or transfer of title. We expect all deferred hardware revenues to be fully amortized by August of 2026. Adding the $221,000 difference in Q3 hardware amortization plus the $724,000 of hardware revenue results in the delta of $945,000 or approximately 95% of the hardware revenue variance between Q3 25 and Q3 24. An additional factor is the reality that new hardware sales have been soft on the residential side of the business, but stronger in the commercial and industrial segment. Echoing this residential trend, last week a leading generator OEM reported Q3 revenue below expectations in the home market which they attributed to reduced incidence of power outages, one of the lowest rates in 10 years, due in part to fewer U.S. hurricane impacts this season. As you can imagine, power outages from any source are a major driver of backup generator demand. We also believe ongoing economic conditions, including high interest rates, slowing job growth, and other financial uncertainties have slowed deployment of backup generators, which range between $7,000 and $24,000 to purchase and install, depending on the home size. It is our sense that these economic challenges have tempered residential demand for several quarters. Longer term, we expect residential demand will rebound as economic conditions moderate, grid uncertainty builds, and power outage incidents grow in frequency and duration. In terms of our large cell phone contract since inception, We have realized $3.9 million of hardware revenue and $343,000 in monitoring revenue, totaling roughly $4.2 million. We are told that there will be additional purchase orders under this contract, but as of right now, we have shipped all the initial hardware ordered. We will continue to recognize monitoring revenue under this contract that was deferred at the point of sale over the 12-month period commencing on the install date. total deferred monitoring revenue at September 30, 2025 under this contract was $290,000. Of course, we fully expect this customer to renew our monitoring services given the customer's over $4 million hardware investment. We expect them to be a long-term and happy customer. This is supported by the value and cost savings of our service and cost-prohibitive nature of switching to a competing offering, all of which are reflected in our history of greater than 90% annual renewal rates. Looking forward, the big question for shareholders is what is our strategy to build on our scalable, high-margin, cash-generating business to achieve our long-term growth goals? The answer is that we are pursuing a number of initiatives across commercial, industrial, and residential markets that fall into five distinct buckets. One, larger commercial and industrial opportunities being pursued by our direct sales team. Two, strategic OEM relationships in which we partner to provide our industry-leading technology and services. Three, expanding our penetration of the residential market through our over 600 generator dealers. Four, developing new products and expanding the capabilities and value of existing products. And five, through accretive M&A transactions. I'll briefly touch on each of these growth initiatives. Larger commercial and industrial opportunities are being pursued via our internal sales team across sectors, including healthcare, telecom, real estate management, retail, and the military. We have a range of ongoing discussions, but many of the organizations are larger and more complex, resulting in sales cycles that are longer, and the timing outcome is hard to predict. We see meaningful long-term growth potential from CNI customers because of their regional and national scale and our proven ability to deliver a compelling return on investment in terms of cost savings, improved data and analytics, as well as reduced operational risk. Strategic OEM relationships in which we partner to provide our industry-leading technology and services. We continue to advance discussions with OEMs regarding potential strategic relationships where monitors would be bundled and installed by the manufacturer rather than in the aftermarket. We believe Omnimetrics technology and service leadership, combined with our ability to support all generator brands, puts us in a very strong position to partner with OEMs. This would allow an OEM to focus on their core business while delivering a superior total solution across their customer universe. Of course, these initiatives require discussion, research, testing, and planning, yet there's no guarantee of success. But we believe the concept makes good sense for both sides, and we'll continue to pursue this avenue which could be an important growth driver for us. Re-expanding our penetration of the residential market through our over 600 generated dealers. While retail adoption of generators has been slow due to a number of factors, we expect the pace to pick up moving forward. We go to market in the residential space through our network of over 600 generated dealers, and so our primary drivers are working to support them in their outreach. New product development is another area of long-term importance that Tracy will touch on in her remarks. M&A transactions remain a priority in our growth efforts. We are evaluating several complementary M&A prospects with monitoring components to their business. Negotiations with two of these are progressing, though it's too early to predict if or when they might happen. We are very motivated to execute on one or more transactions to accelerate our growth and drive further operating leverage. but we remain disciplined on managing risk and the price we are willing to pay to ensure we are building value for our shareholders. As we have new investors on today's call, I'll just touch on some of the long-term secular trends supporting our growth. First, remote asset monitoring is projected to grow approximately 23% annually through 2032, driven by the increasing adoption of IoT-connected devices, real-time data collection, demands for predictive maintenance and data analysis, as well as compliance and reporting obligations. Even some of you on today's call are probably monitoring things you probably didn't or couldn't just five years ago, like home thermostats, lighting, doorbells, HVAC systems, appliances, et cetera. Newer cars allow you to monitor the car's location, fuel efficiency, fluid levels, and other measures, or you may use your remote climate control or door locks. The same thing is happening within businesses. Remote monitoring is increasingly being seen as a necessary and cost-effective tool to enhance operational performance and reduce the risk of disruption, providing reliability, cost savings, and convenience, and Omnimetrics is ideally positioned to meet this growing demand. We all read of growing energy demand from AI and data centers, which is taxing the U.S. energy grid and reducing the reliability of electricity access. Though the hurricane season has spared the U.S., the prevailing trend has been more frequent and severe weather and other natural disasters increasingly disrupting the grid. Electrification demands across the economy are compounding a fragile grid and creating a supply and demand imbalance for electricity. The point is CNI customers and residential customers increasingly need reliable backup power and that's the key driver of our business. We expect that these major secular trends will continue to support our long-term growth. Based on the trends in our growth initiatives, we continue to believe 20% average annual revenue growth is an achievable target over the next three to five years. It won't be straight line, and it will require that we execute on one or more of our larger growth initiatives in coming periods, but we feel the scope of opportunity and the strength of our position makes this very achievable. With that, I'll turn the call back to Tracy to go over our financials and for her perspectives on our operations. Tracy?