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spk03: Good day, and thank you for standing by for the Actelis Works, Inc. Fiscal First Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. As a reminder, this call is being recorded. Joining us today from Actelis, Tuvia Barlev, CEO, and Yoav Efron, CFO. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements. including but not limited to statements of expectations, future events, or future financial performance. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect change that occur after this call. Actual events or results could differ materially These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of our registration statement on Form S-1 followed with the SEC. The non-GAAP adjusted EBITDA measure referenced in today's call is reconciled in our earnings press release to the most directly comparable GAAP measure. which is the net loss. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, June 22, 2022. Finally, I would like to remind everyone that this conference call is being webcast and the recording will be made available for replay on our investor relations website at ir.academy. I will now turn the call over to our CEO, Tuvia Barlev.
spk01: Thank you, Operator. Welcome, everyone, and thank you for joining us today on our first earnings call. Recognizing that many of you might be new to the Actelis story, I'd like to begin today's discussion with a brief history and review of our business. Then I will review our recent updates and highlights before turning the call over to Actelis' CFO, Yoav Efron, to discuss our financial results for the first quarter of 2022, ending March 31st. After that, I'll share some closing remarks. Let's start with a quick overview. At Actelis Networks, our mission is to enable fast, secure, cost-effective, and easily implemented communication for IoT projects deployed over wide areas such as cities, campuses, airports, military bases, roads, and rail. Our networking solutions use a combination of newly deployed fiber infrastructure and existing Kafka and Coexia lines to create a highly cost-effective, secure, and quick-to-deploy network. Our patent-protected hybrid copper fiber network delivers excellent communication over fiber to locations that may be easy to reach with fiber. However, for locations that are difficult to reach with fiber, we could upgrade existing copper lines to develop cyber-hardened, high-speed connectivity without needing to replace the existing copper infrastructure with new fiber. Typically, providing new fiber connectivity to hard-to-reach locations is costly and time-consuming, often requiring permits for boring, trenching, and right-of-way. Connecting such hard-to-reach locations may cause significant delays and budget overruns in IoT projects. Our solutions aim to solve these challenges. By alleviating difficult challenges in connectivity, we believe that Xelis' solutions are making a significant difference. effectively accelerating deployment of IoT projects and making IoT projects more affordable and predictable to plan and budget. Our solutions also offer end-to-end network security to protect critical IoT data, utilizing a powerful combination of coding and encryption technologies applied as required on both new and existing infrastructure within the hybrid fiber-copper network. Actelis' solutions also optionally provide remote powering to IoT devices such as cameras and small cells over the same copper lines used for communications, hence alleviating the need to deploy expensive new power lines to those locations. Actelis also offers a comprehensive software package to help customers manage their network and automate many of the processes involved, making operation of a network intuitive and effective. Our solutions have been tested for performance and security by the U.S. Department of Defense Laboratories and approved for deployment with the U.S. federal government and the U.S. Defense Forces. As of March 31, 2022, we've been deployed with more than 300 customers worldwide. We experienced an average annual sales growth in our IoT business of more than 20% each year from 2018 through 2021 in bookings of orders from customers in the IoT market. While our operations are focused on our fast-growing IoT business, we're also maintaining our commitment to our existing telecom customers. Now, I'll get into where our business is today. Over the past few months, we've made considerable operational progress and achieved several milestones for our business, highlighted by our successful public listing in May, which was a momentous occasion for the company. I'd like to thank everyone for their tireless support. We're confident that the future is bright for Actelis Networks. I want to take a moment to recap a few of our key operational highlights in the first quarter of the year. During the first quarter of 2022, we delivered the first order of a three-year contract with a world-leading partner specializing in airport operations management systems to supply our networking solutions, which helped modernize and digitize airports in 39 countries. Our customer, a leading airport IoT provider for the aviation industry, indicates serving hundreds of airports worldwide. This contract is yet another important milestone for our mission at Actelis to help accelerate modernization in wide area applications. We're enthusiastic to help the air traffic industry, especially in these challenging times for supply chains. I'm looking forward to seeing our solutions and software deployed with our customers in airports globally. In addition to that, our products were selected by an energy company provider of power to the capital city of a major European country, and we have delivered an initial order. The mission of this project is to modernize, digitize, and enhance safety of the customer's power network and streamline operations across its footprint. Additionally, our sales and marketing investment has grown. We have hired two sales leaders in North America to focus on government and commercial sales and business development. The new sales leaders will support to our Chief Revenue Officer of the Americas, Jan Ruderman. Jan, who joined us at the end of 2021, is a great addition to the leadership team, and we are excited about the effect his work is already having on our business. Moving to our financial performance. In the first quarter, we delivered positive results in several key performance areas, namely 21% increase in revenue to $1.9 million and 121% increase in backlog of customer open orders to $4.2 million. We maintain the expectation to ship the majority of this backlog by the end of 2022. Our business experienced growth across several geographical regions and markets as we want new customers and optimize backlog delivery despite challenges in supply chain. I'm proud to say that our team at Actalis acted swiftly and comprehensively to respond to those factors by helping customers and contract manufacturing partners navigate the challenges related to deliveries. These measures successfully kept Actalis operations on track and displayed our company's resilience. As we assess the current environment, IoT infrastructure connectivity demand over fiber, copper, and 5G is growing rapidly. We believe that there's an urgent need to connect tens of millions of locations with fast, secure, rapidly deploy and cost-effective connection, which presents an exciting opportunity for us. Utilizing the funds raised in the IPO, Actels is planning to increase its sales and marketing activities and put more resources into developing solutions that are ever faster and more cyber safe to enable IoT over fiber, copper and 5G. With that, I will turn the call over to our CFO, Yoav Efron, to discuss our financial results for the quarter in greater detail. Yoav?
spk02: Thank you, Tobia. Before I provide an overview of our financial performance in the first quarter of 2022, I'd like to provide a brief summary of our recent capital markets activities. On May 17, 2022, the company finalized its IPO. issuing an aggregate of 4,212,500 shares of common stock, including the partial exercise by the underwriter of its over allotment option to purchase 462,500 additional shares of common stock at a price to the public of $4 per share. The net proceeds from the offering, including the over allotment to the company were approximately 15.4 million after deducting underwriting discounts and commissions. Of the approximately 15.4 million of net proceeds from the offering, we have used about $1 million for IPO-related expenses. Turning now to our financial results for the first quarter of 2022 that ended on March 31, 2022. Revenues for the three months ended March 31st, 2022 were $1.9 million, an increase from $1.5 million for the three months ended March 31st, 2021. The increase in revenues was primarily attributable to $763,000 of growth generated from Europe, the Middle East, and Africa, offset by a decrease of 451,000 in revenues generated from North America due to global supply constraints delaying shipments of orders already placed by customers. It is important to spend some time to talk about our backlog of customer open orders. As we made new sales and booked the orders, we experienced increased lead time from order to shipment and billing. Adding information on backlog provides better visibility to the growth of our business as it takes longer to realize the shipment billing and revenue. Our backlog of customer open orders, a non-GAAP measure, as of March 31st, 2022, increased 121% to $4.2 million from $1.9 million as of March 31st, 2021. We still expect to ship the majority of this backlog by the end of 2022. Cost of revenues for the three months ended March 31st 2022 was $1.3 million, compared to $0.8 million for the three months ended March 31st, 2021. The increase in cost of revenues was primarily due to the increase in revenues, as well as a change in the product mix and an increase in the cost of components and manufacturing driven by supply shortages and end of shipment costs. Research and development expenses for the three months ended March 31st, 2022 were $0.6 million compared to $0.6 million for the three months ended March 31st, 2021. Sales and marketing expenses for the three months ended March 31st, 2022 were $0.7 million compared to $0.4 million for the three months ended March 31st, 2021. The increase in sales and marketing expenses was mainly due to investments in sales and marketing, specifically in payroll from additional sales and marketing employees, increase in commission expenses due to higher revenues and other professional services associated with marketing activity. Our general and administrative expenses were 0.6 million for the three months ended March 31st, 2022. compared to $0.3 million for the three months ended March 31st, 2021. The increase was mainly due to professional services attributed to the work towards the initial public offering completed in May of 2022. Operating loss for the three months ended March 31st, 2022 was $1.4 million compared with $0.6 million for the three months ended March 31st, 2021. This was primarily due to the decrease in gross profit of $146,000 and the increase of $662,000 in operating expenses. Financial expenses net were $3.2 million for the three months ended March 31st, 2022, compared to $0.1 million for the three months ended March 31st, 2021. The growth, the increase is driven primarily by the increase in value of our financial instruments, such as warrants and convertible loan and note. Net loss for the three months ended March 31st, 2022, totaled $4.6 million compared to a net loss of $0.7 million in the three months ended March 31st, 2022. The company net losses grew primarily due to the increase in financial expenses in the amount of $3.1 million resulted primarily from the increases in fair value of various financial instruments, as well as a decrease in gross profit of $146,000 and an increase in operating expenses of $662,000. Adjusted EBITDA loss, a non-GAAP measurement of operating performance, was 0.96%. for the three months ended March 31st, 2022, compared to $0.39 million in the three months ended March 31st, 2021. The higher adjusted EBITDA loss was driven primarily by lower gross profit and an increase in operating expenses. Regarding the balance sheet, the company reported a pro forma balance sheet based on its balance sheet as of March 31st, 2022, as reported, by applying the necessary adjustments to reflect the net proceeds from the IPO completed in May 2022, the issuance of common stock and expenses associated with the IPO. On a pro forma basis, as adjusted, Actelis had $18.3 million of current assets versus $3.9 million as reported, and $19.8 million of total assets versus $5.3 million as reported, and total shareholders' equity of $7.6 million versus a capital deficiency of $24.2 million as reported. A detailed explanation of our pro forma balance sheet can be found in our Form 10-Q filed today, June 22nd, 2022 with the Securities and Exchange Commission or the SEC. That completes my summary. I'd now like to turn the call back over to Tuvia for closing comments. Tuvia?
spk01: Thank you, Yoav. In closing, I'm pleased with the progress we're making in being selected by more and more strategic IoT customers as part of our continued success in increasing the number of customers selecting us as their long-term networking partners in various IOT verticals globally. These new wins add to our current deployment with hundreds of customers, such as energy companies, rail and road systems, cities, campuses, military, and governments. We believe that they will provide a continuously growing revenue source for the company for years to come. I'm also happy to see our new sales leaders are off to a good start in their respective verticals. And last but not least, we're very excited about our successful IPO in May. which was achieved despite difficult financial market conditions. Now we can invest more in sales and marketing resources to expedite our growth in 2022 and beyond. I especially want to thank our dedicated employees for their ongoing contributions and our customer community for their continued partnership. I also want to thank our investors for their continued support. Thank you for joining us today. It is truly an exciting time to be with Actelis. Operator? Operator?
spk03: Thank you for joining us today for Actela's Network's fiscal first quarter 2022 earnings conference call. You may now disconnect. Everyone have a great day.
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