Altigen Communs Inc

Greetings and welcome to Altogen Technologies' fourth quarter and fiscal year 2025 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Gary Stone, CFO at Altogen Technologies. Gary, you may begin.

Thank you, Paul. Good afternoon, everyone, and welcome to Altogen Technologies earnings call for the fourth quarter, fiscal 2025. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer, Joe Hamblin, Chief Digital and Transformation Officer, and I'm Gary Stone, Chief Financial Officer. Earlier today, we issued an earnings release reporting financial results for the period ended September 30th, 2025. This release can be found on our IR website at www.altagen.com. We have also arranged a replay of this call, which may be accessed by phone. This replay will be available approximately one hour after this call's completion and remain in effect for 90 days. The call can also be accessed from the investor relations section of our website. Before we begin our formal remarks, we need to remind everyone that today's call may contain forward-looking information regarding future events, and the future financial performance of the company. We wish to caution you that such expectations and or beliefs are just predictions, and actual results may differ materially due to certain risks and uncertainties that pertain to our business. We refer to the financial disclosures filed periodically by the company with the OTCQB over the countermarket, specifically the company's Audited annual report for the fiscal year ended September 30, 2024, and the most recent unaudited quarterly report for the quarter ending June 30, 2025, as well as the Safe Harbor statement in the press release the company issued today. We do expect our audited financial report for fiscal year 25 to be filed by the end of this month. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Altagen assumes no obligation to revise any forward-looking information contained in today's call. In addition, during today's call, we will also be referring to certain non-GAAP financial measures, such as adjusted EBITDA. These non-GAAP measures are not superior to or a replacement for the comparable gap measures, but we believe these measures help investors gain a more complete and understanding of our results. With that, I'll turn the call over to Altigen's CEO, Jerry Fleming, for opening remarks. Jerry?

Thank you, Gary, and good afternoon, everyone. Thanks for joining us on today's call. I'll begin today with an overview of Altigen's performance and strategic progress during fiscal year 2025. Following my remarks, Joe Hamblin will provide additional insights into our operating execution, after which Gary will return to review our financial results for the fourth quarter and the full fiscal year. Earlier today, we reported our fiscal fourth quarter and full year fiscal 2025 results. I'm pleased to share that we have delivered our sixth consecutive profitable quarter, culminating in full year profitability for fiscal 2025, which we view as a meaningful milestone for that underscores the progress of our business transformation. For the fourth quarter, revenue totaled $3.5 million with net income of $254,000. Looking at full year performance, fiscal 2025 revenue was $13.9 million, representing a 2% increase over fiscal 2024. While cloud revenue declined modestly by 3%, this was more than offset by the 15% growth in our services business, which was driven by higher consulting revenues and increased deployment services revenue related to our new cloud solutions. Compared to the fiscal year 2024, net income before taxes increased by more than $1.3 million year over year, resulting in earnings of 3 cents per share for fiscal 2025. Our long-term objective remains clear to build shareholder value by protecting and extending the lifetime value of our customer base through modern cloud solutions while accelerating growth through AI-enabled solutions and services. I'll now review our progress against this objective, beginning with the actions we've taken to modernize our cloud solutions portfolio. As we previously communicated, we experienced some revenue pressure as a result of the declining competitive position of certain legacy PBX and contact center offerings. This trend was anticipated and understood, and we proactively initiated a comprehensive effort to transition away from those platforms in favor of more scalable, future-ready modern technologies. Over some period of time, we conducted a thorough evaluation of all available alternatives, carefully assessing multiple technology providers against our criteria, including performance, scalability, cost structure, and long-term strategic alignment. These efforts culminated in the introduction of all new best-in-class white-label UCaaS and CCaaS solutions during fiscal 2025. Our technology platforms have been validated, in our opinion, through the early market traction and growing customer momentum since their launch earlier this year, reinforcing our confidence that these investments position Altogen very well for improved competitiveness and long-term value creation. Specifically, for our core engaged teams contact center, which we essentially launched right about this time last year, we deployed six customers representing 240 agents during the year with billing for those customers commencing at various points throughout the fiscal year. We've since contracted with an additional five customers representing another 230 agents which will begin contributing revenue upon completion of their respective deployments. Combined, these 11 customers represent 470 agents, and we expect them to generate approximately $75,000 a month in recurring revenue. For our MaxCloud UC business, we migrated approximately 60 customers representing 1,600 users from our legacy MaxCS cloud platform during fiscal 2025. We've since contracted An additional 50 customers representing about 1,400 users that will commence billing once their deployments have been completed. In addition, we have another 100 customers representing about 2,500 users on our legacy MaxCloud platform that we plan to migrate to the MaxCloud UC platform over the next six months or so. Now, these migrations do not immediately increase revenue. since these customers are already on a monthly cloud recurring revenue plan. However, we do expect the benefits of these migrations to include a significant extension of the customer's lifetime value to materially reduce churn and to lower our long-term support costs. Looking ahead, we'll also be targeting the several hundred remaining MaxVS on-premises customers, which represents about 4,000 users, in an effort to convert them to MaxCloud UC. As we convert these on-premises customers that are lower revenue customers to MaxCloud UC, we do expect to see new monthly incremental revenues. Our ability to enhance our solutions portfolio with the new MaxCloud UC and core engaged platforms is a direct reflection of the build versus buy strategy that we've adopted. In other words, we build solutions where we can deliver differentiated intellectual property most notably in AI-powered applications. Conversely, in highly competitive categories such as UCaaS and CCaaS, we believe value is best created through white-label partnerships and or selective acquisitions rather than duplicating commoditized platforms. This approach has been instrumental in reducing our operating expenses while transitioning our fixed development costs to a more scalable variable cost model. It's also enabled us to reallocate capital we were previously spending on development resources toward the development of new, innovative AI-powered solutions. Turning to our strategic partnership with Fiserv, we are continuing to advance multiple new initiatives, including a next-generation AI-powered cloud IVR solution, an AI-enabled customer experience analytics platform, and now our core engaged contact center service, Contact Center as a service platform. These solutions, as a reminder, are all brought to market by Fiserv under the Fiserv brand. As such, Altogen is not in control of the product launch timelines. Instead, our responsibility is to develop the solutions, work with Fiserv to get them certified under the Fiserv brand, and to support the Fiserv sales effort once those products are launched. With a $20 billion company like Fiserv, it takes time to get the necessary approvals and associate sign-offs completed. However, the wait will be worth it in the end as we continue to progress toward product launch. Moving to our Consulting Services Division, we continue to expand our relationship with the Connecticut Department of Transportation, which includes the addition of new AI-focused initiatives. The engagements with CTDOT not only contribute to near-term revenue, but also generate valuable domain expertise that directly helps our software-based AI solutions. The knowledge we continue to gain from AI projects on the consulting side is fully transferable to the AI solutions on the software side of our business. Now, the AI market, as many of you know, is literally flooded with vendors, most of them focusing on building next-generation AI platforms. Our unique approach is that we don't build the AI platforms. We build business solutions that utilize those platforms. Keep in mind, our typical target midsize enterprise customer does not have deep AI expertise on staff to build their own AI solutions. So our model is to provide that expertise in the form of packaged AI solutions and services, which allows those customers to deploy Altogen AI solutions without the need to invest in expensive technical resources. By all accounts, this is the model preferred by midsize organizations. I'll leave you with this thought. Our business transformation efforts are beginning to show results. We've significantly top-graded our technical talent, we've streamlined our internal business systems, we've reduced our operating expenses, and we've introduced all new leading-edge UCaaS and CCaaS solutions. We believe these efforts position Altogen to drive sustainable profitability, improve customer retention, and long-term customer value.

With that, I'll turn the call over to Joe Hamblin for additional details on our progress. Joe?

Hey, Jerry. Good afternoon, everyone.

Over the past 18 months, we've executed a comprehensive transformation of Altogen, rebuilding nearly every aspect of the company's operating model, technology stacks, and go-to-market foundation. This was a deliberate reset designed to stabilize the business and restore profitability and position Altogen for scalable growth. From an operational standpoint, we focused first on simplification and discipline. We modernized internal systems, outsourced non-core functions such as accounts payable and receivable, consolidated vendors, and introduced greater automation across finance, provisioning, and service delivery. As a result, we've eliminated approximately $1.5 million in annualized operating expense, materially improving our cost structure while increasing our ability to execute our velocities execution. In parallel, We addressed the most critical issues impacting our long-term competitiveness, our legacy product portfolio. During fiscal 2025, we replaced an aging PBX platform and an overly complex contact center solution with modern cloud-native offerings. MaxCloud UC was introduced to preserve and grow our legacy customer base, while CoreEngage to help us accelerate the growth of our Microsoft Teams practice. Using the deliberate buy versus build strategy allowed us to rapidly transform our product portfolio. This approach also enables Altogen to provide differentiation by building solutions where we can add tangible value, particularly in the AI and analytics space. This strategy has fundamentally changed our operating leverage. Our UCaaS and CCaaS platforms now operate on a largely fixed cost model, enabling margins expansion as subscribers' values grow. Just as importantly, it has allowed us to redeploy capital and talent away from maintaining legacy software towards higher value innovation. With the foundation in place, fiscal 2025 marked the completion of our transition year from a transformation to a growth moving forward. To further sharpen execution as we enter the next phase, we have a plan that will align the company functionally around our four primary revenue streams, the Max UC platform, our Microsoft Teams practice, IDR, and our Altitude Consulting Services practice. This functional alignment will improve focus, accountability across both sales and operations, ensuring that product strategy, delivery, and go-to-market efforts are tightly coordinated within each business line. We believe this structure will improve sales effectiveness, accelerate decision-making, and better support scalable growth. To further support our go-to-market efforts, we began a full relaunch of the Altogen brand. We engaged a new digital marketing firm to rebuild our digital presence, modernize messaging, improve demand generation, At the same time, this also includes an SEO remake, a targeted pay-per-click campaign, new core engaged product content, and a specific vertical outreach program. Our initial focus is on approximately 1,700 regional banks and credit unions, each with over 500 main assets, where we already have a strong domain credibility. footprint with our IVR platform and the FISO relationship. As both Jerry and I have stated, product innovation remains centered around AI-driven differentiation. On the solution side, we have completed the development of several AI-enabled offerings that extend the value of our existing footprint. Our conversational AI front-end for the IVR, now in customer preview, modernizes how caller's interact with financial institutions using natural language, reducing containment costs while improving the customer experience. We've also completed the development of Core Insights, our next-generation customer engagement analytics platform. Core Insights uniquely combines the IVR transaction data with the customer demographics data to deliver actionable insights into customer behavior, intent, and service patterns. This platform enables banks and credit unions to better predict customer needs, personalize engagement, and identify new cross-selling opportunities. The customer preview program will begin in first quarter of 2026. To support expansion into larger enterprises and regulated industries, we've also initiated a SOC 2 Type 2 certification program. With the expectation of completing here in January 2026, This is a critical milestone for us and will enable us to pursue larger, more complex opportunities across financial services, public sector, and enterprise markets. On the service side of the business, our Altagen Consulting Service Division continues to perform at a high level, anchored by our longstanding partnership with the Connecticut Department of Transportation. In fiscal 2025, this relationship expanded further with new AI-focused initiatives, reinforcing Altogen's role not just as a technology provider, but also as a trusted transformation partner. We are now leveraging this success to open doors with other state departments of transportation and enterprise organizations. Earlier this year, we presented alongside with Connecticut Department of Transportation at the AIDC Conference in Pennsylvania. which has already resulted in follow-up engagements with several states. We continue our outreach campaign by participating in the Oklahoma State Expo, and we were also at the IHEAP conference this past October. We have plans to participate in several new events in 2026 as the opportunities present themselves. Strategically, we also signed a partnership with a leading agentic AI platform provider. This partnership allows us to provide a scalable, highly secure, enterprise-grade AI solution. This partnership also creates a dual revenue opportunity for us. Recurring platform revenue combined with high-margin professional services that aligns directly with our AI-first strategy. So in summary, Altagen today is a very different company than we were two years ago. We've stabilized the business. We've modernized our platforms. We've simplified operations. We've restored ourselves to profitability. And with that foundation firmly in place, fiscal 2026 will be about execution, scaling our customer base, accelerating revenue growth, and expanding margins through disciplined growth. With that, I'll turn the call over to Gary to review our financial results and for more details.

Go ahead, Gary. Great, thanks. Great, great. Thanks, Joe. Okay, for our 2025 fiscal fourth quarter, which is July to September, we reported total revenue of $3.5 million with gap net income of $254,000 or one penny per share. This compares to the prior quarter's revenue of $3.7 million with gap net income of $2.1 million and eight cents per share. Recall that in Q4 of last year, we recorded a $1.8 million deferred tax benefit. This year, it was only $300,000. For our 2025 fiscal year, we reported total revenue of $13.9 million compared to $13.6 million last year. Total cloud services for fiscal 2025 was approximately $6.9 million, down slightly from the $7.1 million last year. Meanwhile, our services and our other revenue increased 8% to $7 million from $6.5 million in the prior year. Gross margin for the year was 63% compared to 62% in the same period last year. GAAP operating expenses for the year totaled $8.1 million, reflecting a 7% decrease to $8.7 million in the same period last year. GAAP net income for the full year, this figure 25, was $738,000 or $0.03 per diluted share compared to the GAAP net income of $1.56 million or $0.06 per diluted share in the prior year which included that deferred tax benefit I mentioned earlier. So apples to apples, excluding the tax impact, our net income for fiscal year 25 is 1.03 million compared to a loss of 279,000 from last year, a favorable difference of 1.3 million. Earlier this quarter, or last quarter rather, the U.S. District court in Utah ruled in favor of altogen in the lawsuit with Intermountain Technologies. In light of this favorable court ruling, we reduced our accrued liability by half to $372,000. Further reductions in the accrued liability may occur as we get more clarity on the full extent of the damages and legal fees that altogen will be entitled to recover. Looking at our liquidity, we closed out the year with 2.75 million in cash and cash equivalents, up from 2.6 million last September, and down from the 3.5 million in the prior quarter. As you recall, last quarter was a lot higher than we expected due to a large customer who paid ahead of schedule. Working capital was 2.9 million compared to 2.1 million in the previous year, reflecting a 38% increase, and I should add a multi-year high. Our EBITDA adjusted for legal severance and other one-time costs was $1.6 million compared to $500,000 in the prior year. So in conclusion, we've made great progress this year, and we're very excited about our future. So now let me turn the call back over to Jerry for our closing remarks. Jerry?

Gary, are you on mute? Oh, thanks for the instructions.

Sorry about that. The progress we're making is tangible and accelerating. Our investments in modernizing our platforms, improving our cost structure, and expanding our growth initiatives will enable us to deliver on our 2020 vision, which is 20% top-line growth with 20% to the bottom line, building long-term shareholder value. I'll now hand the call back to the operator for a Q&A session. Operator?

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask your question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time. if you wish to ask a question.

And please hold while we poll for questions. And the first question today is coming from Alan Markham from Van Clemens. Alan, your line is live.

Yes, thanks for taking my call. So it sounds like you've rebuilt a lot of your structures and guiding towards the future. Can you... forecast a point during 2026, maybe in the second half or even before that when you'll see a measurable or a material difference in your revenue growth?

We will.

I think we will be able to as we, particularly as we get some of these customers migrated over to the cloud that I discussed earlier. And once we have some more visibility to when those customers are billing, then we'll be able to be in a position where we'll be able to, let's say, offer some predictive predictions, really, in terms of what we expect our revenue to be. Right now it's really hard to say because a lot of it is we have customers that are in various stages of deployment, and we're not 100% certain. We're not in control of those deployment timelines as the customer.

But, you know, as we get those in production, we'll have a lot more visibility going forward.

Okay, thanks. Just to follow up on that, so in the case of just to use Fiserv as an example, and you mentioned you can't control when they launch that product. So I guess when they do flip that switch, that could possibly noticeably change what, you know, what Altogen earns from that company.

Yeah, dramatically, and that's – One of our frustrations that we don't control that, of course, they're Fiserv customers, so these solutions are sold under their brand. But, yes, we're working hard to get access or to get their approval and get their marketing folks to launch the product. But when they do, and we mentioned three of them that we have, as they start kicking in, you know, we'll see a significant uptick in revenue from Fiserv.

Just can't tell you when sitting here today.

Thanks for taking my questions. You're welcome.

Thank you. And once again, it will be star one if you wish to ask a question on today's call. The next question is coming from Mike Schellinger. And Mike is a private investor. Mike, your line is live.

Yes. Can you tell me whether or us whether you expect this quarter to be like sort of the low watermark for revenue? And do you expect it to ramp from here without getting into like, you know, specifics of how much or I'm just trying to understand how If you're at the bottom.

Yeah, that's a that's a fair question, Mike. Yeah, I think so. You know, there can always be anomalies that mess things up a little bit here or there. But the most important thing are most important things, I guess we did. And Joe certainly expounded on that was revamping our legacy platforms, which were causing way too much churn because they had lost their really their competitive nature. And having the new solutions that are now ramping and gaining market acceptance and gaining customers, as I was talking about, yeah, I think that has stopped the downside. And now we can start looking at upside from here. So, yes, we do expect this. It should get better from here is the expectation.

Okay. So we should sort of expect a ramp from here maybe with some variability quarter to quarter, like sort of on a sequential basis.

Generally trending upward is our expectations, Mike.

Okay. All right. And you said something towards the end of the prepared remarks of targeting. I wanted to say, like, it was something like 20% top line and 20% bottom line. Did I hear that right?

Right. By 2028. So, yeah, we're looking to ramp our, and it's a little bit hard to say how we'll do each year, but to achieve that as a as a goal to continue 20% top line and 20% to the bottom line, you know, or sort of our marching orders, if you will, internally and what we're shooting to achieve.

But did you just say by 2028 or starting next year?

By 2028.

I don't think we can get there. We might get there in 2027. Okay. Just with the cloud revenues, I can't guarantee that, but by 2028, we want to be certainly in that position.

Okay. Those are all my questions. Thank you. Yep, you're welcome.

Thank you, and that does conclude today's Q&A session and also concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.

Thanks, everyone. Thank you, everyone.