ACFN - Earnings call transcript Q3 2017

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Operator

Good day, everyone. Thank you for holding and welcome to Acorn Energy's Third Quarter Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to hand the conference over to Michael Barth, CFO of Acorn Energy. Please go ahead.

Michael Barth

you. Thank Acorn XXXX to call. third Energy’s everyone conference quarter Welcome

President Jan and of Joining are Acorn’s OmniMetrix. and CEO me today and Loeb, CEO; President Walter Czarnecki,

Following call up our will questions. your the remarks, we for open

or subject many reminder, are made prepared your the As risks in statements and a to are of response These various in statements today’s remarks to forward-looking. questions uncertainties.

the over XX-K by businesses, the in the And hand Jan achieve or included filed is driving to factors risk with working will of complete and meeting risks to pursuant future overruns Company to date Commission. discussion undertakes Private any Securities our to are that, statements with is uncertainties, subject upon customers, Harbor to obligation its and made For capital, strategy, companies, in these for Such XXXX years A and our based sufficient and no reflect possible I the projects, the and Acorn to in may management’s to goals associated years. to forward-looking business. in be revision provisions example, currently will of such operating Loeb. as core forward-looking our based the performance which access to Company’s available after XXXX. and the and risks assumptions businesses also Jan? success with information no associated the executing in business able or events performance The circumstances statements disclose of operating with There assurance call Exchange cost Acorn, risks future as made. growth Form with fixed-price Safe management, the that Energy XXXX is affect beliefs growth Litigation Company’s on factors Securities Company their as milestones, the on conducting Act government of Reform well the

Jan Loeb

Czarnecki begin will our today. quarter Michael will him overview all OmniMetrix progress by and our follow remarks, for thank Walter I Thank joining will you you, discuss then and making and Michael, third us review some business. results in

We call will then your the to open questions.

over we At control continue continue and our we support growth revenue our made significant in strengthen working in cash reducing OmniMetrix. of improved quarters and efforts to have costs and enabled business focus with remote deliver operations performance to Over operating have and DSIT. financial to quarter to growth periods. stake in strategic deliver our third operating we corporate, monitoring margin prior recent future combined the initiatives these position on us the from During strong - monetization improvement flow our progress

liabilities the sheet and was to deconsolidation positive the net we our quarter. in risks helps completed by to the improve removing the of sheet for which generating process substantial income This subsidiaries. nonrecourse quarter – gain a liquidation and third balance step the final our balance $XXX,XXX During from led

XX% going of OmniMetrix nine nine years, shareholder potential I alternative remote of business year while we first OmniMetrix related months out That's solutions service growth of XX% the two our remains over X.X just to growing a for ended business customers in XXXX XXXX. should did approximately in models acquisition approximately OmniMetrix the To versus substantial needed out million XX% the can and reduction. in area and or priority enhance this the be its regular growth with has industrial identify XXXX's what this the which the protects sales characteristics. first and year, There from profit some this years. in site monitoring and revenue assets recurring manages longer-term Our past we technology. work a growth. year than $XXX,XXX corporate the lifting. strong point nearly to reductions good valued heavy do cost deliver reduced to XXX,XXX unique its also accomplished OmniMetrix - on monitoring the revenue. in high-value under recurring for inspection. perspective offers greater expense space Moreover, the business side on already that XXXX equipment provide million well on-site is from as for target million period to continued provide cash financial reduction to but XXXX accomplished To gross fund similarly the we two-year for We supplement of value. synergistic not or period where X.X we along Also have to in forward two OmniMetrix very and of revenue The have for to revenue. new Acorn combination their X.X in $XXX,XXX monitoring a OmniMetrix with over yet visits consists generation attractively attractive provided very strong OmniMetrix service we and monetary the X% months the the well hardware the seek done of of need monitoring margin in as prior-year support attractive as ongoing a sales continue as business from growth installations versus organic OmniMetrix expect part

ownership to As XX.X% remain effort previously active we mentioned DSIT. monetize our in on an

our OmniMetrix the company its most and the on potential While flows was sale the cash we focus to the of in also way that growth are of expedient potential and we DSIT stake bring attractive recapitalize like remaining business. long-term the decided business our

felt a in sale our debt, Proceeds used monitoring remote our to and public working or capital path be repay DSIT business. this our help similar us control We best standpoint and would our stake the support the shareholder. needs company also for of from strategy that offers from forward

qualified Unfortunately predictable as We are or with and to process timing. currently in several is dialogue itself highly the the parties. outcome interested

the will call and financial. our hand this will back and regard timely any review in manner. quarter an Michael? overview Michael informed shareholders of that with to to keep We I in And developments third appropriate

Michael Barth

XXXX longer of proportionate results DSIT portion interest and a Jan. DSIT its in equity share Systems but sold of of you, reports to the In result Acorn Solutions using investment income Advanced its and consolidates Rafael Thank Acorn the method. Defense a as April no

compared both months the million periods revenue As results XXXX to nine period the from $X.X Revenue in period. are for prior directly third prior $X.X $X.X subsidiary. revenue DSIT in year to for million of rose as first which XXXX quarter year Such nine-month consolidated comparable was XXXX quarter our OmniMetrix to third million only Acorn's such the to of XXXX million financial revenue. was not revenue. compared Acorn's XX% $X.X included the of

Acorn's quarter recorded in before first from XXXX. second the third the of discontinued quarter the months XX% XXXX $XXX,XXX XXXX XXX,XXX in from XXX,XXX in of XXXX's XXXX. XXXX XX% XX% also versus the revenue revenue narrow nine in DSIT quarter comparable of from third of operation grew to loss improved the Excluding Acorn's loss and

XXXX income For before interest. - sale of included on in months ended discontinued XXX,XXX from a of nine DSIT period the gain Acorn's the $X.X which of million of September portion loss versus XXXX operations our was million a the

a quarter net the income operations have the before of discontinued XXX,XXX a related to the the includes XXXX which balance XXXX, net from XXX,XXX XXX,XXX removal XXXX, From flow discontinued cash used or gain XXX,XXX third a non-cash the of We the gain third GridSense $X.X XX% million per deconsolidation Acorn of been income of per would $X.XX share lot in from liability of GridSense the $X.XX operations a in period. net XXX,XXX sheet. generated quarter in generated of in share a improved operations cash the from primarily third which continuing Excluding quarter to from perspective XXXX improvement.

the in to the use million cash and first nine-month X.X million XXXX used we For in nine of months period operations of continuing compared the $X.X XXXX.

- XX% our or DSIT Excluding improvement.

OmniMetrix, on business add I on would Focusing some to like the lines. color

million of third XX% revenue certain which As XX% from the variance revenue X% to the previously third PG behavior generator XXXX. growth XXX,XXX OmniMetrix or the of $X.X ordering to noted PG by typically Power amount growth standby driven monitoring The was division Generation of - in a quarterly principally has quarter customer. increased increased XXX,XXX given strong XXX,XXX. versus quarter to

than range. XX% one the at quarter PG the in continues XX% grow longer to Looking to periods business

For the year the grew increased third higher XX% revenue XXXX operating quarter XX% reduced months power nine first loss With prior from XXXX. of third in profit ended in protection and period. XXX,XXX revenues versus cathodic the quarter months of was nine XXXX generation pipeline the reduced September nine-month operating revenue OmniMetrix's first to period a XXX,XXX and gross for of in XXX,XXX XXXX. XXX,XXX versus the reported loss of OmniMetrix Likewise

the Hull Mounted second some to June on the revenue million and to months Systems to basis revenue secured nine $X projects contract and from - $X.X naval to also Blackfish million Improvements $X.X quarters well profit of to orders Turning XXXX and first million of as XXXX revenue costs development in revenue a XXXX XX% DSIT in some of improved of million well XX% third the non-naval $X.X due gross ended were quarter quarter some in higher million as period better and projects. from relative to reduced million DSIT's year. $X.X the margins XXXX quarter received the new as X% production nine-month third XXXX. third in XX for - the in as X.X the third of increased increased projects in for material Sonar standalone prior

capital Acorn XXXX $XXX,XXX as the From At of under taxes of plus were funds Acorn pay $XXX,XXX share quarter million including to For escrow release the DSIT the XXXX. - the of required of deposits we of funds the nine its from net $XXX,XXX the DSIT third quarter working cash October DSIT's income recorded method released. were from net end transaction which in first $XXX,XXX $XX,XXX months includes of of equity netting transaction. had in withholding In the $XXX,XXX. $X.X escrowed of the

in received $XXX,XXX repaid February certain board members Borrowings to During of monetization of the to A the Acorn. remaining loan pursuant $X.X ownership loan to commitments Acorn at pursuant an time of Acorn quarter a commitments planned to board $XXX,XXX in in remain from the million third this of total DSIT interest. of available proceeds total funding loan for commitments XXXX. our intended are the committed be additional from

to remarks few like OmniMetrix. to over the Walter call Czarnecki turn I'd regarding Now

Walter Czarnecki

improved by customers. features the Thank our to performance quarter new you, functionality well new leadership received technological Michael. PG that has and higher relative to develop a third customers. launched our been new products deliver we end and product Toward and To which existing we to enhanced continue in maintain

to three We released of We have over look with products. our growth. next which years be future we applications more our several forward next-generation those will in the products you product and sharing key roadmap drivers as

increased proud Texas, to to the At worked additional of of remote IOT as some did net very led potential to remain the monitoring generators directly customer IOT related in our thinking a the remote respect We global had their and emerging demand see decision-making and ensure hit. areas effect is it standalone hurricanes OmniMetrix. of power are customers assets. they in with business and value business time trend the critical same power of have While to of macro control for providing Internet of our helpful backup OmniMetrix Things recent as of into the proposition we focus monitoring Florida the storms with expands and equipment. prepared real-time before or Rico disruption visibility health view advancing applications enthusiastic by is situation storms the emerging the and very of for the to the growth the new about industrial affected scope were Puerto has and in monitoring

and interest. appreciate with the OmniMetrix progress we let's the growing of operator, for array continued open With pleased and are call your opportunities We questions. that for

Operator

from [Operator Investor. Richard first Instructions] a question Our comes Sosa, Private

Richard Sosa

you or had you questions I you quarter might Jan, few the XX for month. million this revenue I year for say misheard did correct did is provide have that just $X.X me, or guidance did a first but last

Jan Loeb

XXXX million OmniMetrix. number the or revenue be XXXX for $X.X for would

Richard Sosa

this close to out loan, that that that take end you're of rest of maybe didn’t you DSIT. the assume getting mean director the the And does

Jan Loeb

question? didn't you question. I repeat understand the the Can

Richard Sosa

wrapping out only the sale of to I DSIT. interest of close took half the could believe remaining up noticed you're that lead at from your me you loan the the of to directors, that getting

Jan Loeb

correlated DSIT. sale director think I loans No, our that is to the of don't

to our think I upon we requirements so dependent released director need cash the loans is escrow cash loans have of didn't much has we didn't and needs the been replenished now that that director our the our cash. we take and

that left. it of I so taking So process. my moving down we certainly One takes but the don't from we're to say $XXX,XXX knows people we're have never remark to with the that in of along how interested talking director long DSITs moving certainly we anticipate I parties. talking much loans and did the are

Richard Sosa

maybe had question I growth. think, in a caused what prevention The for I Walter. then you quarter. quick XX% that's cathodic And pretty that mean what unit XX% growth the big or do this

Walter Czarnecki

combination end set to competitors. we're really years. a just past through we more and of the doing we've that's two time of few customers years the a gaining progress. of really also of takes growth that so it incremental the the lot year and that's of seeing know Well A division past seen of lot strategy we and a and displacing the been half years you this but at new a we're building as It momentum part grow was when over that XXXX have what and

what So we're and… excited far so about we've done

Richard Sosa

mentioned you think share segment small correct? pretty have you have in market a might that I

Walter Czarnecki

Today we do, yes.

Operator

a question from ahead. Steven Our Investor. next comes go Jackson, Please Private

Steven Jackson

would question just wondering company I it cash breakeven. to flow and in be a acquisitions. cash cash be, I when expect XXXX the positive flow. have be about window I to about about Also will OmniMetrix's flow would know like

acquisitions be how in a on acquisitions using stock appreciated. and losses. to depressed you anything you same that an past, lines mentioned to would to quick the with You’ve And can the - along are split operating with make of acquisitions profitability acquisitions, net going the might say help you the kind finance need that you of what acquisition for think reverse get price would fit

Jan Loeb

That's a me them take order. lot in to questions, let try

have So to which we years remarks my not flow Acorn - I not in will money up that OmniMetrix many might yes, the Corporate we've we be into breakeven asset as OmniMetrix be cash certainly believe breakeven ago, that positive since in that Acorn cash as bought picked you – anticipate said so anticipate 'XX indicative XXXX. does of would ever any done many, putting flow does

fit what a we of OmniMetrix of revenues with would OmniMetrix annuity we acquisitions terms monitoring In believe we so and the business that is have about strong profitability. of acquisitions in like kind most so

we come we're that a And and the monitoring like, of has kind best. to and on NOLs, but that business those good that's a businesses So our they we income. that shelter what can people better you is we other don't we in generally what we're certainly aspect one like it is of the necessarily shelter some cheap Obviously at. me focused yes, area use are threw it of just question what strategy was can to that's and the income there, NOLs was. of you than then the part some last that of acquisitions is And can remind to looking one

Steven Jackson

the and –- and - to going you are share How funds price obvious.

Jan Loeb

management we For we is technology the as the Acorn. we're and remote on value once people what be and more that monitoring believes that of reflective sell and OmniMetrix recognize that DSIT stock focused will price the of company Board

some debts, And be whether to of positive stock I point we’re markets to and mind an in people in one. acquisition deal to us public sell as two some Step we’ll step it they will So will as that have I something price. it the and we’ll overpaying that right think and is synergistic out number we shares, some move the not try go respond I make think number into well up that's we're terms structure see. time shares recognize will in to will really in think that at doing be my whether

have have done we split one, of that stock in split why feel more we split to In have not shareholder just a accretive while higher reverse so yet approval do it of don’t the itself you valuable mean that doesn’t and doing reverse price not value reverse terms to is we a we’re that's company. to a because

is it when that we’ll at value? right we time shareholder to So do accretive the think truly

Steven Jackson

I those unmonitored? various for the remains targeting is metrics Walter the markets in big have markets from you’re how one what question and Walter,

Walter Czarnecki

in cathodic just business U.S. for monitoring. the Well if it's addressable with market just just protection at to billion $X the total look and you respect the

we additional question monitored sometimes customer how calculate of there at share can new there new overall. we is have a ask and monitoring to when because much is that So what billion that into to the $X competitor we’re of monitored by all their sometimes going

back in market So to another question $X is let to billion our that going enough Power storms how is just that the that of market all unfortunately the anyone that more to the has side and side the much us busy. on the hate that millions for total through Generation those enough monitoring across metrics. there's With generators in very for growth more by U.S. demand but a monitored is and respect you is see we’re months for of and alone of indicator that see and all at always dollars just and cell in looking those is hard times catalyst after the not good only past growth on as the then keep of banks, addressable that we couple for towers, industrial went but about digit triple just typically markets the hospitals, And awareness datacenters, through hundreds are well. commercial we alone the the continuing been looking especially the

Steven Jackson

out like lot there? there opportunities is it’s well of a Right it very exciting monitoring sounds

Walter Czarnecki

been Various very we’ve busy.

Steven Jackson

the you when do a sensor you do What do how customer? alarms contact

Walter Czarnecki

they problem over well and and/or On maintenance the helping as text but however let's is is that can connections now down. to of so owners part up the diagnostically customizable the that much that say equipment we equipment messages intellectual battery trending that see be their so network it. another providing one a folks no do automated like which as with is them so problem preventative for emails receiving we equipment lets of Number already trend are the property or the looking the been that’s our while an and per the our it prognostically fixing of of all voltage know. is the Well is what's it's team yes have in efficient tier the that's

to longer be don't equipment do So if five is you in next the the days going healthy. something no

we’re also maintenance So level to a that on prognostic customers sure don't have failures. they to a make helping and schedule how

Operator

Instructions]. [Operator

next Grosvenor Stanley. Our ahead. comes from Christopher question go Morgan with Please

Christopher Grosvenor

Definitely so quarter some on more you positive margin visibility seeing OmniMetrix. in signs think looking margin one a you the here the XX% Kind future are gross or XX% that maybe you maybe on quarters do about to think question quick guys gross and year looking of wondering how congrats forward at about kind on at here looking how what number? have two of into you just

Jan Loeb

Walter do handle you want that? to

Walter Czarnecki

continuing push further to make expecting of or see more to more to come gradually efficient monitoring for the monitoring on the and focus are increase that. margin the of continued continue margins that is gross well. and take relative to We and the And in total them margin as to quite next-generation a equipment on then up one percentage of secondly revenue the out more our to couple in to improve on to attractive we've products reasons years cost

years. we’re are what numbers the of So over in at mentioned next couple you the if looking of range

Operator

Mayer, comes from Private go question ahead. a Jack Please Investor. next Our

Jack Mayer

DSITs very you and at in with and multiple I parties Can understood least discussions sounds like you're comment it correctly? having if preliminary

Jan Loeb

Yes.

Jack Mayer

general preliminary that the to carrying you your very for in to going general do range on based of does your seem realize able the feel sense that be you an goal? sense discussions that are that asset does that achievable like – Right so value

Jan Loeb

you guess that’s unfortunately I could sheet number. Look balance our fortunately, the say it’s on and

the potential is but purchase So number when if it focus that, people is than number worth look purchasers am more and number but to out on that us the too potential certainly asset it’s early that and at that talking I on. that a focus only that’s number the the they settle yeah on it’s that’s public are people it's just focused number that that’s since on a the there number public whether we that tell you that

Jack Mayer

getting something not like reactions of you’re But line like that? out or that’s

Jan Loeb

that we’re Rafael based we’re number I not the of what the is and see to X reactions sold on first could half mean like get doesn't obviously…. like No to get we president again business we don’t number that we that how it reactions so getting there's going that because

Jack Mayer

No, cetera obviously part in And I appreciate minority but…? cetera I et it it a of sure challenge am so that’s you is that stake I understood have and et that. there- your selling

Jan Loeb

Yes.

Jack Mayer

it and question it’s just it goes. is reasonable we’ll Right so things I that see take all reflecting am no saying I those the saying we’re where number it is a

Jan Loeb

That's fine. that. say Once you

Operator

to seeing turn am further any for like this I conference Instructions] questions at Loeb I'd the time. [Operator to Jan over no back remarks. closing

Jan Loeb

we or Thank ability your or Relations a building today's ask Thank attractive for in pleased of There for the company great end time represents believe potential work that but investors. plans. speak be and for confident our call questions the we our our you the execute Investor your with to an remain may in any Please investors in call. me feel interest can on I'm you Acorn grateful our made you years team in done past right support still strides shareholders and operator, with you. we moving two platform for all any I shareholder have and again set to with direction have. is in Thank contact up to the to to Acorn value. today

Operator

conference for presentation. concluded. is The you now attending today's Thank

You may disconnect. now

Michael Barth	CFO
Jan Loeb	President and CEO
Walter Czarnecki	President and CEO, OmniMetrix
Richard Sosa -
Steven Jackson -
Christopher Grosvenor	Morgan Stanley
Jack Mayer -

Acorn Energy (ACFN) 14 Nov 172017 Q3 Earnings call transcript