ACFN - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Acorn Energy Fourth Quarter and Year End 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary. Please go ahead.

Tracy Clifford

everyone conference welcome and you, to call. today’s Thank

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

renewal and to from For subject operations the economic the company years rates, such and to the business as the in access risks executing customer operating well growth. company’s for base, the maintaining performance in high as capital example, our financial pandemic; changes growing COVID-XX of resulting technology, competitive and impact XXXX strategy, of customer the future disruptions environment, risks demand operating factors, having is in changes associated sufficient financial with to and as

The to to the circumstances that events with the based Act well Risk using as affect revisions Form as are years. are disclose XXXX. Securities statements XXXX, their the Harbor as Acorn’s management to growth beliefs nor company Reform discussion management’s XX-K goals after reflect full currently made. the in filed no information that date be the of or future the A or is risks these on forward-looking Litigation Exchange and undertakes included of achieve in also of no made to provisions obligation uncertainties company statements Securities pursuant OmniMetrix to Safe may to in will available any Commission. Acorn able There assurances Private assumptions the Factors Forward-looking on and

Loeb. Jan call will hand the Jan? CEO, I Acorn’s Now, to over

Jan Loeb

we the have carryforwards, saying income the I investments for moving federal the net future to by year. joining and was Despite business net rose posed COVID-XX, those for OmniMetrix start for flow believe several a how year. What's consolidated on Acorn for the faced positive am morning significant significant track toward very Thank is positive and achieve today you, and profitability and good on our basis of are the over quarter our very for fourth we on call. the been we cash challenges milestones Tracy, even is These that to What I'd us to a operating full income means forward. flow they past and for These quarter the value-enhancing we cash our basis and revenue profitability as our our is last longer able to of line that is grateful Acorn in we have benefiting cash-generating challenges team ones achieve working and proud foreseeable for nearly balances cash operating opportunities. stronger particularly a credit shelter we positively business debt net to Acorn any will now and streams. of positioning. XXXX taxes our month. future and make this from million or pursue investors have our in should paid have shareholders broader base significant Further, future, attractive public loss attractive a equity growing flow margins recurring our a This more This of for self-funding because and we financial like full no important NOLs. and $XX year more that puts position and by NOLs off to and to cash years. company impacting with

cash Acorn business and basis in business in of our we ongoing revenue business within maintain levels. meetings. without achieve the to spread sales the able pandemic, growth experience an value proposition our operational Corrosion procurement development XXXX prospective We or model were remain enabled interruption halted of and all XXXX customers fully XXXX employee Protection GAAP Nevertheless, particularly as dialogues, did, discussions to our however, strength and in-person throughout year-over-year sales CP furloughs. and Importantly, at any the to

versus in in of in revenue. also as margins XX.X% to monitoring – XX% a and gross XX.X% increase higher-margin an our XXXX, total further revenue in reflecting improved percentage We XXXX hardware an margins improvement

our in to long-term very both we in line to power limited COVID, all us. are from opportunity In impacts we generator for as aging XXXX yield. foundation who addition, market endpoints and Texas. for unpredictable as as has backup backup faced power nature, combined be a outages Severe the currently with penetration historically the power to we demand of and potential beginning of a market cold term, and problem long-term challenges drivers California services. of the been personal settings which faced example, generator people generators, continues power of control outlook. spread growing OEMs, upon in are and national to period severe big top not monitoring a also fiscal our for some weather been in large have thereby incidence little our monitored, near has XXXX installations, the weather been not which growing which and of of commercial, mother consumer growth achieve base as offer well disrupt of growth is of extreme line underlying expose have In remotely, generator XXXX. backup the These damaging further generators trends, patterns driver believe increasing that growth that another work California, in It of historically grids. for the XX% support of important the monitoring big may the even markets the This places of bottom a products now wildfires with is estimated industrial base strong and

Protection state, in we a we are reengaging the As companies, that recently to were return to business to in gradually sales new end, increase sales our efforts engineer were build support on we pipeline year. so added dialogues gas To able with activity XXXX, pipeline an a dialogues to development expected adequately business normalized this large working begin more efforts. natural that in particularly segment conditions able latter Corrosion support development business that in our and In with part of operators. to we

We also engineer from generation market an larger focus the growth our and to power segments. added on our sales industrial in expected support commercial additional segment

by technology are Our driven and and also OmniMetrix our solutions in and growth cutting-edge development innovation. prospects ongoing product investment new

annunciator the our launched solutions. upgraded customers of capabilities During customers Rectifier our used our technology, Corrosion import data. the pipeline and remote value our tracking software In solution, Monitor real-time LCD product the our station on by lower while our of basis. new solution next-generation builds launched which a we provides Patriot effectiveness XXXX, upon touchscreen enhance with Protection value-added hardware circuitry. This and OmniPro data Smart This solves also circuit which revolutionize monitoring Annunciator SaaS and we OmniMetrix our a centralized to key display by combined and in X-inch also mission-critical enabling refining software relying our monitors, on device, and XXXX, late assets management a pipeline critical pain for non to HeroX data point test agnostic monitoring

solution. this We with new prospects regarding customer are to reengaging excited be important

expect in our And early marketplace. and sales monitoring solution, stages and support R&D are monitoring our launch we focused launched compressor XXXX. value order continue behind customers its to We is investments in been deliver new plan air in AirGuard, in first which to in still of We on development, to and additional commercialization, products this greater maintain having our our remote and product also technology product year. new leadership to the position enhancements adding

at strengthening by our in to substantially Paycheck and our successful $XXX,XXX software Acron proceeds new reflecting year-end, by operating cash net increasing financial offset $X in loan and was in million financials, products. cash Protection back over Program investments partially $XXX,XXX $XXX,XXX, Turning XXXX, in position of flow to

portfolio. of scenario, shareholder earnings, reasonable meets provides cash or strength within performance pleased being period of and strategy any forged we year. Acorn's over past foundation the the evaluate have growth sheet closely criteria that in Having of OmniMetrix support been immediately time. its as particularly or monitoring or potential accretive our of well that solutions product that our on flow our resiliency, future a we strengthen either remote extremely by and to We In a tuck-in a focused business, is partnerships Our and the inspection would organic the a value, environmental return the to the value, technology that even balance investment resource-intensive to evaluations. believe periodic limits versus to opportunity benefits this and it of possible acquisitions as any physical solid ensure would on deliver significant certainly on-site due remote strength monitoring solutions

proposition, opportunities remains business. remote penetration of levels commercial IoT substantial markets, our continue with and value clear growth industrial Our services continued monitoring low for in to suggest there combined and long-term for

aggressively is of customers industrial of we As stabilizes normal execute our opportunities larger dialogue Acorn our to pipeline solutions. across and to procurement and believe base expanding cycles, our as growth back economy get poised

Board reasons on to the XXXX the remain flow come, I've and cash also management XX% confident in for growth team of at in potential years Acorn while positive profitability and trajectory annual basis. achieve to All of an for maintaining our operating achieving highlighted, an and least and annual

tangible knowledge we going and our and opportunities business enthusiastic position, am I prospects capital provide the to the have and our team forward. value Given very customers, about strong experienced our our our identified, about we

tax could position our back the with the greater that of Washington: valuable financials somewhat overview, tech be even our sweet secondly, increased. the and to in Clifford, become we I'll think model spot and corporate on NOL incentives; CFO, rates review more in clean because in turn issues expected our renewed environmental an focus asset, call green With also to We business are to of Tracy large our a new were in firstly, detail. administration policy

Tracy Clifford

growth quarter to XX% XXXX OmniMetrix monitored, in product generation operating product year same SG&A four OmniMetrix revenue thus $XXX,XXX Corrosion QX to $XXX,XXX to hardware $X.X we X% prior XX% versus in to a expense the to strong as and in I'll to XXXX. to to Corrosion XXXX quarter while In shareholders mix units increased corporate income to $XXX,XXX lines. made per of or disruptions in segment. filed principally as decline sales on loss compared XX% was reflects total higher to higher a increase product development sales as and than compared Gross due to reflecting the with full which income of margin Acorn in annual million well unit, expense QX Protection from a improved profit the from $XXX,XXX fourth a an XXXX deferred full X% X%, results XX% an revenue released in net increased net operating $XX,XXX in products research OmniMetrix' increase from increased year new XXXX $XXX,XXX development period, to of at XXXX This two was the per a in on the XXXX COVID-XX, Thanks, a increased to XX% zero $X.XX and offset increase million to full to comparable is over XX% recognized grew XXXX, XXXX. basis XXXX. XXXX X% in In cents income GAAP $XX,XXX compared well for compared and hardware. mix XX% and was and on with loss QX year primarily due in expenses. strong due or the power our for fiscal or slightly in increased as of margin a particularly $XXX,XXX is $XXX,XXX being quarter net QX the monitoring, continued in in prior reflects compared of to the a revenue. increased the XXXX remained costs or hardware hardware sales of both X% products. in drivers $X.X improved XXXX life quarter our by increased and XXXX, amortization OmniMetrix's also revenue the This million business offset increased in revenue the shareholders four XX% net in of $X.X fourth hardware the $X.X XXXX years are QX attributable monitoring segment from million cost decrease both over a in income year the per fourth in a in grew of our This of as XX% caused gross margin in per $XXX,XXX $X.X operating margin profit monitoring XXXX, higher to increases. quarter result and year potential to operating higher million gain zero fourth from XXXX, XXXX XXXX number sales to XXXX. revenue. from X% due loss hardware enjoyed reduce as XXXX increased margin quarter in release $XX,XXX in revenue review gain full XXXX increases. XXXX XQ XXXX Jan. of to to and higher cost-efficient higher OmniMetrix’s to gross quarter. to Gross increased also a XX-K the the QXX to some XXXX, on forgiveness professional to QX favorable XX% Monitoring both the XXXX QX on quarter prior $XXX,XXX by in from years, due operating and XXXX share Program accordance the attributable gross compared to estimated revenue as XXXX share coming the revenue. operating GAAP, press increase X% $XXX,XXX XXXX. year the when more cents in to share and financial expenses three and we Gross In In in fourth to as highlights a expenses. monitoring SEC. Protection new of of well XXXX as fees. hardware OmniMetrix's was increases the of X% Protection Revenue share as $X.XX which includes income attributed increase development change percentage gross Including SG&A in grew $XXX,XXX Acorn in a R&D in morning, and next-generation recognized increase year-end of loan. in the Acorn's of with and in by in Paycheck

before Excluding recorded non-controlling QX $X,XXX. consolidated have the income net Paycheck of Protection would Program gain Acorn interest

trends. typically As basis the supplement you are uses new period. hardware cash revenue growth we sales than over XX-days. to basis three-year which shipment of differ differ our as recognize revenue defer sales Cash sales know, and And and from performance from may over Acorn measure a revenue recognize is one-year. upon GAAP hardware we and a be contracts from are because GAAP typically monitoring revenue periods generation. expansion Cash monitoring to GAAP or terms sales invoice service, typically business renewal, We are period in our we able greater during active when revenue

Given full new we the the period, impact in on pace of view XXXX as GAAP exceeded of outcome. COVID-XX sales hardware a same sales positive cash during year modestly revenue our our which only

in levels, versus maintain steady For the the to were we again, XXXX. that pandemic XXXX. QX XXXX XXXX. business held impact our to pandemic. basis also XXXX the our the cash do of and were and of sales throughout XXXX fiscal second as sales year practices in sales and once cash expect of XXXX impact revenue GAAP the encouraged able half at our more $X,XXX,XXX full sales half return recedes at XXXX. In fiscal despite we the cash will in that trends the sales exceed normal And basis we're of $X flat has cash sales Cash $X,XXX,XXX second QX for million basis versus We're

XXXX it As by two basis power to across million relates sales increased $XXX,XXX segment. XXXX to generation in segments cash fiscal our to comparing cash our $X.X sales

to with XX given $X.X February the generated cashflow our proceeds on December to and strength And full And line into development. line off outstanding in from this We in we operations we'd cash the increase the $X.X it finance of improved generated of we XXXX, turn plus now December accordance some balance expire activities company's was $XXX,XXX segment year-end by operations mentioned, credit in $XXX,XXX from investments in operating an expected sheet, million increased CP all to and its of call PPP company's believe consolidated to on XXXX. let software operating and net sufficient offset February. renew XX, foreseeable existing future. cash OmniMetrix's million XQ. the to opportunity in give elected liquidity cash activities And due I'll at Jan current consolidated terms. the its line the the previously an have. any provides Cash my That remarks. from $XXX,XXX. operator the you as to ask including $XXX,XXX to declined The may generated over concludes you is to balance $XXX,XXX XXXX. our XXXX, and Operator? While paid from questions At not in as $XXX,XXX

Operator

now question question-and-answer session. investor. will who comes from private the go first begin is The [Operator ahead. Sosa, a We Instructions] Please Richard

Richard Sosa

Jan doing? are Hi you how

Jan Loeb

morning, Good Richard.

Richard Sosa

of congratulations. First all,

this I've held stuff over for XX% know, my like of you what As seems life.

quarter the and So basis congratulations on first profit operating your on cashflow an basis.

for years a to talking been and many see been You've and finally long road great it's about it. it's this

entire to team. and congratulations definitely So your you

Jan Loeb

you. Thank

Richard Sosa

So talked last markets a in pickup of any of in I The industrial kind end about little both the the the quarter two and you on your slowdown generator have markets, had side? you questions. specifically year had first a bit seen

Jan Loeb

that slowdown is industrial the really are side. to from the and you OEM in commercial side referring The

because been growing has So said industrial and Generac that commercial for side significantly. up slowed example, their has side picked very their sales generated residential has has

seen industrial low focus, like very in that not residential because rate. a side our a commercial has been the have the We penetration drop side has

continues significant has but for focus competition focus, us. that's and our that seen OEMs businesses is consistent there from standpoint, the in focused not commercial that residential is our for That of focus on grow commercial our from is So, side very growth and we're the since And side. the area. we've The industrial. because industrial, our OEMs, nicely and our to growing business been residential so

Richard Sosa

a more about It lot pipelines a you, that specific very administration. efficient, is It helps OmniMetrix? potential anything new companies sense, be like benefit of talked administration. darling eyes, in bit the good. of you new be efficient, makes helps their And specific would efficient, helps little be and is Have policy more OmniMetrix sense friendly that generators a a democratic to make a a heard administration more you all could that have

Jan Loeb

we're general, be going to is focus going We've that just not is specific going since goal. the to be closer heard to any area of do a said yet administration and a so monitoring in allows it's has to zero green you But policies. saying get and remote that, that but focus emissions, companies certainly to an

in we're we've direct seen that think the impact spot. we today. not So right heard But would us any or policies

Richard Sosa

That's I great. but and let question, one go I'll queue there. back do somebody go in the more if anyone have there's

Operator

like We question currently, next the ask have to in actually you'd Richard, your don't anybody if question. queue

Richard Sosa

great. Sure. that's Oh,

So in mean, few front attending I is Maxim I with later next do done noticed Roche of this to story, a over you new plan week I do I this something months in December, virtual presentation you've more to obviously. this telling with see But get be, going you and great and week, investors? a that to did believe, job of you a are these your conference, you are conference

Jan Loeb

invited, I we're can it certainly hope that. would do If be that

consolidated I we can before, tried next I reached to noted and that which growth as – now think to that our on profitability growth the I is we've we've potential milestone, basis. show we've milestone, bring. story significant to you reached milestone is that that profitability And have a that think, that a think our get

profit As on business. gross you margin XX% know our we have a

one. profitability gross story our a becomes the as very large So ramps up

And me or focus to over And that next help year bring so, to I that. the accomplish conferences hope will so.

Richard Sosa

look Acorn/OmniMetrix. That's great, your Jan. And I forward continued Congratulations. to success at

Jan Loeb

Richard. you, Thank

Operator

question comes next Capital. with Artko ahead. Peter The Rabover from Please go

Peter Rabover

metrics profitability the relationship the wanted hardware on and Hey between recurring positive. hardware. The for I get questions on some and Jan reaching revenue. congratulations to the the flow cash

correct have Tracy think, something? or said the but or… might this $XXX,XXX And it, were Am sales so, on I quarter that hardware what I

Jan Loeb

want Tracy? Tracy to you handle that?

Operator

your hear we speaking, cannot operator, line be might this Tracy, is muted if the you're you.

Tracy Clifford

could sorry. Peter, I'm your I'm repeat Yes. sorry question? you

Peter Rabover

What were the hardware…

Tracy Clifford

hardware or sale, sale? it Is hardware cash

Peter Rabover

Yes, are increase in I guess you revenue, what to metrics use guess the – guys track sales? deferred hardware an I

Tracy Clifford

as We well by product. use our Sure. differs lines because metrics typically the margin across product gross

the or As amortized three sales, is hardware sales, the three relates actually hardware hardware as stating, it to was sales, I years cash compared of over years. amortized to over

metric recognized. the the that we GAAP So, actual cash, difference sales revenue is and cash between the that the

So into sales there's of monthly revenue a coming on basis. years actually the three amortized GAAP

that explains difference. of kind So the

of sales hardware layers that our amortized are GAAP course, the increase, increase. will revenue also As of in

Peter Rabover

Right.

the So of I'm both the sorry, number GAAP… but what was

Tracy Clifford

– across sales separately I hardware don't cash I sales consolidated believe gave basis. the full Our on

monitoring $X Our in cash million full XXXX and and hardware both were sales XXXX. sales for basis

Peter Rabover

was were I what asking the for sales for Sorry quarter? quarter, hardware the the

Tracy Clifford

for me Let Give just me that just moment. pull you. a

Peter Rabover

Okay.

question. this ask me Let

I of is number without while increased x amount but I sales So in this sort you come guess, she every I don't do or revenue your a good of kind doesn't looking, correct, I out want hardware cash dollars past, think of and GAAP, whether – of monitoring base is but on what to the did idea for by? send and guys have it –

Jan Loeb

about call generator sales, example, is use for and our is number hardware unit $XXX can't a maybe we'll unit. the that it rectifier sale You monitor because really sale a $X,XXX

just you you'd each at units. can't the So say you have look to dollar

Peter Rabover

Okay.

Jan Loeb

Not number. total – sales in units versus a volume volume

Peter Rabover

the Okay. have revenue? monitoring an you for number ARR Do

Jan Loeb

could say revenue, it's monitoring unit year you on on we of $XXX average average. for a every approximately So, kind sell, in

Peter Rabover

terms in last you given in for for think, which like increase Do $XXX,XXX a guess clearly an average to $XXX,XXX rate, kind which, hardware, I get so of high year. XXXX, hardware of like the I value I highlight to was renewal trying Right. the down – just or I'm mean, have of the better metrics your – an was company

least Sounds like fourth was $XXX,XXX. quarter $XXX,XXX, at

value really and is gross like the drives margins, the the the company? what for monitoring ARR revenue gauge which get which of the what the to profits, trying – is base Just gross the

Jan Loeb

to Yes, you can it I give we that here. don't know

Peter Rabover

fair Okay, enough.

Tracy Clifford

Peter, were just $XXX,XXX to four hardware to XXXX. question, circle quarter to fourth compared back in XXXX quarter in the sales your $XXX,XXX

Peter Rabover

Really?

Tracy Clifford

across that's And both again, segments.

Peter Rabover

your year-to-date mean, this in I and X.X it's was hardware the quarter, quarter sales third for number for X.XX.

what confused is. kind just of I'm GAAP So the on

Tracy Clifford

we accessories. Those circle together are going I to can back. reconciliation can and be a put you for

Peter Rabover

back. We to Okay. going trying sales Fair the just can gauge how basically. I'm circle enough. hardware are

Tracy Clifford

Okay.

Peter Rabover

I you guess my second – in – you that I guys question million would are you it's are, amount, the like positive. be $X is a know guess, have big. what not I small cashflow a but cashflow, the cap And $X million on market

So, going with cash are? I'm what just the curious your plans flow forward

Jan Loeb

XX% So, it in would that in growth, use we in our we've one. said our expect least obviously to XXXX beyond. mean, and revenue remarks support we the number I growth

So, inventory cetera. need et some working receivables, we'll capital increases,

up right growth, the now say we would hopefully the ramp So company. would the to cash support our be I as used that growth of

Peter Rabover

Okay. have. Thank all you. I That's

Jan Loeb

Thank you

Operator

Instructions] [Operator

Jan Loeb

there are questions? more Operator any

Operator

have questions. we more appears It no

conference closing I the any would over to session. like back turn our question-and-answer concludes Loeb, to now remarks. this So Jan for

Jan Loeb

place visit our this week. their happy for company. Acorn. information appreciate Growth the Emerging is are thank interest continue you We to in taking reach for again, Once investors opportunities and return net Group's consolidated, complimentary we on to in XXXX. We'll serve Please to I of about markets sustainable, well-positioned all or with support Virtual to speak growth accretive website opportunities. Conference XXXX, shareholders, for your trends and to We the look the profitability in which Maxim fiscal normal growth I'm

set this for Investor can today. call Operator, our You up me. contact with also any this your call. time questions I a you believe or with Relations again concludes to Thank

Operator

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

disconnect. now may You

Acorn Energy (ACFN) 19 Mar 212020 Q4 Earnings call transcript