Acorn Energy, Inc. (ACFN) Earnings Call Transcript & Summary

I second.

I have a voice vote. We will briefly open the lines for everyone on the call for a voice vote. Lines are open. Please make sure you are unmuted. All in favor of the motion, say aye.

Aye.

All opposed, say nay. The ayes, ayes have it. I declare this meeting adjourned.

I'll proceed now.

Okay.

Well, okay. We're going to -- before proceeding to the presentation and any questions, I would like to mention that certain of the statements which may be made by the -- in the presentation this afternoon or in response to questions may be forward-looking and subject to various risks and uncertainties, which may cause actual results or performance to differ from expectations. A summary of these risks and uncertainties is included in our most recent annual report on Form 10-K and quarterly report on Form 10-Q.

I will now proceed with my remarks and presentation, after which we will take your questions. So thank you all, everybody, for joining in today's meeting. Being that this is the 2026 Annual Meeting, I thought what I would do is go through the main events of 2026 and talk a little bit about the company's thought process and why we did some of them and then open it up to your questions and hopefully, our answers. So the first thing that we did in 2026 was the license agreement we did with AIO -- and so let's talk a little bit about that. So number one, we understand the cell tower business. Approximately 20% of our units that we currently monitor are in cell towers. Every cell tower has usually at least 4 generators in it. And so we monitor a decent amount of generators that are located in cell towers. So it's an area that we know and it's a customer base that we know. And we thought that, that would be an interesting area for acquisition and expansion. So we looked at a number of acquisitions in the space. And we felt that the company that had the best technology was AIO. The problem that we felt in acquiring AIO was that their business was in Africa and in Southeast Asia. And it was -- it's hard to manage in that area of the world, especially for a smaller company such as Acorn and OmniMetrix. But we came to an exclusive license agreement with them for North America. And so we thought that, that was really the best way to get the technology that we wanted without the risk that we didn't want. And just so you understand why we are very excited about the cell tower business. If you think about AI, AI -- and everybody talks about data centers, the fact is AI really, in large part, can't be delivered without a cell tower. I've said at the previous meeting that approximately today, 4% to 5% of all wireless traffic is AI and about 60% of AI users are using it on their mobile devices. So we think cell towers is going to -- is already and is really critical in the growth of AI. And I'm sure some of you have read recently about that people are talking about having edge computing closer to cell tower sites. Again, that really just boost the demand, what we think demand for monitoring at cell towers. In addition, theft at cell towers has become fairly rampant with copper prices now at $14,000 a ton. There's just under a ton of copper in a cell tower. Also diesel fuel, once people are in the cell tower, they might as well get the diesel fuel, which is also today very expensive. Our -- in talking to cell tower participants, we believe that close to $500 million a year of theft is happening today at cell towers. And obviously, cell towers are usually in far away remote type locations, and it's hard to police those locations. So we think we have the best system in the marketplace. And hopefully, this will be a very large growth area for the company in the years to come. I'm sure many of you are going to ask about have we been successful in getting POCs or proof of concepts. And so while I will not be, in general, on an ongoing basis, commenting about POCs and number of POCs, et cetera. But rest assured that we have a number of POCs already besides the demo towers that we have up, which we view is now as POCs as well. So that's what's happening and some of our thought process behind what we did and our exclusive license agreement with AIO. We announced recently a deal with Champion. Champion is a generator manufacturer. They've typically done portable generators. They recently got into home backup generators. And we signed an agreement and the agreement says that they're going to order 3,000 units a year. They think they're going to order a lot more, but the agreement says 3,000. What's interesting about this deal, this is -- I call it a quasi-OEM deal, but the fact is that our name -- we're selling it with our name OmniMetrix on the box. The typical OEM deal might have be a private label type deal. But this is -- have OmniMetrix on the box and -- the reason why is Champion's thought that having an Omni monitor on a Champion generator would help spur sales of the generator being that they're relatively new in the business for this product. They thought that the OmniMetrix name would help. And that's really the point I want to make here is that other people or people in the industry feel that the OmniMetrix name is a valuable name to have with your product and is very well respected in the field. And we are still in the hunt for a real OEM deal. So we'll see what happens with that out in the future. Another thing that we've done recently is we repurchased 1% of OmniMetrix from a former CEO of OmniMetrix. So the question there is why now? And although one would say that it's 1%, what's the big deal, but we think this is important in understanding why we did it now and what it bodes for the future. So just you have the genesis of the deal prior to our coming on board, many of you know Acorn was basically a bankrupt company and out of money and the previous management sold 20% of OmniMetrix to a former Board member of the company. And he gave 1% of the 20% to the former CEO of OmniMetrix. And in 2019, we did a rights offering, and we bought back the 19% of Omni that this director had. But we did not buy the 1%. Now prior to that time, Acorn had lent OmniMetrix a significant amount of money. OmniMetrix was not profitable at the time the way they are now. And over time, many of you who follow our financials closely know that Omni was paying back Acorn that loan. So during that period of time, it was difficult or would have been difficult for us to value what the Omni equity was worth with the debt. We were now at the position where Omni had paid back that Acorn loan and Acorn being a non-revenue-generating entity was going to be borrowing money from Omni. So it was made a lot of sense that this was the right time to buy his 1%. In addition, if we were going to make an acquisition into Omni, having that 1% out there would be somewhat difficult. Plus the 1% was a preferred, and so he was due dividends. So overall, it was a very good transaction for us. It was a good transaction for him as well as has given him a path to liquidity. He's locked up for at least 6 months. But we think that's a very positive deal for us and opened us up to the ability to make it much easier for us to make a transaction, which we have done and announced last week. And I'm sure many of you might have some questions about that, and that is we purchased Gen-Tracker. So our thought about purchasing Gen-Tracker is this. Number one, they're a competitor of ours. And so that's beneficial to us. They're more focused on commercial and industrial, which is where our focus has been less so on residential. And a large part of their revenue base is monitoring, which is what we've focused on. We think that's the most valuable part of our business is the ongoing ARR that monitoring generates. Other things are they are focused on the ATS or Automatic Transfer Switches, while our focus is more on the generator controller. So we cover both sides of -- so to speak, that power switch. The owner wanted to retire the Arizona. So we think we got it at a very good price. And obviously, we need to execute. But I think if we execute, everybody is going to be happy with the outcome. They did $1.5 million of revenue in the last 12 months, about $1.1 million is monitoring and $400,000 is equipment. So we think that, that's a very good acquisition for us. And it is accretive. And hopefully, you'll see the benefits relatively soon. Besides that, my general view of -- that we're in a good spot from a macro view, power is at a premium today here in the United States. And so we think there will be continued growth in generator sales and good generator sales to get good monitoring sales, plus we think that monitoring in general, is a thing that people want to have today and can have today. And so those are two big trends. And then weather has not has not really been a factor for the last 2 years as my IR team pointed out, this is the second year in a row that the United States has not had a hurricane. And that the last time 3 years in a row has -- was in the 1860s. Not that I'm hoping for a hurricane, but weather is -- does help us a lot. And coming up in the next few months, there's a Super El Niño, which also might impact power demand here in the United States. Its main focus is in Southeast Asia, but could impact heat and power demand in the United States over the coming months. So I think we overall continue to be very optimistic about our business and on many different fronts. And hopefully, that gives you a brief synopsis of what we've done so far in 2026. Hopefully, we'll get some other interesting things done between now and the end of the year. And with that, we will now proceed to Q&A. [Operator Instructions].

We do have a question from Richard Sosa.

Can you hear me okay?

Richard, we can hear you perfectly.

Great. Congrats you guys have been busy this year. It's nice to see all the updates. Just a question on Gen-Tracker. I mean, are there other companies -- I mean, I know it's a pretty fragmented industry. Are there other companies like Gen-Tracker, where you could see similar type M&A?

There are other companies like Gen-Tracker. And I'm saying -- when you say like Gen-Tracker, I'm saying in the same industry that we're in, that are small. And the answer is yes. As I said, Gen-Tracker had a -- was more interesting to us because of their focus on commercial and industrial. The other competitors have a little bit more heavier mix on residential, which is something we're not that interested in. I'm not saying that we wouldn't do it at the right price, but residential is not an area of our focus. So Gen-Tracker really was our prior -- really the target that we were most interested in. And I'd say that there was probably three other companies that we talk to and we bird-dog in our industry and -- but nothing is on the burner today.

I think when you announced the transaction or the partnership with AIO, I think you had mentioned in a press release or something like that, that you were hopeful that you might have some news by year-end. I don't know the exact words. I don't think it was exactly written like that. But do you have -- do you think that still may be the case that we might hear something by the end of the year?

Yes. I think it's certainly a possibility. And it certainly has taken us longer to get to the right people who are the decision-makers in large companies and most of these companies are larger companies. But I think it's certainly still a possibility. I'm not saying revenue in 2026, but news in 2026, I think it is a possibility.

We have a question from Shai Dardashti.

Do you hear me okay?

Yes, we can hear you okay.

I'm looking at the LinkedIn page for OmniMetrix, and there's a post from yesterday outlining three interesting developments, Omni 360, new acquisitions and OEM partnerships and the third bullet point, T-Satellite capability. Could you, if it's appropriate, speak to that and perhaps calibrate how interesting it might be?

So you're referring to the T-satellite since we discussed the other two. So T-satellite is -- T-Mobile has a program where using your cell phone, you can access satellite -- satellite transmission. We are, I believe, one of the first companies to be certified by T-Mobile to use T-satellite in our services. And right now, we just finished EGSA, which is the association for generators and that garnered a lot of interest at the show. We do today in -- you have used Inmarsat when people wanted to have satellite transmission. Usually in, let's say, Gulf of Mexico, we are on a bunch of generators -- I'm sorry, Gulf of America. We're on a bunch of generators on oil rigs in the Gulf of America. And so they use satellite. So here, using T-satellite on a phone, it's going to be a lot cheaper and just a lot easier for our customers to access our generator monitor with the T-satellite chip. And we are in the process of rolling that out to people who have an interest. And obviously, it's going to be more expensive than the typical chip that we have in our units. But I think as I said, we are one of the first companies that T-Mobile has certified.

[Operator Instructions] well, Jan, I think we're showing no further questions.

Okay. Well, with that, let's wrap up today's meeting. Thank you all for attending. If you wish to contact us, you can reach our IR team at (212) 924-9800. I look forward to seeing you all at the 2027 Annual Meeting and encourage you to participate in our quarterly conference calls. Everybody, take care.

Thanks, everyone. That concludes today's call.