ACORN ENERGY, INC. Q2 FY2023 earnings call

• Acorn achieved excellent topline growth, consolidated profitability, and positive cash flow in Q2. Monitoring revenue grew 10% in Q2 following 3% growth in Q1, with expectation of continued growth.
• Hardware revenue rose 39% driven by strong demand from large C&I customers for TrueGuard back-up generator monitors.
• Introduced new solutions like remote AC mitigation disconnect (RAD) for gas pipelines, which remotely disconnects/reconnects devices to reduce expenditures and enhance safety.
• Made progress on Demand Response program for standby generators in partnership with CPower Energy, which compensates generator owners and OmniMetrix for enabling grid operators to manage peak demand.
• Hired a West Coast sales manager to pursue backup generator opportunities on the West Coast, with initial sales orders and interest generated.
• Ended Q2 2023 with $1.6 million cash, no debt, and cash flow positive business; balance sheet strong with inventory at $803,000 and consolidated cash at $1.6 million as of June 30th.

Monitoring revenues grew 10% in the second quarter, building on a 3% growth in the first quarter. Hardware revenue increased 39% in the period due to strong demand from large C&I customers for TrueGuard back-up generator monitors. Cash basis revenue rose 33% to $2.1 million in Q2 2023 compared to $1.6 million in Q2 2022, and has increased 9% for the first half of 2023. Monitoring revenue is annual recurring revenue with over 90% renewal upon expiration. Hardware revenue growth had an outsized impact on bottom line due to higher gross margin compared to monitoring.

• Expect monitoring revenue growth trend to continue over the balance of the year and beyond.
• Aim to achieve 20% annual cash basis revenue growth for full year 2023. If met, expect positive cash flow and profitability on consolidated basis for full fiscal year 2023.
• Demand Response revenue is an accretive annual recurring revenue stream expected to be an important driver for long-term growth in revenue and profitability, though adoption pace is early to estimate.

• Risks associated with disruptions to business operations and customer demand.
• Risks from executing operating strategy, maintaining high customer renewal rates, and growing customer base.
• Risks from changes in technology, competitive landscape, financial and economic environment.

Q: Scott Searle asked about C&I vs residential mix in the quarter, headwinds in residential, and recovery timeline for residential.

A: Jan Loeb stated Acorn is roughly 65% residential and 35% C&I in mix, residential headwinds due to interest rates and economy, with expectation of recovery over time.

Q: Unidentified Analyst asked about AI opportunities and backlog.

A: Jan Loeb said AI is early for Acorn, and backlog is deferred revenue not actual orders to be filled.

Q: Tom asked about reverse stock split.

A: Jan Loeb explained hesitation due to historical reverse split impact, but may consider if good news is forthcoming.