Transcript: Acorn Energy Q2 2026 Earnings Conference Call

Acorn Energy (NASDAQ: ACFN ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 49 million, reflecting an 8% growth in high-margin monitoring revenue, while hardware revenue declined compared to the previous year.

The company's gross margin improved by 750 basis points to over 82%, driven by the increase in monitoring revenue, with an expectation for blended gross margins to stabilize around 75% as hardware deployments expand. A new partnership with Champion Power Equipment is expected to contribute significantly to growth, with Acorn's monitoring solutions becoming the standard on Champion's generator lines. The launch of Omni360, a comprehensive remote monitoring platform, is anticipated to transform the business with its broad capabilities and positive early feedback; however, the sales cycle is expected to be longer.

Acorn maintained profitability with a net income of $294,012 for Q2, while continuing to explore M&A opportunities and OEM bundling efforts. The company remains optimistic about achieving an average annual revenue growth target of 20% over the next three to five years, supported by a capital-light, high-margin recurring revenue model. Full Transcript OPERATOR Good morning and welcome to Acorn Energy's second quarter 2026 conference call. All participants are currently in a listen-only mode.

Following management's prepared remarks, we will open up the call for questions. As a reminder, today's call is being recorded. I'll now turn the call over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary. Tracy Clifford, CFO and COO of OmniMetrix Thank you, operator, and thank you all for joining our call.

I'll remind everyone first that today's remarks, including responses to questions, contain forward-looking statements. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Factors that may impact our future operating results and financial performance include general risks such as potential disruptions to business operations or changes in consumer or customer demand, as well as specific risks related to our ability to execute our operating plan, maintain strong customer renewal rates, and expand our customer base.

Additional risks may arise from changes in technology, competition, or shifts in macroeconomic or financial markets. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's beliefs, assumptions, and information that is available as of today. There can be no assurances that the company will meet its growth targets or its other strategic goals and objectives. The company undertakes no obligation to update or revise forward-looking statements to reflect future events or specific circumstances that may occur after today.

For a more detailed discussion of risks and uncertainties that may affect our business, please refer to the Risk Factors section of our most recently filed Form 10-K and our Form 10-Q for the second quarter of 2026, both of which are available at and on our website. Now, I'll turn the call over to Jan Loeb, CEO of Acorn Energy and OmniMetrix, for further comment. Jan Loeb, CEO Thank you, Tracy. Good morning, everyone, and thank you for participating on today's call.

Our second quarter results demonstrate the underlying strength of our business model centered on high-margin recurring monitoring revenue driven by a growing base of hardware deployments, which can be variable in their size and timing. As expected, our year-over-year revenue comparison was impacted by strong year-ago hardware deployments related to the material cell phone contract. 49 million reflected 8% growth in monitoring revenue, which is our highest margin and most predictable revenue stream. 21 million in Q2 last year.

3 million in hardware revenue related to the last significant shipments and the fulfillment of the initial purchase orders under the material contract as compared to follow-on purchase orders for hardware, which resulted in revenue from the cell phone provider totaling $263,000 in Q2 2026. Our Q2 gross margin improved by 750 basis points to over 82%, principally driven by the increase in monitoring revenue as a percentage of total revenue. Monitoring generated a gross margin of over 90% in the quarter, though moving forward I would expect our blended gross margin to average more in the 75% range as we make progress in expanding hardware deployments. 09 per diluted share.

These results reinforce our ability to maintain solid profitability and cash generation while investing in future growth. For example, in the residential market, we are advancing our growth potential through a new partnership with Champion Power Equipment. The collaboration makes our monitoring and control solution the standard monitoring option on their popular Axis and Flex lines of home standby generators. Champion has a strong reputation for reliable, high-quality and competitively priced portable generators, which have sold millions of units over the years.

Recently, Champion has developed whole-home solutions featuring advanced technologies such as Flex for better load management and fuel efficiency, durable all-aluminum enclosures for weather resistance with extended warranties. By integrating our monitoring capabilities as the standard option, Champion customers can gain real-time visibility into generator status, fuel levels, battery condition, maintenance alerts, and remote control options through our OmniView interface.

Given Champion's accelerating growth in the residential standby generator market, we believe this partnership provides significant long-term growth potential that should begin contributing to our results in the current quarter. Pricing under the agreement is based on an assumed annual purchase volume of 3,000 units, but the agreement does not obligate Champion to purchase a minimum quantity. Champion is planning to issue a press release today regarding this partnership.

Turning to another exciting initiative that could have a transformative impact on our business, we are particularly thrilled about the formal launch of Omni360, our comprehensive remote monitoring and control platform for cell tower, campus security, and other critical infrastructure. After investing several months in customization, product enhancements, and integration, Omni360 is now available in three tiers—Nova, Horizon, and Zenith—offering different capability levels and each backed by a 24/7 network operating center, a sophisticated AI-supported software suite, and mobile app access.

Omni360 delivers a much broader suite of capabilities that builds on our industry-leading generator-focused solutions to provide unified, turnkey management of an entire site. Capabilities include advanced environmental monitoring and control—temperature, humidity, HVAC, smoke detection, and flood sensors; robust campus security with AI-powered cameras, site access control, intrusion sensing, two-way audio, and live incident response.

It includes comprehensive power management solutions such as fuel level sensing and usage prediction, commercial power automatic transfer switch monitoring, battery health, transformer temperature and voltage, current balance/imbalance detection, along with smart energy and cooling optimization tools. Omni360's all-in-one approach delivers real-time visibility, automated controls, and actionable insights that help operators cut energy costs, reduce unnecessary truck rolls, prevent theft, and ensure compliance.

What makes Omni360 particularly exciting is that it is the only solution that brings together all of these functions into one platform and provides 24/7 monitoring support. While there are a range of hardware solutions already in the market, they are typically limited to just a few functions and they do not include a monitoring capability. We believe these limitations create very exciting opportunities for a more robust solution that also delivers mission-critical real-time data and controls to cell tower owners and tenants. We are actively introducing Omni360 across the industry.

For example, we'll showcase it at this year's ISE Expo, a gathering of telecom sector leaders taking place in Nashville later this month. While the breadth of the solution and typical enterprise sales processes suggest a longer sales cycle, early feedback has been very positive and we see substantial potential in this market. In addition to these efforts, we remain active in seeking and reviewing complementary, accretive M&A opportunities using a very disciplined financial and operational framework. Once we've identified an appropriate target that meets our operational criteria, the challenge is in negotiating appropriate terms that create value for shareholders.

We have lost out in several situations where another bidder was going to pay substantially more than we thought the assets could justify, and we are unwilling to take such risks. By their nature, discussions of this type can take many months and the outcomes are impossible to predict until the very end, and as a result there's little we can say while discussions progress. The same is true for our efforts to secure OEM bundling opportunities, which we continue to pursue as we believe these are worthwhile efforts to continue to increase our number of monitoring connections. The secular tailwinds supporting our business remain in place.

Increasing frequency of severe weather events combined with growing power demand from AI data centers, electrification, and reshoring continue to highlight the critical need for resilient infrastructure. S. power grid, causing hundreds of thousands of outages across multiple regions. These events underscore both the vulnerability of the grid and the value of reliable backup systems and remote monitoring.

Additionally, attacks on critical communications infrastructure reached record levels in 2025 and we estimate that cell tower theft losses will reach approximately $500 million industry-wide in 2026, including copper and equipment theft. Omni360 is purpose-built to help operators combat these exact challenges, increasing reliability, security, and operational efficiency. Also today, one year in, AI already represents 4% of all cell network traffic. Imagine what it will be in three years.

This points to the critical importance of protecting cell towers and related infrastructure. Looking ahead, we remain very optimistic about our long-term growth potential. With the significant hardware revenue contributions from our large national cell phone provider now cycled through our year-ago comparison periods, we expect more favorable revenue and earning comparisons moving forward.

Combined with the momentum in our monitoring base, the launch of Omni360, the Champion partnership, our internal sales strategies, and our ongoing M&A and OEM efforts, we believe we have the pieces in place to achieve growth that more than exceeds and aligns with our three- to five-year target of approximately 20% average annual revenue growth. Further, our capital-light, high-margin recurring revenue model and significant NOLs give us strong operating leverage, allowing us to drive meaningful incremental profitability as we scale. We are very enthusiastic about the progress across all fronts and the opportunities that lie ahead for Acorn Energy and OmniMetrix.

Now I will turn to Tracy for her financial and operational insights. Tracy Clifford, CFO and COO of OmniMetrix Thank you, Jan. A theme for our Q2 2026 results is the steady progression of recurring monitoring revenue and our strong gross margin performance on lower revenues. 26.

I'll now touch on a few key points. 26 this year. The year-over-year decline stemmed from a $1,141,000 decrease in hardware revenue, which was due to the impact of the sales last year under the material contract that were largely fulfilled prior to 2026, partially offset by a $105,000 rise in monitoring revenue. Monitoring revenue rose 8% to $1,425,000 as our installed base of monitored endpoints continued to expand.

Hardware revenue of $1,064,000 included $1,011,000 from sales of new hardware and accessories and $53,000 from the amortization of deferred hardware revenue. Amortization of deferred revenue was $270,000 in the prior year period, a year-over-year variance of $217,000. 26, which will be compared then to 250,000 215,000 which was recognized in Q3 2025. 25, reflecting the higher relative contribution of monitoring revenue, which resulted in gross margin greater than 90% in the quarter.

Operating expenses declined 1% to $1,675,000 from $1,692,000, with R&D expense decreasing by $26,000, partially offset by slightly higher SG&A expense. The modest SG&A increase reflected higher stock-based compensation and personnel costs, partially offset by lower commissions on reduced hardware volume. The decline in R&D expense primarily reflected lower spending after the completion of Omni and Omni Pro product development in 2025 and prior to the start of our next product initiative.

OmniMetrix segment operating income, the combined operating results of our PG, CP and IS segments, the IS segment being the Infrastructure Solutions segment, was $722,000, demonstrating the profitability of our core operating subsidiary even after absorbing approximately $30,000 of operating expense in our pre-revenue Infrastructure Solutions segment. 28 per diluted share, in the year-ago quarter. 25. 47 per share, in the first half of 2025.

Six-month results included $296,000 of non-cash stock-based compensation expense versus $93,000 in the prior-year period. Now looking at liquidity and cash flow, our cash balance was $4,478,000 at June 30. 25 million at December 31, 2025. We remain debt-free.

In the first half of 2026, we generated $277,000 of cash from operating activities, used $263,000 in investing activities, including the $250,000 related to the exclusive license agreement for Omni 360, and received $10,000 from financing activities tied to the exercise of stock options, producing a net cash increase of $24,000. 3 million, leaving meaningful capital loss carryforwards to enhance cash flows to support future growth and potential M&A initiatives. We're very excited about our new product and other strategic opportunities we discussed, as well as the prospect of returning to top-line year-over-year growth comparisons in the second half of 2026.

Operator, you may now prepare the lines for questions. Thank you, thank you. OPERATOR We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone.

If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time we'll pause momentarily to assemble the roster. The first question will come from Joel Sklar, private investor.

Please go ahead. Joel Sklar, Private Investor Good morning Jan and Tracy. Nice quarter. Very excited about the growth prospects here.

First question is that agreement with Champion, that partnership, it almost sounds like an OEM deal, but you're not calling it one. So can you explain what I'm missing in terms of it not being an OEM deal? And then also with the rollout of Omni 360, I'd like to get some more color on how it's going. I know you went to that Rural Wireless trade show recently.

Hopefully you got some good feedback there. What's the receptivity to it and what does the competition look like? So, thank you. I'll pause for a response.

Jan Loeb, CEO Okay, good morning, Joel. Thank you very much for your kind words. Firstly, on the Champion, we're not calling it an OEM because it's our own product being sold as currently constituted. So we had a discussion with Champion management whether they wanted to have it branded as a Champion monitor, and they said no, they didn't.