Q3 2025 Acorn Energy Inc Earnings Call
Remarks, we will open the call for questions. As a reminder, today's call is being recorded.
Operator: Morning, Moon. Following management's prepared remarks, we will open 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 CEO of its OmniMetrix subsidiary.
I'll now turn the call over to Tracy Clifford CFO of Acorn energy and CEO of its omni metrics subsidiary.
Thank you operator, and thank you all for joining our call today.
Tracy Clifford: Thank you, Operator, and thank you all for joining our call today. Before we begin, I'd like to remind everyone 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 projected. 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 the macroeconomic and financial environment.
Before we begin I'd like to remind everyone that todays 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 projected factor.
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 change.
And technology competition or shifts in the macroeconomic and financial environment. These forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 and are based on management's current beliefs assumptions and information available as of today.
Tracy Clifford: These 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 current beliefs, assumptions, and information available as of today. There can be no assurances that the company will meet its growth targets or other strategic goals or objectives. The company undertakes no obligation to update or revise forward-looking statements to reflect future events or circumstances that occur after today's call. For a more detailed discussion of the risks and uncertainties that may affect our business, please refer to the risk factors section of our most recently filed Form 10-K, available online at www.sec.gov, or on our own website. Now I'll turn the call over to Jan Loeb, CEO of ACORN ENERGY and OmniMetrix, for further remarks. Jan?
There can be no assurances that the company will meet its growth targets or other strategic goals or objectives. The company undertakes no obligation to update or revise forward looking statements to reflect future events or circumstances that occur after today's call.
For a more detailed discussion of the risks and uncertainties that may affect our business. Please refer to the risk factors section of our most recently filed.
Form 10-K available online at Www Dot SEC Gov or on our own website now I'll turn the call over to Dan Loeb CEO of Acorn and the metrics for further remarks Dan.
Thanks, Tracy and thank you everyone for joining this call.
Jan Loeb: Thanks, Tracy, and thank you, everyone, for joining this call. First, let me start by acknowledging that although monitoring and hardware revenue each grew over 20% for the first nine months, driving a 35% increase in net income, our Q3 2025 revenue was significantly lower than in Q3 2024 due to lower hardware revenue. The Q3 2025 revenue variance is largely due to the timing of hardware revenue from our large cell phone provider contract. Given the size and nature of our business, a contract of this magnitude, while highly beneficial to both our short-term and long-term cash generation, can create variability in our quarterly reporting, primarily due to the timing of hardware revenue. This contract was originally expected to roll out over two years, but the customer desired faster deliveries, which were largely fulfilled over the first 12 months.
First let me start by acknowledging that although monitoring and hardware revenue each grew over 20% for the first nine months driving a 35% increase in net income. Our Q3 25 revenue was significantly lower than in Q3 2024 due to lower hardware revenue.
The Q3 2025 revenue variance is largely due to the timing of hardware revenue from our large cell phone provider contract.
Given the size and nature of our business a contract of this magnitude while highly beneficial to both our short term and long term cash generation.
And create variability in our quarterly reporting primarily due to the timing of hardware revenue.
This contract was originally expected to rollout over two years, but the customer desire faster deliveries, which were largely fulfilled over the first 12 months.
Final deliveries that we had expected to record in Q3 2025.
Jan Loeb: Final deliveries that we had expected to record in Q3 2025 have been pushed into Q4 2025 and possibly Q1 2026, resulting in no hardware revenue from this contract in Q3 2025 versus revenue of $724,000 from initial hardware deliveries in Q3 2024. Additionally, we recognize $215,000 of deferred hardware revenue in Q3 2025 versus $436,000 in Q3 2024, a difference of $221,000. Deferred hardware revenue reflects the non-cash amortization of hardware sales prior to September 2023, which were deferred and amortized over three years. The amount of revenue recognized from the amortization of deferred revenue will continue to decrease as we have not deferred revenue from hardware sales since 1 September 2023, when we began selling hardware units that can be sold independently from our monitoring services. Hardware sales are recognized to revenue upon shipment or transfer of title.
Five.
I have been pushed into Q4, 2025, and possibly Q1 2026, resulting in no hardware revenue from this contract in Q3 2025 versus revenue of $724000 from initial hardware deliveries in Q3 2024.
Additionally, we recognized $215000 of deferred hardware revenue in Q3 2025.
Versus $436000 in Q3 2020 for a difference of $221000.
The FERC hardware revenue reflects the noncash amortization of hardware sales prior to September 2023.
Which were deferred and amortized over three years.
The amount of revenue recognized from the amortization of deferred revenue will continue to decrease as we have not deferred revenue from hardware sales since September one 2023 when.
When we began selling hardware units that can be sold independently from our monitoring services.
Hardware sales are recognized to revenue upon shipment or transfer of title.
We expect all deferred hardware revenues to be fully amortized by August of 2026.
Jan Loeb: We expect all deferred hardware revenues to be fully amortized by August of 2026. Adding the $221,000 difference in Q3 hardware amortization plus the $724,000 of hardware revenue results in a delta of $945,000, or approximately 95% of the hardware revenue variance between Q3 2025 and Q3 2024. An additional factor is the reality that new hardware sales have been soft on the residential side of the business, but stronger in the commercial and industrial segment. Echoing this residential trend, last week, a leading generator OEM reported Q3 revenue below expectations in the home market, which they attributed to reduced incidents of power outages, one of the lowest rates in 10 years, due in part to fewer US hurricane impacts this season. As you can imagine, power outages from any source are a major driver of backup generator demand.
Adding the $221000 difference in Q3 hardware amortization plus the 724000 of hardware revenue results in the delta of $945000 or approximately 95% of the hardware revenue variance between Q3 25 in Q3 'twenty four.
An additional factor is the reality that new hardware sales have been soft on the residential side of the business, but stronger in the commercial and industrial segment.
Echoing this residential trends last week, a leading generate a OEM reported Q3 revenue below expectations in the home market.
Which they attributed to reduced incidence of power outages, one of the lowest rates in 10 years due in part to fewer U S Hurricane impact this season.
As you can imagine power outages from any source or a major driver of backup generator demand.
We also believe ongoing economic conditions, including high interest rates slowing job growth and other financial uncertainties have slowed deployments of backup generators, which range between 7020 $4000 to purchase and install depending on the home sites. It.
Jan Loeb: We also believe ongoing economic conditions, including high interest rates, slowing job growth, and other financial uncertainties, have slowed deployment of backup generators, which range between $7,000 and $24,000 to purchase and install depending on the home size. It is our sense that these economic challenges have tempered residential demand for several quarters. Longer term, we expect residential demand will rebound as economic conditions moderate, grid uncertainty builds, and power outage incidents grow in frequency and duration. In terms of our large cell phone contract, since inception, we have realized $3.9 million of hardware revenue and $343,000 in monitoring revenue, totaling roughly $4.2 million. We are told that there will be additional purchase orders under this contract, but as of right now, we have shipped all the initial hardware ordered.
It is our sense that these economic challenges has tempered residential demand for several quarters.
Longer term, we expect residential demand will rebound as economic conditions moderate grid uncertainty builds and power outage incidents grow in frequency and duration.
In terms of our large cell phone contracts since inception, we have realized $3 $9 million of hardware revenue and $343000 in monitoring revenue totaling roughly $4 2 million.
We are told that there will be additional purchase orders under this contract, but as of right now we have shipped all the initial hardware ordered.
We will continue to recognize monitoring revenue under this contract that was deferred at the point of sale over the 12 month period.
Jan Loeb: We will continue to recognize monitoring revenue under this contract that was deferred at the point of sale over the 12-month period, commencing on the install date. Total deferred monitoring revenue at 30 September 2025 under this contract was $290,000. Of course, we fully expect this customer to renew our monitoring services given the customer's over $4 million hardware investment. We expect them to be a long-term and happy customer. This is supported by the value and cost savings of our service, and the cost-prohibitive nature of switching to a competing offering, all of which are reflected in our history of greater than 90% annual renewal rates. Looking forward, the big question for shareholders is, what is our strategy to build on our scalable, high-margin, cash-generating business to achieve our long-term growth goals?
Mensing, an install date.
Total deferred monitoring revenue at September 32025 under this contract was $290000.
Of course.
We fully expect this customer to renew our monitoring services given the customers over 4 million dollar hardware investment we expect.
<unk> to be a long term and happy customer.
This is supported by the value and cost savings of our service and cost prohibitive nature of switching to a competing offering all of which are reflected.
And our history of greater than 90% annual renewal rates.
Looking for the Big question for shareholders is what is our strategy to build on our scalable high margin cash generating business to achieve our long term growth goals.
The answer is that we are pursuing a number of initiatives across commercial industrial and residential markets.
Jan Loeb: The answer is that we are pursuing a number of initiatives across commercial, industrial, and residential markets that fall into five distinct buckets. One, larger commercial and industrial opportunities being pursued by our direct sales team. Two, strategic OEM relationships in which we partner to provide our industry-leading technology and services. Three, expanding our penetration of the residential market through our over 600 generator dealers. Four, developing new products and expanding the capabilities and value of existing products. Five, through accretive M&A transactions. I'll briefly touch on each of these growth initiatives. Larger commercial and industrial opportunities are being pursued via our internal sales team across sectors including healthcare, telecom, real estate management, retail, and the military. We have a range of ongoing discussions, but many of the organizations are larger and more complex, resulting in sales cycles that are longer, and the timing outcome is hard to predict.
<unk> into five distinct buckets.
One larger commercial and industrial opportunities being pursued by our direct sales team to strategic OEM relationships.
As we partner to provide our industry, leading technology and services three expanding.
Our penetration of the residential market through our over 600 generator dealers.
We're developing new products and expanding the capabilities and value of existing products and five through accretive M&A transactions.
I'll briefly touch on each of these growth initiatives.
Larger commercial and industrial opportunities are being pursued be via our internal sales team across sectors, including healthcare Telecom real estate management retail and the military we have a range of ongoing discussions with many of the organizations are larger and more complex, resulting in sales cycles are longer.
The outcome is hard to predict we.
We see meaningful long term growth potential from C&I customers.
Jan Loeb: We see meaningful long-term growth potential from CNI customers because of their regional and national scale, and our proven ability to deliver a compelling return on investment in terms of cost savings, improved data and analytics, as well as reduced operational risk. Strategic OEM relationships in which we partner to provide our industry-leading technology and services. We continue to advance discussions with OEMs regarding potential strategic relationships, where monitors would be bundled and sold by the manufacturer rather than in the aftermarket. We believe OmniMetrix's technology and service leadership, combined with our ability to support all generator brands, puts us in a very strong position to partner with OEMs. This would allow an OEM to focus on their core business while delivering a superior total solution across their customer universe. Of course, these initiatives require discussion, research, testing, and planning, yet there's no guarantee of success.
Are there regional or national scale, and our proven ability to deliver a compelling return on investment in terms of cost savings improved data and analytics as well as reduced operational risk.
Strategic OEM relationships in which we partner to provide our industry, leading technology and services and we continue to advance discussions with Oems regarding potential strategic relationships, where monitors would be bundle installed by the manufacturer.
Rather than in the aftermarket.
We believe our metrics technology and service leadership combined with our ability to support all generate a brands puts us in a very strong position to partner with Oems.
This would allow an OEM to focus on their core business, while delivering a superior total solution across their customer universe.
Of course these initiatives require discussion research testing and planning.
Yet there is no guarantee of success, but we believe the concept makes good sense for both sides and we will continue to pursue this avenue, which could be an important growth driver for us.
Jan Loeb: We believe the concept makes good sense for both sides and will continue to pursue this avenue, which could be an important growth driver for us. Expanding our penetration of the residential market through our over 600 generator dealers is a key focus. While retail adoption of generators has been slow due to a number of factors, we expect the pace to pick up moving forward. We go to market in the residential space through our network of over 600 generator dealers, and our primary drivers are working to support them in their outreach. New product development is another area of long-term importance that Tracy will touch on in her remarks. M&A transactions remain a priority in our growth efforts. We are evaluating several complementary M&A prospects with monitoring components to their business.
<unk> expanding our penetration.
As I read some residential market through our over 600 generated dealers, while retail adoption of generators have been slow due to a number of factors. We expect the pace to pick up moving forward. We go to market in the residential space through a network of over 600 generated dealers and so our primary drivers are working to support them in.
Their outreach.
New product development is another area of long term importance of Tracey will touch on in her remarks, M&A transactions remain a priority in our growth efforts, we are evaluating several complementary M&A prospects with monitoring components to their business.
Negotiations with two of these are progressing though it's too early to predict if or when they might happen.
Jan Loeb: Negotiations with two of these are progressing, though it's too early to predict if or when they might happen. We are very motivated to execute on one or more transactions to accelerate our growth and drive further operating leverage. We remain disciplined on managing risk and the price we are willing to pay to ensure we are building value for our shareholders. As we have new investors on today's call, I'll just touch on some of the long-term secular trends supporting our growth. First, remote asset monitoring is projected to grow approximately 23% annually through 2032, driven by the increasing adoption of IoT-connected devices, real-time data collection, demand for predictive maintenance and data analysis, as well as compliance and reporting obligations.
We are very motivated to execute on one or more transactions to accelerate our growth and drive further operating leverage.
But we remain disciplined in managing risk and the price we were willing to pay to ensure we are building value for our shareholders.
As we have new investors on today's call I'll, just touch on some of the long term secular trends supporting our growth.
First remote asset monitoring is projected to grow approximately 23% annually through 2032, driven by the increasing adoption of Iot connected devices real time data collection demand for predictive maintenance and data analysis, as well as compliance and reporting obligations.
Some of you on today's call are probably monitoring things you probably didn't or couldn't just five years ago like home thermostats lining doorbell HVAC systems appliances et cetera, newer cars allow you to monitor the credit location at fuel efficiency fluid levels and other measures or you may use your remote start remote climate control a door locks.
Jan Loeb: Even some of you on today's call are probably monitoring things you probably didn't or couldn't just five years ago, like home thermostats, lighting, doorbells, HVAC systems, appliances, etc. Newer cars allow you to monitor the car's location, fuel efficiency, fluid levels, and other measures, or you may use your remote start, remote climate control, or door locks. The same thing is happening within businesses. Remote monitoring is increasingly being seen as a necessary and cost-effective tool to enhance operational performance and reduce the risk of disruption, providing reliability, cost savings, and convenience, and OmniMetrix is ideally positioned to meet this growing demand. We all read of growing energy demand from AI and data centers, which is taxing the US energy grid and reducing the reliability of electricity access. Though the hurricane season has spared the US, the prevailing trend has been more frequent.
The same thing is happening within businesses remote monitoring is increasingly being seen as the necessary cost effective tool to enhance operational performance and reduce the risk of disruption, providing reliability cost savings and convenience and other metrics is ideally positioned to meet this growing demand.
We all read of growing energy demand from AI and data centers, which is taxed in the U S energy grid and reducing the reliability of electricity access.
Though the hurricane season has spurred the U S. The prevailing trend has been more frequent.
And severe weather and other natural disasters increasingly disrupting the grid.
Jan Loeb: Severe weather and other natural disasters increasingly disrupting the grid. Electrification demands across the economy are compounding a fragile grid and creating a supply and demand imbalance for electricity. The point is CNI customers and residential customers increasingly need reliable backup power, and that's the key driver of our business. We expect that these major secular trends will continue to support our long-term growth. Based on the trends and our growth initiatives, we continue to believe 20% average annual revenue growth is an achievable target over the next three to five years. It won't be a straight line, and it will require that we execute on one or more of our larger growth initiatives in coming periods. We feel the scope of opportunity and the strength of our position makes this very achievable.
Electrification demands across the economy.
Our compounding.
Fragile grid, and creating a supply and demand imbalance for electricity.
The C&I customers and residential customers increasingly need reliable backup power.
And that's the key driver of our business we.
We expect as these major secular trends will continue to support our long term growth.
Based on the trends in our growth initiatives. We continue to believe 20% average annual revenue growth is an achievable target over the next three to five years.
It wont be straight line and it will require that we execute on one or more of our larger growth initiatives in coming periods, but we feel the scope of opportunity and the strength of our position makes us very achievable.
That I will turn the call back to Tracy to go over our financials and for her perspectives on our operations Tracy.
Jan Loeb: With that, I'll turn the call back to Tracy to go over our financials and for her perspectives on our operations. Tracy. Thanks, Jan. As Jan noted, the primary driver of our year-over-year performance in Q3 and through September relates to the timing of orders under our cell phone provider contract. Focusing on third-quarter performance for 2025 versus 2024, we realized $148,000 of monitoring revenue related to the contract in Q3 2025, and zero hardware revenue versus $724,000 of hardware revenue and no monitoring revenue in Q3 2024, an aggregate difference of $576,000. Q3 2025 total revenue was $2,478,000 versus $3,050,000, a difference of $572,000. High-margin, recurring monitoring revenue grew $422,000 to a record $1,560,000 in Q3 2025. Our Q3 2025 gross margin expanded to 78.5% from 71.7%, driven by a significantly higher proportion of monitoring revenue relative to hardware revenue.
Thanks, Dan.
As Dan noted the primary driver of our year over year performance in Q3 and through September relates to the timing of orders under our cell phone provider contract.
Focusing on third quarter performance for 25 versus 24, we realized a $148000 in monitoring revenue related to the contract in Q3 25.
Zero hardware revenue versus 724000 of hardware revenue and no monitoring revenue in Q3 'twenty four.
In aggregate difference of 576000.
$3 25, total revenue with $2 million 478000 versus 350000, a difference of 572000 high margin recurring monitoring revenues grew to 422000 to a record 1.560 million in Q3 Q3 2025.
Our Q3 25 gross margin expanding to 78, 5% from 71, 7% driven by a significantly higher proportion of monitoring revenue relative to hardware revenue.
Operating expenses increased 24, 8% to $1 million 786000 from 1 million 100.
Jan Loeb: Operating expenses increased 24.8% to $1,786,000 from $1,431,000 in Q3 2024 due to higher SG&A and R&D expenses. Increases included $110,000 in non-recurring corporate expenses related to our NASDAQ uplisting, a $60,000 increase in tax professional fees, of which approximately 50% is not recurring as it related to our 382 study that was completed in October, a $40,000 increase in our other public company expenses and stock compensation, and $33,000 of higher R&D investment. Q3 2025 net income to stockholders fell to $252,000 or $0.10 per diluted share versus $725,000 or $0.29 per diluted share in Q3 2024, a function of lower revenue and higher operating costs. The year-to-date highlights include revenue of $9,101,000, which is a 22% year-over-year increase.
1.431 million in Q3, 2004, due to higher SG&A and R&D expenses.
Increases included 110000, nonrecurring corporate expenses related to our NASDAQ uplifting a $60000 increase in tax professional fees of which approximately 50% is not recurring as it related to our <unk>. Two study that was completed in October of $40000 increase in our other public company.
And stock compensation and $33000 of higher R&D investment.
Q3 dollars 25, net income to stockholders fell to 252000 or 10 cents per diluted share versus 725000, or <unk> 29 per diluted share in Q3 'twenty four.
And of lower revenue and higher operating costs.
The year to date highlights include revenue of $9 million 101000 within the 22% year over year increase the first nine months gross margin improved to $75 nine versus 73%, reflecting the benefit of adding revenue on a largely fixed cost structure and progress, we're making in our heart where product margins.
Jan Loeb: First-time month gross margin improved to 75.9% versus 73%, reflecting the benefit of adding revenue on a largely fixed cost structure, and progress we are making in our hardware product margins. EPS of $0.57, an increase of 36% year-over-year, even after consideration of income tax expense of $331,000 in the current year period compared to $67,000 of income tax expense in the prior year-to-date period. Cash flow from operations was $1,795,000, which is a 143% year-over-year increase. Quarter-end available cash of $4,167,000, which increased to $4,372,000 as of 4 November 2025, and we continue to be debt-free. As a leader in remote generator and pipeline monitoring, we maintain our competitive edge through ongoing investment in product development. Q3 was the beta launch of our next-generation monitors, Omni for residential, and Omni Pro for commercial and industrial use.
EPS of <unk> 57, an increase of 36% year over year, even after consideration of income tax expense of 331000 in the current year period compared to 67000 in income taxes spent in the prior year to date period.
Cash flow from operations was $1 million 795000, which is a 143% year over year increase.
Quarter end available cash of $4 million 167000, which increased to 4.372 million as of November four 2025, and we continue to be debt free.
As a leader in remote generator and pipeline monitoring we maintain our competitive edge through ongoing investment in product development Q.
Q3 was the beta launch of our next generation monitors omni for residential and Ami pro for commercial and industrial use these.
These next generation monitors offer smaller size and quicker processing speed and other new features that reduce installation time and service costs and enhanced reliability such as over the air updates and they offer remote exercise programming and enhanced compliance reporting.
Jan Loeb: These next-generation monitors offer a smaller size and quicker processing speed, other new features that reduce installation time, service costs, and enhance reliability, such as over-the-air updates. They offer remote exercise programming and enhanced compliance reporting. These features and upgrades increase the value of our offering relative to our competition. Also, in Q3, we began testing a redesigned version of our remote AC mitigation disconnect, or RAD, for our pipeline segment. Without getting too technical, the RAD product allows remote disconnection and reconnection of alternating current or AC mitigation tools for enhanced employee safety and lower cost versus manual field disconnections, which are required for maintenance. The new RAD EX design adds pipeline measurement capability in addition to the disconnect feature, combining two important pipeline maintenance requirements into a single product.
These features and upgrades increased the value of our offering relative to our competition.
Also in Q3, we began testing a redesigned version of our remote AC mitigation disconnect our Rab for our pipeline segment.
Not getting too technical the Rad product allows remote disconnection reconnection of alternating current or AC mitigation tools for enhanced employee safety and lower cost versus manual field, Disconnections, which are required for maintenance the new rat E X design adds pipeline measurement capability. In addition to the disconnect feature combining two important pipeline maintenance.
Earnings into a single product.
We also continue to improve our omni view to our Ob to user interface in response to customer requests and suggestion and we routinely review and update our cyber security protocols to mitigate constantly changing risks.
Jan Loeb: We also continue to improve our OmniView 2, our OV2 user interface, in response to customer requests and suggestions, and we routinely review and update our cybersecurity protocols to mitigate constantly changing risks. Many of our ideas for improvements come from listening to our customers and being proactive in addressing customer concerns and needs in our future offerings and updates. This requires close relationships and partnerships with our customers, which we are very proud of at OmniMetrix. Our customers sincerely value that our products improve reliability, reduce costs, and assist in their compliance and operational reporting. Based on feedback, we're excited about the opportunities ahead, and we look forward to updating you in the coming quarters. Operator, you may now prepare the lines for questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone.
Many of our ideas for improvement has come from listening to our customers and being proactive in addressing customer concerns and needs and our future offerings and updates there.
This requires close relationships and partnerships with our customers, which we are very proud of it on the metrics.
Our customers sincerely value that our products improve reliability reduce costs and assist in their compliance and operational reporting.
Based on feedback we're excited about the opportunities ahead, and we look forward to updating you in the coming quarters. Operator, you may now prepare the lines for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys that anytime. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble.
Jan Loeb: If you're 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 then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Chris Tuttle with Blue Catterpillar. Please go ahead. Hey, guys, thanks for taking my question. I actually have a couple. Let's start with the positives. Your recurring revenue on the software monitoring side was up nicely, and I'm curious, is that something you see as being sustainable? Are we going to experience kind of ongoing some level of sequential growth in that category? It is sustainable. It is recurring. We expect consistent growth in that number. I'm not saying you're going to see 37% every quarter, but since we amortize first years, so.
<unk> roster.
The first question comes from Kris Tuttle with Blue cap Caterpillar. Please go ahead.
Hey, guys.
Hey, guys. Thanks for taking my question.
Actually I have a couple let's start with the positives.
Your.
<unk> revenue on the software monitoring side was up.
Isaly and I'm curious as.
Is that something you see as being sustainable or are we going to experience.
You know kind of ongoing some level of sequential growth in that category.
It is sustainable it is recurring so we expect.
Consistent growth in that number I'm, not saying you're going to see 37%.
Every quarter, but.
Citizens, we amortize first years so.
It comes in over over time.
Jan Loeb: It comes in over time, and you should see consistent growth. We view that as the core value builder of our business. I mean, unless something unusual happens, like a customer cancels or something, there should be some, as more units come online, that the number will go up at least a little bit over time. In other words, this quarter should be at least marginally higher than last quarter, 100%, and hopefully better than recently. Got it. Yes. Got it. Perfect. Now, my other question is just turning to hardware for a moment. Obviously, a little bit weaker than maybe people were expecting, and I just wanted to make sure I understand what you said. It sounds like there's still a few more deliveries on these long-term, the big contract that kind of propelled you guys in this quarter and in Q1. Do I have that right?
And.
You should see consistent growth and we view that as the core value builder of our business.
Okay, unless something unusual happens like a customer cancels or something.
<unk> be some more units come online that the number will go up at least a little bit over time.
In other words this quarter should be at least marginally higher than the last quarter.
100%.
And hopefully better than not anymore, yes.
Yes got it perfect now my other question is just starting to hardware for a moment.
Obviously, a little bit weaker than maybe people were expecting.
And I just wanted to make sure I understand what you said it sounds like Theres still a few more deliveries.
Long term the big contract that kind of propelled to you guys in Q in this quarter and in Q1.
Right.
So the.
Basically we finished the majority of our deliveries to this customer in Q2 of 2025.
Jan Loeb: Basically, we finished the majority of our deliveries to this customer in Q2 2025. We started Q3 2024. We ended Q2 2025, so over a one-year period. However, there's, we'll call it, other stuff that they have told us that we're going to be getting. They haven't given us a date yet. There's still, I'll call it, the tail end of the contract still to come, and hopefully it'll be Q4. Maybe it'll be Q1 2026. Okay. Again, that's on equipment, right? That's on the hardware line, right? Additional deployments. With your last question, sort of with respect to this contract, obviously, the customer is a large customer. They moved to their own beach. They own the football. Do you still believe that there's a possibility you might get, do they have additional.
We started Q3 of 2024, we ended Q2 of 2025, so over one year period.
However, there is.
We'll call it other stuff that they have told us that we're going to be getting.
They haven't given us a date yet so there is some I'll call. It the tail end of the contract is still to come and hopefully it'll be Q4, maybe it will be Q1 of 2026.
Okay, and Thats again, thats been on equipment equipment.
Right that's on the hardware line additional deployments and so.
Last question here with respect to the contract.
And obviously the customers large customer they move to their own.
On the football.
Do you still believe that there is a possibility you might get did they have additional.
Coverage that they want to implement and could that mean additional.
Jan Loeb: Coverage that they want to implement? Could that mean additional purchase orders for you at some point in the future, along the same lines of what you had with them? The answer to that is yes, but they have given us no indication that that's forthcoming. Okay. The last question, Tracy talked about some things on the new product side, and you guys got to show me at least the new box that you were putting out. It looks like a real step forward. This time, you talked a little bit more about AC power. I mean, maybe you could help me understand. I mean, I get it at a high level, but is there a specific kind of market use case, customer type that you think about when you look at the AC-based, some of the things that Tracy talked about?
Purchase orders for you at some point in the future along the same lines of what you had with them.
The answer to that is yes, but they haven't given us no indication.
Hum.
But that's forthcoming.
Okay.
Yeah.
And then the last question.
Tracy talked about some things on the new product side and you guys got to show me the at least the new box that you are putting out and it looks like a real step forward and this time, you can talk a little bit more about AC power.
And just I mean, maybe you could help me understand.
Get it at a high level, but is there a specific kind of market use case customer types that you think about when you look at the AC based.
Some of the things that Jason talked about.
So I believe what you're referring to.
Jan Loeb: I believe what you're referring to was AC mitigation, which is in our corrosion protection side of our business. I'm sure you know, about 90% of our revenue comes from power generation, and about 10% comes from corrosion protection. This is a product that we've been beta testing in corrosion protection and has seemed to have gotten some industry attention. We're hopefully going to roll that out in the fourth quarter, and we'll see what happens. That's in our corrosion protection side of our business versus our power generation side of our business. I got it. That's helpful clarification. All right, I'll get off the box here and let other folks jump in if they've got questions. Thanks a lot, Jan and Tracy. Thank you, Chris. Again, if you have a question, please press star then one.
With AC mitigation.
Which is in our corrosion protection.
Side of our business so as I'm sure you know about.
90% of our revenue comes from power generation and about 10% comes from corrosion protection.
This is a product that we've been beta testing in corrosion protection.
And it seemed to have gotten some industry attention.
And so we're hopefully going to roll that out in the fourth quarter and we'll see what happens so.
That's in our corrosion protection side of our business versus our power generation side of our business.
I got it that's helpful clarification, Alright, I will get off the box and let other folks jump in a bit.
Thanks, a lot Jana thanks.
Thank you Chris.
Okay.
Again, if you have a question. Please press Star then one the next question comes from Jason Muhlenkamp Private Investor. Please go ahead.
Jan Loeb: The next question comes from Jason Mullencamp, private investor. Please go ahead. Hi, Jan and Tracy. Always good to hear from you both. I have a more timeless question here, perhaps. I'm a bit curious if you could discuss. You guys have always been good about reinvesting in the business and moving the product forward. What I don't have a sense for, I would love to hear from you, is when you launch a new product, kind of what percentage of those are to existing customers? I'd imagine some customers upgrade, some don't. Could you just discuss that a little bit for folks? Sure. In the case of the Omni and Omni Pro, those are products that are replacing existing products. We have TruGuard and TruGuard Pro as existing products, and we're now replacing them with Omni and Omni Pro. As Tracy discussed, all the.
Hi, Dan Tracy always good to hear from you both.
I have a more time with question here, perhaps so.
A bit curious if you could discuss.
You guys have always been good about reinvesting in the business moving the product score.
What I would I don't have a sense, where we'd love to hear from you is when you launch a new product what kind of what percentage of those are to existing customers.
Some customers upgrade some don't.
Can you just discuss that a little bit for folks.
Sure.
Yeah.
So in the case of <unk>.
The omni and omni pro.
Those are.
Products that are replacing.
Existing products. So we have true guard and <unk> pro as.
Existing products and were now replacing them with omni and and pro and as Tracy discussed all the.
Benefits pushing this has all the benefits, but some of the benefits of.
Jan Loeb: Well, she didn't discuss all the benefits, but some of the benefits of the new product versus the old product. In the case of the RAD EX, that would be a totally brand new product. We don't have an existing product like that in the marketplace. Our product for corrosion protection is the Hero, so that would be a brand new line for us. Does that answer your question? Actually, I think, Jason, let me add to that for you. When we introduced the new generation of TG and TG Pro, our existing customers would not typically replace the units that they currently have. Certainly, moving forward, as you know, we have customers that order on a repetitive basis, and dealers that order on a repetitive basis. Their new orders would then be fulfilled with the new generation of product.
The new product versus the old product.
In the case of.
In the case of the.
Iran, Yes that would be a totally brand new product, we don't have an existing product like that in the marketplace our products corrosion protection.
Is the hero.
So that would be a brand new.
<unk> for us.
Does that does that answer your question, let me add it.
Actually I think Jason let me add to that for you.
So when we introduced the new generation of T. G N N T V pro our existing customers would not typically replace the units that they currently have certainly moving forward as you know we have customers that order on a repetitive basis.
And dealers that order on a repetitive basis. So their orders there new orders would then be fulfilled that the new generation of products. So we will essentially as our inventory depletes on our existing older generation that will be entirely replaced with the new generation inventory, so anyone who orders from that point forward.
Jan Loeb: We will essentially, as our inventory depletes on our existing older generation, that will be entirely replaced with the new generation inventory. Anyone who orders from that point forward will receive the new generation of products. It's not our expectation that anyone would replace an existing unit that is functioning properly to replace it with our new generation product. I think that was more what you were asking, correct? Yeah, correct. That's very helpful. The growth there is generally tied to your existing customers or dealers having growth in their business, essentially. Is that true? Yes, or consistency in their business. Yes. Okay. Thank you. Consistent demand. Once again, if you have a question, please press star then one. The next question comes from Joe Stein with Oppenheimer. Thank you. I can't do what they're telling me. Let's move on, operator. Jan? Hello? No problem.
Will will receive the new generation of products, but they would not it's not our expectation that anyone would would replace an existing unit that is functioning properly.
To replace it with our new generation product I think that was more of what you were asking correct.
Yes, correct, that's very helpful and.
So the growth there is generally tied to your existing customers or dealers having growth in their business essentially is that true.
Yes, or consistency in their business yes.
Okay. Thank you.
Current demand mhm.
Once again, if you have a question. Please press Star then one.
The next question comes from Joe Stein with Oppenheimer.
Yeah.
I can't I can't do it.
Let let's let's move on operator.
Hi.
Oh no no problem, we can move on.
James.
Jan Loeb: We can move on. Jan? Yes. Can you hear me? Yes, I can hear you. I'm on the machine. It's Joe Stein. I'm sorry. I got on a little late, but my question was, was the problem not having the inventory and receiving product or a lack of demand where you got no revenue in this quarter on the telephone side? Did I misread that? Yeah. No. We did not have the order. We did not have the PO to ship anything, so we don't have an inventory. We have whatever our customers need. We're very good about that. That's what I thought. Okay. All right. Everything else reads very well, but thank you for clearing that up for me. Okay. Thank you. Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jan Loeb for any closing remarks.
Yes can you hear me.
Yes, I can hear you answer that.
A machine.
John I'm sorry.
I've gone on a little late but I was my question was was the problem not having the inventory and receiving product or a lack of demand.
You got no revenue in the in this quarter when the telephone.
It does.
I misread that.
Yes.
We did not have the order.
I mean, we did not have the Po to ship anything so.
Got you and we don't have we don't have an inventory.
We have whatever our customers need to where we're very good about that that's what I thought okay.
Alright.
I mean, he knows very well.
Thank you for clearing that up for me Okay. Thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Mr. Dan Loeb for any closing remarks.
Thank you all for joining today's call. We appreciate your continued support if you have any follow up questions. Please reach out to our IR team listed in today's press release or to Tresiba and myself. We look forward to updating you again on our next conference call.
Jan Loeb: Thank you all for joining today's call. We appreciate your continued support. If you have any follow-up questions, please reach out to our IR team, listen to today's press release, or to Tracy or myself. We look forward to updating you again on our next conference call. Take care. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.