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Good morning. 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 will now turn the call over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary.

Thank you, operator. Thank you all for joining our call. I will 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 www.sec.gov and on our website. Now I will turn the call over to Jan Loeb, CEO of Acorn and OmniMetrix, for further comment. Jan?

Thank you, Tracy. Good morning, everyone. 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. Total second quarter revenue of $2.49 million reflected 8% growth in monitoring revenue, which is our highest margin and most predictable revenue stream. Hardware revenue was $1.06 million in the second quarter versus $2.21 million in Q2 last year.

The year-ago period reflected over $1.3 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 this 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. On the bottom line, we reported second quarter net income of $294,000 or $0.12 per diluted share.

For the first six months, our net income was $217,000, or $0.09 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 3 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 asset 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 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 and 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 willing 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. 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. In just the past few weeks, extreme heat and thunderstorms have strained the U.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'll 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 earnings 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 and OmniMetrix. I will turn to Tracy for her financial and operational insights.

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, OmniMetrix, our operating subsidiary, again delivered solid profitability with operating income of $722,000 in Q2 2026 versus $1.2 million in Q2 2025, and significantly better than $395,000 in Q1 2026. I will touch on a few key points. Total revenue was $2,489,000, down from $3,525,000 in Q2 2025 and up from $2,227,000 in Q1 2026.

This 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 $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 $1,000,011 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. We expect to recognize our remaining deferred hardware balance of $5,000 in Q3 2026, which will be compared to $215,000, which was recognized in Q3 2025.

Gross margin increased 750 basis points to 82.4%, from 74.9% in Q2 2025, 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 OMNIPRO product development in 2025, 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 solution 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 solution segment. On a consolidated basis, including unallocated corporate headquarters costs, we reported net income to Acorn stockholders of $294,000 or $0.12 per diluted share, compared to net income of $720,000 or $0.28 per diluted share in the year-ago quarter. Q2 2026 results included $99,000 of non-cash stock-based compensation expense versus $32,000 in Q2 2025. For the six months ended June 30th, 2026, net income to Acorn stockholders was $217,000 or $0.09 per share, compared to $1,184,000 or $0.47 per share in the first half of 2025.

Six months results included $296,000 of non-cash stock-based compensation expense versus $93,000 in the prior year period. Looking at liquidity and cash flow, our cash balance was $4,478,000 at June 30th. Excluding deferred revenue of $2.7 million, our net working capital improved to $6.4 million versus $6.25 million at December 31, 2025, and 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 OMNI360, and received $10,000 from financing activities tied to the exercise of stock options, producing a net cash increase of $24,000. With respect to our deferred tax asset, we continue to maintain a partial valuation allowance of $10.3 million, leaving a meaningful base of NOL and 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. 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.

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. Can you explain what I'm missing in terms of it not being an OEM deal? Also, with the rollout of OMNI360, 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? Thank you. I'll pause for a response.

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. 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. They wanted to keep it as an OmniMetrix monitor Because the OmniMetrix name in the industry carries some real cachet, and they thought it would be better for them and their dealers that they sold their aXis and fleX home backup generators with an OMNI monitor. It just looks like our regular OMNI product. There's no difference in it, that's why we're not calling it an OEM. In other OEM situations that we have discussions, a lot of them want to have their brand name on the monitor.

We produce the monitor, we do the monitoring of it, we get the fees, but it has the brand name of the OEM on it. That's why here it's a little different, and we're not calling it OEM. In terms of the volumes and the things that we believe can happen over time, it certainly would fall into that category. The interesting thing about these type of deals is that this year they sell, hopefully, many thousands of generators, and we monitor them, then next year they add to that another many thousands. Over time, it just really grows our monitoring endpoints. That's the answer to your first question. In terms of your second question on OMNI360, yes, we were at the Rural Wireless Conference. That conference, we just walked around and tried to make contact. We did not have a booth.

That came very quickly after we were ready with the product. This upcoming conference, in a week and a half in Nashville, we actually have a booth where we'll have our product showing, we think that'll be a much better opportunity to meet people and show off our wares. It's been going well. We have made good contacts. We've had some very good phone calls. We'll see what happens.

Okay. Thank you, Jan.

The next question will come from Kris Tuttle with Blue Caterpillar. Please go ahead.

Hey, thanks for taking my question, and hi, Jan and Tracy. A couple questions. One of them is, you're right to point out we're kind of done with the, we had that hardware revenue, kind of the sheet going through the pipeline that's completed. My question about that is, now that that's over, is that installed base of hardware a potential catalyst to see an acceleration in the monitoring software as those units turn into monitoring revenue for you guys? That's my first question.

Yes. It already has. The way we sell our monitoring product is we sell the piece of equipment, and with the piece of equipment, we sell the first year of monitoring. You get monitoring right off the bat. In the big cell phone contracts, they're a little bit different because they have some different terms. In general, that's the way it works. Now we're already into the renewal period for them, and they've been renewing those monitors. Yes. Plus, we have received add-on orders, and we anticipate that over a continuous period, they put up new cell tower sites. They put in our new monitors. We expect a continuous flow of business, nowhere near the size of what the original contract was.

We see both kind of continued equipment sales on a lower level and continued growth in monitoring as that equipment gets installed.

Okay. As a follow-up, because analysts are analysts, the monitoring revenue was up 8%, I believe, year-over-year in Q2, and it was up 9.8% per your release for the first half of 2026. Strictly speaking, that's a minor deceleration of monitoring revenue growth in Q2 versus the first half. I'm trying to think about what my expectations should be in terms of that monitoring revenue growth as we go through the rest of 2026.

I can't tell you. It's hard for you to come up with a 2026 number. As I said, a lot depends on units that we sell. What I can tell you is that, with this big customer, a lot depends on dates of renewal and when they pay for the renewals. You can't judge just on a one-quarter basis or a half as to what the real growth factor is. It does shift quarter-to-quarter because of renewals.

Okay.

I just want to clarify something for you, Kris. On the monitoring revenue. First of all, units can be sold without monitoring revenue if they choose, but more than 99% of our units, of course, choose us to monitor the hardware. We defer that monitoring hardware until the unit is installed. I'm not sure if that helps you, but let's say we can ship 100 units this quarter of hardware. They may put those units in inventory and not install them for three months, four months. The amortization of the deferred monitoring revenue would not commence until they're actually installed. That's sort of what Jan was alluding to, that can cause some disconnection between the sales of hardware and when you're seeing the monitoring revenue actually hit for that hardware. Does that make sense?

Yeah. Tracy, that's helpful. I see what you're getting at there and appreciate that point. That's good context. The other question is a little less structured, which is, I know you did your walk around at that conference, and as investors, we're doing a virtual walk around as well, looking at all these competitors who are in this sort of, I'm going to call that telecom monitoring, generally speaking. My question is, they're all over the map. They're some very dominant companies, but they look like they take a rather IT-oriented approach, I might call it, versus a more embedded IoT kind of approach.

I'd love to get your maybe top one or two observations in terms of, after walking around that conference and seeing these established competitors, what do you think the one or two key leading sales messages you can go with that differentiates what OmniMetrix and OMNI360 is going to be versus the other cell tower and telco-based monitoring solutions are?

I would say the number 1 differentiating factor is that everything is in one place, one dashboard, all in one. Every piece of data that you're interested in is easily laid out in one place. As I said in my remarks, there are other companies that have cameras, and I'm sure they're very good cameras. There's nobody who has cameras, a generator monitoring system, a HVAC monitoring system, all of those things in one place. One company, one dashboard. I think that that is the number 1 differentiating factor. Makes it a lot easier for the customer. The number 2 differentiating factor, I think, is that the technology that we have is the best. I'm talking about the software is the best. Besides the fact that it's all integrated, we have AI in it, we have predictive capability.

We have not seen that in our competitors.

Okay. Do you think you might have a pricing, kind of easier to adopt kind of advantage here as well, versus some of these companies are a lot larger than you?

I haven't made a sale yet, so I can't tell you exactly. We believe that we offer three different levels, which is three different prices depending on what you want. Meaning, you want to have Zenith, which encompasses everything in your cell tower campus, or you only want Nova, which encompasses only some of the things in your cell tower campus. It's up to the customer what level they want. We also will offer what we call a CapEx model, which you pay upfront. We also will offer an OpEx model, which is something you sign a five-year contract and you pay over time. We're going to try our best to make it very competitive to any of our customers.

We don't want to underprice ourselves because we think we have a premium product, and which is what we have with our OMNI and OMNIPRO for the generator monitoring. We're the premium product. We have the best technology, and we offer it at a higher price than our competitors, but we still continue to pick up market share against our competitors.

Okay. Just last question on that, and overall is, what's the current roundabout pricing level for, let's call it the existing OmniMetrix business, maybe on a per site basis, versus where do you think your OMNI360 pricing will kind of shake out over time versus that?

Yes. I think we've said that, let's say your question is for a cell tower generator monitor or for one cell tower generator monitor, the average price is maybe $650. If you took the whole system, I'd say it'd be around $5,000.

Is that per year or per month?

That's just the equipment cost.

Okay. All right.

There's the monitoring cost. There's the annual monitoring cost.

How does the annual monitoring cost compare?

I'd say, again, we haven't sold one, so it's hard to say, but I would say it's something like $2,000 a year.

For the OMNI360?

For OMNI360.

Okay. What's the 650 equipment that's maybe 200 a year or something like that?

Yeah, something like that.

Okay. All right. I know these are all negotiated. We'll see how sales are. That's all I have. I really appreciate your time. There's a few other small things, but we'll do a follow-up later on.

You know how to reach us.

I sure do.

Once again, if you have a question, please press star and then one. The next question will come from Mason Hill, private investor. Please go ahead.

Hi, Jim, Tracy. Congrats on the quarter. I just wanted to double-click on the Champion Power deal. It sounds great, and you've answered some of it, which is great. I'd love some color on the economics there if they differ from your traditional monitoring hardware sales. I'd also love to understand, is there an opportunity, and I don't know exactly how big Champion's install base is, but is there an opportunity, only half of their installed base has monitoring equipment installed, where you're going to go and say, "Hey, we can offer these monitoring tools to the installed base rather than new generator sales." Is that something you guys have thought about, or is that an opportunity?

Okay. I'd say in answer to your first question, it is generally in line, and just recognize that they would get a volume discount. Okay?

Okay.

That's the answer to the first question. In answer to your second question, no. I don't perceive that we will be taking an installed base and putting monitors on existing units. This is for new units being sold. Just recognize that while Champion has been in business for over 20 years, they've sold 4 million-5 million portable units during that period of time, the home generators, the whole home type generators, is maybe 2 years old. Our view is this will be on new sales is where we're going to be on. We're not going to be on old sales, and they don't really even have a significant base of whole home generators today in their portfolio.

Okay. That's helpful. That's helpful. It's great to hear the progress on OMNI360. You got some branding out there. Is there any more capital outlays that we should expect over the coming quarters relating to that product development? Can you give any sort of guidance there?

I think the only capital outlays, certainly we're going to be spending money in marketing.

Sure.

Which you would expect, we would spend some money on inventory. In terms of the system or software upgrades or anything like that, no. We have the system. It works phenomenally, marketing and inventory is where we'd have to spend a little bit of money.

Sure. Okay. That's helpful. Jim, we might have talked about this in the past, but can you remind me the data that is aggregated from this new product, where does the ownership of that sit?

Meaning who owns the data or where is the server?

The buyer, the former.

It's the customer's data.

Am I right to say, though, that you guys will have the ability to leverage this data internally and kind of compound your operational capabilities?

It's possible that we can leverage the data and help our operational strategy with that data. If your question is, do we see a market to take that data and resell it to the industry, I don't see that at this point in time.

I was more interested in the operational side, so that's helpful. Just a couple more on my end here. You've reiterated that 3-5-year 20% annual growth CAGR. Is that coming from on a go-forward basis now? Is that reiteration of like, "Hey, we've eclipsed these tough comps and now we think we can grow 20% per year on average over the next 3-5?" Or is that still from the original time that you shared that ambition?

From the original time that I shared that ambition.

Okay. On the M&A front, it's interesting to hear that you guys are still looking. That's great. Two points there. Has anything changed in terms of what you're targeting? It doesn't sound like it. Has anything changed in how you think about financing that?

Nothing has changed in terms of targeting, and really nothing has changed in terms of how we think of financing it.

Okay. How do you feel about capital allocation in terms of shareholder returns at this point? Similar to when we had last talked of, there are more attractive uses of your capital, or how are you weighing that?

I'm all for shareholder returns. I try to keep equity low, and if I can use debt, I'll certainly use debt well before I use equity.

Okay. That's helpful. Thanks, Jim. That's all from me.

Thank you.

The next question will come from Matt Dodson, private investor. Please go ahead.

Hey, Jim and Tracy. First of all, let me say thanks so much. I always appreciate your communication with shareholders. Really, it's just great always to read the transcripts of these calls and to hear how honest you are. My question sort of follows up on the pricing. Obviously Acorn OmniMetrix is a very small player and these customers are, some are very big. I was wondering, how you feel in the negotiations about being able to maintain pricing, if pricing is a sticking point in the negotiations. If it's not, I'm just wondering where are the sticking points in these negotiations? I know they take a long time, probably always a little longer than expected.

Let me say that we always get beat up by big customers. At the end of the day, I think the customers recognize that they get a quality product that actually works, easy to install, and gives them all the data, doesn't break down. There's a reason we have won that contract and that we continue to make inroads against competitors who are significantly larger than us. In terms of price, we're not going to do a deal that we feel makes no sense for the company. In terms of other things that customers want, price is always a significant issue. I think that we can, with the services that we provide and the data that we provide that far outshines what other people are doing. I think it's a fair negotiation after they beat us up a little bit.

Okay. Thanks very much. I just had one other question. Since OmniMetrix could target a few different industries, but it's a small team. I was wondering, I know there are some expansion natural gas pipelines, but I don't know if the sales team is focusing on that. I'm just wondering if you're going more for a sort of a targeted spearfishing approach with a few sort of precise customers, or if you're still exercising your full range with the sales team.

The more the merrier. No, definitely not. The fact that we're a smaller company, I think it gives us the right to go after smaller people and larger people. No, we'll take any customer that we think we can help. We're not I don't spearfish, so I can't tell you, but we try to spread a broad net.

Thank you so much.

Thank you.

The next question. Pardon me. The next question is a follow-up from Joel Sklar, private investor. Please go ahead.

Hi, Jan. Yes, just a quick follow-up. On OMNI360, I understand the prioritization of the cell towers, and it makes perfect sense. I know that their equipment is also suitable and very helpful for data centers and utility substations and the like. I was just curious as to what your plan is to roll out. I don't know whether you need to change the product much. It sounds like the product that you're selling to the cell towers will be very suitable for substations and data centers. I was wondering what the timing is and your strategy for marketing to them, whether you want to first establish a foothold with cell towers and then move on, or whether you're going to proceed sooner than that.

Of course, with data centers, timing is everything, and with the rapid build-out of them, I would think you'd want to strike while the iron is hot, so to speak. Anyway, can you shed some light on what you're thinking strategic timing is with those markets?

Yes. I don't disagree with you on data centers and timing is hot, et cetera. It is really not our focus. I'd love to tell you that it is, but it's not. I don't think strategically it makes sense for us. We feel that the cell tower market, which is where we're already in, where our name is recognized, is the opportunity is so large that we should not be taking our eye off that ball. If you've heard any some of my presentations, you know that there's 235,000 cell towers in North America, and on average, each cell tower has roughly four customers in the cell tower. The market is 1 million potential users.

Let's just, for argument's sake, say that we were able to get a 10% market share of 235, not 10% of 1 million, but just 10% of 235, based on the numbers that I gave out on this call. That'd be over $100 million in revenue for us. The opportunity is very large. I don't want to take our eye off that ball. I'm a salesman. We are focused on cell tower. If I miss the data center opportunity, I miss it. I'm missing it for a very good reason.

Okay. You would know that best. Thank you, Jan.

The next question will come from Shai Dardashti, private investor. Please go ahead.

Hi, Jan. Good morning.

Good morning, Shai.

Thank you for the clarity about Champion and OMNI360. I'm actually curious about demand response and CPower. It's been pretty quiet. Does that mean that things are delayed? What should the expectations be regarding demand response over time, please?

Well, I'll say that right now you should have no expectations about demand response. We have a couple of programs going. They generate a drop in a bucket for us. The ISOs don't have their act together still as to how much they're paying. PJM, because of what's been going on in the Mid-Atlantic, has upped their payments, so more people are interested, and we're talking to a bunch of dealers in the Mid-Atlantic area about demand response. We're there, we're positioned, we have the capability, but I just would not view that as having any impact on our company in the near term.

A different question. I'm looking at the 10-Q Note 8, commitments and contingencies, and there's language that breaks down the AIO agreement structure, where there's $ targets and there's % revenue shares. Could you just speak through how those targets were established and what was the negotiation like, and how have you picked those particular milestone numbers?

I picked them because it was a number that I thought was in the bucket for us.

Why is 34% where the number stops and not higher or lower? I'm just curious. It's a rather specific number.

It's basically a third. We start at a half, and we end up at a third.

Okay. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Jan Loeb for any closing remarks.

Thank you for joining today's call. We appreciate continued support from all of our shareholders. If you have follow-up questions or comments, please reach out to myself or to our team, whose contact information is in today's release. We hope to see some of you at our annual meeting of shareholders in Baltimore on September 16th. Our proxy statement with meeting details was recently filed. Again, please reach out if needed. Otherwise, we look forward to updating you on our next conference call or via a press release with interim developments.

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

Good morning, welcome to Acorn Energy's first quarter 2026 conference call. All participants are currently in listen-only mode. 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 COO of its OmniMetrix subsidiary.

Thank you, Regina, and thank you all for joining us today. First, I'd like to remind everyone that today's remarks, including responses to questions, contain forward-looking statements. These 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 or financial environment.

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 that is available as of today. There can be no assurances that the company will meet its growth targets or other strategic goals and objectives. The company undertakes no obligation to update or revise such 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 recent Form 10-K and our Form 10-Q for the 1st quarter of 2026, which are available online at www.sec.gov or on our own website. Now, I'll turn the call over to Jan Loeb, CEO of Acorn and OmniMetrix. Jan?

Thank you, Tracy, and to everyone for your interest in our company. Our Q1 2026 results reflect continued expansion of our base of monitoring endpoints, offset by an anticipated decrease in year-over-year hardware revenue related to our material cell phone provider contract. We recognized $93,000 of hardware revenue from this customer in Q1 2026 related to our original contract, and now hardware shipments for our initial contract are largely complete. This compares to $876,000 of hardware revenue from this customer in Q1 2025. Our Q1 2026 results also reflected $167,000 of monitoring revenue from this customer, compared to $69,000 in Q1 2025, related to first year monitoring revenues on the original contract.

Based on our ongoing dialogue with this customer, we are optimistic about securing further hardware deployments and related revenue that will build on our initial contract starting in Q2 2026. It has always been our goal to build on this customer opportunity, so this initial follow-on activity is a good indication of the strength of our relationship and the customer satisfaction with our solutions and the services we have been providing for over a year. We currently expect incremental hardware revenue from this customer in the range of $350,000-$500,000 in 2026. Tracy will non-cash management and board compensation in Q1.

Based on our record financial performance in 2025, accomplishing our Nasdaq up-listing and the completion of the AIO partnership agreement on January first, the board approved an increase in our 2026 stock option awards to compensate management and the board in lieu of additional cash compensation or board fees. These options were issued at a market price of $19.02, so their potential value is tied directly to value creation for all shareholders. The 50,000 options issued to management vest over 12 quarters, so higher stock comp expense will have an impact on financial results through the third quarter of 2028.

If you exclude the impact of non-cash compensation, Acorn's consolidated results would have been profitable in Q1, and the company continues to generate cash, as reflected by $53,000 of cash provided by operating activities in the quarter and the stable cash balance of $4.3 million at quarter end. In past communications, including our year-end news announcements, we have reviewed our five complementary growth initiatives, one of which is our ongoing pursuit of accretive M&A opportunities to expand our monitoring product offerings, market reach, and revenue and customer base. Through this process, we identified the AIO opportunity, which we decided to pursue as an acquisition of commercialization and distribution rights through a technology partnership. We are now actively working to bring their industry-leading, multifaceted suite of products for cell towers, data centers, and utility substations to North America for the first time.

These Infrastructure Solutions protect against theft, power issues, environmental and other risks, and maximize energy utilization. We believe the acquisition of these rights is an ideal way to leverage our 20-plus year reputation and established base of customers and substantially expand our capabilities and reach within the North American infrastructure market in a focused and highly capital-efficient way. We are currently working to finalize sales and marketing materials for the OmniMetrix branded solutions. We are initially targeting cell tower operations where we have a good base of existing customer relationships. Utilizing that experience, we will then pursue opportunities in fast-growing markets for data-driven and utility scale infrastructure management. Relative to our focus on backup generators at cell towers, this new suite of solutions provide remote oversight to the full cell tower campus.

Our solutions provide actionable insights through advanced analytics, machine learning, and comprehensive real-time monitoring that significantly reduce downtime, improve maintenance processes, and extend asset lives, lowering costs and delivering measurable ROI. Based on our initial assessments and customer discussions, we view theft as perhaps the most pressing issue facing cell tower operators today. Theft alone can potentially cost cell tower operators hundreds of millions of dollars annually and is a growing and largely unaddressed problem in the United States. As copper, fuel, and assets costs rise, it's widely expected that theft could become an even bigger risk management issue in North America, as it already is on other continents. To combat this risk, we are bringing to market the strongest available solution backed by years of proven performance.

We are still working through final hardware and services pricing models, but given the expanded scope of the AIO solutions, we currently expect our average AIO sale to be 5 to 6 times the average sale of existing OmniMetrix products. Given expected pricing and the scale of the opportunity provides a very meaningful growth potential for our company. We currently have our first 2 AIO-based tower sites live and running for customer demonstrations. For those of you who may or may not be familiar, cell towers are typically managed by independent tower companies who own and operate the physical structure and lease space to multiple wireless carriers. The 2 sites we are running are both in the Atlanta area with an existing telecom customer, where we are monitoring their shelter or hut within the cell tower, as well as the front gate.

Our dashboard shows everything, including stats on power systems, fuel levels, battery voltage, operating equipment, temperature, humidity, HVAC runtime, flood detection, et cetera, along with live feeds from security cameras that monitor physical access. We have secure permission to take prospective customers to these sites and expect to begin these efforts in the coming weeks. As I mentioned, we're in the process of advancing our program to launch these products in the U.S., including fine-tuning features and alerts, the sales approach, installation protocols, customer materials, as well as sales and training collateral that our team will need to scale this offering. The AIO team has been to Atlanta for several weeks to train and work with our engineering, tech support, and sales and marketing teams to set up for success in this product launch.

In terms of our financial reporting, we have set up a separate reporting segment called Infrastructure Solutions or IS to track this line of business, which you will note in our Form 10-Q. We do not expect revenues from this segment in the first half of 2026. We continue to believe that attractive secular tailwinds should support our value propositions and growth potential for years to come. Companies are increasingly focused on ensuring reliable access to the energy infrastructure and the compliance support they need. At the same time, broader demand drivers such as AI, data centers, electrification, EV adoption, reshoring continue to strain an aging U.S. grid, compounded by severe weather trends, all of which underscore the importance of energy resilience. In March, we saw severe storms across the Midwest and Mid-Atlantic, leaving more than 1 million customers without power in the PJM and MISO territories.

Even with significant investment, it will take years, if not decades, to address these challenges, and we believe this positions us well both for the near term and longer term. Given substantial unmet needs in our current markets plus opportunities in adjacent addressable markets, we believe 20% average annual revenue growth over a 3-5-year period remains achievable. Further, our capital-light, cost-efficient, and scalable business model positions us to bring roughly 50% of each incremental revenue dollar from our existing businesses to operating income line. As a small company, large hardware shipments will make our quarterly results vary, but our high margin recurring revenue model, supported by strong secular trends, position us well to continue to deliver growth and value to our shareholders. With that, I'll turn the call over to Tracy for financial and operational insights. Tracy?

Thank you, Jan Loeb. The headline takeaway from our Q1 2026 results is the continued strength of our recurring monitoring revenue stream and the improved gross margin profile of the business set against a challenging year-over-year hardware comparison driven by the timing of our largest contract. I'll also point out that our OmniMetrix operating subsidiary remained solidly profitable in the quarter, delivering operating income of $395,000. We provided a fair amount of detail in today's news release and in our Form 10-Q, so I'll just touch on a few of the key highlights. Focusing on Q1 2026 versus Q1 2025. Total revenue was $2,227,000, down 28.1% from $3,098,000 in Q1 2025. The decrease was driven by a $1,019,000 or 55.7% decline in hardware revenue.

Partially offset by a $148,000 or 11.7% increase in monitoring revenue. Monitoring revenue grew $1,417,000, reflecting continued expansion of our installed base of monitored endpoints. Hardware revenue was $810,000, which included $556,000 of new hardware sales and $110,000 from the amortization of deferred hardware revenue. The latter compared to $315,000 in the prior year period as we approach the final recognition of the remaining deferred hardware balance later this year. Gross margin improved 510 basis points to 80.2% from 75.1% in Q1 2025, reflecting both the higher mix of monitoring revenue, which carried a 94% gross margin in the quarter, and a lower contribution from material contract hardware.

Operating expenses rose 11.2% to $1,914,000, driven by a $228,000 increase in SG&A, partially offset by a $36,000 reduction in R&D following completion of the new OMNI and OMNIPRO development programs. The SG&A increase was primarily due to a $136,000 increase in non-cash stock-based compensation expense related to stock option grants to officers and directors, plus $111,000 in higher OmniMetrix SG&A, reflecting incremental personnel and technology investments, partially offset by lower commissions.

OmniMetrix segment operating income, the combined operating results of our PG, CP, and IS segments was $395,000, demonstrating the continued profitability of our core operating subsidiary, even in our seasonally lowest revenue quarter and even after absorbing approximately $50,000 of operating expense in our pre-revenue Infrastructure Solutions segment, which included the hiring of a new sales manager in February for the IS segment. On a consolidated basis, including unallocated corporate headquarters costs, we reported a net loss of $77,000 or $0.03 per basic and diluted share, compared to net income of $464,000 or $0.19 per basic and diluted share in Q1 2025. The Q1 2026 results include $197,000 of non-cash-based stock compensation expense versus $61,000 in the prior year period.

We recognized an income tax benefit of $25,000 in Q1 2026 compared to income tax expense of $154,000 in Q1 2025. We did not record any change to our deferred tax asset valuation allowance in the quarter. We continue to maintain a partial valuation allowance of $10.3 million, leaving a meaningful base of NOL and capital loss carryforwards to support future growth and potential M&A initiatives. Turning to the balance sheet and cash flow, we ended the quarter with cash of $4,257,000 compared to $4,454,000 at year-end 2025. Excluding deferred revenue and deferred cost of goods sold, net working capital was $6,024,000 at March 31, 2026 versus $6,184,000 at year-end. I remind you all, we remain debt-free.

Q1 cash flow from operations was $53,000. We also used $260,000 in investing activities, of which $250,000 represented the upfront payment for the acquisition of the exclusive commercialization and distribution rights under the AIO technology partnership agreement executed January 1st with the remainder of the other capital items. Stock option exercises generated $10,000 of financing cash inflow. OmniMetrix's deferred revenue, or what we refer to as our backlog, was $3,269,000 at quarter end, of which $2,934,000 is expected to be recognized as revenue in the next 12 months. Operationally, our next generation OMNI and OMNIPRO generator monitors and our RadEX cathodic protection product are all built on our new OCOM proprietary communications core now being deployed in the field.

These platforms reduce installation time, lower service costs, and enhance reliability, which strengthens our value proposition on our competitive position as we move further into 2026. Within the Infrastructure Solutions segment, as Jan Loeb mentioned, we now have two telecommunications tower sites live for customer demonstrations. We're really excited about this opportunity to bring AIO Systems solutions to North America under the OMNI brand and the broader set of growth opportunities ahead of us. I very much look forward to updating you as we progress in the coming quarters. Operator, at this time, please prepare the lines for questions. Thank you very much.

We will now begin the question-and-answer session. To ask a question, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset and ensure that your phone is not on mute when asking your question. Again, that is star one for questions. We'll pause for a moment to compile the Q&A roster. We'll take our first question from the line of Joel Sklar. Please go ahead with your question.

Good morning, Jan Loeb and Tracy. Let me start off by saying I'm suffering with a bad head cold. If I at any point I'm inaudible or cough, please let me know and bear with me. First, just a comment in that your option package, you know, I'm an investor in a lot of other public companies, and I don't think it's in any way unreasonable given the success that OmniMetrix and Acorn has had. I think it's wonderful that the, your leadership is gonna participate in the future success of the company, and I don't think the number of options is in any way out of line. That's my opinion. Question. We've seen very long sales cycles for the OmniMetrix generator monitoring equipment.

Given that the, your new Infrastructure Solutions, partnering with AIO are gonna maybe, you know, be even greater outlays.

Is there a chance that we're also gonna see a very long sales cycle there? Or do you feel that the solutions that you're offering in this Infrastructure segment are so compelling and urgent that we'll see a shorter sales cycle?

Joel Sklar, thank you very much for your comments and I hope you feel better. The answer is we're not 100% sure yet. Yes. Typically, I would say that the cell tower solution will have as long a sales cycle as our generating monitoring solution. It's just because we're dealing with, you know, large corporations, and so there's just a lot of tape to get through with large corporations. All saying that is that theft is really a very big problem that they are now beginning to address. It could be that because of the need, the sales cycle will be quicker. I just don't know yet because we haven't really started to get into the weeds with our customers.

You know, certainly the technicians that we've spoken to in the field as we were putting up these units, they certainly feel that there's a strong and very present need for the product.

Okay. Thank you. Good answer.

Again, for any questions, please press star followed by 1 on your telephone keypad. Our next question will come from the line of James Kahn. Please go ahead.

Hi. Okay. Well, you've got a lot of new initiatives that are interesting. I just wanted to ask about, you know, you had that big sale, about a year ago to the large customer, and then they didn't renew in September. Can you just give us some background on what happened there? Was it the product that didn't really work or, why that one did not get renewed?

Hi, James. Your basic assumptions are, need to be corrected. You know, the contract was for approximately between 5 and 10,000 monitoring units. They wanted us to ship it to them within a year. Initially, when we were negotiating with them, it was 2 years, but then they changed it. They wanted to have it all within a year. We did that. Q3, Q4 of 2024 and Q1 and Q2 of 2025, we basically shipped all the product to them. Which doesn't actually mean that that's when all the total revenue of that was recognized, because needs to go into their system, whatever. We finished that major contract, and that's that.

What I've said in my prepared remarks here is that they have come back to us in 2026, and that I anticipate that we'll have another $350,000-$500,000 worth of equipment sales. This is not monitoring because we continue to monitor everything. You know, that's approximately, you know, call it 7%-10% of the original order, they now come back for additional stuff. I mean, they have installed the original number of units that we've sold to them, and now as they're putting it into new cell towers, they're ordering new stuff for us. We have a very good relationship with them. The product works very well.

They're very happy with it, and they continue to be a very big and happy customer of ours.

Okay. Well, thank you. That clears things up. I appreciate that.

Once again, to ask a question, simply press star 1 on your telephone keypad. We will pause for a moment to compile the Q&A roster. We will take a question from the line of Richard Sosa. Please go ahead.

Hey, Jan, Tracy. Good morning. Another great quarter. Love seeing the monitoring re-revenue continue to trend upward. Sorry I did get on the call really late. Just on the AIO, did you guys discuss, and I can go back to the notes afterward, but did you discuss the go-to-market strategy for the product?

We mentioned it briefly. Firstly, good morning, Richard. We mentioned it briefly that our main focus is gonna be telecom- customers because we already have them as customers, so we don't have to sell the OmniMetrix name to those customers. That's gonna be our first target. You know, we have these two demo sites up and live that we take people to. That's gonna be our first strategy. Data centers is gonna be our second strategy. AIO has a very good data center product, and that will be, you know, after telecom, we're gonna focus on data centers. Third is utility substations. That's kind of how we see it. You know, we've already put out some initial phone calls to our customers. We're working on the pricing models, CapEx model and an OpEx model that we're gonna roll out in the next few weeks.

That's kind of our game plan.

All right. Very exciting. You know, I noticed from the 10-Q that you did break out, you are breaking out an IS division going forward. Is that something you had to do, or did you just feel strongly enough that it was worth doing?

Um, we thought-

I'll take that, Jan Loeb.

Oh, thanks. Thank you.

I mean, our expectation, Richard, is, you know, that this will be a material contributor moving forward. We felt like in an abundance of transparency, it was important to, you know, to carve that out from the initiation point to monitor this segment and give our shareholders the opportunity to see that, you know, from the beginning.

Okay, that's great. You didn't have to do it. You just felt strongly enough that, you know, it was worth doing for transparency.

Well, from the standpoint of GAAP, you know, you evaluate whether something is material, and certainly it's not material today because, you know, the expenses we've spent so far wouldn't be material from the context of looking at it as a percentage of the total. We just felt like it will be material. That's our plan, that's our hope, that's our focus. We felt like doing that from the beginning was the right thing to do.

Yeah, it definitely makes things easier. Perfect. All right. Well, you know, continue the good work. I look forward to future updates.

We have a follow-up from the line. Joel Sklar, please go ahead.

Hello again, Jan Loeb and Tracy Clifford. Just a couple of quick follow-ups. One is sort of leveraging off of Richard Sosa's question. See, I was curious, this may be a little nitpicky, but your partnership with AIO Systems, is that with Acorn, the parent, or with OmniMetrix? In other words, I know the branding is gonna be OmniMetrix. I don't know whether that means it falls under OmniMetrix, and we own 99% of what we wind up getting from that partnership, or whether it's under Acorn and we get 100%. That's the first question.

I mean, everything's gonna be done under OmniMetrix. I'll put it that way. Meaning the sales, the sales manager that we hired for AIO is under OmniMetrix and is resident in Atlanta. It's gonna be, have an OmniMetrix brand name. We view it as an OmniMetrix product.

Your former CEO of OmniMetrix will be happy about that, I guess. The other question is, can you tell us whether I expect the answer is yes, but whether the existing AIO sales model is also a subscription model where their customers overseas, they make money from both, certainly from hardware sales, but then they also get continuing revenue from monitoring and maintenance, and whatnot.

Their model is that they mainly sell the equipment, and then they have a what they call SLA. They have this an ongoing revenue stream as well. We don't think it's gonna be as big as our monitoring revenue, 'cause we're gonna be offering you know, more services. We also, as I said, might have a OpEx model where we'll roll in the complete package, meaning equipment monitoring, et cetera, for one price, one monthly price. Our model is gonna be a little bit different than their model, because we think our market's a little bit different than the markets that they address.

Okay, great. Thank you. At the risk of getting greedy here, just one more question. If an existing cell tower or other customer who would potentially be a customer for your generator monitoring came to you, and they wanted generator monitoring as well as your full Infrastructure Solutions, through the AIO partnership, will you be then Will you need to integrate the OmniMetrix generator monitoring? My impression is that the Infrastructure Solutions will, is, as the name of the company applies all at once, will encompass that. Can you comment on that?

Yeah. They have their own generator monitoring solution, and we have our own generator monitoring solution. Ours is a little bit more comprehensive than theirs. We will be integrated in the software. For example, the 2 cell towers that we are on as the demo models happen to have our generator monitors in them, and so they are integrated into the software system of AIO.

Right. Your customers will get the best of both worlds then. They'll get the maybe slightly more advanced and or the feature-driven, current OmniMetrix generator monitoring together with the new Infrastructure Solutions provided by AIO, if I understand correctly.

Yeah. Yeah. We hope our customers believe the same thing.

Okay. Thank you once again, Jan.

Again, to ask a question, press star one on your telephone keypad. While we compile the roster, I will hand the call over to William Jones for any pre-submitted questions.

Thank you, operator. We do have a pre-submitted question from a private investor, and the question is: Over the past two quarters, companies like Generac and Caterpillar have both reported greater than 20% year-over-year growth in their power generation segments, along with increasing backlogs, primarily selling into C&I customers in the data center market. Are you seeing any opportunity whatsoever in OmniMetrix's ability to attach itself to this opportunity? I understand that there is the AIO partnership, which in theory helps to address this market, but would be great to hear any further thoughts on this.

Sure. As I said in previous calls, we and OmniMetrix have not been focused on the data center market because our product is a remote monitor, and most of the data centers have 24/7 people on-site monitoring their equipment, their servers, etc. We only had 1 product, a generator monitor. That was not a focus of ours. With the AIO product, AIO has a full suite of products for a data center, and one of the other things we are getting with the AIO partnership is a NOC. We think that the data center market is a market that we can address, and we hope to address it shortly.

Again, as I said before, we want to first tackle the cell tower market, then we would go after the data center market.

Excellent. Thank you.

By the way, I'm sorry I said NOC. I said NOC. That is a network operations center.

Excellent. The second question is regarding potential OEM white labeling and bundling progress that you've mentioned in the past. Could you provide an update on any ongoing dialogues for bundling OmniMetrix solutions with new OEM equipment?

Yeah, I have no update. We continue to have discussions with 2 OEMs, but no update to report.

This concludes our question and answer session. I'll now hand the call back over to Jan for any closing comments.

Thank you all for joining today's call. We appreciate the continued support from all of our shareholders. If you have any follow-up questions, please reach out to myself or to our IR team, whose contact information is in today's press release. We hope to meet some of you next month at the Planet MicroCap Showcase that we're planning to attend on June 17th and 18th in Las Vegas. As always, we look forward to updating you on our next conference call. All the best.

This concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, everyone, and welcome to Acorn Energy's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, today's event is being recorded. I'd now like to turn the conference call over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary.

Thank you, operator, and thank you all for joining our call today. First, I'd like to remind you that today's remarks, including responses to questions contain forward-looking statements. These 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 risk 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 that may arise from changes in technology, competition or shifts in the macroeconomic or financial environment. 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 that is available as of today. There can be no assurances that the company will meet its growth targets or other strategic goals and objectives. The company undertakes no obligation to update or revise such 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 base -- our business, please refer to the Risk Factors section of our Form 10-K, which is available online at www.sec.gov or on our own website at acornenergy.com. Now I'll turn the call over to Jan Loeb, CEO of Acorn and OmniMetrix for further comments. Jan?

Thank you, Tracy, and thank you all for your interest. In 2025, Acorn achieved record revenue, improved operating income, higher cash flow and our third straight year of profitability. Our performance benefited from a 22% increase in high-margin monitoring revenue, driven by continued growth in our installed base of remote monitoring endpoints. Our year-over-year Q4 and full year comparisons reflect the benefit of a national cellphone provider contract, the largest in our history. The bulk of hardware revenue for this contract was recorded between Q3 of 2024 and Q2 of 2025, contributing to lower year-over-year hardware revenues in the second half of 2025. The contract also includes one year of monitoring services ratably over 12 months, following each hardware units commissioning. Importantly, we earned very favorable feedback from this customer regarding our technology, managing capabilities and customer service, resulting in what we believe is a solid relationship with future potential. Our 2025 hardware revenue was also tempered by an $885,000 decrease in noncash deferred revenue amortization from units sold prior to September of 2023 when the majority of our hardware sales were deferred and amortized over 3 years. Acorn's 2025 results reflected $956,000 in revenue from amortization of deferred hardware revenue, a 48% decrease from the $1.84 million recorded in 2024, but with no impact on cash generation. This revenue impact will end this year as we expect the balance of deferred hardware revenue of $168,000 to be fully amortized by August of 2026. Lastly, our 2025 revenues were also impacted by an industry-wide slowdown in residential generated deployments, which we and other industry participants attribute to high interest rates, fewer major power outages related to hurricanes and other weather events in 2025 as well as inflation and economic uncertainty that impacted consumers' ability or willingness to invest and backup generator security at a cost of approximately $15,000 per installation. Our belief is that consumer generated demand is likely to return to more historic levels as impending factors moderate. Turning to our strategies for growth. We reviewed five complementary core initiatives in today's press release on which I'd like to provide a little more color. One is larger commercial industrial opportunities, which our internal sales teams continue to pursue across various sectors that include health care, telecom, real estate, retail grocery, hospitality, government and financial institutions. We have a range of ongoing discussions. However, the most significant opportunities with more large organizations that require budget compliance and also longer, more complex sales cycle. Two is the pursuit of strategic relationships to integrate our technology with OEMs or other strategic partners, for example, through white labeling our products for the OEMs. We have ongoing dialogues with a few industry OEMs to bundle OmniMetrix Solutions with their product offerings. Currently, our monitors are installed by the dealers in the aftermarket. However, our technology, service leadership and support for all generated brands puts us in a strong position to partner with one or more OEMs. Their core business isn't providing monitoring services and by working with us, they can offer a superior solution that offers greater value to their customers, while also providing the potential to reduce or eliminate their overhead and investment in an in-house solution. We believe this is the direction our industry is going, and we continue to work to advance OEM discussions. However, it's difficult to predict the potential or timing of these efforts. Three is expanding our penetration of the residential and small business markets through our network of 600-plus generator dealers. While the retail market was slow in 2025, as I mentioned, we are optimistic for a rebound in 2026, given the potential stimulus to secure backup power provided by recent winter storms as well as moderating interest rates. One of the larger generator manufacturers has publicly stated they expect a 10% increase in residential generated sales in 2026, so we expect to benefit if this does indeed occur. Four is our ongoing investment in research, development and engineering to enhance existing OmniMetrix products and develop new products. These investments are essential to maintain competitive -- our competitive position and expand our value proposition and addressable market. Tracy will review our recent product launches momentarily. Five is our ongoing pursuit of accretive opportunities to expand our product offerings, market reach and customer base with a focus on businesses that have a meaningful monitoring components to their businesses. The nature of the M&A process is that it takes a lot of work, research and negotiations to get to the point where you have a solid opportunity and acceptable price. We are highly motivated to identify and execute on an acquisition to enhance our growth, operating leverage and monetization of our NOLs, but balance this with a disciplined approach to managing deal terms and risk for our shareholders. Our recent strategic partnership with AIO, which stands for all in one, emerged through our M&A dialogues. AIO is the global leader in remote monitoring and control solutions for critical infrastructure but had no business operations in the U.S. They provide best-in-class technology and cloud-based business intelligence platforms that have successfully deployed at over 110,000 sites in 15 countries. In this case, we found the best path was to secure exclusive North American rights to their proven product suite for what amounts to a modest commitment to invest in building out the business. AIO solutions target the full cell phone tower campus as well as solutions for data centers and utility operations. Their monitoring control solutions deliver actionable insights to advanced analytics, machine learning and comprehensive monitoring of environmental conditions, battery health, security breaches, energy optimization, microgrids and more. The technology reduces downtime, streamlines maintenance and provides measurable cost savings and ROI, made the logical choice for smarter, safer and more profitable operations. The partnership is a perfect fit for Acorn and our OmniMetrix brand, as it substantially expands our product offerings and addressable market by integrating AIO Solutions with our industry-leading remote monitoring and control technology, our 20-plus year reputation and established U.S. customer base. We see exciting growth potential starting with our existing telecommunication customers and then expanding to data center and utilities to strengthen our ability to serve rising demand for data-driven infrastructure management with solutions that protect against power issuance, theft and environmental and other risks while maximizing energy utilization. We anticipate that the average sale of OmniMetrix labeled AIO products will be approximately 5 to 6x the average current omni sale. As we will be sharing SaaS revenue with AIO, it is too early to project what our margins will be. We will be selling AIO technology solutions under the OmniMetrix brand and from our market research, there are no better existing technologies in the industries they serve. This partnership has the potential to transform our company by expanding the respective OmniMetrix brand into new end markets with a product that would take us many years and significant R&D dollars to develop. We expect to have our first demo unit installed by the end of the month with a large existing telecom client. AIO has been in existence for 18 years. As we have stated, we do not expect any revenues from this partnership until the second half of 2026. We see secular tailwinds that should support our growth in the coming years as business and consumers take action to ensure uninterrupted access and support for their energy infrastructure management and regulatory compliance needs. Energy demands for AI, data centers, electric vehicles, electrification of buildings and reshoring of industry are all strain the aging U.S. electrical grid, which is also being disrupted by extreme weather events, forest fires and other natural disasters. Despite the relatively benign year in 2025, we've already seen a rebound in power outages from winter storms so far this year, including severe ice storms across 12 states in the Southern Appalachian in early January, resulting in over 1 million customers without power, many of them for days and some for weeks amidst winter weather. Even if the nation changed course and started massively investing in energy resources and infrastructure today, we are so far behind. It would take many years if not decades to meet our rapidly growing energy and reliability needs. Given the substantial unmet needs of the markets we now serve, we continue to believe 20% average annual revenue growth over the coming 3 to 5 years is an achievable target. Further, given the efficiency and scalability of our model, we believe approximately 50% of each incremental revenue dollar from our existing business should flow through to operating income. As a small company peaks and valleys in purchasing cycles for major hardware orders will persist, but we believe that our high-margin capital-light business model positions us very well for the future. With that, I'll turn the call over to Tracy for financial and operational insights. Tracy?

Thank you, Jan. The key takeaway from our 2025 results is the solid growth we are achieving in our annual recurring monitoring revenue stream, which achieved a 95% gross margin in 2025 and was driven by the ongoing expansion of our installed base of monitored endpoint. We view a steadily growing base of annually recurring high-margin revenue as the core value driver for our business, fueled by new hardware deployment, which could continue to be more regular in nature leading to some variation in year-over-year comparisons. We've provided a fair amount of detail in today's news release, so I'll just touch on a few key highlights. Revenue rose 4.5% to $11,478,000, thanks to the diligent efforts of the entire OmniMetrix team. Monitoring revenue grew 22% due to the expansion of monitored endpoint. Total hardware revenue declined 8% due to the timing of deliveries for our large cell phone customer and an $885,000 decrease in the amortization of deferred hardware revenue. Excluding the impact of declining amortization of deferred hardware revenue, new hardware revenues rose approximately 8% in 2025 compared to prior year. Gross margin improved to 76.8% versus 72.8%, an increase of 400 basis points, reflecting the increase in higher-margin monitoring fees as a percentage of revenue and hardware margin improvements related to the cost efficiency of the next-generation products that deliver more value. Diluted earnings per share was $0.99 in 2025, including an $0.18 per share deferred income tax benefit compared to diluted EPS of $2.51 in 2024, which included $1.77 per share of deferred income tax benefit. Cash flow from operations more than doubled to $2.090 million in 2025 or an increase of 131% year-over-year. Consequently, our year-end cash position improved by $2.1 million to $4,450,000, and we've maintained a strong cash position of $4,131,000 as of March 3, 2026, following our investment of $250,000 since December for the AIO OmniMetrix partnership in North American product launch. We also remain debt free. I think it's important to note that Acorn was able to release an additional $464,000 of its valuation allowance against our deferred tax assets in 2025 as a result of the big beautiful bill, which allowed us to treat certain R&D expenses in a more favorable way for tax purposes. This compares to $4.4 million released in 2024, both of which were reflected in our bottom line results. We now maintain a $10.3 million or greater than 70% valuation allowance, against $14.4 million in NOL and capital loss carryforwards. Most of our NOLs expire in 2031 or later. So we still have plenty of time to utilize them through growth in our existing operations via potential M&A initiatives. In late 2025, we launched our next generation and generator monitors to omni for the residential market and OmniPro for commercial and industrial applications. In addition to significant upgrades and new features, design innovation have reduced installation time and service costs while enhancing the liability. We also launched RADEX, an enhanced version of our RAD, remote alternating current mitigation disconnect, product for the Pipeline segment. These next-gen product launches enhance our value proposition, expand our technology leadership and will contribute to our growth in 2026 and beyond. We're very excited about the potential AIO opportunities ahead as well as the other growth opportunities that Jan discussed in his remarks, and we look forward to updating you on our progress. Operator, you may now prepare the lines for questions. Thank you very much.

[Operator Instructions] And our first question today comes from Jason [indiscernible].

I have a few questions. I want to follow up a few things from the AGM, if you don't mind. The first one I wanted to hit was you guys had mentioned that you're talking to three OEMs, and you don't think you'll get three OEMs. It's a very long sales cycle, and you kind of mentioned that you certainly would get one. Is that kind of still the status on that front?

I believe that is still true.

Okay. And then the next follow-up from AGM would be, in terms of acquisitions, you had said that you had three acquisitions in mind and three term sheets out. It seems like the AIO is one of those. Can you give an update? Is there still two outstanding, or where does that stand today?

We've had discussions with the other two. Firstly, you're right, AIO is one of them. We've had discussions with two others. As of right now, they're still available, but the price, we have not come to any agreement on price, too far apart on price.

Okay. And then my final question is a bit more open ended. I'm curious if you could kind of discuss the bottlenecks for each of the growers -- each of the growth drivers. So for instance, is the lack of personnel, or is it sales? What's kind of like the bottlenecks, and what are you guys doing to try to relieve those bottlenecks?

So I think the #1 bottleneck is the customer base that we are trying to bring in-house. So on the residential side, and small commercial side, usually, it's one decision maker is making the decision to get monitoring and not monitoring, the head of the household or the owner of the small business, the doctor's office, et cetera. And going after bigger customers, we're just finding that the sales cycle is much longer. And there are other extraneous factors that come into play, the economy, tariffs, layoffs, et cetera, that impact bigger customers. So to me, our internal team is excellent. And I don't think adding more personnel is an answer. It's just staying on top of these customers, and hopefully, we reel them in because we feel very confident about our product, and how we can help them. So I think that to me is the #1 bottleneck that we have.

Our next question comes from Richard Sosa.

Great to see the results this year. I'm excited about the AIO partnership and looking forward to hearing more about it. But just a really quick question. I joined late, so you might have addressed it on the call. But in terms of the monitoring revenue in the fourth quarter, I thought it was like slightly below what it was in the third quarter. Is it -- was it a timing issue, or was it something else?

Hi, Richard, thanks for the question. No, the decrease in monitoring revenue in 4Q '25 compared to 3Q '25 was actually due to the positive impact of the nonrecurring revenue recognition related to a policy that was made effective in 3Q '25 of recognizing first year of monitoring revenue on any units that have been shipped into which the first year monitoring had already been paid, but the unit had been outstanding for 24 months or longer and had not yet been installed. So that there was an impact that would be nonrecurring in the third quarter of 2025.

Okay. But the actual ongoing --

The third quarter was much higher than it should have been, really, I guess it was a onetime benefit in the third quarter.

Correct. That's correct.

And then on an ongoing basis, Richard, the fourth quarter was above the third quarter in monitoring revenue.

And our next question comes from Joel Sklar.

Excited about the future for Acorn. A couple of questions. One, Jan, can you give us a little bit more flavor for the market receptivity to AOI. Obviously, you have one telecom customer who is least interested in getting a model in there and seeing how it works out. But can you give us some more -- I know it's still in the very early stages, but a more general flavor for the market receptivity to the product. And then the second one was anything new on demand response.

Okay. Good morning, Joel. So on AIO, it's just too early to tell about market receptivity because we haven't really gone out and shopped it or sold it. Obviously, you're right. One of our telecom customers has agreed to put up everything on their demo -- in the demo site. And so we've obviously talked to them about it. And so they're certainly interested in. But I would think -- and this goes kind of beyond a little bit beyond your question, but I would think the -- any telecom tower company would be interested in the product. I'm not saying that they would buy it or -- but they would certainly be very interested in it. You have to recognize and then this also kind of goes to why we were interested in AIO, and where we see the future going. And remember, AIO has put in over 110,000 sites with their equipment. So -- and they know what they're doing and their equipment really works. But what's interesting about the equipment is, besides monitoring everything in a cell tower site, for example, whether it be locks, cameras, battery, HVAC, lots of stuff that are monitored that we don't monitor, we just monitor the generator. So obviously, it's a very good fit for us. But their products, because it's so AI-based, for example, depending on which is the cheapest form of energy at any particular time, whether it's solar, battery, fuel, they can switch. They have the technology to switch the uses depending on the cheapest source of power at that particular time. So we think it's a big -- it could turn into a big cost savings for the tower operators. Another thing we know is that security of cell phone tower is pretty lack of physical. I mean they're in remote sites. With the price of copper where it is today, we think that security has to be hardened at cell tower sites. And so they have the #1, at least what we believe to be the #1, security system in place. And then just if you think about it because it's the way we think about it, the industry is spending billions and hundreds of billions of dollars on AI based on reports that we've seen today, roughly 40% of AI is delivered through mobile apparatuses, which obviously needs cell towers. So we think sub towers are going to be -- are an important site, and we'll continue to be a growing part of the infrastructure that's needed. And we think we have, with AIO product, the best solutions for towers. And so we think there'll be great receptivity once we have a proof of concept. We have one up and showing. We have the software that we can show people. So we think it will be a very big item. But again, we're saying nothing for right now. Let's see what happens towards the second half of the year. Have I answered your question, Joel?

Yes. I remember I also had on demand...

Okay. On demand response, there's nothing new. We continue to have discussions with utilities that, as a matter of fact, we have one coming up in a week on their interest in demand response. The issue is how it gets structured. For example, this particular utility can only give demand response payments to their end customer by law. So how do we work that Acorn gets the money that they deserve. So the concept continues to be an important concept, the actual operations is unclear yet because it's too new as to how the money will flow. But there's certainly a lot of interest, and we are in the midst of it.

Okay. Great. Can I have one quick follow-up on AOI, Jan?

Sure.

Okay. So the decision to -- you're going to be -- you have terms to share the monitoring revenue, and of course, we value that a lot more, it's ongoing. Recurring revenue is a great thing, like the razor-blade model. But the -- but from my understanding, and please correct me if I'm wrong, we're not going to get any revenue from the hardware sales even though it's going to be branded OmniMetrix. And I assume there are going to be some costs associated with selling the hardware, including maybe commissions. So could you tell us a little bit more what went behind the thought that we would be sharing in the monitoring, but not directly in the hardware sales.

So let me correct you on that. No, we are definitely getting the hardware sale. So we are getting a hardware sale. And what we're doing is we're sharing in the monitoring. So the way I look at it, it's like a semi acquisition of the North American rights for AIOs product line. So we have given a relatively small upfront fee, which requires them to do a bunch of things, for example, putting up a demo site and providing personnel, et cetera. And then we're sharing in the ongoing monitoring. So I view that as kind of like an earn-out. So a small upfront acquisition fee and then an earn-out in terms of the ongoing monitoring fee is how I look at it, and why I think it's such an interesting structure, and again, it takes out a significant amount of risk for shareholders and leaves us with a significant amount of upside. We're going to go to market with a product in two different ways. We'll have a CapEx model. We have an OpEx model. But in all situations, we are getting paid for hardware. We're not in the 3B business.

Okay. Great. Wonderful. And then at the risk of being greedy, I'm going to pose one more question. So I saw a part of the announcement with AIO is the right to forget what technically is called not right of first refusal or something to their South America, Central America to business there. And you may wonder why am I asking about that when you're just getting your toe in the door with North America, but the reason I asked there is I saw that AOI has some important existing customers. I think maybe in a SouthTower company that has expansive operations in South America. And if you could -- so that may be some low-hanging fruit if that was something that you could execute and get the rights to their South America business. So I was just curious about that.

Yes. So we built that into our contract because, as you say, there's some interesting opportunities in South America. But also, we wanted so to speak. We didn't want to have our flank with somebody else. So growing up, I played a lot of risk. So I figured if we're having North America, I want to have South America as well. It's a growing area, and it's easier for us to service South America than AIO from where they're located. So it made sense, and we negotiated for it, and we got it. So we'll see -- we see what happens. But again, as you said, first, let's get North America going the way we expect it to happen and then we can see what happens with South and Latin America.

And at this time, I'm showing no additional questions. I'd like to turn the floor back over to Jan Loeb for closing remarks.

Thank you all for joining today's call. We appreciate the continued support from our shareholders. If you have any follow-up questions, please feel free to reach out to myself or our IR team, whose contact information is provided in today's press release. We look forward to updating you again on our Q1 call upcoming. All the best.

And with that, everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.