ACORN ENERGY, INC. Q3 FY25 Results

Q3’25 hardware revenue decreased as we did not have any hardware sales from our cellphone provider contract during this quarter versus hardware revenue of $724,000 in Q3’24 related to sales from that contract. What was originally expected to be a two-year hardware rollout was predominantly fulfilled within 12 months as our customer requested faster hardware delivery which we were able to meet. Also impacting the year-over-year comparison was $215,000 in the amortization of deferred hardware revenue recorded in Q3’25 compared to $436,000 of amortization of deferred hardware revenue recorded in Q3’24. 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 1, 2023 when we commenced selling hardware units that can be sold separable from our monitoring services. We expect all deferred hardware revenue to be fully amortized by August 2026. In addition, we have seen a slowdown in residential deployments in 2025 which we believe is primarily the result of relatively high interest rates, fewer weather events and economic uncertainty on consumer decision making. We have been working on several initiatives to continue to grow our revenue since the critical mass of hardware sales from the cellphone provider contract has been fulfilled. While these efforts have long lead times, we remain confident in the potential for additional larger-scale deployment opportunities. We have realized $3.9M of hardware revenue and $343,000 in monitoring revenue, since inception, from the cellphone provider contract and believe there is potential to receive additional purchase orders in the future. On the plus side, our monitoring revenue rose 37.1% to a company record of $1.56M in Q3’25 and 23.9% to a company record of $4.15M in the 9M’25 period. These increases reflect the continued expansion of our installed base of remote monitoring end points. This predictable, high-margin, recurring revenue stream is the core value driver of our business. Our large cellphone provider contract contributed $148,000 of monitoring revenue in Q3’25, while none was contributed from that contract in Q3’24. Our Q3’25 gross profit margin rose to 78.5%, compared to 71.7% in Q3’24, as it benefitted from a significantly higher proportion of higher-margin monitoring revenue in our revenue mix. In the first nine months of 2025, our gross margin improved to 75.9% vs. 73.0% in the year-ago period. The improvement reflects the benefit of growing revenue on a largely fixed cost structure, as well as ongoing progress we are making in improving our hardware product margins. We completed our uplisting to the Nasdaq Capital Market in Q3’25. This is a significant milestone for Acorn as it underscores our financial and operational progress, while enhancing the liquidity and the visibility of our shares before a broader base of potential investors. We also expect the benefits of our Nasdaq listing to support our M&A efforts by providing a more respected and liquid market for our common stock, should we wish to use shares to fund a transaction. We incurred $110,000 in expenses during Q3’25 related to the uplisting, which includes NASDAQ application and listing fees and related legal fees. We continue to advance discussions with OEMs regarding potential strategic relationships, including the bundling of our solution with their products to extend our market reach. We also continue to evaluate and pursue acquisition opportunities that include a monitoring component that aligns with our business model. These initiatives tend to have long lead times and outcomes that are hard to predict, but they remain an important aspect of our efforts to drive long-term accretive growth. To maintain our technology and solution leadership, we continually invest in enhancing our solutions as well as in new product development. We recently began beta testing our next-generation monitors – including Omni for the residential market and OmniPro for commercial and industrial applications. New features include a smaller size, real-time diagnostics, remote exercise programming, and compliance reporting. Design innovations have reduced installation time and service costs, while enhancing reliability and further strengthening our value proposition. Based on customer feedback, we also redesigned and began the beta testing of RADTM EX, an enhanced version of our RADTM (Remote Alternating Current Mitigation Disconnect) product for the pipeline segment. This product remotely disconnects/connects AC mitigation tools, enabling increased employee safety, as well as substantial cost reductions. We expect secular trends, such as increasing adoption of IoT connected devices, real-time data collection, demand for predictive maintenance and data analysis, compliance and reporting requirements, and growing energy demand from AI, data centers and other sources to provide a long-term tailwind for our business. With this backdrop and the proactive initiatives outlined, we feel Acorn continues to be well-positioned to deliver long-term top and bottom line growth in the coming years. Accordingly, we continue to target 20% average top line growth over the next three-to-five years with approximately 50% of incremental revenue dropping to operating income. Given the timing and impact of orders, however, we will continue to experience variability in our quarterly results.”