Good day, ladies and gentlemen. Welcome to the Acorn Energy second quarter conference call. As time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I would like to turn the call over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary. Ms. Clifford, please go ahead.

Thank you and welcome everyone to today's conference call. As a reminder, many of the statements made in today's prepared remarks or in response to your questions may be forward looking in nature. These statements are subject to various risks and uncertainties. For example, the operating and financial performance of the company in 2021 and in future years are subject of factors such as risks associated with disruptions to business operations and customer demand resulting from executing the company's operating strategy, maintaining high renewal rates, growing its customer base, changes in technology, changes in the competitive environment, financial and economic risks and the impact of the COVID-19 pandemic as well as having access to sufficient capital for growth. Forward looking statements are based on management's beliefs as well as assumptions made using information currently available to management pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. There are no assurances that Acorn nor OmniMetrix will be able to achieve their growth goals in 2021 or in future years. The company also undertakes no obligation to disclose any revisions to these forward-looking statements to reflect events or circumstances after the date made. A full discussion of the risks and uncertainties that may affect the company is included in the Risk Factors on Acorn's Form 10-K as filed with the Securities and Exchange Commission. Now, I will hand the call over to Acorn's CEO. Jan?

Thanks Tracy. Good morning and thank you for joining today's call. This morning, Acorn reported another strong quarter of improved results continuing to build on the progress we are making in our remote monitoring business. In Q2 2021, we achieved revenue, gross profit and net income growth and our third consecutive profitable quarter. Year-to-date, our revenue increased by over $500,000 to $3.3 million and the majority of this increase fell directly to our bottomline, as net income improved to a small profit from a loss of $316,000 in the year ago first half. Having moved the business into profitability, we are also well-positioned with a large net operating loss carry-forward of nearly $70 million to show future taxable income and enhance our cash flows. Our year-to-date GAAP revenue growth of 18% is in line with our long term goal of 20% while our all important cash basis revenue grew an impressive 25% to $3.5 million from $2.8 million in the first six months of 2021 versus a year ago. Cash basis revenue is a non GAAP measure that we use to track our business progress. A reconciliation of cash basis revenue to GAAP revenue is provided in our press release with the primary difference being that cash basis revenue includes deferred hardware and monitoring revenues that are amortized over future periods for GAAP. Gross profit grew 25% due to revenue growth and gross margin improvements. Gross margins have been improving over time due to a variety of ongoing initiatives, including the launch of next generation monitoring equipment and services that offer more value add to the customer as well as the benefit of ongoing design improvements and cost controls. We continue to invest in new product initiatives for existing markets as well as related industrial, IoT and remote monitoring opportunities…

Thank you Jam. And again, good morning everyone. As Jan mentioned, we released our second quarter 2021 results and filed our Form 10-Q with SEC this morning. I will review some financial highlights and then Jan and I will take any investor questions. OmniMetrix revenue grew 10% to $1.6 million in Q2 2021 from $1.5 million in Q2 2020, driven by a 16% increase in hardware revenue and a 6% improvement in monitoring revenue. The increase in hardware revenue is due to a more receptive sales environment in 2021 versus 2020 which, as Jan mentioned, was impacted by COVID-19 business disruptions and in particular higher sales of next generation products, including our Hero-2 pipeline monitor and rectify monitors versus Q2 last year. Monitoring revenue growth has benefited from a growing installed base as well as efforts to ship our sales focus to commercial and industrial customers from residential. For the first six months of 2021, GAAP revenue increased 18% to $3.3 million primarily due to increased sales of custom design monitoring hardware and next generation units along with growth in monitoring. Gross profit grew 20% in Q2 2021 and 25% in the first six months of 2021 and our gross margin improved to 76% in Q2 2021 from 70% in Q2 2020, mainly due to increased hardware sales to commercial industrial customers versus the lower margin residential customers, increased accessory sales and growth in high margin monitoring revenue. OmniMetrix' operating expenses increased 21% due to an increase in SG&A and higher R&D expenses. The increased SG&A is due to a rebound in business development travel expenses with the easing of COVID-19 traveling and trade show restrictions, compensation and benefits for added sales engineers, increased sales commissions and ongoing investments in our corporate technology infrastructure. OmniMetrix generated operating income of $231,000…

First question comes from Joe Stein, Morgan Stanley. Please go ahead.

Well, congratulations, Jay, on a great quarter. Keep up the good work. I heard the comments on the inventory. But are you having any problem getting any of your equipment with everybody complaining, not that you are in the high-tech world, but are you having problems with any of your equipment that you are picking up to service?

Right. Sure. Thank you for your question. I will take that question. We have really spent a lot of time focused on sourcing secondary providers so that as we see potential issues cross up with longer lead times, we are able to substitute those secondary suppliers in fairly quickly. And we are placing POs for significantly more volume of the parts that we traditionally need in all of our units so that we can ensure that there's no issues. In the past, we have always been more on-time demand where we have ordered smaller volumes at a time and more frequent orders throughout the year. And so we have taken a different strategy this year where we are ordering much larger volumes ahead of the need to ensure that we are building the stock.

So you are comfortable building up the inventory.

We are.

Okay.

Right. We are comfortable at the current pace and we feel like we have got sufficient safety stock and we thought of that strategy quite a number of months ago, because we really anticipated that the market or the availability was going to constrict in some of the components that we needed. So we really focused on getting that strategy launched very early and I think it's paid off for us.

Great. Thanks Tracy.

[Operator Instructions]. This time, we have no further questions. And I would like to turn the conference back over to Jan Loeb for closing remarks. Please go ahead.

Jan?

Jan, are you there?

Hi. I am with you. I just want to conclude by saying that although risks remain regarding COVID-19 variants and their potential economic impact, we are very happy with our business performance positioning and its trajectory. Thank you again for your interest in Acorn and we greatly appreciate your support and I am always as happy to speak with investors about the company. To set up a call with me or to ask any questions, please contact our Investor Relations team via their contact information on today's press release. Thank you again for your time. Operator, I believe that concludes today's call.

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