Actelis Networks, Inc. (NASDAQ:ASNS) Q4 2024 Earnings Conference Call March 24, 2025 5:00 PM ET Company Participants Tuvia Barlev - Chairman & Chief Executive Officer Yoav Efron - Deputy Chief Executive Officer & Chief Financial Officer Conference Call Participants Theodore O'Neill - Litchfield Hills Research Operator Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to Actelis Networks' Annual 2024 Results Conference Call. At this time, all participants are in a listen-only mode. ...

Financial Data and Key Metrics Changes - Total revenue increased by 38% to $7.8 million, up from $5.6 million in 2023 [20] - Gross margin improved to 55% for the full year compared to 34% in 2023, reflecting a 125% year-over-year improvement [21] - Operating loss decreased to $3.8 million compared to $7.4 million in 2023, a reduction of 49% [24] - Net loss for the year was $4.4 million compared to $6.3 million in 2023, with loss per share shrinking by 67% to $0.85 [24] Business Line Data and Key Metrics Changes - New orders in the federal/military sector grew by 150% year-over-year [10] - Software and services new orders tripled, driven by a large North American telecom customer [11] - The GigaLine 900 solution family gained significant traction with numerous trials and installations underway [11] Market Data and Key Metrics Changes - North American revenues increased by 134%, representing a larger portion of total business [20] - Major deployments secured in smart city and transportation sectors, including cities like Washington, DC, and Seattle [12] Company Strategy and Development Direction - The company is prioritizing three strategic initiatives for 2025: introducing MetaShield into the installed base, strengthening go-to-market execution, and focusing on operational efficiency [15][18] - The introduction of MetaShield aims to generate recurring revenue through subscriptions and integrated network management software [15] - The company is positioned to capitalize on major infrastructure projects, particularly in federal and military markets [10][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, particularly in federal, city transportation, and IoT markets, which are valued in the tens of billions [38] - The company is optimistic about its growth prospects, emphasizing the importance of strategic partnerships and market penetration [30] - Management acknowledged the challenges of predicting revenue due to the lumpiness of orders but expects growth to stabilize over time [36] Other Important Information - The company has nearly repaid all outstanding debt, with only a $774,000 bank credit line remaining [25] - Cash and cash equivalents stood at $2.3 million at year-end, down from $5.5 million in 2023, primarily due to debt repayment [26] - The company is evaluating selective debt facilities to support growth initiatives while minimizing equity dilution [27] Q&A Session Summary Question: What caused the sequential decline in revenue from Q3 to Q4? - Management explained that the business is characterized by lumpiness in orders, making it difficult to predict exact timing for larger orders and shipments [36] Question: Are expenses stable, or will they increase with growth? - Management indicated that while expenses have been decreasing, there will be controlled increases in sales and marketing to drive growth [42][44] Question: How is the company positioned to benefit from military spending in Europe? - Management clarified that their focus is on US military sales, treating international deployments similarly to domestic ones [47] Question: Is there a concern about a reverse stock split due to low share price? - Management stated there are no current plans for a reverse split and expressed confidence in future growth to improve share value [56] Question: What is the future outlook for the company financially and business-wise? - Management highlighted ongoing efforts in federal markets, IoT, and MDU markets, with expectations for growth but no guarantees of profitability in 2025 [108]

Financial Performance - Total revenue for 2024 reached $7.8 million, a 38% increase from $5.6 million in 2023, driven by strong performance in government, military, and smart city sectors[2] - Gross margin improved to 55% in 2024, up from 34% in 2023, representing a 125% year-over-year increase, reflecting a strategic focus on higher-margin segments[2] - Net loss decreased to $4.4 million in 2024 from $6.3 million in 2023, with loss per share shrinking by 67% to $0.85, indicating progress towards profitability[2][13] - Total revenues for 2024 increased to $7,760,000 from $5,606,000 in 2023, representing a growth of approximately 38.5%[26] - Gross profit for 2024 was $4,270,000, compared to $1,900,000 in 2023, indicating a significant improvement in profitability[26] - The net comprehensive loss for 2024 was $4,374,000, an improvement from a loss of $6,286,000 in 2023[26] - The company reported a basic and diluted net loss per share of $0.85 for 2024, compared to $2.61 in 2023, showing a reduction in loss per share[26] - GAAP net loss for 2024 was $(4,374) compared to $(6,286) in 2023, indicating an improvement in financial performance[34] - Non-GAAP adjusted EBITDA margin for 2024 was 44.8%, up from 10.8% in 2023, reflecting significant operational efficiency gains[34] - The adjusted EBITDA for 2024 was $3,481, compared to $606 in 2023, showcasing a strong recovery in profitability[34] Cost Management - Operating expenses declined by 13% year-over-year, building on a 6% reduction achieved in 2023, due to a comprehensive cost management initiative[2] - Operating expenses decreased to $8,028,000 in 2024 from $9,263,000 in 2023, a decline of approximately 13.3%[26] - Interest expense for the year was $6,187, indicating a stable cost of capital management[34] - Other financial expenses amounted to $(1,893), suggesting a focus on controlling non-operational costs[34] Asset and Liability Management - Total current assets rose to $6,903,000 in 2024 from $5,912,000 in 2023, an increase of about 16.8%[22] - Total liabilities decreased to $5,240,000 in 2024 from $10,835,000 in 2023, a reduction of approximately 51.7%[24] - The total shareholders' equity increased to $2,757,000 in 2024 from $229,000 in 2023, indicating a significant improvement in the company's financial position[24] - Cash and cash equivalents at the end of 2024 were $1,967,000, up from $620,000 in 2023, reflecting a substantial increase[29] - The company has nearly repaid all outstanding debt, with only a $0.77 million bank credit line remaining, enhancing financial flexibility[3] Market Growth and Strategy - New orders from Federal and Military sectors grew by 150% year-over-year, positioning the company to capture additional market share in infrastructure modernization[5] - Actelis is prioritizing growth in recurring revenue through MetaShield subscriptions and network management software offerings for 2025[7] - The company plans to expand its industry presence in 2025 through participation in major events and exhibitions to raise awareness of its capabilities[7] - The company is focusing on strategic partnerships to accelerate market penetration and scale growth in 2025 and beyond[3] - The GigaLine 900 solution for Multi-Dwelling Units (MDUs) has generated significant interest, with numerous trials and installations underway globally[5] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[34] Research and Development - Research and development expenses totaled $444, demonstrating the company's commitment to innovation and product development[34] - Fixed asset depreciation expense was $262, highlighting ongoing investments in capital assets[34]

Revenue and Market Position - Actelis Networks generated approximately 72% and 73% of its revenues from IoT customers for the years ended December 31, 2024 and 2023, respectively[27]. - The top ten customers accounted for approximately 74% and 66% of total revenues for the years ended December 31, 2024 and 2023, respectively[28]. - The global IoT market is expected to grow to $1.8 trillion by 2028, with a CAGR of 24.5%[50]. - The smart city connectivity infrastructure market is projected to reach $6,965.02 billion by 2030, with a CAGR of 25.8%[51]. - The company has deployed products and solutions with over 100 telecommunication service providers globally, focusing on both enterprise and residential customers[83]. - The company has projects in over 100 cities, primarily in North America and Europe, focusing on smart city applications[102]. Financial Performance - As of December 31, 2024, Actelis had an accumulated deficit of $44.0 million and cash on hand of $2.3 million[30]. - The company reported net losses of $4.4 million and $6.3 million for the years ended December 31, 2024 and 2023, respectively, resulting in an accumulated deficit of $44 million as of December 31, 2024[166]. - Negative cash flows from operations were $6.5 million and $6.6 million for the years ended December 31, 2024 and 2023, respectively[168]. - The company has cash on hand of $2.3 million and long-term restricted cash of $0.2 million as of December 31, 2024[168]. - The company has received a notification from Nasdaq regarding non-compliance with the Minimum Shareholders' Equity Requirement of $2.5 million, but has since regained compliance[171]. - The company’s financial condition raises substantial doubt about its ability to continue as a going concern[170]. Product Development and Innovation - Actelis introduced the MetaShield cyber-aware networking product family in 2024, enhancing its cybersecurity offerings[40]. - The company signed a strategic partnership in August 2024 to develop an AI-Powered SaaS offering under its 'Cyber Aware Networking' initiative[26]. - The company has invested nearly $100 million in developing its patented "Triple Shield" technology, which enhances connectivity performance and security across various markets[68]. - In 2023, the company introduced the "Gigaline" product family for hybrid-fiber-copper connectivity, addressing challenges faced by IoT and telecom customers[69]. - The MetaShield product, introduced in 2024, is an AI-powered cybersecurity solution that continuously monitors IoT devices for cyber risks and operational anomalies[74]. - The GL5000 and GL6000 product lines include over 40 variants of hardened, 10Gbps fiber switches to expand offerings into the IoT market[72]. Strategic Partnerships and Compliance - Actelis has been selected for deployment in sensitive applications with U.S. DoD and other government organizations, highlighting its market credibility[43]. - The company has been selected by Norseman Defense Technologies to provide solutions to all branches of the US Military and Government[99]. - The company regained compliance with Nasdaq Listing Rule 5550(b)(1) regarding minimum shareholders' equity, confirming compliance as of August 27, 2024[65]. - The company has entered into several large multi-year contracts with ITS, military, and airports, which will generate more predictable sales for the next several years[126]. Operational Challenges and Risks - The company may face challenges in generating sufficient revenue to support its cost structure and may need to execute a cost reduction plan if cash flow does not improve[169]. - The company is susceptible to unfavorable global economic conditions, which could weaken demand for its products and affect its ability to raise capital[176]. - The company may face challenges in raising additional capital, which could dilute stockholders' ownership interests and impact market value[178]. - The company is dependent on key manufacturers and suppliers, which poses risks related to procurement and product quality[161]. - The company relies on outsourced manufacturing, which may lead to quality and reliability risks, affecting production rates[188]. - Cybersecurity measures are critical, as breaches could lead to significant data loss and operational disruptions[197]. Workforce and Intellectual Property - As of December 31, 2024, the company had approximately 49 employees and contractors, with a focus on retaining and developing its workforce[142]. - The company has registered 16 patents in the United States and is actively maintaining its intellectual property through various legal protections[150]. Future Growth and Strategic Focus - The company is evaluating growth through mergers and acquisitions to fill business gaps and enhance its offerings[138]. - The company is expanding its network of partners and representatives in over 30 countries, including Italy, France, and the United States, to enhance global coverage[123]. - The company is investing in cybersecurity capabilities to position its products as the most cyber-safe IoT building blocks in the secure IoT communication market[127]. - The company plans to leverage its presence in the field to offer customers the option to host and integrate various applications into its IoT connectivity building blocks, aiming for recurring revenue models[131]. - The Bipartisan Infrastructure Law mandates approximately $1.2 trillion in investments, with specific allocations that could positively impact the company's communication infrastructure solutions[134]. Economic and Market Conditions - Prolonged inflation rates may negatively impact revenues and profitability, with potential decreases in customer spending leading to lower sales[177]. - Economic conditions, including the impact of pandemics and political uncertainty, may affect overall business performance[213]. - Fluctuations in foreign currency exchange rates can influence financial outcomes[214].

Actelis Reports Strong Performance in 2024 Driven by Software and Services renewals, Federal and Military Sector Growth, New Product Adoption, and Strategic Cost Management; Gross Margin Expansion to 55% Reflects Success in High-Value Markets as Company Positions for Continued Growth in Three Multi-Billion vertical marketsFREMONT, Calif., March 24, 2025 (GLOBE NEWSWIRE) -- Actelis Networks, Inc. (NASDAQ: ASNS) (“Actelis” or the “Company”), a market leader in cyber-hardened, rapid-deployment networking solut ...

Company Overview - Actelis Networks, Inc. is a market leader in cyber-hardened, rapid deployment networking solutions for IoT and broadband applications [1][3] - The company specializes in hybrid fiber-copper networking solutions, providing fiber-grade performance with cost-efficiency [3] Financial Results Announcement - Actelis will publish its annual 2024 financial results on March 24, 2025 [1] - A conference call will be held on the same day at 5 p.m. Eastern time to discuss the business and financial results [2][3] Conference Call Details - The conference call will be hosted by CEO Tuvia Barlev and Deputy CEO and CFO Yoav Efron [2] - Interested parties can submit questions before or during the call [2] - A transcript of the call will be available within 24-48 hours after the call [3] Cybersecurity Initiatives - Actelis offers AI-based cyber monitoring and protection for all edge devices through its "Cyber Aware Networking" initiative [3]

Core Insights - Actelis Networks, Inc. has received a follow-on order from a Hungarian utility provider to support the modernization of its communications network, building on a previous engagement from October 2023 [1][2][3] Company Overview - Actelis is a market leader in cyber-hardened, rapid deployment networking solutions for IoT and broadband applications, focusing on hybrid fiber-copper technologies [4] - The company's solutions are designed to provide secure, high-speed data transmission essential for monitoring and controlling critical infrastructure [2][3] - Actelis' technology is widely deployed across various sectors, including transportation, energy, government, and military, offering robust and high-performance communications solutions [3][4] Recent Developments - The latest order will expand the deployment of Actelis' advanced hybrid fiber networking technology across additional locations, reinforcing the network's capabilities [2][3] - The company emphasizes its commitment to supporting the digital transformation of Hungary's energy sector, highlighting the trust customers place in its solutions [3]

Core Insights - Actelis Networks, Inc. has received an order for the County of Ventura's Systemic Countywide Signalized Intersection Improvement Project, aimed at modernizing traffic signal communications across the county [1][4] - The project will utilize Actelis' advanced networking technology to enable high-speed, secure data transmission between traffic management centers and signalized intersections, enhancing traffic flow and safety while reducing infrastructure costs [2][3] - Actelis is collaborating with Crosstown Electrical & Data, Inc., a contractor specializing in Intelligent Transportation Systems, to implement the project [3][4] Company Overview - Actelis Networks is a leader in hybrid fiber-copper, cyber-hardened networking solutions for rapid deployment in various IoT applications, including government and transportation sectors [5] - The company's technology is widely used in traffic management applications globally, contributing to operational efficiency and smart transportation initiatives [4][5] - Actelis offers a "Cyber Aware Networking" initiative that includes AI-based cyber monitoring and protection for edge devices, enhancing network security [5]

Core Viewpoint - Actelis Networks, Inc. has appointed Julie Kunstler as an independent director to its Board of Directors, bringing extensive experience in communications technology and corporate governance [1][5]. Group 1: Appointment Details - Julie Kunstler's appointment is effective immediately and reflects Actelis' commitment to enhancing its board with diverse perspectives and deep industry knowledge [1][5]. - Kunstler has over three decades of experience in communications components and broadband access equipment sectors, along with public company board experience [1][2]. Group 2: Professional Background - Kunstler currently serves on the board of Ethernity Networks Ltd. and has previously been on the board of TTI Team Telecom International [2]. - She has held leadership roles in the communications technology landscape, including Chief Analyst for the Broadband Access Intelligence Service at Omdia and Vice President of Business Development at Teknovus [3]. - Kunstler co-founded Portview Communications Partners, a venture capital fund focused on early-stage investments in communications technology [4]. Group 3: Strategic Importance - Kunstler expressed her honor in joining Actelis and highlighted the expanding requirements for secure broadband access networking solutions across various sectors [5]. - Tuvia Barlev, Chairman and CEO of Actelis, emphasized that Kunstler's strategic vision and expertise will be instrumental in strengthening the company's leadership in cyber-hardened networking solutions [5]. Group 4: Company Overview - Actelis Networks is a market leader in hybrid fiber-copper, cyber-hardened networking solutions for rapid deployment in wide-area IoT applications [7]. - The company offers fiber-grade performance with the flexibility and cost-efficiency of hybrid fiber-copper networks and provides AI-based cyber monitoring and protection for edge devices [7].

Core Insights - Actelis Networks, Inc. has appointed Dr. Niel Ransom to its Board of Directors, enhancing its leadership in secure, high-performance networking for critical infrastructure and intelligent transportation systems [1][5] - Dr. Ransom brings nearly five decades of experience in networking and communications technology, having held significant roles at Bell Labs, BellSouth, and Alcatel, and has a strong background in R&D investments and M&A strategy [2][3] - His expertise in optical networking, mobile edge computing, and broadband access solutions aligns with Actelis' focus on cybersecurity-driven networking [3] Company Developments - The appointment of Dr. Ransom follows the retirement of Joseph (Yossi) Moscovitz from the Actelis Board, effective February 1, 2025, with the company expressing gratitude for Moscovitz's contributions [4] - Dr. Ransom's strategic vision and knowledge in communications and network security are expected to be instrumental in strengthening Actelis' position in cyber-hardened hybrid-fiber networking solutions [5] - Actelis Networks is recognized as a market leader in hybrid fiber-copper, cyber-hardened networking solutions, catering to various sectors including government, military, and telecom [6]