The Digital Energy Company
June 2013
Connecting the world of energy
Safe Harbor Statement
Certain of the matters discussed in this presentation contains statements that are forward-looking, such
as statements relating to results of operations, financial condition, business development activities and market
dynamics. Such forward-looking information involves important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ materially from those expressed in any
forward-looking statements made on or behalf of Acorn Energy.
All statements other than statements of historical fact in this presentation regarding Acorn Energy’s
future performance, revenues, margins, market share and any future events or prospects are forward-looking
statements.
For more information regarding risks and uncertainties that could affect Acorn Energy’s results of
operations or financial condition review Acorn Energy’s filings with the Securities and Exchange Commission (in
particular, it’s most recently filed Form 10-K and Form 10-Q).
Acorn Energy’s forward-looking statements are not guarantees of future performance and the actual
results or developments may differ materially from the expectations expressed in the forward-looking statements.
As for the forward-looking statements that relate to future financial results and other projections, actual results will
be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse
than projected and such differences could be material.
Acorn Energy undertakes no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
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The Digital Energy Company
Why should you own Acorn Energy?
● Leveraging digital technology vastly improves, protects energy infrastructure
● Controlling position in four energy tech portfolio companies with TAM 0f >$4 Billion
● History of getting macro bets right and generating attractive exits with modest capital
● Strong cash position of $20m in cash as of March 31, 2013 and debt-free
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Acorn History and Proven Track Record
September 2005
2007
August 2011
• $10MM Market Cap
• April COMV IPO @
$250MM Valuation
• Sell CoaLogix $100 M
• December Secondary
@ $600MM Valuation
• Buy CoaLogix $10 M
$16 million net of dividends raised to create $140 million of value
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Acorn Energy Portfolio
• Huge revenue growth
expected
• 4 strong businesses
• ACFN majority owner
• Great customer traction
• We supply growth capital
• Strong management teams
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Sensing technologies to detect and alert
security teams to the presence of U-W
threats to critical energy infrastructure
Market Drivers
Highlights
Financial Snapshot
• Global insecurity
• Seven reference clients
• $13.6M Rev 2012
• Non-dilutive funding
• $9.6M in backlog
• Secure infrastructure
• 37% Gross Margin
• New tech needed
• 84% Ownership Stake
TAM $3.5 B+
•
3,500 energy facilities on/near water
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Remote monitoring solutions for back-power
as well as pipelines
During Hurricane Sandy 25% of all Cell Towers were without power
•
•
•
•
Over 1500 American Tower sites monitored by Omnimetrix, all operated with 100% uptime
Unmonitored generators fail 10% of the time called on
FCC is holding hearings to improve power assurance for cell towers
220,000 cell towers in USA
* Pre- management option pool
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Remote monitoring solutions for back-power
as well as pipelines
Market Drivers
Highlights
Financial Snapshot
• Cell tower power
assurance
• Lowering costs
• $661k Rev 2012
• Dependence on
wireless
• Recruited sales force
• Increasing features
• Aging grid
• $533k Rev Q1 2013
• 96% gross margin on
renewals
• 100% ownership*
TAM $1B+
•
•
•
•
Over 2M permanently-installed back-up generators (50:50 residential/C&I)
< 2% generators monitored
< 2% households have generator
75% growth in connections and >5,000 monitors
* Pre- management option pool
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Cost-effective sensors for transformers and power
lines (easy retrofit) to help utilities improve
electric grid
Market Drivers
Highlights
Financial Snapshot
• Demand for reliable
power/ 4 challenges
• Pilots with 46 utilities
• $3.7M Rev in 2012
• Aging grid
• Web-based platform
• Alain Steven on board
• $1.5M Rev in Q1 2013
• Power theft
• 43% Gross Margin
• Cyber security
• 100% ownership*
• Renewables
TAM $1B+
•
•
•
30M U.S. transformers (sensor locations)
Less than 2% transformers have sensors
>400 utility customers worldwide
* 17% phantom option plan
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The 3D Seismic Imaging Revolution for Conventional
Oil Predicts the Benefit of a 4D Seismic Revolution
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History and Future of Seismic
Evolution from 2D to 4D Seismic
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Unconventional Oil Frac Jobs Are Not Meeting
Producers Expectations
- 50% of frac stages produce zero hydrocarbons
- 20% of frac stages responsible for 80% of production
“
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Oil Producers Need to Improve Productivity and NPV of Wells
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Solution: Revolutionary 4D Microseismic Monitoring
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Optical Fibers: The Neurons For Future Intelligent Wells
Replace This…
With This
Electronic-based Sensors
Optical Fiber Sensor
“..the industry is on the verge of a step change in
well and reservoir monitoring capability”
-Jorge Lopez et al, Shell Oil
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Forbes: Big Data And Microseismic Imaging Will Accelerate
The Smart Drilling Oil And Gas Revolution*
This (USSI) imaging technology does for seismic the equivalent of going from 20th century x-rays to 21st century MRI.
Microseismic brings radically enhanced navigation and, critically, the opportunity for a new era of dynamically controlled subsurface operations
…getting the stages to be productive can only come from far more precision and far higher resolution of the underground domain… Operators
need to move from today’s static and episodic geophysics maps to dynamic models of how rocks and fluids change.
You need to see the micro-fractures from the real-time results of the fracking itself. Hearing the millimeter-scale cracks forming complex arrays
in shale a mile away, then separating out the signals from confounding environmental noise is like hearing a whisper from the other side of a
noisy auditorium. All of these “micro” events are not detectable with standard seismic.
…today’s best-in-class geophones cannot fully unlock the potential of microseismic. The sensors need to see (hear) signals at 100 times the
bandwidth, and be at least 100 times more sensitive (quieter). And, in an ideal world - which eventually becomes the standard operating
procedure - imaging has to move from snap-shots to continuous real-time monitoring…This will require a new
class of sensors both cheap and robust enough to survive for long periods, even permanently in the hot underground. Conventional electronics
cannot deliver that combination.
Making practical fiber optic geophones has been devilishly difficult. The issue isn’t in the physics ... The challenge has been to come up with a
design that is simple, easy to manufacture, yielding a highly reliable and reproducible product.
…the revolution really takes hold as the full power of U.S. Seismic’s richer data streams enable the emergence of better algorithms
and…models that accommodate the complex mix of both plastic and brittle behavior of rocks in the subsurface…where correlations become
possible now across the entire suite of hydrocarbon information - surface survey maps, drill-bit sensors, flow rates, pressures, temperatures,
chemical analyses, etc. There is no chicken-egg uncertainty in which comes first; better and richer data flows will drive the emergence of new
big data analytics.
Microseismic capabilities are not only economically exciting, they promise collateral opportunity for greater safety and environmental
monitoring
* Mark Mills for Forbes. May 2013
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How Our Technology Works
Laser
Optical Interrogator
Downhole Fiber Optic
Geophone Array
-High performance
-Lower cost
-More reliable
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How Microseismic Monitoring Works
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18
USSI Gaining Critical Field Experience
USSI Geophone
Electronic
Geophone
●
Seven pilot trials two years
●
First commercial trial, big system December 25, 2012
●
Soon to announce major customer trial results
New Iberia - LO
Fayetteville - ARK
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19
Well Head
Devine - TX
Microseismic Needs a Higher Performance Sensor
10x Better at Low Frequency-100x at High Frequency
- highest sensitivity (improved signal to noise ratio)
- widest bandwidth (detects all signals of interest)
- lowest noise floor (detects quieter signals)
- highest temperature capable
US DOE Lawrence Berkeley National Laboratory (LBNL) Richmond Field test site
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Small Increase in Well Productivity Yields Huge Returns
Two different services for unconventional oil producers
Economics of 3D Vertical Seismic Profiling
Current Situation
Vertical well cost $1 million
30 fracs cost $9 million
The Problem
20% of frac spend is effective= $2.8 million
Upfront Investment:
$500,000 to survey before fraccing
Estimated savings by eliminating 50%
unproductive frac stages= $3.1 million
ROIC +600%
Microseismic while fracking
To Improve Yields:
$400,000 per well x 8 = $3,200,000
Results:
- $33M @ 10% improvement
- $65M @ 20% improvement
- $100M @30% improvement
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Proven Fiber Optic Technology and Team
Improves Odds of Success
• Revolutionary fiber sensor emerged from DOD
-USSI CEO started and led team
-Built, installed world’s largest fiber sensor system
-Key members of team now at USSI
• USSI commercialized technology
•USSI expanded IP
• 7 issued and 17 patents filed
•USSI licensed DOD technology
• 4 issued patents
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Acorn Energy Directors and Management Team
- Chris Clouser, Chairman
- John Moore, CEO
- Richard Rimer, Executive Vice President
- Rob McKee, Director
- Mannie Jackson, Director
- Ed Woolard, Advisor
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23
Income Statement (Q1 2013)
Three months ended March 31, 2013
Revenues
$
DSIT
OmniMetri
x
3,315
$
533
GridSense
$
1,543
USSI
$
325
Acorn
$
—
Total
$
5,716
Cost of Sales
2,011
205
882
493
—
3,591
Gross profit
1,304
328
661
(168 )
—
2,125
Gross profit margin
39 %
62 %
43 %
(52 )%
37 %
R& D expenses, net of
credits
271
120
712
898
—
2,001
Selling, general and
administrative expenses
836
1,151
1,096
781
1,392
5,256
Operating income (loss)
$
197
$
(943 )
$
(1,147 )
$
(1,847 )
$
(1,392 )
$
(5,132 )
Three months ended March 31, 2012
Revenues
$
DSIT
OmniMetri
x
3,041
$
103
GridSense
$
918
USSI
$
121
Acorn
$
—
Total
$
4,183
Cost of Sales
2,014
63
574
332
—
2,983
Gross profit
1,027
40
344
(211 )
—
1,200
Gross profit margin
34 %
39 %
37 %
(174 )%
29 %
R& D expenses, net of
credits
176
16
218
908
—
1,318
Selling, general and
administrative expenses
723
201
1,248
596
1,461
4,229
Operating income (loss)
$
128
$
(177 )
Confidential
$
(1,122 )
24
$
(1,715 )
$
(1,461 )
$
(4,347 )
Income Statement
Year ended December 31,
2012
Revenues:
Projects
Products
$
Services
Total revenues
Cost of sales:
Projects
Products
Services
Total cost of sales
Gross profit
Operating expenses:
Research and development expenses, net
Selling, general and administrative expenses
Total operating expenses
Operating loss
Finance expense, net
Gain on sale of HangXing
2011
14,651
$ 11,368
3,880
7,049
888
511
19,419
18,928
10,749
2,996
471
7,886
3,730
399
14,216
12,015
5,203
6,913
6,590
2,995
19,361
11,952
25,951
14,947
(20,748)
57
(8,034)
(26)
-
Loss before taxes on income
492
(20,691)
Income tax benefit (expense)
(7,568)
2,956
12,767
Net income (loss) from continuing operations
Loss from discontinued operations, net of income taxes
Gain on the sale of discontinued operations, net of income taxes
(17,735)
-
5,199
(1,948)
31,069
Non-controlling interest share of loss from discontinued operations
Net income (loss)
(17,735)
540
34,860
Net loss attributable to non-controlling interests
1,024
Basic net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
From continuing operations
$
From discontinued operations
Basic net income (loss) per share attributable to Acorn Energy, Inc. shareholders
$
$
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic
Diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
From continuing operations
$
$
Diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders
$
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – diluted
Dividends declared per common share
(0.93)
$
0.33
(0.93)
$
$
1.70
2.03
17,462
(0.93)
$
0.32
-
$
1.67
(0.93)
$
17,891
$
25
$ 35,409
17,891
From discontinued operations
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549
$ (16,711)
Net income (loss) attributable to Acorn Energy, Inc. shareholders
0.140
1.99
17,743
$
0.085
Balance Sheet
As of December 31,
2012
2011
As of December 31,
2012
2011
ASSETS
Current assets:
Cash and cash equivalents
Short-term deposits
Restricted deposit
Funds held in escrow
Accounts receivable
Unbilled revenue
Inventory
Other current assets
Total current assets
Property and equipment, net
Severance assets
Restricted deposit
Intangible assets, net
Goodwill
Other assets
Total assets
$
$
26,147
699
5,481
5,213
5,106
3,547
46,193
927
3,165
115
9,561
6,630
745
67,336
$
$
34,280
18,000
2,223
5,961
4,965
3,778
2,144
922
72,273
635
2,620
271
4,780
4,637
589
85,805
Confidential
LIABILITIES AND EQUITY
Current liabilities:
Short-term bank credit and current maturities of
long-term debt
Accounts payable
Accrued payroll, payroll taxes and social
Deferred revenue
Other current liabilities
Total current liabilities
Non-current liabilities:
Accrued severance
Long-term debt
Other long-term liabilities
Total non-current liabilities
Commitments and contingencies
Equity:
Acorn Energy, Inc. shareholders
Common stock - $0.01 par value per share:
Authorized – 30,000,000 shares; Issued
–18,870,526 and 18,325,529 shares at December
31, 2012 and 2011, respectively
Additional paid-in capital
Warrants
Accumulated deficit
Treasury stock, at cost – 801,920 shares at
December 31, 2012 and 2011
Accumulated other comprehensive income
Total Acorn Energy, Inc. shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
26
$
$
153
$
677
2,631
2,420
3,323
1,708
10,235
2,052
1,907
2,876
4,544
12,056
4,491
665
5,156
3,837
141
204
4,182
188
183
83,469
55
(29,733)
84,614
427
(13,022)
(3,036)
(3,036)
716
51,659
286
51,945
67,336
485
69,651
(84)
69,567
85,805
$
Cash Flows
2012
Cash flows used in operating activities:
Net income (loss) before non-controlling interests
Less net loss from discontinued operations
Net income (loss) from continuing operations
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
Change in deferred taxes
Inventory write-off
Increase in liability for accrued severance
Gain on sale of HangXing
Stock and stock option compensation
Other
Changes in operating assets and liabilities:
Decrease in accounts receivable, unbilled revenue, other current assets and other assets
Increase in inventory
Increase in accounts payable, accrued payroll, payroll taxes and social benefits, other current liabilities and other non-current liabilities
Net cash used in operating activities – continuing operations
Cash flows provided by (used in) investing activities:
Acquisitions of property and equipment
Acquisition of license
Restricted deposits, net
Advances to CoaLogix prior to sale
Amounts funded for severance assets
Proceeds from the sale of Coreworx debt and shares
Proceeds from the sale of CoaLogix net of CoaLogix cash
Proceeds from the sale of HangXing
Escrow deposits from CoaLogix sale
Release of escrow deposits
Short-term deposits, net
Acquisition of OmniMetrix net of cash acquired
Net cash provided by investing activities – continuing operations
Cash flows provided by (used in) financing activities:
Proceeds from employee stock option and warrant exercises
Short-term bank credit, net
Proceeds from borrowings of long-term debt
Repayments of long-term debt
Dividends paid
Other
Net cash used in financing activities – continuing operations
Net cash used in discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year of discontinued operations
Cash and cash equivalents at beginning of year of continuing operations
Cash and cash equivalents at end of year
Confidential
27
$
$
(17,735)
(17,735)
2011
$
34,320
(29,121)
5,199
1,406
(1,832)
357
573
855
15
851
(14,657)
390
(492)
458
(87)
(3,981)
(3,076)
1,175
(22,243)
(89)
(1,027)
1,615
(7,839)
(684)
(150)
1,680
(476)
5,961
18,000
(7,835)
16,496
(502)
(1,091)
(278)
(315)
100
62,117
492
(6,308)
347
(18,000)
36,562
1,355
(510)
16
(173)
(3,208)
(2,520)
134
(8,133)
34,280
26,147
211
(557)
68
(342)
(613)
30
(1,203)
(524)
(72)
26,924
807
6,549
34,280
$