ATGN (ATGN) Q3 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to the Altigen Technologies Third Quarter and Fiscal Year 26 Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, Please note, this conference is being recorded. I will now turn the conference over to your host, Corey, our AI agent. You may begin. Good afternoon, and welcome to the Altigen Technologies fiscal third quarter 26 earnings call. My name is Corey, I am Altigen's AI developed communications agent. Built on the same CoreInteract AI platform that powers Altigen's customer engagement solutions. I am a fitting demonstration of what we are building. Before we get started, let me cover a few housekeeping items. This call is being recorded and will be available for replay on the investor relations section of Altigen's website at altigen.com. A copy of today's prepared remarks will be made available following the conclusion of this call. This replay will be available 1 hour after this call's completion and remain in effect for 90 days. At this time, I would like to read Altigen's safe harbor statement. Certain statements made during this call may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. These statements include but are not limited to, statements regarding Altigen's business strategy, expected financial performance, product road map, customer pipeline, and market opportunities. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks include, but are not limited to, dependence on a limited number of customers and partners, rapid technological change in the communications and AI markets, competition from companies with significantly greater resources, Altigen's ability to develop, market, and deliver new and enhanced products and services. The company's reliance on third party vendors and platform partners, and general economic conditions. Altigen cautions that these factors are not exhaustive. Additional risks and uncertainties are described in Altigen's most recent filings with the OTCQB, including its annual report on Form 10-K for the fiscal year ended 09/30/2025. In addition, during today's call, we will also be referring to certain non GAAP financial measures. Such as adjusted EBITDA. These non GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help gain a more complete understanding of our results. Listeners are cautioned not to place undue reliance on these forward looking statements. Which speak only as of today's date. Altigen undertakes no obligation to update any forward looking statements to reflect new information, future events, or otherwise. Thank you. Joining us today is Jerry Fleming, chief executive officer Joe Hamblin, president and chief operating officer, and Gary Stone, Chief Financial Officer. With that, I will turn the call over to Jerry.

Thank you, Corey, and good after-- good afternoon, everyone. Thanks for joining us for today's call. Earlier today, Altigen reported third quarter fiscal 2026 revenue of $3 million, our 9th consecutive profitable quarter, which demonstrates the financial discipline we have maintained while transforming our business. Today, I will discuss our strategic direction, our expanding solutions portfolio, and business growth opportunities. Joe will follow with a business and operational update, then Gary will come on with a detailed review of our financial results. So let me begin with the quarter's most important development. Newly contracted cloud revenue exceeded the cloud revenue loss through our legacy customer churn. This is a critical inflection point for Altigen. During the company's transformation initiatives, churn from our legacy business outpaced revenue gains from our new cloud solutions. That equation is now beginning to change. We believe most of the legacy churn is behind us, positioning Altigen to move from managing a revenue transition to generating sustainable revenue growth. Our new solutions are gaining traction. Our average revenue per customer continues to grow. And our revenue mix is increasingly shifting toward larger strategic opportunities. In short, our transformation efforts are now beginning to yield results. The key strategic element of our business transformation has been our focus on building all new cloud native AI powered customer engagement solutions. These solutions, which target mid sized enterprise organizations, combine AI first customer service AI enabled contact center, and AI driven customer analytics into an integrated customer engagement suite. CoreInteract is our AI first virtual agent customer service platform. As the enterprise digital front door, CoreInteract engages customers 24 hours a day across voice and digital channels resolving the majority of issues without ever needing to engage a live agent. Our objective is not to simply create a better chatbot. it is to provide a first contact resolution solution for our customers any customer, any communications channel, any time of day. In some circumstances, human assistance is inevitable. In these instances, CoreInteract seamlessly transfers the customer along with the full context of the conversation to CoreEngage, our Microsoft Teams-based contact center solution. CoreEngage picks up where CoreInteract leaves off. Allowing live agents to efficiently and cost effectively manage voice and digital customer interactions within their familiar Microsoft Teams environment. Resulting in higher employee productivity, increased leverage of an organization's investment in Microsoft technologies, and lower operating costs. The third and final component of Altigen's new customer engagement suite is CoreInsights. Which analyzes customer interaction and transactional data to create a complete 360-degree view of the customer. CoreInsights further applies AI to identify trends, detect issues, and recommend actions turning customer interactions into intelligence, executives can use to make better informed decisions to improve business outcomes. Together, these solutions create a complete customer engagement platform powered by AI, with CoreInteract utilizing AI to resolve customer issues, CoreEngage empowering live agents with AI customer assistance, and CoreInsights transforming every customer interaction into actionable business intelligence. The new platform designed for mid market and enterprise organizations enables us to secure customers that have larger contract values, longer retention periods, and significantly greater expansion potential than our historical small business customer base. These dynamics are changing the economics of Altigen's business. Resulting in a stronger cloud business model, improved operating leverage, and more sustainable long term growth. AI is also creating opportunities for Altigen's consulting services division, ACS. Mid-sized and enterprise organizations are increasingly evaluating AI, to automate processes, improve customer engagement, and reduce costs. But they often lack the in house expertise or internal resources to deploy a successful AI project. ACS assists those customers in identifying AI projects with the highest ROI potential, then designs, deploys, and manages the AI solution for that customer. Many of these AI projects are done in conjunction with our customer engagement solutions. Enabling Altigen to deliver real world AI solutions that most of our competitors are simply not equipped to provide. Today, Altigen is fundamentally different from the company we were several years ago. We have moved beyond our legacy identity as a communications technology provider. We are building an integrated AI powered customer engagement company that helps organizations serve customers more effectively, automate complex transactions, unlock customer intelligence, and operate more efficiently. We have also remained consistently profitable while investing in that future, which we see as very bright. With that, I will turn the call over to Joe for his business and operational update. Joe.

Alright. Thank you, Jerry. Good afternoon, everyone. I would like to provide an update on the progress we are making across the business. From our consulting services organization and the investments we have made in strengthening our operational foundation. To the traction that we are seeing across the cloud platform and existing customer base along with our strategic partnerships. Taken together, I believe these areas demonstrate how the investments we have made over the last 2 years are beginning to position Altigen for our next phase of growth. Let me begin with our consulting business. Altigen Consulting Services continues to be an important and stable part of our business. During the quarter, we completed our annual consulting planning process with the Connecticut Department of Transportation establishing our scope of work for the upcoming year. This continues a long standing relationship and reflects the confidence CT DOT places in our team to deliver and support the mission critical solutions we have. We also successfully completed our first major development project for 1 of our newest regulated industry customers. The solution was delivered on time, on budget, and has now transitioned into an ongoing support relationship. These engagements demonstrate the strength of our consulting model, maintaining and expanding long term strategic relationships while applying our development expertise to win new customers. More importantly, they demonstrate our ability to design, build, deploy, and support enterprise grade solutions that solve real business problems. Our focus now is to replicate that success with additional enterprise and public customers. Over the last 2 years, we have invested heavily in strengthening our Altigen's operational foundation. Many of these investments are not immediately visible in our financial results, but they are essential to building a company that can scale efficiently as we grow. During the quarter, we completed and launched CoreManage our next generation customer management portal, replacing our legacy portal. The customer migrations are now underway. Our SOC 2 certification continues through the audit monitoring process. Once complete, we will remove an important barrier we encounter with customers operating in highly regulated industries particularly financial services and health care. We are also developing CoreInteract AI Studio. Which will allow us to integrate solutions from multiple AI providers through a common-- rather than tying Altigen to a single AI technology or provider, we are building an environment that gives us the flexibility to adopt new AI capabilities as the market continues to evolve. On the infrastructure side, we are deploying a new geo redundant SBC environment that will allow us to leverage multiple tier 1 and tier 2 carriers. Beyond improving resiliency and give us greater carrier flexibility we expect this initiative to reduce our operating costs by approximately $10 thousand per month once we are fully implemented. None of these projects generate headlines individually. Collectively, however, they create an operational and technology foundation we need to scale the business while continuing to deliver the level of customer experience our clients expect. We are beginning to see the benefit of these investments in our cloud business, where CoreEngage continues to gain momentum. We are adding new customers on a consistent basis. But what is particularly encouraging is the size and complexity of the opportunities we are now winning. During the quarter, we signed the largest cloud customer in Altigen's history. This is an important milestone for us. Not simply because of the size of the engagement but because it demonstrates our ability to compete and win large enterprise opportunities. The profile of our new customers is changing. We are increasingly engaging with larger organizations that have more complex requirements, deeper Microsoft Team environments, and the need to integrate communications, customer engagement, and AI capabilities. Simply put, the platform is gaining traction. We also continue to see meaningful opportunity with our existing customer base. Our MaxCloud, MaxCS customers represent a well established installed base with a long standing Altigen relationships. As we continue to transition customers from our legacy premise solutions to our cloud platform, we have the opportunity to expand recurring revenue while strengthening those relationships. Importantly, the opportunity extends beyond cloud migrations. Our existing customer base also provides a natural path to introduce CoreInteract and our AI Studio capabilities. Creating additional opportunities to expand the value we deliver to those customers over time. We believe our installed base represent an important and efficient source of organic growth as we continue to expand our cloud and AI portfolio. I would like to also spend a moment discussing Fiserv. We continue to believe this represents 1 of the most strategic opportunities for Altigen. During the quarter, Fiserv approved our AI IVR enhancements for general availability. We also received approval to begin QA testing for our new analytics platform, CoreInsights. Both solutions provide opportunities to drive incremental revenue across our existing Fiserv customer relationships. These approvals are significant because of the rigorous certification process required within the Fiserv ecosystem. We also now participate in regular sales engagement sessions with the Fiserv team reflecting a much closer go to market relationship than we have had historically. Next week, we are participating in the Fiserv customer forum expected to reach approximately 4 thousand banking executives. Again, another example of how we are strengthening our go to market partnership. go-to-market partnership. This represents 1 of the largest targeted marketing opportunities we have had within the financial services market, and our sales organization is working closely with Fiserv to capitalize on that opportunity. As we move into the fourth quarter, our priorities remain straightforward. Continue growing recurring revenue, expand customer adoption of CoreEngage and Core Interact, leverage our Fiserv relationship, and continue investing in AI powered solutions that solve meaningful customer problems. For the past 2 years, we have been focused on building the company we want Altigen to become. We have modernized our infrastructure, strengthened our operational discipline, improved our delivery capabilities, and positioned ourselves to compete for larger enterprise opportunities. While we still have a great deal of work ahead, the progress we are seeing provides encouraging evidence that these investments are beginning to translate into increased customer adoption. A growing recurring revenue opportunity, and a stronger competitive position. We are encouraged by the progress we are making and excited about the opportunities ahead. With that, I will turn the call over to Gary to discuss the financial results and outlook. Gary.

Yes. Thank you, Joe. For our 2026 fiscal third quarter, which is April to June, we reported total revenue of $3 million with GAAP net income of $15 thousand or $0.00 per share and non GAAP net income of $190 thousand or $0.01 per share. That compares to the prior year's quarter revenue of $3.5 million with GAAP net income of $110 thousand and also $0.00 per share and non-GAAP net income of $350 thousand or $0.01 per share. Total cloud services for the third quarter was approximately $1.4 million down 18% from the $1.7 million last year. Our services and other revenue was approximately $1.5 million, down 8% from the $1.7 million last year. Gross margin was 58%, down from 63% last year, impacted by lower revenue increased professional service costs associated with new project work requiring additional upfront resources. GAAP operating expenses for the quarter totaled $1.7 million reflecting an 18% decrease from the $2.1 million in the same period last year, and the main reason why we have been able to remain profitable. Looking at our liquidity, we closed out the quarter with $3.4 million in cash and cash equivalents, up from $2.75 million last September 30, 2025. Working capital was $3.2 million compared to $2.9 million reported at the end of September. Our EBITDA adjusted for legal severance, and other 1-time costs was $423 thousand compared to $645 thousand in the prior year. Now I will turn the call back over to Jerry for our concluding remarks. Jerry.

Thank you, Gary. Our top priority now is execution. With our legacy business declines largely behind us, we are focused on deploying the business we have contracted, expanding within our enterprise customer base, converting our pipeline into recurring revenue, and building Altigen into a larger, stronger, and increasingly valuable company. We are confident in our direction, We are encouraged by our progress. And we are excited about the opportunity ahead. With that, I will now turn the call back to the operator.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset. Once again, that is 1 to ask a question. 1 moment while we poll for questions. To ask a question, please press 1. We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks.

All right. Thank you, operator, and thanks again, everyone, for joining us today. We look forward to updating you on our fiscal year end call later this year. Thanks again.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.