Altigen Communications, Inc. (OTC:ATGN) Q3 2025 Earnings Call Transcript

Altigen Communications, Inc. (OTC:ATGN) Q3 2025 Earnings Call Transcript August 1, 2025

Operator: Greetings. Welcome to the Altigen Technologies Third Quarter and Fiscal Year 2025 Results Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. Now I would like to turn the call over to your host, Gary Stone, CFO of Altigen Technologies. Please go ahead.

Gary Stone: Good afternoon, everyone, and welcome to Altigen Technologies Earnings Call for the Third Quarter Fiscal 2025. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer; Joe Hamblin, Chief Digital and Transformation Officer; and I am Gary Stone, Chief Financial Officer. Earlier today, we issued an earnings release reporting financial results for the period ended June 30 2025. This release can be found on our IR website at www.altigen.com. We’ve also arranged a replay of this call, which may be accessed by phone. This replay will be available approximately 1 hour after the call’s completion and remain in effect for 90 days. This call can also be accessed from the Investor Relations section of our website.

Before we begin our formal remarks, we need to remind everyone that today’s call may contain forward-looking information regarding future events and future financial performance of the company. We wish to caution you that such statements are just predictions and actual results may differ materially due to certain risks and uncertainties that pertain to our business. We refer you to the financial disclosures filed periodically by the company over-the-counter market, specifically, the company’s audited annual report for the fiscal year ended September 30, 2024, and the most recent unaudited quarterly report for the quarter ending March 31, 2025, as well as the safe harbor statement in the press release the company issued today. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company’s projections or forward-looking statements.

Altigen assumes no obligation to revise any forward-looking information contained in today’s call. In addition, during today’s call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or replacement for the comparable GAAP measures, but we believe these measures — I’m sorry, we believe these measures help the replacement help investors gain a more complete understanding of results. A reconciliation of GAAP to non-GAAP measures and additional disclosures regarding these measures are included in today’s press release. With that, I’ll turn the call over to Jerry Fleming for opening remarks. Jerry?

Jeremiah J. Fleming: Great. Thank you, Gary. Good afternoon, everyone, and thank you for joining us today. I’ll start with a high-level overview of our third quarter results, followed by the current state of the business. Then I’ll hand the call to Joe Hamblin, our Chief Digital and Transformation Officer, to walk you through our operational achievements. Finally, our CFO, Gary Stone, will dive into the financial details behind this quarter’s performance. Earlier today, we released our fiscal Q3 results, and I’m pleased to report another strong quarter. Revenue came in at just over $3.5 million, marking a 7% increase year-over-year. Operating income grew to $125,000 compared to $69,000 in Q3 of last year. To put our strategy into perspective, 18 months ago, we announced a rebranding of the company from Altigen Communications to Altigen Technologies.

Q&A Session

At the time, we stated that this wasn’t just a name change. It signaled our transformation from a traditional communication software company into a next-generation provider of customer experience solutions and digital transformation services. In that announcement, we underscored our vision to lead with innovation, harness the power of emerging technologies and embed artificial intelligence into everything we do. Fast forward to today, and I’m proud to say that the new Altigen is no longer a vision. It’s a reality with the tangible results of our transformation beginning to take hold. As evidenced, over the past 12 months, we delivered revenue of $14.1 million and operating income of $680,000 compared to $13.4 million in revenue and $470,000 operating loss in the prior 12-month period.

This turnaround is not coincidental. It is a direct result of the strategic initiatives that we put in place, our commitment to innovation and focused execution by our team. Now with that context, let’s take a look at the current state of the business. One of the key elements of our business transformation strategy has been to completely reinvent our technology platforms. Our legacy systems simply couldn’t deliver the innovative features and scale we needed to drive our business forward. We are now fully engaged in the replacement of our legacy PBX and contact center platforms as we began the rollout of the next- generation UCaaS and CCaaS solutions built for the long term. Our next-gen UCaaS platform, MaxCloud V2, is designed for small to midsized businesses and delivers a cost-effective integrated unified communications suite, including phone calls, SMS, instant messaging, web conferencing and mobile apps, making it a very feature-rich solution for that target market.

The migration of our legacy PBX customers to this new platform is well underway, with nearly 50 customers now deployed on MaxCloud V2. Our goal remains to transition our entire cloud and on-premises customer base to the new MaxCloud platform within the next 18 months. It’s also important to point out that when customers are forced to make a change, some will inevitably decide to go in a different direction. However, once we complete the migration of MaxCloud, customer churn should be at a minimum, plus the addition of legacy on-premises customers moving to the cloud for the first time should contribute to incremental revenue growth. Turning to CCaaS. We have launched CoreEngage one of the few native Microsoft Teams contact center solutions available today.

CoreEngage purpose-built for the Microsoft cloud ecosystem is offered as a fully managed service. A key benefit of our managed service offering is that it enables our Microsoft of partners, most of which do not have deep voice expertise to sell an enterprise-grade contact center solution but are able to rely on Altigen to provide all the necessary migration, deployment and support services. It’s a powerful win-win. Partners are able to grow their Microsoft related revenues, while Altigen expands our CCaaS footprint across the Microsoft Teams customer base. Today, we’ve contracted with approximately 10 customers for CoreEngage. And due to migration planning and setup times, deployments can take several months. So only about half of the CoreEngage customers are currently deployed and billable.

As we complete the migrations and move customers into production, we will experience continued growth in monthly recurring revenues. In addition to increasing our CoreEngage contracted revenue, the new opportunity pipeline has grown nearly fivefold in the past 3 quarters. While this doesn’t yet reflect contracted revenue a growing pipeline is a key leading indicator of future performance. Moving to an update on our strategic partnership with Fiserv. We are in the midst of quite a few initiatives. Starting with the contact center, we’re working through Fiserv’s security requirements in order to get CoreEngage certified to be sold through the Fiserv sales organization. We expect to complete this process over the course of the next few months while we’re simultaneously working directly with Fiserv customers for CoreEngage opportunities that need to be deployed prior to a certification date.

I also want to highlight just a couple of the new AI based solutions we’re planning to introduce in conjunction with Fiserv. First, our new conversational AI front end for the Altigen IVR, which, by the way, isn’t used by over 1,500 Fiserv bank and credit union customers is now ready for customer preview. This natural language AI solution will modernize customer interactions, reduce operational costs and provide increased revenue for Altigen. And this is just the first phase in the evolution of the Altigen IVR from a bank by phone application to a complete omnichannel 24/7 AI-powered customer self-service platform. This quarter, we’ll also launch our Core Insights customer preview program. Core Insights as our new next-gen AI customer engagement analytics platform.

This platform uniquely synthesizes IVR transaction and customer demographic data to provide valuable insights into how and why specific customer demographic groups and individual customers are engaging with the bank or credit union. Armed with this data, banks and credit union executives will be able to understand, predict and deliver improved customer service, personalized customer experiences and increased cross-selling of additional products and services. These solutions represent just a few of the AI-powered solutions that are in various stages of our product development life cycle. We’re also broadening our scope to target both Fiserv customer as well as all other banks and credit unions in the U.S. and U.K. markets. And while we’ve invested a great deal in terms of time, money and effort in the development of these products, we are closing in on the monetization zone.

Today, we’re generating approximately $350,000 in revenue per month from our financial institution customers. Looking out over the next few years, each of the solutions that I’ve mentioned has the realistic opportunity to generate $350,000 or more in monthly recurring revenue, all primarily driven by the new AI capabilities. I’ll shift my discussion now to the Altigen Consulting Services division, which has done a great job of expanding our business relationship with the Connecticut Department of Transportation or CT DOT. This quarter, we are beginning a new AI project with CT DOT, which has been funded by the federal government. While we’re not in a position to disclose the specific objectives for this project, I can say that we expect the deliverables to be applicable to most state departments of transportation.

Toward that end, we’re actively engaging with a handful of other DOTs with the objective of leveraging our success that we’ve had with CT DOT. Just as importantly, the knowledge and expertise we gained from our current AI projects on the services side will also carry over to the AI solutions we’re offering on the software side of our business. Although the AI solutions offered by our software division are more packaged in nature, customers typically don’t have an abundance of AI expertise on staff to effectively manage those AI solutions. So they often need to rely on the vendor to provide that expertise, which we at Altigen are uniquely able to do through our Consulting Services division. With that, I’ll turn the call over to Joe Hamblin for an operational update.

Joe?

Joe Hamblin: All right. Thank you, Jerry. Good afternoon, everyone. Over the past 15 months, we’ve executed a comprehensive transformation of the company, rebuilding nearly every aspect of our operations, systems and solutions, from outsourcing accounts payable and receivable processes to replacing outdated products with modern platforms like CoreEngage, MaxCloud UC, V2, we’ve reset the foundation of Altigen for long-term success. At the same time, we’ve driven out approximately $1.5 million in annualized operating costs through aggressive system automation, vendor consolidation and operational streamlining. While we continue to focus on operational excellence, we will now enter the next phase of our transformation revenue growth.

To position our sales organization for success, we’ve launched several strategic go-to-market initiatives. We’re not just beginning a full — we’re not just bringing a full suite of next-generation solutions to the market. We’re relaunching the Altigen brand. The first step in this process was to bring in a strategic marketing partner to drive our digital marketing strategy. In partnership with our new marketing firm Grafton, we’ve undertaken a comprehensive brand overhaul, including SEO, pay-per-click campaigns and a new CoreEngage product infomercial, along with a targeted outreach program. Our initial focus is on 1,700 regional banks and credit unions, each with over $500 million in assets under management. We believe this renewed focus on our brand visibility, digital engagement will enable both our direct sales teams and our partners to more effectively compete and win.

Now turning to our product development. On the Altigen Solutions side of our business, we’ve completed the development of our secure SIP ID solution, which combines phone number validation voice biometrics and our AI-powered banking IVR routing platform to help prevent fraud. This solution will be jointly marketed with our partners at Fiserv starting in Q4. As a reminder, we currently support over 1,500 financial institutions already on our IVR platform, each of whom are eligible to adopt this enhanced security offering. To support expansion into larger enterprises, in regulated industries, we’ve initiated the process to acquire our SOC 2 Type 2 certification with expected completion in the January ’26 time frame. This will be a critical enabler for us to compete for secure larger, more complex revenue opportunities.

Additionally, we’ll complete the development. Additionally, we’ve completed the development of Core Insights, our new data analytics platform, which is now ready for the first customer evaluation in Q4. Core Insights integrates transaction and demographics data to provide actionable insights and will soon include generative AI capabilities to uncover even deeper patterns and business opportunities. In anticipation of future growth, we’ve also made significant investments in our platform scalability and customer enablement. Our solutions delivery portal has been enhanced with new provisioning capabilities, enabling large enterprise customers to self-manage their Microsoft Teams, PSTN environments at scale. More self-service and automation features will follow to support the evolving market demands.

Turning to our Consulting Services division. This team continues to operate at a high level, anchored by our strategic partnership with the Connecticut Department of Transportation. In Q3, we were honored to attend the AIDC Conference in Harrisburg, Pennsylvania, alongside CT DOT to share our digital transformation success story with other state Department of Transportation. That event has already led to follow-up engagements with several interested states. We’ll continue this momentum with a participation in the state of Oklahoma State Expo this month, followed by HEAT Conference in Myrtle Beach in October, one of the largest highway and infrastructure tech events of the year. Strategically, we also signed a partnership agreement with Krista, a leading AI provider.

The partnership enables us to white label Krista’s offering under favorable reseller terms and become a preferred integration partner of Krista’s direct to customer projects. The benefits are by twofold, recurring platform revenue, services revenue from the implementation and ongoing support. This is also a high-value partnership to complement both the consulting and the platform strategies. In summary, we stabilized the business modernized our technology and made strategic investments in our go-to-market capabilities. Now we’re focused on execution, growing our customer base, increasing recurring revenue and driving sustainable long-term growth. With that, I’ll turn the call over to our Chief Financial Officer, Gary Stone, to review our financial performance.

Gary?

Gary Stone: Thank you, Joe. All right. As Jerry mentioned, for our 2025 fiscal third quarter, we reported total revenue of $3.5 million compared to $3.3 million for Q3 2024. That’s a 7% increase. Total cloud services and legacy recurring revenue for third quarter 2025 was approximately $1.95 million, down slightly from the $2.03 million in the same period last year. Meanwhile, our services and other revenue increased 25% to $1.56 million from $1.25 million in the prior year’s quarter. Gross margin for the quarter was 63% compared to 61% in the same period last year. GAAP operating expenses for the quarter totaled $2.1 million, reflecting an 11% increase compared to $1.9 million in the same period last year. I do want to point out that our Q3 operating expenses included approximately $300,000 in onetime accrued severance expenses related to our business transformation initiatives that we’ve talked about quite a bit.

GAAP net income for Q3 was $111,000 or $0.00 per diluted share compared to the GAAP net income of $62,000 or $0.00 per diluted share in the prior quarter. Looking at our liquidity. We closed the quarter with $3.5 million in cash and cash equivalents, up 25% compared to the $2.8 million in the prior quarter. This increase was due to our large government customer who elected to accelerate payments prior to their fiscal year-end. As a result, working capital was $2.5 million compared to $1.9 million in the previous quarter, a 32% increase. Our EBITDA adjusted for legal, severance and other onetime costs was $645,000 compared to $314,000 in the prior year quarter. Now let me turn the call back over to Jerry for our closing remarks. Jerry?

Jeremiah J. Fleming: Thanks, again, Gary. To wrap up our prepared remarks, Q3 2025 marked another solid step forward in our transformation journey financially, operationally and strategically. We’re building real momentum in terms of 5 consecutive quarters of profitable growth. New platforms gaining market traction, new high-impact AI solutions under development and close to deployment, a strengthened and emerging strategic partnership portfolio and an energized team driving it all forward. With that, I’ll turn the call back to the operator for Q&A. Operator?

Operator: [Operator Instructions]. And we have a question from [ Michael Zimba ].

Unidentified Analyst: I do have to preface by saying I was in the security business for a while and I’ve listened to lots of conference calls. So good job you guys, I love your little company. I mean, the way you save money and just pay as you go. And listening, obviously, on top of it with the projections, and you talked revenue growth a lot. We have a group of about 3 or 4 of us, I’m not the technology guy. But what I want is when are we going to have our first number over — with revenue starting over for — in other words, to start to get some of the significant growth you talk about.

Jeremiah J. Fleming: Yes. That’s — this is Jerry, Michael. It’s a good question. I’m not trying to dodge your question. We’re not presently giving guidance, but I’ll tell you what, we are a little bit laser focused on getting there as quickly as possible. I do expect that we’re going to see that in FY ’26, but I can’t give you an exact quarter at the moment. We’re not trying to grow by 5,000 a quarter, right? We need to get it going, and we understand that. That’s our objective.

Unidentified Analyst: And that’s what I’m saying, yes, they start to get a little more significant in the revenue growth. I know it takes time, as I say, I’ve been involved with companies. But that was kind of it. It seems like everything is set up with what you’re doing? And also the — with the Connecticut, I thought by now you might have other states or other parts of your software obviously is compatible with — would be compatible with other items. And you mentioned how it’s going. It sounds like you’re on the verge of growth there, too.

Jeremiah J. Fleming: Yes. And I will say with what we’ve done is extremely pervasive custom project management system, billing, et cetera, that we’ve built for them. And that becomes a little more difficult because it’s such a large integrated platform to take a piece of that and fit it into another Department of Transportation and everybody is doing something today. And that’s been a bit of a challenge, right, trying to extend what we’ve done in that regard. With the AI piece, that’s a totally different ballgame because we are now retrieving disparate information, so I can at least share this, disparate information from all sorts of different data sources that these folks need to have, whether it’s engineering, drawings or bids or proposals or cost estimates and cost overruns, those sorts of things to provide the management team with the information they need to run that aspect to the business.

That is applicable to the other DOTs. We certainly are, I think, optimistic about our opportunities to penetrate additional. And it doesn’t have to be state departments of revenue, but that’s the low-hanging fruit because that’s what we’re doing. We’ll start there and take it out further from there.

Unidentified Analyst: Yes. Here’s a question. I think I know the answer, you guys are going to ask. Joe, you’re happy you came back. I know it’s been about a year, I understand you were away and then came back to help with the operation.

Joe Hamblin: Yes, I am. Actually, I’m enjoying myself, starting to — you see the progress and maybe the pendulum is starting to turn in our favor. So I’m really — I’m enjoying what I’m doing. And I’m very, very optimistic. I don’t want to come across wrong ways. I don’t want to accidentally give any false hope, but I’m optimistic personally that we’re getting this thing turned in the right direction.

Unidentified Analyst: Yes, I think so. This is — what can I say that we love the little company, like I say, so many little ones are diluted and spend more money than you’ve got coming in. You guys have been very responsible on that thing. And now I think $0.60 a share with only 25 million shares, we need a little revenue growth, and we can have a multiple of what we’re at now.

Jeremiah J. Fleming: We absolutely — that’s the game plan. And we do plan on getting there and generating some real value for our shareholders.

Operator: [Operator Instructions]. And there are no further questions in queue at this time. This does conclude our question-and-answer session. I would now like to turn the floor back to Jerry Fleming, CEO of Altigen Technologies for closing remarks.

Jeremiah J. Fleming: Thanks, operator, and thank you, everyone, for participating in our call today. We look forward to updating you on our progress on our year-end call, which will be later in the calendar year and we’ll do our best to achieve Michael’s objective as quickly as we can. Thank you very much.

Operator: Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you once again for your participation.