Rekor Systems (REKR) 15 Nov 222022 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. Conference Call. My name is John, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

Before we get started, I would like to read you the company's abbreviated Safe Harbor statement. product remind future statements financial be revenues, economic products to conference in position, construed like any are conditions, concerning and forward-looking of call results and or as would a you that future made that this markets, other prediction I statements partnerships performance may events releases, of operations, statements. by and results such other factors, expressed cause actual to Such materially and or statements which statements. uncertainties, implied can unknown risks, involve those differ known from may ask full release. We refer in disclaimer the that to you our earnings

information factors You in with the should will the presentation also description review Non-GAAP non-GAAP company SEC. annual of also filings the quarterly The risk discussed on the call. contained concerning ongoing over presentation and be Systems. of results our provided supplementary I Please believes the company's sir. only. purposes go useful CFO and informational Mr. now operations like turn provides would ahead, Rekor Eyal Hen, for data to is to the the of

everyone. and nine us Hi, three update September XXXX, XX, topics. for ended you today our and results Thanks to key months the business discuss joining on for

in third On Desharnais. of on call With will COO, and and our additional revenue with quarter have David quarter of our our recurring full growth Robert a under revenue are I me the President XXXX, CEO, services the our color go after in our Berman; metrics. sales business provide model. over David today relevant accelerated traffic X,XXX we

emphasis XXXX. revenue the of since shifted As I've recurring explained third previously, from point-in-time to our revenue we've quarter

but and impact solid for the earlier are appropriate revenues had sizes subscription strong in long-term. over on in hardware software basis. near-term models This a overall recurring to our in we providing year, new revenues our on foundation we strength engage overall and stability laying is and continue While growth the now seeing the point-in-time our a sales in data a services circumstances,

$X.X last months $X.X of revenue the three XXX% period same XX%. by ended the ended compared and million XX, increase as year, increase to the Revenue in of STS, year. in XXXX, compared recurring for nine XX, third in third to year, for the This increased XXX%. million, three XXX% $XX.X the period XX, for last same and to last the increased into $X.X million obligations consolidated include or the million in fully me the ended months million September period are get Highlights XXXX, of September September financial XXXX. months Recurring million, nine for results million $XX.X quarter and the operations of to to of an results Revenue three Solution XX, Let represents September period XXXX, million revenue Performance details same significant of respectively, ended compared the some compared quarter. XX, for XX, XXXX, year. XXXX, for Traffic nine of ended the a $XX.X XX, the growth increase was as to $XX.X period December was same months September and September $X.X last compared Southern XXXX.

As $XX.X result of million. impairment and an a recognized the goodwill a current market interim conditions, of assessment

September months of second nine revenues and and continued compared in in three quarter quarter for can recurring improvements XX% the you As reflected see see, ended to significant and three and compared XXXX. respectively, third XX, revenue XX% of months XX, nine we've in to the recurring percentage the XX% ended total XXXX, XX% respectively. XXXX, for value the revenue and was to September The

XXXX, the of our quarter in for million, $XX of September nine started of XXXX. operating not to to the SG&A began impairment our compared the in streamlining XX, stems as which result set Earlier Total marketing goodwill in also increases correlated third end Increase expenses including $XX.X a activities, significant new teams technology at were months We reduction from our ended see the integrated expenses. period year, products sales our and the into as offerings. million operating same hires we of and expenses growing in and to service the XXXX. engineering, during we added

to in the However, operating quarter resulted expenses the focused carefully been inclusion XXXX, second even with of we've as current SPS managing the the quarter operating of results a a period, evaluating of our in expenses. quarter from on in This and reduction XXXX our expenses. compared full of third

significant goodwill. in we capitalization, quarter event experienced a third XXXX, we decline During which triggering our deemed market of a to the related

we had an result, and we of interim in goodwill assessment of that as $XX,XXX,XXX. a performed XXXX impairment impairment determined an amount XX, As to the related September

million as ended with we're we margin and and nine to compared September the XXXX, months operations in XX, from was September Rekor to position Our decline the increased primarily loss of for at as $X.X from of respectively. infrastructure. third the a XXXX in ended in months nine margin the the XXXX, and network to in of This adjusted XX, consistent highlighted Adjusted of is future. we installed close XX%, in three decrease for increased three previously. discussed million, nine of and coverage loss the loss months increase and The to margins. pursue The the base, investment gross to same that ended gross year. second investment I've higher $XX.X last million months growth future for quarter see to in September loss improvement margin attributable of in and due $X.X million for and period expect is able EBITDA margins improvement our in of our larger stayed $XX.X improvement gross XXXX, September our The XXXX approximately to XX, adjusted quarter a expansion our from the adjusted a transactions XX, XXXX, a XX% XXXX, loss XX% for to ended

performance a the into provide second KPIs see the more help insight we enhanced our have and provide detailed of that changed business. view We a hope decrease activities, the and to time, into streamlining progress. we from loss better model, will of a in as visibility key our revenue quarter Since we XXXX. released However, indicators with our these shareholders over result success

As XXXX. our increased period nine for compared noted in financial to XX, recurring and September the our the and XXXX, three XXX% revenue highlights, ended same months XXX%

XXXX. $X.X acquisition. During million XXXX, of to new value the $X.X the of contracts nine XX% during in we related is ended an won STS new September won months increase period million to of the This primarily same compared contract XX,

remaining were million. $XX.X obligation XX, September XXXX, contract of performance As

$XX.X STS approximately due represents We of as -- over our recognize an of amount of or to compared XX XX, XX% $X succeeding expect this December of the XXXX. to obligation was to to increase the the months. XX% increase This primarily acquisition. in obligation performance million This performance million

As we we our expand build are relationships acquired and short through in customers many nature. presence, which pilot typically programs,

programs expand see KPIs will contracts, pilot expect improve. we and these larger-scale these to to As convert

Moving our to financial liquidity. condition and

$X.X the our equivalents. of used capital The net from growth part decrease cash working to million, to capital XXXX. December as as This summary, million growth of offset STS. balance as million increase $XX.X working position Our was a We cash down in a the momentum working was cash September September to December by partially sales $XX of due our had our of deficit a decrease primarily we decline XX, our due on the The markets. and as million, inflow was prospects and in of future in million decrease of XX, of market continue In agreement. loss cash passionate in company from primarily XXXX of the as a are cash cash and XXXX. experience $X.X a about strong as from in XX, XXXX capital we $XX.X was operations, for XX, acquisition reflects in reduction XXXX,

long-term that, will value we focused With David now you are significantly. to remain our benefit call margins shareholders. the them will discuss to David. As our that increasing shareholder investments improve on concentrating creating We David? now on will our I with decisions fully over making expect and rapidly and turn next,

afternoon, expenses. base. in invest the from our a the everyone, that to about transition you, primarily a and I'd long-term to welcome. talking to and you by Good recurring quarter, establishment when model, trade-offs, revenue discussed start relationships, need Thank point-in-time we revenues revenue Last the Eyal. stable revenue of like a and model provide

that Now that are you in the to recent accelerate able fully recurring acquisition were this results we financial revenue. of reflected that to quarter's see transition can STS, results, our

our The on from is a the XXX% just the our revenues, XXXX. Waycare XX% while just from total quarterly acquisitions able total that's beginning. XX% where than the recurring of life, Eyal crash us placed we've of quality period revenue revenues securely migration, to revenue in is quarterly to one of revenues described, But and our years, the year, less and the to agencies congestion, provide challenges sustainability, to urban intelligent the been needed fatalities development the the that in increased of needed the by ourselves put technology forefront the operators in we've and of in equity the key which infrastructure generated of year of past transition really in As safety. recurring have been quarter increased public leading working position address last STS for corresponding three of for components, combination in to

States has United the management of improve in effort better its begun emerged a collection a is data a the to effort. that priority growing year, implementation Over as distribution has mobility consensus past massive infrastructure, this and

receipt and roadwork being The funds. studies our required This US from only inductive expensive, roadways. government one-off has same each currently methods agencies to to manage the underinvestment, for in the are investments and Current For basic samplings that support are roadway capture for and install but collected that data the roadway suffers fraction the responsible way signed of million federal from. states decades, to data and radars highway fully that X to the decisions traffic year. loops currently dangerous from of is firing network across aging collect data a results mandated collection that suffers conditions traffic use network, evaluate and over

into access and of collection their the to and actionable meaningful traffic roadways only studies greener analyzed smarter, trillion mandated $X.X quality, efforts, accurate access data and As investment responsibilities state agencies transportation to sources, tools to network, insights roadway, when other cost to from citizens. connected the they federal interactive vehicle safer, an collected tangible the drive gain be these approach also and on an gain system the achieved data, federal can crowd and their are collected third-party and efficiency and digitized is active more that continuous aggregated against results data technology as a states combined at to we broader time. needed is with basis. the This and time data intelligence integrated Rekor's in In that accelerated real be transition to place that being bring data can sourced improve delivers in a right the digitized in infrastructure. right which by short, and can

busy a are of emblematic several can had would what of have our we like moving progress highlight meaningful we key made against to past We where quarter. expect that and goals examples and have forward. exciting I wins

The of machine On launched extensible more. accuracy, classifications utmost vision the system, collection Edge AI-driven and networked computer deliver system. data non-roadway uses a safety, performance, front, the state-of-the-art federally-mandated to system traffic technology and Flex simplicity we first-of-its-kind vehicle for and in the data learning intrusive

recall more studies annually will million previous my opportunity and tremendous these Rekor. traffic ahead of completes you growth represents the X a As this from for remarks, than US

strong us. have we've since and states we of system, our doing are the of this Edge strong are our XX% deploy the interacted seen Flex from behind initial keen with innovative launch a quarter technology than to deployments US more with. engagement this They we Now, pipeline

Ohio. provide and and have to expansion pilot in are cross-modal collection upgrade to South and the Carolina, in implementing begun collection system of to management analytics predictive programs projects and data regional include Alabama roadway state data the in integrated pedestrians We bicycles and Florida,

and unprecedented pleased for its Web for supporting or a and again Amazon who of witnessing customer growth. to for we proven chosen the smart an On developers governments front, rate city I'm are the technical and were also success mobility announce unique ecosystem transportation distinction Smart urban once City urban that proficiency AWS, and recognizes Rekor is This transportation. Services, city Competency unique

and formation Waze able addition our announced our and the the we connected Partner tomorrow.io public In PredictiQ, also addition, Rekor an announced others the pane the recently we data launch and how is Network to of our to network. in to in of mobility Blyncsy, and of the provide a ability citizen industry-first North customers provide the holistically of an stage season private also were unprecedented in customers ecosystem. hub single Carolina Southeast. and formal manage a set The for already and At glass Network, partner launch, in for Rekor dozens routing intelligence roadway and safety and to our roadway Partner to Florida vehicle what hurricane

we and states over quarter. and key US This key million proactive congestion Highway for have front, for $X progress Federal we to the Transportation, where grant with customers customer operations the selected On Department past made also Administration includes Transportation the in Alabama of were Department of traffic. significant route

services $X.X transit million Transit for as also Authority, to otherwise with Central being known traffic its selected Ohio. improve Rekor We announced the and for program win COTA a Ohio with

with state for XX-year Oregon announced on architecture Roadway And also the Transportation Transportation be we a chose to Department platform quarter its connected vehicle deploying Department Texas and firms technology and statewide of the key and of the Intelligence of We contract in win Oregon infrastructure selected where Rekor are there. from pool was and a data were another ecosystem with standardize to down XX of major and roadway major we the win that now platform, a technology. on

We knowledge the into roadway -- trusted other are system a we we transform our time IP, that by and We services insights our with these To-date, results As and Rekor cost-effectively. machine for our and can for customers technology, to about this well who three-decade More I Waycare recently, as accelerated with I deliver what states proprietary platform and million growth. once systems and digitize turns $XXX and and A past with party key leader into conference computer call see, busy been We've short, and AI network for engine technologies, and operating federal collection, I service. quarter of efficiently, including ecosystem forward AI of and progress data to by sourcing data all in look about we building all, are momentum invested we $X.X departments and ahead. and Thank capabilities Most we updates as customer ago, deliver model value a tell turn transportation will aggregate Rekor's and we and leader more fronts, they forward a attention. is Rekor across Berman as you bill acquired data data actionable differentiated Robert knowledge. managing vision we rapidly you us again a positioned we've STS, One, importantly, the rapid unique ever-expanding on partners. than remarks your Robert? acquired and customer technologies, Rekor a appreciate and you intelligence are really transportation. the learning the is speaking session. increasingly we or infrastructure potential continued the over several and trillion third for the analytics to than spend. to again question-and-answer poised In the pay-for-data more for pioneered it, quickly, and roadway hardware, roadway state-of-the-art long-term quarterly data with that now year the operating providing the US excited next look Rekor artificial intelligence. our call. in and software, it's September, you our on look company, final near-term our all growth state future for into our and XX roadway incorporated

you. thank David,

say a open to on narrowing resources that who of for can this say, of is we Operator? a diligently we are this try before questions questions, our soon. focus liquidity We'll of we'll might this recently. best your great attention you can, many concerns that to seeking are some a little our and occupying as know Needless not we current provide understand of that time. answer it deal but in I at be details At I you there options, except position have So, about point, conditions. the working we're been up to our please number and under market be has there

you. Thank

session. We our will And now of be first line with conducting a instructions] question [Operator B. question-and-answer Riley. question. from comes the Please Cummins with proceed Zach your

the a that I mean, congrats the here to building you're cost time you that nearly us DOTs. know, transition But Thanks. potential seems line have of for right to on expecting Yes. I give kind bridge sense across like near-term variety Thanks of and you like Good point. now, revenues and seems questions, breakeven the into plans that you operating towards share taking you momentum adjusted of to for of can't a It funding give still my business you actions some EBITDA. any it afternoon. QX. around breakeven can when this undertook reduction building

just any of update a you give there? us So give sense sort of can

company technology the We this Eyal. Zach, Rekor customers what probably will profitable. we this So believe have high we're take the scale now by We there, acquiring believe year, Robert. and to that it is next right? question. I'll adopting be visibility and will towards. will – we substantial figures Thanks our time think to eight the revenue that with we that Yes. looking that's need, we the get are resources for

these really with on the a us speaking the to and SDS about, of just across momentum – give sense deals there? how that just customers? mean I get Alabama, some in Is you're relationships digging Oregon, was deeper what's building getting can David door you for a state And with little of of bit new Understood. driving are Texas you of having curious that this of it kind prior opening door relationships these

the Zach, you able come call on Charlie, are here? to just

here. I'm

Head quite government I he's rolling of and together didn't to decades, speak. tech in the Charlie. affairs, But speak what's Government the Charlie, for states I and I got call. with on Relations let as And worked have the to I'll background our out, we're extensive have him an for happening and plan him

data, into I we've FHWA, the vehicle on and and Yeah. with and we're we've beyond I've technology, circumspect not Typically, result so it new gets we when been you're – to able state pleasant here XX entities, about this one, to experienced different rewarded solution MPOs ever the vehicle to have the our classification that, technology. said do basically sophisticated or It's the do, tech surprise. because recognition. roadways. discussed But that in is of comes very has new nobody Transportation for states, been and a level probably is forward, is being to talking their XX XX report of has – for everyone with calling they're leaning very one technology classification when a of what is on government welcomed for like our can requires been tell government to bins nothing our And really, federal municipalities DOTs do not long, AI not entities. kind Department which to The this

I'm see factor infrastructure any And regarding are from getting sort what DOTs? could know to just as along starting impede could to bill. the with be you line, into now, Understood. big that, their that customers that gating hands just the progress curious a funding funds the demand that there's of any I Are tailwind

what that we're deep Zach, the can't see we is of somewhat We're too speak maybe to operating the see starting to ideas with see this, but David at and they to is becoming to – system. the envision age, roads the starting starting could to into we're government the it. You federal digital the sharing know, about way states level the more get an

do emblematic this? to want talk that, is out you right. David, we're Oregon bit a think of little I in about

that. to do me, I you happy hope I'm Yes. hear okay? can Yeah,

is uptick available our and when certainly, funds forward, how and you've we're the to from So funding they those an projects states. apply submit, we And need got this are federal the released. about seeing works, think that against Zach path -- states

be things accepted. infrastructure where submitted are the is and will today funds build projects that in So being are released when the are they the

what not it's key to in front, of on uptick we're transportation it and subject this on We've to the what I that pretty on management our projects well our significant been and it's so availability classification just submitted. be are But a And we me, on the is seen tell. on funds right track traffic from The pipeline seeing. with. are working seems and say with we've based in to terms that from now track state submitted board. would capabilities management that approval projects are across And as can being projects

evolution are a kind usage with that's we road of the way next the the So with can of for where today. journey the And this has up much state continued imagine Oregon generation pump at road is to of charges where usage. not you an they're and that them as identify or electric to vehicles filling EVs example anymore. been of gas a charge

usage be gas. solution states it's is to next-generation trying not if determine So rightfully going what to for are that road

that And connected spot roadway et so for everything sweet to that's what in ecosystem. moving really with a requires about that's really it in requires, understand us you And when think cetera. the vehicles, a ability our

transition and into real transform very well-positioned. opportunities. now and So seeing that And contracts we we're feel

So powered it's an stage implementation infrastructure by into stage. idea the all the off bill. more moving of and Again,

In excise to XX.X% taxes okay, that's with have going change, to to been roadways our and the United is those, recover that, that, Robert. support government just to we redistribute said up add XX right? share revenue right? the then California, forcing so years vehicles. that EVs the David the what think Yes. States, framework about set has to true to if because Zach, it's last electric because Well, federal states have I gasoline are you the in XX, would

which distribute earlier. excise Bin, what gasoline the FHWA been were collecting way taxes the to we XX has So is talking equitable about

a question things, excise vehicle into like that. it a to your a what new longer there to side, technology company other non-intrusive other into you're is this to that's works, you So federal of tape side, the help the third-party redistribution And easy want and that from for part the comes the both way. But got digging It has taxes. back it the the up to doing with [ph], a right? you're dollars and to have billions there's states the tie putting not doing hundreds all connected the money. respect not [ph] was in want where bring do yes, does based you And the STS to roads Charlie side of the it that That opening on the Rekor way safe, like, of EVs it, purposes time same in duct here. other technology also, door an in end data troop to it that takes out a is bringing money. which it, you're and have they technology the loops for of roadways, ability friendly it's really because earlier redistributed think about way with if by government down been about the no of relationships? gasoline to support highways system ground and has with But had we STS better okay, the there's tied

have we roads, brings do with do counting this? to deliver them But made the Southeast, certain the know to you need that that acquisition. the that The walk for because delivering And level and why these You of in in has trust just a DoTs right, to for need fact a up don't throughout that's we dig vehicles, primarily to to have DoTs way, STS that understands that been a that. want how that's data three they they decades company don't technology. to have

two, but There know. on and money ago looking for it's not an them ecosystem years. for We would took an easy roadways mention that it importantly, a allow it’s big money are right? XX last were an for then it's week. all the harp about multinationals not XX charge, that -- able And of way and bundle, And would more David selected doing that, to that win right? for incorporate hope was the So to the people part being right, mean, there it's other right? teams old started So three what three every So out helps, that's the now. companies competitors, out. bill. is ago, done but three the of transportation that. I I that on more got of whole those lot which states, years, I technology, of would call been something it, this That way down the the figuring operating to is right, that speaks And of the to companies to system an XX of it. to use the year, right? was way spent, done have to part that It's beat thing, put were recalibrate one -- and ahead in it, collect from issued those I'm going going but to FHWA-XX. It's Oregon. letter volume converting And to I the last same XX XX, the data, years and okay? RFI out want of said it's think years we new do a that Oregon Oregon were That's award that right? to

helpful. So hopefully, that's

up pass go for I'll ahead taking time want the the all don't helpful. my and so extremely pick here to questions. along. Absolutely I Well, queue, Thanks in it

you. Sure. Thank

Our David comes your question. Please proceed the Hargreaves, private Instructions] question next with line a [Operator investor. from of

a on receivables probability could something transitioning balance type the you I'm be entities it of is they government mostly My if collection, that there congratulations sheet, the If a about talk the if might government high on little wondering with securitizable? revenue bit model. entities. are

Yes. Yes.

And entity. as entities most more right, you're days government are looking them options mentioned all XX, than right of Robert So at But XX not of most are we're before, Yes. our they government now. outstanding. AR,

Yes.

that. I to will think add

intersection I years, think get Rekor to traditional, look starting be a to governmental will so going question, debt, seven, we're getting right? obligation, we're we contracts right, when access contract debt, we're that's run debt able loss to value performance pursue our to rollout five, that bank that at that I going right? a equity commercial point we with next the bank, to year your from of we're something to right? think where to that there. of can more And you is see of hoping a the going commercial substantial And financially So XX get build expenditures with the our and capital P&L

I negative just straight than… then the don't three like less I – hoping there we've quarters line. we a last fourth there see with in be quarter any that and got $XX for of the $XX Is mean, reason I'm that deviation a million we -- million quarter. EBITDA would think

I that… think

ahead. Eyal, go

Right.

quarter see losses. mentioned to we see our it's and I trend previously, a but David, we're EBITDA third to think good we'll expectation the a through we Sorry, of that from when expenses, QX, is quarterly you EBITDA XXXX, some you reduce profitability. breakeven the And in can as our on if point, reduction going a look start said

Good very progress again. Okay. Thanks Well, much. thank you.

Yeah. Thank you.

you. Thank

Thank you.

like at no over this comments. to the turn for are There time. any floor closing would you. Thank to I further back Robert questions

is beaten And us do. your well look, everybody. to tough. lot other not The thanks but as have look as companies, is up a of this Well, Appreciate patience. this easy markets

the year in and We've in see made is XXXX there. acquisitions. a everything the together, that. million of shareholders going mentioned, going this that technology. important can results and do coming invested we're going to of We've get long-term. the for very over David company and As the we value we'll this years has $XXX to this think That's And synergistic plan, to we're to think we And making. our we it's maintain two been be

appreciate So time. your

This today's everyone. you, Thank does conference. conclude

day. great and you for participation, disconnect may at time. lines You this a your Thank your have