Q3 2020 Rekor Systems Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the recourse systems Inc. Conference call. My name is almost daily and I'll be your coordinator for today.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
He wants you to our operators thus ensuring the conference. Please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.
Before we get started I'd like to read you the company's abbreviated Safe Harbor statement I'd like to remind you that statements made in this conference call concerning future revenues results of operations financial position markets economic conditions products and product releases partnerships and any other statements that may be construed as a prediction of future performance or events.
Our forward looking statements.
Such statements could involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimers in our earnings release, you should also review a description of the risk factors contained in our annual and quarterly filings.
That's easy.
Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only I.
I would now like to turn the presentation over to mR.E.L. head C. F O of recourse systems. Thank you.
Thank you good afternoon, all thank you for joining us to discuss the results of critical third quarter and nine months ended September 30, when 20 and provide an update on key business topics on the call with me today is Robert Berman, President and CEO.
Our company, which is more than 40% revenue growth in Q3, 40 20 over the same quarter in 2019 Oh.
Oh wait to present the highlights of the results for the three and nine months ended September 30.
Revenue for the quarter was 2.1 million from birth to what that's probably in the same period last year gross 40% right.
For the nine months ended September Thirtyth when it's when it was 6.4 million comfort for me here for the same period last year growth of 60% the increase in revenues attributable mainly to the substantial completion of the implementation phase software in Carter called truck as well as organic increasing revenue.
<unk> you, calling us about.
The revenue.
From our ecommerce platform were from Onesixty 7000 in the third quarter was 2019 to 35 in the third quarter.
Well, there was 2020, which represents over 40% growth.
Additionally, ecommerce revenue grew from 285 in the first nine months of when you make team seeks.
621000 in the first nine months of 2020, which represents more than doubled the revenues from this channel. This.
This growth this growth was organic and not the result of formal marketing campaign for this channel, which is planned for the near future.
Gross margin for the fourth quarter was 53.7% compared to 74.6% in the same period last year.
More than for the nine months ended September 30, 2020, 67% compared to 70.9% in the same period last year the.
The lower margin ordinarily have to do the work to be initial cost of building infrastructure in connection with lost software and hardware contract.
One of the advantages of recall, one platform, which we'll discuss later it makes sense for us to installed infrastructure to sell a large network I mean.
Good service in an area.
Let them <unk> operating expenses for the quarter were 4.6 million births frequent 6 million in the same period last year.
The operating expenses for the nine months ended September 30, 2020 was 12.5 million compared to 8.1 million in the same period last year.
The increase is attributable mainly to the implementation of our go to market plans to develop and promote though technology products and services as well as recurring additional manpower recruiting additional many parts to support our growth plan.
[noise] complete the Companys reorientation physically direction and solidify the corporate structure.
Adjusted EBITDA for the quarter was a loss of 2.7 million as compared to a loss of 1.8 million the same period last year.
Adjusted EBITDA for the nine months ended September Thirtyth when it's when he was a loss of 6.8 million as compared to loss of 3.9 million.
The increase in loss was due to the increasing expensive and indicated before.
Our cash balance at September 30, 2020 was 24.4 million and our working capital was 21.1 million.
As we announced previously they have retired the debt through change in cash transaction and currently we are still essentially debt free.
Oh performance obligation balance has grown 16.5 million, which represents future revenue under existing contracts.
In summary, we continue to see a lot of momentum in the market or customer base is growing we are excited about the many opportunities that lie ahead of us.
Now I would like to turn the call over to Robert Robert.
Thanks, Phil Good afternoon, everyone and welcome to the first quarterly earnings Conference call, We'll report it.
Today's call I'm going to provide you with an update on some key developments together with an overview of our business as it stands today.
I'd like to start by mentioning a few key highlights.
The sale of our two main business units at the end of the second quarter and the retirement of our debt this quarter recourse completed the realignment, we'd be gone and 2019.
We're now well positioned to take on the opportunities and challenges that three years of investment vehicle recognition and ultra roadway technologies that's created for us.
Just in the last year Weve gained a leading position in the government and commercial segments as represented by our recent agreements with Mastercard and barrel mobility amongst others.
This morning, we announced the state of Oklahoma will be deploying record warm platform across the state.
This will identify uninsured motorists part of the state's innovative effort to address the problem of uninsured motorists through proactive engagement.
Rather than increasing reliance on expensive personal intensive enforcement efforts in the past.
The state wide contract was won through competitive bidding where recall was shown to be the only company that has us all the in house capabilities and demonstrated needed implementation of programs securely and efficiently.
Award demonstrates clearly the value will require won and shows that we are the leader in a large untapped new arena.
Nationally uninsured drivers are a significant problem with one more than well more than 12% were nearly one in every eight vehicles uninsured and require one is now the only platform that provides all the technologies state needs to identify these vehicles and take a progressive measure to ensure compliance this innovative program not only make.
The roads safer for insured motorists with developing new source of previously Uncaptured revenue for the state.
But this is just one facet of the value of require warrant.
Recall, one can provide to the governments [noise].
The beauty is that you can make multifunctional use of an existing network of roadway cameras since require one kind of interface with multiple programming languages and support multiple operating systems and facilitate rapid apiay communication.
From a variety of sources and facilitate.
Rapid communication to collaborating a strategic decision, making for a variety of participating agencies.
For example state using require one for an uninsured vehicle program can extend the use of the network and to lapse tags vehicle counting emissions congestion pricing unsafe speed wrong way detection and many others.
And the precise data needed by each agency can be stripped off at the source distributed and stored in a way that meets all of these agencies needs for security and privacy protection.
Require one is the first platform that serves as a unifying source of roadway intelligence for government agencies across cities counties and states. This means that as we expand from state to state we are automatically position to expand our services and many other areas within each state.
Alcohol me you. Good. It's just one great example of how the platform and efficiently and economically support multiple community safety culture roadways, and revenue generation activities as we like to say that.
Recall, one each sensor can execute multiple missions.
Since our core software has been developed using AI, we have over three year lead and intensive machine learning for vehicle recognition and we just filed for six patents based on the products. We've been developing out of that this has led to several significant announcements for the third quarter of 2020.
First is the launch of our new E Commerce platform.
There's a new sales channel that gives us a broad array of customers quick access to vehicle intelligence solutions solutions that can enhance our operations automate tasks and increased community safety.
Thats Mastercard announce that they selected our vehicle recognition technology as a core component and the advanced AI powered drive Thrus solution that has been developing for several years I.
For this program has just launched at White Castle, and the Midwest as retailers and consumers navigate through one of the most disruptive periods in modern history teaming with Mastercard and their quick service restaurant partners not only helps us usher in the future frictionless ecommerce what it signals the value of our nickel recognition technology and enabling low.
Touch high engagement experiences for retailers and the end customer.
In early August of this year, we also announced that their mobility, a global leader in smart transportation will be a nonexclusive reseller record technology.
Through this partnership their mobility were offer requires entire line of vehicle recognition software and hardware products to its existing and extensive U.S. customer base.
As well as any new global prospects significantly recourse software will also powered by our mobility is existing mobile and fixed camera systems quickly setting a new standard of expectations.
The industry.
This past summer, we also signed a five year non exclusive licensing agreement for school bus stop Pharm systems with Mesa Engineering.
Which is the primary engineering firm used by Conduent. Another major force in Smart Transportation Arena.
This agreement will further increase recourse market penetration in the state local government and international markets also.
Also during the third quarter, our public safety put print expanded.
Oh, the Collier Bill.
Tennessee Police Department and this engagement includes watchman go our first of its kind mobile app that processes on the device delivery.
Delivering instantaneous results. In addition to the installation up 17 camera system supported by reports Watchman back office platform mobile App will give color abrupt police officers convenient access to accurate real time vehicle recognition wherever their smartphones can go.
Floating remote areas and underground Rogers.
I have a lot more to say about mobile apps in the near future.
As most of you know we have successfully sold all of our non core assets and this continued investments beyond the scope of our current focus.
Well they'll see key solutions and our extra staffing company, which were instrumental in supporting our operations previously were sold for profit.
We continue to retain a 19.9% interest in global public safety offsetting global subsidiary available can be associates Inc., a diversified services provider to federal state and local governments and commercial organizations. We believe this position the synergistic with our public safety business and it has grown in value over time.
That we have owned it.
Finally from time to time, we get investor questions on rocker.
Can management App they use our technology.
Soccer is a mobility platform aimed at developing a smart parking ecosystem using record technology.
Which is recourse pulled backwards is a passive investment for recourse and I would encourage all of you to visit rocker Inc.
I've come to stay up to date at this point I would like to turn the call back to the operator for questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May proceed star two if you'd like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing star keys, we will take as many questions as possible, having our Q and a session at around five pm.
One moment, please while we poll for questions.
Our first question comes from Zach Cummins with B. Riley FBR.
Yeah.
Yes, hi, good afternoon, Robert and I, all that thanks for making the time today to take some questions. So I know you had pretty good year over year growth here in Q3, but I think it was a little bit below your expectations kind of heading into the quarter. So can you give us a sense of maybe some of the challenges that you ran into during the quarter and what you're seeing out there in terms of the invoice.
Revenue for the rest of the year.
Sure. Thanks Zack.
You know like most companies coal that has had some impact on our business.
We ran into issues with logistics, where we had products tied up in customs that were going out of the country. We had issues with customers that will not allow engineers on our technical people on site.
Things like that and it's also created the delay in the chain of of the way things happened because we deal with a lot of partners.
Things have to fall in line like Dominos, and I think the whole.
Our country and World is out of whack right now on and really it's hard to anticipate any of these things. So one example would be that we've got a large customer that has won a substantial contract and California for the California Highway patrol.
And they were supposed to start the implementation of their contract and second quarter of this year and they still haven't received the notice to proceed. So that's what's impacting things on that on that front I'd say in addition to that it's not just told that I think that.
There are a lot of things that require has gone over the last year related to building infrastructure with people and systems and so forth.
Examples our E Commerce platform, we had hoped to have that Don.
Over well over a quarter ago.
It's just technically a little bit more involved than we thought and it didnt make any sense to try to launch. It in total is completed and from time to time. That's what you have on your development stage company. We think we have most of that behind us and going into 2021, we're pretty sure that the the engine going be firing on all cylinders, we can't speak to the pandemic.
I think anyone can but.
I think we'll start seeing much better results next year.
Understood. Thanks for that and then I I know you mentioned your ecommerce platform now that that's up and fully functional how.
How should we be thinking about kind of the pace of contribution from that channel moving forward since you're able to provide almost touch less transaction for for your entire suite of products.
Well you know this [laughter] the point of contention around here because we've all been anxious to start marketing.
And we just didnt have the tools to do it with respect to the way. The the older Web site that was set up that was attracting the organic business that we had did not have the ability to meet the needs of what it takes to really brought a true digital campaign. So as an example, we have customers in over 50 countries and if you want to offer.
Products and market in those countries person on the other end needs to pull up a platform that comes up in their language with their currency. So it's that type of thing that you need to have in place but.
Ill said previously take a look at the numbers. This is all organic growth we've not done any marketing up until the last couple of weeks announcement trials with things, but you can see that we doubled the business you know.
For the same period last year to this year I mean, it's grown says 700 almost $700000 for the nine months.
And again I would suggest that we're just starting to market now and we've been finding some interesting things and it looks positive and we're seeing some good results with.
Some of the test campaigns that were doing and I will say this that from from my perspective, I would say that the amount of business every quarter has on the E. Commerce platform cannot be the entire universe of customers that are out there in 54 countries.
To that end, so, we'll probably have a much better metrics and a couple more quarters. Because now we can begin to launch campaigns and we'll see the growth and we'll figure out you know how every dollar invested you know what the return back is on the cost of acquisition of customer attrition and other things So I would.
I would just caution everybody to you know, let's give a couple of quarters and see how it goes but we're anticipating some pretty solid growth from it. So again, if you look at the organic growth that is purely organic that's nothing more than inbound on a very.
Ill.
A site that just wasnt capable really handling anymore than that it's doing.
So all thats helpful.
Got it got it that's helpful. And then in terms of the win that you announced this morning with the state of Oklahoma and can you talk a little bit more about the process behind being able to secure that we had with Oklahoma essentially your new record one platform.
I mean, how are you thinking about the total addressable opportunity just within Oklahoma and kind of how that can progress going forward and it seems like this is something that can be readily adopted by other states outside of Oklahoma as we move forward.
You know exact it just absolutely a huge win for recourse.
Re core one the platform was announced less than a month ago.
Right and if you if you go back and take a look at the investor deck, you'll see that we focused in three areas right infrastructure public safety and revenue.
And if you look at the the slide in the deck on our website under revenue you'll see on uninsured motor vehicles as just one slice of the pie for that particular sub category of require one.
States need revenue and Omniture motor vehicles are a huge problem across the United States and the number of vehicles that are on the shirt or in the tens of millions.
Yes. This is the first state wide program.
That addresses it but it's not just the opportunity to get on the shared motor vehicles off the road and run a profitable program. This gives us the ability to deploy our system across the state.
And then to use the system and use it to show a showcase all the other tools that we have for a variety of different agencies from DLP BMV the.
The public safety and on and on and on so it can spider web out.
Into other services for other agencies, but the opportunity by itself.
Is remarkable and we're in early stage discussions with about a half a dozen states.
We found to be very receptive to the concept.
And maybe it's a combination of the uninsured problem being.
Such a big issue for many states creates a lot of friction, but it's also you know revenue generator. So.
Things are probably different today than they were a year ago. Prior to hold that I think a lot of municipalities are going to be looking for revenue and.
The onshore motor vehicle program is an elegant solution to that.
Because its a turnkey program, we're actually taking people that are driving uninsured and and getting them compliance, where they're driving with insurance and so forth.
So it's a nice way to to to address the problem and it's an elegant solution that it generates revenue for state. So we think we think we're going to see a lot of interest from other states.
The process was complex.
There were a number of companies that looked at it what Rick or was the only company that had a turnkey solution that was domiciled in the U.S.
And that's an important thing so we.
We will also be the only company one other states start coming out, let's say that they're launching or fees to look for such a solution and we will be the only company that has experience running this program.
So the market is remarkable I think you know looking at your report today, you're right. That's a $1.45 billion addressable market in the us and the states have to deal with the uninsured problem.
So we think we found an elegant solution to it and I think it's going to roll out you know overtime and take time, but it's going to roll out from state to state almost away lotteries did back in the early days a lot of ours.
Understood. That's helpful context, and then I know you briefly mentioned in your script, but I mean can you give us any additional updates from the Mastercard partnership it sounds like you're a start.
Starting some pilots with white castle, thus far and any expectation for additional QSR adoption before moving forward at the end.
This year.
Yes, I think that this is a good opportunity to get folks understand better what what this mastercard opportunity is so mastercard has been working on a solution for several years.
It is not a solution that involves just vehicle recognition point of sale on Bloom your non.
It is a solution that involves voice recognition that involves AI within the point of sale systems for our anticipated and expected ordering and a host of other things, including menu boards and so forth mastercard's approach to this is developing a completely new experience.
For drive throughs, and they've got a bunch of people working on this from data scientists to others.
To not only on a proved the experience for the customer, but the operational efficiency of the restaurant and so on and so forth and it's a huge opportunity Mastercard is looking to sell.
Sell the solution to the fast food industry worldwide.
We announced it you know their vested and that now so they are public and going after it but I will I will say. This this is mastercard. These pilots are moving forward, they're going well, but like anything else when you bring a product to market, especially in the beta stage, you know things have to be tweaked.
And and and changes after we've made and so forth. So it's probably going to take a little bit more time.
But you know the way we look at it is once Mastercard is comfortable with it and they and they they go after the industry.
As they can being an 800 pound gorilla.
You know, there's hundreds of thousands of drive-thrus around the world. Okay, and this is mastercard, they will gain penetration and.
They are very happy with recourse performance so far.
So we expect this to just grow but it's going to grow through the years and it's going to take some time, but once it starts to be deployed we expect it to scale you know to to something pretty sizable and I often get questions and calls from people about Mastercard and.
Look we've been working with them for almost a year now we couldn't say anything about it until they announced it and I think there's an expectation that based on the announcement that you're going to have revenue. Two weeks later it doesn't work with something of this magnitude.
Okay that they've got a fortune invested in this thing and they're looking to attack it.
From a global perspective and penetrate the industry.
And its mastercard, there, they're going to be successful with it and we're going to ride on their hotels, but everybody's got to be patient with it we've got to give them a chance to get the solutions, where it works and when it works with the relationships. They have with these large chains, we think that they will be very successful penetrating that market.
Got it kind of that's helpful. And then on the reseller side I know you signed a number of public safety and security resellers earlier. This year I mean can you give us an update in terms of learning how to get those partners fully trained and ramped and and when are you expecting to start to see more contribution from from those partners.
Well, that's that's a good question so going back to your prior question about some of the things that.
Happened.
In the third quarter that may have taken a little longer look we've chosen to sell our products through resellers. We've got a three legged stool here. So E. Commerce is one like strategic partnerships with companies like Mastercard is another leg and the third leg or resellers. So you know the choices.
Direct salesforce or resellers, we chose resellers because it's just a much better path.
And what we've learned is it also takes time.
Going through the process with Vera mobility, which is a very large company variability was not prepared to go out there and start really pushing the products into their customers until they were comfortable that that collectively both of their mobility and re core you know had all the tools in place that we need to see.
Service those customers. So yes, there is a lot of different things that you need a toolbox actually put a reseller out there to stop start marketing your products. So.
We've got a a complete system we call the business in a box now we've got all the the systems to go along with it from a software perspective, so that the resellers can be managed and they can deal with us from a customer service perspective, a financial perspective, and other things, but it takes about 12 weeks to get a reseller.
Through the program from the day that we that them to the point that they could really go to market and start selling and I would say going into 2021, we've got less than a dozen resellers and those include resellers on steroids like Vera.
And then some smaller ones and I think that that's pretty good on given the complexity of what it took to put this program together.
And then as we start getting into 2021, we're going to see that number increase each quarter and we're also looking at international resellers, which is a whole different on brings a whole different set of issues, but we're doing all of that now so I think that the.
A reseller programs work really well I think we've got some great partners going into 2021, and I think we're going to be adding more you know every every month as we get into get into the new year.
Understood and then just final question for me and thanks for taking all the questions today, but I noticed in the press release you you had a brief statement, saying you had a settlement agreement with vigilant in place here. This month I understand in terms of the settlement are going to be confidential, but I mean can you give us a sense I mean is there going to be any sort of meaningful impact to your business moving forward.
Or I guess, how are you thinking about that relationship as we progress our.
The meaningful impact is that the case is settled.
And that's really the bottom line.
And you don't Unfortunately that meet the terms of settlement agreement are confidential.
But you know it.
Not going to have any material impact on record whatsoever. We don't have any licensing agreements. We don't have any obligations for payment. So it's not going to impact our business in any way shape or form.
Other than the fact that it's gone and if it gets rid of the overhang of people asking the question about about the lawsuit that was frivolous to begin with and that.
That brought it to a settlement.
I understood. That's helpful well, Thanks, again, Robert and I alternate for taking my question today and congrats on on the wind this morning.
Thanks, Thanks Zack.
Okay.
Our next question is from Casey and merged with Shane.
Hi, guys. Thanks for very much for taking my question.
Good to see the news on Oklahoma.
That type of breakthrough I guess, just a couple of questions because as we sit back and we try to look at.
No.
Kind of like the landscape of your market like when when we see this Oklahoma contracted can you just walk us through a little bit more detail. So I saw an article out there that the 600000 cars that are not in short in Oklahoma.
And you're going to get around $45, a car and then you're going to get a fee for.
Churns.
Selling that like how much money like how do we think about kind of like what the possibility could be out of that.
On that contract that's that's a fair question Casey so.
We do.
We propose to.
The state of Oklahoma that we believe that over a three year period that we could bring the number of uninsured motor vehicles down from the level that it is to a steady state of about 10%.
So you can do the math on and we believe that program will work well and we believe we can accomplish that so.
It's really that it's really that simple right. So if you're starting with X number of uninsured motor vehicles, and we're bringing it down to a steady state of 10%, it's never going to go to zero, because you're always going to have new people that are uninsured for a variety of reasons.
Your your you can do the math you see what we're being paid on the insurance side you know.
The reinsurance component of this was very important to us as well as Oklahoma, because we we believe I personally believe that it's unfortunate that that people that are driving uninsured that may be perfectly good drivers, let's say.
In most states as they.
Get caught and end up having to go into an assigned pools they end up spending.
A much higher premium than they would otherwise pay if they were being insured based on their driving record. So we wanted to incorporate.
That into this this program and we've done that so the point of it is that you know if you've got somebody that's driving uninsured because they've all in on hard times are they lost their job or they missed a credit card payment.
That doesn't mean that should get whacked over the head with the 2000, our insurance premium right. So yes, that's part of part of how you bring it down to that steady state by making it affordable and the way it's worked in the past and other states and states have a variety of different ways that they deal with on a trip motor vehicles. Most of it is at the local da level, which creates a lot of friction, but most people just get put.
And twin assigned insurance pool, some ridiculous rate for a period of time, which is not fair right. So that's that's the way to look at the program and I would say that you know with the discussions that we had with Oklahoma going into this leading up to them doing an RFP are winning on the crowd.
The ability of being able to get the program launched in Oklahoma is going to help us in other states.
And you can do the math and other states because it's basically that simple the object is to get the number of uninsured motor vehicles down to a steady state of 10% from what it starting at so if you and Robert just so just so I understand like so there's 100 people or uninsured.
Trying to get it down to 10 people that are uninsured or the steady state kind of as a percent. That's the that's the objective we're trying to get down to a steady state of 10% of the number of uninsured motor vehicles in this state and over a three year period.
And then a continuous program just can run.
Okay and then so just so I understand so you got the camera because I'm just trying to do so I think a lot of people when I talk to people. There. So a car is driving down the highway or toll road or whatever and the camera as Rob and they're just taking pictures and they're just.
Comparing the capture of the image versus your AI and you guys can pull out which ones are uninsured real time.
Well you know we have.
Were working but I want to get into too much of what we're doing because some of that is proprietary Casey but bottom line is already have access I don't know, but we have access to the vehicles that are uninsured and then we brought them back to.
A website and an 800 number they go into a diversion program that we manage.
They they pay a small diversion fee that drops of criminality and then they go into the insurance underwriting process. They get insured and then basically that's that's what happens going forward. So it was its a combination of a number of different things that we're doing to scrape and pull in and make sure that we.
I have an accurate list of uninsured motor vehicles.
Do you want to have false positives because that can create problems as well.
So it's a pretty neat program and the beauty of it is that.
Unlike.
Law enforcement, where you need immediate.
Notification. If you are looking for an amber alert or vehicle that was stolen with uninsured. If a person stop found today. They are found a week from now the reason I'm, saying that is because we can cover a state like Oklahoma on with a limited amount of equipment and cover the entire state. So the cost of of our implementing the program.
It is not all that great, but that creates a statewide system for us that gives us the ability to.
Up sell that to other agencies and for other things and so forth.
Okay next.
The next question second one and that's my last one just right.
Right a lot on the school bus initiatives could you just kind of walk us through that and kind of talk a little bit about how how big that can be and how how that.
Why why would they want to.
Upgrade or make their school buses smart just kind of.
Walk through that a little bit I mean.
First I just want to say that I've heard from one of our other shareholders that they listened into their mobility call earnings call and they talked extensively about school bus stop arm and they vary said on the call that the whole programs basically stalled in all the 20, some odd states that have passed legislation.
Has there aren't a lot of school buses outboards, just you know yet right. The first coming back so everything's been pushed back a little bit.
But the reason that someone would want to use a LPR and use our system is that first of all we bought the cost of the equipment that they are using way down.
And what that does is it allows every bus to be.
Fitted with you know with equipment.
Whereas before the convention prior to us coming along with that.
A company that's in this business will go into a school district and say you've got 100 plus routes. We can only cover 12, because we can't make the economics work.
Right. So thats the first thing.
That we've done the second thing is that if you think about.
These horrible things like you know if you go look you can Google and then find that most child abductions happen.
At or around the near school bus stops right.
Right. So you know there are a lot of them.
People out there that troll school buses and they watch where kids get off and on and.
It's not just that it could be drug the pillars to that you know so.
So you know having functioning LPR tied back to law enforcement, which is the same agency that's going to be running the school bus stop on program with the school district. So that they can see you know the vehicles if theres any vehicles of interest that were on a hot list for some reason that are around those buses and they see a pattern of it it gets.
And the ability to deal with it right. So the idea of adding you know a.
A safety net around the school bus while its moving on.
Is providing more protection and just you know the idea that you're going to.
Stop somebody from driving past and extend the school bus stop arm and hitting a kid. So it makes perfect sense and when you put those two things together.
That's why we're able to do deals with both and non exclusive with the larger players in the business because they want to make use of that technology. So like everything else I mean look.
If you go back three years, Okay. There were only a few states that had legislation for school bus stop arm. Then there was some event that happened now in the Midwest and then I think 17 or 18 states in 18 months passed legislation for she had this huge watershed thing and when you look.
The number of school buses and those states you know, it's a busy over a couple of hundred thousand right. So everybody was gearing up for this big ramp up with this our keys came out but then you had coal been in the buses arent running and you know.
You can't do an implementation because you can't send your tech because they don't want the person there. So it's not going away. Okay. It's just been.
And pushed off a little bit and nothing's changed with our technology. So I think where is in good position, whether this when we announced it.
Okay, and then just lastly.
Yes, just on the finance side, so listen you've outlined E commerce strategies like Oklahoma reseller strategies, like our mobility and joint ventures.
Companies like Mastercard, So there's a lot of going on you can see a lot of revenue.
Rose developing I guess, how do you think about your expense base. I mean is there is expense stays pretty fixed up to a certain point or does it or do the expenses need to grow net.
Yes, that's right.
That's a fair question I think.
The interesting thing that we've learned about this business is that it has tremendous operating leverage and we obviously had to add a lot of folks here, primarily in engineering and marketing.
To gear up to do all that we're doing you know we're running a number of different.
Projects at the same time on implementations think about installing something like Oklahoma at the same time, you got places like Holly or bill among other things going on so to answer your question I think the way. This business works is that when you think about.
Let's say.
On Zacks Commons from from B. Rileys report I think.
You know the level that he has when you get later into 2021 of of SGN, a and really operating expenses to run the whole company I think that it kind of gets to a steady state itself, where you're going to have incremental cost growing only in certain things like R&D.
But that's going to be a pretty but you can grow the revenues well beyond okay, what he's talking about their without increasing expenses dramatically. So the answer is.
We are still going to be hiring.
It's it's starting to slow down and we're getting to a point, where we probably have.
More than enough of what we need to to service all the different components of this business and when we do get to that revenue level and we're going to get there.
You know the expenses are not going to just all the revenues on the same line. So there is going to be a lot of operating leverage here. It's great. Because you know it's it's still at the end of the day really a software business right. So.
With scale its going to have a lot of operating leverage.
Thanks, very much appreciate it guys great work.
Thank you.
Our next question is from David Hargreaves with FBR capital.
Hi, congratulations on Oklahoma, and congratulations on being debt free.
I am a little new to the story. So I apologize. If this is basically could you talk about the strength of your patent protection and.
What you see is potential threats in terms of competing efforts to develop something similar.
Sure. It's a good question.
First let me just explain that we have about 30 different solutions. So we deployed here.
On our ecommerce platform. There are about 10, we announced a few weeks back that we're launching a mobile app, which.
Which is quite amazing and in a couple of weeks here. This month that will be launched so that will add to the ecommerce platform.
And then we have about 20 other products that are the summer just software and others are.
Highly bundled hardware software.
Products. So all of all of those are derived data on primarily to proprietary.
On products that we have the first is that the algorithms that read of video stream, which is what we used for vehicle recognition intelligent roadways and the other is IP 360, the back end citation.
Notice platform that we've completely rebuilt its cloud based now.
And.
The the advantages of of the products that are AI are really more.
Based on the machine learning.
With respect to protection so on.
Theres a lot of proprietary Sos and the algorithms themselves they were not patented.
For a lot of different reasons and.
The lawyer seemed to think that's the right thing to do but what.
What really gives us protection with that as the machine learning. So you know the main algorithm was developed back in 2012 2013, and that's had an extensive period here to learn and to get smarter and and faster and so forth.
Beyond that right. So we think that we have a a runway where it would take somebody can throw money at it but you need the data to catch up with respect to machine learning because it really is all about update on time.
When it comes to extending our our products into these other areas like require one.
The patents that we filed recently in there are half a dozen of them, we think give us great protection.
With the ability to do a lot of what we talk about with three core one so again I would encourage everybody to go back and look at the back on the corporate website. There's a page there for the core one you can see it.
Page that comes after that as about the patents that we filed so without getting into the detail. The patents acting I can try to frame. This for you in a way that.
You know, we don't want to give away any secrets here, but on if we have the ability to identify something on a roadway and then there's an existing database that we can we can pull from and marry those two things in order to create a solution at the end of that Thats patentable, Okay, and that's what we've done to create some.
Some of the products that we have for these governmental agencies and we.
We think it's going to it's going to be difficult for others to replicate and work around those patents.
I'd have to come up with some pretty unique technology to do it now St can happen because stuff is getting developed everyday.
That's one of the things that we've been dealing with while we've been building the company I mean, it's like let's.
It looks like flying a plane and building it at the same time on the competitive than the technical technological landscapes and shifting underneath our feet. You know every month here for the last year and a half and we think we we think we're well ahead of it and we think we've done while protecting ourselves and and.
We feel we feel good about where we are.
That's great and then based on your expectations for your your outlook or.
Do you think you can remain debt free.
I believe that we can remain debt free.
The question becomes the scale of certain pro.
Program, So as an example, mastercard.
If we were required to go install.
Thousands and thousands of locations for.
You know for their program.
We might choose though you know because its mastercard's credit and we have long term contracts with them that it might be better for the company to finance the production of that equipment for each one of those restaurants, and finance that where the bank, but we would only do that if it made sense, but we'd be doing that based on significant growth.
At scale.
Other other than that we do see ourselves you know remaining debt free. So I guess my point would be that that would come in if there were commercial and we're there to help scale a program, where we've got significant credit behind it with significant margins. So I'm certainly.
Certainly be better to do that and sell equity right.
So that that would be the thought there.
I asked the question poorly that will be wonder that thank you very much.
Thank you.
Our next and last question comes from Ray He cow private investor.
Hey, Robert Thanks for taking my call I. Appreciate you have this conference call and keeping shareholders up to speed between now.
On the cops call and second shareholders, why there, which has put out back in April which I thought had a lot of valuable information well my two questions are one off.
Any updates on acquisitions in the near future and my second question is are also an update with Tesla. Thank you.
Sure.
So.
Listen we're always looking we always see things I don't believe that we have any pending.
Acquisitions that we'd be looking at we believe that we can do most of what we're doing here organically and grow the company with what we have but there are some from time to time some interesting smaller.
Pieces of technology that we see that may plug into let's say like re core one for certain things that you know if they make sense. We would look at them. They would be very small and the only reason that we would do something like that is speed to market. If if you know there is the reason to buy something because.
It's cheaper than building it and they can get.
It can it can that be additive to our platform than those are the kinds of things that we would be looking at.
But beyond that were really not thinking about much of anything.
And with respect to Tesla I can only tell you that thats.
It's just in profits and progress.
And again, so I can there as an example, so.
What we've been working on with them was supposed to be showcased at the New York Auto show in April and then when they change the date to August and then they cancel that so that's that's where it is but.
You know, it's still being worked on and it's a it's a project in the pipeline.
Yeah.
No.
Omar.
Alright, yeah raced.
Raced along the line, but that concludes our questions I'd like to turn the floor back over to you.
For any concluding remarks.
Yes, Thank you Omar I'm well. Thank you all for your interest and re cornick specially for supporting.
You know the company in its recent achievements today, we're more confident than ever that the strong fundamentals of the business will enable us to deliver long term value to the shareholders. We expect to continue to improve our business with growing sales and extend a global customer base and the future looks bright and look we're going to we're in an emerging market and.
What we're dealing with things that are new.
And and tremendous opportunities and that you know I think.
Requires at the Nexus of some very interesting things that are happening and I think the thing that we're most proud of here is the relationships that we have with some of our counterparties like Mastercard Lightbearer mobility on and you know and others and I think that speaks for itself and we've got a great team here.
Sure and we've added some great people to the senior management team and we've got.
All very supportive and a wonderful board contributes and we've got a good shareholder base and we we hope everybody just as the patients because report.
Is the kind of company that you might see in Silicon Valley and.
You wouldn't see us growing pains, both were public but that creates an opportunity for everybody in a development stage company. So thanks.
Thank you all and well see you I guess again on our next call and though.
Communicate the news we have between now and then.
All right. Thank you everyone for your participation. This concludes today's conference and have a great evening you may disconnect your lines now.
Thank you.