Q4 2021 Rekor Systems Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to <unk> systems Conference call.
Good afternoon ladies and gentlemen and welcome to Raycor Systems Conference Call. My name is Rob and I'll be your coordinator for today.
My name is Rob and I'll be your coordinator for today.
If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference call is being recorded for replay purposes.
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.
Before we get started I would like to read you the company's abbreviated safe harbor statement.
I would 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 are forward looking statements.
I would 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 are forward looking statements.
Such statements can 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 disclaimer.
Such statements 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 with the SEC.
You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC.
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.
And he believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.
Speaker Change: I would now like to turn the presentation over to Mr. Hao Han, CFO of Raycorp Systems.
I would now like to turn the presentation over to Mr. <unk>.
<unk> and CFO Ray CT systems.
Good afternoon, and thank you for joining us.
I: Good afternoon and thank you for joining us. Today we'll discuss recourse results for the year ended December 31, 2021 and provide you with an update on key business topics.
Today, we'll discuss recourse result for the year ended December 31, 2021 and provide you with an update on key business topics.
I: On the call with me today, we have a Berman CEO and David Darnay, president who will be giving you additional color on our business after I go over our relevant myths.
On the call with me today, well, the Burman CEO and David <unk>, President, who will be giving you additional color on our business. After I go over all relevant metrics.
2021 with an important and defining year in recorded history.
David Dhery: 2021 was an important and defining year in RICO's young history. In 2021, we had a follow-on offering, a large strategic acquisition, and our inaugural investor day, where we presented our RICO-1 platform to the investment community.
In 2021 we'd had the follow on offering allows both digital acquisition and our inaugural Investor day.
When we presented our recall one platform to the investment community.
David Dhery: The introduction of RICO-1 and the acquisition of the company, formerly known as Waycare, has put us in a position to jumpstart the adoption of our operating platform, accelerate our growth, and claim our place as the leader in the emerging intelligent infrastructure market.
The introduction of recall, one and <expletive> with eating up the curve.
Company, formerly known as weight there.
That's put us in a position to jumpstart their adoption of our operating platform.
Salaried outgrowth and claim or places the leader in the emerging intelligent can put back to a market.
David Dhery: David will provide more detail regarding our go-to-market strategy in our near term and forward-looking opportunity.
David will provide more detail regarding our go to market strategy and our near term.
Forward looking opportunities.
David Dhery: Since the second quarter of 2021, we've been moving from a product-oriented transactional revenue model to a solution-oriented recurring revenue model.
Since the second quarter of 2021 we've been moving from a product oriented transactional revenue model to a solution oriented recurring revenue model.
David Dhery: The sale of solutions, as compared to products, spread revenues out over a longer period of time, thus reducing revenue in a longer period of time.
The sale of solutions as compared to product spread revenues out over longer periods of time.
Reducing revenue in the short term.
David Dhery: This shift from point-in-time revenue to recurring revenue has had an important impact on near-term revenue.
This shift from point in time revenue to recurring revenue has had an important impact on near term revenue.
David Dhery: But we continue to generate year-over-year revenue growth, as our newly refined go-to-market strategy has also had a positive impact on our growth.
But we continue to generate year over year revenue growth as our newly refined go to market strategy is also had a positive impact on our growth.
David Dhery: With that, let me go over the financial results for the year end of December 31, 2021.
With that let me go over the financial results for the year ended December 31st 2021 .
Our company achieved significant revenue growth for the year ended December 31st 2021 compared to 2020.
David Dhery: Our company achieved significant revenue growth for the year ended December 31, 2021, compared to 2020.
Revenue for the year ended 2021 was $14 3 million compared to $9 2 million in the same period last year.
David Dhery: Revenue for the year ended 2021 was $14.3 million compared to $9.2 million in the same period last year, a robust increase of 55%.
Robust increase of 55%.
David Dhery: Recurring revenue was 4.6 million for the year-ended December 31, 2021, which represented an increase of 1 million or 28% compared to 3.6 million for the year-ended December 31, 2020.
Recurring revenue was $4 6 million for the year ended December 31st 2021.
Which represented an increase of 1 million or 28% compared to $3 6 million for the year ended December 31st 2020.
The year over year increase in revenue is primarily due to the expansion of our product and service offerings.
David Dhery: The year-over-year increase in revenue is primarily due to the expansion of our product and service offering.
David Dhery: Our current sales model emphasized SaaS revenues generated through direct sales, but we have also seen increases in our e-commerce revenue and customer support revenue.
Our current sales model emphasize sauce revenues generated through direct sale.
We have also seen increases in our ecommerce revenue customer support revenue.
We benefited from the strategic marketing initiated that we launched at the beginning of 2021 and are seeing measurable results from our focus on recurring revenues.
David Dhery: We benefited from the strategic marketing initiative that we launched at the beginning of 2021 and are seeing measurable results from our focus on recurring revenues.
David Dhery: We expect the emphasis on sales-based revenue in our current go-to-market strategy to generate long-term growth well beyond what we could have achieved under the previous model.
We expect the emphasis on south based revenue in our current go to market strategy.
To generate long term growth well beyond what we could have achieved under the previous model.
David Dhery: We will, however, continue to monetize opportunities that are transactional in nature.
We will however continue to monetize opportunities with our transactional in nature.
Total operating expenses for the year ended December 31st 2021 were $39 3 million compared to $17 6 million during the same period in 'twenty 'twenty.
David Dhery: Total operating expenses for the year end of December 31, 2021 were $39.3 million.
David Dhery: compared to $17.6 million during the same period in 2020.
David Dhery: were recorded as a significant increase in payroll and payroll-related expenses.
We recorded a significant increase in payroll and payroll related expenses.
David Dhery: The addition of headcounts due to the Waker acquisition played a part in this increase.
The additional head count due to the way care acquisition.
A part in this inquiry.
While we continue to add important new hires our engineering and sales and marketing team.
David Dhery: while we continue to add important new hires to our engineering and sales and marketing teams.
We have expanded it.
David Dhery: And we continue to expand ourselves and marketing efforts as we add additional resources to promote our product and services.
We continue to expand.
Sales and marketing airports as we add additional resources to promote our products and services.
David Dhery: Finally, we have strategically invested in research and development to develop new solutions and improve our line of product.
Finally, we've started equally invested in research and development to develop new solutions and improve our line of products.
David Dhery: This investment will enhance our competitive edge as we continue developing additional state-of-the-art solutions that address our customers' growing needs.
This investment will enhance our competitive edge as we continue developing additional state of the art solutions that address our customers' growing needs.
Our adjusted gross margin for the year ended December 31, 2021 was 56% a.
David Dhery: Our adjusted gross margin for the year end of December 31, 2021 was 56%, a decline from the 62% reported on December 31, 2020.
A decline from the 62% that we reported on December 31st 2020.
David Dhery: The declining margin for the year and the December 31, 2021 is primarily attributable
The decline in margin for the year ended December 31st 2021.
It's primarily at the beautiful.
David Dhery: to the evolution of our go-to-market strategy as we continue to focus our near-term efforts on sales that generate high-margin recurring revenues we should expect to see an improving in our adjusted gross margin.
The evolution of our go to market his thoughts.
We continue to focus our near term airports hotels that generate high margin recurring revenues you should expect to see an improving in our adjusted gross margin.
David Dhery: The adjusted EBITDA for the year ended December 31, 2021, was a loss of $21.8 million.
Adjusted EBITDA for the year ended December 31st 2021.
The loss of 21 8 million.
David Dhery: compared to a loss of 9 million the same period last year.
Bert to a loss of 9 million the same period last year.
David Dhery: This increase in loss was due to the investments into positional record for future growth that I've just discussed.
This increase in loss was due to the investments to position <unk> for future growth that I've just discussed.
During 2021 or at least in his key performance indicators to help provide visibility and a more concise view into our success and progress.
David Dhery: During 2021, we released Enhance Key Performance Indicators to help provide visibility and a more concise view into our success and progress.
David Dhery: We hope that over time, these KPIs will provide our showholders better insight into our business.
We hope that overtime. These kpis would provide our shoulder better insight into our business.
In 2020 , one we booked contract value.
David Dhery: In 2021, we booked contract value at 8.9 million during the year ended December 31st, 2021. This is an increase of 35% compared to 6.6 million of total contract value won during the year ended December 31st, 2020.
$8 9 million during the year ended December 31st 2021 .
This is an increase of 35% compared to $6 6 million of total contract value. One during the year ended December 31st 2020.
David Dhery: As of December 31, 2021, remaining contract performance obligations were $22.6 million, an increase of 35% from the $16.7 million reported as of December 31, 2020.
As of December 31st 2021 remaining contract performance obligations with $22 6 million.
An increase of 35% from the $16 7 million reported as of December 31st 2020.
Moving to our financial condition and that liquidity.
David Dhery: Our cash balance on December 31st, 2021 was $25.8 million up from $20.6 million as of December 31st, 2020.
Our cash balance on December 31st 2021 was $25 8 million up from $20 6 million as of December 31st 2020.
David Dhery: Raise $70.1 million in net cash proceeds in a public offering in February 2021 and use $39.9 million for the acquisition of the company formally known as Waker Technologies in August 2021.
Raised $70 1 million in net cash proceeds in a public offering in February 2021 and used 39 9 million for the acquisition of the company, formerly known as wake up technologies in August 2021 .
Working capital on December 31st 'twenty, 'twenty, one was $17 million down from $18 2 million as of December 31st 2020.
David Dhery: Working capital on December 31, 2021 was $17 million down from $18.2 million as of December 31, 2020.
David Dhery: The increase in cash and cash equivalent was primarily due to the net profit from our public offering.
The increase in cash and cash equivalents was primarily due to the net proceeds from our public offering.
David Dhery: in the first quarter of this year, partially offset by a cash payment as part of the total consideration offered for the weight care acquisition.
In the first quarter of this year, partially offset by a cash payment as part of the total consideration for the weight care acquisition.
Yeah.
David Dhery: The decrease in working capital was primarily due to an increase in accounts payable and accrued expenses to avoid supply chain issued and secured vital components of our product, as well as the expansion of our sales, marketing and research and development efforts.
The decrease in working capital was primarily due to an increase in accounts payable and accrued expenses to avoid supply chain issued unsecured vital components of our product as well as the expansion of our sales marketing and research and development effort.
David Dhery: In summary, we are enthusiastic about our growth prospects.
In summary, we are enthusiastic about our growth prospects.
David Dhery: The Enhanced Health team has been extremely busy winning new clients' relationships, deepening existing ones and forming new partnerships.
The enhanced team has been extremely busy winning new clients relationship deepening.
Existing once and forming new partnerships.
David Dhery: We feel very good about our pipeline and the strong momentum we are experiencing.
We feel very good about our pipeline and the strong momentum we are experiencing.
Whether the investments we're making in our go to market strategy will negatively impact our margins in the early years.
David Dhery: While the investments we are making in our go-to-market strategy will negatively impact our margins in the early years, we fully expect our margins to improve significantly in later years as we reap the benefits of this.
We fully expect our margins to improve significantly in later years.
As we reap the benefits of it.
Estimates.
David Dhery: There is significant operating leverage embedded in our business model, and we will remain focused on creating shareholder value and making decisions that will benefit our long-term shareholders.
There is significant operating leverage embedded in our business model and we will remain focused on creating shareholder value and making decisions that will benefit our long term shareholders.
Speaker Change: With that, I will now turn the call over to Robert. Robert?
With that I will now turn the call over to Robert.
Thank you al good afternoon, everyone and welcome.
Robert Berman: Today you are going to hear a brief overview of our business and the progress we have made during the past 12 months.
Today, we're going to hear a brief overview of our business and the progress we have made during the past 12 months.
Robert Berman: First, I would like to highlight our strategic acquisition of Waycare in August of 2021. This important development has propelled
First I would like to highlight our strategic acquisition of wake her in August of 2021 .
This important development has propelled our company forward.
Robert Berman: There's a lot going on here at Recor that already marks us as an established big data company working in the intelligent infrastructure sector.
There's a lot going on here every quarter that already marks us as an established big data company working in the intelligent infrastructure sector.
Robert Berman: Recor is actively innovating and building to expand our software portfolio so that we can address not only our customers' current challenges, but also the evolving challenges they will face in the future.
Recourse actively innovating and building to expand our software portfolio. So that we can address not only our customers current challenges, but also the evolving challenges they will face in the future.
Make no mistake about it we are a development stage company, yet we can compare ourselves to any other large cap private equity and venture capital backed companies that are scrambling to get off the launch pad.
Robert Berman: Make no mistake about it. We are a development stage company, yet we can compare ourselves to the other large cap, private equity and venture capital back companies that are scrambling to get off the launch pad. We've already cleared the launch pad and are miles ahead when it comes to understanding the intelligent infrastructure.
We've already cleared the launch pad in our miles ahead when it comes to understanding the intelligent infrastructure market.
Robert Berman: We excel at AI and machine learning as it relates to vehicle recognition.
We excel at AI and machine learning as it relates to vehicle recognition.
Robert Berman: intelligent data processing, 5G, edge processing, and cloud computing. Technology is one of the three pillars
Intelligent data processing, five G edge processing and cloud computing.
Technology is one of the three pillars of our business model.
Technology stands alongside real estate and expertise.
Robert Berman: Technology stands alongside real estate and expertise.
Robert Berman: We will continue to grow our capabilities adding to all three of these pillars.
We will continue to grow our capabilities, adding to all three of these pillars.
As recall begins the next leg of its journey like most great companies with a bright future.
Robert Berman: As RECORE begins the next leg of its journey, like most great companies with a bright future, we're attracting amazing talent.
We're trapping amazing talent.
Speaker Change: I'd like to mention how proud we are that David DeHoney has joined RECOR as our president.
I'd like to mention how proud we are that David Harney.
Has joined recourse our president.
Speaker Change: David's background is quite remarkable. I'll let him get into the details and more formally introduce himself.
David's background is quite remarkable I'll, let him get into the details and more formally introduce himself.
Speaker Change: But with his vast tech product and marketing experience, as a seasoned veteran of the management teams at IDEMIA, American Express, and Amazon Web Services, we are pleased he has chosen to lead the world of blue chip companies and join RECOR as we begin to reimagine the future of intelligent infrastructure. With that, I will now turn the call over to the next speaker.
But with his vast tech product and marketing experience.
Seasoned veteran of the management teams at I Damia American Express and Amazon Web services. We are pleased he has chosen to leave the world of Blue Chip companies.
And recall as we began to re imagine the future of intelligent infrastructure.
With that I will now turn the call over to our president.
David.
Thank you Robert.
Speaker Change: Thank you, Robert. I'm honored and thrilled to be here at RECOR and a part of your senior leadership team. Good afternoon, everybody. It's a pleasure to be with you today.
I'm honored and thrilled to be here at record and a part of your senior leadership team.
Good afternoon, everybody, it's a pleasure to be with you today.
Speaker Change: A way of introduction, perhaps some quick background on me would be helpful.
By way of introduction, perhaps some quick background I mean, it would be helpful.
But more than 25 years.
Speaker Change: I've been deeply involved in building leading-edge software and technologies, building cloud, big data, and AI platforms.
I've been deeply involved in building, leading edge software and technologies.
Cloud Big data and AI platforms.
Speaker Change: building global, high-performing teams, and building strong, strategic partner networks.
Building global high performing teams and building strong strategic partner networks.
Speaker Change: I've also had the opportunity to build multiple billion dollar businesses and in the process build myself as a passionate leader in digital transformation and scale.
I've also had the opportunity to build multiple billion dollar businesses and then the process build myself, that's a passionate leader in digital transformation and scale.
Speaker Change: During my career, I've served in global senior leadership roles at large, publicly-traded companies.
During my career I've served in global senior leadership roles at large publicly traded companies VC backed startups and private equity led firms and have headed up multiple technology product and business organizations around the world numbering in the.
Speaker Change: VC-backed startups and private equity-led firms and have headed up multiple technology, product, and business organizations around the world, numbering in the thousands.
Thousands.
I've had the opportunity to learn from mentors such as Jeff Bezos tension out Steve Squirrel lip Bhutan, Andy Jesse and more along the way I, absolutely love, what I get to do every day I'm passionate about technology people and connecting the dots to find solutions for big.
Speaker Change: I've had the opportunity to learn from mentors such as Jeff Bezos, Ken Chenault, Steve Squirey, Lip Buton, Andy Jassy, and more along the way. I absolutely love what I get to do every day. I'm passionate about technology, people, and connecting the dots to find solutions for big problems and big opportunities. All of these experiences with technology.
And big opportunities all of these experiences with technology and product have led me to record.
Speaker Change: As I have joined ReCore as president a little over eight weeks ago, I've been focused on engaging with our global teams, technology, and capabilities, meeting with and listening to key customers and partners, and diving deeper into our position and opportunities within the emerging intelligent infrastructure market.
As I have joined <unk> as president a little over eight weeks ago I've been focused on engaging with our global teams technology and capabilities.
Eating with and listening to key customers and partners.
Diving deeper into our position and opportunities within the emerging intelligent infrastructure market.
Speaker Change: Mobility of people, vehicles, materials, and information is integral to nearly every aspect of our daily lives.
Mobility of people.
Calls materials and information is there.
Integral to nearly every aspect of our daily lives.
Speaker Change: We step from our homes into a road system that leads us to work and school to get our food and to many of our daily family and social functions.
We step from our homes into our route system that leads us to work and school to get our food and too many of our daily family and social functions.
Speaker Change: infrastructure is the backbone of a functioning economy and depends on well-maintained synchronized networks and systems.
Infrastructure is the backbone of a functioning economy and depends on well maintained synchronized networks and systems.
Unfortunately.
Speaker Change: many areas of the world face aging and legacy infrastructure today, resulting from decades of neglect and underinvestment, creating an unprecedented mobility, equity, sustainability, and public safety challenge to cities, states, and
Many areas of the world space aging and legacy infrastructure today, resulting from decades of neglect and underinvestment, creating an unprecedented mobility.
QWERTY sustainability and public safety challenge to cities States.
And and municipalities.
Speaker Change: The myriad of problems with our roadways is well known, and we feel it every day.
The myriad of problems with our road waste is well known and we feel it every day.
Globally.
Speaker Change: crashes on roads cause nearly 1.3 million preventable deaths and 50 million serious injuries every year.
Crashes on roads caused nearly 1.3 million preventable deaths and 50 million serious injuries every year.
Speaker Change: It is the leading killer of children and young people worldwide.
It is the leading killer of children and young people worldwide.
Speaker Change: These numbers, in both absolute and relative terms, have remained largely unchanged for the past 20 years, and it is unacceptable.
These numbers in both absolute and relative terms have remained largely unchanged for the past 20 years.
And it is unacceptable.
Speaker Change: Keeping pace with fast changing global technology, sustainability, and public safety dynamics and concerns requires inventive approaches to modernize our infrastructure backbone.
Keeping pace with fast changing global technology sustainability, and public safety dynamics and concerns requires inventive approaches to modernize our infrastructure backbone.
Speaker Change: Advancements in data collection, analytics, and communications must be employed at the core and alongside of infrastructure, thereby making it intelligent.
Advancements in data collection analytics and communications must be employed at the core and alongside of infrastructure, thereby making it intelligent.
Speaker Change: Spurred by the 2021 Infrastructure Investment and Jobs Act in the United States, a once in a generation $1.2 trillion surge of investment is being dedicated to improve existing transportation infrastructure and increase public safety and sustainability through modern, efficient and connected infrastructure.
Spurred by the 2021 infrastructure investment and jobs didn't added states a once in a generation 1.2 trillion dollar surge of investments is being dedicated to improve existing transportation infrastructure and increased public safety and sustainability to modern.
Fishing and connected infrastructure.
Speaker Change: This is creating a massive new intelligent infrastructure market opportunity.
This is creating a massive new intelligent infrastructure market opportunity.
Now companies looking to successfully meet the demands of this emerging and massive intelligent infrastructure economy must not only have scalable software solutions modern platform architectures and operate in the cloud.
Speaker Change: Now companies looking to successfully meet the demands of this emerging and massive intelligent infrastructure economy must not only have scalable software solutions, modern platform architectures, and operating the cloud, they must also have an AI or artificial intelligence playbook and be armed with data, algorithms, and machine learning models that fuel their solutions.
They must also have an AI or artificial intelligence playbook and be armed with data algorithms and machine learning models.
Fuel their solutions.
Speaker Change: This is exactly where RECOR is highly differentiated. And this is where RECOR will be creating the most shareholder value.
This is exactly where <unk> is highly differentiated and this is where we call it wouldn't be creating the most shareholder shareholder value.
As I look forward I believe that our strength in data proprietary AI technology deep domain expertise and the mission critical solutions, we deliver.
Speaker Change: As I look forward, I believe that our strength and data, proprietary AI technology, deep domain expertise, and the mission critical solutions we deliver, coupled with the privileged position of access and trust that we have earned with our customers.
Coupled with the privileged position of access and trust, we've earned with our customers.
Speaker Change: puts us in an advantaged market position and at the forefront of this new intelligent infrastructure economy.
Puts us in an advantaged market position and at the forefront of this new intelligent infrastructure economy.
Speaker Change: We are at the right place and time with the right talent and technology to capture significant growth in an inevitable future.
We are at the right place and time with the right talent and technology to capture significant growth in an inevitable future.
Speaker Change: I firmly believe that for recor, the best is yet to come.
I firmly believe that the weak or the best is yet to come.
Once again it is a pleasure to be with you today and I look forward to speaking with you.
Speaker Change: Once again, it is a pleasure to be with you today and I look forward to speaking with you again to update you on our progress.
To update you on our progress.
Speaker Change: At this point, I would like to turn the call back to Robert for closing remarks.
At this point I would like to turn the call back to Robert for closing remarks.
Thanks, David.
And I'd like to close by saying first that I agree with David we are seeing exceptional growth and we are attracting exceptional talent like David and our new Chief people Officer Deb Hennessey.
Robert Berman: And I'd like to close by saying first that I agree with David, we are seeing exceptional growth and we are attracting exceptional talent like David and our new chief people officer, Deb Hanna.
Robert Berman: We're growing organically and will remain opportunistic when it comes to exploring additional accretive acquisitions, so stay tuned.
We're growing organically and we'll remain opportunistic when it comes to exploring additional accretive acquisitions, so stay tuned.
Speaker Change: At this point, I'd like to turn the call back to our investor conference call coordinator for questions.
At this point I'd like to turn the call back to our Investor Conference call coordinator for questions.
Thank you well now be conducting the question and answer session.
Speaker Change: Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question at this time, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your questions.
To ask a question at this time, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Let me first start to feel like to remove your question from the queue.
Speaker Change: If just instead of using speaker equipment, maybe necessary to pick up your handset before pressing the star key.
So instead of using speaker equipment may be necessary to pick up your handset before pressing the star keys. One moment. Please we poll for questions and once again Thats star one thank you.
Speaker Change: One moment, please, while we poll for questions. And once again, that's star one. Thank you.
Two questions.
Speaker Change: Thank you. Our first question today comes from the land of Max Michelleis with Lake Street Capital Markets. Please just leave a comment.
Thank you. Our first question today comes from the line of Max Michelle with Lake Street Capital Markets. Please proceed with your question.
Hey, guys nice quarter I was wondering if you could just give me a fourth quarter number for your recurring revenue segment and as well given the quarters almost over for Q1, how has that trended in.
Max Michelli: Hey guys, nice quarter. I was wondering if you could just give me a 4th quarter number for your recurring revenue segment and as well as given the quarters almost over for Q1. How is that trended in the last 90 days?
In the last 90 days.
Yeah.
Okay.
And you can't do everything.
Sorry about that yeah, I'm, sorry, I might be a little muffled, but I was just wondering if you could give me a solid Q4 number for your recurring revenue because I know you only gave the full year and then as well how that has trended over Q1, given the quarters pretty much wrapped up here.
Speaker Change: Yeah, I'm sorry, I might be a little muffled. I was just wondering if you could give me a solid Q4 number for your recurring revenue because I know you only gave the full year and then as well as how that has trended over Q1 given the quarters pretty much wrapped up here.
Speaker Change: So obviously we cannot make any reference to Q1, it's not public information, but Q1 overall revenues we have...
Okay.
Make any reference in Q1.
Public information, but if.
Do you want overall.
The news, we have a $3 2 million.
Compared to.
Q4, $3 2 million as compared to Q3.
$2 6 million.
So it's a nice well.
Speaker Change: So it's a nice photo since we changed the revenue model.
Since we changed the revenue model.
Nothing more.
Speaker Change: Okay, and then just given your statements about gross margin, gross margin improvement, how does that trending, you guys, be directionally over fiscal year 2022? When should we start seeing improvement? Is that, should we see it first half or we take a more second half of the year?
Okay, and then just given your statements about gross margin gross margin improvement how is that trending do you guys see directionally over our fiscal year 2022 when should we start seeing improvement does that should we see it first half or we take more second half.
Of the year.
Speaker Change: Yeah, as we said, it's also an industrial call in September and in last industrial call. We'll see start to see improvements in the West Barge and then some other KPIs as we get into the second and third quarter of 2022 so we can start to see this improvement.
Yes, as you said it.
Certainly there's some pull in.
In September and then lots of investable.
See start to see improvement in our gross margin and some other kpis as we get into the second and third quarter of 2022. So we can start to see this.
The Bakken is 2022 .
Right.
Okay. Thanks, that's it for me good quarter guys.
Thank you.
Our next question comes from the line of Zach Cummins with B Riley Securities. Please proceed with your questions.
Speaker Change: Our next question comes from Milano Zachumans with B-Riley Securities. Please see if there are questions.
Zac Uumens: Great. Hi, Robert. Hi, David. Thanks for taking my question. Yeah, David. Yeah, David, just starting with you. I mean,
Great Hi, Robert Hi, David Thanks.
Thanks for taking my questions.
David Yeah, David just starting with you I mean.
David Dhery: Appreciate you getting on the call for an introduction. I mean, can you talk about what really attracted you to ReCore from the get-go, and what really is your overall vision for the company as you start to build out your teams? Yeah, I'm happy to do that.
Appreciate you getting on the call for an introduction I mean can you talk about what really attracted you to record from the get go in and what really is your overall vision for the company as you start to build out your teams.
Yeah, I'm happy to do that Jack Thanks for the question.
Speaker Change: So looking at the opportunities in the market, what is always interested to me is a high growth opportunity. And if I look at RECOR being really a growth company, a startup company, the way I view it in a way I think better.
So looking at the opportunities in the market.
What is always interesting to me is is a high growth opportunity and if I look at record being really a growth growth company as startup company the way I view it.
And the way I think the market should view it.
Speaker Change: This is a very, very large fragmented market. There's a lot of money being poured into the market. And when I think of the opportunity ahead,
This is a very very large fragmented market, there's a lot of money being poured into the market and when I think of the opportunity ahead. It was very attractive very compelling.
Speaker Change: It was very attractive, very compelling. Of course, the people that I met during the introduction process also compelled me. I liked the mindset.
Of course, the people that I met during that sort of introduction process also compelled me I like the the mindset of the leadership team here and I liked the technology that we're sitting on that I think has a lot of room to run. So I mean, I would say the headline those are some of the bigger tractors for me.
Speaker Change: leadership team here and I like the technology that we're sitting on that I think has a lot of room to run. So, I mean, I would say as a headline, those are some of the big attractors
When I look at the path forward here.
Speaker Change: I think in many ways, you know, the company would have been cast as a hardware company or really in a very defined segment around law enforcement or public safety over time.
I think in many ways the company would've been cashed as a hardware company or really in a in a very defined segment around law enforcement public safety over over time.
Speaker Change: I don't see that. I think that is a component of our business. I look at it as very much as a big data company. I look at it as very much as really as the transportation market and the whole infrastructure build kicks in not only here in the U.S. clearly, I mean, we see indicators of that, but just globally. There's a lot of problems to fix.
I don't see that I think that is a component of our business I look at it is very much as a big data company I look at it very much as.
Really as the transportation market and the whole infrastructure Bill kicks in not only here in the U S. Clearly I mean, we see indicators of that but just globally and there's a lot of problems to fix and it's gonna be data driven the old way of managing infrastructure monitoring it's improving it is going to change and it's going to.
Speaker Change: And it's going to be data-driven. The old way of managing infrastructure, monitoring it, improving it is going to change. And it's going to be very, very rooted in data.
Very very rooted in data.
Speaker Change: very rooted in AI. And these are areas that I'm well versed in. I've spent my career in that segment. And I look at what we have today as technology. I look at the data that we currently even consume, ingest, and transform.
Rooted in AI and these are areas that are well versed in that I've spent my career in that segment and I look at what we have today is technology I look at the data that we currently even consume ingest and transform.
Speaker Change: and the market opportunities there, so I really had no logical choice, if I can say, but yeah, I'm thrilled about the conditions for success here, and we're going to go after it.
And the market opportunities there, so I really I really.
I really had no logical choice [laughter], if I can say, but yeah I'm thrilled about our about the conditions for success here and we're going to go after it.
Speaker Change: Understood, that's helpful. And Robert, can you provide us any sort of update around your current pilot programs that you have with Recor one? I mean, is there any sort of sense you can give us of the potential square mileage opportunity under coverage and maybe when we should start to see some of these pilots converting the contracts?
Understood. That's helpful and Robert can you provide us any sort of update around your current pilot programs that you have with record. One I mean is there any sort of sense you can give us of the potential <unk>.
Quarter mileage opportunity under coverage and maybe when we should start to see some of these pilots converting their contracts.
I'm sure I I think yeah.
Robert Berman: The ones that the markets were such as Chattanooga, Winchester, Philly, those are moving along nicely. The implementations are near completion and some cases completed in segments of those cities.
The ones that the market's aware of such as Chattanooga, Winchester or Philly.
Those are moving along nicely. The implementations are near completion in some cases completed in segments of those cities.
Robert Berman: I'm pleased to say that we've added a number of smaller deployments, and I don't have, you know, the exact square miles sack, but I will tell you that the footprint is growing.
I'm pleased to say that we've added.
A number of smaller deployments and I don't have the exact square miles Jack but I will tell you that the footprint is growing.
Robert Berman: And I think as we get into the second and third quarter this year, we're going to see some of those things start converting and the results of the effort of getting those pilots going.
And I think as we get into the second and third quarter of this year, we're going to see you know some of those things start converting in the results of.
The effort of getting those pilots going.
You know give us better kpis better information that we can see forward with but we're still very confident about the value of what we think this technology.
Robert Berman: forward with, but we're still very confident about the value of what we think this technology
Robert Berman: is, I think, you know, when David joined, one of my concerns, frankly, was having him here, was that he was going to, you know, uncover something where maybe we were drinking our own Kool-Aid, and I think, you know, we've confirmed that we think the value
As I think you know when David joined one of my concerns frankly, what's happening in New York City was going to.
You know uncover something where maybe we were drinking our own Kool aid and I think we've confirmed that we think of the value.
Robert Berman: of the data and we've learned that there are so many more use cases outside of government.
The data.
And we've learned that there are so many more use cases outside of government that you know some of the numbers that we've kind of thrown around not formally yet, but we've all talked about those are realistic and maybe in some cases might even be on the low side I mean, David do you want to add anything to that yeah I totally agree.
Robert Berman: that some of the numbers that we've kind of thrown around, not formally yet, but we've all talked about those.
Robert Berman: you know, are realistic and maybe in some cases might even be on the low side. I mean, David, do you want to add anything to that? Yeah, I totally agree. I think when we looked at the market sizing back in the investor day, it predates my time, but I was a keen observer and watched the numbers and also dug into the data.
I think when we looked at the market sizing back in the Investor day. It predates my time, but I was a keen observer and watched watch the numbers and also dug into the data I think it's looking at a very really narrow view of what is possible.
David Dhery: I think it's looking at a very narrow view of what is possible and when I think of
When I think of those commercial aspects and what you would traditionally view is it government or beta G. The.
David Dhery: both commercial aspects and what you would traditionally view as a government or B2G.
David Dhery: The commercial side was really not even contemplated in that, and second of all, it was rooted in
The commercial side was really even not even contemplated in that and second of all it was it was rooted in sort of a legacy mindset starting from an H M S.
David Dhery: sort of a legacy mindset starting from an ATMS or automatic traffic management system like signaling sort of legacy infrastructure approach. And when I think of this concept of intelligent infrastructure, you know, there is infrastructure out there. We see it every day, right? We drive on it. We see it on the roadway.
Or automatic.
Traffic management system like signaling sort of legacy infrastructure approach and when I think of this concept with intelligent infrastructure.
There is infrastructure out there we see it everyday right we weren't we drive on it we see it on the roadways.
David Dhery: The idea of digitizing that and being able to marry physical and digital infrastructure is really the opportunity. And that's something that is, I would say, a new, really a large and new opportunity for us. And the monetization.
The idea of digitizing and being able to marry physical and digital infrastructure is really the opportunity and that's something that is a I would say a.
New.
Really large and new opportunity for us and the monetization.
David Dhery: is quite significant. If you think about, you know, if you have intelligent infrastructure in a location, the ability to serve multiple missions, you know, you think about traffic moving across a roadway and you think about the value that information provides to, you know, commercial entities and even something as simple as commercial real estate.
Is that it is quite significant if you think about you know if you have intelligent infrastructure in a location the ability to serve multiple missions, you think about traffic moving across a roadway and you think about the value that information provider to commercial entities and.
Even something as simple as commercial real estate.
David Dhery: Like that idea and how they build and where they build and how they monetize retail and how they think about that whole space.
We like that idea and how they build and where they build and how they monetize retail and how they think about that whole space.
David Dhery: That was never contemplated back in the investor day in terms of where the value or pockets of value sit. So, I do think it's pretty significant. I do think that the approach that we're taking is quite unique. And I do believe that we'll have a disproportionate value to customers as we look across not only BDG, but...
That was never contemplated in back in the Investor day in terms of where the value or pocketed on ship.
I do think it's it's a pretty significant I do think that the approach that we're taking is quite unique and I do believe that we will have a disproportionate value to customers as we look across not only BTG, but commercial.
Yeah.
Speaker Change: Understood, that's helpful. And final question for me geared more towards EL. Can you discuss the cash burn that we saw here in the quarter? Kind of some of the items that were impacting that amount, I realize you're making some pretty aggressive investments and headcount expansion, but how we should think about available cash when it comes to executing on your plan going forward?
Understood. That's helpful and final question for me are geared more towards the al can you discuss the cash burn that we saw here in the quarter. It kind of some of the items that were impacting that amount I realize you're making some pretty aggressive investments in head count expansion, but how we should think about available cash when it when it comes to executing on your plan going forward.
Again, we cannot discuss anything that is not public but as you can see in the cash flow. We make we made significant investment in capital investment to secure inventory.
Speaker Change: Again, we cannot discuss anything that is not public, but as you can see in the cash flow, we made significant investment in capital investment to secure inventory, to make sure we have enough inventory on hand as we see, you know, we're all aware of the supply chain constraints.
Makes you have.
Inventory on hand, as we can.
You see the supply chain constraints. So you can see.
Speaker Change: So you can see a significant investment in CAPEX. Other than that, Q4 burn rate increased relative to $2 million for operating cash flow.
Significant investment in Capex other than that Q4 burn rate increase of two 2 million.
For operating cash flow.
Speaker Change: And that's what we expect maybe to grow as we hire more people in 20
And this.
That's what we expect maybe to grow as we hire more people in 2020.
Sure.
Speaker Change: Understood. That's helpful. Well, thanks for taking my questions and best of luck here going forward.
Understood. That's helpful. Thanks for taking my questions and best of luck here going forward.
Thanks Zack.
Speaker Change: Thank you. As a reminder, you may press star one to ask a question. The next question is from the line of Mike Lattimore with Northland Capital Markets.
As a reminder, you May press star one to ask the question. The next question is from line of Mike Latimore with Northland Capital markets. Please proceed with your question.
Mike Latimore: Hi, this is Aditya on behalf of Mike Latimo. Could you tell me what needs to happen or the key milestones that needs to be achieved in order for you to give guidance?
Hi, This is on behalf of Mike Latimore could you tell me what needs to happen or the key milestones that needs to be achieved in order for you to give a guidance.
Speaker Change: You know, Mike, that's a fair question. It's a good question. I think I'm
You know Mike that's a fair question, it's a good question I.
I think I I I need to.
Do my best to frame the answer by by starting.
Speaker Change: Do my best to frame the answer by starting.
As an example that the company that you are covering that was.
Speaker Change: As an example, the company that you're covering that was
Acquired by stack.
Speaker Change: You know looking at what they do similar business model different sectors to a certain degree
You know looking at what they do it's a similar business model different sector to a certain degree, but you know I think the point is that what it's very difficult to do when you're public and your fledgling right you know that.
Speaker Change: But, you know, I think that the point is that what is very difficult to do when you're public and you are fledgling, right, you know, that company was around for 20 years. I learned today looking at crunch-based data that, you know, the average start-up from family members.
That company was around for 20 years I learned today looking at Crunch base day, though that you know the average oh startup from founding to IPO.
Speaker Change: roughly nine to 11 years, right? So, you know, we're three years into this.
Roughly nine to 11 years right. So you know we're three years into this.
From the standpoint of record.
Speaker Change: as we as we look at it today and and if you look at the effort in those three years
As we as we look at it today and if you look at the the effort in those three years.
Speaker Change: And I think 50% of our resources went into other things that are not related to the core business. 2022 is the first year that this is 100% focused on.
I think 50% of our resources went into other things that are not related to the core business 2022 was the first year that this was a 100% focus on.
Speaker Change: what we're doing. So I think that if
What we're doing so.
Think that is.
If folks are willing have little patience and you guys have been great with us and we appreciate it and we've got a good group of shareholders.
Speaker Change: Folks are willing to have little patience, and you guys have been great with us, and we appreciate it, and we've got a good group of shareholders. It's not that far out. I think we need a little bit more maturity with some of the pilots, some of the use cases that David and his team are now working on for us to be able to start to give guidance.
It's not that far out I think we need a little bit more maturity with some of the pilots some of the use cases that.
David and his team are now working on for us to be able to start.
Start to give guidance.
Speaker Change: I think that that's possible towards the end of this year.
I think that thats possible, okay towards the end of this year.
Speaker Change: And I believe that if we get there before the end of the year and are able to give guidance going into 23, I think, frankly, I think that's quite remarkable given that we're 36 months into this.
I I believe that if we get there before.
Before the end of the year and are able to give guidance going into 'twenty. Three I think frankly, I think that's quite remarkable given that were 36 months into this right.
Speaker Change: So that's the best answer that I can give you. We just don't want to put stuff out there that.
So that's that's the best answer that I can give you.
We just don't want to put stuff out there.
Speaker Change: is not going to be accurate and that can't be relied upon. So we're getting there. We're almost there. And again, I think that's a good point.
<unk> is not going to be accurate and that can't be relied upon so we're getting there we're almost there and again.
Again now that this.
Speaker Change: business plan. I think when you read the business section of the K, this is the first time we filed a document.
Business plan I think when you read the business section of the K. This is the first time, we filed the document.
Speaker Change: where there's no legacy issues and things related to businesses that we're not in.
Where theres no legacy issues and things related to businesses that were not in and so forth. So 100% of the focus and the effort and the time and our resources are going into the business you see.
Speaker Change: 100% of the focus and the effort and the time and the resources are going into the business you see. And this should be a good one.
And this should be a pivotal year for us and I think it's not unrealistic to by the end of the year, we might be in a position to give guidance.
Speaker Change: It's not unrealistic that by the end of the year, we might be in a position to give that
Speaker Change: All right, all right. Can you also give some color on how cities are deploying your platform? Is it across all square miles or is it like a subset just around the BCS areas?
Alright, Alright can you also give some color on how cities are deploying our platform is it across all glad miles or is it like a subset are just that on the busiest areas.
Yes.
Oh yeah.
Speaker Change: Yeah, it's both. It depends. It's very location-dependent where they see the need, what they see traffic is where, you know, the focus is, and it's where we bring the value for analytics as well as observability and security. So it's a little bit of both, I would say.
Yeah. It's it's both it depends it's very location dependent where where they see the need what they see traffic is where the focus is and it's where we bring the value for analytics as well as the observer ability and security so it's a little bit of both.
I would say.
Alright.
Thank you.
Thank you Mike I appreciate it.
To summarize we are confident that record is well positioned to serve the needs of our customers, while maintaining financial discipline combined with the strong fundamentals of our business. This will enable us to deliver long term value to our shareholders.
Speaker Change: To summarize, we are confident that RECOR is well positioned to serve the needs of our customers while maintaining financial discipline.
Speaker Change: Combined with the strong fundamentals of our business, this will enable us to deliver long-term value to our shareholders.
Speaker Change: We will be looking at strategic acquisitions, but we are intently focused on continuing to improve our business with growing sales and an expanded global customer base. The future continues to look very bright for RECOR as the government and commercial markets continue to adopt our technology and experience the growing opportunities it provides for their mission.
We will be looking at strategic acquisitions, but we are intently focused on continuing to improve our business with growing sales and an expanded global customer base.
Future continues to look very bright for record as the government and commercial markets continue to adopt our technology and experienced the growing opportunities. It provides for their missions.
Speaker Change: Thank you all once again for your support as we look forward to another exciting year.
Thank you all once again for your support as we look forward to another exciting year.
This concludes today's conference. Thank you for your participation.