Rekor Fourth Quarter 2022 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to today's recourse Systems, Inc. Conference call. My name is sure Molly and I will be a coordinator for today.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.
Before we start I want to read you the company's abbreviated Safe Harbor statement.
I want to remind you that statements made in this conference call concerning future revenues results.
Results of operations financial positions 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 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 in our earnings release.
You should also review a description of the risk factors contained in our annual and quarterly filings with the S. E C.
non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data.
Turning to the company's ongoing operations and is provided for informational purposes only.
I want to turn the presentation over to Mr. Eyal Cohen CFO of record systems.
Hi, everyone. Thank you for taking the time to join US Orient course year end results. We are excited to share our team's progress over the year ended December 31st 2022, and update you on key business topics.
The call with me today, our CEO , although behrman and our president and CFO David Gearhart.
David will provide additional colo business, along with having remarks on recent offering and provide the stub.
But first I'll review, our relevant metrics when.
With the revenue from thousands of traffic services in the last six months was 2022.
We have accelerating growth or giving you the our sales model.
As you may recall in the third for those 2021 we made a strategic shift in our business model, so emphasizing recurring revenue more than point in time.
Our goal is to provide more value and flexibility for our customers. So subscription based data services and software offerings.
And its consequences.
We saw strong growth in recurring in 2022 the.
Our percentage of recurring revenue.
Total revenue was 66% over the 12 months ended December 31.
2022 months compared with 40% for the 12 months ended December 31st 2021.
This is providing us with a solid foundation for strength.
Revenues for the long term.
In the third quarter 2022 we also undertook significant streamlining business achieved a notable reduction in operating expenses.
During the fourth quarter we.
We saw the full impact of the <unk>.
Operating expenses across our general and administrative sales and marketing and research and development expenses decreased by 4 million during the four $4 million.
During the fourth quarter 2022, compared to the third quarter of 2022.
The reductions were designed to scaled back longer range project as we concentrate on near term infrastructure spending opportunities in North America.
Now let me highlight some other detail the financial results for the 12 months ending December 31st 2022, and some more recent developments.
As a result of a significant change in market capitalization.
Neither goodwill impairment was $34 $8 million in the third quarter was 2022.
In December 2022.
We sold our low margin legacy automated traffic safety enforcement business units for $3 $4 million and its results are categorized as discontinued operation one O N E.
January 'twenty two 'twenty three we finalized the $15 million senior secured note transaction led by our CEO Albert Behler.
On Friday, we also finalized the $10 million.
Also rig which was priced at the market.
At close.
Revenue for the year ended December 31st 122 was $19 9 million.
Compared to $11 $6 million in the same period last year, an increase of seven 2%.
Total revenue of discontinued operations was $22 $3 million for the year ended December 31.
So when you do.
Compared to $14 $3 million for the year ended December 31st 2021.
Recurring revenue for the 12 months ended December 31st when we need to increase by eight and a half million dollar compared to the same period last year.
This represents an increase in recurring damage.
82% or 12 months period.
As of December 31st let me explain it to compare to the center.
This year.
The assortments obligation increased to $21 1 million as of December 31st 2022, compared with $14 7 million.
As of December 31st 2021.
Well for secret very pleased to share that our revenue target.
Tenured clients with significant improvement in 2022 compared with 2021.
In fact, 6% of total revenue for the 12 months ended December 31st.
Terry.
Compared to only 40% of the same period in the previous year.
As I mentioned before we have been hard at work streamlining our business, we invested in our growth by adding new hires so our engineering sales and marketing teams in the field.
It's about when it's going to as we integrate them the latest technology.
Into our suite of product and service offerings.
We also experienced increases in payroll and payroll related expenses.
Anything to our S E T S acquisition.
Total operating expenses for the year ended December 31st two.
Two were $60 million not including the goodwill impairment.
Compared to $38 9 million during the year end December 31 21.
But we have been.
Keeping a watchful eye on our expenses evaluated our results carefully admits to maintain their fear and grateful notes operating expenses. These efforts have already paid off and we are pleased to share that.
We have managed to reduce our expenses by $3 9 million in the last six months when compared to the first six months of the year.
Five the inclusion of a full six months of STS expense.
While we are excited about the future we continue to manage our expenses, while investing in our growth and delivering the best possible value to our stakeholders.
We do some remarkable results.
Nick.
About the future and look forward to continuing to drive growth and profitability.
During the third quarter was 2022, we experienced a significant decline in our Watson designation.
Which we deem a triggering events related to COVID-19.
As a result, we made an impairment assessment as of September 30.
Clearly 2022 and determine that we had an impairment related to goodwill in the amount of 34 $8 million.
Our adjusted gross margin for the year ended December 31.
22 decreased to 45% from 61% in the same period last year.
The decline in margin for the year ended December 31st 2022 is primarily attributable to lower margin on Sps revenue, which we are working to improve with new technologies.
With the expansion of our customer footprint and installed technology base, we expect to see improvements in our adjusted gross margin in the future.
Adjusted EBITDA for the year ended December 31st point in 'twenty twos.
And so when you work increased to a loss of $37 $4 million from a loss was $22 8 million respectively.
This increased loss was due to the investment.
<unk> previously to position us for future growth.
However, as a result of the more recent streamlining it.
We have seen a decrease in loss from the second quarter of 2018.
Yeah.
<unk> has released intense key performance indicators to provide better visibility and a more detailed view of our success and progress.
We've changed our revenue model September 2020 one.
We believe.
This Casey I give our shareholders a better insight into our business overtime.
During the year ended December 31, who we won $22 million.
No contracts compared to only $8 $9 million in total contract value of one during the same period in 2021.
As of December 31st plenty plenty to our remaining contract performance obligation amounted to $21 $1 million.
We expect to recognize approximately 59% of the CMO over the succeeding 12 months.
This represents a remarkable increase of $6 $7 million.
A 45%.
Compared to $14 $7 million of performance obligations as of December 31st.
'twenty one.
We believe that our Kpis, we continued to improve as we continue to build relationships and expand our presence.
Moving moving to our financial condition and liquidity.
On Friday, we announced as I said direct offering for $10 million.
This action provides us with the liquidity, we need to continue and execute our strategy.
All of them will elaborate on the transaction data.
As a result of the transaction, we will file our 10-K shortly.
Our cash balance on December 31, two was $2 $5 million a decrease from $24 1 million.
December 31st 2021.
We've had in working capital.
As of December 31st when it's when the queue of $6 million down from working capital of $16 9 million as of December 31st 2021.
The decrease in working capital was primarily due to a decrease in cash and cash equivalents.
This decline was primarily due to the increase in our loss per operation as we position the company for future growth and reflects the cash acquired.
To acquire STS.
The reduction in cash was partially offset by a net cash inflow of $22 $8 million as part of our 'twenty to 'twenty.
2022 after market sales agreement, which was terminated in December of this year.
In January we announced the closing of senior secured notes in the aggregate the most up to $15 million.
Led by our CEO almost burger.
With participation from other new and existing investors.
As clothing, 12, and a half million dollars.
It was funded.
We are confident.
Regarding <unk> growth prospects, because we are experiencing strong momentum.
You know market.
As you'll hear from David in just a moment, we are taking a strategic approach to all investments.
Focusing on our rapidly increasing our margins to maximize profitability.
With this approach we fully expect to see significant improvements in our margins in the near future.
Our company remains firmly committed to creating shareholder value and making decisions that will benefit our long term shareholders.
We are dedicated to delivering consistent growth and are excited about the opportunities that lie ahead.
Thank you for your continued support as we work toward achieving our goals together.
With that I will now turn the call over to David.
David.
Thank you al.
Good afternoon, everyone and thank you for joining us today, I'm, David Harney, President and COO of record.
I've just recently passed the one year Mark as part of the leadership team here and I must say, it's been an incredible privilege and honor to shape the future of our company and to have the opportunity to change the course of an entire industry.
Though it has been quite a challenging year, given the geopolitical macroeconomic and overall market volatility and uncertainty. It has also been a remarkable year of transformation growth and opportunity for recall.
Looking forward to sharing some highlights of what we've accomplished in the past year and our plans for future growth.
<unk> stands at the forefront of innovation, leading the charge as the premier provider of roadway intelligence and data driven mobility insights on a global scale.
As a technology company.
We are changing the course of the public safety urban mobility and transportation market segments, with our cutting edge AI, driven solutions, enabling smarter safer and more sustainable streets for all communities.
Over the past year.
As you just heard from al.
We have prioritized driving key performance indicators such as revenue.
Annual recurring revenue performance obligations and operational efficiencies across people processes and technology.
And as I also highlighted in his remarks, we have achieved significant progress on all of these metrics in 2022, both quarter over quarter and year over year.
Starting with operational efficiencies like many tech companies, we continue to make talk too, but important choices help rightsize, our business and instill financial and operational disciplines across people processes and technologies.
As part of our operational efficiencies in late 2022.
Divested our automated traffic safety enforcement business, commonly known as the Red light and speed camera ticket business.
This move was a strategic shift towards prioritizing our core data services businesses.
The a T. S E business was labor intensive and had low profit margins and was entering into a heavy technology refresh cycle, which would serve as a distraction from our core focus.
While we divested our ATSG interests at the same time, we focused on completing the integration of recourse to strategic acquisitions wake her.
And southern traffic services or S. T S.
This is a result.
<unk> insignificant advantages and synergies on the technology and business front per week over as we enter 2023 ally, allowing us to advance our leading technology vertical expertise in the transportation markets and expand our footprint, while simultaneously, increasing our visibility and momentum with major industry input.
Influencers such as the U S Department of Transportation Federal Highway administration, intelligent transportation systems, or Etfs, and the American Association Association of state highlights or Ashton.
As well as forged new partnerships with dozens of transportation data and technology leaders, including safely strike.
Strike, well Cintra Huizhou, Blink see predict IQ Tomorrow, I O ways, Amazon Web services and many others.
An example of significant advantages and synergies from our acquisitions, we recently announced the formation of the <unk> partner network, which extends the work that wake her started with third party data providers several years ago.
And now has been expanded and considered to be one of the most comprehensive hubs for mobility data and transportation information in the industry.
Today, we call partner network boasts 40 partners connecting data from various sources that cover 95% of U S Road weights 28 auto Oems close to 14 million connected and electric vehicles, and 20 trillion data points globally.
Why does this matter with.
With 65% of U S roadways weighted in poor condition traffic congestion and greenhouse gas emissions measuring the highest ever recorded in.
And a tragic 43000 fatalities and millions more seriously injured every year on our roadways. There has never been more demand and call for states municipalities City and Redwood managers to understand exactly what is moving on their streets and in their communities in real time, and predictably and to take proactive and immediate and.
Form decisions.
Record is uniquely positioned to answer that call with our growing expanding Rico apartment network.
Another example of where our acquisitions have brought significant advantages and synergies is with STS is 30 years of traffic engineering and data collection expertise coupled with the deep relationships. They have forged across multiple state departments of transportation and commercial entities.
In the second half of 2022 we successfully integrated STS as traffic and data collection expertise with.
<unk> next generation AI and machine learning technologies, and Iot edge devices always on always connected always learning, forming a connected digital infrastructure and a new operating system for the roadways.
It is important to note that every public and private roadway or intersection project always starts with planning and planning always start with collecting data from the roadway this is where recourse strength and differentiation really shines.
And there are literally millions of these traffic studies conducted across the U S annually.
And every state and municipality in the country is required to provide traffic class count and speed reports to the federal Highway administration to receive federal transportation funds.
This integration of STS and record has positioned us to be the leading provider of noninterest.
Driven real time traffic data collection and analytics services in the industry.
With over 30000 data collection sites more than 60000 lanes and hundreds of thousands of miles of roadway already under management. We are now expanding this footprint across the U S with our recently announced breakthrough.
Hedge Max and edge Flex solutions for both permanent and short term traffic studies. We see these solutions are significant growth drivers for revenue and pipeline into 2023.
Okay.
Now I would like to provide some key highlights in each of our business segments coming into the year.
Urban mobility transportation management, and the licensing of our vehicle identification software and license plate recognition technology across public agencies and commercial entities around the world.
First.
Let's talk about our progress in urban mobility.
Traditional approaches to capturing roadway and infrastructure analytics for planning and engineering employee expensive manual processes that use antiquated technology to capture a fraction of the information needed for a fraction of the time.
This market segment is ripe for disruption and we are well positioned to benefit from this industry transformation.
Seamless opportunity emerging in the fall of 2022, we pre announced our new AI based edge, Max and edge Flex roadway data collection systems designed to help our customers capture high resolution roadway data using AI and transform it into holistic traffic insights for vehicle classification counts.
And speed according to the exacting standards of the Federal Highway administration and U S Department of transportation.
Whether it be passenger vehicles are mixed axel commercial trucks or any of the 13 specific D. O T vehicle classes present on our roadways.
Core Pas ground truth insights, both in real time, and historically, allowing agencies to better organize and execute roadway planning and city building initiatives and a smart safe and future proof way.
In addition to government agencies, many businesses also need to understand and manage the vehicle flow patterns types and other important analytics regarding vehicles in their geographies, whether it is an engineering firm collecting roadway data for their customers a corporation monitoring traffic across campuses for a real estate developer planning.
A specific area the capture of accurate holistic roadway data is valuable for each of these unique use cases.
Since announcing our new edge, Max and edge Flash solutions, we are encouraged by the multiple reverse inquiries and strong engagement for more than 40% of the U S. State so far and have confirmed interest to deploy our non intrusive AI driven data collection systems across their states. This is all new pipeline for us and it is.
It's growing rapidly.
I'm pleased to highlight several significant customer wins as examples.
<unk>, a seven year contract to provide AI based traffic data collection to the Florida Department of transportation and the city of Tallahassee, including 18 counties in the Panhandle region of Florida.
We're also proud to have secured new and extended contracts and task orders with state departments of transportation across the U S, such as Pennsylvania, Mississippi, Alabama and Ohio.
Our advanced non intrusive edge based data collection technology is being used to support the digitization of transportation infrastructure and the shifting ubiquitous AI based traffic studies across the states.
I'm also pleased to highlight that our project with the Philadelphia Navy yard and the city of Brotherly Love as a real world large scale laboratory sites to push the boundaries of our traffic analytics capabilities and solutions and a one of a kind public private partnership with Amazon Web services.
We of course technology is analyzing traffic patterns across the full scope of the metro area, providing critical insights of the traffic flow visitors volume types of vehicles and the impact of those visitors and vehicles, including environmental insights such as electric vehicle volumes electric vehicle charging station placement and greenhouse gas emission analytics.
The work that we've done with Philadelphia is a shining example of practical here and now AI based smart city applications.
Icing on the cake here is that this project also earned us the AWS Smart city competency for Smart urban transportation, which is a distinction held by only a handful of companies worldwide.
Another key milestone to highlight is our recently announced partnership with Drake wall.
The newest rig core partner network partner.
Yeah.
Break most providing fast accurate and easily shareable traffic data analytics for transportation agencies, and corporations and private firms worldwide.
Greg will seamlessly integrates with our edge Max and edge Flex data collection systems, covering all aspects of the department of transportation traffic data programs.
<unk> customers include eight U S and two international Department of Transportation, and our partnership as a launching pad for multiple expansion opportunities, making it simple for departments of transportation everywhere to adopt and access our next generation AI based approach for real time traffic analytics.
Now, let me shift gears to another one of our segments.
Called Transportation management.
In this business segment, our machines to help traffic management centers and agencies ship from being Siloed and reactive to being integrated interoperable and proactive in our approach to managing roadways, providing the necessary modern tools to help them save lives improve traffic flow and <unk>.
Reduced pollution in their cities.
We of course traffic management platform revolutionize the way traffic operations and management centers operate.
Providing an unparalleled set of real time, and predictive tools and the most complete and holistic view of their roadways with this insight the platform empowers decision makers to take Swift and effective action to enhance safety sustainability and efficiency for citizens across the communities setting a new standard for intelligent traffic management.
Yeah.
Our traffic management solutions have consistently proven to identify more incidents faster than conventional methods to enable proactive traffic management through advanced crash risk predictions and to do this in a collaborative way connecting agencies and stakeholders, including notifications and alerts to citizens and the public.
And the comprehensive Cross agency platform.
<unk> offers specific applications, where traffic management.
The way service patrol first responders and maintenance crews aligning all to better address traffic challenges, while arming them with the vital information needed to identify manage and recover from incidents events and irregularities on our roadways.
Now lets funds from the $1 two trillion dollar bilateral infrastructure law continue to be unlocked in 2023, we are seeing an increase in our opportunities and pipeline growth as well.
Along this line I'm excited to highlight some of the recent customer wins and milestones in our transportation management business segment.
One example is our recent multi year contract win with Texas, The second largest state in the U S.
Using recall, the Texas Department of transportation or Txdot is.
He is building a first ever comprehensive real time source of roadway intelligence for the state.
Our record traffic management platform will serve as the hub for Txdot.
Providing accurate insights for predictive high potential crashed hotspots, leveraging real time connected vehicle data and multiple third party data sources.
This means traffic management.
And txdot will be able to receive alerts for instance, like crashes abandoned vehicles and runway debris in real time and from a single source of truth.
This will enable the agency to collaborate or respond quickly and proactively to high risk areas and enhance safety of its vast network of roadways.
Our program with Txdot.
Is a significant achievement for <unk> as it expands our value and presence across one of the largest and most extensive traffic management centers in the nation.
As another example of progress in this segment is record being chosen by the Central Ohio Transit Authority, our Cotai for their integrated mobility innovation Transit program and initiatives designed to improve roadway safety and transit services across 13, Ohio counties.
In addition, we have also been selected by the Missouri Department of transportation for their new strategic Highway safety plan called Xiaomi zero.
As they aim to reverse rising traffic fatalities on the roadways.
Tapping into the new infrastructure Bill funding with Missouri, we are combining our traffic management expertise.
Integration of multiple datasets across multiple ecosystem players as well as bringing our deep expertise and marrying our record edge Iot devices to connect the dots across software data and hardware systems, providing the most comprehensive and complete view of Missouri's highways for the state's traffic management Center.
Other bellwether successes in 2022 included partnership Cintra.
One of the largest private developers of transportation infrastructure in the world, where together, we secured a multiyear contract to serve as the technology platform for Oregon's connected vehicle data ecosystem.
This program supports the Oregon statewide road usage charge initiative and our selection was the result of us being down selected from a pool of 14 major competitors.
This is an important achievement given that electric vehicle ownership is rapidly the placing.
Federal and state gas tax revenues.
And the work we are doing with Oregon is being monitored closely by multiple other states.
In addition to our partnership with Oregon, and Cintra, We also expanded our solutions in other departments of transportation across the U S. In 2022, including California's Metropolitan Transportation Commission.
As well as Colorado, Kansas, and Alabama States, all representing new multiyear contracts the record.
And in addition, we achieved a significant contract extension with Elan highways in Israel, highlighting our reputation for excellence and our global scale.
These successes are tangible evidence of the differentiation, we deliver to our customers every day and the ability to serve the evolving needs of the transportation industry.
While our urban mobility and transportation management business segments have gained significant traction and growth in the past year. I'm also pleased to highlight our momentum in the direct sale and licensing of our software and technology across public safety law enforcement security industries and various commercial use cases.
In the past year, we've secured multiple new major contracts and partnerships and continue to extend our leadership in AI driven vehicle identification license plate recognition and comprehensive roadway intelligence solutions in the public sector and the public safety business segment.
For example, we've made significant inroads in the commercial market over the past year with our vehicle identification and LPR software and systems being chosen by a major American amusement Park Corporation to improve traffic management and security capabilities.
Household name you would know this corporation I want the most theme parks and water parks combined of any amusement Park company post over 30 million guests annually and ranked seventh in the world in terms of attendance.
In addition to this weaker also added the Las Vegas pumps Casino resort as its eighth major casino customers cementing our vehicle identification and LCR solutions as a new gold standard for the gaming industry with leading casino operators in Nevada, New York, and California, selecting <unk> for their security across properties.
Our partnership with safely.
Is another Prime example of traction and growth in the past year across our public safety business segment.
As of right now the provider of safety solutions for fleet vehicles nationally say fleet leads the market in a wide range of industries, including law enforcement transit in the school bus market nationwide.
We recently announced a multi year licensing agreement with safe fleet deploying our advanced technology in their next generation violation detection platforms for transit.
For law enforcement and for school bus stop arm violation detection platforms.
All three platforms, our focused growth pillars for safe fleets business. We are pleased to play a role in helping them achieve their objectives.
This also presents a significant growth opportunity for <unk> with the potential to be inside and connected to thousands of fleet vehicles across states and nationally.
Vance Veeco recognition and enforcement technologies.
In addition.
Record is also is also playing a mission critical role in safeguarding the security of our nation.
Vehicle recognition technology meets the exacting standards of the federal agencies and being utilized at key locations worldwide.
We are proud to serve the federal government across multiple agencies already.
And they have received yet another significant purchase order extension project elegant software for deployment domestically.
And internationally.
And speaking of international growth.
Pleased to also highlight that one of the largest states and Mexico has selected and is now deploying our vehicle recognition software and hardware across 1800 locations across that region, representing the largest vehicle recognition and roadway intelligence deployment and Mexico's history as they aim to improve the public safety and security of millions of Mexican citizens.
There's one more area that I wanted to highlight with you as part of my business update.
This is regarding our record e-commerce platform the channel that deserves recognition.
Our E Commerce platform offers a secure and seamless shopping experience for vehicle identification and L. P. R technology licensing serving customers worldwide.
Over and over 90 countries around the world.
Highlighting the expanding demand for our products and services globally.
The growth of our software as a service or SaaS licensing business has been remarkable over the past years with revenue increasing from zero point $4 million in 2019 to $1 7 million in 2022, representing an astounding, 280% growth over the period and surpassing 12.
800 active monthly subscribers in 2022, all with little investment in marketing.
As we look ahead in 2023, we expect continued and accelerated growth of our E Commerce channel and of course across each of our business segments as well.
Recall, we are moving into scale now and truly believe the best is yet to come.
To conclude my remarks today once again it has been an honor and a privilege to help guide the transformation of recall over this past year as president and COO. It has been a remarkable year of transformation growth and opportunity and.
And we are reshaping the industry.
Our progress in advancements in 2022 were significant and made possible by our leading edge technology and strategic partnerships and by the dedicated and committed employees, who work tirelessly to navigate the challenging business climate and deliver against our growth objectives and financial results.
Looking forward, we call it is well positioned for growth and scale we.
We have technical differentiation in each of our business lines, a first mover advantage massive market tailwind strong partnerships and clients that hold us to the highest standards and a growth flywheel all contributing to our continued success.
We're excited about our path forward as a company and grateful.
To our shareholders continued support and trust in the company and leadership.
I'd like to thank you all for joining me today and I look forward to speaking with you soon.
Now to hand, the call over to Robert Berman, our CEO for final remarks and for Q&A.
Robert.
Thank you David.
As al mentioned earlier in the call on Friday, we announced a registered direct offering for $10 million.
Given the turmoil in the world and banking sector, creating severe market headwinds our decision was made to access the shelf overnight before this earnings call.
For those of you that are not aware the company shelf was re measured with the filing of the 10-K.
At our present market cap, our shelf would have fallen to baby shelf rules allow.
Allowing for the company to access less than a couple million dollars at best if needed.
Our conversations with strategic investors continue and we've had offers however to date those have come with way too many strengths and conditions, where recourse independents will be impaired.
The overnight offering strengthened recourse hand, and put cash on the balance sheet to continue funding our growth.
Mind, you, we do business with almost all of the companies, we're talking to about a broader relationship and cap.
So we need to be careful about tossing the baby out with the Bath more.
As David stated as we look ahead in 2023, we expect continued and accelerated growth across all of our business segments.
Consequently, and for the first time, we were pleased to be providing revenue guidance for the fiscal year 2023.
And the range of $45 million to $55 million in revenue with EBITDA of negative $26 million to $28 million.
This year and profitable by the end of 2023.
Furthermore, we are forecasting 2024 is revenue.
In the range of $120 million to $130 million with eight $5 million to $15 million in positive EBITDA.
This growth is achievable because our technology is replacing legacy technology.
Which is at the end of life, which has not changed and more than 60 years.
For those of you that are concerned about recourse share count I will say that we have been extremely judicious with our stock over the past years.
We have invested more than $100 million in our technology and.
In addition to making two significant and important acquisitions.
With less than 78 million shares on a fully diluted basis.
We were able to accomplish this because we did access the equity markets at various pricing.
At various times from $1 40 to $12 per share.
We funded the R&D and product position of our solutions. When we had the resources to prudently maintain a first mover advantage.
And now we are focused on prudently, maintaining our first mover advantage, but efficiencies and scale.
The time will come when this technology will be monetized and reflected in our share price and given the size of this market opportunity our share count is less than one one might think.
Recourse started as a startup.
Public company a tire.
And I believe we are now a season entity with the credibility customer trust technology and resources to see this through.
Now I would like to open the floor for any questions you may have please.
Please don't hesitate to ask we're here to provide transparency and clarify and we're eager to address any and all concerns or inquiries you may have.
Operator.
Yeah.
Thank you and at this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starts.
And our first question comes from the line of Zach Cummins with B Riley Securities.
Please proceed with your <unk>.
Yeah, Hi, good afternoon. Thanks for taking my questions. Robert I appreciate you, giving some more insight into potential.
Potential for this business going forward here I mean, just to that point I mean can you speak to.
I don't know some of the underlying assumptions that are driving confidence in not only providing guidance for the next couple of years, but I'm.
Pretty pretty robust growth versus kind of where we ended up in 2022, so any sort of additional insight on that front would be very helpful.
Yeah, I mean sure Zack thank you.
Look.
We've spent several years.
<unk> ourselves for just us right.
There's not that many people on this call right.
And that means theres not that many people paying attention to that.
And I think thats, the same with infrastructure and the infrastructure Bill on the whole concept of infrastructure moving to a new world, which is putting a digital layer over it.
And I believe that we've positioned ourselves exactly there when we introduced the technology back in I guess what Congress.
<unk> 22 to do what's mandate, which is count class and speed by every state every state does the same thing for 60 or 70 years.
How does the federal government distribute gasoline excise taxes right.
Inductive loops.
On mechanical counters buggy whips and charges and so on and so forth. You know this is not that interesting to a lot of people right. So therefore, they don't pay attention to it.
Alright.
The confidence in the growth comes from the fact that we've introduced technology that you know that traffic engineers that work at Dot's want.
They want a way to do this without intruding in the roadways and digging into roadways up and having people get harmed and creating congestion so on and so forth.
And that's where it comes from and we see it by the reverse inquiry as David mentioned.
40% of the states, saying, Okay can you really do this come show us.
So it's you know it's being out there working with the states and seeing the demand for the technology.
It's there and that's what we've been working towards fall. This year. So that's what gives us the confidence and we know it's there and were out there deploying this technology now so it's not about aspirational or developing and making it happen it's something we're doing today.
Alright, and Thats, what gives us it gives us the confidence that we can do this and beyond.
Got it that's helpful and and I think David might have mentioned it in some of his commentary but are.
Some of your end customers starting to get access to infrastructure funding at this point to where it's able to accelerate some of these deployments I'm just curious on what Youre, saying.
That's exactly that's a really interesting question, but I want to separate the transportation Bill from what funding.
Funding is already there so what we're talking about is forming that's there and has been there for the past decades.
Okay. David can go into the new stuff coming in that has to do with you know.
The things that we're doing with it.
With the way care acquisition right, but we're talking about is stuff that they're doing here and in Europe for the last 50 or 60 years. So they have that funding theyre doing it anyway, it's just a better way of doing it.
So David maybe you can talk to the some of the stuff that's going on that's outside of that but it was tough we're talking about sac is already funded.
Yes, Robert I can I can complement on that in regards to the department of transportation, gaining access to the infrastructure bill or bilateral infrastructure law as it's now called <unk>.
Those are accessible through grants and states are already submitting applications for these grants and we are working with states to help them in the submission process to help.
To be able to put the technology layer the digital layer that's required in some of these grants that require technology and digitization.
And so we are starting to see that now open up and states are aggressively moving to be able to capture their fair share our unfair share or is it may be in some cases to capture those funds. So yes, we are starting to see that now happen. It is what is driving a significant uptick in our pipeline in our transportation management business in particular.
But going back to Robert's point, when we look at urban mobility and the classification counting the speed opportunity ahead of US. These are funds that are available now it's not tied to the infrastructure Bill funds at all this is that money thats there to access today. So we have the ability to monetize today as well.
As into the future.
Using both of those sources.
Got it that's helpful and final question for me I'm, Robert I appreciate that the guidance into the adjusted EBITDA side as well I mean.
Obviously, you did did the recent.
Direct capital raising gear up overnight, but I mean can you talk about potential cash needs as you continue to ramp up pretty significantly in the second half of this year.
Yeah, I mean, I think looks at between the note offering registered direct.
We feel very confident that we can drive the company to profitability right in 2023.
I think we feel good about where we are and again a lot of it comes from.
Something that one we acquired STS they had already pioneered the concept of pay for data.
Right so the differences.
Installing inductive loop for $40000 and dig up the road and spent 30 or 40 days to do it.
Or put up a system that can do it.
As easily for a fraction of the cost right.
In real time without <unk>.
All the damage it goes along with taking out the road and so on and so forth right. So that's where we see the.
The growth coming from it's primarily in urban mobility and it's it's truly I think it's important to break this out because I think you know that.
So look there's so few or several hundred people on this call right and you know and frankly, you're all the fortunate ones right because someday it'll be several thousand or more.
Right the concept of what.
What we're doing is disrupting something thats been bond for 60 70 years, if not more of the same way using technology that has not changed.
Okay, and that's the point and they are mandated to do this and you can now do this with the technology that <unk> has been developing for several years right, which is proficiency of edge processing roadside.
Machine vision, and so forth and it starts with vehicle Ivy and vehicle.
Recognition and then you transfer that to vehicle classifications.
You are right and this is something that the states have been looking for and hearing about but nobody's delivered it. So you know here we are.
Right. So that's why we have the confidence level right.
Be able to say that we believe we can do what we're gonna do going into 'twenty, three and 'twenty four.
Understood well, thanks for taking my questions and best of luck here in the coming quarters.
Yes, Thanks Jack.
Okay.
And just as a reminder, if anyone has any questions you May press star one to join the question and answer.
Q.
And our next question comes from the line of Yahoo, a private Investor. Please proceed with your question.
Yes, Thanks for taking my call definitely impressed with the management team and the shelves and in reflection of the Pea ours. One of my questions is.
Within the United States, It seems to be a lot of activity with the contracts and technology, but outside the U S overseas Besides Israel.
<unk> been a little quiet can we expect that to change.
Well that's a that's a really good question. So let me start by saying this almost every government okay in the world right even in.
Very slowly developing countries right. They how do they budget the roadways. They they look at the tonnage going across the road over a period of time 510, 15, 20 years and they they extrapolate and idea of what they think it might require to repair replace and maintain that.
Alright, so they do this with very rudimentary wage state.
<unk> do mechanical counting of vehicles from someplace, they actually put people on the roads account vehicles.
Alright, so everybody uses the same concept to figure out how to maintain and repair replace the roadways. So it starts with that it all starts with analytics and as David said earlier planning and planning starts with data.
So if there's a different way to collect data on roadways, well then that's where it begins right. So everybody across the globe does the same thing.
Alright, so it starts with the ability to collect data and the beauty about what recourse on it's just created a single system that has multiple capabilities.
So not only can we go out and collect the data.
Right and then tell you what's crossing your roadways, you know how much tonnage.
Emissions from the tonnage is crossing the road so on and so forth, but also can be used for public safety and a thousand other cases without touching the device. It's just one device that goes after against us there.
Alright, you can toggle things on top of things off so I think what youre going to see is that this is going to expand beyond the U S. It's going to expand well beyond the U S borders right.
And we can tell you today that we know that there are companies installing inductive loops all around the world, they're doing and in South Korea, there during Europe , they're installing these things a whole replace because the technology is pretty much the same.
You drive through any traffic intersection if you look when you get to the intersection you'll see cuts on the road and what that is that's an inductive loops. So it feels the weight of your vehicle crossing it.
And then there's some magnetic field there that measures the number of actuals and it triggers a timer well. This is the 20 <unk> century, you don't need to do that right.
So.
The answer to your question the same technologies used outside the U S. Certainly almost in you know the majority of the developed world. So hopefully we'll see CFO .
Yeah.
And then also I believe since I mentioned, Israel, I think I read somewhere do you plan on implementing yeah. The bus transit technology also in the future.
Well, that's the same thing what we're doing with coda in Ohio. It was we're helping them throughout their buses because they're able to schedule more real time, where the buses are so that somebody can look at their phone, which we're all used to looking at an figure. Okay. My muscles three minutes early it's kind of in the slate I can plan my schedule. So again this comes from the same tech.
Knowledge and that's the point right. It's one piece of technology that does all of this it does all of it right and for those of you that had been following record for a few years you know that we started with vehicle I D.
So that's where we got our start license plate recognition looking at a vehicle from their machine learning takes over and you just train and train and train and train and you can look at different things. So that's exactly the point.
So whether youre looking at loss schedules train schedules.
Raptor travelers pulling in and out of ports it doesn't matter what it is okay. This the system that we both can do all of that right. So we're here at the very early stages of it for whatever reason roads bridges tunnels are not all that exciting to the investment that you're mandated they'd rather sheet Tech talk you know so that you can post a video.
But you know this is probably the largest.
Many of you.
You know the economy that there is when you look around the world. It's infrastructure right. So you have to put a layer of digital infrastructure over pardon infrastructure and that's what we're doing.
And someday like I said there'll be thousands and thousands of you on these calls not just you know the several hundreds of thorough so thank you for the question.
Yeah, and with also with the Oklahoma PR today and.
And the uninsured motor vehicles is that drawing interest from any other states also.
You know.
It hasn't at this point when we started it we had a number of states that we're interested.
Why the states not want it and reduce the number of walnuts shred motor vehicles on the road I have no idea.
Since we have been which is only a couple of years running the program in Oklahoma to exactly what we told Oklahoma would happen we've reduced the number of uninsured motor vehicles on that states roadway by law.
A little over 40% right in the self funded program I do think over time.
Given this this is the 20 <unk> century that contactless compliance, whether it's registration or motor vehicle inspections uninsured whatever it might be theres better things for our law enforcement officers to be knowing the pulling people over for.
Minor traffic infractions. So this is a system that record belt that works well, but again, it's the same system the chapter counting count classroom speed.
So we need everybody on this call to understand when we deploy a system. It does all of this it's just a matter of toggling on we're turning it off right. If you want and I'll turn it off.
You'll pay for it but I will turn it off right. So that's the point, we don't need to go back out to the.
Highway and install something else that's that's the difference.
And also what's the silly contract maybe ours, that's the wonder pilot or can we expect that to be.
Any contract PR in the future.
Well you know it started as a pilot with AWS and we expect it to evolve into more right and I think that the.
The information that we've given the city has.
And such that they understand the value of it and I think we'll see it expand and it'll go from there and I will tell you that I you know as David said, you know having AWS as a partner and then you know.
Belgium.
The proficiency of our technology is something that's important.
You know, we're getting there and you know.
It's just it's just early for maybe because we're public it's late but you know we've only been around for a few years. So it's still early in this game.
And one other question.
I believe the south.
South Carolina, and New York in 14 other states are a.
The question that proof of our capability two quarters ago, I mentioned, the pilot and how many bronco <unk> and you mentioned the steering away from the pilots, what's the difference between like a pilot and proof of capability.
Order rates for different I'll, let David address this David maybe you can address the capability and start with South Carolina.
Yeah.
Yes, no problem. So so the distinction that I guess, you could make of a proof of concept versus that proof of capability.
The proof of concept, we're not trying to prove the concept the concept been proven it's more of the in that particular environment for that state on those particular roadways, it's more of the capability that we're demonstrating to them that's something that works, but it's more of a refinement for their specific needs. They may have a specific type of.
<unk> like dust like heavy dust on a road or they may have particular or unique vehicles that are there that you know.
Machine learning training perspective, we may not have seen enough up to train and the way that we want so the proof of capability is really to put the devices on a roadside on the roadside for them in particular and trained for their particular environmental conditions, which is very fast actually so that's what we mean when we say <unk>.
That capability versus a proof of concept now.
Now and that's what it's been like six months I'm sorry.
Oh, yes, indeed, yeah, I mean, it's literally like four to six weeks maybe initially.
Or six to eight but I expect that to come down because there is something called transfer transfer learning on that re whereas when you learn it in one environment.
It closes the gap in multiple other environments at the same time as you might imagine so what a proof of capability might take one or two what is called the sprint and the R&D terms to close on that particular environment.
That really captures more and more of all the environments, we would expect to see in the envelope.
So yes does that answer your question.
Yes, it definitely does I appreciate it and also my last question I did have one war with Mexico and.
The technology is spread across 1800 locations I don't remember anything Bill mentioned and the length of the contract with potential revenue can we expect something from that in the near future.
Well.
It's a good question we have now several thousand.
Device solutions and operating a multi city in some parts of Mexico in different states.
It started back with Monterrey, a few years ago. If you look at our announcements and when it comes to public safety a lot of the these enter.
Entities governmental entities that are primarily public safety law enforcement.
They don't like us to talk about it because all.
But people that they are using it.
To keep an eye on you know find out about it right. So we do the best we can to accommodate them right.
The good news is that it's grown.
One in Mexico from 2019 to today to several thousand from a few hundred devices out there.
And we see that happening in other places as well same thing with our business with the U S. D O D.
It's grown significantly if you go back through the years and you look at the contracts we've had with D O D.
We can't really talk about where the technology is being used.
I don't think they want folks knowing where it's being used for that's being used and I think that's that's what's important the importance is that it's being used in.
These are significant contracts.
And we have reached the end of the question and answer session I will now turn the call back over to Robert Berman for closing remarks.
Yes, Thank you Luke.
Thanks, everybody and I can tell you you know looking at the.
Tenants list here.
Recourse very fortunate and I feel very fortunate and I'm sure I speak for the rest of the team and we've got a really great group of shareholders right that had been with US and supported the company and so for US it's not an easy thing to do.
Right and all I can tell you is that and I've always said this we're not we're public but if we were private right you might consider yourself flies on the wall inside some big V. C's office listening all the stuff you might not see the company for a few more years, but that's what creates the opportunity.
Okay record has been around for several years right and I think we've made tremendous progress. It's been like you know balancing on the head of a pin to try to just work because we're public.
But as I said in my remarks earlier.
When went along or startup. Okay. This this company is off to the races, and I think you know in 'twenty, three and beyond Youre going to see significant growth in <unk>.
So there yourselves very fortunate to be part of a very small club, that's probably going to grow significantly.
So with that I, thank everybody for coming to the call. Thank you for all your support.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your <unk>.
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