Q3 2023 Rekor Systems Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to today's recourse Systems, Inc. Conference call. My name is John 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.
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 the conference call concerning future revenues results of operations financial position markets economic conditions product 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 disclaimers 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 concerning the company's ongoing operations and is provided for informational purposes only.
Now I want to turn the presentation over to Mr. Ale N C F O of recourse systems.
Hi, everyone. Thanks for joining us to discuss our results for the three and nine months ending September 32023.
We're happy to share our continued progress with you.
I would like to start off by sharing two slides with you that I think really demonstrate the progress that <unk> made.
Over the past five years since we've been tracking our technology revenue.
<unk> has delivered 268% compound annual growth rate or CAGR.
This has included multiple challenges in times when we've been constrained by limited resources, we have made significant investment in our roadway intelligence technology and successfully integrated two acquisitions.
During this time, we quickly gain a significant foothold in the transportation market and are becoming well recognized thought leader within the industry.
The next slide compares three other AI technology companies as you can see on the left the revenue for sure for recall is significantly higher than the other three companies and was accomplished in much less time.
As you can also see on the right. We did all of this with the intelligent use of much less equity than this other AI tech companies.
I'll give you a good sense of the rapid progress.
We've made while being mindful to use equity judiciously and not overly dilute our existing shareholders.
With that in mind, I would like to discuss the compute.
Continues revenues momentum and other achievements, we have seen during Q3 and the last nine months.
And so is that so far continued growth and progress.
We are pleased to announce an unprecedented top lines for the third quarter was 2023 with a consecutive quarter over quarter increase of six 5%.
It's not worthy that's we accomplished this while we also continued to reduce our SG&A expense.
Over the last year, we've demonstrated that we can be financially prudent even as we integrate significant acquisition.
Also important to mention that we achieved this while continuing to make significant investments in our future for research and development.
Let's talk about some other significant additional details for Q3.
Highlighting the tangible growth and forward momentum just discussed we are pleased to share that our revenue for the third quarter increased to $9 $1 million 35, 34, 5% higher than the $6 $8 million experiencing the same period last year and about six 5%.
Then the second quarter of 2020 threes.
Total revenue for the nine months ended September 32023 was $23 $9 million, a significant increase of 77, 4% or the same period in 'twenty to 'twenty two.
We had revenue of $13 5 million Bucks.
Our 2023 growth is mainly organic with the more and more states municipalities and commercial customers adopting our technology across all applications.
In the first nine months was 2023, we also achieved a reduction in cash used for operations down to $26 $7 million from $13 $4 million in the same period last year.
And I'd like to point out our 'twenty 'twenty. Three results include one time payments for accrued accounts payable from 'twenty to 'twenty, two especially in those teams and deployment of new systems.
During the third quarter, our cash burn continue to decline.
This showcases our commitment towards really thoughtful and efficient financial management as we position recall for growth at scale.
Turning our attention to financial metrics and other recent developments I'll cover several promising trends.
Q3, 2023 revenue achieved a robust nine $1 billion in revenues demonstrating significant growth of 34, 5% from the $6 $8 million recorded during the same period in 2023.
We also continued our growth quarter over quarter, which was six 5% above Q2 of 2023.
Revenue for the night for the first nine months of 'twenty 'twenty train totaled $23 9 million up 77, 4% from the $13 5 million during the same period in 2022.
As I mentioned earlier, our revenue would have grown organically since all operation for our recent acquisitions have been fully included.
Also seemed remarkable improvement in adjusted gross margins up to 52, 6% for the third quarter was 2023 from 46, 1% in the third quarter of 2022.
This margin performance has been fueled both by technology advancement and the use of automation and process controls, enabling us to optimize costs and bolster bolster margins.
Operating losses due to our improved margin and reduction in SG&A expenses was successfully decreased our operating loss from $1.8 million in the third quarter of 2022, I'm not including the goodwill impairment to $9 $8 million in the third quarter of 2023.
Furthermore, the first nine months of 2023 show a reduction from $40 9 million below in the correspondent and the corresponding periods in 2022 down to $32 $8 million, even as we worked intently to complete the integration of the Sps acquisition.
Adjusted EBITDAR for the.
First for the third quarter of 2023, the adjusted EBITDA loss stand at $6 $6 million, an improvement of over 38% from the $10 $7 million in the same period last year.
For the first nine months of 2023 road use day adjusted EBITDA loss by 28, 5%.
$93 $2 million down from 32 points or $4 million in the same period last year.
Quarter to quarter important for Q2, 2023 was roughly a half million dollar reduction or approximately seven 6%.
We anticipate this trend to continue as we continue to grow our topline and manage operating expenses prudently.
As in previous quarters me boring, one time expenses linked to payable management I sit in inventory system deployment.
And associated professional services will continue to maintain a disciplined approach on operating expenses and diligently review each of our financial metrics.
Statistically allocates resource resources to areas that provide the best opportunities to drive revenue acceleration.
We've been providing and reached key performance indicators to provide a more granular insight into our upward trajectory.
He is to empower you to assess our ability to obtain new contracts.
For shareholders to appreciate the enduring value these contracts bring to outperformance commitment.
In the third quarter of 2023, our recurring revenue percentage from total revenue was 52, 6% a decrease from 71, 4% during the same period last year.
This was a result of different mix in the products and services are sold.
As we stated before we generally anticipate to have 65% to 75% of recurring revenues.
You may vary based on the mix of sales between products and services that provide recurring revenue and dose that produce pointing time revenue.
Recurring revenue for the nine months ended September 30, Twenty-twenty treat accounted for 62% of total revenue.
A small decrease from 64% in the same period last year.
The third quarter of 2023.
We executed contracts worth $8 $4 million or 74% increase over the $4 $8 million total contract value in the same quarter of 2023.
Additionally towards the nine months ended September 30, 2023 we secured contracts worth of $38 $1 million and 343% increase over the $8 $6 million total contract value with the same period those 2022.
Finally as of September 32023, our remaining performance obligation stood at $32 million of probing the job of $8 8 million or 41% compared with $21 $4 million as of December 31, 2022.
We project that approximately 73% of the remaining performance obligation.
As of September 32023 will be realized in the coming 12 months.
Moving to our financial condition liquidity in January we completed the closing of senior secured notes in the aggregate amount of up to $15 million led by our CEO all the billing.
With participation from other new and existing investors.
Loathing 12, and a half million barrels was probably in the March 23, we also completed a registered direct offering for $10 million.
These transactions gave us the liquidity to continue executing our strategy.
Cash balance as of September 30th 2023 was $7 million, an increase from $1 9 million boil off as of December 31st 2022.
In July a warrant holder exercise warrants, resulting in approximately $11 million of cash proceeds.
Our working capital position has also increased significantly.
As of September 32023, they had working capital of $3 6 million compared to a deficit of $6 million as of December 31, 2022.
The improvement in working capital was primarily due to increased cash and cash equivalent and accounts receivable.
In summary, we're pleased to see continued solid and synergy synergistic impacts from our technology development efforts.
D. G acquisitions, we also expect to have a strong fourth quarter and meet or beat the current estimates for the full year.
This continues to give us confidence you know upward trajectory operational efficiency and commitment to long term growth and shareholder value generation.
With that I will.
Now I'll turn the call over to David David.
Thank you Emil and good afternoon to all of you that have joined US today. We appreciate your interest in <unk> and in our progress.
Building upon the earlier comments about our financial performance and momentum I am pleased to report that the third quarter as Mark yet another period of continued performance and growth for <unk>.
Not only have we expanded the breadth of our market presence, but also deepened the impact with customers across each business segment, we serve.
And as we've all seen and read in the media lately U S. Roadways are in a critical state the increasing number of roadway collapses and the overall deterioration of roads have created heightened public awareness and intense political pressure to address the continued decline in public safety stemming from sharp increases in traffic congestion.
<unk> environmental concerns and roadway fatalities.
Traditional tools and methods for managing and optimizing this vital infrastructure are putting inadequate.
And there was an immediate need an urgent call for innovative approaches and transformative solutions.
The passage of the bilateral infrastructure law at the end of 2021 marked a historic 1.2 trillion dollar investment for the revitalization and digitalization are critical infrastructure and roadways in.
In this dynamic landscape of both chaos and opportunity the markets and public agency customers, who we interact with are doing more than just reassess their existing investments. They are proactively looking to embrace AI and digital infrastructure technologies as a solution.
For <unk>, this is where preparedness and opportunity meet.
Okay.
The guiding vision of record and the passion of our teams is to improve the lives of people in the world around them by enabling roadways and communities to be safer smarter and greener for all.
To realize our vision, we leverage our 3000, plus man years of field and roadway experience and combine that with our award winning AI technology to collect connect and organize the world's mobility data to create essential and comprehensive roadway intelligence that is useful and easily.
Accessible for our customers.
Our strategy is distinct in that we do not simply collect data as a pass through to customers.
As is common practice in the transportation industry.
Data for data is not helpful or useful.
What's different about <unk> and our approach is that we use AI to aggregate and fused together massive amounts of volumes philosophies and varieties of data data about roadways data about anything moving on or around the roadways and data about events that can impact roadways.
And we're bringing all of this together to generate unique real time and predictive insights and roadway intelligence that is used by our customers to help them make better more informed mission critical decisions that improve the lives of people on roadways and the world around them.
We provide our roadway intelligence solutions to both commercial and public sector customers across public safety urban mobility and transportation management market segments.
This past quarter in particular has been pivotal for us and cementing our position as an essential innovator in AI for digital infrastructure and delivering significant breakthroughs in our products and platforms each of these market segments.
We also worked to exponentially increase our distribution capacity.
<unk>, our internal systems and processes.
And strengthened our brand promise as a leading provider and roadway intelligence solutions.
I am pleased to provide some key highlights in each of these areas on our call today.
Starting with public safety and licensing we made significant technology and AI model updates in the quarter dramatically expanding our geographic coverage and scope of vehicle recognition capabilities, including the latest plate designs and reflected properties.
Our new vehicle makes and models across traditional combustion engine hybrid and electric vehicles driving on roadways around the world.
In parallel to these technology updates, we saw new and expanded adoption of our scout vehicle recognition platform with major wins in Colorado, Florida, and New Jersey.
We also saw continued expansion of our footprint in Latin America.
EMEA.
In North America, and through our fast growing OEM licensing and reseller channels.
Scout vehicle recognition technology operates as a powerhouse engine under the Hood of critical solutions provided by companies like Safe fleet Hayden AI and.
And multiple others that are deploying tools to transit authorities and law enforcement agencies globally and across major metro areas in the United States, including New York, Philadelphia, Chicago, and Washington D C.
This represents record technology licensing arm inaction, and we expect this area to grow significantly in the coming quarters.
Beyond law enforcement and transit. We've also continued to deepen our relationships and footprint with enterprise clients, such as corporate campuses stadiums universities parking facilities theme parks casinos retail establishment and more in the quarter.
This expansion is supported by a growing set of regional value added resellers that we recently established to drive faster and more efficient market penetration and scale.
Now, let's shift attention to our performance in the urban mobility segment for the quarter.
Departments of transportation and commercial entities are supposed to conduct an estimated 5 million traffic studies in the U S. Each year.
These traffic studies or mandated by the Federal Highway administration.
And the U S Department of transportation and must meet exact exacting standards for vehicle counts classification and speeds on all of their roadways.
Today stake struggled to collect and report traffic data for most of their roadway due to the cost of collection and the inability for legacy technologies and manual approaches to keep up with and meet the evolving standards.
The inability to properly report these traffic studies.
States cannot recoup the much needed funding to build and maintain their vital infrastructure.
This perpetual lack of underinvestment.
It is also a reason why roadways and bridges in the U S. Having a bit more seen minus report card.
This has to change.
A record nothing gives us more pleasure than reinventing normal, creating technology and innovation that customers love and resetting their expectation for what normal should be.
This is certainly the case with our groundbreaking discover platform for AI based traffic studies that we launched earlier this year.
We built a record discover solution to provide an unmatched value proposition for our customers.
Our unique AI driven approach delivers a substantial cost savings per data collection site compared to traditional legacy methods and assures fast safe and non intrusive deployment keeping road workers out of Harm's way.
We do this at a fraction of the cost and in a fraction of the time safely flexibly and with the highest levels of reliability and accuracy made possible by advanced AI.
Using the discover platform customers can now easily and completely collect data across all of their roadways address the federal requirements for traffic data coverage and accuracy and automatically generate comprehensive reporting for class count and speed across all of their roadways.
Using discover customers can now substantiate secure and reclaimed federal funds back to the state for critical infrastructure development.
And they're doing that.
In the quarter, despite incredibly challenging weather conditions from an intense hurricane season in our southeast markets that continuously disrupted roadway operations, our dedicated teams in Georgia, Florida, Alabama, the Carolinas and Virginia rose to the occasion.
As a result, we recorded our most successful quarter ever in our history for the volume of both permanent.
And short term traffic studies and a major milestone for the year so far.
And our customer pipeline for our urban mobility segment continues to expand across the United States as well.
Already generating significant revenue from our footprint in key states, such as Georgia, Florida, and South Carolina are influence continues to broaden with an additional 14 pilot programs already underway in various states, including New Mexico, North Carolina, Maryland, New York, Montana, and Colorado and more are upwards.
Trajectory for continued growth here is more than promising.
Shifting gears to our transportation management market.
I'm excited to share that we have also made significant progress here in the quarter as well, including major new technological advancements expanded partner programs and customer growth.
Traffic management center shoulder, a substantial responsibility tasked with ensuring smooth and safe traffic flow across extensive road networks. Their role is critical in managing and optimizing traffic tax made increasingly difficult due to chronic understaffing and reliance on outdated tools.
The job. They do is mission critical in maintaining efficient and safe transportation and they are demanding advanced solutions to augment their capabilities. This has become urgent.
As a leader in roadway intelligent solutions and building on the success of our record command platform, which is already popular among major traffic management centers, both in the U S and internationally.
We delivered an enhanced suite of new advanced capabilities tools and actionable insights in the quarter that further create a force multiplier for traffic management centers and provide an even more comprehensive and a central tool kit for situational awareness and response for the roadways.
Okay.
Roadway status incident persistent scoring an automated response planning are among a few examples of these new capabilities that were released to the market.
We also unveiled a groundbreaking new approach and predictive analytics to assess roadway and crash risk, enabling traffic managers to foresee potential road hazards and accidents hours in advance.
Proactive responsiveness to an incident saves lives and being able to do this again as a force multiplier for our customers.
In fact traffic management centers enthusiastically report to us over and over that by using a record command platform. They can now automatically detect up to 49% more potentially fatal incidents.
That would have otherwise been missed.
And respond to incidents as up to 23 minutes faster than traditional methods not.
Not only does this translate to reduced congestion on our roadways and secondary crashes, but but more importantly, it saves lives.
Recourse stands alone in our ability to provide these kinds of real time predictive insights to traffic management centers for.
For these reasons and more we are observing an increase in annual revenue per customer growth and profitability per customer and a sharp rise in engagement adoption and usage of new capabilities. We believe that this momentum will continue to build and here's why.
Efficiencies like these also deliver substantial operational and physical benefits to our customers and not to be tens of millions of dollars in potential direct and indirect savings per year to the state.
All of these compounding advantages worked together.
And it's why customers choose record.
Supporting this I'm pleased to report that we strengthened and deepened our position with the largest states in the United States and on the largest roadway networks in the nation, including Texas, Florida and California.
We also advanced our work with the Oregon Department of Transportation, where we are partnering with central and.
And serving as the core technology platform and hub for all data and connected vehicle providers.
Oregon aims to deploy a first of its kind comprehensive ambient computer solution.
For roadway usage charging.
Across what is today the highest concentration per capita of electric and hybrid vehicles on roadways in the U S.
Many other states are closely monitoring our work in Oregon, as a potential template for their own road usage programs in the coming year.
In addition to this we also kicked off new projects in multiple other states counties and municipal districts as part of a targeted sales campaign and marketing initiatives to reach 800 cities counties and municipal planning organizations in the U S. We believe this is a segment of the transportation market that is wildly underserved today.
And there were record can deliver unique and disproportionate impact.
As we do at the state level.
We are well positioned to help connect the dots and enable sharing and collaboration between agencies at all levels across the state and even across multiple states.
As we look ahead customers in this segment have told us they often struggled to manage through arcane complexities and timeliness of traditional government procurement systems and processes.
To aid in this and to accelerate growth in this segment. This quarter, we also announced deepened partnership and co selling channel relationship with Amazon, It's AWS marketplace and its public public sector team, making the record command platform available and accessible for easier government procurement.
This will make technology adoption and deployment much simpler for states counties and municipalities and ensures immediate and continuous access and scalability on demand for them as they adopt and expand usage of our roadway intelligence solutions.
Overall, we are encouraged with the progress that we've made this quarter in the transportation management customer segment.
I believe the best is yet to come as we continue to expand and scale, our technology partners and customer growth.
In summary.
The third quarter has been another period of solid performance for our company marked by substantial product innovations across each of our customer markets and growth in both the size and the strength of our relationships with clients.
At the same time, we've continued to aggressively innovate and expand our range of products and services with each new product designed to modular Lee to integrate seamlessly with our record one roadway intelligence engine.
Designing our system's wisely in this way Optimizes, our technology investments for speed reuse and scale and shortened time to market and profitability for each segment.
By almost any measure record is in a stronger position now than at any time in our past, we have momentum and believe our relentless focus and execution against our vision and mission. We will continue to propel us into further exceptional growth and opportunity ahead.
In closing I want to recognize that while we're not immune to the significant and continuous market financial and geopolitical upheaval faced here in the U S and around the world. We are resolute in our vision and are working hard to build something important something durable something that matters to our customers and something that we can tell our grandchildren.
Al.
Such things are not meant to be easy.
We are incredibly fortunate to have a group of dedicated <unk> employees around the world, who sacrifices dedication and passion for our shared vision is what builds record.
And we remain ever grateful to our customers for their business and trust and to you our shareholders for your continued encouragement and support.
Thank you for spending time with us today, and I look forward to keeping you up to date on our continued progress.
At this point I'll turn the call over to Robert Berman, our CEO and chairman of record for final remarks and Q&A.
Robert.
Thank you David.
Good afternoon, everyone.
I'd like to underscore what I presented earlier with a CAGR in <unk>.
Company's comparison slides.
Since we began tracking our roadway intelligence revenue in 2018.
<unk> has experienced a 268% compounded annual growth rate.
This demonstrates our ability to sustain growth through challenging times in periods with limited resources we.
We've constantly enhanced our technology and successfully completed key acquisitions.
And at the same time, we have also solidified our market presence and emerge.
Industry thought leaders and roadway intelligence.
Our acquisition of <unk> in August of 2021.
In STS in June of 2022 broad combined revenue of approximately $15 million.
Since then and despite the sale of our last non core asset in the fourth quarter of 2022.
Which resulted in a reduction of $2 $5 million of gross revenue.
Our top line continues to climb.
I am, particularly proud of the fact that the revenue growth. The company has experienced over the last 12 months is entirely organic.
Because we expect to have yet another record quarter meeting or beating the current revenue estimates for the fourth quarter of 2023.
Recall, we'll have again more than doubled its topline.
Driving this organic growth is the adoption of the company's technology and we.
We're just getting going with.
Where you are seeing is just the tip of the iceberg.
Thanks to the continued execution of the entire team. This remarkable growth was achieved more swiftly than many of our peers is reflected.
And the revenue per share comparisons then they all shared with you earlier.
As David outlined the strength of Lord differentiated products and technology, nor our ability to scale is allowing us to grow more quickly.
Plus equity investment than comparable companies.
As we've worked to prudently manage our equity we've been able to reach these milestones while avoiding the heavy dilution that is often seen in the sector.
This strategic approach has allowed us to advance steadily mindful preserving and maximizing shareholder value.
Company moves towards breakeven between Q4 this year Q1 of 2024.
As the company scales, it's growth most of the capital will need just directly related to the installation from roadside Iot sensors nationwide.
We're going to continue to be efficient avoid using equity and work to address this funding with debt.
And other mechanisms as much as possible.
In addition, as our footprint grows from east to west the opportunity to transact in states, where we have no direct presence where people continues to be a challenge.
We don't see these as problems.
Morris challenges and opportunities that our technological lead puts us in a position to seize.
And we'll have more to say about this in the coming weeks.
In closing I want to express my deep gratitude to our shareholders for your trust support and belief in our vision.
You have been the foundation of our achievements and together we are just not navigating the future we're shaping up.
Now I'd like to open the floor for any questions you may have and please don't hesitate to ask.
To provide transparency and clarity and we're eager to address any concerns or inquiries you may have operator.
Thank you we will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the queue. You May press star two to remove a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please when we poll for questions.
And the first question comes from the line of Mike Latimore with Northland Capital markets. Please proceed with your question.
Alright, thanks, so much congrats on the strong organic growth here.
You've mentioned in the prepared remarks strengthened urban mobility I don't know if you can give a little more.
Quantification, but it wasn't it over half under half of bookings in the quarter.
Hum.
Mike I don't know that I can speak directly to them.
The percentage, but it was a large percentage of them will.
Bookings in the quarter and will continue to be in the fourth quarter.
And that's where our focus is and what.
I referenced with respect to rolling out Iot sensors and nationwide.
Okay.
And.
Yeah, as you look to the fourth quarter.
Do you see kind of all three business segments driving.
Kind of the plan sequential growth there is one more pronounced as this urban mobility Merck announced how do we think about kind of drivers in the fourth quarter.
I think.
We believe the urban mobility will lead the way.
And if you think about R. R.
Public safety and licensing business.
We started that we will continue to grow.
The the concept of building, which is what's necessary digital layer of infrastructure over our existing road system requires Iot nodes right.
So as we get these you know across the states and across the country.
It pulls on.
Transportation management, So I think our mobility will lead the way and that's a great business because long term state contracts recurring revenue very profitable.
And that pulls in the ability to do the other pieces. So I think urban mobility, but they will all scale urban mobility, probably will lead lead the way in and scale percentage of scale and I would say that public.
Public safety and license and we will continue to scale traffic management is not far behind there may be a point in a couple of years down the road where traffic.
Traffic management starts to kind of catch up like a horse race.
And that's understandable because that's how everything comes together and that's the secret sauce of what we're doing so I think that's that's a good way of looking at it right.
Right now David do you have any thoughts on that.
<unk>.
No.
Nothing more than you said that Robert I think you captured it well.
Okay great.
On the.
Urban mobility side of things, how many deployments precise deployments can you do per day.
Do you have enough.
Deploy certain amounts for Dana.
David do you want to take that.
Yeah.
There's its a multi stage process.
Pour concrete you have to wait for it to set et cetera, but after after that you can do this pretty efficiently four to six a day.
If the crews are all operating.
That's pretty typical.
That would be per crew right and we have multiple levers so yeah.
Peru, yet per crew per like region region or segment of Brooklyn.
They go in.
Thanks.
Five six hours you can put assist them up.
Right.
Many crews do you have them for four to six per crew how many crews.
David right now.
Four four and building.
So for between four and a half.
Yeah makes sense, okay great.
Well, thanks, a lot Mike Michael.
Michael I, just want to add to that.
You know once the processes now in which it is it's pretty much sampling repeat them.
Labor that it takes to address this as you know labor that's out there you can think about field technicians that are installed things like five G towers for cell companies and others.
So that's the nature of.
The labor required so it's pretty well expandable and Thats why I had mentioned earlier the challenge that re courthouse, which is really an opportunity is that.
We've got a lot of business in states, where we can transact, but have no presence and we're working to solve that so which means adding crews right. I mean, that's really what that's all about.
Character.
Great well congrats again, thanks very much.
Yes. Thank you.
Yeah.
And the next question comes from the line of Zach Cummins with B Riley Securities. Please proceed with your question.
Hi, good afternoon, thanks for taking my questions.
I just wanted to ask around the weather delays that you mentioned in the southeastern United States.
Can you give us an update was it really more of just kind of a one time delay in terms of project implementations and then second part of the question is it seems like you are in pilot with 14 additional states now how many of those do you expect it to move forward with a more commercial deployment as you get towards year end.
So what's that.
Yeah sure so on the on the deployment.
With weather concerns.
It's not just the weather event itself, it's the inability to get out there and preparation for the weather and then if there's a weather event, it's the clean up afterwards so.
It's really the it's not the event itself. It's all the stuff that the threat of the event that slows things down because you can't put crews out there second of all in.
And the nature of some of the work that we do.
Even rain heavy rain can make an impact and so you don't send crews out and in the dangerous kind of weather like that so it's episodic or episodic and it's something that we dealt with certainly in the hurricane season in the South East.
So we'll come back to that if you have additional questions.
In terms of deployments across the 14 these are in different stages right now.
And partially as were moving crews westward and trying to schedule them with the existing work that we're doing in the southeast becomes a race condition right and so it's really just about our scheduling right now and so those are progressing well and we have two that are in process right now.
<unk> continued to schedule it is.
As quickly as we can for the rest as we looked at at crew members as well as expand our footprint Westwood.
Yeah.
Understood and then final question for me it seems like the real gating factor here is just the ability to have crews to implement some of these deployments and really do that at a pretty quick pace.
Or are you thinking about options.
Robert you mentioned pursuing some sort of debt financing to potentially fast track some of that so I'm just curious of how you're thinking about potential solutions that it's a really fast track somebody have appointments.
Good good question Zack so.
As we approach breakeven here the majority of the capital that the record.
<unk> will be for the implementation of these systems.
And the most efficient way to do that is with debt.
We've been working for months.
On creating a structure that can be stamped and repeated with regard to being able to fund.
All of those systems.
The good news is if you think about the counterparty, it's a state with good credit.
Long term contracts you know highly profitable. So we think we have an answer for that.
We're hoping so.
To be able to talk more about that in this quarter.
We think we have the no guarantees, but we think we have that problem solved.
And if we solve that problem.
Just an accelerant for the Companys growth.
And that's.
That's the most efficient way to fund that and today, we've been funding a lot of these appointments with equity which is terribly inefficient.
So that's.
That's that's.
How we're thinking about it going forward.
Understood well, thanks for taking my questions and best of luck with the rest of the year.
Thank you. Thank you.
Okay.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. The next question comes from the line of Casey <unk> with Shay Capital. Please proceed with your with your question.
Hi, Thank you very much for taking the questions really didn't see the growth accelerate here just a couple ones on on the state contracts.
How should we think about the cadence of these contracts are they rolling up a bunch of cities and municipalities or.
Can we think about actually landing some large.
Actual state contracts and then across rolling in footprint out across that region.
Well that's a good question Casey so.
There is multiple pieces of this business, but.
The states are required to do this our data collection as our other municipalities counties and towns villages Sydney.
Cities and so forth.
Each state contracts are typically done with one or two vendor.
Vendors the way they've been done with legacy technology for years. So this is changing because we're changing the way they do it with the technology they do it.
These contracts are fairly large.
That was the reason, we acquired STS because STS ad pie.
Pioneered the concept of installing using legacy technology.
These systems under a different model that you would typically see which is just the contractors deploying equipment with some type of maintenance contracts, where this is here now pay for data. So I think youre going to see some significant contracts with stage.
Well, there's a whole other side of this business, which we are.
Attacking right now which is.
The more local level.
It's probably equal in size to that that.
It happens at the state level. So I think it's going to be a combination of both but I think you'll see some really significant state contracts. We already have I mean, we already have some pretty significant state contracts. So I think you know about it.
In terms of.
Robert in terms of like these large state contracts like what's the is there like a K like a duration is it are they five year contract for X million like how do we think about kind of thing.
Sure.
Yes.
It's a good question so the best the best way I can answer used by telling you you know history. So.
As an example, the state of.
Georgia has been a customer of <unk>.
Through our acquisition of STS since 19 seven.
So the contracts typically run.
Five 710 years.
And it's a very sticky business and the <unk> the <unk>, where you saw the change.
The service providers, because they can't afford to lose the service and the data so they stick with what they have is it's working.
So these are usually very long term contracts and it's a very sticky business, where they just you know.
Continue to renew.
So that kind of leads me into my next question like when you think about it.
Other companies you're familiar with that are like another record out there that's kind of rolling out this national footprint.
There is nobody in competitors.
No there is nobody that we know well.
Excluding Iot sensors roadside for the purposes of what we're talking about doing here.
None.
Typically that you don't.
Have the service side of the business, which is what makes <unk> different Casey look if you. If you think about new technology and dealing with government right. So they have this technology that they've been using for 50 60 70 years it could be an induction loop ipas or it could be.
Then in play it's a whole bunch of different things right. So what has happened through the years is that there are limited companies that actually can service the old stuff.
And deploy new technology, if it existed well up until recently it hasn't existed so the service side of our business.
What makes us unique.
And I say that.
In the same way that when you think about Amazon what are their technology company or are they a real estate owner.
Where are they.
Do they want an airline or the home you know are they like GPS. So this is a business where being able to service to customer roadside and then have the proprietary technology that goes along with that makes all the difference in the world because you can service legacy stuff, while you're rotating.
The legacy stuff out to new equipment, because they can have the legacy stuff go down while he replaces alright.
So I think requiring that weighs very very unique it's very unique and I can't think of another company like.
Like record right. There there are companies that sell equipment.
There are companies that maybe.
B do construction or maintenance.
But I can't think of any other company that has the proprietary tests we have done.
And also how does as David mentioned earlier.
A man hours I'm understanding.
All of this works roadside and has it all under one roof and is able to deploy it and work and gain the trust of these agencies.
To be able to service them. So that's that's what makes this so.
So special and I think we shouldnt lose side of that is very important.
Okay, and then just two quick questions on the numbers.
That to me was your comment that you plan on being breakeven in <unk> is that I am looking at the analysts' models here are we talking like adjusted EBITDA, because they have losses throughout next year.
Hum.
But I'll answer that Paul.
Right.
Yes.
So can you ask again please.
Yeah. So you guys mentioned that you plan on being breakeven in <unk> or <unk> of you know.
Going forward is that how should we think about that one is that like on an adjusted EBITDA basis, because I'm looking at models losses yeah.
Throughout all of next year.
Yeah Casey.
On an adjusted EBITDA basis get cash flow positive.
Breakeven.
And this fourth quarter first quarter next year.
Yeah, and I think again Casey the challenge, we have which we've been working on for months news, how we fund these implementations right. So.
That's what we've been solving for.
We think we have a solution for it again no guarantees but.
We feel pretty confident that we've got a solution for that that is something that.
It is replicated bowl and it's something that's elastic we can grow with the company that solves that problem.
Okay like some sort of funding mechanism that can flex with your growth.
Yeah, exactly something that's funding mechanism.
You know is on terms that are.
Favorable to a company like record the conflicts with our growth.
Give us the ability to do exactly what we're talking about doing Oh, Okay. And then one last question. Robert I know you guys don't give guidance on a year out and told me third.
Third quarter.
Can you just kind of help us think about how to think about the revenue profile for 2024 at the state contracts about to come online in <unk>.
You you have this new perhaps funding maybe tack on some acquisitions like how do you think about what this company looks like this time next year.
In terms of revenues.
Thank you.
We've all seen young companies that have crazy CAGR right like you know when you look at <unk> from 2018 forward and remember the revenue that we have.
There is no legacy revenue here from anything that's not related to what we're doing today. So I said in the script that we expect to double revenue again this year.
So when you think about that.
I think you can expect that to continue.
That type of growth rate and it will accelerate it.
Funding mechanisms are those two challenges the funding mechanism, which we think we have saw alright.
But no guarantees, but we think we have it's all.
And the second is expanding our footprint so that we can do.
New business in the states that we can transact with today well it hasnt been able to get to.
So we have.
Customers that wanted to just where we can't get to them right because we've been bogged down in other places, but we think we think we have a solution for both so I would say both of those things come together the funding mechanism.
The way we're approaching it.
[noise] footprints so that.
So we can handle the business than.
We can exceed the growth that you've seen.
This point right I mean, it could just accelerate an increase.
So I think when you look at the history of it I think it's pretty impressive.
And I think you know.
It's just very early stage the size of this market is massive okay. The technology is being adopted.
There's no question about it right and it's just a matter of being able to execute the business and get out there and do it in.
It's a high class problem. So you just figure out okay. How do we do this and you just figure out how to do it and you're going to do it and that's where we are now.
That's that's where recorded record is at a point where the.
It just needs to execute now the business is there and we just need to figure out a way that's too and we will.
Great. Thank you very much for all your time.
Okay. Thank you.
Thank you and at this time there are no further questions now I'd like to turn the floor back over to Robert Berman for any closing comments.
Yeah look thanks.
Everybody. Thanks for the support thanks for your patience and time and.
Think record look I think we had a fantastic quarter I think we've got a fantastic year.
Introducing new technology as you know I'm not all that easy right, it's not something that it's black and white.
There are things that happen along the way but.
Because of the team we have and the people we have and the hard work that they've invested in this and we've gotten through it right. So this company is now at the point, where it's going to scale and youre going to see it you're already seeing it you may not realize it but youre seeing it right and it's going to continue and that's going to accelerate and it's going to grow and this market is.
Massive because at the end of the day, you're replacing legacy technology with something that's needed I think everybody on this call can understand the need to have.
Our connected layer of digital technology across these roadways that allows for so many other things to happen right and record is the company that's going to do that in the same way that the guys are rolled out electricity back maybe early 20th century did what they did that's exactly what we're doing okay.
And then once you put that electricity grid out there or somebody else comes along that's the same thing I had my phone line on.
Your telephone your electric pole right, there's a whole bunch of other things to come together with that and we have all those pieces and that's what we're solving for and we're on a path to do that we're going to execute that plan and we're going to get it done and we think for thank you all for your support and patience.
Stick with us stick with us so it'll be worth it okay. So much appreciate it everyone.
And ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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