2023 Rekor Systems Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to today's Recourses, Inc. Conference call. My name is Alicia and I will be your coordinator for today.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Should you 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 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 SEC.
non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.
I now would like to turn the presentation over to Mr. Robert Gorman, CEO and chair of recourse systems Board of directors.
Hi, everyone. Thank.
Thank you for joining us we really appreciate your interest and support so many of you have given us over the past year.
Before we begin our discussion I just wanted to mention a recent change we've made and the scheduled date for our planned Investor day.
Originally we announced at our Investor Conference coincide with the date of our annual meeting.
Because we thought it would be convenient to take advantage of the facilities that we have reserved for the annual meeting at NASDAQ headquarters in New York.
But with a number of things that are moving forward at Recor, we thought the timing for the Investor day should be moved back a bit.
As a result of the day change we decided to include some of the narrative on the investment thesis for record in today's presentation.
Before I turn the call over to al I'd like to take some time to tell you why I believe so strongly in what we're doing and then record shelf.
For some of you thinks they appear as if they werent happening fast enough.
Let me tell you when you consider all the demands of working with government.
Progress is happening and at lightning speed.
Having spent much of my career in businesses regulated by both state and federal governmental agencies I can say that we have been well received and making progress at a rate that is much faster than one could expect and certainly nothing like I've ever experienced.
I wish I could share all of what we're working towards with you. That's just as impossible for many reasons on disclosure rules procurement requirements and frankly, our need to be careful to maintain our first mover status and limit the efforts of our competitors to copy us.
It tends to be us.
But there is a sea change coming driven by a technology refresh that's needed in a massive global industry.
An industry that has had its last tech refresh over 30 years ago.
As you'll hear from David today, There've been many technological advances that gate record the ability to build the platforms we have.
Our Texas best in breed.
And adoption is happening.
The first wave of this refreshes on the horizon and we can see it.
I can say that weren't serious discussions and negotiations with multiple governmental agencies and in many cases, we find that we were alone at the table.
Our 2023 results are pretty damn good for a young company judiciously, managing its capitalization and accomplishing all of that we have such a short timeframe.
The first wave is already hit for sure.
I firmly believe theres a tsunami on horizon many of you.
Call and reach out.
And offer helpful suggestions, what's it suggests the company just does not communicate as much as it should.
I'm sorry, if some of you feel this way.
That and think that things just haven't happened fast enough.
And I'm confident that in 'twenty 'twenty four is going to be a year, where record breaks out and I hope you all get to enjoy the benefit of what's ahead.
So let me now turn the call over to al.
Thank you all of them.
Well, it's really be back shortly without president and COO, David Harney to give you some insight into the future, but first I want to discuss recourse systems yearend results for the period ending December 31st 2023.
2023 has been a landmark year for equal marked by outstanding financial performance and strategic growth. We are thrilled to report another significant uplift in our top line with the 75% increase in annual revenue and a 21 right over there.
<unk> 21 per cent rise over the preceding quarter.
The fourth quarter was particularly notable with revenue, reaching 11 point to $1 million.
This represents a substantial increase of the book.
A year into it.
In the preceding quarter.
Total revenue for the year stood at $34 $9 million, even though we are also focused on reducing operational cash usage.
Our adjusted gross margin improved to 59.8% showcasing the impact although it technological advancements and operational efficiencies as well as the synergy achieved as we integrated the acquisition basically yeah.
This improvement enabled us to significantly reduce our operating loss for $59 million in 2022 without goodwill impairment to $42 1 million daus in 'twenty two 'twenty three.
In addition, we saw a continued reduction of losses in adjusted that'd be done throughout the year, a testament to our sustained growth momentum and operational discipline.
The year was highlighted by executing contract towards off 14.
$49 $1 million, a substantial increase from the previous year without remaining performance obligation at year end spending at $26 4 million dollar ensuring continued revenue stream.
When he twenty-three was also characterized by successful equity and debt transactions that enhance our liquidity.
January 'twenty two 'twenty three we completed a significant those actually are involved in senior secured notes of $12 $5 million led by our CEO all the Belmont alongside other new and existing stores.
Notes with fully redeemed in February of 'twenty 'twenty four with both of them. The redemption price paid in common stock at a conversion rate of 2.5 dollars per share.
In March 23, we also completed and they just did their rig all three for $10 million in July the warrants hold they're exercised warrants, resulting in approximately $11 million cash proceeds.
In December 'twenty to 'twenty three we also closed on the sale of $15 million or water serious a prime revenue sharing.
This unique structure develops a financing mechanism for that unlocks the value of the strong revenue stream with our contracts provide for scaling our business.
We expect to issue additional serious those notes under the same structure. When we acquired as we sign more long term contracts that require capital expenditure investments.
Oh goodness with Asia.
We used a portion of the cash proceeds from their bus to acquire all traffic data or a T. D. In generally 'twenty 'twenty four.
In February 'twenty 'twenty four we also completed a follow on offering with William Blair Fortinet, the amount was $46 $5 million.
We used some of the cash from the offering to redeem the senior secured notes.
This strategic explained incident management contributed to a cash balance of $15 $4 million as you said look 31st 2023.
Up for $1 $9 million at the end of the previous year.
Our working capital position also improved substantially demonstrating our enhanced financial health and operational efficiency.
In closing 2023 was a year of dynamic growth strategic achievements.
All its financial health for report.
We've built for the future of digital infrastructure in the world The way intelligence.
Looking forward, we continue to be confident in the potential of our technology co development strategic acquisition and the continued support of our investors. Thank you for that.
With the overview for <unk> 2023 I'm pleased to now give the floor to David for his remarks on our path forward in 'twenty 'twenty four.
David.
Thank you al good afternoon, and thank you for joining us today.
Record achieved many critical milestones in 2023, including several new major products and platforms much to market multiple new technology patents filed and awarded three X expansion in our production and distribution capacity.
30% increase in new customers.
As Al mentioned this led to a 75% growth in revenue year over year improved margins and a significant reduction in operating expenses.
Also in terms of customer acquisition costs versus long term value, our CAC to LTV ratio brings in and an incredible seven seven times more than twice that of what is considered to be a well run technology company.
Despite aggressive moves well funded public and private legacy players in the market requires Katanga stand out as the technology leader in the.
Energy for each of our business lines in 2023.
In fact, as we consistently outperform all others in the industry when it comes to its system flexibility performance and accuracy anywhere and in any mode.
Now let me tell you why the conditions are excellent and exceptional growth for our record in 2024 and beyond.
We are at the Nexus of acute andruzzi wide transitions happening right now.
First you can refresh our physical infrastructure with digital infrastructure that has happened right.
Simple visit to the U S Department of transportation to website, we'll confirm that after a month.
Decades of Underinvestment.
Red Lake and infrastructure are in bed.
Sheikh really they see minus on the official U S T scorecard.
This scorecard also called out that 65% of existing roadways, and 45% of bridges on the state of serious disrepair and highlight the negative impacts that this is having a citizen's safety personal financial losses, and the competitiveness of U S National economy.
Our roadway infrastructure isn't just about concrete asphalt and steel.
All equipment and tools that we all depend on to identify vehicles should manage traffic monitoring respond to incidents.
And operate the plant at Red Lake and communities.
Every year H D O T smart performed millions a federally mandated traffic studies in order to secure funding for work, we operations maintenance planning and projects.
These studies are done using a combination of multiple millions of rubber tubes, you see running across streets antiquated CCTV cameras and Doctor groups T. S electric sensors and radar devices that you see embedded in on and around our roadways.
All this equipment was installed over the past 70 years and successor and massive waves of technology refresh everything.
90 years.
The first wave started in the 19 fifties and sixties. The advent of pneumatic tubes. This was followed by a second wave in the Seventy's and Eighty's with inbound devices like luxe and teenagers and more.
The most recent and massive refresh of technology roadways happen at midnight, approximately 30 years ago with the introduction of outside firing radar devices that you can see today hanging from Poles on the highway approximately every quarter mile yourself.
Due to being 30 year old technology. These radar systems are known to have high failure rates in a rising safety concerns for drivers with multiple radar systems that are built one of the most cars today.
These devices are yesterdays tax, we're not able to be out there you can't fully capture and report on the equal classes counts and speed now requires that the U S Department of transportation and Federal Highway administration.
Like the previous waves of technology.
These radar systems our analog.
Connected they are no longer useful practical are safe and are far beyond excellence.
Taking all three previous waves of technology refresh there are literally millions of bees obsolete sensors and devices littered across U S. Roadways today, and it's estimated that up to two thirds of them don't even work at all.
As a result of our safety and transportation agencies that are responsible to deliver safer smarter greener roadways and communities.
The necessary and accurate data they need to do their jobs effectively.
They are eager for new tools data and insights they need to put everything in plain sight and in real time.
As the rest of the world Modernizes around public safety urban mobility, and transportation management agencies are struggling to keep up with ever increasing demand.
And the expectations of their job.
You'd likely experience this yourself, even with new technologies in our cars and smart phones.
Leasing challenges getting from point a point B predictably.
Our news is public reports about congested roads deteriorating road conditions collapsing bridges and the concerning fact that vehicles are the primary sources of greenhouse gas emissions now reaching unprecedented level I'm predicting a deepening sustainability crisis.
Sadly readily commissions continued to be the leading cause of death, among children and adults under 30.
All of this and more can be basketball improvement safer smarter and greener roadway infrastructure.
But the infrastructure is the background backbone public safety transportation and competitive and smooth running the carton Curran.
Currently the U S is ranked number 13 in the world for infrastructure resiliency and probably further behind.
Addressing this gap with urgency has become a categorical imperative for the federal government and this has picked up a whole new investment cycle and wafer technology refresh you build the next trillion dollars of infrastructure.
In addition to the approximate $250 billion that is already dedicated to roadway infrastructure every year.
Funded by the motor fuel excise taxes.
A new bipartisan infrastructure law has authorized an additional $326 billion for modernizing digitizing roadways.
15 billion for the electrification of transportation.
Tens of billions more including public safety.
Paying ability.
This once in a generation level of additional funding is expected to cop one two trillion dollars.
We expect approximately 350 billion of that new investment applies to the areas that core technology serves.
So it was the first major trend the transition to digital infrastructure is already well underway.
This industry wide.
This brings me to the second trend.
Increasing adoption of AI and other technologies in what is another industry wide transition.
Simply put.
Pace at which our customers are gaining confidence and embracing artificial intelligence machine learning computer vision processing five G cloud, even now generative behind is accelerating as they move along that S curve or technology adoption.
These are all areas of strength for record our software.
State of the art Nvidia GPU based hardware systems.
It appears together process trillions of data points of mobility data sourced from key partners in the ecosystem.
In our multimodal composite AI solution stacks.
Seamlessly across edge, Iot cloud and on premise environments.
This means our customers can easily deploy recorded within their existing workflows datasets.
Gotcha.
We've taken a deliberate approach and radical simplification.
The complex simple so our customers can be an immediate and obvious value.
With multiple patents filed and granted already and others in the works being the leader in digital infrastructure and roadway intelligence is what we've been pioneering for some time now.
And that's working.
The combination of these two industry right trends is opening up a whole new world of high value applications that will translate into a very significant business.
As in our 2023 results demonstrate.
Off to a strong start.
Looking ahead in 2024, we expect to more strongly verticalizing, our go to market activities and their margin improvement and cost leverage as we drive continuous improvement in productivity and efficiency and grow our expertise in managing product mix and pricing.
All new products, we launched this year, where we built on our existing platforms.
Our investment curve can be less steep.
And the kind of profitability should reduce.
As our customer base expands we'll continue to build out our sales technical support production and field distribution infrastructure to ensure that we can meet and exceed customer demand across the U S with improvements in technology automation and roadside experience and expertise.
We're also continuing to build our system capacity.
Partnering closely with global technology leaders, such as Nvidia and AWS to prepare capacity for multibillion dollar scale.
All while keeping our current customers and systems operating at the highest levels of performance.
On a 24 by seven basis.
We will also continue to enhance the scope of our current product and service offerings. For example monitoring of greenhouse gas emissions from vehicles, our largest contributor to greenhouse gas of any sort.
Is the most recent addition to our product and service offerings.
We're now working with states and federal government. So that the states will be able to prove through accurate vehicle emission data on their road ways that they can clear the air along with multiple other studies they must perform.
We believe we stand alone in our ability to deliver this.
In summary, we remain confident in our ability to execute on our plan for 2024 and are well positioned for another year of outstanding growth.
Look forward to providing you continued updates and further details on our progress throughout the year ahead.
At this point I will turn the call over to Robert Berman, CEO and chairman of <unk> for final remarks and Q&A.
Robert.
Thank you David.
To sum things up I want to go back to my opening remarks.
This is a once in a lifetime opportunity to participate in a massive technology refresh.
It's impossible to control the timing of this state by day or even month by month.
Im certain however, this will be as clear as it can be this year.
Patience is rewarded along with hard work.
We will keep doing this hard work and hope you will continue your support and find the patients to help us sell the ship into the harbor.
I would like to add that management has received nearly a dozen requests have calls with individual investors. After this call.
This is just not practical for us to do and would greatly appreciate that you ask your questions here and now and we will do our best to answer them for the benefit of all of our shareholders.
Yeah.
[noise].
Hello.
Operator.
Operator, do we have any questions.
Okay.
Okay.
We have some questions.
Yes.
Guys can you hear me now yes.
Yes.
Yeah. This is rob.
Brian.
I apologize I was prompted for Q&A, but I guess my microphone western working I apologize for the technical I just kept to wait let's get to it.
This is all the questions we have.
Our first question comes from the line of Louis Dipalma with William Blair. Please proceed with your question.
Good afternoon, Robert L and David.
Okay.
Louis Dipalma: Hey, how are you.
Sure.
Robert you reported a 124% increase in contracts and.
Louis Dipalma: David described how transportation modernization appears to be a major.
Speaker Change: It'll priority are you observing in acceleration in projects funded by the 550 billion II JA infrastructure Bill and are we still.
Speaker Change: In the early innings here of this.
Yes.
David Let me take that first.
And then David can follow up but I think.
Speaker Change: There's two pieces here.
The first is.
The program money from.
The government requires state cities and other.
Municipalities to do statewide rate that's program money.
We are seeing is an increasing interest in using our technology to do that as opposed to the legacy technology and David you can take the second piece with respectful.
Speaker Change: Hum.
Good morning.
Yes, if you can hear me okay.
Yes.
Money freed up as a result.
Distributions from the JV, which is otherwise known as the bipartisan infrastructure law or B I L. It's.
It's about I would say about 300 billion has been deployed over 2022 late 2022, and also coming into 2023, and so there's a lot of.
I'd say a lot a lot more to go but the funds are already being released and we are seeing that states are starting to reap the benefits of that freed up.
Injection of capital.
Okay. Thanks.
Can I just add to that.
As you know just for our shareholders on the call here.
In the fall of 2023.
The administration released its rules on.
Measuring greenhouse gases in setting targets for 2030.
And those rules went into effect in early January I think January six theyre not mistaken it was either six or eight.
And they have to set their targets by 'twenty four.
Speaker Change: And they have to then show.
How they measure those and get to where their targets by 2030, and I think some of that may be related to the new money, but this is all new.
Very new great I mean, it's just the beginning of the year and it just satish rules and Theyre just starting to operate under him now.
Okay.
Great.
<unk>.
Robert and David you referenced how highways and bridges are in desperate need of improvements and as it relates to the traffic measurement over the past many decades.
Antiquated and now obsolete radar.
Systems have been installed what is the total market opportunity to replace the outdated technologies.
Analytics software sensors.
Yeah.
Speaker Change: David you want to take a shot of a pattern.
Yes.
States every state has existing spend on roadside devices that they had deployed for many years as I mentioned.
These are going through a refresh a stake could have anywhere from a few hundred to a few thousand.
States like California, obviously, much larger have a lot more devices there as they are filling out.
I'll give you an example, like a P S O sensor or an inductive look theres there literally I.
I would say.
Hundreds and hundreds of thousands of these that are throughout the United States and they often are ground up as a road gets repaved or moved or anything like that and or are they just simply fail because they're a mechanical device that.
And second you put it in the in the ground it starts to deteriorate as a as a mechanical moving thing. So these will inevitably be replaced as they're filling out and a lot of them are already filling out and so you know the.
The size of opportunity depends on the types of devices, but it's literally in the billions of dollars of range and they are long term contracts I mean, some of these devices have been installed for 30 years 40 years 50 years.
And so the opportunity to kind of get in being able to deliver a unique value based on our approach using AI.
Single serve as well as with different about AI is when it's out there rather than deteriorate. It actually starts to improve every single time that to the new situation that learn and continues to get better and stronger. So we believe that on one dimension just a sheer replacement of technology theres an enormous opportunity there.
And that's partially funded from existing spend that $250 billion of existing spend and also partially funded by the new injection of capital from the IHA, a or the bipartisan infrastructure block.
<unk> does not comprehend is that the way that we've approached the market and our technology is that we do with a single device, we have the ability to monetize the multiple connections as Robert Byrd Chin.
That greenhouse gas emissions, there's really nothing out there today on the roadside other than like hundreds of thousands of dollars that you would spend for a greenhouse gas super right. There's no way to really do that today and Arctic LNG actually does it today.
On the same device that we do classification count in speed and other other studies with and so our ability to monetize on a roadside units that would be replacing legacy tech and continue to future proof that and expand upon that footprint.
As large and expanding.
Thanks Ann.
Robert and David you described the opportunity in the billions.
You grow revenue, 71% year over year in the fourth quarter.
And.
The team discussed how new products will be built onto your existing platform. So with the large revenue opportunity and revenue growing.
Speaker Change: So fast how are you balancing revenue growth.
Margin.
Expansion.
Yes.
I'll take it.
So basically our revenue margins, we anticipate we did technology as we penetrate more and more.
State Dot's without technology.
Dissipate the margin actually to go up.
Margins on the technology.
It is higher than the loops and T. As David described so we do anticipate.
As we increase revenue is always going up and the mix of revenues leaning more towards our technology.
These margins will go up.
Over time.
Speaker Change: In the short lead time periods.
We will see this improvement in margin as we are.
It puts more and more our Iot node devices roadsides.
Defensive question.
Yes.
Let me just add to that.
Let's be clear right. So.
What we're doing is we're putting Iot nodes will chart.
And it's a single system that can have multiple.
Missions.
Speaker Change: Right. So when we are asked to put a system in to do what's mandated like count class and speed and we install it.
It's out there it's dawn.
The state or the municipality decides they want to do.
Greenhouse gas emissions, we turned it on.
They decide that they wanted to weigh emotion or tonnage or origin destination, we turn it on.
We don't have to go back out and touch the device.
Okay. It's out there it's connected it's a singular device its future proof and as David mentioned earlier.
Speaker Change: <unk> technology that we're talking about which hasnt been refreshed in the last time 30 years ago.
We don't have to go back out to the road and we install it and do anything it's there we just turn on additional functionality and it serves the purpose for their needs.
So the margins go up because youre getting additional fees for the same device just providing additional functionality.
Thanks Robert.
Really helpful and I think that helps.
Everybody on the call understand me.
<unk> price, but mostly fixed price nature.
Yeah your product suite.
Yes.
Yeah.
Thank you.
Thank you. Our next question comes from the line of Michael Latimore with Northland Capital markets. Please proceed with your question.
Yeah.
Great. Thanks, Jeff.
Congrats again on the strong organic growth in the quarter.
In terms of the bookings can you just maybe give a little more detail there maybe what percent of the bookings are in this discover product area and then for those discover wins are the most.
Most of the expansions new states, just a little more color on bookings that would be great.
You know, Michael maybe I'll, let al take a piece of this but before we do I just want to make it clear that.
As we've always said, we started within our footprint, which was the acquisition of STS and their relationships in the southern states.
And since then we've added states outside of their footprint, where we have no relationship whatsoever.
So we're starting to see adoption of this technology by brand new customers that are new to record and we're new to them.
So.
That's fair.
Fair to say that.
Speaker Change: This is new.
And it's not just our technology, that's new it's the whole concept of AI.
Connected devices and all these other things going on out there that.
Customers have to get customer.
And used to and whatnot and it just all.
It's all happening and it's happening right now.
So.
You want to.
Answer from there.
Yeah Yeah.
Talk about it before as well as total contract value that we have close to $50 million.
Speaker Change: It is across all three segments.
Mike.
Speaker Change: We've talked about it before yeah, it's leaning more toward the discover.
Cover or the urban mobility segment that we have because they saw a larger contract for a longer period. This time.
Speaker Change: But we see.
Total contract value of the booking as you call them.
And our portfolio is really across all three segments.
We see it and you can see the growth in all three segments revenue, that's what we anticipate.
This back.
Backlog or bookings will go up.
You're right it has been doing.
It will be because of the nature of the contract.
Thanks, Scott and Michael maybe maybe it's <unk>.
Gordon can make note of the fact that.
Sometimes it's the discover platform that leads to the customer or command.
But what happens is once they get the technology out there.
Three platforms fit hand in glove, because it's public safety and as traffic management or mobility.
It's the same system that performs all of these different functions. So.
One leads to another leads to another at least one order right.
Yes.
Thanks.
And how about in terms of just the deployment resources you have.
You, obviously have your organic team and I think you were building that and then you've added in <unk>, but maybe you can just talk a little bit about how many I don't know people you have that can deploy your technology and how many systems that can do per month or something like that.
Okay.
David you want it.
Yeah. So so we've got.
With the acquisition of the entity joining us in January we have upwards of 77.
75.
Individuals that are in the field that are outside experts and certified to do the work out there but.
But I would say that from a deployment perspective, we now have reached a pretty much every state in the U S, which is a very important element for us otherwise we would have had to build that office by office.
That's been good for us, but we're not limited to our own staff. We've got cases, where we have third party third party I agree with you now.
As a preferred or a state we can do that so it's really not limitation thereof.
It's more of a hybrid and we can do it it can be done through a third party integrator as well. So that's really not a linked question, but to answer your question about 75 to 80.
Speaker Change: In terms of roadside certified experts that are out there.
Okay great.
It's important to note those are people that.
Understand working roadside working with dot and others.
Do this stuff every day.
As David mentioned integrators, or adding field tax.
Speaker Change: Frankly, it's not rocket science right, it's more of the expertise.
The.
The trust that you have with dealing with the agency that knows it's getting done correctly. So there's no problem expand their labor force if necessary or.
Using integrators, who it was more of the expertise that we were concerned about and that's why adding ATV was so valuable.
Okay that makes sense.
Okay and then just.
Things may be evolving so you might not be able to guide on this but can you give us some sense of what.
<unk> versus service mix might be for the year are you thinking about that and then also.
<unk>.
Speaker Change: Orderly revenue level, you might get to EBIT breakeven.
Well.
No.
Is the service right.
I know that May sound kind of.
What.
But the.
This is not an industry, where technology company just walks in and says Hey, we're here use our software and you can do all this stuff each door growth.
So the product and the service.
Hum.
They go hand in glove.
Without question.
So that's an important thing and that's what makes <unk> unique.
Alright.
Our ability to.
<unk> provides services to customers that want trust.
The supplier.
But they can maintain existing equipment and continue the flow of existing data, while the transferring over to new systems and.
And getting data new way.
So you can keep them operating and that's a really important component of it so.
They really do go together and it's hard to break it out so I would say the service and the product or.
Almost one and the same.
David would you agree with that.
Yes.
As we're learning here.
The services that we would provide become more and more automated right. So they almost become product ties.
Sure I can through automation, and just being able to simplify and cut down steps. So that just becomes a stamp or Pete you know typically you think of our services.
Something very customized and such and of course, there's always going to be that element of it is as we work with states and cities and municipalities and think that they you know, particularly trying to get done, but more and more we see automation coming to play there to automate steps in and just make that more product ties so a lot more efficient.
On the on the product side, you know the ability to make that more of a service as well as an element that we're very cognizant, we build for and when you think of from a technology standpoint, do you think of micro services and data services and even things like generative AI or foundation model.
Approaches here allows us to be very flexible and just by the sheer nature of AR and Iot device. It has infinite flexibility to be whatever it needs to be.
The roadside and what I mean by that is you've got a very powerful product a processor that sits on the side of the road, it's like a mini supercomputer and the ability to upload various services that are on there like think of it as AI services, maybe greenhouse gas maybe class count and speed, maybe it's a vehicle identive.
Vacation, maybe it's a way of motion maybe its something else the ability to create a very flexible environment almost the product starts to be a service. So we're seeing the services become a private guy. So we're seeing products become more like a service.
Just to give you a little bit more color on how we're building and structuring our path forward here. So efficiency is really the name of the game.
Are you able to have something very flexible and adaptable for the needs of our customers.
Got it.
Speaker Change: He used to breakout product versus recurring revenue.
Gonna be one revenue line going forward.
No it will be too.
I guess your question was what is the mix between the recurring revenue and product and services revenues for the year right.
For the year and then what do you think it might be going forward.
I would think right.
60% level and we anticipate this to to lead the mix you know appropriately the 60% to 70% recurring and product.
Services revenue, but it really depends on some point of time. So that we may have even though there will be a big auto all hardware and software.
Little.
Change the mix, but for the long term, we anticipate the recurring revenue to be approximately 70% of total revenues.
Got it okay.
Thank you.
Speaker Change: Thank you Mike.
Thank you. Our next question comes from the line of Michael Cohen, a private Investor. Please proceed with your question.
Michael Cohen: Hi, Robert.
Hey, Michael.
I have two questions first of all I believe if im not mistaken on the last conference call you promised us today that you would give us updated guidance on breakeven.
I was hoping that you could give us a sense of when you'll be breakeven in 2024.
Okay.
I think what we said.
Last calls we thought that that would be between Q1, and Q2 and I don't I don't think that's changed based on what we see.
Okay. My second question is.
And the last equity raise you did in February in your presentation, you put out on revenue number of 85 million for 2024.
As a as an investor what confidence can you give me that that number is attainable.
You missed your 2023 guidance you missed your breakeven guidance in 2023, the market, obviously doesn't believe $85 million because you wouldn't be trading at $2 a share I'm also not mistaken William Blair in their recent initiation has $65 million of revenue. So what would you tell the market to give us confidence that $85 million deliverable.
In 2024, I think alright. Thanks.
Michael that.
With any one company okay.
What we've done in a few short years to grow the way we've grown to put the products in the market that we have.
I would say that look I'm proud of the team that's gotten us to where we are.
Okay, and I think it's been a remarkable year when youre dealing with government.
State and federal level.
They don't operate on the same calendars that private sector does.
It's hard to.
Hey to a specific date.
Do I believe that we're going to get to that $85 million number this year I do.
I can't say that it won't be lumpy along the way, but I think we would get there based on what we know what we're discussing and I think I've said.
And my remarks that you know where you have a lot of stuff going on.
Because of pure margin.
And other things, we're just not at Liberty to talk about stuff because.
You can beat the acute in our procurement based on.
Making the wrong call to the wrong individual at the wrong time right. So we think we get there and we think that number is very realistic.
Possible it could be higher.
Possible it can be a little bit lower.
It's not impossible that we get there based on what we've done in the last few years at all based on all the discussions that we have going on.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of David Hargreaves, a private Investor. Please proceed with your question.
First of all congratulations on the progress you guys have made and and thank you for everything you've done to kind of try to keep things on an even keel. There is a fair amount of going concern language. It seems in the document and I'm just wondering what your plans are for addressing that and then thank you and keep.
Keep up the good work.
Okay. Thanks, David and it's nice to have the complement we appreciate it.
But no one concern is something that's pretty dynamic.
As we got into the weeds.
With the auditors with looking at our pipeline.
The accounting rules are very strict.
And in looking at what we had and we showed them.
Just didn't meet the requirements of their guidelines. So we were forced to take a haircut on our forecast.
Conversely, you always look to mitigate so while we can cut expenses right and when we looked at that.
We had difficulty saying that we can put expense.
Based on the opportunities.
We have in front of us are very real that we're working on every day.
And so you have a classic chicken and egg conundrum here, where we find ourselves in a box.
But you know we.
We see a path.
To get through this it doesn't necessarily need to wait until the.
The end of calendar 2024.
It can happen in calendar 2023.
Michael Cohen: And we believe it will and we're going to continue to work hard too.
To cross that bridge can't predict today.
But it's going to happen so, but we also respect the accounting rules and announced.
And how strict they are and how difficult it needs to do these things in.
Sometimes you just don't have choices when you're putting in a box and that's where we're.
Put in the box.
That helps to answer your question.
So just to quickly follow up if we put aside or accounting hat for a moment could you talk about your comfort with liquidity and.
And what options you think you might have to raise additional liquidity if needed.
Thank you that's my last question.
So with respect to raising capital back.
It's not something the accounting rules allow us Stephen.
Look at right, but.
We feel comfortable with where we are with cash on our balance sheet in.
The business that we have that.
Can make it through this and our plan.
<unk> was always to do exactly what we did okay. It was too.
Construct an issue those prime revenue sharing those.
Michael Cohen: And to establish that as a program.
Two grow the contract base and to continue to issue those.
And that's what we're going to continue to work towards and Thats, how we hope to.
Fund implementations on contracts that are paper data, which states that have large contracts.
We feel good about it but again, it's a tough situation. When you have this chicken and egg situation with.
Rules that are.
Michael Cohen: So black and white that you can move right Jim will lap right. So.
We feel good about where we are and we think we can make it through this and.
We really don't have any concern about it.
Okay. Thank you very much and good luck. Thank you yep.
Thank you.
Thank you. Our next question comes from the line of Ray <unk> with <unk>.
That is a private investor. Please proceed with your question.
Yes, hi, Thanks for taking my call I had just two questions.
Ray: First one is can you touch on the technology being used for a train yards seaports and this capable and my second question would be can we expect any overseas contracts or partnerships. Thank you.
Thank you David do you want to touch on.
That's two questions yes.
No problem, yes, I would say what our specialty is is really object identification and we do that through a multiple different ways. There's no reason why the technology cannot be applied to really any object living in a frame or on a road way whether that's in a shipyard.
Transit, a train or rail or whatever it may be our focus though the technology is not it's not a limitation and technology, it's a limitation in where we choose to focus our <unk>.
Finite resources go to market and so we haven't focused on on driving.
Growth in those sort of planes and trains we've been focused on automobiles planes.
Ray: Planes trains and automobiles.
But definitely as we look forward. There's no reason why the check can apply there just a matter of focus on where we see that money.
Available now.
I think the infrastructure bill or the bipartisan infrastructure law.
<unk> will provide additional funding there, but again, it's it's something that you have to be very vertically focused on in order to win the confidence of the customer sat and our expertise is really wet.
And not not ports.
Ports and airports.
Ray: Is it maybe does that help give you some some thoughts around that.
Yes, it does and the other question I had mentioned was out any.
Contracts are partnerships expected overseas.
Boy I'll tell ya focusing here in the U S has really been for us and we're always open to that but it goes back to where we want to make sure. We put the most wood behind the arrow.
Robert I don't know if you have any comments on that but I would say right now we're really focused.
Right.
Robert: Look I think it's a fair question. So if you look at.
Just the federal mandate for count class and speed, which is how every government probably.
And any developed nation around the world.
Funds the roadways right they use something similar.
So what we do here could be done elsewhere.
The market is just so massive here, we've not had to.
Robert: Even think about that because we're focused on what's in our backyard.
And should the right opportunity come.
And of course, we look at it but right now I think we've got enough potential growth ahead here that we don't need to think about that but we wouldn't foreclose the opportunity either.
So okay. That's all I had thank you much appreciate it.
Thank you. Thank you.
Thank you.
Yeah.
Thank you as a reminder, please press star one to ask a question at this time.
There are no further questions I would like to turn the floor back over to Robert Berman for closing comments.
Everybody. Thank you.
Thanks for participating I know, it's getting late.
And it's been a long day.
We appreciate all your support and as I said earlier, we'll continue to do the hard work, but it takes both patients.
As well.
Robert: Something is going to make it I mean, we've had an amazing two years.
The technology is real it's being adopted by all.
Entities.
Only some companies would hope to be able to do business with any of them right over here.
And it's all new and it's happening now and it is as David said, it's a technology refresh this doesn't happen.
That often it happens.
Once in a lifetime frankly.
We're at the forefront of it and we're going to try to maintain our first mover.
Status that we have in <unk>.
Robert: We need to do our best to grow the company.
Thanks continue onwards, and I appreciate everybody's support so thank you all for them.
Fine.
Yeah.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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