Q2 2024 Rekor Systems Inc Earnings Call

Speaker Change: Rekor Systems, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar

Operator: Rekor Systems, Aditya Dagaonkar, David Desharnais, Aditya Ruh, Ruh, Ruh, Ruh, Ruh, Ruh, Ruh, Ruh, Ruh, Ruh, Rekor Systems, Aditya Dagaonkar, David Desharnais David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, Rekor Systems, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar Rekor Systems, Aditya Dagaonkar, David Desharnais, Rekor Systems, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar David Desharnais, Aditya Dagaonkar, David Desharnais, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar [inaudible] David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems conference. Michael Latimore, Robert Berman, Unknown Attendee, Zachary Cummins, Aditya Dagaonkar, David Desharnais, for a brief question and answer. David Desharnais, Aditya Dagaonkar, Rekor Systems, Aditya Dagaonkar. If anyone should require operators, press star zero on your.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc.

Diego: My name is Diego, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. A brief question and answer session will follow a formal presentation. If anyone should require operator systems during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.

Diego: Conference Call. My name is Diego and I will be your coordinator for today.

Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.

Operator: As a reminder, this conference call is being recorded for, Before we start, I want to read you the company's abbreviated Safe Harbor. I want to remind you that statements made in this conference call concerning future revenue. Results of Operations, Markets, Economic, Products and Product Releases, Partnerships, and any other statement. Unknown Attendee, Zachary Cummins, Aditya Dagaonkar, David Desharnais, Eyal Hen, Noah, or events are forward looking, such statements can involve known and unknown risks and uncertainties. Actors, which may cause actual results of different materially from those expressed or implied by such dates.

Unknown Attendee: 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 positions, markets, economic conditions, products and product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements. Such statements can involve known and unknown risks and uncertainties and other factors, which may cause actual results in the different material from those expressed or implied by such statements.

Speaker Change: Before we start, I want to read you the company's abbreviated Safe Harbor Statement. I want to remind you that statement is made in this conference call concerning future revenues.

Speaker Change: Results of operations, financial position, markets, economic conditions, products and product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements.

Speaker Change: Such statements can involve known and unknown risks and uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements.

Unknown Attendee: We ask you 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.

Operator: We ask that you refer to the full disclaimers in our earnings. You should also review a description of the risk factors. Annual and Quarterly Filing. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP.., provides useful supplementary data, ongoing operations, and is provided for. I would now like to turn the presentation over to Mr. David Desharnais, President, CEO. Good afternoon and thank you for joining us today.

Speaker Change: We ask that you refer to the full disclaimers in our earnings release.

Speaker Change: You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC.

Unknown Attendee: 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.

Speaker Change: 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.

David Dernays: I would now like to turn the presentation over to Mr. David Dernays, President and CEO of Recourse Systems. Good afternoon, and thank you for joining us today. As I conclude my first full quarter as President and CEO of Recourse, I am pleased to share our solid progress in the quarter and strategic vision for the future. Over the past 90 days, since stepping into this role, I've dealt deeply into every aspect of our business. I've been focusing on refining our financial processes, enhancing the work that we are doing in government relations, and driving operational excellence across our sales team and field operations.

Speaker Change: I would now like to turn the presentation over to Mr. David Desharnais, President and CEO of Recourse Systems.

David Desharnais: As I conclude my first full quarter as President and CEO of Rekor, I am pleased to share our solid progress in the quarter and strategic vision for the future. Over the past 90 days, since stepping into this role, I've dealt deeply into every aspect of our business. I've been focusing on refining our financial processes, enhancing the CapEx program, and enhancing the work that we are doing in government relations and driving operational excellence across our sales team and field operations.

David Desharnais: Good afternoon and thank you for joining us today. As I conclude my first full quarter as president and CEO of Recore, I am pleased to share our solid progress in the quarter and strategic vision for the future.

Speaker Change: Over the past 90 days since stepping into this role, I've delved deeply into every aspect of our business. I've been focusing on refining our financial processes, enhancing the work that we are doing in government relations, and driving operational excellence across our sales team and field operations. Thank you.

David Dernays: My commitment is to establish and strengthen the governance structures and scaling mechanisms that will help transform Recourse into a more predictable growth engine. And I'm encouraged by the team's positive response to the direction and priorities that have set and the substantial progress we've made so far. Also, over the past three months, I've had the privilege of engaging with many of our investors and shareholders globally. Your insights have been invaluable to me, and I want you to know that I'm listening. Our conversations have reinforced three key themes. Strong enthusiasm for a market position and opportunity. Concerns about securing necessary capital to continue our significant growth trajectory amidst macroeconomic uncertainty and slow government contracting cycles.

David Desharnais: My commitment is to establish and strengthen the governance structures and scaling mechanisms that will help transform Rekor into a more predictable growth environment. And I'm encouraged by the team's positive response to the direction and priorities that I've set and the substantial progress we've made so far. Also, over the past three months, I've had the privilege of engaging with many of our investors and shareholders globally. Your insights have been invaluable to me, and I want you to know that I'm, Our conversations have reinforced three key, Strong enthusiasm for our market position and opportunity.

Speaker Change: My commitment is to establish and strengthen the governance structures and scaling mechanisms that will help transform Rekor into a more predictable growth engine, and I'm encouraged by the team's positive response to the direction and priorities that I've set and the substantial progress we've made so far.

Speaker Change: Also, over the past three months, I've had the privilege of engaging with many of our investors and shareholders globally. Your insights have been invaluable to me, and I want you to know that I'm listening.

Speaker Change: Our conversations have reinforced three key themes.

David Desharnais: Concerns about securing necessary capital to continue our significant growth trajectory amidst macroeconomic uncertainties, slow government contracting cycle, and finally, eagerness, for Meaningful Customer Tracking. Today, I'll address these three areas and provide insight into our path forward. To begin with, let me stress that navigating the complex procurement process of federal, state, and local government agencies is challenge.

Speaker Change: strong enthusiasm for our market position and opportunities, concerns about securing necessary capital to continue our significant growth trajectory amidst macroeconomic uncertainty and slow government contracting cycles.

David Dernays: And finally, eagerness from meaningful customer traction.

David Dernays: Today, I'll address these three areas and provide insight into our path forward. To begin with, let me stress that navigating the complex procurement process of federal, state, and local government agencies is challenging. But it also provides an opportunity with unparalleled long-range stability and growth potential. While we've been fielding our AI-based solutions in the transportation and traffic segments for just over a year at this point, namely our Discover and Command platforms. We have moved at a rapid pace, gaining awareness, preference, and adoption across multiple states, including South Carolina, Georgia, Florida, New Mexico, Texas, Colorado, Ohio, Maryland, Oklahoma, Kansas, Oregon, and multiple others in the works.

Speaker Change: And finally, eagerness for meaningful customer traction.

Speaker Change: Today, I'll address these three areas and provide insight into our path forward.

Speaker Change: To begin with, let me stress that navigating the complex procurement processes of federal, state, and local government agencies is challenging, but it also provides an opportunity with unparalleled long-range stability and growth potential.

David Desharnais: But it also provides an opportunity with unparalleled long-range stability and growth. While we've been fielding our AI-based solutions in the transportation and traffic segments for just over a year at least, namely our discover and command. We have moved at a rapid pace, gaining awareness, preference, and adoption across multiple states, including South Carolina, Georgia, Florida, New Mexico, Texas, Colorado, Ohio, Maryland, Oklahoma, Kansas, Oregon, and multiple others in the world. However, it is important that we remain realistic, given that the government contracting process is opaque at that, and as its own patient.

Speaker Change: Well, we've been fielding our AI-based solutions in the transportation and traffic segments for just over a year at this point, namely our Discover and Command platforms.

Speaker Change: We have moved at a rapid pace, gaining awareness, preference, and adoption across multiple states, including South Carolina, Georgia, Florida, New Mexico, Texas, Colorado, Ohio, Maryland, Oklahoma, Kansas, Oregon, and multiple others in the works.

David Dernays: However, it is important that we remain realistic, given that the government contracting process is opaque at best, and has its own pace and timeline. It is something that we will continue to be conservative with in setting expectations as it relates to timing of deals and expansion. Along this line, and as an update to our last earnings call, I wanted to update you on the upcoming deployment of up to 1,000 Discover and Edge units, decoding to a potential upside of approximately $35 million in revenue in one of the largest states in the US as they finalized their AI policy.

Speaker Change: However, it is important that we remain realistic, given that the government contracting process is opaque at best, and as its own pace in time life. It is something that we will continue to be conservative with in setting expectations as it relates to timing of deals and expansion.

David Desharnais: It is something that we will continue to be conservative with in setting expectations, as it relates to timing of deals and expand- Along this line, and as an update to our last earnings call, I wanted to update you on the upcoming deployment, of up to 1,000 discover and edge units, decoding to a potential upside of approximately $35 million in revenue, in one of the largest states in the U.S. as they finalized their AI policy. As of today, I'm pleased to share that we've initiated deployments in the region.

Speaker Change: Along this line, and as an update to our last earnings call, I wanted to update you on the upcoming deployment of up to 1,000 Discover and Edge units equating to a potential upside of approximately $35 million in revenue.

Speaker Change: in one of the largest states in the U.S. as they finalized their AI policy.

David Dernays: As of today, I'm pleased to share that we've initiated deployments in the region. However, progress has been hampered by continuous interruptions resulting from multiple storms with this hurricane season, most recently by Hurricane Debbie. We don't control these things, of course, but the state does not permit anybody to work roadside in hazardous weather conditions. In the period leading up to the storm, during the storm itself, of course, but also in the immediate aftermath. Understandably, this is an impacted or expected timeline for deployments, as the state is prioritizing emergency response efforts for citizens. But the initial sites we have already activated have performed flawlessly under these extreme conditions and have already proven to be mission-critical, delivering vital insights to the state's Emergency Operations Center to support evacuation routes during these storms. This underscores the essential role our technology plays, further cementing record as a trusted and indispensable partner in this state, which would pay dividends.

David Desharnais: However, progress has been hampered, by continuous interruptions resulting from multiple storms this hurricane, most recently by Hurricane Debbie. We don't control these things, of course, but the state does not permit anybody to work roadside in hazardous weather conditions, in the period leading up to the storm, during the storm itself, of course, but also in the immediate after.

Speaker Change: As of today, I'm pleased to share that we've initiated deployments in the region. However, progress has been hampered by continuous interruptions resulting from multiple storms this hurricane season.

Speaker Change: Most recently, by Hurricane Debbie. We don't control these things, of course, but the state does not permit anybody to work roadside in hazardous weather conditions. In the period leading up to the storm, during the storm itself, of course, but also in the immediate aftermath. The storm itself itself, but also in the immediate aftermath. The storm itself, but also in the immediate aftermath.

David Desharnais: Understandably, this has impacted our expected timeline for deployments as the state is prioritizing emergency response efforts for its citizens. But the initial sites we have already activated have performed flawlessly under these extreme conditions and have already proven to be mission critical, delivering vital insights to the state's Emergency Operations Center to support evacuation routes during these storms. This underscores the essential role our technology plays, further cementing Rekor as a trusted and indispensable partner in this state, which will pay dividends.

Speaker Change: Understandably, this has impacted our expected timeline for deployments as the state is prioritizing emergency response efforts for its citizens.

Speaker Change: But, the initial sites we have already activated have performed flawlessly under these extreme conditions and have already proven to be mission critical, delivering vital insights to the state's Emergency Operations Center to support evacuation routes during these storms.

Speaker Change: This underscores the essential role our technology plays, further cementing Rekor as a trusted and indispensable partner in this state, which will pay dividends.

David Dernays: As I also highlighted in the previous call, the transportation infrastructure industry is undergoing a massive and generational technology refresh, and that within our existing Southeast footprint alone, we see the potential to add 6,000 to 8,000 sites, which could generate an estimated 200 to 300 million in cash flows over the coming years. Recours reputation as a trusted partner in the south-eastern states has never been stronger, and our success is being closely monitored by other states nationwide as we continue to execute our growth stress.

David Desharnais: As I also highlighted in the previous call, the transportation infrastructure industry is undergoing a massive and generational technology refresh, and that within our existing southeast footprint alone. We see the potential to add 6,000 to 8,000 sites, which could generate an estimated 200 to 300 million cash flows over the coming years. Rekor's reputation as a trusted partner in the southeastern states has never been stronger, and our success is being closely monitored by other states nationwide as we continue to execute our growth strategy. Given our recent performance with these states during these crises, It only positions us more strongly for our continued expansion in the region.

Speaker Change: As I also highlighted in the previous call, the transportation infrastructure industry is undergoing a massive and generational technology refresh, and that within our existing southeast footprint alone.

Speaker Change: We see the potential to add 6,000 to 8,000 sites, which could generate an estimated 200 to 300 million in cash flows over the coming years.

Speaker Change: Rekor's reputation as a trusted partner in the southeastern states has never been stronger, and our success is being closely monitored by other states nationwide as we continue to execute our growth strategy.

David Dernays: Energy. Given our recent performance with these states during these crises, it only positions us more strongly for our continued expansion in the region. Our growing recognition and reputation, along with the ongoing infrastructure overhaul that is happening, puts us in an ideal spot to capitalize on this transformative period in the industry. So while we must continue to navigate the complex and often slow-moving procurement processes of state and local governments, it also provides us a unique opportunity for long-term and durable growth that we believe will benefit our investors in the long run. Despite the relatively short time we've been deploying our technology in the market, we're experiencing continuous accelerated growth and am confident in our ability to sustain this momentum.

Speaker Change: Given our recent performance with these states during these crises, it only positions us more strongly for our continued expansion in the region.

David Desharnais: Our growing recognition and reputation, along with the ongoing infrastructure overhaul that is happening, puts us in an ideal spot to capitalize on this transformative period in the, So while we must continue to navigate the complex and often slow-moving procurement processes of state and local governments, It also provides us a unique opportunity for long term and durable growth that we believe will benefit our investors in the long term. Despite the relatively short time we've been deploying our technology in the market, we're experiencing continuous accelerated growth, and I'm confident in our ability to sustain this momentum.

Speaker Change: Our growing recognition and reputation, along with the ongoing infrastructure overhaul that is happening, puts us in an ideal spot to capitalize on this transformative period in the industry.

Speaker Change: So while we must continue to navigate the complex and often slow-moving procurement processes of state and local governments, it also provides us a unique opportunity for long-term and durable growth that we believe will benefit our investors in the long run.

Speaker Change: Despite the relatively short time we've been deploying our technology in the market, we're experiencing continuous accelerated growth and I'm confident in our ability to sustain this momentum.

David Desharnais: Later in the call, I'll discuss some of the new contracts we've secured during the last quarter and examples of meaningful traction we're experiencing. Before diving into these details, I'll now hand the call over to Eyal Hen, Rekor's CFO. He'll review our financial highlights for the quarter and discuss the proactive steps we're taking to solidify our capital position and protect our shareholders as we navigate the uncertainties of the current macroeconomic environment and B2G domain. Eyal?

David Dernays: Later in the call, I'll discuss some of the new contracts we secured during the last quarter and examples of meaningful traction we're experiencing.

Speaker Change: Later in the call, I'll discuss some of the new contracts we've secured during the last quarter and examples of meaningful traction we're experiencing.

Eyal Hen: Before diving into these details, I'll now hand the call over to Eyal Hen, Rekor CFO. He'll review our financial highlights for the quarter and discuss the proactive steps we're taking to solidify our capital position and protect our shareholders, as we navigate the uncertainties of the current macroeconomic environment and B to G domain.

Eyal Hen: Before diving into these details, I'll now hand the call over to Eyal Hen, ReCore CFO. He'll review our financial highlights for the quarter and discuss the proactive steps we're taking to solidify our capital position and protect our shareholders.

Eyal Hen: as we navigate the uncertainties of the current macroeconomic environment and B2G domain.

Eyal Hen: Eyal. Thank you, Davies.

Eyal Hen: Thank you, David. Hello, everyone, and thanks for joining us today, to discuss our results for the 6th entry month ended June 30, 2024. I would like to start with our recent announcement that we have just infused $15 million into the company through a facility that can provide up to another $20 million in capital should we need it. The agreement is designed with strong shareholder protection, including a $2.6 million monthly cap on prepaid balance conversions to equity, and a ban on short selling by the counterparty, which minimizes dilution and allows us to draw less capital or repay the notes early once our expected contracts materialize. Full details about this agreement have been provided in our 8K concerning the financing, and I won't delve into them now.

Eyal Hen: Hello, everyone, and thanks for joining us today to discuss our results for the six and three months in the June 30, 2024. I would like to start with our recent announcement that we have just infused $15 million into the company for a facility that can provide up to another $20 million in capital should we need it. The agreement is designed with strong shareholder protection, including a $2.6 million monthly cap on prepaid balance conversions to equity, and a ban on short selling by the counterparty, which minimizes dilution and allows us to draw less capital or repay the notes early once our expected contracts materialize.

Eyal Hen: Eyal?

Eyal Hen: Thank you, David. Hello, everyone, and thanks for joining us today.

Speaker Change: To discuss our results for the 6th and 3 months ended June 30, 2024.

Eyal Hen: I would like to start with our recent announcement that we have just infused $15 million into the company through a facility that can provide up to another $20 million in capital should we need it.

Eyal Hen: The agreement is designed with strong shareholder protection, including a $2.6 million monthly cap on prepaid balance conversions to equity.

Eyal Hen: and a ban on short selling by the counterparty, which minimizes dilution and allows us to draw less capital or repay the notes early once our expected contracts materialize.

Eyal Hen: Two details about this agreement have been provided in our 8-K concerning the financing, and I won't delve into them now. So, I say to you to say that this gives us the necessary resources to address the recent government contract delays we've been facing. This injection of funds positioned us to meet our 2024 growth targets, and as is shown by our Q2 performance, we are making solid progress against this. We've continued to drive operational efficiencies and carefully manage our cash flow to ensure it is used effectively. For the same time, we've improved our metrics year-over-year and quarter-over-quarter.

Eyal Hen: Full details about this agreement have been provided in our 8K concerning the financing, and I won't delve into them now.

Eyal Hen: Association to say that this gives us the necessary resources to address the RISU government contract delays we've been facing. This injection of funds positions us to meet our 2024 growth targets, and as is shown by our Q2 performance, we are making solid progress against this. We've continued to drive operational efficiencies and carefully manage our cash flow to ensure it is used effectively, but at the same time, we've improved our metrics year-over-year and quarter-over-quarter.

Eyal Hen: Suffice it to say that this gives us the necessary resources to address the recent government contract delays we've been facing.

Eyal Hen: This injection of funds positions us to meet our 2024 growth targets, and as is shown by our Q2 performance, we are making solid progress against this.

Speaker Change: We've continued to drive operational efficiencies and carefully manage our cash flow to ensure it is used effectively, but at the same time, we've improved our metrics year over year and quarter over quarter.

Eyal Hen: Going forward, some of the larger recurring revenue contracts we're pursuing may involve significant upfront installation expenses. If additional capital is needed for this implementation, we plan to prioritize non-dialogue and financing options such as issuing an additional series to our revenue sharing notes. We expect to continue to address our capital needs brilliantly, extending our industry leadership and fulfilling our customer commitment as new.

Eyal Hen: Going forward, some of the larger recurring revenue contracts we are pursuing may involve significant upfront installation expenses. If additional capital is needed for this implementation, we plan to prioritize non-dilutive financing options, such as issuing an additional series to our revenue sharing.

Blake Floyd: Going forward, some of the larger recurring revenue contracts we are pursuing may involve significant upfront installation expenses.

Blake Floyd: If additional capital is needed for this implementation, we plan to prioritize non-dilutive financing options, such as issuing an additional series to our revenue sharing notes.

Eyal Hen: We expect to continue to address our capital needs prudently, expanding our industry leadership and fulfilling our customer commitment as new. In this regard, we have engaged DC digler and company, a specialty investment back to service as placement agent and market maker in connection with future issues of our revenue sharing now. Over the past few months, we've been in discussions with them, as well as with writing agents to work on getting these notes rated, which should help reduce overall cost and improve their, We anticipate continuing to use this structure, which aligns potential future debt to the growth of fully performing contracts as a primary funding source of additional growth capital.

Blake Floyd: We expect to continue to address our capital needs prudently, expanding our industry leadership and fulfilling our customer commitment as new.

Eyal Hen: In this regard, we have engaged VC Digler and Company, a specialty investment bank to serve as placement agent and market maker in connection with future issues of our revenue sharing notes. Over the past few months, we've been in discussions with them, as well as with the writing agency, to work on getting these notes rated, which should help reduce overall cost and improve their marketability. We anticipate continuing to use this structure to align potential future debt to the growth of fully performing contracts, as a primary funding source of additional growth capitals.

Speaker Change: In this regard, we have engaged DC Ziegler & Co., a specialty investment bank, to service as placement agent and market maker in connection with future issuances of our revenue-sharing notes.

Speaker Change: Over the past few months, we've been in discussions with them, as well as with rating agencies, to work on getting these notes rated, which should help reduce overall costs and improve their marketability.

Speaker Change: We anticipate continuing to use this structure, which aligns potential future debt to the growth of fully performing contracts, as a primary funding source of additional growth capital.

Eyal Hen: Now I'm pleased to talk about our financial highlights for the three and six months and the June 30, 2024. In the second quarter of 2024, our revenue rate, a record revenue of $12.4 million, marking a significant growth of 45% increase from the $8.6 million in the same period last year. We also demonstrated our robust revenue growth quarter of a quarter at over 27% above Q1 2024. In the six months and the June 30, 2024, we achieved $22.2 million in revenue, an increase of 51% from the $14.7 million we marked in the same period last year.

Eyal Hen: Now I'm pleased to talk about our financial highlights for the three and six months ended June 30, 2024. In the second quarter of 2024, our revenue reached a record revenue of $12.4 million, marking a significant growth of 45% increase from the $8.6 million in the same period last year. We also demonstrated a robust revenue growth quarter over quarter. It's over 27% above Q1 2024.

Speaker Change: Now I'm pleased to talk about our financial highlights for the three and six months ended June 30, 2024.

Speaker Change: In the second quarter of 2024, our revenue reached a record revenue of $12.4 million, marking a significant growth of 45% increase from the $8.6 million in the same period last year.

Speaker Change: We also demonstrated a robust revenue growth quarter-over-quarter at over 27% above Q1 2024.

Speaker Change: In the six months ended June 30, 2024, we achieved $22.2 million in revenue, an increase of 51% from the $14.7 million we marked in the same period last year.

Eyal Hen: In the six months ended June 30, 2024, we achieved $22.2 million in revenue, an increase of 51% from the $14.7 million we marked in the same period last year. Recurring revenue also increased by 8.9% from $5.8 million in the same quarter of 2023, compared to $6.3 million in the same quarter of 2024. Our adjusted gross margin for the three months ended June 30, 2024, was 53.5%, an increase from 51.8% in the second quarter of 2022. This increase was primarily due to higher margin mix of cell during this quarter.

Eyal Hen: Recurring revenue also increased by 8.9% from $5.8 million in the same quarter of 2023, compared to $6.3 million in the same quarter of 2024. Our adjusted growth margins for the three months and the June 30, 2024, was 63.5%. An increase from 5.21.8% in the second quarter of 2023. This increase was primarily due to higher margin mix of sales during this quarter. As previously explained, we expect a primary benefit of our technology refresh efforts to allow us to move from lower margin to higher margin sales over time.

Speaker Change: Recurring revenue also increased by 8.9% from $5.8 million in the same quarter of 2023 compared to $6.3 million in the same quarter of 2024.

Speaker Change: Our adjusted gross margin for the three months ended June 30, 2024, was 63.5%, an increase from 51.8% in the second quarter of 2023.

Speaker Change: This increase was primarily due to higher margin mix of sales during this quarter.

Eyal Hen: As previously explained, we expect a primary benefit of our technology refresh efforts to allow us to move from lower margin to higher margin sales over time. However, during the early growth phase we are in, this evolution may be choppy, as we saw at the beginning of this year. The adjusted gross margin for the six months ended June 30, 2024, was 50.2 percent, a decrease from 52.5 percent for the same period last year.

Speaker Change: As previously explained, we expect a primary benefit of our technology refresh efforts to allow us to move from lower margins to higher margins over time.

Eyal Hen: However, during the early growth phase we are in, this evolution may be choppy, as we saw at the beginning of this year. The adjusted growth margin for the six months and the June 30, 2024, was 60.2%. A decrease from 52.5% for the same period last year. The decrease is mainly due to lower margins we experienced at the beginning of the year. We also continue to see improvements in our adjusted EBIT dollars. While the second quarter is now spent at $5.8 million, an improvement of over 19% from the $7.2 million in the same period last year.

Speaker Change: However, during the early growth phase we are in, this evolution may be choppy, as we saw at the beginning of this year.

Robert Berman: The adjusted gross margin for the six months ended June 30, 2024 was 50.2%, a decrease from 52.5% for the same period last year. The decrease is mainly due to the lower margins we experienced at the beginning of the year.

Eyal Hen: The decrease is mainly due to lower margins we experienced at the beginning of the year. We also continue to see improvements in our adjusted EBITDA loss. For our second quarter, it now stands at $5.8 million, an improvement of over 19% from the $7.2 million in the same period last year. The adjusted debit dollars for the six months ended June 30, 2024, was down to $15.2 million from $16.5 million the same period last year.

Speaker Change: We also continue to see improvements in our adjusted EBIT dollars. For our second quarter, it now stands at $5.8 million, an improvement of over 19% from the $7.2 million in the same period last year.

Eyal Hen: The adjusted EBIT dollars for the six months and the June 30, 2024, was down to $15.2 million from $16.5 million the same period last year.

Speaker Change: The adjusted debit dollars for the six months ended June 30, 2024, was down to $15.2 million from $16.5 million the same period last year.

Eyal Hen: Lastly, another significant development with the second quarter of 2024 was the exercise of 3,675,000 warring in June 2024, which resulted in 5.2 million dollars of cash to the company, of which 3.2 million dollars was received in July after the balance sheet date.

David Desharnais: Lastly, another significant development in the second quarter of 2024 was the exercise of $3,675,000 warrants in June 2024, which resulted in $5.2 million of cash to the company, of which $3.2 million was received in July after the balance sheet date. Also in July, we sold our remaining 19.9% ownership of Global Public Safety for $1.5 million. And of course, as I highlighted earlier, we received $15 million under our prepaid advance agreement, which has been structured to provide up to $35 million under appropriate circumstances.

Speaker Change: Lastly, another significant development in the second quarter of 2024 was the exercise of $3,675,000 warrants in June 2024, which resulted in $5.2 million of cash to the company.

Speaker Change: of which $3.2 million was received in July after the balance sheet date.

Eyal Hen: Also in July, we sold our remaining 19.9% ownership of Global Public Safety for one and a half million dollars. And of course, as I highlighted earlier, we received 15 million dollars under our prepaid advance agreements, which has been structured to provide up to 35 million dollars under appropriate circumstances.

Speaker Change: Also in July we sold our remaining 19.9% ownership of Global Public Safety for $1.5 million.

Speaker Change: And of course, as I highlighted earlier, we received $15 million under our prepaid advance agreement, which has been structured to provide up to $35 million under appropriate circumstances.

Eyal Hen: In summary, we are very pleased with our solid second quarter results and the synergetics and the creative impact of our recent acquisition. Our capital raise and the engagement with Diggler are instrumental enablers in continuing to secure our leadership position in the industry. Our financial and operational strategies are designed to capitalize on future growth opportunities. Looking forward, we continue to be confident in the potential of our technological developments, strategic acquisition, and are grateful for the continued support of our investors.

David Desharnais: In summary, we are very pleased with our solid second quarter results and the synergetic, and the creative impact of our recent acquisition. Our capital raise and the engagement with Diggler are instrumental and able in continuing to secure our leadership position in the industry. Our financial and operational strategies are designed to capitalize on future growth opportunities. Looking forward, we continue to be confident in the potential of our technological development, strategic acquisition, and are grateful for continued support of our investors. Now I'm going to turn the call back to David to cover additional business highlights from the quarter. David.

Speaker Change: In summary, we are very pleased with our solid second quarter results and the synergetics and accretive impact of our recent acquisitions.

Speaker Change: Our capital raise and the engagement with Diggler are instrumental enablers in continuing to secure our leadership position in the industry.

Speaker Change: Our financial and operational strategies are designed to capitalize on future growth opportunities.

Speaker Change: Looking forward, we continue to be confident in the potential of our technological development, strategic acquisition, and are grateful for continued support of our investors.

David Dernays: Now I'll turn the call back to David to cover additional business highlights from the quarter. David. Thanks, they all. As I all highlighted, we delivered a solid Q2, performing well against all metrics and achieving the highest top-line revenue in our history. And when the capital now in place to support our continued growth, we are laser focused on executing our customer expansion plans and driving what we expect will be a strong year-over-year growth, along with a healthy pipeline dynamic heading into 2025.

Speaker Change: Now I will turn the call back to David to cover additional business highlights from the quarter. David?

David Desharnais: Thanks, y'all. As Eyal highlighted, we delivered a solid Q2, performing well against all metrics, and achieving the highest top-line revenue in our history. And when the Capitol now in place. To support our continued growth, we are laser-focused on executing our customer expansion plans and driving what we expect will be a strong year-over-year growth, along with a healthy pipeline dynamic heading into 2020. Now, I'd like to share some important business highlights from the quarter.

David Desharnais: Thanks, Eyal.

David Desharnais: As Eyal highlighted, we delivered a solid Q2, performing well against all metrics and achieving the highest top line revenue in our history.

David Desharnais: And when the Capitol now in place.

Speaker Change: To support our continued growth, we are laser-focused on executing our customer expansion plans and driving what we expect will be a strong year-over-year growth.

Speaker Change: along with a healthy pipeline dynamic heading into 2025.

David Dernays: Now I'd like to share some important business highlights from the quarter. As mentioned earlier, a major theme I've heard from investors is the strong enthusiasm for our market position and opportunity, and even as to see customer traction. I'm pleased to share that the progress we made in the past quarter across each of our business segments is meaningful and continues to lay a solid foundation for continued growth. Record industry reputation as the leader in roadway intelligence is steadily growing, with a brand and AI-based solutions gaining recognition across multiple high-profile forums and institutions. We are regularly invited to share insights and success stories in local and national media, underscoring our thought leadership in the future of AI and transportation.

David Desharnais: As mentioned earlier, a major theme I've heard from investors is a strong enthusiasm for our market position and opportunity, and eagerness to see customer traction. I'm pleased to share that the progress we've made in the past quarter across each of our business segments is meaningful, continues to lay a solid foundation for continued growth. Rekor's industry reputation as the leader in roadway intelligence is steadily growing, with a brand and AI-based solutions gaining recognition across multiple high-profile forums and institutions.

Speaker Change: Now, I'd like to share some important business highlights from the quarter.

Speaker Change: As mentioned earlier, a major theme I've heard from investors is the strong enthusiasm for our market position and opportunity.

Speaker Change: and eagerness to see customer traction.

Speaker Change: I'm pleased to share that the progress we've made in the past quarter across each of our business segments is meaningful.

Speaker Change: and continues to lay a solid foundation for continued growth.

Speaker Change: Rekor's industry reputation as the leader in roadway intelligence is steadily growing, with a brand and AI-based solutions gaining recognition across multiple high-profile forums and institutions.

David Desharnais: We are regularly invited to share our insights and success stories in local and national media, underscoring our thought leadership in the future of AI and transportation. We were also proud to recently have the Baltimore Business Journal recognizes as the never one fastest-growing company in the region, as well as highlight our commitment to digitizing critical transportation infrastructure across the nation. Additionally, we were honored with a special invitation to join a high profile panel alongside leaders from TxDOT, and Amazon Slash AWS.

Speaker Change: We are regularly invited to share our insights and success stories in local and national media, underscoring our thought leadership in the future of AI and transportation.

David Dernays: We were also proud to recently have the Baltimore Business Journal recognize us as the never-one fastest-coring company in the region, as well as highlight our commitment to digitizing critical transportation infrastructure across the nation. Additionally, we were honored with a special invitation to join a high-profile panel alongside leaders from TechSTOT and Amazon slash AWS. During the event, the CIO of TechSTOT highlighted record industry leadership and the significant impact of our technology. Notably, Rekor Command was credited with helping achieve a 29 percent reduction in secondary crashes and a 44-minute improvement in incident resolution times, underscoring our vital role in their mission-critical efforts to save lives on their roadways.

Speaker Change: We were also proud to recently have the Baltimore Business Journal recognize us as the number one fastest growing company in the region.

Speaker Change: as well as highlight our commitment to digitizing critical transportation infrastructure across the nation.

Speaker Change: Additionally we were honored with a special invitation to join a high profile panel alongside leaders from TxDOT.

David Desharnais: During the event, the CIO of TxDOT highlighted Rekor's industry leadership and the significant impact of our technology in Texas. Notably, Rekor Command was credited with helping achieve a 29% reduction in secondary crashes and a 44-minute improvement in incident resolution time, underscoring our vital role in their mission-critical efforts to save lives on the road. This quarter.

Speaker Change: and Amazon slash AWS.

Speaker Change: During the event, the CIO of TxDOT highlighted Rekor's industry leadership and the significant impact of our technology in Texas.

Speaker Change: Notably, ReCore Command was credited with helping achieve a 29% reduction in secondary crashes and a 44 minute improvement in incident resolution times.

Speaker Change: underscoring our vital role in their mission-critical efforts to save lives on their roadways.

David Dernays: This quarter, Rekor was prominently featured by ITS America as a leading force in the current and future landscape of AI for digital infrastructure and transportation. They highlighted multiple Rekor use cases where we are proving to improve transportation and fit its safety across state and local roadways. This recognition, along with the award of multiple new technology patents we received this year, reflects our team's ongoing commitment to advancing the state-of-the-art of roadway intelligence.

David Desharnais: Rekor was prominently featured by ITS America as a leading force in the current and future landscape of AI for digital infrastructure and transportation. They highlighted multiple Rekor use cases where we are proving to improve transportation and instead it's the safety across state and local roads. This recognition, along with the award of multiple new technology patents we received this year, reflects our team's ongoing commitment to advancing the state-of-the-art of roadway intelligence. Our proven technology solutions are centered around our three growth pillars.

Speaker Change: This quarter, RECOR was prominently featured by ITS America as a leading force in the current and future landscape of AI for digital infrastructure and transportation. They highlighted multiple RECOR use cases where we are proving to improve transportation and citizen safety across state and local roadways.

Speaker Change: This recognition, along with the award of multiple new technology patents we received this year, reflects our team's ongoing commitment to advancing the state-of-the-art of roadway intelligence.

David Dernays: Our proven technology solutions are centered around our three growth pillars: public safety with our SCAL platform, transportation management with Command, and urban mobility with Discover. I'd like to start with our first growth pillar, public safety and SCAL. Rekor's reputation as a leader in AI-based vehicle and license plate recognition is well known and continues to grow in what is a noisy and fragmented market. We believe that the future of this industry sector will be defined by open platforms and seamless integration into existing public safety infrastructure, principles that are central to our growth strategy. As such, our focus has been and remains on integrating our technology into existing law enforcement and security systems, while expanding our market reach through partnerships with OEMs, resellers, and third-party channels.

Speaker Change: Our proven technology solutions are centered around our three growth pillars.

David Desharnais: Public Safety with our Scout Platform, Transportation Management with Command, and Urban Mobility with Discovery. I'd like to start with our first growth pillar, public safety and scouting. Rekor's reputation as a leader in AI-based vehicle and license plate recognition is well known and continues to grow in what is a noisy and fragmented market.

Speaker Change: Public Safety with our Scout Platform, Transportation Management with COMMAND, and Urban Mobility with DISCOVER.

Speaker Change: I'd like to start with our first growth pillar, public safety and scout.

Speaker Change: Rekor's reputation as a leader in AI-based vehicle and license plate recognition is well known and continues to grow in what is a noisy and fragmented market.

David Desharnais: We believe that the future of this industry sector, will be defined by open platforms and seamless integration into existing public safety infrastructure. Principles that are central to our growth strategy. As such, our focus has been and remains on integrating our technology into existing law enforcement and security systems, while expanding our market reach through partnerships with OEMs, resellers and third party channels. The key example of the strategy in action is our recently announced partnership with Sound [inaudible] a leading public safety technology company known for delivering AI and data-driven solutions to law enforcement, civic leaders, and security professionals. Sound thinking is already trusted by thousands of public safety agencies across, By integrating Scout technology with their ShotSpotter gunshot detection solution.

Speaker Change: We believe that the future of this industry sector will be defined by open platforms and seamless integration into existing public safety infrastructure, principles that are central to our growth strategy.

Speaker Change: As such, our focus has been, and remains, on integrating our technology into existing law enforcement and security systems, while expanding our market reach through partnerships with OEMs, resellers, and third-party channels.

David Dernays: A key example of this strategy in action is our recently announced partnership with Sound Thinking, a leading public safety technology company known for delivering AI and data-driven solutions to law enforcement, civic leaders, and security professionals. Sound Thinking is already trusted by thousands of public safety agencies across the U.S. By integrating SCAL technology with their ShotSpotter gunshot detection solution, we are providing an end-to-end public safety offering to renew go-to-market channels that it immediately enhances public safety for major cities and strengthens recorders' presence in key markets. In addition, this quarter SCAL was recognized by Amazon Web Services as the first-ending industry to achieve the Well-Architected stamp of approval, joining the rest of our portfolio in the marketplace.

Speaker Change: A key example of this strategy in action is our recently announced partnership with Sound Thinking, a leading public safety technology company known for delivering AI and data-driven solutions to law enforcement, civic leaders, and security professionals.

Speaker Change: Sound thinking is already trusted by thousands of public safety agencies across the U.S.

Speaker Change: By integrating Scout technology with their ShotSpotter gunshot detection solution, we are providing an end-to-end public safety offering through new go-to-market channels that immediately enhances public safety for major cities and strengthens Rekor's presence in key markets.

David Desharnais: We are providing an end-to-end public safety offering, to renew go-to-market channels that it immediately enhances public safety for major cities and strengthens Rekor's presence in key markets. In addition, this quarter scout was recognized by Amazon Web Services as the first ending industry to achieve the well-architected stamp of approval, joining the rest of our portfolio in the market. This achievement is important because not only does this speak volumes about the strength and differentiation of our technology, but also brings Scout into the highly selective AWS market.

Speaker Change: In addition, this quarter, Scout was recognized by Amazon Web Services as the first in the industry to achieve the well-architected stamp of approval. Joining the rest of our portfolio in the marketplace.

David Dernays: This achievement is important because not only does this speak volumes about the strength and differentiation of our technology, but also brings SCAL into the highly selective AWS Marketplace. It also expands our reach by enabling customers to access SCAL through the AWS Partner Network and Amazon Business distribution and procurement channels. This positions us to integrate more seamlessly with leading technology platforms, ensuring that our offerings are accessible to a wider audience. Also, we expanded our relationship with NVIDIA, as well as our participation in their Metropolis partner network, building upon NVIDIA's most advanced jet-packed technology for our customers.

Speaker Change: This achievement is important because not only does this speak volumes about the strength and differentiation of our technology

Speaker Change: but also brings scout into the highly selective AWS marketplace.

David Desharnais: It also expands our reach by enabling customers to access Scout through the AWS Partner Network and Amazon Business Distribution and Procurement Channel. This positions us to integrate more seamlessly with leading technology platforms, ensuring that our offerings are accessible to a wider audience. Also, we expanded our relationship with NVIDIA, as well as our participation in their Metropolis Partner Network, building upon NVIDIA's most advanced Jetpack technology for our customers. Our deep technical collaboration with NVIDIA powers our advanced computer vision and machine learning technologies, accelerating time-to-market for new features and simplifying customer.com, Looking ahead in the public safety segment. We are focused on licensing our vehicle recognition SDK through third party e-commerce platforms and developer pool.

Speaker Change: It also expands our reach by enabling customers to access Scout through the AWS Partner Network and Amazon Business Distribution and Procurement Channels. This positions us to integrate more seamlessly with leading technology platforms, ensuring that our offerings are accessible to a wider audience.

Speaker Change: Also, we expanded our relationship with NVIDIA, as well as our participation in their Metropolis Partner Network, building upon NVIDIA's most advanced Jetpack technology for our customers.

David Dernays: Our deep technical collaboration with NVIDIA powers our advanced computer vision and machine learning technology. Emeralds, Accelerating Time to Market for New Features and Simplifying Customer Adoption. Looking ahead in the public safety segment, we are focused on licensing our vehicle recognition SDK through third-party e-commerce platforms and developer portals. This approach will empower third-party developers to create new, innovative market applications that leverage Rekor technology at their core. In addition to this, we're developing the next generation of Scalp. Our next gen platform not only promises to strengthen our leadership in the public safety sector, but also caved the way for continued growth and innovation across the industry and with our partners.

Speaker Change: Our deep technical collaboration with NVIDIA powers our advanced computer vision and machine learning technologies, accelerating time to market for new features and simplifying customer adoption.

Speaker Change: Looking ahead in the public safety segment.

Speaker Change: We are focused on licensing our vehicle recognition SDK through third-party e-commerce platforms and developer portals. This approach will empower third-party developers to create new, innovative market applications that leverage ReCore technology at their core.

David Desharnais: This approach will empower third-party developers to create new, innovative market applications that leverage Rekor technology at their core. In addition to this, we're developing the next generation of scouts. Our next gen platform not only promises to strengthen our leadership in the public safety sector, but also caved the way for continued growth and innovation across the industry and with our partners. Moving on to Pillar 2, our Transportation Management Segment and the Rekor Command Platform.

Speaker Change: In addition to this, we're developing the next generation of Scout. Our next gen platform not only promises to strengthen our leadership in the public safety sector, but also pave the way for continued growth and innovation across the industry and with our partners.

David Dernays: Moving on to pillar two, our Transportation Management Segment and the Rekor Command Platform. Departments of transportation are confronting an increasingly complex and demanding environment in their mission to ensure roadway safety and keep traffic moving. With the increase of sophisticated vehicles, the growing issue of distracted driving, aging roadway infrastructure, and never-ending roadwork and traffic interruptions. The challenges are multiplying for these agencies. Compounding these difficulties are the deep organizational and data silos that DOTs must navigate to try to keep traffic flowing and people safe. The situation is further strained by the rapidly increasing retirement of seasoned DOT professionals from the agencies and the ongoing struggle to recruit skilled talent quickly enough to meet these escalating demands.

Speaker Change: Moving on to Pillar 2, our Transportation Management Segment and the Recall Command Platform.

David Desharnais: Departments of Transportation are confronting an increasingly complex and demanding environment in their mission to ensure roadway safety and keep traffic moving. With the increase of sophisticated vehicles, the growing issue of distracted driving, aging roadway infrastructure, and never-ending road work and traffic interruption, and challenges are multiplying for these ages. Compounding these difficulties are the deep organizational and data silos that DOTs must navigate to try to keep traffic flowing and people safe.

Speaker Change: Departments of Transportation are confronting an increasingly complex and demanding environment in their mission to ensure roadway safety and keep traffic moving.

Speaker Change: With the increase of sophisticated vehicles, the growing issue of distracted driving, aging roadway infrastructure, and never-ending road work and traffic interruptions.

Speaker Change: The challenges are multiplying for these agencies.

Speaker Change: Compounding these difficulties are the deep organizational and data silos that DOTs must navigate to try to keep traffic flowing and people safe.

David Desharnais: The situation is further strained by the rapidly increasing retirement of seasoned DOT professionals and the ongoing struggle to recruit Scope Helen quickly enough to meet these escalating demands. The Rekor command platform addresses these challenges by providing tools that are full stack solutions versus siloed and that leverage AI to process and integrate massive and disparate data sets. Turning them into actionable insights that can be shared across departments and agencies using a single source of truth and a single painted block.

Speaker Change: The situation is further strained by the rapidly increasing retirement of seasoned DOT professionals from the agencies and the ongoing struggle to recruit skilled talent quickly enough to meet these escalating demands.

David Dernays: The Rekor Command Platform addresses these challenges by providing tools that are full-stack solutions versus silos and that leverage AI to process and integrate massive and disparate data sets, turning them into actionable insights that can be shared across departments and agencies in a single source of truth and a single pin and glass. This comprehensive view of roadway and mobility data provides real-time visualization, situational awareness, predictive analytics, and more, enabling agencies to do it effectively manage roadways despite the increasing demands and limited resources. As mentioned earlier, our work with TxDOT has been particularly impactful for Texas roadways and recognized across the U.S.

Speaker Change: The Rekor command platform addresses these challenges by providing tools that are full-stack solutions versus silos.

Speaker Change: And that leveraged AI to process and integrate massive and disparate data sets, turning them into actionable insights that can be shared across departments and agencies in a single source of truth in a single pane of glass.

David Desharnais: This comprehensive view of roadway and mobility data provides real-time visualization, situational awareness, predictive analytics, and more, enabling agencies to effectively manage roadways despite the increasing demands and limited resources. As mentioned earlier, our work with TxDOT, has been particularly impactful for Texas roadways and recognized across the U.S. Building on a momentum and an alignment with TechStyle, record-breaking $142 billion investment in transportation infrastructure over the next ten years. We launched the construction partner program this quarter with, DPP is a vital, citizen-facing app powered by command designed to enhance mobility and roadway safety across Texas through real-time incident monitoring and work zone management.

Speaker Change: This comprehensive view of roadway and mobility data provides real-time visualization, situational awareness, predictive analytics, and more, enabling agencies to effectively manage roadways despite the increasing demands and limited resources.

Speaker Change: As mentioned earlier, our work with TxDOT

Speaker Change: has been particularly impactful for Texas roadways and recognized across the U.S.

David Dernays: Building on this momentum and an alignment with TEX DOTs, Rekor breaking 142 billion dollar investment and transportation infrastructure over the next 10 years, relaunched the construction partner program this quarter with TEX DOT. DPP is a vital citizen-facing app powered by command designed to enhance mobility and roadway safety across Texas through real-time incident monitoring and work zone management. Additionally, in collaboration with TxDOT and the University of Texas at Austin, we developed an economic benefit calculator that assesses and validates the efficiency and monetary benefits of key metrics like crash reduction and congestion improvement, helping any transportation agency clearly understand and visually see the return on investment they make in our command platform.

Speaker Change: Building on this momentum and in alignment with TxDOTS,

Speaker Change: record-breaking $142 billion investment in transportation infrastructure over the next 10 years.

Speaker Change: We launched the Construction Partner Program this quarter with TxDOT.

Speaker Change: DPP is a vital, citizen-facing app powered by command designed to enhance mobility and roadway safety across Texas through real-time incident monitoring and work zone management.

David Desharnais: Additionally, in collaboration with TxDOT and the University of Texas at Austin, we developed an economic benefit calculator that assesses and validates the efficiency and monetary benefits of key metrics like crash reduction and congestion improvement, helping any transportation agency clearly understand and visually see the return on investment they make, in our command class. But our progress isn't limited to Texas. We're pleased to also announce the initial adoption of the Command Platform in Oklahoma and, Further extending our reach and ability to drive influence and adoption across state lines as we build out a connected network of smart roadways, both regionally and nationally.

Speaker Change: Additionally,

Speaker Change: In collaboration with TxDOT and the University of Texas at Austin, we developed an economic benefit calculator that assesses and validates the efficiency and monetary benefits of key metrics like crash reduction and congestion improvement, helping any transportation agency clearly understand and visually see the return on investment they make in our command platform.

David Dernays: But our progress doesn't limit it to Texas. We're pleased to also announce the initial adoption of the command platform in Oklahoma and... and Kansas. Further extending our reach and ability to drive influence and adoption across state lines as we build out a connected network of smart roadways, both regionally and nationally. Similarly, in Oregon, Umatilla County announced their adoption of command. In conjunction with the state's connected vehicle ecosystem, bringing advanced roadway intelligence to the unique challenges facing rural areas and communities. And supporting the work we're doing with Oregon DOT's road usage charge program state work. These developments highlight the growing recognition and adoption of command across the country.

Speaker Change: but our progress isn't limited to Texas.

Speaker Change: We're pleased to also announce the initial adoption of the command platform in Oklahoma and Kansas.

Speaker Change: Further, extending our reach and ability to drive influence and adoption across state lines as we build out a connected network of smart roadways both regionally and nationally.

David Desharnais: Similarly, in Oregon, Umatilla County announced their adoption of command, in conjunction with the state's connected vehicle ecosystem. Bringing advanced roadway intelligence to the unique challenges facing rural areas and communities, supporting the work we're doing with Oregon DOT's Road Usage Charge Program State. These developments highlight the growing recognition and adoption of command across the country.

Speaker Change: Similarly, in Oregon, Umatilla County announced their adoption of command.

Speaker Change: in conjunction with the state's Connected Vehicle Ecosystem.

Speaker Change: Bringing advanced roadway intelligence to the unique challenges facing rural areas and communities and supporting the work we're doing with Oregon DOT's road usage charge program statewide.

Speaker Change: These developments highlight the growing recognition and adoption of command across the country.

David Dernays: Expansion of our footprint in the segment underscores our commitment to transforming roadway and traffic management by delivering unprecedented visibility and insight that legacy systems just can't offer. Our solutions enable agencies to monitor traffic in real time, break the data and organizational silos, and utilize AI-driven insights to respond to incidents faster, reduce response times, and vastly improve the time it takes to get roads back to normal. Our continued innovations and strategic partnerships ensure that we will continue to lead the way in providing the technology and insights needed for smarter, safer, and more efficient roadways.

David Desharnais: Expansion of our footprint in this segment underscores our commitment to transforming roadway and traffic management by delivering unprecedented visibility and insights that legacy systems just can't offer. Our solutions enable agencies to monitor traffic in real time, break the data and organizational silos, and utilize AI-driven insights to respond to incidences faster, reduce response times, and vastly improve the time it takes to get roads back. Our continued innovations and strategic partnerships ensure that we will continue to lead the way in providing the technology and insights needed for smarter, safer, and more efficient road, Last but not least, I'd like to share some progress that we've made this quarter in the third growth pillar, our urban mobility segment, and our Rekor Discover platform.

Speaker Change: The expansion of our footprint in this segment underscores our commitment to transforming roadway and traffic management by delivering unprecedented visibility and insights that legacy systems just can't offer.

Speaker Change: Our solutions enable agencies to monitor traffic in real time, break the data and organizational silos, and utilize AI-driven insights to respond to incidences faster, reduce response times, and vastly improve the time it takes to get roads back to normal.

Speaker Change: Our continued innovations and strategic partnerships ensure that we will continue to lead the way in providing the technology and insights needed for smarter, safer, and more efficient roadways.

David Dernays: Last but not least, I'd like to share some progress that we've made this quarter in the third growth pillar, our urban mobility segment, and our record discovery platform. As mentioned in our last earnings call, the traffic data collection industry is at a pivotal moment, which is a significant growth driver for Record. We believe we're leading one of the largest legacy data collection technology refreshes in the US, where millions of outdated and legacy-based traffic study sites across the US roadways will be replaced with advanced AI-driven solutions. Our discover platform initially built on the foundation of our 2022 acquisition of Southern Traffic Services, and further strengthened by our acquisition of All Traffic Data earlier this year, has transformed the permanent and short-term traffic study landscape.

Speaker Change: Last but not least, I'd like to share some progress that we've made this quarter in the third growth pillar, our urban mobility segment and our ReCore Discover platform.

David Desharnais: As mentioned in our last earnings call, the traffic data collection industry is at a pivotal moment which is a significant growth driver for Rekor. We believe we are leading one of the largest legacy data collection technology to refreshes in the US. We're millions of outdated and legacy based traffic study sites, across the U.S. roadways will be replaced with advanced AI-driven, Our Discover platform, initially built on the foundation of our 2022 acquisition of Southern Traffic Services, further strengthened by our acquisition of all traffic data earlier this year, has transformed the permanent and short-term traffic study landscape. It allows us to replace legacy systems with secure, connected, and modular AI-based solutions that integrate seamlessly into existing infrastructure, greatly enhancing safety and sustainability for our customers.

Speaker Change: As mentioned in our last earnings call, the traffic data collection industry is at a pivotal moment which is a significant growth driver for ReCore.

Speaker Change: We believe we are leading one of the largest legacy data collection technology refreshes in the U.S., where millions of outdated and legacy-based traffic study sites

Speaker Change: across the U.S. roadways will be replaced with advanced AI-driven solutions.

Speaker Change: Our Discover platform, initially built on the foundation of our 2022 acquisition of Southern Traffic Services.

Speaker Change: and further strengthened by our acquisition of all traffic data earlier this year has transformed the permanent and short-term traffic study landscape.

David Dernays: It allows us to replace legacy systems with secure, connected, and modular AI-based solutions that integrate seamlessly into existing infrastructure and greatly enhance safety and sustainability for our customers. The platform's mission critical status was clearly demonstrated recently during Hurricane Debbie, where we supported multiple states in the southeast in managing roadways and evacuation routes in real time, and tracing, ensuring citizen safety during emergency operations. This quarter, I'm pleased to share that we were awarded over $15 million in new contracts, highlighting the strong demand for discovery and better traffic data management reporting as states looked to modernize and digitize their legacy roadway infrastructure.

Speaker Change: It allows us to replace legacy systems with secure, connected, and modular AI-based solutions that integrate seamlessly into existing infrastructure, greatly enhancing safety and sustainability for our customers.

David Desharnais: The platform's mission-critical status was clearly demonstrated recently during Hurricane Debbie, where we supported multiple states in the southeast in managing roadways and evacuation routes in real-time, ensuring citizen safety during emergency operations. This quarter, I'm pleased to share that we were awarded over $15 million in new contracts highlighting the strong demand for discovery, and better traffic data management reporting as states look to modernize and digitize their legacy roadway. Notably, we expended our reach westward with statewide contracts in Ohio and Texas.

Speaker Change: The platform's mission-critical status was clearly demonstrated recently during Hurricane Debbie, where we supported multiple states in the southeast in managing roadways and evacuation routes in real time, ensuring citizen safety during emergency operations.

Speaker Change: This quarter I'm pleased to share that we were awarded over 15 million dollars in new contracts highlighting the strong demand for Discover and better traffic data management reporting as states look to modernize and digitize their legacy roadway infrastructure.

David Dernays: Notably, we expanded our reach westward with statewide contracts in Ohio and Texas. These contracts not only cover the maintenance, repair, and replacement of existing infrastructure, but also pave the way to transition failing traffic data collection sites to AI across the state. It's worth noting that this new Texas contract is independent from the work we're already doing in Texas with Command, illustrating our land and expand strategy in action. Action. Our approach is to penetrate a state by delivering clear value with one of our platforms and then expand to the next platform in our portfolio and then the next.

Speaker Change: Notably, we expanded our reach westward with statewide contracts in Ohio and Texas.

David Desharnais: These contracts not only cover the maintenance, repair, and replacement of existing infrastructure, but also pave the way to transition failing traffic data collection sites to AI across the state. It's worth noting that this new Texas contract is independent from the work we're already doing in Texas with Command, illustrating our land and expand strategy in. Our approach is to penetrate a state by delivering clear value with one of our platforms and then expand to the next platform in our portfolio. And then the next.

Speaker Change: These contracts not only cover the maintenance, repair, and replacement of existing infrastructure, but also pave the way to transition failing traffic data collection sites to AI across the state.

Speaker Change: It's worth noting that this new Texas contract is independent from the work we're already doing in Texas with command, illustrating our land and expand strategy in action.

Speaker Change: Our approach is to penetrate a state by delivering clear value with one of our platforms and then expand to the next platform in our portfolio and then the next.

David Dernays: And along the way, we have the opportunity to continue to layer on new value-added surfaces over the top, such as air quality, electric vehicle studies, weight and touch, and more. Increasing the value we deliver to the state and our revenue potential. As another example of customer attraction, we also announced a new $1.5 million contract with the Maryland Department of Transportation to deploy the Discover Platform or Custom of the Nations or heavily used corridors, including I-95, I-495, and I-695. This win, which is over and above our AI-based class count and speed offering, focuses on quarter management and sustainability, incorporating advanced environmental analytics like carbon reduction, EV counting, and air quality monitoring, weight and tonnage, and volume by lane, through our new vehicle insight solution.

David Desharnais: And along the way, we have the opportunity to continue to layer on new value-added services over the top, such as air quality, electric vehicle studies, weight and tonnage, and more, increasing the value we deliver to the state and our revenue potential, as another example of customer traction. We also announced a new 1.5 million dollar contract with Maryland Department of Transportation to deploy the Discover Platform across some of the nations or heavily-used programs, including I-95, I-495, and I-695.

Speaker Change: And along the way, we have the opportunity to continue to layer on new value-added surfaces over the top, such as air quality, electric vehicle studies, weight and tonnage, and more, increasing the value we deliver to the state and our revenue potential.

Speaker Change: as another example of customer traction.

Speaker Change: We also announced a new $1.5 million contract with Maryland Department of Transportation to deploy the Discover platform across some of the nation's most heavily used corridors, including I-95, I-495, and I-695.

David Desharnais: David Desharnais, David Desharnais, Aditya Dagaonkar, David Desharnais Good afternoon ladies and gentlemen and welcome to today's Rekor Systems Conference call.

David Desharnais: This win, which is over and above our AI-based class count and speed off, focuses on quarter management and sustainability. Incorporating advanced environmental analytics like carbon reduction, EV counting. Air Quality Monitoring, Weight and Tonnage, and Volume by Land, to our new Vehicle Insight Solution.

Unknown Attendee: My name is Diego and I will be your coordinator for today. At this time, all participants are in a listen only mode. A brief question and answer session will follow a formal presentation. If anyone should require operator systems during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.

Speaker Change: This win, which is over and above our AI-based class count and speed offering.

Speaker Change: focuses on corridor management and sustainability.

Speaker Change: incorporating advanced environmental analytics like carbon reduction, EV counting, and air quality monitoring, weight and tonnage, and volume by lane.

Unknown Attendee: 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 positions, markets, economic conditions, products and product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward looking statements. Such statements can involve known and unknown risks and uncertainties and other factors, which may cause actual results in the different material from those expressed or implied by such statements.

David Dernays: These enhancements will help Maryland improve traffic management while addressing environmental concerns, and this is further open the door to additional opportunities within the state. In addition, we also expanded into Colorado's Pickton County where we are deploying Discover in the highly traffic aspect area surrounding region. This new contract includes our Discover class count and speed offering, as well as air quality monitoring. Once again, showcasing our ability to grow our footprint by providing value-added surfaces over the top of existing infrastructure. This project supports better roadway planning, maintenance, and sustainability in a region known to drive environmental improvements.

David Desharnais: These enhancements will help Maryland improve traffic management while addressing environmental concerns. And this has further opened the door to additional opportunities within, In addition, we also expanded into Colorado's Pitkin County, where we are deploying Discover in the highly trafficked Aspen area and surrounding regions. This new contract includes our Discover, Class Count, and Speed Offering, as well as Air Quality Monitor. Once again, showcasing our ability to grow our footprint by providing value-added services over the top of existing infrastructure. This project supports better roadway planning, maintenance, and sustainability in a region known to drive environmental impact.

Speaker Change: to our new Vehicle Insight Solution.

Speaker Change: These enhancements will help Maryland improve traffic management while addressing environmental concerns and this has further opened the door to additional opportunities within the state.

Speaker Change: In addition, we also expanded into Colorado's Pitkin County, where we are deploying DISCOVER in the highly trafficked Aspen area and surrounding region.

Speaker Change: This new contract includes our discover, class count, and speed offering, as well as air quality monitoring. Once again, showcasing our ability to grow our footprint by providing value-added services over the top of existing infrastructure.

Unknown Attendee: We ask you 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-gap results will also be discussed on the call. The company believes the presentation of non-gap information provides useful, supplementary data concerning the company's ongoing operations and is provided for informational purposes only.

Speaker Change: This project supports better roadway planning, maintenance, and sustainability in a region known to drive environmental improvement.

David Dernays: Looking ahead, we continue to see significant momentum and opportunities emerging for Discover. Our recent strategic partnership with MS-2, a leader in transportation data management for states, is expanding our reach to dozens of new state DOTs and numerous cities and county counties across the U.S. This collaboration, combined with our mission of collecting, connecting, and organizing the world's mobility data to make it useful and accessible for unique insights. Positions record on a fast path to becoming the leading roadway intelligence data exchange for the industry, leading a strong foundation for the continued success, holding enormous and durable value at the core of our strategy.

David Desharnais: Looking ahead, we continue to see significant momentum and opportunities emerging for discover. Our recent strategic partnership with MS-2. A leader in transportation data management for states is expanding our reach to dozens of new state DOTs and numerous cities and counties across the U.S. This collaboration, combined with our mission of collecting, connecting, and organizing the world's mobility data to make it useful and accessible for unique insight, positions Rekor on a fast path to becoming the leading roadway intelligence data exchange for the industry, laying a strong foundation for the continued success, holding enormous and durable value at the core of our strategy. As we close out my first full quarter as CEO of Rekor. I'm encouraged by the solid progress we've made across all of our growth pillars.

Speaker Change: Looking ahead, we continue to see significant momentum and opportunities emerging for DISCOVER. Our recent strategic partnership with MS2, a leader in transportation data management for states, is expanding our reach to dozens of new state DOTs and numerous cities and counties across the U.S.

Speaker Change: This collaboration, combined with our mission of collecting, connecting, and organizing the world's mobility data to make it useful and accessible for unique insights.

David Desharnais: I would now like to turn the presentation over to Mr. David Dernays, President and CEO of Recourse Systems. Good afternoon, and thank you for joining us today. As I conclude my first full quarter as President and CEO of Recourse, I am pleased to share our solid progress in the quarter and strategic vision for the future. Over the past 90 days, since stepping into this role, I've dealt deeply into every aspect of our business.

Speaker Change: Positions Rekor on a fast path to becoming the leading roadway intelligence data exchange for the industry. Laying a strong foundation for the continued success

Speaker Change: holding enormous and durable value at the core of our strategy.

David Dernays: As we close out my first full quarter, a CEO of Recore, I'm encouraged by the solid progress we've made across all of our growth pillars. We've continued to navigate the complexities of government procurement, secured multiple multi-million dollar contracts, and expanded our reach into key states like Ohio, Texas, Maryland, Colorado, Kansas, and Oklahoma. Our strategic partnerships with industry leaders such as AWS, Nvidia, Sound Thinking, and MS-2 are further strengthening our market presence and positioning record as a leader in providing roadway intelligence to the industry. As I mentioned earlier, in my discussions with many investors over the past 90 days, the key things you raised, such as market opportunities, capital needs, and meaningful traction, have been for me.

ReCore: As we close out my first full quarter as CEO of ReCore, I'm encouraged by the solid progress we've made across all of our growth pillars. We've continued to navigate the complexities of government procurement, secured multiple multi-million dollar contracts.

David Desharnais: We've continued to navigate the complexities of government procurement, secured multiple multi-million dollar contract, and expanded our reach into key states like Ohio, Texas, Maryland, Colorado, Kansas, and Oakland. Our strategic partnerships with industry leaders such as AWS, NVIDIA, SoundThinking and MS2 are further strengthening our market presence and positioning Rekor as a leader in providing roadway intelligence to the, As I mentioned earlier, in my discussions with many investors over the past 90 days, The key themes you raised, such as market opportunities, capital needs, and meaningful traction have been top of mind.

David Desharnais: I've been focusing on refining our financial processes, enhancing the work that we are doing in government relations, and driving operational excellence across our sales team and field operations. My commitment is to establish and strengthen the governance structures and scaling mechanisms that will help transform Recourse into a more predictable growth engine. And I'm encouraged by the team's positive response to the direction and priorities that have set and the substantial progress we've made so far.

ReCore: and expanded our reach into key states like Ohio, Texas, Maryland, Colorado, Kansas, and Oklahoma.

ReCore: Our strategic partnerships with industry leaders such as AWS, NVIDIA, SoundThinking, and MS2 are further strengthening our market presence and positioning Rekor as a leader in providing roadway intelligence to the industry.

David Desharnais: Also, over the past three months, I've had the privilege of engaging with many of our investors and shareholders globally. Your insights have been invaluable to me, and I want you to know that I'm listening. Our conversations have reinforced three key themes. Strong enthusiasm for a market position and opportunity. Concerns about securing necessary capital to continue our significant growth trajectory amidst macroeconomic uncertainty and slow government contracting cycles. And finally, eagerness from meaningful customer traction.

Speaker Change: As I mentioned earlier, in my discussions with many investors over the past 90 days, the key themes you raised, such as market opportunities, capital needs, and meaningful traction have been top of mind for me.

David Dernays: We've made important strides in each of these areas in the quarter, securing necessary capital, continuing our growth, winning new contracts, and expanding our market footprint. While we remain cautious due to the inherent complexities and unpredictability of government contracting, the traction we've gained this quarter is a strong indication that we're on the right path. We're committed to building on this momentum and continuing to deliver our strategic vision. I look forward to updating you on our continued progress in cutering. Thank you.

David Desharnais: We've made important strides in each of these areas in the quarter, securing necessary capital to continue our growth, winning new contracts, and expanding our market footprint. While we remain cautious due to the inherent complexities and unpredictability of government, Traction we've gained this quarter is a strong indication that we're on the right.

Speaker Change: We've made important strides in each of these areas in the quarter, securing necessary capital to continue our growth, winning new contracts, and expanding our market footprint.

Speaker Change: While we remain cautious due to the inherent complexities and unpredictability of government contracting.

Operator: We're committed to building on this momentum and continuing to deliver our strategic vision. I look forward to updating you on our continued progress. Thank you. We'll now move on to Q&A. Operator. Thank you, will now conduct their question and answer session. If you would like to ask a question, press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in a question. You may press star 2 if you would like to remove your question from, For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Speaker Change: The traction we've gained this quarter is a strong indication that we're on the right path.

Speaker Change: We're committed to building on this momentum and continuing to deliver our strategic vision.

David Desharnais: Today, I'll address these three areas and provide insight into our path forward. To begin with, let me stress that navigating the complex procurement process of federal, state, and local government agencies is challenging. But it also provides an opportunity with unparalleled long-range stability and growth potential. While we've been fielding our AI-based solutions in the transportation and traffic segments for just over a year at this point, namely our Discover and Command platforms. We have moved at a rapid pace, gaining awareness, preference, and adoption across multiple states, including South Carolina, Georgia, Florida, New Mexico, Texas, Colorado, Ohio, Maryland, Oklahoma, Kansas, Oregon, and multiple others in the works.

Speaker Change: I look forward to updating you on our continued progress in Q3.

Unknown Attendee: We'll now move on to Q&A. Operator? Thank you.

Speaker Change: Thank you. We'll now move on to Q&A.

Unknown Attendee: We'll now conduct our question and answer session. If you would like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question q. You may press star two if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, ask a question. Press star one on your telephone keypad. We'll pause for a moment to pull for questions. Thank you.

Operator: Once again, to ask a question, press star 1, telephone keypad. We'll pause for a moment to pull for questions. Our first question comes from Michael Latimore with Northland Capital Markets. All right. Thank you.

Speaker Change: Thank you.

Speaker Change: will now conduct their question and answer session.

Speaker Change: If you would like to ask a question, press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in a question queue.

Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, press star 1 on your telephone keypad. We'll pause for a moment to pull for questions. Thank you.

Speaker Change: David Desharnais, Aditya Dagaonkar

David Desharnais: However, it is important that we remain realistic, given that the government contracting process is opaque at best, and as its own pace and timeline. It is something that we will continue to be conservative with in setting expectations as it relates to timing of deals and expansion. Along this line, and as an update to our last earnings call, I wanted to update you on the upcoming deployment of up to 1,000 Discover and Edge units, decoding to a potential upside of approximately $35 million in revenue in one of the largest states in the US as they finalized their AI policy.

Michael Latimore: Our first question comes from Michael Latimore with Northland Capital Markets. Please state your question.

Speaker Change: [inaudible]

Speaker Change: Our first question comes from Michael Latimore with Northland Capital Markets. Please state your question.

Michael Latimore: All right. Thank you. Yes.

Michael Latimore: Yes. Yeah, great to see all the, News recently, contracts and it's a 27% sequential growth in quarter here. I guess. In terms of this kind of large time track you highlighted here, you know, a thousand units potentially, I guess. One, are those basically going to go into locations that you currently manage and you upgrade them or are there also new locations embedded in that? And then what's your thought on time to get all these deployed? Hey there, Mike.

David Dernays: Great to see all the news recently, contracts in this 27% sequential rule of the quarter here. I guess in terms of this kind of large contract you highlighted here, you know, a thousand units potentially. I guess one are those basically going into locations that you currently manage, and you upgrade them, or there are also new locations embedded in that. And then what's your thought on time to get all these deployed?

Michael Latimore: All right, thank you. Yes, yeah, great to see all the news recently. Contracts and it's 27% sequential growth in the quarter here.

Speaker Change: I guess, uh...

Michael Latimore: In terms of the this kind of large contract you highlighted here, you know, a thousand units potentially, I guess, one, are those basically going to go into locations that you currently manage and you upgrade them or are there also new locations embedded in that? And then what's your thought on, you know, time to get all these deployed now?

David Desharnais: As of today, I'm pleased to share that we've initiated deployments in the region. However, progress has been hampered by continuous interruptions resulting from multiple storms with this hurricane season, most recently by Hurricane Debbie. We don't control these things, of course, but the state does not permit anybody to work roadside in hazardous weather conditions. In the period leading up to the storm, during the storm itself, of course, but also in the immediate aftermath.

David Dernays: Hey there, Mike. Good to have you on the call. Thanks for the question. So, in terms of the large contract, yes, we do have management responsibility for a number of these, but it's a mixture of existing as well as new areas that otherwise would not have been done. The mixture of you know, areas that would have normally been done with portable or short term that will move to a more permanent solution because now it can be done.

David Desharnais: Good to have you on the call. Thanks for the question. So, in terms of the large contract, yes, we do have, we do have management responsibility for a number of these, but it's a mixture of existing as well as new areas that otherwise would not have been done. The mixture of, you know, areas that would have normally been done with portable or short-term equipment that will move to a more permanent solution because now it can be done.

Michael Latimore: Hey there, Mike. Good to have you on the call. Thanks for the question. So in terms of the large contract, yes, we do have management responsibility for a number of these, but it's a mixture of existing as well as new areas that otherwise would not have been done.

David Desharnais: Understandably, this is an impacted or expected timeline for deployments as the state is prioritizing emergency response efforts for citizens. But the initial sites we have already activated have performed flawlessly under these extreme conditions, and have already proven to be mission-critical, delivering vital insights to the state's Emergency Operations Center to support evacuation routes during these storms. This underscores the essential role of our technology plays further cementing record as a trusted and indispensable partner in this state, which would pay dividends.

Michael Latimore: The mixture of, you know, areas that would have normally been

Michael Latimore: done with portable or short-term that will move to a more permanent solution because now it can be done. So, that's a lot of new opportunity there for us. But to answer your direct question, it is a mixture of...

David Desharnais: So that's a lot of a lot of new opportunity there for us. But to answer your direct question, it is a mixture of existing ones that are scheduled for replacement and and new ones that otherwise could not.

David Dernays: So that's a lot of a lot of new opportunity there for us, but the answer to your direct question is a mixture of existing ones that are scheduled for replacement and new ones that otherwise could not have been done. Great, and it sounds like you have started to deploy the U.S. and is there a what over what how many months or quarters you expect to be able to deploy the thousand? Well, we would expect that it's probably, like it depends on I would say a few things like in the area and I hope you understand there's there's expected and predicted to be about 20 to 24 named storms in the area, 8 to 12 hurricanes up between June and November.

Michael Latimore: existing ones that are scheduled for replacement and new ones that otherwise could not have been done.

David Desharnais: Great. And it sounds like you have started to deploy the units. And is there a, What, over what, how many months or quarters do you expect to be able to deploy the thousand? Well, we would expect that we're, it's probably like, it depends on, I would say a few things. Like, like in the area and, I hope you understand there's there's expected and predicted to be about 20 to 24, named storms in the area, 8 to 12 hurricanes between June and November. So, again, if those didn't happen, clear sunny days, I would say that we'd probably be in the six-month range.

Speaker Change: Great and it sounds like you have started to deploy the units and is there a

David Desharnais: As I also highlighted in the previous call, the transportation infrastructure industry is undergoing a massive and generational technology refresh, and that within our existing southeast footprint alone, we see the potential to add 6,000 to 8,000 sites, which could generate an estimated 200 to 300 million in cash flows over the coming years. Recours reputation as a trusted partner in the south-eastern states has never been stronger, and our success is being closely monitored by other states nationwide as we continue to execute our growth stress.

Speaker Change: What, over what, how many months or quarters do you expect to be able to deploy the thousand let's say?

Speaker Change: Well, we would expect that it's probably, like it depends on, I would say, a few things.

Speaker Change: Like in the area, I hope you understand, there's expected and predicted to be about

Speaker Change: 20 to 24.

Speaker Change: named storms in the area, 8 to 12 hurricanes between June and November . So again, if those didn't happen, clear sunny days, I would say that we'd probably be in the six-month range.

David Dernays: So again, if those didn't happen, clear sunny days, I would say that we probably be in the six month range to get that through with existing resources, and it could go, you know, higher based on that, but I'd say that's what I would expect. Respect. Yeah, yeah, I'm near the Gulf Coast and very assumed to those forecasts, so for sure. Yes, indeed. And then is the pricing model here, and maybe you can't talk about it, is the pricing model kind of the hardware and maintenance one or the full subscription one? In the cases that we're talking about because we're talking about a regional area varies by the states in the southeast, but the one in particular that I'm referring to is a mixture of hardware and subscription funneled together.

David Desharnais: Energy. Given our recent performance with these states during these crises, it only positions us more strongly for our continued expansion in the region. Our growing recognition and reputation, along with the ongoing infrastructure overhaul that is happening, puts us in an ideal spot to capitalize on this transformative period in the industry. So while we must continue to navigate the complex and often slow-moving procurement processes of state and local governments, it also provides us a unique opportunity for long-term and durable growth that we believe will benefit our investors in the long run. Despite the relatively short time we've been deploying our technology in the market, we're experiencing continuous accelerated growth and am confident in our ability to sustain this momentum.

Unknown Attendee: Unknown Attendee, Zachary Cummins, Aditya Dagaonkar, David Desharnais, Eyal Hen, Noah, What I would explain. Yeah. Yeah. Yeah, I'm near the Gulf Coast and very assumed of those forecasts, so for sure.

Speaker Change: to get that through with existing resources, and it could go, you know, higher based on that. But I'd say that's.

David Desharnais: Yes indeed, and a buckle up, and then is the pricing model here, and maybe you can't talk about it, is the pricing model kind of the hardware and maintenance one or the full subscription? In the cases that we're talking about, because we're talking about a regional area, it varies by the states in the southeast. But the one in particular that I'm referring to is, is a mixture of hardware and subscription funneled together. So paid up front in the way that the state would like to do that through their procurement process. But, but it very much is over time, but I would say it is bundled together.

Speaker Change: What I would expect.

Speaker Change: yeah

Speaker Change: I'm near the Gulf Coast and very attuned to those forecasts, for sure. Yes, indeed. Buckle up.

Speaker Change: And then is the pricing model here, and maybe you can't talk about it, is the pricing model kind of the hardware and maintenance one or the full subscription one?

Speaker Change: In the cases that we're talking about, because we're talking about a regional area, it varies by the states in the Southeast. But the one in particular that I'm referring to is a mixture of hardware and subscription funneled together.

David Desharnais: Later in the call, I'll discuss some of the new contracts we secured during the last quarter and examples of meaningful traction we're experiencing.

Eyal Hen: Before diving into these details, I'll now hand the call over to Eyal Hen, Rekor CFO. He'll review our financial highlights for the quarter and discuss the proactive steps we're taking to solidify our capital position and protect our shareholders, as we navigate the uncertainties of the current macroeconomic environment and B to G domain. Eyal. Thank you, Davies.

David Dernays: So paid up front in the way that the state would like to do that for the procurement processes, but it very much is over time. But I would say it is bundled together. Okay, great. And then on the Texas news you just had, you characterize that as, you know, I think kind of maintenance and repair. I guess one is that just to clarify that that's what that feels about, and then two. Did you see an opportunity in Texas similar to the one, you know, the one the large one we just discussed? So on the Texas opportunity, one of the things that we do well and we're trusted to do is looking to have evaluating, maintaining, replacing, repairing existing infrastructure.

Speaker Change: So, paid up front in the way that the state would like to do that through their procurement processes, but it very much is over time, but I would say it is bundled together.

David Desharnais: Okay, great. And then on the Texas news you just had, you characterized that as, you know, I think kind of maintenance and repair. I guess one is that just to clarify that that's what that deals with. And then two, do you see an opportunity in Texas similar to the one, you know, the large one we just discussed? So on the Texas opportunity, one of the things that we do well and we're trusted to do is look at evaluating, maintaining, replacing, and repairing existing infrastructure.

Speaker Change: Look at the print.

Eyal Hen: Hello, everyone, and thanks for joining us today to discuss our results for the six and three months in the June 30, 2024. I would like to start with our recent announcement that we have just infused $15 million into the company for a facility that can provide up to another $20 million in capital should we need it. The agreement is designed with strong shareholder protection, including a $2.6 million monthly cap on prepaid balance conversions to equity, and a ban on short selling by the counterparty, which minimizes dilution and allows us to draw less capital or repay the notes early once our expected contracts materialize.

Speaker Change: And then on the Texas news you just had, you characterized that as, you know, I think kind of maintenance and repair. I guess one is that, just to clarify, that that's what that deals about. And then two, do you see an opportunity in Texas similar to the one, you know, the one, the large one we just discussed?

Speaker Change: So on the Texas opportunity, one of the things that we do well and we're trusted to do is

Speaker Change: looking to, well, evaluating, maintaining, replacing, repairing existing infrastructure. That's frankly what makes us

David Dernays: That's frankly what makes us incredibly valuable to the states, but the opportunity to have lined a site on every device on the roadway is the provision to also replace with AI. So right now we have access to both of those opportunities, and we're just getting started. So we need to make sure that we're being able to extract every single dollar and earn every single dollar from that opportunity, and it will equate to both existing maintenance as well as replacement for AI.

David Desharnais: That's frankly, what makes us Incident and Accident Prevention, David Desharnais, Eyal Hen, Noah Levitz, Rekor Systems, Aditya, being able to extract every single dollar and earn every single dollar from that opportunity. And it will equate to both existing maintenance as well as replacement for a, Okay, and if I have one on E.T.D. How is that tracking with your expectations? Have they helped with some of these reasons?

Speaker Change: incredibly valuable to the states.

Speaker Change: But the opportunity to have line-of-sight on every device on the roadway is the provision to also replace with AI.

Eyal Hen: Two details about this agreement have been provided in our 8K concerning the financing, and I won't delve into them now. So, I say to you to say that this gives us the necessary resources to address the recent government contract delays we've been facing. This injection of funds positioned us to meet our 2024 growth targets, and as is shown by our Q2 performance, we are making solid progress against this. We've continued to drive operational efficiencies and carefully manage our cash flow to ensure it is used effectively for the same time we've improved our metrics year-over-year and quarter-over-quarter.

Speaker Change: So, right now, we have access to both of those opportunities, and we're just getting started, so we need to make sure that we're

Speaker Change: Being able to extract every single dollar and earn every single dollar from that opportunity and it will equate to both existing maintenance as well as replacement for AI.

David Dernays: Okay, and just last one on ETD. How was that tracking with your expectations? Have they helped with some of these recent ones? The actually very well, very pleased with the acquisition as we have been over time with our STS acquisition as well. Excellent team at broadened the market for us. We're doing work in new states that we've never done, and also now integrating our AI technologies into the workflows. So I really truly could not be happier with that team and also with the progress we're making in terms of integration, but also new business. So yeah, very, very well actually.

Speaker Change: And this last one on ATD, how is that tracking with your expectations? Have they helped with some of these recent ones?

David Desharnais: Actually, very well. I'm very pleased with the acquisition, as we have been over time with our STS acquisition as well.

David Desharnais: It broadened the market for us. We're doing work in new states that we've never done and also now integrating our AI technologies into the workflow. So I really, truly could not be happier with that team and also with the progress we're making in terms of integration, but also new business. So, yeah, very, very well. Yeah, great. Thanks a lot.

Speaker Change: Actually, very well. I'm very pleased with the acquisition as we have been over time with our STS acquisition as well. Excellent team. It broadened the market for us. We're doing work in new states that we've never done.

Eyal Hen: Going forward, some of the larger recurring revenue contracts we're pursuing may involve significant upfront installation expenses. If additional capital is needed for this implementation, we plan to prioritize non-dialogue and financing options such as issuing an additional series to our revenue sharing notes. We expect to continue to address our capital needs brilliantly, extending our industry leadership and fulfilling our customer commitment as new.

Speaker Change: and also...

Speaker Change: now integrating our AI technologies into the workflow. So I really truly could not be happier with that team, and also with the progress we're making in terms of integration, but also new business. So yeah, very, very well, actually.

Michael Latimore: Yeah, right. Thanks so much. That's a lot to share. Thank you. Thank you, Mike.

David Desharnais: Best of luck this year. Thank you. Thank you, Mike. Thank you and a reminder to the audience to ask a question, press star 1. To remove your question from the queue, press star 2.

Speaker Change: Thanks a lot. Best of luck this year.

Unknown Attendee: Thank you and our reminders and audience to ask a question. Press star one to remove your question from the queue. Press star two.

Speaker Change: Thank you. Thank you, Mike.

Speaker Change: Thank you, and a reminder to the audience, to ask a question, press star 1. To remove your question from the queue, press star 2.

Eyal Hen: In this regard, we have engaged VC digler and company, a specialty investment back to service as placement agent and market maker in connection with future issues of our revenue sharing notes. Over the past few months, we've been in discussions with them, as well as with writing agency, to work on getting these notes rated, which should help reduce overall cost and improve their marketability. We anticipate continuing to use this structure to align potential future debt to the growth of fully performing contracts, as a primary funding source of additional growth capitals.

Noah Levitz: Our next question comes from Noah Levitts with William Blair. Please state your question. David Neal. Good afternoon. This is Noah Levitts on for Louis de Palma. Thank you for taking my question. Hi, to start off, thank you. Thank you.

Operator: Our next question comes from Noah Levitz with William Blair. David and Eyal, good afternoon. This is Noah Levitz on behalf of Louis de Palma.

Speaker Change: Our next question comes from Noah Levitz with William Blair. Please state your question.

Speaker Change: David and Eyal, good afternoon. This is Noah Levitz on for Louis de Palma. Thank you for taking my questions.

Noah Levitz: Thank you for taking my question. Hi, it's the third off. Thank you. Thank you. As it relates to your new partnership with Sound Thinking for Plate Ranger, just to gain some more color, how is your solution going to stack up versus some of the existing solutions already on the market? Will it be priced comparatively to some of the others? And then can you also elaborate on any other differentiators that you're going to provide?

David Dernays: As it relates to your new partnership with Sound Thinking for Plank Ranger, just again some more color, how is your solution going to stack up versus some of the existing solutions already on the market, will it be priced comparatively to some of the others, and then can you also elaborate on any other differentiators that you're going to provide? So yes, a very good question. We're excited about this relationship. Sound Thinking is a respected name and brand in the law enforcement area, and so we're thrilled with the opportunity to work with them. In terms of our go to market and pricing, that's really up to how Sound Thinking wants to approach their market.

Speaker Change: Hi. To start off...

Speaker Change: Yes, thank you. Thank you. As it relates to your new partnership with Sound Thinking...

Speaker Change: for Plant Ranger. Just to gain some more color, how is your solution going to stack up versus some of the existing solutions already on the market? Will it be priced comparatively to some of the others? And then can you also elaborate on any other differentiators that you're going to provide?

David Desharnais: So yes, a very good question. We're excited about this relationship. Sound Thinking is a respected name and brand in the law enforcement area.

Eyal Hen: Now I'm pleased to talk about our financial highlights for the three and six months and the June 30, 2024. In the second quarter of 2024, our revenue rate, a record revenue of $12.4 million, marking a significant growth of 45% increase from the $8.6 million in the same period last year. We also demonstrated our robust revenue growth quarter of a quarter at over 27% above Q1 2024. In the six months and the June 30, 2024, we achieved $22.2 million in revenue and increase of 51% from the $14.7 million we marked in the same period last year.

Speaker Change: So yes, a very good question. We're excited about this relationship. Sound Thinking is a respected name and brand in the law enforcement area, and so we're thrilled with the opportunity to work with them.

David Desharnais: And so we're thrilled with the opportunity to work with them. In terms of our go to market and, you know, pricing, you know, that's really up to how sound thinking wants to approach their market. They've got a large install base that that will expand into including, Vehicle Recognition and LPR and the connection with Plate Ranger, which is powered by Rekor under the hood of that and connecting to their shots. How does it compare competitively? One of the things I can say objectively through third-party benchmarking is that Rekor's license plate recognition and vehicle recognition technology is the top of the stack.

Speaker Change: In terms of our go-to-market and pricing, that's really up to how SoundThinking wants to approach their market. They've got a large install base that will expand into including

David Dernays: They've got a large install base that will expand into including vehicle recognition in LPR and the connection with Plate Ranger, which is powered by Rekor under the hood of that and connecting to their shots. How does it compare competitively? One of the things I can say objectively through third-party benchmarking is that Rekor's license plate recognition and vehicle recognition technology is the top of the stack. So, from a competitive nature, we still feel very good about that. In terms of how Sound Thinking and their ShotSpotter technology stacks up, we believe, and we've heard enough evidence from our customers that this is a leading technology in the market.

Speaker Change: Vehicle Recognition and LPR and the connection with Plate Ranger, which is powered by

Speaker Change: Rekor under the hood of that and connecting to their shots. How does it compare competitively?

Speaker Change: One of the things I can say objectively through third-party benchmarking is that

Speaker Change: Recor's license plate recognition and vehicle recognition technology is the top of the stack.

David Desharnais: So from a competitive nature, we still feel very good about that. In terms of how SoundThinking and their shots butter technology stacks up, we believe and we've heard enough evidence from our customers that this is a leading technology in the market. So to me, it's like chocolate and peanut butter coming together.

Eyal Hen: Recurring revenue also increased by 8.9% from $5.8 million in the same quarter of 2023, compared to $6.3 million in the same quarter of 2024. Our adjusted growth margins for the three months and the June 30, 2024, was 63.5%. An increase from 5.21.8% in the second quarter of 2023. This increase was primarily due to higher margin mix of sales during this quarter. As previously explained, we expect a primary benefit of our technology refresh efforts to allow us to move from lower margin to higher margin sales over time.

Speaker Change: So, from a competitive nature, you know, we still feel very good about that.

Speaker Change: In terms of how SoundThinking and their ShotSpotter technology stacks up, we believe, and we've heard enough evidence from our customers, that this is a leading technology in the market. So to me, it's like chocolate and peanut butter coming together, so you really have an end-to-end solution now.

David Dernays: So to me, it's like chocolate and peanut butter coming together, so you really have an end-to-end solution now for law enforcement to have the tools that they need to increase public safety. So pricing, it's going to be up to how Sound Thinking wishes to structure that with our customers, not us, so I can't comment on that. But our solution together with Sound Thinking is where we are effectively working with Sound Thinking as a channel to market, and so again, the rest of that engagement will support it, but it really starts with Sound Thinking. Does that help you understand, Noah?

David Desharnais: So you really have an end-to-end solution now for law enforcement to have the tools that they need to increase public safety. And so pricing, it's going to be up to how SoundThinking wishes to structure that with their customers, not us. So I can't comment on that.

Speaker Change: for Law Enforcement to have the tools that they need to...

Speaker Change: you know, to increase public safety. And so

Speaker Change: Pricing, it's going to be, it's going to be up to how sound thinking, which is the structure that with our customers, not us. So I can't comment on that. But our, our solution.

David Desharnais: But our solution together with SoundThinking is where we are effectively working with SoundThinking as a channel to market. And so, again, the rest of that engagement will support it, but it really starts with SoundThinking. Does that help you understand, Noah?

Eyal Hen: However, during the early growth phase we are in, this evolution may be choppy, as we saw at the beginning of this year. The adjusted growth margin for the six months and the June 30, 2024 was 60.2%. A decrease from 52.5% for the same period last year. The decrease is mainly due to lower margins we experienced at the beginning of the year. We also continue to see improvements in our adjusted EBIT dollars.

Speaker Change: together with SoundThinking is where we are effectively working with SoundThinking as a channel to market. And so again, the rest of that engagement will support it, but it really starts with SoundThinking.

David Dernays: Yeah, I know that that was very helpful, and I just a little follow up on that. Will it be utilizing solar? There's a lot of traction with solar powered LPR cameras, as interested as Plate Ranger will also be doing that. Yeah, yes indeed it will. The technology again from a physicality standpoint is record technology under the hood, both from a hardware perspective as well as the software perspective and the AI agents that run. So we've always been solar, so solar is absolutely part of it, and it's in fact a strong differentiator for us as well.

Noah Levitz: Yeah, no, that was very helpful. And then just a little follow up on that. Will it be utilizing solar? There's a lot of traction with solar-powered LPR cameras. Interested if Plate Ranger will also be doing that. Yeah, yes, indeed, it will. The technology, again, from a physicality standpoint, is Rekor technology under the hood, both from a hardware perspective, as well as the software perspective and the AI agents that run.

Speaker Change: Does that help you understand, Noah?

Noah: Yeah, no, that was very helpful. And then just a little follow-up on that, will it be utilizing solar? There's a lot of traction with solar-powered LPR cameras, so I was interested if Plate Ranger will also be doing that.

Eyal Hen: While the second quarter is now spent at $5.8 million an improvement of over 19% from the $7.2 million in the same period last year. The adjusted EBIT dollars for the six months and the June 30, 2024 was down to $15.2 million from $16.5 million the same period last year.

Speaker Change: Yeah, yes indeed it will. The technology, again from a physicality standpoint, is recore technology under the hood, both from a hardware perspective as well as the software perspective and the AI agents that run.

David Desharnais: So we've always been solar. So solar is absolutely part of it. And it's, in fact, a strong differentiator for us as well. Great. That was it from me. Thank you very much.

Speaker Change: So, we've always been solar, so solar is absolutely part of it and it's, in fact, a strong differentiator for us as well.

Noah Levitz: Great, that was it from me. Thank you very much. All right, thanks, Noah. Appreciate it.

Noah Levitz: All right. Thanks, Noah. Appreciate it, in our next question. Kc Ambrecht with Shea Capital.

Speaker Change: Great. That was it from me. Thank you very much.

Eyal Hen: Lastly, another significant development with the second quarter of 2024 was the exercise of 3,675,000 warring in June 2024, which resulted in 5.2 million dollars of cash to the company, of which 3.2 million dollars was received in July after the balance sheet date. Also in July we sold our remaining 19.9% ownership of global public safety for one and a half million dollars. And of course, as I highlighted earlier we received 15 million dollars under our prepaid advance agreements, which has been structured to provide up to 35 million dollars under appropriate circumstances.

K.C. Ambrecht: Our next question comes from K.C. Ambrecht with Shay Capital. Please state your question. Hey, David, thank you very much for taking a question. Good up, David. Here's one of this quarter. Just a couple of clarifications here. The 35 million hour contract that you guys mentioned last quarter is that you talked about today. I assume based on the hurricane conference area is probably Florida, but I just wanted to get a sense that if it's over six months, just at the minimum, which is how they're probably going to be more just depending on how it's falling this time of the year, that adds about six million dollars.

Speaker Change: Alright, thanks Noah, appreciate it.

Speaker Change: And our next question comes from Kc Ambrecht with Shea Capital. Please state your question.

KC Ambrecht: Hey David, thank you very much for taking the question, good update to hear this quarter. Just a couple of clarifications here, the $35 million contract that you guys mentioned last quarter that you talked about today, I assume based on the hurricane conference there is probably Florida, but I just wanted to get a sense that, If it's over six months, just at the minimum, which it sounds like it's probably going to be more just depending on how it's falling this time of the year, that adds about six million dollars. Like how, $6 million, if it's equal, if it's, you know, straight line, that adds about $6 million of revenue a quarter. How do we think about profitability for Rekor when a contract this size comes online?

KC Ambrecht: Hey David, thank you very much for taking the question. Good update to hear this quarter.

KC Ambrecht: Just a couple of clarifications here. The $35 million contract that you guys mentioned last quarter that you talked about today, I assume based on the hurricane conference there is probably Florida, but I just wanted to get a sense that

Speaker Change: If it's over six months, just at the minimum, which it sounds like it's probably going to be more, just depending on how it's falling this time of the year, that adds about six million dollars of...

K.C. Ambrecht: 6 million dollars, if it's equal, if it's straight line, that's about 6 million dollars of revenue and quarter.

Eyal Hen: In summary, we are very pleased with our solid second quarter results and the synergetics and the creative impact of our recent acquisition. Our capital raise and the engagement with Diggler are instrumental enablers in continuing to secure our leadership position in the industry. Our financial and operational strategies are designed to capitalize on future growth opportunities. Looking forward, we continue to be confident in the potential of our technological developments, strategic acquisition and are grateful for continued support of our investors.

Speaker Change: like how six million dollars if it's equal if it's you know straight line that adds about six million dollars of revenue a quarter how do we think about profitability for Rekor when a contract this size comes online?

Eyal Hen: How do we think about profitability for Rekor when it contracts this size comes online? Trying to understand. I don't know, Eyal, maybe you understand the question better than I do. I mean, you guys lost 5.5 million dollars at even out of this quarter. And if you start bringing in this contract, that should add 6 million dollars a month in revenue. If you just say it's going to take 6 months, that's a 35 million dollar contract. How do we think about, how does that impact your profitability? So you wouldn't do it all the way. Let me make sure I understand. So effectively, over a span of say 6 months, you're going to be putting an X number per week or a month and per quarter, etc.

David Desharnais: I'm trying to understand. I don't know, Eyal, maybe you understand the question better than I do. I mean, you guys, you guys lost five and a half million dollars at EBITDA this quarter.

Speaker Change: I'm trying to understand, I don't know, Eyal, maybe you understand the question better than I do. I mean, you guys lost five and a half million dollars at EBITDA this quarter, and if you start bringing in this contract that should add six million dollars a month in revenue, if you just say it's gonna take...

KC Ambrecht: And if you start bringing in this contract, that should add six million dollars a month in revenue. If it's if you just say it's going to take, six months. 35 million dollar contract. How do we think about how does that impact your your profitability? So, you wouldn't do it all at once.

Speaker Change: six months, which is a $35 million contract. How do we think about, how does that impact your profitability?

David Desharnais: Let me make sure I understand. So, effectively, over a span of, say, six months, you're going to be putting in X number per week or per month and per quarter, etc. So, you're gonna ramp into that over time. And so, and the, the way that the contract would be structured here is that it would be paying up front. So, you would realize that linearly through the period of time, you know, as fast as you can put things in the faster that turns on. Is that answered? Am I getting to the Hardier version?

David Desharnais: Now I'll turn the call back to David to cover additional business highlights from the quarter, David. Thanks, they all. As I all highlighted, we delivered a solid Q2, performing well against all metrics and achieving the highest top-line revenue in our history. And when the capital now in place to support our continued growth, we are laser focused on executing our customer expansion plans and driving what we expect will be a strong year over year growth, along with a healthy pipeline dynamic heading into 2025.

Eyal Hen: So, you wouldn't do it all at once? Let me make sure I understand. So, effectively, over a span of, say, six months, you're going to be putting in X number per week, or per month, and per quarter, etc. So, you're going to ramp into that?

Eyal Hen: So you're going to ramp into that over time. And so, and the way that the contract would be structured here is that it would be paying up front. So you would realize that linearly through the period of time, you know, as fast as you can put things in, the faster that turns on. Is that answered? Am I getting to the heart of your question case? Yeah, and then how much of that would be like hardware versus kind of a staff type contract? Is it 50, 50? Is it more hardware than that? Like how do we think about that?

Speaker Change: over time and so and the the way that the Contract would be structured here is that it would be paying up front. So you would realize that Linearly through the period of time, you know as fast as you can put things in the faster that turns on

Eyal Hen: Yeah, Kc. Yeah. Okay. And then how much of that would be like hardware versus kind of a, Eyal, do you have the details on that? Yeah, it's more on the hardware upfront and the sassies all the time.

David Desharnais: Now I'd like to share some important business highlights from the quarter. As mentioned earlier, a major theme I've heard from investors is the strong enthusiasm for our market position and opportunity and even as to see customer traction. I'm pleased to share that the progress we made in the past quarter across each of our business segments is meaningful and continues to lay a solid foundation for continued growth. Record industry reputation as the leader in roadway intelligence is steadily growing, with a brand and AI-based solutions gaining recognition across multiple high profile forums and institutions.

Speaker Change: Is that answer am I getting to the heart of your question, Casey? Yeah, okay, and then how much of that would be like hardware versus kind of a SAS type contract? Is it 50-50? Is it more hardware than SAS? Like how do we think about that?

Eyal Hen: Do you have the details on that? Yeah, it's more on the hardware up front, and the staff is all the time. So 2 to your question on the 6 million every month. That's not 6 million; maybe in cash, if it's, although, well, but the revenues are only for the hardware and some of the staff as we go, we recognize as we go. So the contract talked about three years, three years up from for staff, so we recognize it all the time. Okay.

Speaker Change: Eyal, do you have the details on that? Yeah, Tasty, it's more on the hardware up front, and the SaaS is all the time. So to your question on the $6 million every month,

KC Ambrecht: So, TTO question on the six million every month. That's not six million, maybe in cash, if it's although well, but the revenues are only for the hardware and some of the sass as we go, we recognize as we go. The contracts talk about three years, three years up from for sass, so we recognize as all the time. Okay. And then you mentioned the previous question talked about Texas. How big can Texas be?

Speaker Change: That's not six million, maybe in cash if it all goes well, but the revenues are only for the hardware and some of the SAS as we go, we recognize as we go. The contracts talk about three years up for SAS, so we recognize it all the time.

David Desharnais: We are regularly invited to share insights and success stories in local and national media, underscoring our thought leadership in the future of AI and transportation. We were also proud to recently have the Baltimore business journal recognizes as the never-one fastest-coring company in the region, as well as highlight our commitment to digitizing critical transportation infrastructure across the nation. Additionally, we were honored with a special invitation to join a high profile panel alongside leaders from TechSTOT and Amazon slash AWS.

David Dernays: And then you mentioned a previous question, talk about Texas. How big can Texas be? Can it be the same size as this type of contract over time, or is it a different size? That's a really important question, Casey. Texas is the largest road-going network in the United States. And so, if you think about the miles of roads there, you can imagine a disproportionate amount of sensors, right? And so the opportunity there. It's a big state. The other state that you're referring to is also a large state in the top five in the nation. So, you know, landing in these states and being able to expand, as I've described, also in Texas during my prepared remarks.

Speaker Change: Okay, and then you mentioned a previous question talked about Texas. How big can Texas be? Can it be the same size as this type of contract over time or is it a different size?

David Desharnais: Can it be the same size as this type of contract over time or is it a different size? So that's a really important question, Kc. Texas is the largest roadway network in the United States.

K.C.: So that's a really important question, Kc.

David Desharnais: And so if you think about the miles of road there, you can imagine a disproportionate amount of, sensors, right? And so the opportunity there, it's a big state. The other state that you're referring to is also a large state, one of the top five in the nation. So, you know, landing in these states and being able to expand as I've described also in Texas during my prepared remarks, the opportunity there is enormous, for sure.

K.C.: Texas is the largest roadway network in the United States.

Speaker Change: And so if you think about the miles of road there, you can imagine a disproportionate amount of.

David Desharnais: During the event, the CIO of TechSTOT highlighted record industry leadership and the significant impact of our technology Notably, Rekor Command was credited with helping achieve a 29 percent reduction in secondary crashes and a 44-minute improvement in incident resolution times, underscoring our vital role in their mission-critical efforts to save lives on their roadways. This quarter, Rekor was prominently featured by ITS America as a leading force in the current and future landscape of AI for digital infrastructure and transportation.

Speaker Change: sensors, right? And so the opportunity there...

Speaker Change: It's a big state

Speaker Change: The other state that you're referring to is also a large state, one of the top five in the nation. So, you know, landing in these states and being able to expand, as I've described also in Texas during my prepared remarks,

David Desharnais: And so a lot of sensors, a lot of roadways, and statistically, from what we understand from our customers, and as they've described the stuff that's on roadways today, a half to two-thirds aren't really producing the results they need.

David Dernays: The opportunity there is enormous for sure. And so a lot of sensors, a lot of roadways, and statistically, from what we understand from our customers and as they've described the stuff that's on roadways today. I have to two-third aren't really producing the results they need. So it provides a tremendous opportunity, for sure. Okay.

Speaker Change: The opportunity there is enormous, for sure.

Speaker Change: Statistically, from what we understand from our customers and as they've described the stuff that's on roadways today, a half to two-third aren't really producing the results they need. So it provides a tremendous opportunity for sure.

David Desharnais: They highlighted multiple Rekor use cases where we are proving to improve transportation and fit its safety across state and local roadways. This recognition, along with the award of multiple new technology patents we received this year, reflects our team's ongoing commitment to advancing the state-of-the-art of roadway intelligence. Our proven technology solutions are centered around our three growth pillars, public safety with our SCAL platform, transportation management, with command, and urban mobility with discover.

David Desharnais: So it provides a tremendous opportunity, for sure. Okay. And then lastly, you guys mentioned Georgia and your prepared commentary. It wasn't clear that you guys were there before. How big is Georgia today on an annual basis in your numbers? Eyal, can you talk to that?

David Dernays: And then lastly, you guys mentioned Georgia and your prepared commentary. It wasn't clear that you guys were there before. How big is Georgia today on an annual basis in your numbers? Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar. Did you increase the size of that contract? Yes, the size of the contract, you know, but we did put AI units in Georgia. Okay, which increases the revenue, right? The current contracts with Georgia and some sort of fixed rights we did increase the overall revenues from Georgia, yes, based on other parameters, but not from the existing contract.

Speaker Change: Lastly, you guys mentioned Georgia in your prepared commentary, it wasn't clear that you guys were there before. How big is Georgia today on an annual basis in your numbers?

Eyal Hen: Yeah, we do not we do not provide a number per customer, but this is one of the largest customers that we have. And to your point, Georgia is over 30 years customer with SDS before the acquisition. It's a very large customer, as did you upsell Georgia when he took over that company, SCF. Did you increase the size of that contract?

Speaker Change: Eyal, can you talk to that? Yeah, we do not we do not provide number per customer but this is one of the largest customer that we have and to your point, Georgia is over 30 years customer with STS before the acquisition. It's a very large customer.

David Desharnais: I'd like to start with our first growth pillar, public safety and SCAL. Rekor's reputation as a leader in AI-based vehicle and license plate recognition is well known and continues to grow in what is a noisy and fragmented market. We believe that the future of this industry sector will be defined by open platforms and seamless integration into existing public safety infrastructure, principles that are central to our growth strategy. As such, our focus has been and remains on integrating our technology into existing law enforcement and security systems, while expanding our market reach through partnerships with OEMs, resellers, and third-party channels.

Speaker Change: Did you upsell Georgia when you took over that company, SDS?

David Desharnais: Yes, the size of contact, no, but we did put AI units in Georgia. Okay, which increased the revenue, right? The current contract with Georgia is some sort of fixed price. We did increase the overall revenues from Georgia, yes, based on other parameters, but not from the existing contract. We have other sources of revenue in Georgia as well. What an angry history it's the relationship that we have with Georgia and help us expand beyond the current, Okay, so you guys just outlined I'll say Florida, but you can say, or can say Georgia and Texas is three, you know, significant states in the union.

Speaker Change #100: Did you increase the size of that contract?

Speaker Change #101: Yes, the size of contact, no, but we did put AI units in Georgia.

Speaker Change #102: Okay, which increased the revenue, right?

Speaker Change #103: The current contract with Georgia is some sort of fixed price. We did increase the overall revenues from Georgia, yes, based on other parameters, but not from the existing contract. We have other sources of revenue in Georgia as well.

David Dernays: We have other sources of revenue in Georgia as well. And then we have this great relationship that we have with Georgia and help us expand beyond a current contract.

David Desharnais: A key example of this strategy in action is our recently announced partnership with Sound Thinking, a leading public safety technology company known for delivering AI and data-driven solutions to law enforcement, civic leaders, and security professionals. Sound Thinking is already trusted by thousands of public safety agencies across the U.S. By integrating SCAL technology with their shot-spotter gunshot detection solution, we are providing an end-to-end public safety offering to renew go-to-market channels that it immediately enhances public safety for major cities and strengthens recorders' presence in key markets.

Speaker Change #103: What I agree with is the relationship that we have with Georgia and help us expand beyond the current contract.

David Dernays: Okay, so you guys just outline, I'll say Florida, but you can say, or can say Georgia and Texas is three, you know, significant states in the union. So that's good to see.

Speaker Change #103: [inaudible]

Speaker Change #104: Okay, so you guys just outlined...

KC Ambrecht: So that's, that's good to see. Um, and then this new facility you set up with Ziegler, I think it's Ziegler. What can you just kind of walk through like the strategy behind that?

Speaker Change #105: I'll say Florida, but you can say Georgia and Texas are three significant states in the Union, so that's good to see. And then this new facility you set up with Ziegler, I think it's Ziegler. Can you just kind of walk through the strategy behind that? What type of loan...

Eyal Hen: And then this new facility, you set up with Ziegler, I think it's Ziegler, what, can you just kind of walk through like the strategy behind that, what type of loan to values you're getting on contracts, like how it's structured, like if you drop in a new state, say like on the West Coast, that's the size. And it's a significant capital. How much, how much credit are you going to get against the contract? Are you talking about the revenue sharing contract? No, the new, the new financing facility you guys announced today was, I think it's called Ziegler.

KC Ambrecht: What type of loan to values you're getting on contracts, like how, how it's structured. Like if you drop in a new state, say like on the West coast, that's a size and it's a significant capital. How much, how much, How much credit are you going to get against the contract?

Speaker Change #106: Robert Desharnais, Eyal Hen, Robert Berman

David Desharnais: In addition, this quarter SCAL was recognized by Amazon Web Services as the first-ending industry to achieve the well-architected stamp of approval, joining the rest of our portfolio in the marketplace. This achievement is important because not only does this speak volumes about the strength and differentiation of our technology, but also brings SCAL into the highly selective AWS marketplace. It also expands our reach by enabling customers to access SCAL through the AWS partner network and Amazon Business Distribution and procurement channels.

KC Ambrecht: Are you talking about the revenue sharing contract? No, the new financing facility. You guys are not today with, I think it's called Grigor.

Speaker Change #107: How much credit are you going to get against the contract?

Speaker Change #108: Are you talking about the revenue sharing contract? No, the new financing facility you guys announced today. I think it's called Ziegler.

Eyal Hen: No, so you're, I think you're confusing with the thing. We announced a pre-paid advance agreement, which is some sort of convertible. Yeah, that's the $15 million upfront that we get. It's an equity, basically, that we get upfront cash. We oversee a $15 million upfront cash, and there will be a conversion over time to repay the payments. With Ziegler, it's the same structure that we set back in 2023; it's called the revenue sharing note. Yeah, yeah. Yeah, so in this structure, actually, when we have a new contract, which is pay for data, as opposed to the contract that we talked before on 35 million, which they pay upfront on the hardware.

KC Ambrecht: No, I think you're confusing with this thing. We announced a prepaid advance agreement, which is some sort of convertible. Yeah, that's the $15 million upfront that we get.

Speaker Change #109: Robert Desharnais, Eyal Hen, Robert Berman

Eyal Hen: It's an equity, basically, that we get upfront cash. We oversee a $15 million upfront cash, and there will be a conversion over time to repay this payment. With Ziggler, it's the same structure that we set back in 2023.

Speaker Change #110: It's an equity basically, we get upfront cash, we oversee a 15 million upfront cash and there will be a conversion over time to repay this payment.

David Desharnais: This positions us to integrate more seamlessly with leading technology platforms, ensuring that our offerings are accessible to a wider audience. Also, we expanded our relationship with NVIDIA, as well as our participation in their Metropolis partner network, building upon NVIDIA's most advanced jet-packed technology for our customers. Our deep technical collaboration with NVIDIA powers our advanced computer vision and machine learning technology. Emeralds, Accelerating Time to Market for New Features and Simplifying Customer Adoption.

Eyal Hen: It's called the Revenue Sharing Note. Yeah, so in this structure, actually, when we have a new contract, which is paid for data, as opposed to the contract that we talked before on 35 million, which they pay upfront on the hardware. Some of the states that procurements require pay-for data, they don't want to own the hardware. So they pay smaller monthly fees for SAS, for maintenance, the hardware, and the software.

Speaker Change #111: with Ziegler. It's the same structure that we set back in 2023. It's called the Revenue Sharing Note.

Speaker Change #111: [inaudible]

Speaker Change #112: Yeah, so in this structure, actually, when we have a new contract, which is paid for data, as opposed to the contract that we talked about before on $35 million, which they pay up front on the hardware.

Eyal Hen: Some of the states, the procurements require pay for data; they don't want to own the hardware, so that they pay smaller monthly fees for staff, you know, for maintenance, the hardware and the software. And with the current structure that we have on the revenue sharing note, we get 50 cents for every dollar, meaning if we have 30 million dollars worth of total contract value three years over three years, the current indentures said that we can grow up to 50 percent, so $15 million. That's just the current structure with the revenue sharing note. Okay, great.

David Desharnais: Looking ahead in the public safety segment, we are focused on licensing our vehicle recognition SDK through third-party e-commerce platforms and developer portals. This approach will empower third-party developers to create new, innovative market applications that leverage Rekor technology at their core. In addition to this, we're developing the next generation of Scalp.

Speaker Change #112: Some of the states that procurements require pay for data, they don't want to own the hardware. So they pay a smaller monthly fee for maintenance, the hardware, and the software.

Eyal Hen: And with the current structure that we have on the revenue-sharing notes, we get 50 cents for every dollar. Meaning, if we have $30 million worth of total contract value over three years, the current indenture says that we can grow up to 50%, so $15 million. That's just the current slideshow we've been sharing.

Speaker Change #112: And with the current structure that we have on the Revenue Sharing Notice,

Speaker Change #113: Robert Desharnais, Eyal Hen, Robert Berman

David Desharnais: Our next gen platform not only promises to strengthen our leadership in the public safety sector, but also caved the way for continued growth and innovation across the industry and with our partners.

David Desharnais: Moving on to pillar two, our Transportation Management Segment and the Rekor Command Platform. Departments of transportation are confronting an increasingly complex and demanding environment in their mission to ensure roadway safety and keep traffic moving. With the increase of sophisticated vehicles, the growing issue of distracted driving, aging roadway infrastructure, and never-ending roadwork and traffic interruptions.

KC Ambrecht: Okay, great. And then David, now that you've been there, you know, really starting to run the company for over a quarter now, but been there for a couple years. What's your expectation for profitability, considering that you have these large contracts coming online? When do you come across that threshold?

Speaker Change #113: That's just the current structure with the revenue sharing notes.

David Dernays: And then, David, now that you've been there, you know, really starting to run the company for over a quarter now, but been there for a couple of years. What's your expectation for profitability, considering that you have these large contracts coming online? When do you come across that threshold? Yeah, we have ambitions here in 2024, but I believe that given the, the, the hurricane season such that we may bleed into 2025, but early, early 2025. So that's what I can tell you, but, you know, there's a lot of time between now and the end of the year, and we have a lot of stuff that's being executed.

Speaker Change #113: Okay, great. And then, David, now that you've been there, you know, really starting to run the company for over a quarter now, but been there for a couple years, what's your expectation for profitability, considering that you have these large contracts coming online?

David Desharnais: The challenges are multiplying for these agencies. Compounding these difficulties are the deep organizational and data silos that DOTs must navigate to try to keep traffic flowing and people safe. The situation is further strained by the rapidly increasing retirement of seasoned DOT professionals from the agencies and the ongoing struggle to recruit skilled talent quickly enough to meet these escalating demands. The Rekor Command Platform addresses these challenges by providing tools that are full-stack solutions versus silos and that leverage AI to process and integrate massive and disparate data sets, turning them into actionable insights that can be shared across departments and agencies in a single source of truth and a single pin and glass.

David Desharnais: [inaudible] Yeah, we have ambitions here in 2024. But I believe that given the The hurricane season is such that it may bleed into 2025, but early, early 2025. So that that's what I can tell you. But, you know, there's a lot of time between now and the end of the year. And we have a lot of stuff that's being executed. So, again, we'll wait and see. But that's if I, you know, be direct and fair.

Speaker Change #114: When do you kind of cross that threshold?

David Desharnais: Yeah, we have ambitions here in 2024, but I believe that given the

Speaker Change #115: The hurricane season is such that it may bleed into 2025, but early.

Speaker Change #115: Early 2025, so that's what I can tell you, but you know there's a lot of time between now and the end of the year and we have a lot of stuff that's being executed so again we'll wait and see but that's if I you know redirects and and and fair I would say you know we have

K.C. Ambrecht: So again, we'll wait and see, but that's if I, you know, redirects and, and, and fair. I would say, you know, we have optimism, but again, we have a practical thing about the deal with too. So we will see how this goes, but we may believe in the 2025 in the first half. Okay, great. A lot of momentum. Thank you very much for the time. You bet. Thanks, Casey. Thank you.

David Desharnais: I would say, you know, we have a, a, We have optimism. But again, we have a practical thing you have to deal with, too. So we will see how this goes. But, We may bleed into 2025 in the first.

Speaker Change #115: We have optimism, but again, we have a practical thing you have to deal with too. So we will see how this goes, but we may bleed into 2025 in the first half.

KC Ambrecht: Okay, great. A lot of momentum. Thank you very much for the time.

KC Ambrecht: You bet. Thanks, Casey. Thank you. And thank you, and a final reminder to the audience, to ask a question, press star one now on your telephone keypad. We'll pause for a couple moments while we allow for any final questions. Once again, to ask a question, press star 1 on your telephone keypad, press star 2 to remove your question. We have an additional question from Michael Latimore with Northland Capital Mark. Michael Latimore, you might have yourself muted.

Speaker Change #115: Okay, great. A lot of momentum. Thank you very much for the time.

Unknown Attendee: And a final reminder to the audience: a task of question, press star one now on your telephone keypad. We'll pause for a couple of moments while we allow for any final questions. Thank you.

Casey: You bet. Thanks, Casey.

Casey: Thank you.

David Desharnais: This comprehensive view of roadway and mobility data provides real-time visualization, situational awareness, predictive analytics, and more, enabling agencies to do it effectively manage roadways despite the increasing demands and limited resources. As mentioned earlier, our work with TEX DOT has been particularly impactful for Texas roadways and recognized across the U.S. Building on this momentum and an alignment with TEX DOTs, Rekor breaking 142 billion dollar investment and transportation infrastructure over the next 10 years, relaunched the construction partner program this quarter with TEX DOT.

Speaker Change #117: Thank you. And a final reminder to the audience, to ask a question, press star 1 now on your telephone keypad.

Speaker Change #118: We'll pause for a couple moments while we allow for any final questions. Thank you.

Speaker Change #118: [inaudible]

Speaker Change #118: Once again, to ask a question, press star 1 on your telephone keypad. Press star 2 to remove your question.

Unknown Attendee: Once again, task of question: press star one on your telephone keypad, press star two to remove your question. We'll pause for another moment.

Speaker Change #118: We'll pause for another moment.

Speaker Change #118: [inaudible]

Michael Latimore: We have an additional question from Michael Latimore with Northland Capital Markets. Please do your question. Michael Latimore, you might have yourself muted. Go ahead. All right, there we go. Yeah, just on these recent command wins. Can you explain the kind of competitive dynamics there? Is there anything you're replacing? Or is this greenfield? And, you know, how does it roll out? You know, does raw state wide or is it going to city by city? Yeah, thanks, Mike.

David Desharnais: DPP is a vital citizen-facing app powered by command designed to enhance mobility and roadway safety across Texas through real-time incident monitoring and work zone management. Additionally, in collaboration with TEX DOT and the University of Texas at Austin, we developed an economic benefit calculator that assesses and validates the efficiency and monetary benefits of key metrics like crash reduction and congestion improvement, helping any transportation agency clearly understand and visually see the return on investment they make in our command platform.

Speaker Change #118: Michael Latimore, you might have yourself muted. Go ahead.

Operator: Alright, there we go. Um, yeah, just on these recent command wins, um, Can you explain the kind of the competitive dynamics there? Is there anything you're replacing or is this greenfield?

Michael Latimer: All right. There we go.

Michael Latimer: Yeah, just on these recent command wins,

Speaker Change #120: Can you explain the kind of the competitive dynamics there? Is there anything you're replacing or is this greenfield? And you know, how does it roll out? You know, does it roll out statewide or does it go kind of city by city?

Michael Latimore: And, you know, how does it roll out? You know, does it roll out statewide or does it go kind of city by city? Yeah, thanks, Mike. So command from the contracts that we announced here, this is regional based, not statewide for Oklahoma and Kansas City, or Kansas City, sorry, Kansas State, that was what I meant to say. What's really interesting about that, so it is regional, and we fully expect that will extend into the state.

David Dernays: So command from the contracts that we announced here, this is regional based, not statewide for Oklahoma and Kansas City or Kansas City story, Kansas state. It was what I meant to say, which really interesting about that. So it is regional, and we fully expect that will extend into the state. One of the things that I am pleased to say is coming into the new role, you know, as we are entering these smaller communities, it's a very important strategic move for us because it gives us a footprint with less friction. At a state level, you're dealing with a completely different dynamics.

David Desharnais: But our progress doesn't limit it to Texas. We're pleased to also announce the initial adoption of the command platform in Oklahoma and.., and Kansas. Further extending our reach and ability to drive influence and adoption across state lines as we build out a connected network of smart roadways, both regionally and nationally. Similarly, in Oregon, Umatilla County announced their adoption of command. In conjunction with the state's connected vehicle ecosystem, bringing advanced roadway intelligence to the unique challenges facing rural areas and communities.

Speaker Change #120: Yeah, thanks, Mike. So, command from the contracts that we announced.

Speaker Change #121: here. This is regional based, not statewide for Oklahoma and Kansas City.

Speaker Change #121: or Kansas City, sorry, Kansas State was what I meant to say.

Speaker Change #122: What's really interesting about that, so it is regional and we fully expect that will extend into the state. One of the things that I am pleased to say is coming into the new role

Michael Latimore: One of the things that I'm pleased to say is coming into the new role, you know, as we are entering these smaller communities, that's a very important strategic move for us, because it gives us a footprint with less friction. At a state level, you're dealing with a completely different dynamic. So being able to enter a state at a regional level is an accelerated pace. And this is that's the situation with these, these two that I talked about, in particular with Kansas, as well as Oklahoma.

Speaker Change #122: You know, as we are entering these smaller communities, it's a very important strategic move for us because it gives us a footprint.

David Desharnais: And supporting the work we're doing with Oregon DOT's road usage charge program state work. These developments highlight the growing recognition and adoption of command across the country. Expansion of our footprint in the segment underscores our commitment to transforming roadway and traffic management by delivering unprecedented visibility and insight that legacy systems just can't offer. Our solutions enable agencies to monitor traffic in real time, break the data and organizational silos, and utilize AI driven insights to respond to incidents as faster, reduced response times, and vastly improve the time it takes to get roads back to normal. Our continued innovations and strategic partnerships ensure that we will continue to lead the way in providing the technology and insights needed for smarter, safer and more efficient roadways.

David Dernays: So being able to enter a state at a regional level is an accelerated pace. And this is that's the situation with these two that I talked about in particular with Kansas as well as Oklahoma.

Speaker Change #122: with less friction.

Speaker Change #122: At a state level, you're dealing with a completely different dynamic. So being able to enter a state at a regional level is an accelerated pace. And that's the situation with these two that I talked about, in particular with Kansas as well as Oklahoma.

Michael Latimore: Oregon, we talked about the work that we're already doing in Oregon. What this represents in Oregon, in particular Umatilla County, this is a rural community that actually sees an enormous amount of traffic, surprisingly, and along that line have the same challenges that they're facing at the state level. So this allows them to start doing two things. First of all, operate off the same source of truth and same, you know, pane of glass as the statewide, but they didn't have access to the system.

David Dernays: Oregon, we talked about the work that we're already doing in Oregon. This represents an Oregon in particular, Umatila County. This is a rural community that actually sees an enormous traffic, surprisingly. And along that line, have the same challenges that they're facing at the state level. So this allows them to start doing two things. First of all, operate up the same source of truth and same, you know, paint of glass as the statewide. But they didn't have access to the system. So now they have access to the system. And it also connects into the future of the connected vehicle ecosystem that is going that we're working on with Oregon.

Speaker Change #122: Oregon, we talked about the work that we're already doing in Oregon. What this represents in Oregon, in particular Umatilla County, this is a rural community that actually sees an enormous amount of traffic, surprisingly, and along that line have the same

Speaker Change #122: challenges that they're facing at the state level. So this allows them to start doing two things. First of all, operate off the same

Speaker Change #122: and the same, you know, pane of glass as the statewide, but they didn't have access to the system. So now they have access to the system and it also connects into the future of the connected vehicle ecosystem that is going, that we're working on with Oregon.

David Desharnais: So now they have access to the system, and it also connects into the future of the connected vehicle ecosystem that is going, that we're working on with Oregon. So it's a little different dynamic, but to net it out, I would say that the regional approach is a very. Fast Path Relative to a State Approach.

David Desharnais: Last but not least, I'd like to share some progress that we've made this quarter in the third growth pillar, our urban mobility segment, and our record discovery platform. As mentioned in our last earnings call, the traffic data collection industry is at a pivotal moment, which is a significant growth driver for record. We believe we're leading one of the largest legacy data collection technology refreshes in the US, where millions of outdated and legacy based traffic study sites across the US roadways will be replaced with advanced AI driven solutions.

David Dernays: So it's a little different dynamic, but to net it out, I would say that the regional approach is a very. Fast Path, relative to a state approach. It could take 18 months sometimes for a state, and these can be done in months. And it really helps to pave the way for future expansion. And if you, and you know, you're in the Gulf area, Gulf Coast area, right? You know, Texas butts up to Oklahoma, that butt's up to Kansas. And you can kind of see an I-35 corridor going through there that becomes interesting across state lines.

Speaker Change #122: So, it's a little different dynamic, but to net it out, I would say that the regional approach is a very

David Desharnais: It could take 18 months sometimes for a state, and these can be done in months, and it really helps to pave the way for future expansion. And if you, and you know, you're in the Gulf area, Gulf Coast area, right, you know, Texas butts up to Oklahoma, that butts up to Kansas, and you can kind of see an I-35 corridor going through there that becomes interesting across state lines. Nobody does that, Mike.

Speaker Change #122: Fast path relative to a state approach. It could take 18 months sometimes for a state and these can be done in months and it really helps to pave the way for future expansion.

Speaker Change #123: And if you, and you know, you're in the Gulf area, Gulf Coast area, right? You know, Texas butts up to Oklahoma, that butts up to Kansas, and you can kind of see an I-35 corridor going through there that becomes interesting across state lines.

David Desharnais: Our discover platform initially built on the foundation of our 2022 acquisition of Southern traffic services, and further strengthened by our acquisition of all traffic data earlier this year has transformed the permanent and short-term traffic study landscape. It allows us to replace legacy systems with secure, connected, and modular AI-based solutions that integrate seamlessly into existing infrastructure and greatly enhancing safety and sustainability for our customers. The platform's mission critical status was clearly demonstrated recently during Hurricane Debbie, where we supported multiple states in the southeast in managing roadways and evacuation routes in real time, and tracing ensuring citizen safety during emergency operations.

David Dernays: Nobody does that, Mike. So this is really, really an interesting thing that we expect to continue to expand both at the state level, which we're excited about the progress for making there. But also at the regional level, local level, like we're seeing. Very good, very good. Now, you asked the second question; I just remembered the sort of component like you were placing something or we're not replacing anything, we're replacing, I don't know, spreadsheets and cameras. You know what I mean? Like whatever the traditional approach would be. So this is not like some displacement of some ATM system or something like that.

David Desharnais: So this is really, really an interesting thing that we expect to continue to expand both at the state level, which we're excited about the progress we're making there, but also at the regional level, local level, like we're seeing. Very good, very good. You asked the second question. I just remembered.

Speaker Change #123: Nobody does that, Mike. So this is really, really an interesting thing that we expect to continue to expand both at the state level, which we're excited about the progress we're making there, but also at the regional level, local level, like we're seeing.

Mike: Very good, very good. Now, can I just ask you a second?

David Desharnais: We're not replacing anything. We're replacing, I don't know, spreadsheets and cameras. You know what I mean?

Speaker Change #125: You asked the second question, I just remembered.

Speaker Change #126: We're not replacing anything, we're replacing, I don't know, spreadsheets and cameras, you know what I mean? Like, whatever the traditional approach would be. So this is not like some displacement of some ATMS system or something like that. So just to answer that question.

Michael Latimore: Whatever the traditional approach would be, so this is not like some displacement of some ATMS system or something like that. So just to answer that question, that makes sense. So it's sort of like digitization of that function as well, just like let's discover. That's right, that's right, and then I'm Gross Margin. I was up nicely sequentially.

Eyal Hen: So I just answered that question. That makes sense. Yeah. So it's sort of like digitization of that function as well. Just like, let's discover. That's right. And then I'm gross margin. That was up nicely sequentially. How should we think about gross margin kind of going further?

David Desharnais: This quarter, I'm pleased to share that we were awarded over $15 million in new contracts, highlighting the strong demand for discovery, and better traffic data management reporting as states looked to modernize and digitize their legacy roadway infrastructure. Notably, we expanded our reach westward with statewide contracts in Ohio and Texas. These contracts not only cover the maintenance repair and replacement of existing infrastructure, but also pave the way to transition failing traffic data collection sites to AI across the state.

Speaker Change #126: That makes sense, yeah. So it's sort of like digitization of that function as well, just like with Discover.

Eyal Hen: How should we think about Gross Margin kind of going to Florida? Mike, thank you for the question. As I mentioned on the call, we anticipate for the long run to have a higher gross margin as we refresh all technology with our technology. In the meantime, it will be a little choppy, but we do anticipate to see the trajectory of growth, as we can see here, around 50 to 55 percent, and as we start to refresh more and more of this old technology with our technology, we anticipate the gross margin to be above 60, 65 percent. Thanks a lot.

Speaker Change #126: That's right, that's right.

Speaker Change #127: And then on gross margin, that was up nicely sequentially. How should we think about gross margin kind of going forward here?

Eyal Hen: Mike, thank you for the question. As I mentioned, on the call, we anticipate for for the longer to have higher gross margin as we refresh all technology without technology. In the meantime, it will be a little chubby, but we do anticipate to see the trajectory of growth as we can see here, you know, around 50 to 55%, and then we start to refresh more and more of this all technology with our technology. We anticipate the gross margin to be about 60 to 65%. Okay. Thanks a lot. Thank you. Thanks, Mike.

Speaker Change #128: Mike, thank you for the question. As I mentioned on the call, we anticipate for the long run to have a higher gross margin as we refresh all technology with our technology.

David Desharnais: It's worth noting that this new Texas contract is independent from the work we're already doing in Texas with command, illustrating our land and expand strategy in action. Action. Our approach is to penetrate a state by delivering clear value with one of our platforms and then expand to the next platform in our portfolio and then the next. And along the way, we have the opportunity to continue to layer on new value added surfaces over the top, such as air quality, electric vehicle studies, weight and touch and more.

Speaker Change #129: In the meantime, it will be a little chubby but we do have to see the trajectory of growth as we can see here and all.

Speaker Change #129: around 50 to 55% and then we start to refresh more and more of this old technology with our technology. We anticipate the growth margin to be above the 60 to 65%

Speaker Change #130: Okay, thanks a lot.

Ray Yakko: Our next question comes from Ray Yakko.

Michael Latimore: Our next question comes from Ray Yakko, please stay. Yes, thanks for taking my call. With your partnership with sound thinking and the rollout of plate ranger, I believe in September. Will they go back to their existing?

David Desharnais: Increasing the value we deliver to the state and our revenue potential. As another example of customer attraction, we also announced a new $1.5 million contract with Maryland Department of Transportation to deploy the Discover Platform or Custom of the Nations or heavily used corridors, including I-95, I-495 and I-695. This win, which is over and above our AI-based class count and speed offering, focuses on quarter management and sustainability, incorporating advanced environmental analytics like carbon reduction, EV counting, and air quality monitoring, weight and tonnage and volume by lane, through our new vehicle insight solution.

Mike: Thank you. Thanks, Mike.

Ray Yakko: Please state your question. Yes. Thanks for taking my call with your partnership with Sound Thinking and the rollout of Plate Ranger. I believe in September.

Mike: Our next question comes from Ray Yakko, please state your question.

Ray Yakko: Yes, thanks for taking my call with your partnership with Sound Thinking and the rollout of Slight Ranger, I believe in September . Will they go back to their existing?

David Dernays: Will they go back to their existing customers that they have an offer to them also, or is it just their forward customers going forward? And do you also expect any other partners yet by the end of the year?

Ray Yakko: customers that they have and offer it to them also, or is it just their forward customers going forward? And do you also expect any other partnerships by the end of the year? Hey, Ray, that's a great question.

Ray Yakko: customers that they have and offer it to them also or is it just their forward customers going forward? And do you also expect any other partnerships by the end of the year?

David Dernays: Hey Ray, that's a great question. So listen, I can't speak for them, but I can tell you what we're observing right, because as they master the good market for that on their timing. I think our expectation, and we're already seeing it, is that they are going into an existing customer base. I mean, they've got. They've got a brilliant solution, but not a way to do vehicle recognition or LPR. So that compliment is a no brainer, and we've already done public webinars on this with their communities and stuff like that. So it's on. And that's a natural thing for them to do, and we're seeing that happen how they're doing that sort of in the out years.

David Desharnais: So, listen, I can't speak for them, but I can tell you what we're observing, right? Because as they master the go-to-market for that, on their timing, our expectation, and we're already seeing it, is that they are going into an existing customer base. I mean, they've got a brilliant solution, but not a way to do vehicle recognition or LPR. So, that compliment is a no-brainer.

Speaker Change #132: Hey, Ray, that's a great question. So, listen, I can't speak for them, but I can tell you what we're observing, right? Because as they master the go-to-market for that on their timing, our expectation, and we're already seeing it, is that they are going into an existing customer base. I mean, they've got...

Speaker Change #132: They've got a brilliant solution, but not a way to do vehicle recognition or LPR. So that compliment is a no-brainer. And we've already done public webinars on this with their communities and stuff like that.

David Desharnais: These enhancements will help Maryland improve traffic management while addressing environmental concerns and this is further open the door to additional opportunities within the state. In addition, we also expanded into Colorado's Pickton County where we are deploying Discover in the highly traffic aspect area surrounding region. This new contract includes our Discover class count and speed offering as well as air quality monitoring. Once again, showcasing our ability to grow our footprint by providing value added surfaces over the top of existing infrastructure.

Ray Yakko: And we've already done public webinars on this with their communities and stuff like that. So, it's on, and that's a natural thing for them to do, and we're seeing that happen. How they're doing that sort of in the out years, I would expect the same, but I can't speak for them. I'm sure you can understand, but that would be a logical thing to do.

Speaker Change #132: And that's a natural thing for them to do, and we're seeing that happen. How they're doing that sort of in the out years, I would expect the same, but I can't speak for them. I'm sure you can understand, but that would be a logical thing to do. Yes.

David Dernays: I would expect the same, but I can't speak for them. I'm sure you can understand, but, but it that that would be a logical, a logical thing to do.

David Dernays: And my second question is, what's the share price fee in 12-11 cents off the 52-week low? Do you believe the profitability is what's holding the share price down at this time? If you had mentioned profitability, then push back to early quarter next year, maybe half next year? Yeah, that's a crystal ball type of question. There's so many things that affect the stock price, you know, but I would say yes, one of the things that has been really clear to me and we're really thrilled to talk about today was the progress and the traction that we're getting, and I would consider it meaningful traction with customers that we've been working with.

David Desharnais: Yes. And my second question is, with the share price being $0.11 off the 52-week low, do you believe the profitability is what's holding the share price down at this time? If you had mentioned profitability being pushed back to early quarter next year, maybe half of next year? Yeah, that's a that's a crystal ball type of question.

Speaker Change #133: And my second question is with the share price being $0.12 or $0.11 off the 52-week low, do you believe the profitability is what's holding the share price down at this time? If you had mentioned profitability being pushed back to early quarter next year, or maybe half of next year?

David Desharnais: This project supports better roadway planning, maintenance and sustainability in a region known to drive environmental improvements. Looking ahead, we continue to see significant momentum and opportunities emerging for Discover. Our recent strategic partnership with MS-2, a leader in transportation data management for states is expanding our reach to dozens of new state DOTs and numerous cities and county counties across the U.S. This collaboration combined with our mission of collecting, connecting and organizing the world's mobility data to make it useful and accessible for unique insights.

Ray Yakko: There's so many things that affect the stock price, you know, but I would say yes, one of the things that has been really clear to me, and we're really thrilled to talk about today was the progress and the traction that we're getting. And I would, I would consider it meaningful traction with customers that we've been working with. And I think, As we look forward, the value of the company is We believe to be substantial and we're in it for the long term and we believe we're making the right decisions.

Speaker Change #134: Yeah, that's a that's a crystal ball type of question. There's so many things that affect the stock price, you know, but I would say yes. One of the things that has been really clear to me and we're really thrilled to talk about today was the progress and the traction that we're getting and I would consider it meaningful traction.

David Dernays: And I think as we look forward, the value of the company is, we believe, substantial, and we're in it for the long term, and we believe we're making the right decisions. We think the stock will be valued accordingly. In the short run, day to day, yeah, I can't speak to the fluctuations, but you know, our profitability and frankly, our ability to continue to intercept the opportunity ahead, I think that was the big question. With the ability to close sort of the concerns around capital, which we've done, the ability to be able to demonstrate meaningful customer traction, which we've done, and frankly our technology position, I think we're doing the right things and we're going to continue to do more of those.

David Desharnais: Positions record on a fast path to becoming the leading roadway intelligence data exchange for the industry, leading a strong foundation for the continued success holding enormous and durable value at the core of our strategy. As we close out my first full quarter, a CEO of Recore, I'm encouraged by the solid progress we've made across all of our growth pillars. We've continued to navigate the complexities of government procurement, secured multiple multi-million dollar contracts and expanded our reach into key states like Ohio, Texas, Maryland, Colorado, Kansas and Oklahoma.

Speaker Change #134: with customers that we've been working with. And I think as we look forward, the value of the company is, is...

Speaker Change #134: We believe it to be substantial, and we're in it for the long term, and we believe we're making the right decisions. We think the stock will be valued accordingly.

Ray Yakko: We think the stock will be valued accordingly in the short run day-to-day. I can't speak to the fluctuations, but our profitability and frankly our ability to continue to intercept the opportunity ahead, I think that was the big question. With the ability to close the concerns around capital, which we've done, the ability to be able to demonstrate meaningful customer traction, which we've done and frankly our technology position, I think we're doing the right things and we're going to continue to do more of those and so I can't speak to the crystal ball of the market, but we're going to continue to do what we're doing, which is executing against our, Yes, as a shareholder, I've been around for a long time, so I'm not... David Desharnais, Eyal Hen, Unknown Attendee, Zachary Cummins, Aditya Dagaonkar, David Desharnais, Eyal Hen, Noah Levitz, Rekor Systems, Aditya Dagaonkar, David Desharnais, Eyal Hen, Noah, No, with MasterCard, you know, that predates my time even at the company. And I think that program, I don't, I don't work for MasterCard. I don't know what they're doing on that program.

Speaker Change #135: in the in the short run day to day. Yeah, I can't speak to the fluctuations, but, you know, our profitability and frankly, our ability to continue to intercept the opportunity ahead. I think that was the big question with the ability to close.

Speaker Change #135: sort of the concerns around capital, which we've done, the ability to be able to demonstrate meaningful customer attraction, which we've done, and frankly, our technology position. I think we're doing the right things and we're going to continue to do more of those.

David Desharnais: Our strategic partnerships with industry leaders such as AWS, Nvidia, Sound Thinking and MS-2 are further strengthening our market presence and positioning record as a leader in providing roadway intelligence to the industry. As I mentioned earlier, in my discussions with many investors over the past 90 days, the key things you raised such as market opportunities, capital needs and meaningful traction have been for me. We've made important strides in each of these areas in the quarter, securing necessary capital, continuing our growth, winning new contracts, and expanding our market footprint.

David Dernays: And so I can't speak to the crystal ball of the market, but you know, we're going to continue to do what we're doing, which is executing against our plan. Yeah, that's a shareholder. I've been around for a long time. So I'm not the day-by-day guy, but I've been around since the BFDI days, so I'm not going anywhere. And I like the other vision that's been set.

Speaker Change #135: I can't speak to the crystal ball of the market, but, you know, we're going to continue to do what we're doing, which is executing against our plan.

Speaker Change #136: Yes, as a shareholder I've been around for a long time so I'm not...

Speaker Change #137: The day-by-day guy, but I've been around since like the VFDI days so I'm not going anywhere and I like the vision that has been set so and The last question is I haven't been mentioned I believe the last quarter either. What about MasterCard? Has there been any updates with MasterCard?

David Dernays: So my last question is, I haven't mentioned, I believe, the last quarter either. What about MasterCard? Has there been any updates with MasterCard? No, with MasterCard, you know, that predates my time even at the company. And I think that program; I don't work for MasterCard; I don't know what they're doing on that program. That's a MasterCard program. And so we're not engaged in expanding that program with them. So, from that standpoint, I would say that there's nothing new to report on that. We do see opportunities in the QSR space, which is the Quick Service Restaurant domain, that we think is actually very, very interesting without a MasterCard, so we're not tethered to that.

David Desharnais: While we remain cautious due to the inherent complexities and unpredictability of government contracting, the traction we've gained this quarter is a strong indication that we're on the right path. We're committed to building on this momentum and continuing to deliver our strategic vision.

David Desharnais: That's a MasterCard program, and so we're not engaged in expanding that program with them so from that standpoint I would say that there's nothing new to report on that. We do see opportunities in the QSR space which is the quick service restaurant domain that we think is actually very very interesting without a master card so we're not tethered to that but I'd say stay tuned right stay tuned on on that for for additional information but, The MasterCard piece, there's no updates on that for the reasons I mentioned. Okay, one last question. I just thought of going back a couple quarters ago with the state of Ohio and the Uninsured Motorist Program. Nobody else seemed interested in that?

Speaker Change #138: No, with MasterCard, you know, that predates my time even at the company, and I think that program, I don't work for MasterCard, I don't know what they're doing on that program, that's a MasterCard program.

David Desharnais: I look forward to updating you on our continued progress in cutering. Thank you.

Unknown Attendee: We'll now move on to Q&A.

Speaker Change #139: And so, we're not engaged in expanding that program with them, so from that standpoint, I would say that there's nothing new to report on that.

Unknown Attendee: Operator? Thank you.

Unknown Attendee: We'll now conduct our question and answer session. If you would like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question Q. You may press star two if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, ask a question. Press star one on your telephone keypad. We'll pause for a moment to pull for questions. Thank you.

Speaker Change #139: We do see opportunities in the QSR space, which is the quick service restaurant domain.

Speaker Change #139: that we think is actually very, very interesting without a MasterCard, so we're not tethered to that. But I'd say stay tuned, right? Stay tuned on that for additional information.

David Dernays: But I'd say, stay tuned, right? Stay tuned on that for additional information, but the MasterCard piece, there's no updates on that. For the reason that I mentioned.

Ray Yakko: I mean, just beside the state of Ohio that I believe you had the contract with? Yeah, it's not Ohio, it's Oklahoma. It's Oklahoma State. Oklahoma, I'm sorry. Yeah, no problem.

Speaker Change #139: The MasterCard piece, there's no updates on that for the reasons I mentioned.

David Dernays: Okay, one last question I just thought of going back a couple quarters ago with the State of Ohio and the Uninsured Motorists program. Nobody else seemed interested in that. I mean, to specify the state of Ohio, that's what I believe you had to contract with. Yeah, it's not Ohio, it's Oklahoma; it's Oklahoma State. Oklahoma, I'm sorry. Yeah, no problem with just making it clear. Yeah, Oklahoma. Very good results. The state is overwhelmingly happy. This is something that's tied to legislation in such that it's done at a state-by-state level. So the merits are there. They're very clear.

Speaker Change #140: Okay, one last question I just thought of. Going back a couple quarters ago with the state of Ohio and the uninsured motorist program, nobody else seemed interested in that? I mean just beside the state of Ohio that I believe you had the contract with?

Michael Latimore: Our first question comes from Michael Latimore with Northland Capital Markets. Please state your question. All right. Thank you. Yes. Great to see all the news recently contracts in this 27% sequential rule of the quarter here. I guess in terms of this kind of large contract you highlighted here, you know, a thousand units potentially. I guess one are those basically going into locations that you currently manage and you upgrade them or there are also new locations embedded in that.

David Desharnais: Just making it clear. Yeah, Oklahoma, very good results. The state is overwhelmingly happy.

Speaker Change #141: Yeah, it's not Ohio, it's Oklahoma. It's Oklahoma. It's Oklahoma. I'm sorry.

Speaker Change #142: Yeah, no problem. They're just making it clear. Yeah, Oklahoma.

Speaker Change #142: Very good results. The state is overwhelmingly happy.

David Desharnais: This is something that's tied to legislation and such that it's done at a state-by-state level. So the merits are there. They're very clear. The roads are way safer. Uninsured motorists are off the roads.

Speaker Change #143: This is something that's tied to legislation and such that it's done at a state-by-state level. So the merits are there. They're very clear. The roads are way safer. Uninsured motorists are off the roads.

David Dernays: The roads are way safer; uninsured motors are off the roads. So for all the things that you and I would care about being on the road and knowing that the people that we're driving with, I mean, that's all good in the Oklahoma market. How the other states want to do it, you know, it's unpredictable. Legislation is legislation. So the merits are there, but we don't control the legislation part.

David Desharnais: So for all the things that you and I would care about being on the road and knowing that the people that we're driving with, I mean, that's all good in the Oklahoma market. How other states want to do it, you know, it's unpredictable. Legislation is legislation. So the merits are there, but we don't control the legislation part.

Speaker Change #143: So for all the things that you and I would care about being on the road and knowing that the people that we're driving with, I mean, that's all all good in the Oklahoma market. How the other states want to do it. You know, it's.

Speaker Change #143: It's unpredictable, legislation is legislation, so the merits are there, but we don't control the legislation part.

Michael Latimore: And then what's your thought on time to get all these deployed? Hey there, Mike. Good to have you on the call. Thanks for the question. So in terms of the large contract, yes, we do have management responsibility for a number of these, but it's a mixture of existing as well as new areas that otherwise would not have been done. The mixture of you know, areas that would have normally been done with portable or short term that will move to a more permanent solution because now it can be done.

Michael Latimore: So that's a lot of a lot of new opportunity there for us, but the answer to your direct question is a mixture of existing ones that are scheduled for replacement and new ones that otherwise could not have been done. Great, and it sounds like you have started to deploy the U.S, and is there a what over what how many months or quarters you expect to be able to deploy the thousand? Well, we would expect that it's probably, like it depends on I would say a few things like like in the area and I hope you understand there's there's expected and predicted to be about 20 to 24 named storms in the area 8 to 12 hurricanes up between June and November.

Unknown Attendee: Thank you.

David Dernays: And that's all the time we have for questions today.

Operator: Thanks. And that's all the time we have for questions today. I'll now hand the floor back to management for closing remarks. Well, thank you all for your questions and for joining us today. We've covered a lot of ground from our financial strategies and market opportunities to the progress we're making across each of our segments. So as we move forward, we remain committed to executing our plan. Addressing your concerns and driving value at the end of the day.

David Dernays: I'll now hand the floor back to management for closing remarks. Well, thank you all for your questions and for joining us today. We've covered a lot of ground from our financial strategies and market opportunities to the progress we're making across each of our segments. So, as we move forward, we remain committed to executing our plan, addressing your concerns, and driving value at the end of the day. We're excited about the opportunities they had and confident in our ability to deliver on these commitments. So thank you again for your support, and we look forward to updating everyone on our Q3 call.

Speaker Change #144: Thank you. And that's all the time we have for questions today. I'll now hand the floor back to management for closing remarks.

Operator: We're excited about the opportunities ahead and confident in our ability to deliver on these commitments. So thank you again for your support, and we look forward to updating everyone on our Q3 call. This concludes today's conference. You may disconnect your lines at this time. Have a wonderful day.

Speaker Change #145: Well, thank you all for your questions and for joining us today. We've covered a lot of ground from our financial strategies and market opportunities to the progress we're making across each of our segments.

Speaker Change #145: So, as we move forward, we remain committed to executing our plan.

Speaker Change #145: addressing your concerns and driving value at the end of the day. We're excited about the opportunities ahead and confident in our ability to deliver on these commitments. So thank you again for your support and we look forward to updating everyone on our Q3 call.

Unknown Attendee: Thank you.

Unknown Attendee: This concludes today's conference. You may disconnect your line at this time. Have a wonderful day.

Speaker Change #146: Thank you. This concludes today's conference. You may disconnect your lines at this time. Have a wonderful day.

Michael Latimore: So again, if those didn't happen, clear sunny days, I would say that we probably be in the six month range to get that through with existing resources and and it could go, you know, higher based on that, but I'd say that's what I would expect. Respect. Yeah, yeah, I'm near the Gulf Coast and very assumed to those forecasts, so for sure. Yes, indeed. And then is the pricing model here and maybe you can't talk about it, is the pricing model kind of the hardware and maintenance one or the full subscription one?

Michael Latimore: In the cases that we're talking about because we're talking about a regional area varies by the states in the southeast, but the one in particular that I'm referring to is is a mixture of hardware and subscription funneled together. So paid up front in the way that the state would like to do that for the procurement processes, but it very much is over time, but I would say it is bundled together. Okay, great.

Michael Latimore: And then on the Texas news you just had, you characterize that as, you know, I think kind of maintenance and repair. I guess one is that just to clarify that that's what that feels about and then two. Did you see an opportunity in Texas similar to the one, you know, the one the large one we just discussed. So on the Texas opportunity, one of the things that that we do well and we're trusted to do is is looking to have evaluating, maintaining, replacing, repairing existing infrastructure.

Michael Latimore: That's frankly what makes us incredibly valuable to the states, but the opportunity to have lined a site on every device on the roadway is the provision to also replace with AI. So right now we have access to both of those opportunities and we're just getting started. So we need to make sure that we're being able to extract every single dollar and earn every single dollar from that opportunity and it will equate to both existing maintenance as well as replacement for AI.

Michael Latimore: Okay, and just last one on ETD. How was that tracking with your expectations? Have they helped with some of these recent ones? The actually very well, very pleased with the acquisition as we have been over time with our STS acquisition as well. Excellent team at broadened the market for us. We're doing work in new states that we've never done and also now integrating our AI technologies into the workflows. So I really truly could not be happier with that team and also with the progress we're making in terms of integration, but also new business.

Michael Latimore: So yeah, very, very well actually. Yeah, right. Thanks so much. That's a lot to share. Thank you. Thank you Mike. Thank you and our reminders and audience to ask a question. Press star one to remove your question from the queue. Press star two.

Noah Levitz: Our next question comes from Noah Levitts with William Blair. Please state your question. David Neal. Good afternoon. This is Noah Levitts on for Louis de Palma. Thank you for taking my question. Hi, to start off, thank you, thank you.

Noah Levitz: As it relates to your new partnership with Sound Thinking for Plank Ranger, just again some more color, how is your solution going to stack up versus some of the existing solutions already on the market, will it be priced comparatively to some of the others, and then can you also elaborate on any other differentiators that you're going to provide? So yes, a very good question. We're excited about this relationship. Sound Thinking is a respected name and brand in the law enforcement area, and so we're thrilled with the opportunity to work with them.

Noah Levitz: In terms of our go to market and pricing, that's really up to how Sound Thinking wants to approach their market. They've got a large install base that will expand into including vehicle recognition in LPR and the connection with plate ranger which is powered by Rekor under the hood of that and connecting to their shots. How does it compare competitively? One of the things I can say objectively through third party benchmarking is that Rekor's license plate recognition and vehicle recognition technology is the top of the stack.

Noah Levitz: So from a competitive nature, we still feel very good about that. In terms of how Sound Thinking and their shot spotter technology stacks up, we believe, and we've heard enough evidence from our customers that this is a leading technology in the market. So to me, it's like chocolate and peanut butter coming together, so you really have an end to end solution now for law enforcement to have the tools that they need to increase public safety.

Noah Levitz: So pricing, it's going to be up to how Sound Thinking wishes to structure that with our customers, not us, so I can't comment on that, but our solution together with Sound Thinking is where we are effectively working with Sound Thinking as a channel to market, and so again, the rest of that engagement will support it, but it really starts with Sound Thinking. Does that help you understand, Noah?

Noah Levitz: Yeah, I know that that was very helpful, and I just a little follow up on that. Will it be utilizing solar? There's a lot of traction with solar powered LPR cameras as interested as plate ranger will also be doing that. Yeah, yes indeed it will. The technology again from a physicality standpoint is record technology under the hood, both from a hardware perspective as well as the software perspective and the AI agents that run. So we've always been solar, so solar is absolutely part of it, and it's in fact a strong differentiator for us as well.

Noah Levitz: Great, that was it from me. Thank you very much. All right, thanks, Noah. Appreciate it.

K.C. Ambrecht: Our next question comes from K.C. Ambrecht with Shay Capital. Please state your question. Hey, David, thank you very much for taking a question. Good up, David. Here's one of this quarter. Just a couple of clearifications here. The 35 million hour contract that you guys mentioned last quarter is that you talked about today. I assume based on the hurricane conference area is probably Florida, but I just wanted to get a sense that if it's over six months, just at the minimum, which is how they're probably going to be more just depending on how it's falling this time of the year, that adds about six million dollars.

K.C. Ambrecht: 6 million dollars, if it's equal, if it's straight line, that's about 6 million dollars of revenue and quarter. How do we think about profitability for Rekor when it contracts this size comes online? Trying to understand, I don't know, Eyal, maybe you understand the question better than I do. I mean, you guys lost 5.5 million dollars at even out of this quarter. And if you start bringing in this contract, that should add 6 million dollars a month in revenue, if you just say it's going to take 6 months, that's a 35 million dollar contract.

K.C. Ambrecht: How do we think about, how does that impact your profitability? So you wouldn't do it all the way. Let me make sure I understand so effectively over a span of say 6 months, you're going to be putting an X number per week or a month and per quarter, etc. So you're going to ramp into that over time. And so, and the way that the contract would be structured here is that it would be paying up front.

K.C. Ambrecht: So you would realize that linearly through the period of time, you know, as fast as you can put things in, the faster that turns on. Is that answered? Am I getting to the heart of your question case? Yeah, and then how much of that would be like hardware versus kind of a staff type contract? Is it 50, 50? Is it more hardware than that? Like how do we think about that? Do you have the details on that?

K.C. Ambrecht: Yeah, it's more on the hardware up front and the staff is all the time. So 2 to your question on the 6 million every month. That's not 6 million, maybe in cash, if it's although well, but the revenues are only for the hardware and some of the staff as we go, we recognize as we go. So the contract talked about three years, three years up from for staff, so we recognize it all the time.

K.C. Ambrecht: Okay. And then you mentioned previous question, talk about Texas. How big can Texas be? Can it be the same size as this type of contract over time or is it a different size? That's a really important question, Casey. Texas is the largest road going network in the United States. And so if you think about the miles of roads there, you can imagine a disproportionate amount of sensors, right? And so the opportunity there.

K.C. Ambrecht: It's a big state. The other state that you're referring to is also a large state on the top five in the nation. So, you know, landing in these states and being able to expand as I've described also in Texas during my prepared remarks. The opportunity there is enormous for sure. And so a lot of sensors, a lot of roadways and statistically from what we understand from our customers and as they've described the stuff that's on roadways today.

K.C. Ambrecht: I have to two-third aren't really producing the results they need. So it provides a tremendous opportunity for sure. Okay. And then lastly, you guys mentioned Georgia and your prepared commentary. It wasn't clear that you guys were there before. How big is Georgia today on an annual basis in your numbers? Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar, David Desharnais, Aditya Dagaonkar Did you increase the size of that contract? Yes, the size of the contract, you know, but we did put AI units in Georgia.

K.C. Ambrecht: Okay, which increase the revenue, right? The current contracts with Georgia and some sort of fixed rights we did increase the overall revenues from Georgia, yes, based on other parameters, but not from the existing contract. We have other source of revenue in Georgia as well. And then we have this great relationship that we have with Georgia and help us expand beyond a current contract. Okay, so you guys just outline, I'll say Florida, but you can say, or can say Georgia and Texas is three, you know, significant states in the union.

K.C. Ambrecht: So that's good to see. And then this new facility, you set up with Ziegler, I think it's Ziegler, what, can you just kind of walk through like the strategy behind that, what type of loan to values you're getting on contracts, like how it's structured, like if you drop in a new state, say like on the west coast, that's the size. And it's a significant capital, how much, how much credit are you going to get against the contract?

K.C. Ambrecht: Are you talking about the revenue sharing contract? No, the new, the new financing facility you guys announced today was, I think it's called Ziegler. No, so you're, I think you're confusing with the thing, we announced a pre-paid advance agreement, which is some sort of convertible. Yeah, that's the $15 million upfront that we get. It's an equity, basically, that we get upfront cash, we oversee a $15 million upfront cash and there will be a conversion over time to repay the payments.

K.C. Ambrecht: With Ziegler, it's, it's the same structure that we set back in 2023, it's called the revenue sharing note. Yeah, yeah. Yeah, so in this structure, actually, when we have a new contract, which is pay for data, as opposed to the contract that we talked before on 35 million, which they pay upfront on the hardware. Some of the states, the procurements require pay for data, they don't want to own the hardware, so that they pay a smaller monthly fees for staff, you know, for maintenance, the hardware and the software.

K.C. Ambrecht: And with the current structure that we have on the revenue sharing note, we get 50 cents for every dollar, meaning if we have 30 million dollar worth of total contract value three years over three years, the current indentures said that we can grow up to 50 percent, so $15 million. That's just the current structure with the revenue sharing note. Okay, great. And then, David, now that you've been there, you know, really starting to run the company for over a quarter now, but been there for a couple of years.

K.C. Ambrecht: What's your expectation for profitability considering that you have these large contracts coming online? When do you come across that threshold? Yeah, we have ambitions here in 2024, but I believe that given the, the, the hurricane season such that we may bleed into 2025, but early, early 2025. So that's what I can tell you, but, you know, there's a lot of time between now and the end of the year and we have a lot of stuff that's being executed.

K.C. Ambrecht: So again, we'll wait and see, but that's if I, you know, redirects and, and, and fair, I would say, you know, we have, we have optimism, but again, we have a practical thing about the deal with too. So we will see how this goes, but we may believe in the 2025 in the, in the first half. Okay, great. A lot of momentum. Thank you very much for the time. You bet. Thanks, Casey.

K.C. Ambrecht: Thank you. And a final reminder to the audience, a task of question, press star one now on your telephone keypad. We'll pause for a couple of moments while we allow for any final questions. Thank you. Once again, task of question, press star one on your telephone keypad, press star two to remove your question. We'll pause for another moment.

Michael Latimore: We have an additional question from Michael Latimore with Northland Capital Markets. Please do your question. Michael Latimore, you might have yourself muted. Go ahead. All right, there we go. Yeah, just on these recent command wins. Can you explain the kind of competitive dynamics there? Is there anything you're replacing? Or is this greenfield? And, you know, how does it roll out? You know, does raw state wide or is it going to city by city?

Michael Latimore: Yeah, thanks, Mike. So command from the contracts that we announced here, this is regional based, not statewide for Oklahoma and Kansas City or Kansas City story, Kansas state. It was what I meant to say, which really interesting about that. So it is regional and we fully expect that will extend into the state. One of the things that I am pleased to say is coming into the new role, you know, as we are entering these smaller communities, it's a very important strategic move for us because it gives us a footprint with less friction at a state level you're dealing with a completely different dynamics.

Michael Latimore: So being able to enter a state at a regional level is an accelerated pace. And this is that's the situation with these these two that I talked about in particular with Kansas as well as Oklahoma. Oregon, we talked about the work that we're already doing in Oregon with this represents an Oregon in particular, Umatila County. This is a rural community that actually sees an enormous traffic, surprisingly. And along that line have the same challenges that they're facing at the state level.

Michael Latimore: So this allows them to start doing two things. First of all, operate up the same source of truth and same, you know, paint of glass as the statewide. But they didn't have access to the system. So now they have access to the system. And it also connects into the future of the connected vehicle ecosystem that is going that we're working on with Oregon. So it's a little different dynamic, but to net it out, I would say that the regional approach is a very.

Michael Latimore: Fast Path, Relative to a State Approach. It could take 18 months sometimes for a state, and these can be done in months. And it really helps to pave the way for future expansion. And if you, and you know, you're in the Gulf area, Gulf Coast area, right? You know, Texas butts up to Oklahoma, that butt's up to Kansas. And you can kind of see an I-35 corridor going through there that becomes interesting across state lines.

Michael Latimore: Nobody does that, Mike. So this is really, really an interesting thing that we expect to continue to expand both at the state level, which we're excited about the progress for making there. But also at the regional level, local level, like we're seeing. Very good, very good.

Michael Latimore: Now, you asked the second question, I just remembered the sort of component like you were placing something or we're not replacing anything we're replacing, I don't know, spreadsheets and cameras. You know what I mean? Like whatever the traditional approach would be. So this is not like some displacement of some ATM system or something like that. So I just answered that question. That makes sense. Yeah. So it's sort of like digitization of that function as well.

Michael Latimore: Just like let's discover. That's right. And then I'm gross margin. That was up nicely sequentially. How should we think about gross margin kind of going further? Mike, thank you for the question. As I mentioned, on the call, we anticipate for for the longer to have higher gross margin as we refresh all technology without technology. In the meantime, it will be a little chubby, but we do anticipate to see the trajectory of growth as we can see here, you know, around 50 to 55% and then we start to refresh more and more of this all technology with our technology. We anticipate the gross margin to be about 60 to 65%. Okay. Thanks a lot. Thank you. Thanks Mike.

Ray Yakko: Our next question comes from Ray Yakko. Please state your question. Yes.

Ray Yakko: Thanks for taking my call with your partnership with sound thinking and the rollout of plate ranger. I believe in September. Will they go back to their existing customers that they have an offer to them also or is it just their forward customers going forward? And do you also expect any other partners yet by the end of the year?

David Desharnais: Hey Ray, that's a great question. So listen, I can't speak for them, but I can tell you what we're observing right because as they as they master the good market for that on their timing. I think our expectation and we're already seeing it is that they are going into an existing customer base. I mean, they've got. They've got a brilliant solution, but not not a way to do vehicle recognition or LPR.

David Desharnais: So that compliment is a no brainer and we've already done public webinars on this with with their communities and stuff like that. So it's on. And that's a natural thing for them to do and we're seeing that happen how they're doing that sort of in the out years. I would expect the same, but I can't speak for them. I'm sure you can understand, but, but it that that would be a logical, a logical thing to do.

David Desharnais: And my second question is, what's the share price fee in 12-11 cents off the 52-week low? Do you believe the profitability is what's holding the share price down at this time, if you had mentioned profitability, then push back to early quarter next year, maybe half next year? Yeah, that's a crystal ball type of question. There's so many things that affect the stock price, you know, but I would say yes, one of the things that has been really clear to me and we're really thrilled to talk about today was the progress and the traction that we're getting and I would consider it meaningful traction with customers that we've been working with.

David Desharnais: And I think as we look forward, the value of the company is we believe to be substantial and we're in it for the long term and we believe we're making the right decisions. We think the stock will be valued accordingly. In the short run day to day, yeah, I can't speak the fluctuations, but you know, our profitability and frankly, our ability to continue to intercept the opportunity ahead, I think that was the big question.

David Desharnais: With the ability to close sort of the concerns around capital, which we've done, the ability to be able to demonstrate meaningful customer traction, which we've done and frankly our technology position, I think we're doing the right things and we're going to continue to do more of those. And so I can't speak to the crystal ball of the market, but you know, we're going to continue to do what we're doing, which is executing against our plan.

David Desharnais: Yeah, that's a shareholder. I've been around for a long time. So I'm not the day-by-day guy, but I've been around since the BFDI days, so I'm not going anywhere. And I like the other vision that's been set.

David Desharnais: So my last question is, I haven't mentioned, I believe, the last quarter either, what about MasterCard? Has there been any updates with MasterCard? No, with MasterCard, you know, that predates my time even at the company. And I think that program, I don't work for MasterCard, I don't know what they're doing on that program. That's a MasterCard program. And so we're not engaged in expanding that program with them. So from that standpoint, I would say that there's nothing new to report on that.

David Desharnais: We do see opportunities in the QSR space, which is the Quick Service Restaurant domain, that we think is actually very, very interesting without a MasterCard, so we're not tethered to that. But I'd say stay tuned, right? Stay tuned on that for additional information, but the MasterCard piece, there's no updates on that. For the reason that I mentioned.

David Desharnais: Okay, one last question I just thought of going back a couple quarters ago with the State of Ohio and the Uninsured Motorics program. Nobody else seemed interested in that. I mean, to specify the State of Ohio, that's what I believe you had to contract with. Yeah, it's not Ohio, it's Oklahoma, it's Oklahoma State. Oklahoma, I'm sorry. Yeah, no problem with just making it clear. Yeah, Oklahoma, very good results. The State is overwhelmingly happy.

David Desharnais: This is something that's tied to legislation in such that it's done at a state by state level. So the merits are there. They're very clear. The roads are way safer, uninsured motors are off the roads. So for all the things that you and I would care about being on the road and knowing that the people that we're driving with, I mean, that's all good in the Oklahoma market. How the other states want to do it, you know, it's unpredictable legislation is legislation. So the merits are there, but we don't control the legislation part.

Unknown Attendee: Thank you.

David Desharnais: And that's all the time we have for questions today. I'll now hand the floor back to management for closing remarks. Well, thank you all for your questions and for joining us today. We've covered a lot of ground from our financial strategies and market opportunities to the progress we're making across each of our segments. So as we move forward, we remain committed to executing our plan, addressing your concerns and driving value at the end of the day. We're excited about the opportunities they had and confident in our ability to deliver on these commitments.

Unknown Attendee: So thank you again for your support and we look forward to updating everyone on our Q3 call. Thank you.

Unknown Attendee: This concludes today's conference. You may disconnect your line at this time. Have a wonderful day.