Q3 2024 Rekor Systems Inc Earnings Call
Kevin: Good afternoon ladies and gentlemen and welcome to today's Recourse Systems, Inc. conference call. My name is Kevin and I'll be your coordinator for today.
Kevin: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes.
Before we start,
I want to read the company's abbreviated Safe Harbor Statement.
Kevin: I want to remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, products and product releases, partnerships, and other statements that may be construed as a prediction of future performance or events are forward-looking statements. Such statements can involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements.
Kevin: 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.
Speaker Change: I'd now like to turn the conference over to Mr. David Desharnais, President and CEO of Recore Systems.
David Desharnais: Thank you, Operator, and thanks to everyone for joining us today. I'll start with a brief update on customer activity, followed by an overview of the current market and our strategic priorities.
David Desharnais: Eyal will walk through our Q3 2024 financial results, and I'll conclude with an update on our market position, goals for 2025, and the path forward.
I'm pleased to report that the pipeline has been completed.
David Desharnais: Now entering the deployment phase, validating our growth strategy across all three core product areas. Urban mobility with Discover, transportation management with Command, and public safety with Scout.
David Desharnais: In each area, we're seeing steady platform expansion, increasing customer engagement, and expanding strategic partnerships.
David Desharnais: Starting with Discover, we recently achieved the much-anticipated inclusion of our systems on Florida's Approved Product List, or APL, and have now begun the first wave of statewide deployments spearheaded by the Central Office of Florida DOT.
David Desharnais: I'm especially proud to report that our first installations have already been battle-tested and proved their value. During one of the most challenging hurricane seasons in Florida's history, RECOR was a reliable and accurate source of traffic data for the state and its emergency operations, facilitating the safe evacuation of millions.
David Desharnais: While these back-to-back hurricanes required Florida DOT to prioritize emergency operations and evacuations for citizen safety during this time, we are now excited to be making renewed forward progress in Q4.
David Desharnais: With our inclusion on the APL and strong endorsement from Florida DOT's central office
David Desharnais: We are collaborating with multiple districts to expand the reach of the SCUGGR, leveraging existing and discretionary budgets for wider implementation across the region.
David Desharnais: with our existing involvement in servicing Florida's legacy data collection network.
David Desharnais: We believe we are well positioned to modernize thousands of outdated sites across the state, many of which are currently underperforming or in disrepair.
David Desharnais: With APL approval of our advanced technology now behind us, our established relationships and operational momentum make Florida a cornerstone for our growth this year and beyond.
David Desharnais: Although the approval took longer than expected, it marks a pivotal step allowing us to expand the delivery of reliable and mission-critical insights that validate our strategic direction.
David Desharnais: This continued rollout not only positions us for sustained growth in one of the nation's largest and most influential states But also sets the stage for expansion beyond
David Desharnais: Florida has built a strong reputation with the Federal Highways Administration as a leading state for advanced data collection approaches, serving as a model for other states.
David Desharnais: Florida's exceptional results through the recent hurricanes has been particularly instructive for other coastal regions and states that face similar and severe weather challenges.
David Desharnais: We are confident that our ongoing work in the region sets a powerful example and will help to facilitate accelerated adoption nationwide.
David Desharnais: Securing an initial order in a new state requires winning the confidence of key decision makers as well as successfully navigating a challenging procurement process.
Complex state procurement policies can present unexpected challenges.
David Desharnais: To address this, we've streamlined our approach by codifying essential elements such as documenting our steps to eliminate AI risks,
David Desharnais: implementing robust cybersecurity and data protection measures and establishing predefined contract vehicles all into a structured framework.
David Desharnais: This framework is designed to simplify our collaboration with procurement departments.
reduce friction and accelerate timelines in future engagements.
David Desharnais: This achievement grants us access to approximately 115,000 miles of public roadways and serves as a critical entry point for a potential broader rollout statewide.
David Desharnais: With this milestone, RECORD can now engage with various local union engineering and construction firms to install our Edge AI devices for use at numerous data collection sites across the state.
David Desharnais: Based on their experience with our currently installed systems, New Mexico has also made the recent decision to move away from outdated 1990s side-firing radar technology.
Where Texas D O T Austin, and the Central Texas Regional mobility authority.
David Desharnais: Or C T RMA and implemented command as its AI based incident detection and response platform as well as for works on management and real time public notifications.
Speaker Change: Eight the performance has been impressive with Txdot reporting a 29% reduction in secondary crashes and the ability to restore normal traffic flows on averaged 44 minutes faster using command.
Speaker Change: Txdot has also presented our solution to the Texas House legislator as a model for future roadway management.
Speaker Change: Our deployment and its outcomes were highlighted in a recent video featuring testimonials from senior leaders at Txdot, including the state C I O and head of traffic management.
Speaker Change: This video underscores commands value as a transformative tool for helping to create safer smarter and more efficient workplace and communities.
And highlights their plans for statewide enterprise level deployment record.
Speaker Change: If you haven't seen the video that's available on our website and various social media channels.
Speaker Change: We are excited about our ongoing progress here.
Speaker Change: I believe that both Texas, and Florida have the potential to become some of our top revenue generating states in the coming years.
Speaker Change: In addition to these specific projects we are currently engaged with.
Speaker Change: At managed 1.2 million miles of roadway data collection in aggregate.
Speaker Change: Our expanding footprint now includes Hawaii.
Speaker Change: Our new partnership with a large and trusted local infrastructure service provider for the state.
Speaker Change: This collaboration will bring our advanced solutions closer to many communities in Hawaii, providing the most advanced digital infrastructure for their departments of transportation and public safety.
Speaker Change: Speaking of public safety.
Speaker Change: We were pleased to see the continued momentum building for our scout platform with.
Speaker Change: With increasing concerns about crime across communities in the United States. This is a market segment that is expected to see significant growth in the coming years.
Notably.
Speaker Change: More than 70% of all crime involved the vehicle underscoring the need for high performance and accurate vehicle recognition technology and roadway intelligence.
Speaker Change: Yeah.
Speaker Change: We recently announced our partnership with sound thinking.
Speaker Change: The meeting public safety company trusted by thousands of public safety agencies nationwide.
Our collaboration and joint offering is already seeing positive initial results in the market.
Speaker Change: With down thinking reporting multiple millions of dollars of new pipeline already established and with more to come.
Speaker Change: In addition.
Our participation at the recent International Association of Chiefs of police.
Speaker Change: Otherwise known as a C P.
Speaker Change: It was well received with other companies in the public safety domain approaching us for potential partnerships as well.
Speaker Change: This reinforces our confidence in the growth outlook for scale.
Speaker Change: Safety segment over the coming months and years ahead.
Speaker Change: Also we're pleased to announce that Scout has recently passed an initial technology approval for New Jersey statewide networked a L. P R program or N J snap.
Marking an important milestone on our journey to establish scout has deep trusted vehicle recognition solution for New Jersey law enforcement agencies and public safety initiatives.
As part of our growth strategy, we are continuing to forge industry, leading partnerships that enhance our capabilities and strengthen our market position.
Notably as industry leaders, Amazon Web services, and Nvidia are intensifying their focus on public safety and transportation infrastructure and they are aligning with strategic partners. They believe will be the leaders in this space.
They have chosen recall.
Putting weight behind our solutions.
We'd previously highlighted our deep collaboration with AWS across each of our business segments. Now Nvidia has published a case study on our integration with their full stack accelerated computing platform.
Speaker Change: By leveraging Nvidia AI and no real influence micro services or NIM.
Speaker Change: We harnessed generative AI to accelerate deployments and strengthen data security.
Speaker Change: We are also running multiple large language and computer vision models on videos Triton AI inference server.
Speaker Change: This provides critical capabilities for data annotation workflow automation and camera calibration.
And advances the state of the art for our AI driven roadway intelligence.
Speaker Change: Maintaining visibility and influence is critical for B Corp, as it fuels innovation and keeps us at the forefront of a rapidly evolving industry.
In Q3.
Speaker Change: <unk> had a strong presence at over 30 industry events.
Speaker Change: Thought leader and strengthening ties with current and future clients.
Speaker Change: Our national profile is also on the rise.
Speaker Change: We were recently featured on motor week, the nation's longest running automotive television series, where our brands and technology reached a broad audience reinforcing record as the leader in enabling the future of safer smarter transportation.
Speaker Change: Yeah.
I'm also honored to share a significant milestone for my personal commitment to advancing transportation and infrastructure.
In addition to serving on the board of directors for the U S Department of Transportation Center for multimodal mobility.
Speaker Change: For the past year.
Speaker Change: I'm now pleased to share that I was recently inducted to the board of directors of <unk>.
Speaker Change: Yes America as well.
Speaker Change: A leading authority in the intelligent transportation industry.
This is a strong recognition of recourse vision and role in shaping the future of digital infrastructure and roadway intelligence nationwide together, we will set the standard for safer smarter and more connected communities.
Speaker Change: Yeah.
Speaker Change: As I've shared in previous calls and outlined in my recent shareholder letter.
Speaker Change: All indicators point to what is an evitable decade long wave of transformation towards digital infrastructure.
Speaker Change: Seismic technology shift that will fundamentally redefine roadways and communities across the U S and beyond.
Speaker Change: <unk> is poised to lead this transition with our <unk>.
Speaker Change: I based technology and unparalleled expertise in roadway intelligence.
Speaker Change: However, navigating government procurement cycles requires adaptability and patients as timelines in the BTG sector can be unpredictable.
Speaker Change: Since assuming the CEO role this past summer I have focused on creating a leaner more efficient record $2.
A company ready to capitalize on significant breakout opportunities in 2025 and beyond.
Speaker Change: While progress toward our long term goals may not always be linear our growing customer momentum expanding backlog and meaningful partnerships have strengthened our opportunities for sustainable self funded growth.
Speaker Change: Together with my senior management team, we are fully committed to executing our plans and creating lasting value for shareholders customers and employees alike.
So stay resilient in this environment, we've taken the necessary steps to adjust to the unpredictability of government procurement timelines and trim our expenses.
Speaker Change: This expense realignment is designed to achieve up to $15 million in annualized savings.
Speaker Change: And gave us the confidence to eliminate an additional $20 million.
Speaker Change: And optional advances we had in place with Georgetown.
Speaker Change: These actions demonstrate our commitment to operating in our meetings.
Speaker Change: Reducing reliance on external capital and positioning ourselves firmly on the path to positive cash flow in 2025.
Speaker Change: With industry, leading technology platforms across all business segments and.
Speaker Change: And strong partnerships within the ecosystem.
Speaker Change: <unk> is poised to transform 4.2 million miles of U S roadways, setting the standard for smart AI driven infrastructure.
Speaker Change: Our statewide engagements are stronger than ever.
Speaker Change: Steadily propelling us towards our vision of becoming the global leader in roadway intelligence.
Speaker Change: And then immensely proud of our team's daily dedication to making that happen.
Okay.
Speaker Change: Exciting journey to build a safer smarter communities and I am comp.
Speaker Change: Yeah.
Speaker Change: I'll now hand, the call over to al him recourse CFO to review, our Q3 financial highlights.
Speaker Change: Yeah.
David Desharnais: Thank you David.
Speaker Change: And thanks for joining us today to discuss our results for the three and nine months ended September 30th 'twenty 'twenty four.
I'd like to begin by highlighting recent strategic actions, we've taken to optimize our cost structure.
Speaker Change: Which are projected to produce 20 to 25.
Pensive by up to $15 million compared to 2024.
Speaker Change: These initiatives include the workforce restructuring to do.
Speaker Change: Better align our cost base.
Speaker Change: Current business needs.
Speaker Change: We have placed our emphasis certainly current operations and near term revenue producing opportunities.
Speaker Change: While ensuring that we retain key talent and maintain the operational capacity required to deliver high quality service to our customers.
In addition to a thorough evaluation the timelines for our longer range development efforts and reduction of other expenses.
Speaker Change: We have implemented targeted compensation adjustments that include more equity based compensation.
Speaker Change: Total compensation packages.
Speaker Change: This demonstrates the long term faith or talk to employees.
Speaker Change: Future success.
Speaker Change: Also in the third quarter numbers.
Speaker Change: We had revenues of $10 $5 million, an increase of 16% compared to Q3 'twenty to 'twenty three.
Speaker Change: For the nine months ended September 30th 'twenty 'twenty, four we achieved $32 $8 million in revenue.
Speaker Change: An increase of $8 $9 million or 37% over the same period last year.
Oh, well the mobility segment, which consist of revenue derived from world way data aggregation of activities was the main driver of our growth in the quarter.
Speaker Change: Recurring revenue reached $5 $5 million in the third quarter of 'twenty 'twenty four.
Speaker Change: An increase of 14% over the same period last year.
Speaker Change: For the nine months ended September 30 of 'twenty 'twenty four recurring revenue totaled $16 $8 million.
An increase of 13% compared to the same period last year.
Speaker Change: Adjusted gross margin. So the three months ended September 30th 2024 was 44% a decrease of 52, 6% for the same period last year.
Speaker Change: For the nine months ended September 32024, adjusted gross margin was 48, 2%.
Speaker Change: The decrease from 52, 6% for the same period last year.
Speaker Change: As indicated in previous calls we're still in an early cold feet and margin can fluctuate on a quarterly basis.
Speaker Change: The decline in Q3, 'twenty 'twenty four was largely driven by lower gross margin projects and some adverse weather conditions over the late summer months.
Speaker Change: We expect gross margins to bounce back or the coming quarters.
Speaker Change: Driven by new wins and delivery of our higher margin go for it.
Speaker Change: Adjusted EBITDA loss for the third quarter point.
Speaker Change: An increase from $6 $6 million in the same period of last.
Speaker Change: Yeah.
Speaker Change: The higher adjusted EBITDA loss was largely due to the aforementioned lower gross margin.
Speaker Change: For the nine months period ended September 32024, adjusted EBITDA loss was $24 $3 million from 'twenty, two 'twenty $3 $2 million for the same period last year.
Speaker Change: Our Q3 2020 full financial results reflects the variability where previously noted in serving government sector clients.
Speaker Change: To help smooth out this unpredictability.
Speaker Change: We're actively optimizing our cost structure.
Speaker Change: Focusing intently on near term revenue generation been.
Speaker Change: Been trimming back personnel and longer range development areas as well as other nonessential expenses.
Speaker Change: Although these decisions are challenging they are necessary to streamline operation accelerates our path to profitability.
Speaker Change: Strict in our balance sheet.
Speaker Change: We anticipate implementing with the majority of our targeted reduction.
Speaker Change: On your full run rate basis by year end.
Speaker Change: As part of our commitment to prudent financial management, we've made strategic adjustments to all frame. This.
Speaker Change: Financing arrangements.
Speaker Change: In October.
Speaker Change: Amended or prepay the defense agreements with Yorkville advisors.
Speaker Change: We need to have the option for an additional $20 million.
This decision reflects our confidence you know currently alignment.
Speaker Change: Growing operating momentum and commitment to delivering value to all of the show.
Speaker Change: Despite some near term challenges.
Speaker Change: I know, it's a little operational but yes.
Speaker Change: A solid foundation for strong future growth.
Speaker Change: Perfect.
Speaker Change: I want to reiterate that our actions position us to operate within our means.
Speaker Change: Yes, I realize it's still a little cocky time.
Speaker Change: This would put us on the path to achieve positive cash flow in 2025.
Speaker Change: We are confident you know food.
Speaker Change: All forward outlook.
Speaker Change: Grateful for the continued support of our investors.
Speaker Change: Now I'll turn the call back to David to cover additional business highlights.
David.
David Desharnais: Thank you a L.
Speaker Change: As you can see we are taking deliberate actions to align our cost structure with the realities, we've experienced in the government procurement cycle.
Through a disciplined financial approach, we are positioning <unk> for sustainable self funded growth with a clear line of sight to positive cash flow in 2025.
Speaker Change: At the same time.
Speaker Change: We are at a defining moment in the evolution of technology.
Speaker Change: Transportation departments across the U S are at a crossroads. They can either continue without dated unsafe labor intensive methods.
Speaker Change: Or embrace modern AI, driven solutions that provide better worker safety deeper insights and increased efficiency and future proofing.
Speaker Change: We are well positioned to lead the way and support our forward looking customers as they continue to embrace digital infrastructure are part of this inevitable and massive wave I don't know.
Speaker Change: Transition.
Speaker Change: Record has the capacity to deploy hundreds of thousands of our eight I urge units along with our software ultimately transforming over $4 2 million miles of U S runways.
Speaker Change: While exact deployment timelines are difficult to predict.
Speaker Change: Once these agencies commit to this transition.
Speaker Change: We believe there was a potential for a 40% compound annual growth rate in revenue over the next five years.
Speaker Change: This level of growth.
Speaker Change: With established record among a select group of industry leaders.
Speaker Change: Looking beyond technology and partnerships.
Speaker Change: We are building a company prepared to endure and thrive.
Speaker Change: As we move forward, we expect to deliver consistent revenue growth expanding gross margins and enhanced predictability.
Speaker Change: Our disciplined approach and commitment to financial independence, not only supports a self sustaining growth model, but also paves the way to unlock recourse multibillion dollar potential.
Speaker Change: And to deliver outstanding value tourists to our stakeholders.
Speaker Change: We're excited about the road ahead.
Speaker Change: With recourse dedicated global team, leading AI solutions across each of our product lines and strategic partnerships. We are uniquely positioned to modernize millions of miles that U S roadways, and pave the way for global expansion.
Speaker Change: We of course thought leadership and influential presence on the board of leading industry bodies also places us squarely at the forefront at transforming the future of transportation.
Speaker Change: The future is bright.
Speaker Change: And we look forward to continuing this journey together building safer smarter and more efficient infrastructure for communities everywhere.
Speaker Change: Now I'd like to open the floor for any questions you may have.
Speaker Change: Operator.
Thank you and I'll be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Speaker Change: Oh confirmation tone will indicate your line is in the question queue. He.
Speaker Change: You May press star two if you'd like to have a question from the Q1 moment. Please while we poll for questions.
Speaker Change: First question is coming from Mike Latimore from Northland capital markets for a while there's not a lot.
Speaker Change: Alright, great. Thank you.
Speaker Change: Congrats on the I T S appointment David.
David Desharnais: Thank you very much Mike.
Speaker Change: Just a couple quick things on the results in the quarter here. So recurring was down sequentially and if I recall last year.
Speaker Change: This is a similar dynamic occurred when a hurricane came through.
Speaker Change: In the third quarter, So I guess it was there.
Speaker Change: Oh, it was recurring revenue when I sort of was it.
Speaker Change: Goodbye.
Speaker Change: Hurricanes in the quarter like particularly the mobile site revenue and does that bounce back in the fourth quarter.
Speaker Change: Yes, Mike. Thank you for the question you are correct.
Speaker Change: The same kind of weather conditions, even worse in Q3.
Speaker Change: The three dogs are lower recurring revenues are lower revenues from our recurring contract and we anticipate this to come back in Q4 and going forward.
Speaker Change: Okay.
Speaker Change: Oh, Yes, and then with regard to Florida, great to see you.
Speaker Change: On the APL lessons that you say deployments have.
Men.
Speaker Change: Can you give a little more detail there.
Speaker Change: Is there a detailed plan for a number of.
Speaker Change: And planes per month or a certain.
Speaker Change: Certain districts father had another district, maybe just talk a little bit about kind of how visible this commenced.
Speaker Change: Yeah.
Speaker Change: So Mike in regards to Florida as you know the hurricane seasons have been pretty nasty. This year right Hum the intention of the Central office of Florida's is they wanted to be able to have effectively eyeballs in every district to be able to get good coverage.
Across the state during emergency operations.
Speaker Change: Obviously, I think you're you're in that market and so you know hurricane Cerus is brewing again and you understand you know there's a timeline associated with this in.
Speaker Change: They're trying to get as much done between now and May to.
Speaker Change: To make sure that they are prepared for the next whatever may come in the next season and so.
Speaker Change: In terms of distribution you can have you can imagine every every district will have a certain number of units in their planning that out right now and we're working with them daily on it I I wouldn't be prepared to give you that detail on here just for competitive reasons not other things right, but yes, it's a very very close relationship.
Speaker Change: I would say in part because of the performance that we've we've demonstrated there in the past year of our engagement, but it it really reached a peak.
Undeniable.
Speaker Change: Evidence during the performance during the storms themselves, where we're literally the only device is able to provide accurate reliable sustainable data during the storm. So that really accelerated a lot of things that I would say otherwise would've taken a slower boat through the channels and the labor and theft.
Speaker Change: Permits and things.
Speaker Change: In this case you know that.
Speaker Change: Never let a crisis go to waste and that in that way and it's really helped to kind of accelerate the planning there and also the confidence in the state to move very very quickly now.
Speaker Change: Now beyond that every district operates also independently. So you have central Central office or Central Florida that overlooks you know across the state for their needs and then you have every district that has you know day to day operational needs for things like class counts speed. Another statistics and so we're engaged in parallel with the districts as well as the central office.
Speaker Change: And the and the districts themselves have their own needs and when we talk about the potential in a state like Florida.
Speaker Change: Say 18000 devices over time right. If you look at that as the potential Tam.
Speaker Change: That area then the district play a pretty heavy role in that and as we look to go beyond Central office, we'll get that done and then also in parallel working with the districts that opens up tremendous footprint and tapping into different budgets some of which are existing budget. Some of them are discretionary budgets and some art budgets.
Speaker Change: To come based on you know their future planning, but I would say net net very very tight trusted relationship. We're building with Florida, and we expect again that to be one of our largest revenue producing states over time so I.
Speaker Change: I hope that provides some color there Mike.
Speaker Change: Thank you.
Speaker Change: And then just maybe thinking about it more broadly here in terms of the addressable market you're talking in Florida to hear about.
Several thousand units and then I think historically, you've mentioned kind of maybe the Tam is about millions Spring Hill, Florida is one of the bigger states. So can you kind of pick up like that you know broader Tam versus what we're seeing in Florida right now.
Speaker Change: Yeah, you know I'll try to color that up in a in a way that you can extrapolate to how do we think about this across different states. So if I take if I take Florida and for those of you that that Oh don't look at the stats here in Florida has about 122000.
Speaker Change: Myles the public roadways.
Speaker Change: You know our concentration is really on the highways and interstates and.
Speaker Change: No.
Speaker Change: If you look at the the mileage of highways in their state Myles, it's around 13500 yourself right.
Speaker Change: And if you look at the 18th.
And that equates to about 1.3 sites per mile and in some cases it can be up to two two per mile. Now I can tell you are living in the in the north or mid Atlantic I should say I will tell you going up and down I 95 every quarter a mile or so I can tell you there's there's devices there.
Speaker Change: So when we start looking across the states whether you know if you look at Texas and their road miles if you look at Florida and their road miles you'd look at Hawaii, New Mexico Road miles, we see pretty easily.
Speaker Change: 750000 to a million million and a half sites potential as a Tam now if you think about the devices and this is this is how we think about it you know we have an opportunity to be able to serve each of those states on the roadways with.
Speaker Change: The superior data that we do produce for them for class count speed power. Once you have that real estate will just call it real estate.
Speaker Change: The ability to do up sells and cross sells there is enormous and so when we think about the potential that 750000 to a million and a half sites provides it's not just one and done it's the ability to expand upon that add value added services on top and frankly, we're sorry.
Speaker Change: To see this they'll pull in or additional platform. So what I'm talking about right now is discover.
But we also have our command platform and we also have our scout platform and those are tied together on the backend that allows us to do expansion. So the Tam is pretty significant even if you just looked at independently as our urban mobility segment with discover it's it's a very very good Tam overall.
Speaker Change: But then you start to look at the cross selling and up selling capability. It becomes really terrific and that's what that's what we see ahead of us.
Speaker Change: Thanks, and one last one just on G&A.
Speaker Change: Was up sequentially was there any one time item in there.
Speaker Change: Yeah, you're right, we have a significant amount of a one time items there associated with the financing transaction. We did in Q3 like the Yorkville Ah you know, we did a new shelf and we did the the warrants exercised this happen all in Q3 and resulted in.
Speaker Change: Expenses.
Speaker Change: So the 15 million of savings.
Speaker Change: You expect is Oh.
Okay, So basically relative to the opex in the third quarter, probably excluding those one time items I would imagine.
Speaker Change: Yeah.
Speaker Change: One time items.
Speaker Change: We said, we did a salary realignment with equity and some other measures.
Speaker Change: To reduce our expense structure significantly in 'twenty to 'twenty five.
Speaker Change: Okay great.
Speaker Change: Thank you Mike and thank you.
Speaker Change: Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Louie Dipalma from William Blair. Your line is now live.
Louie Dipalma: Good afternoon, David and a O.
Speaker Change: Hey, Louie.
Louie Dipalma: Hey, you're making significant progress and in Florida, with the APL and U.
Louie Dipalma: And that development with Texas, and New York.
Speaker Change: We were wondering how might the new.
Speaker Change: Presidential administration impact Recall's business as there has been a lot of discussion of doge, reducing red tape and bureaucracy and yeah.
So I did that the inconsistent government procurement cycle.
Speaker Change: X per day procurement and lead to a faster conversion.
Speaker Change: There's like very large 750000.
Speaker Change: And to deploy.
Speaker Change: Deployment and revenue.
Speaker Change: Yeah.
You know that that's something that we've got a lot of thought to.
Speaker Change: Leading up into the election season in and obviously the outcome of the election.
Speaker Change: A couple of things I would say just as sort of contextual points is that.
The infrastructure and jobs act or the bipartisan infrastructure law Ah. Thanks.
Speaker Change: Thankfully was intended to.
Speaker Change: Extend beyond a single administration. So that's still in place that's still $1 two trillion in and it's still within a five year duration of time, so regardless of the outcome to the election that still stands and the money that has been earmarked are allocated already earmarked and allocated now.
Speaker Change: Got it.
Speaker Change: As we've kind of looked at this.
Speaker Change: Snack scenario planning here, what may happen, we kind of took a look at you know trumps first term and just sort of as an indicator of what we can expect and you know there's been no announcement of a secretary of transportation, yet or the department of energy you know those are still open open positions yet to be fulfilled, but but they will still have the.
Speaker Change: Infrastructure law to depend on and deploy and the reality is is that you know nothing has really fundamentally changed in terms of we've got increasing demand for travel.
Speaker Change: Infrastructure is aging the fact that fuel tax revenue is going down and that the existing sort of program spend four departments of transportation is is insufficient to do what they need to do they need to be able to leverage and tap the infrastructure law or the bipartisan infrastructure.
Speaker Change: It's still there and trumps known to have a heavy focus on highway expansion for sure you know when we think about and emphasis on rural rural areas of border civilians.
Speaker Change: Stick I C E vehicle production. So you know were standard.
Speaker Change: Petroleum vehicles, I mean, where where all of that bodes well for what we have as an offering today and we don't see anything but positive ahead I mean, it's gonna be AI focused it's gonna be about being able to have scalable affordable solutions that enable labor reduction. So you think of Doge right.
Speaker Change: And some of the efficiencies that.
Speaker Change: May come up as a result of that.
Speaker Change: And the streamlining of bureaucracy and the need to reduce friction. So procurement. We expect we'll have a maybe a simpler a simpler path forward. There again all of this is speculation, but that's how we're looking at this so we overall I would say, we're we're feeling good about the transition as it relates to our business and the path forward.
Speaker Change: And and we're excited to see who the secretary of transportation is going to be I'm looking forward to aligning with that now the last thing I'll say here is that you know.
Speaker Change: Recourse presence.
And influence in the industry is growing and our ability to have good insight into what's to come and our ability to help shape whats to come at the highest levels of the U S Department of transportation Federal Highways administration, and now with <unk> with my appointed on the I T. S America, Our board of directors I think that puts us in a very.
Speaker Change: Strong position to help shape the future here so for us it's a green likes a full steam ahead for us.
Speaker Change: Sounds good and it seems the progress of the 1000 camera deployment with State Act has been impacted by the hurricane season.
Speaker Change: When that deployment should be completed.
Speaker Change: And once it's completed.
Speaker Change: Investors back in our follow on orders.
From a state act like what is.
Speaker Change: The market opportunity and are you already in negotiations for some follow on tranches with data.
Speaker Change: Yes, so, yes, yes, and yes Louie.
Speaker Change: So state X as we've referred to before in previous calls is as I've hopefully tried to make more clear today is Florida with our inclusion on the E. P. L. A there's an enormous opportunity there and our position in the state is very favorable again based on performance and based on our relationship and the momentum.
Speaker Change: You know keep in mind, we've had a long long time relationship with with the state in Florida, and Florida's influential to other states not only around.
Speaker Change: Florida and adjacent to Florida, but really across the nation. They are one of the top top states when it comes to the Federal Highway administration.
Speaker Change: So many times.
Speaker Change: The question becomes what is Florida doing and maybe that's what we should do.
Speaker Change: When it comes to states and how they make decisions and so we're really pleased with that the opportunities that I've outlined there is very real.
Speaker Change: And we're extremely well positioned so you know we're working with the districts now on deployment plans. It will tie into their program spend it will tie into discretionary funds and yeah. I mean again, that's yes, yes, and yes for US we still have to enter the operational things that will go through with them. There are still things that we're working.
Speaker Change: On an end timelines are you know how to stage that through the districts.
Speaker Change: Labor and things related to that but yeah the opportunities limits there.
Speaker Change: Great.
Speaker Change: Also the.
Speaker Change: The equivalent of approved product list and some of your other large market.
Speaker Change: Such as New York, and Texas and California.
Speaker Change: There are you know and it becomes relevant depending on so a T L or a food product was they there's different names for it but similar kind of thing not every state has them, but a lot of states to do and a lot of states have reciprocal agreement. So you know what one state does another state will follow and if it's good enough for them. That's good enough for us without the without having to go through that.
Speaker Change: What can be elongated process sometimes.
Speaker Change: But havent gone gone through now.
In multiple states, we have a we have.
Speaker Change: Growing experienced them. There's a lot of this can be template ties in my early remarks, I talked about you know dealing with with procurement and how were codified in the process of building a framework and part of that is we know this is going to become something right and we have answers now and I think we can accelerate that process, that's our expectation.
Speaker Change: So that's for states that are buying equipment.
Speaker Change: That they need to have an approved product list, but our business model provides alternatives like for example, some states don't need to buy equipment. They will do data services only and if it's the data services only theres no equipment to buy per se. So there's no approved product list to worry about you're delivering a service or data service.
Speaker Change: At the end of the day, so what we expect to see happen is that states that do you have.
Speaker Change: It can lead to procure hardware is that we will navigate through the APL process. If there is one and will lend sorry, we will lean on existing Apl's that we currently have to help accelerate that process and or have a reciprocal agreement there.
Speaker Change: And the third option there is that we would.
Speaker Change: Look to partner with a local integrator Ah that is already enabled with everything lined up with an E. P. L to accelerate that process, but I think.
Speaker Change: The main point is that states do have apl's they become irrelevant, if they have to buy equipment, but we see more and more states are moving to more of a hybrid model and or even a data services model, so it'll become less relevant.
Speaker Change: I would say as we move forward, but if there is one well navigated if there isn't one that's great too.
Sounds good and.
Speaker Change: Lastly does the.
$15 million in and cost saving initiatives does that provide.
Speaker Change: Enough.
Speaker Change: Any cushion for required to execute its plan.
Until the company become like a free cash flow breakeven on free cash flow positive in the second half of next year.
Speaker Change: Yes so.
Speaker Change: The way we look at it yes, we will look on our expense structure and our focus really on near term revenue generating.
Speaker Change: Activities.
Speaker Change: And we believe that a cut that we did and the $15 million savings that we have will give us enough run rate.
Speaker Change: To to get to a free cash flow in 2025.
Right.
Speaker Change: Thanks, that's it for me.
Thank you Anza remind her that star one to be placed in the question queue. One moment. Please while we poll for further questions.
Speaker Change: We've reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.
Speaker Change: I just wanted to say thank you very much for tuning in today, we've made I would say.
Speaker Change: Tremendous progress in a short period of time, where young companies still we've accomplished a lot.
Speaker Change: A good example, I think is is getting through the.
Speaker Change: Processes with that Florida is sort of a template. An example, we've learned a lot in that process and I think that it's going to accelerate our path forward. So a lot of goodness coming out of that and you know the changes that we've made from an operating expenses perspective is you know its significant something like that is difficult to do and we've got some amazing people.
Speaker Change: And some rock stars that that's a you know we'll be onto their next adventure and we wish them well, but the folks that are remaining are fully committed to the plan here. We believe that the changes that we've made are get allow us to cash flow our business as we move forward to profitability.
Speaker Change: And we're starting to see the business turn in the way that we expected a it took a little longer than we would like to see but it's a it's on its way and we expect this to continue into 'twenty five for sure and beyond and so where we're at we're excited with the path forward. We have a lot of work to do and we're clear eyed about that and and we're on it.
Speaker Change: So thank you very much for the support and the patients and I believe that youre going to be well rewarded as we as we continue to navigate the path forward to what is an inevitable future. So thank you very much for today and I look forward to updating updating you in the next in the next quarter.
Speaker Change: Thank you that does conclude today's webcast.
Speaker Change: I just wanted to have a wonderful day, we thank you for your participation today.
Speaker Change: Yeah.