Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rekor Systems Inc reported a significant revenue increase of 58.1% year-over-year, reaching $9.8 million in Q1 2024.
- The company successfully completed a follow-on offering with William Blair, raising a net amount of $26.5 million.
- Rekor Systems Inc completed the acquisition of All Traffic Data (ATD), enhancing its operational capabilities and market reach.
- Recurring revenue grew by 18% from the previous year, driven by additional contracts in urban mobility and public safety segments.
- Rekor Systems Inc is actively engaged in deploying its technology in multiple states, with contracts allowing the deployment of thousands of devices based on task orders.
Negative Points
- Adjusted gross margin declined to 45.9% in Q1 2024 from 53.6% in Q1 2023, primarily due to lower margin projects and adverse weather conditions.
- The company reported a material weakness in internal controls regarding tax accounting for the ATD acquisition.
- Total contract value signed during the quarter decreased by 35.1%, and the remaining performance obligation also decreased by 13.2%.
- The introduction of new federal and state cybersecurity and AI policies has delayed the procurement processes, impacting revenue outlook for 2024.
- Rekor Systems Inc continues to experience a high cash burn rate, necessitating a scale-up in operations to meet anticipated demand.
Q & A Highlights
Q: Good afternoon, Dave and now David, congrats on the promotion and Robert best wishes as Chairman. It is now a month and Louie DiPalma is afternoon on to start, David, just at CYO., should we expect any particular significant changes in your strategy going forward?
A: Hi there, Noah. hey, thanks for the question. No, at this moment, I would say that we're pretty locked and loaded. We've been very thoughtful in developing the strategy up till now had been very much part of that with the rest of the team in developing and executing against it. So the short answer is no, we believe in our path, and we believe that we're making good progress against our objectives.
Q: And then just to follow up on ITS. Americas and Phoenix. We watch the demo for record demand and the technology is very impressive. Record demand is successfully deployed with at least one major Tier one West Coast city. What does the pipeline look like for both record demand and record discussions?
A: We have a very robust pipeline across both of those platforms. And you're right the command platform is a fantastic solution, and it's really well loved by the customers that use it today. From a pipeline perspective, we're engaged in my gosh, probably a third of the states today. And in addition to that, from a Discover perspective, we're currently that's pretty new for us, but we're engaged already in over a dozen states as well as a significant pipeline beyond that, too. So we feel like the path ahead and the adoption of our technology there is well positioned.
Q: And then just one last quick one on keeping it broad. Can you describe what you've been seeing as it relates to the competitive environment? Thanks.
A: Yes, you know, in every business and industry, there's going to be a host of competitors what we find is that when we engage with the customer, our solutions are quite different from what you might view as a competitive situation. We actually partner with the majority of other players in the ecosystem today, for example, in the context of command, which you mentioned, which is really targeting it, transportation and traffic management centers across states, there's probably 3,004 thousand different connection points of other ecosystem players that must surface through. And then at that an environment that environments as often as a TMS system offers automated automated traffic management system and or it's through the committed platform. We partner with pretty much every one of the ATMS. partners today or excuse me, providers today. So from a competitive landscape, we are providing something truly unique, which is why the ATMS providers like to work with us. So that's one dimension. On the Discover side, Discover has actually really got a clear path forward. There's little to no competition in that when it comes to AI based roadside units that do that, the class count and speed collection that we do with the ability to extend into multiple other types of traffic studies. And when you think about the existing roadside devices out there, which is wood, which really would be the competition, it is really legacy technology from 30 40, 50 sometimes 60 years ago, that look a lot like a rubber to or big construction project. So the competition there is really not direct that I think the competition there is the way that they've always done things and this is the modernization of that legacy technology.
Q: Yes. Great. Thanks. And Yes, congrats Dave on the new role here. So I think on that you referenced one deal that where procurement was delayed six months. Did you, do you think you'll be able to, kind of, did you say you, you think you'll be able to recognize that revenue this year or what, what's your thought on kind of how that deal plays out this year?
A: Yes, we believe so. We believe very strongly. So in fact, every every day as we're learning more on that. But I think in short, yes, I can't predict exactly the day of the week that's going to happen given my remarks there, but I definitely will look forward to updating you in the next quarter. And I think we'll have some good solid news there.
Q: And then just in terms of the year, should we think about NOK year revenue being maybe taking that?
A: Yes, first quarter as a baseline number and then you know, adding that deal to it, and that's kind of a way to think about the full year? Or can you give us a little more perspective on it? Yes. So we in our model, if you look at that one deal in particular that I mentioned, we model $35 million in our business plan for 2024. In addition to that, we believe that that will do at an additional 50 million on top of that. So I think the path that we set forth for 2024, we still believe that we're going to land again with the caveat that there some timing things that we're working through with the states on their policy development and such. But yes, we're confident in our approach and the path forward here.
Q: Yes, hi, guys. David, I want to congratulate you as well as your new roles with the company. Excited about your leadership going forward. We know one matrix for success, and this may apply or not is the stockprice. I've been patient with this company for several years. I come from the days when stock price was about 25 plus dollars a share. And a year ago, we were about for 15 somewhere. And now we've eroded today at a high one 83 after ours is one 48. So and I see continuing quarter after quarter losses. So I guess the question would be when Let me complement first, I was glad to hear you, David say you're working on an investor relations person. So it's not about just being on these Paul's quarterly, but we can we can call in and ask questions. So with continuing losses at some point as we deal with a turnaround address the paychecks I just mentioned.
A: As far as stock prices, that's not everything, but when are we going to see and up climb at adidas situation we're in right now. Yes, that's a that is the $60,000,000, $600 million dollars question. We see that we see that every day as well, as you can imagine, right there, and we don't we don't control the stock price obviously. But I would say that we're very, very committed to the path forward here and we do believe the opportunity ahead is undeniable. When we look at where we are today in 2024 and whatever what we're modeling in our business plan for 2024. We're confident we're on track for that. We do have the Q1 material impact,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
