Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rekor Systems Inc (REKR, Financial) has achieved significant progress with its Discover platform, securing inclusion on Florida's Approved Product List (APL) and commencing statewide deployments.
- The company has expanded its strategic partnerships, including collaborations with Amazon Web Services and NVIDIA, enhancing its capabilities in public safety and transportation infrastructure.
- Rekor Systems Inc (REKR) reported a 16% increase in Q3 2024 revenues compared to Q3 2023, driven primarily by its Urban Mobility segment.
- The company is making strides in transportation management with its Command solution, which has been successfully implemented in Texas, leading to a 29% reduction in secondary crashes.
- Rekor Systems Inc (REKR) is optimizing its cost structure, projecting up to $15 million in annualized savings, which is expected to support its path to positive cash flow in 2025.
Negative Points
- The approval process for Florida's APL took longer than expected, causing delays in deployment and revenue generation.
- Rekor Systems Inc (REKR) experienced a decrease in adjusted gross margin for Q3 2024, dropping to 44% from 52.6% in the same period last year.
- The company reported an increased adjusted EBITDA loss of $9.2 million for Q3 2024, up from $6.6 million in the same period last year.
- Recurring revenue was impacted by adverse weather conditions, particularly hurricanes, leading to lower revenues from recurring contracts in Q3 2024.
- Rekor Systems Inc (REKR) faces challenges with government procurement cycles, which can be unpredictable and lead to delays in project execution and revenue realization.
Q & A Highlights
Q: Was recurring revenue impacted by the hurricanes in the quarter, and will it bounce back in the fourth quarter?
A: Yes, recurring revenue was affected by the severe weather conditions in Q3, similar to last year. We anticipate a recovery in Q4 and moving forward. - David Desharnais, President and COO
Q: Can you provide more details on the deployment plan in Florida after being included on the APL list?
A: The Central Office of Florida aims to have comprehensive coverage across districts for emergency operations, especially given the hurricane season. We are working closely with them on deployment plans, but specific details are not disclosed for competitive reasons. - David Desharnais, President and COO
Q: How does the broader TAM compare to the current deployment in Florida?
A: Florida has about 122,000 miles of public roadways, with a potential of 18,000 sites. Across different states, we see a TAM of 750,000 to 1.5 million sites, with opportunities for upselling and cross-selling additional services. - David Desharnais, President and COO
Q: Was there any onetime item that caused G&A expenses to rise sequentially?
A: Yes, there were significant onetime expenses related to financing transactions in Q3, including the Yorkville agreement and warrant exercises. - Eyal Hen, CFO
Q: How might the new presidential administration impact Rekor's business, especially regarding procurement cycles?
A: The Infrastructure and Jobs Act remains in place, providing stability. We expect potential streamlining of bureaucracy and procurement processes, which could benefit our business. Our growing industry influence positions us well for future developments. - David Desharnais, President and COO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
