Core AI Holdings Q3 FY2023 earnings call

• Adoption of critical communication devices expanding in U.S. and international markets across verticals like public safety, education, etc.
• Achieved stock status with major U.S. carrier for SD7 handset, expected to drive stronger sales.
• Expanded distribution to strategic resellers in U.S. and international markets.
• Increased proof-of-concept trials for SD7 rugged devices.
• Launched SD7 Plus with wide-angle camera and body camera functionality, starting customer trials.
• Siyata Real Time View installed in ambulances, rolling out to more vehicles.
• Expanded sales team with Doug Clark, who helps develop new sales opportunities.

For the third quarter of 2023 ended September 30, revenues were $1.8 million compared to $2.6 million in Q3 2022. Revenue from the U.S. was 69% of total revenue for the quarter. Rugged device sales in Q3 2023 were $1.1 million versus $1.9 million in Q3 2022. Gross margin percentage for Q3 2023 was 26.6% versus 33.3% in Q3 2022. SG&A expenses were $2.7 million in Q3 2023 versus $2.4 million in Q3 2022. Adjusted EBITDA for Q3 2023 was negative $1.6 million compared to negative $1.6 million in Q3 2022. Working capital as of September 30, 2023, was nearly $3.8 million versus just over $1.6 million as of December 31, 2022. For the 9 months ended September 30, 2023, total revenue was $6.4 million compared to $4.4 million in the same period of 2022, a 45% increase. Gross margin dollars were $1.8 million in 2023 compared to $1.2 million in 2022, a 47% increase. Gross margin percentage was 28.2% in 2023 versus 27.9% in 2022.

• Expect stronger sales in coming quarters, especially with stock status at major U.S. carrier.
• Anticipate larger volumes for SD7 rugged devices and accessories as end customers appreciate unique offering.
• SD7 Plus expected to contribute in 2024.
• Confident in growing revenue due to improved partnerships and stock product status.

• Uncertainties in achieving expected sales growth as sales efforts require carrier sales force training, customer trials, etc.
• Risks associated with forward-looking statements, including market uncertainties and execution risks.

Q: Good morning. Thanks for the update and taking my questions. Marc, let me just start with a quick question, a housekeeping question on the OpEx line. The third quarter 2023 total OpEx of $2.7 million. It looks like S&M expense has picked up, which makes sense to support sales growth but you guys meaningfully reduced G&A expense and overall OpEx is down pretty meaningfully is – which is good to see. Is this a normalized quarterly OpEx level going forward? Are there any puts and takes or onetime blips in this quarter? Or is this a good go-forward rate for an analyst perspective?

A: There definitely are some onetime expenses that you're not going to see going forward. And I think that it's actually a higher quarter than what you're going to see going forward. And I think that the general – the OpEx and also the G&A are going to be a little bit lower. So this is on the high side. It's not even standard.

Q: Good morning gentlemen. Sitting in for Tom Kerr today. Just wanted to circle back to the Real Time View. And maybe if you could give me a little bit of insight into the verticals that you're seeing the most interest from right now and where you think the greatest opportunities will be for that product?

A: Okay. So right now, we're very focused on EMS, and this is a great product for EMS. We're seeing a lot of success with ambulances, with other EMS-type vehicles. So that's certainly a vertical that we're very focused on. But also for commercial fleet, for security fleets, it's something that's very interesting. This gives the fleet manager a very high level of control to be able to know what's going on with that vehicle and actually see the vehicle remotely, whether from a control center or a command center or from their phone, they're able to put in certain information into their control centers so that if the driver is not driving correctly, if the driver goes out of a certain geo fence, it allows the fleet managers to really have much more control, but even more than that, it allows them to know what the driver is seeing when the driver is in certain areas. And that type of system is very desirable for a lot of fleet managers, they just want to have more control over their fleets.