Rekor Systems, Inc. Q4 FY2024 earnings call

• Strategic partnerships: Deepened relationships with AWS, NVIDIA, and expanded with SoundThinking, ShotSpotter, SoundHound, and MS2. - Product developments: Rekor Discover platform and Edge Series systems expansion in New Mexico, Rekor Scout certification for New Jersey's SNAP program, new Incident Priority Ranking feature in Rekor Command. - Financial steps: Early repayment of $15 million prepaid advance agreement with Yorkville Advisors Global, strengthening balance sheet and flexibility. - IP expansion: Secured patents for detecting irregular traffic congestion in US and Europe, fortifying data privacy approach.

In the fourth quarter of 2024, revenue was $13.3 million, surpassing consensus estimates. The Urban Mobility segment, driven by robust demand for the new roadway data aggregation solution, contributed to growth. Public safety, the second largest revenue source, achieved mid-teens growth. Recurring revenue for the quarter totaled $5.8 million, a modest 2% year-over-year decline due to timing differences. For the full year 2024, revenue was $46 million, a 32% increase from 2023. Product and services revenue grew significantly to $23.4 million, up 65% year-over-year. Adjusted gross margin rebounded to 52% in Q4 2024 from 44% in Q3 2024, driven by contract wins and higher margin offerings. Full year 2024 adjusted gross margin was 49.3% compared to 52.8% in 2023, reflecting a higher proportion of SaaS revenue.

• Expect steady gross margin improvement driven by enhanced SaaS revenue mix and pay-for-data contracts. - Continue working towards steady declines in adjusted EBITDA losses as revenue grows. - Established a $25 million at the market issuance sales agreement with Northland in February 2025 for opportunistic capital raising.

• Reliance on government contracts and uncertain timing, which could lead to unnecessary shareholder dilution. - Potential challenges in aligning operational model with government contract timelines beyond control.

Q: From a technical perspective, are Rekor's solutions able to offer the same types of capabilities as Flock Safety?

A: Robert Berman stated it's apples and oranges; Rekor focused on commercial market and OEM-ing software with better vehicle recognition LPR software.

Q: How should we think about the timeline for free cash flow breakeven?

A: Eyal Hen mentioned they still keep the thought from previous calls but didn't provide a specific timeline.

Q: How has the partnership with SoundThinking progressed?

A: Robert Berman said SoundThinking is selling, making progress with pilots, and expected to pay off in 2025.

Q: Progress of the rollout in Florida and potential for more contracts?

A: Robert Berman said government procurement processes are complex; things in Florida, Texas, Georgia are proceeding well but can't discuss specific details due to procurement laws.

Q: Thoughts on organic growth this year without acquisitions?

A: Robert Berman said they've developed products from projects and expect fruits of labor to bear, but growth is outside of control.

Q: Color on first quarter 2025 business and Florida cameras deployed?

A: Eyal Hen said no guidance provided for 2025; Robert Berman said can't disclose number of cameras in Florida as it relates to Q1 revenue.

Q: Other states with best potential for Discover contract this year?

A: Robert Berman said they did many proof of concept installments, in deployment or RFP stages, but careful with RFP rules and can't disclose specific states.