COLUMBIA, MD / ACCESSWIRE / March 25, 2024 / Rekor Systems, Inc. (NASDAQ:REKR) ("Rekor" or the "Company"), a leader in developing and implementing state-of-the-art roadway intelligence technology, today unveiled its notable financial results for the fiscal year ending December 31, 2023. Demonstrating substantial progress across all metrics, the Company not only continued its trajectory of year-over-year revenue growth but also laid the groundwork for a future defined by innovation and strategic financial health.
2023 Financial Highlights: A Year of Consistent Growth and Stability
Leadership Insights: Charting the Path Forward
Eyal Hen, CFO of Rekor, commented on the year's success, "The financial milestones achieved in 2023, including significant revenue growth, a notable increase in our contract values, and a reduction in operating cash burn, stand as a testament to our robust strategic execution. These accomplishments, supported by successful fundraising initiatives, have fortified our financial foundation, enabling us to pursue our strategic vision with even greater confidence."
Robert A. Berman, Rekor's Chairman and CEO, reflected on the Company's trajectory, stating, "Our remarkable 162% CAGR in revenue from 2018 to 2023 underscores our commitment to sustained success and innovation. This growth, coupled with our commitment to avoiding toxic debt and overly dilutive financing mechanisms, underscores the strides we've made as a technology company. We're not just surviving; we're thriving, setting new benchmarks for innovation and financial health in our industry."
Hen added, "The Company had initially planned to hold its Investor and Analyst Day concurrently with our annual meeting at the NASDAQ headquarters in New York, leveraging the convenience and resources available at this location. However, considering certain rapid developments and forward momentum, we believe it is prudent to reschedule our Investor and Analyst Day to a later date. This adjustment will allow us to ensure that we can share the most current and comprehensive updates with our investors and analysts."
Financial Results for the Twelve and Three Months Ended December 31, 2023
This section highlights the changes for the twelve and three months ended December 31, 2023, compared to the three and twelve months ended December 31, 2022.
Revenues
| Year Ended December 31, | Change | Three Months Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| Revenue | $ | 34,933 | $ | 19,920 | $ | 15,013 | 75% | $ | 11,066 | $ | 6,469 | $ | 4,597 | 71% | |||||||||||
The increase in revenue for the twelve and three month period ended December 31, 2023, compared to the twelve- and three-month period ended December 31, 2022, was primarily attributable to our Urban Mobility product line. During the twelve- and three-month period ended December 31, 2023, revenue attributable to our Urban Mobility product line increased $9,081,000 and $2,330,000, respectively, compared to the twelve- and three-month period ended December 31, 2022. Additionally, our contactless compliance revenue increased $1,110,000 and $391,000, respectively, for the twelve and three month period ended December 31, 2023, compared to the twelve and three month period ended December 31, 2022.
The other main driver of revenue growth during the periods ended December 31, 2023, compared to December 31, 2022, was attributable to increased sales of the Company's software and hardware products.
Cost of Revenue, excluding Depreciation and Amortization
| Year Ended December 31, | Change | Three Months Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| Cost of revenue, excluding depreciation and amortization | $ | 16,499 | $ | 10,890 | $ | 5,609 | 52% | $ | 5,180 | $ | 3,457 | $ | 1,723 | 50% | |||||||||||
For the year ended December 31, 2023, cost of revenue, excluding depreciation and amortization increased compared to the year ended December 31, 2022, primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue. The costs of revenue increased at a lower rate than our revenue increased as the Company was able to realize efficiencies in its operations and better manage its software costs.
Loss from Operations Excluding Goodwill Impairment
| Year Ended December 31, | Change | Three Months Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| Loss from operations | $ | (42,116) | $ | (50,949) | $ | 8,833 | 17% | $ | (9,346) | $ | (9,750) | $ | 404 | 4% | |||||||||||
The decrease in operating loss for the twelve and three months ended December 31, 2023, compared to the twelve and three months ended December 31, 2022, was primarily attributable to our growth in revenue and improved Adjust Gross Profit (discussed below), accompanied by steady operating expenses year over year.
Additional Key Performance Indicators and Non-GAAP Measures
Performance Obligations
As of December 31, 2023, the Company had approximately $26,390,000 in remaining performance obligations not yet satisfied or partially satisfied. This is an increase of approximately 23%, up from $21,412,000 of remaining performance obligations as of December 31, 2022. Total performance obligations increased over time across all product areas as the Company focused intently on near-term revenue-generating activities and closing long-term contracts.
Total Contract Value
The total contract value of contracts won in the current period also provides us with visibility into our future operating results and cash flows from operations. Total contract value is a non-GAAP measure in which there are certain assumptions that we make when determining the total value of a contract, such as the success rate of renewal periods, cancellations, and usage estimates. For the year ended December 31, 2023, we won contracts valued at $49,087,000, compared to $21,962,000 for contracts won for the year ended December 31, 2022. This represents growth of $27,125,000 or 124%, period over period.
Adjusted Gross Profit and Adjusted Gross Margin
| Year Ended December 31, | Change | Three Months Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| Revenue | $ | 34,933 | $ | 19,920 | 15,013 | 75% | $ | 11,066 | $ | 6,469 | 4,597 | 71% | |||||||||||||
| Cost of revenue, excluding depreciation and amortization | 16,499 | 10,890 | 5,609 | 52% | 5,180 | 3,457 | 1,723 | 50% | |||||||||||||||||
| Adjusted Gross Profit | 18,434 | 9,030 | 9,404 | 104% | 5,886 | 3,012 | 2,874 | 95% | |||||||||||||||||
| Adjusted Gross Margin | 52.8% | 45.3% | 7.5% | 16.6% | 53.2% | 46.6% | 6.6% | 14.2% | |||||||||||||||||
Adjusted Gross Profit for the twelve and three months ended December 31, 2023, increased $9,404,000 and $2,874,000, respectively which equated to an increase to Adjusted Gross Margin of 7.5% and 6.6% percentage points, respectively, compared to the twelve and three months ended December 31, 2022.
As the Company continues to scale and standardize its product offerings it has begun to realize operational efficiencies that have resulted in an improved Adjusted Gross Margin. Additionally, the Company has worked diligently to reduce its software and data costs.
EBITDA and Adjusted EBITDA
The Company calculates EBITDA as net loss before interest, taxes, depreciation, and amortization. The Company calculates Adjusted EBITDA as net loss before interest, taxes, depreciation, and amortization, adjusted for (i) impairment of intangible assets, (ii) loss on extinguishment of debt, (iii) stock-based compensation, (iv) losses or gains on sales of subsidiaries, and (v) other unusual or non-recurring items. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the U.S. ("U.S. GAAP") and should not be considered as an alternative to net earnings or cash flow from operating activities as indicators of our operating performance or as a measure of liquidity or any other measures of performance derived in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of a company's ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.
The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands):
| Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
Net loss from continuing operations | $ | (45,685 | ) | $ | (83,454 | ) | ||
Provision (benefit) for income taxes | 32 | (987 | ) | |||||
Interest expense, net | 3,596 | 21 | ||||||
Depreciation and amortization | 7,894 | 6,422 | ||||||
EBITDA | $ | (34,163 | ) | $ | (77,998 | ) | ||
Gain on extinguishment of debt | $ | (527 | ) | $ | - | |||
Share-based compensation | 4,352 | 6,616 | ||||||
Gain on the sale of ATSE | - | (2,643 | ) | |||||
Loss (gain) due to the remeasurement of the STS Earnout and Contingent Consideration, net | 384 | (883 | ) | |||||
Impairment of SAFE agreement | 101 | - | ||||||
Goodwill impairment | - | 34,835 | ||||||
Legal judgements and settlements | 801 | 1,608 | ||||||
One-time consulting fees | 365 | 1,024 | ||||||
Adjusted EBITDA | $ | (28,687 | ) | $ | (37,441 | ) | ||
Rekor has scheduled a conference call to discuss the 2023 results on Monday, March 25, 2024, at 4:30 P.M. (Eastern).
Any person interested in participating in the call should please dial in approximately 10 minutes prior to the start of the call using the following information:
North America: 877-407-8037 (Toll Free)
International: 201-689-8037
A live webcast of the conference call will be available online at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=7xcGmLzZ
REPLAY INFORMATION
A replay will be made available online approximately two hours following the live call for a period of two weeks. To access the replay, use the following numbers:
Replay Dial-In: 877-660-6853 / 201-612-7415
Access ID: 13744769
An archived webcast will also be available to replay this conference call directly from the Company's website under Investors, Events & Presentations.
About Rekor Systems, Inc.
Rekor Systems, Inc. (NASDAQ: REKR) is a leader in developing and implementing state-of-the-art roadway intelligence systems using AI and machine learning. Pioneering the implementation of digital infrastructure in our communities, Rekor is redefining infrastructure by collecting, connecting, and organizing the world's mobility data - laying the foundation for a digital-enabled operating system for the road. With our Rekor One® Roadway Intelligence Engine at the foundation of our technology, we aggregate and transform trillions of data points into intelligence through proprietary computer vision, machine learning, and big data analytics that power our platforms and applications. Our solutions provide actionable insights that give governments and businesses a comprehensive picture of roadways while providing a collaborative environment that drives the world to be safer, greener, and more efficient.
To learn more please visit our website: https://rekor.ai, and follow Rekor on social media on LinkedIn, Twitter, and Facebook.
Forward-Looking Statements
This press release and its links and attachments contain statements concerning Rekor Systems, Inc. and its future expectations, plans, and prospects that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the impact of Rekor's core suite of AI-powered technology and the size and shape of the global market for ALPR systems. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," by the negative of these terms or by other similar expressions. You are cautioned that such statements are subject to many risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual circumstances, events or results may differ materially from those projected in the forward-looking statements, particularly as a result of various risks and other factors identified in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made and are based on management's assumptions and estimates as of such date. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise.
Company Contact:
Rekor Systems, Inc.
Eyal Hen
Chief Financial Officer
Phone: +1 (443) 545-7260
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Media & Investor Relations Contact:
Rekor Systems, Inc.
Charles Degliomini
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REKOR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
| December 31, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 15,385 | $ | 1,924 | ||||
Restricted cash and cash equivalents | 328 | 254 | ||||||
Accounts receivable (net of allowance for credit losses of $101 and $69 at December 31, 2023 and 2022, respectively) | 4,955 | 3,238 | ||||||
Inventory | 3,058 | 1,986 | ||||||
Note receivable, current portion | 340 | 340 | ||||||
Other current assets | 1,270 | 1,202 | ||||||
Current assets of discontinued operations | - | 331 | ||||||
Total current assets | 25,336 | 9,275 | ||||||
Long-term assets | ||||||||
Property and equipment, net | 13,188 | 16,733 | ||||||
Right-of-use operating lease assets, net | 9,584 | 9,662 | ||||||
Right-of-use financing lease assets, net | 1,989 | - | ||||||
Goodwill | 20,593 | 20,593 | ||||||
Intangible assets, net | 17,239 | 21,299 | ||||||
Note receivable, long-term | 482 | 822 | ||||||
SAFE investment | - | 2,005 | ||||||
Deposits | 3,740 | 3,451 | ||||||
Total long-term assets | 66,815 | 74,565 | ||||||
Total assets | $ | 92,151 | $ | 83,840 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | 5,139 | 5,963 | ||||||
Notes payable, current portion | 1,000 | 1,000 | ||||||
Notes payable, related party | - | 1,000 | ||||||
Loans payable, current portion | 75 | 106 | ||||||
Lease liability operating, short-term | 1,261 | 1,069 | ||||||
Lease liability financing, short-term | 547 | - | ||||||
Contract liabilities | 3,604 | 3,044 | ||||||
Other current liabilities | 5,610 | 2,772 | ||||||
Current liabilities of discontinued operations | - | 490 | ||||||
Total current liabilities | 17,236 | 15,444 | ||||||
Long-term liabilities | ||||||||
Notes payable, long-term | 1,000 | 2,000 | ||||||
2023 Promissory Notes, net of debt discount of $1,012 | 2,988 | - | ||||||
2023 Promissory Notes - related party, net of debt discount of $2,149 | 6,351 | - | ||||||
Series A Prime Revenue Sharing Notes, net of debt discount of $447 | 9,553 | - | ||||||
Series A Prime Revenue Sharing Notes- related party, net of debt discount of $223 | 4,777 | - | ||||||
Loans payable, long-term | 273 | 349 | ||||||
Lease liability operating, long-term | 13,445 | 14,237 | ||||||
Lease liability financing, long-term | 1,057 | - | ||||||
Contract liabilities, long-term | 1,449 | 1,005 | ||||||
Deferred tax liability | 65 | 52 | ||||||
Other long-term liabilities | 587 | 1,416 | ||||||
Total long-term liabilities | 41,545 | 19,059 | ||||||
Total liabilities | 58,781 | 34,503 | ||||||
Commitments and contingencies (note 13) | ||||||||
Stockholders' equity | ||||||||
Preferred stock, $0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of December 31, 2023 and December 31, 2022, respectively. No preferred stock was issued or outstanding as of December 31, 2023 or 2022, respectively. | - | - | ||||||
Common stock, $0.0001 par value; authorized; 100,000,000 shares; issued: 69,273,334, shares at December 31, 2023 and 54,446,602 at December 31, 2022; outstanding: 69,176,826 shares at December 31, 2023 and 54,405,080 at December 31, 2022 | 7 | 5 | ||||||
Treasury stock - at cost, 96,508 and 41,522 shares as of December 31, 2023 and 2022, respectively | (522 | ) | (417 | ) | ||||
Additional paid-in capital | 232,568 | 202,747 | ||||||
Accumulated deficit | (198,683 | ) | (152,998 | ) | ||||
Total stockholders' equity | 33,370 | 49,337 | ||||||
Total liabilities and stockholders' equity | $ | 92,151 | $ | 83,840 | ||||
REKOR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
| Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
Revenue | $ | 34,933 | $ | 19,920 | ||||
Cost of revenue, excluding depreciation and amortization | 16,499 | 10,890 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | 27,038 | 26,612 | ||||||
Selling and marketing expenses | 7,347 | 8,329 | ||||||
Research and development expenses | 18,271 | 18,616 | ||||||
Depreciation and amortization | 7,894 | 6,422 | ||||||
Goodwill impairment | - | 34,835 | ||||||
Total operating expenses | 60,550 | 94,814 | ||||||
Loss from continuing operations | (42,116 | ) | (85,784 | ) | ||||
Other income (expense): | ||||||||
Gain on extinguishment of debt | 527 | - | ||||||
Gain on the sale of business | - | 2,643 | ||||||
Interest expense, net | (3,596 | ) | (21 | ) | ||||
Other expense, net | (468 | ) | (1,279 | ) | ||||
Total other income (expense) | (3,537 | ) | 1,343 | |||||
Loss before income taxes | (45,653 | ) | (84,441 | ) | ||||
(Provision) benefit for income taxes | (32 | ) | 987 | |||||
Net loss from continuing operations | (45,685 | ) | (83,454 | ) | ||||
Net income from discontinued operations | - | 339 | ||||||
Net loss | $ | (45,685 | ) | $ | (83,115 | ) | ||
Loss per common share from continuing operations - basic and diluted | (0.72 | ) | (1.68 | ) | ||||
Earnings per common share discontinued operations - basic and diluted | - | 0.01 | ||||||
Loss per common share - basic and diluted | $ | (0.72 | ) | $ | (1.67 | ) | ||
Weighted average shares outstanding | ||||||||
Basic and diluted | 63,168,299 | 49,807,475 | ||||||
| Last Trade: | US$1.01 |
| Daily Change: | 0.12 13.48 |
| Daily Volume: | 5,624,951 |
| Market Cap: | US$94.770M |
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