Rekor Systems, Inc. Reports Third Quarter 2021 Financial Results
Rekor Systems, a global AI technology firm, unveiled its Rekor OneTM operating system, aimed at enhancing infrastructure with traffic analytics and safety modules. In Q3 2021, revenues rose 23% to $2.6 million year-over-year, while performance obligations increased 57% to $23.8 million. The company reported a net loss of $9.7 million, attributed to a shift towards a recurring revenue model. The acquisition of Waycare Technologies accelerates growth by integrating data analytics. Despite short-term revenue challenges, Rekor anticipates stronger revenue in H2 2022 and beyond, supported by its land-and-expand strategy.
- Revenue increased 23% year-over-year to $2.6 million in Q3 2021.
- Performance obligations rose 57% to $23.8 million, indicating strong future revenue potential.
- Recurring revenue grew 28% to $1.2 million, reflecting a successful transition in the revenue model.
- Total contract value increased 108% to $7.7 million for the first nine months of 2021.
- Acquisition of Waycare Technologies enhances product offerings and data capabilities.
- Operating loss increased to $9.7 million in Q3 2021, up from $3.4 million in Q3 2020.
- Revenue declined 39% from Q2 2021 due to a shift towards recurring revenue model.
- Adjusted gross margin decreased to 46% from 54% in Q3 2020.
Highlights:
- Launched our Rekor OneTM operating system for intelligent infrastructure, which includes modules for traffic analytics, incident management, public safety, and law enforcement.
- Evolved our revenue model to effectively execute on our land-and-expand strategy and introduced new key performance indicators to allow investors to assess our progress, which include:
- Performance obligations increased
57% to$23.8 million , up from$15.2 million in the second quarter of 2021. - Total Contract Value for the nine months ended September 30, 2021, increased
108% to$7.7 million , up from$3.7 million for the comparable period in 2020. - Recurring revenue, which includes SaaS revenue, licensing and subscription revenue, eCommerce revenue and customer support revenue, increased
28% to$1.2 million as compared to$1.0 million in the third quarter of 2020.
- Performance obligations increased
- Third quarter 2021 revenue increased
23% to$2.6 million as compared to$2.1 million in the third quarter of 2020. - Revenue for the first nine months of 2021 increased
74% to$11.1 million as compared to$6.4 million for the same period in the prior year. - Third quarter 2021 adjusted gross margin, which excludes the impact of depreciation and amortization expense, was
46% , down from54% in the third quarter of 2020. - Closed the acquisition of Waycare Technologies, Ltd., expanding our global footprint, capabilities, and product offerings.
COLUMBIA, MD / ACCESSWIRE / November 15, 2021 / Rekor Systems, Inc, (NASDAQ:REKR) ("Rekor" or the "Company"), a global AI technology company with a mission to build safer, smarter and more efficient cities around the world through intelligent infrastructure, announced today its unaudited financial results for the third quarter of 2021.
"In the third quarter of 2021, we generated revenue growth of
"We expect the long-term benefits of our focus on recurring, subscription-based revenues to more than offset any short-term growing pains we may experience, thus significantly enhancing Rekor's value proposition. There's a meaningful advantage in retaining ownership of sensors we install and the data we aggregate, as this allows us to create customized solutions for a variety of customers and use cases in a given market without the need to install additional sensors. So, we're confident that this strategy will provide us a solid foundation for future growth. By strategically using software subscriptions to expand our geographic footprint more quickly, which could pose headwinds to revenue growth over the next few quarters, we expect to be able to position the Company to achieve a meaningful pick up in revenue in the second half of 2022 and beyond."
"The third quarter was a pivotal point in the company's young history," noted Robert A. Berman, President and CEO, Rekor. "We announced the acquisition and closing of Waycare Technologies, which has allowed us to speed up our evolution by years. We can now overlay the data generated by our own optical sensors with third-party provided data. This provides an unparalleled, holistic view of what's happening on the roads and in the communities that we serve in real time and allows us to leverage that actionable intelligence using our proprietary AI and machine learning algorithms. This allows our industry leading solutions to provide a highly efficient incident management capability for our customers, as well as a range of other services.
"We're at a point in our evolution where we can focus intently on generating long-term shareholder value through sales as well as research and development. As outlined during our inaugural investor day in New York City, we've been evolving and sharpening our business model. Our land-and-expand strategy makes it advantageous for us to retain ownership of our optical sensors for two reasons: First, it permits us to enter a market at an attractive price point while allowing the customers to experience the capabilities of our products and our exceptional customer service immediately. This facilitates the expansion of our geographic footprint and allows us to grow faster. Second," Mr. Berman added, "when we retain ownership of optical sensors, we can use them in full compliance with the most stringent security and privacy requirements, to provide additional solutions to other agencies and customers without needing to invest in additional sensors - one sensor, multiple missions.
"As with any company transitioning from a transactional to a recurring revenue model, we've seen a sequential dip in revenues in the quarter," Mr. Berman continued. "Yet we're highly confident that this is just temporary. We're aggressively growing our sales force and customer base and will use a direct consultative sales approach to expand our footprint rapidly. Rekor OneTM is designed to be a modular platform. So, we can use it to build additional recurring revenues by simply authorizing it to deliver additional solutions.
"To that end, Mike Dunbar, our Chief Revenue Officer, has been restructuring our sales mechanics and overall approach to the market. Our restructured approach is designed to build a base for generating meaningfully higher revenue over time than we could have under the previous model -- because once we enter a market, we're confident that we can successfully upsell additional modules. Enabling these other modules is as simple as turning them on via the Rekor OneTM operating platform. And once we've established a relationship with one agency in a market, we can cross-sell our products to other agencies. Our experience with existing clients supports this approach. We have very little attrition, and we've demonstrated the ability to continually innovate and lead the industry with cutting edge solutions. This is what gives us confidence in our ability to successfully upsell and cross-sell our offerings once we've gained entry to a market.
"Today, we also announced that the plaintiffs in Miller v. Rekor Systems, Inc., et al. (21-cv-1604) have dropped a shareholder lawsuit against Rekor alleging violations of federal securities laws. This was a decision made by the plaintiffs independently and without compensation. While we're not surprised by the ultimate outcome, we're pleased to see it achieved expeditiously.We're looking forward to the journey ahead and having a positive impact on all stakeholders," Mr. Berman concluded. "We are in an enviable position in that we can improve the health, safety, and well-being of communities and cities, while creating significant value for our shareholders."
Third Quarter Financial Results
Revenues
Revenue for the three months ended September 30, 2021, increased
Recurring revenue for the three months ended September 30, 2021, which includes SaaS revenue, licensing and subscription revenue, eCommerce revenue and customer support revenue, increased
Product and service revenue for the three months ended September 30, 2021, which includes the Company's contactless compliance revenue, implementation revenue, perpetual license sales and hardware sales, increased
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted gross profit for the three months ended September 30, 2021, increased to
For the nine months ended September 30, 2021, the Company generated adjusted gross profit of
Loss from Operations
Operating loss for the three months ended September 30, 2021, increased to
The Company also increased its research and development expenses in the three months ended September 30, 2021, primarily due to the development of new products and additional software capabilities. The increase in research and development expenses is mainly attributable to an increase in headcount and hours associated with research and development activities. Furthermore, marketing expenses increased due to a ramp up in marketing efforts to promote the Company's products and services including digital marketing and other sales efforts. In addition, there was an increase in the sales force to support execution of Rekor's land-and-expand strategy. The Company expects to continue to add to headcount and expand the sales force.
Loss per Share
Loss per share for the three months ended September 30, 2021, declined to
Total Value of Contracts Won
The total contract value of contracts won in the period provides visibility into the Company's future operating results and cash flows from operations. There are certain assumptions embedded in the total contract value of an agreement, such as, success rate of renewal periods, cancellations, and usage estimates. During the nine months ended September 30, 2021, we won contracts valued at
Performance Obligations
On September 30, 2021, the Company had approximately
EBITDA and Adjusted EBITDA
We calculate EBITDA as net loss before interest, taxes, depreciation, and amortization. We calculate 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, (v) losses associated with equity method investments, (vi) merger and acquisition transaction costs, and (vii) 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):
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Total comprehensive loss from continuing operations | $ | (9,610 | ) | $ | (6,667 | ) | $ | (19,771 | ) | $ | (10,860 | ) | ||||
Income taxes | 3 | 7 | 10 | 20 | ||||||||||||
Interest | 21 | 218 | 72 | 2,468 | ||||||||||||
Depreciation and amortization | 930 | 497 | 2,169 | 1,386 | ||||||||||||
EBITDA | $ | (8,656 | ) | $ | (5,945 | ) | $ | (17,520 | ) | $ | (6,986 | ) | ||||
Loss on extinguishment of debt | $ | - | $ | 3,081 | $ | - | $ | 3,281 | ||||||||
Share-based compensation | 694 | 202 | 2,600 | 539 | ||||||||||||
Gain on sale of business | - | - | - | (3,631 | ) | |||||||||||
Loss due to change in value of equity investments | - | - | 150 | - | ||||||||||||
One-time consulting fees | 1,249 | - | 2,025 | - | ||||||||||||
Adjusted EBITDA | $ | (6,713 | ) | $ | (2,662 | ) | $ | (12,745 | ) | $ | (6,797 | ) | ||||
Rekor has scheduled a conference call to discuss the 2021 third quarter results on Monday, November 15, 2021, at 4:30 P.M. (Eastern).
All interested parties may listen to a live webcast of the call at:
Online: https://www.webcaster4.com/Webcast/Page/2523/43087
By phone: North America: 888-506-0062 (toll free) or International: +1-973-528-0011; passcode: 949579
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 trusted global authority on intelligent infrastructure providing innovative solutions that drive the world to be safer, smarter, and more efficient. As a provider of comprehensive, continuous, and real-time roadway intelligence, Rekor leverages AI, machine learning and holistic data to support the intelligent infrastructure that is essential for smart mobility. With its disruptive technology the Company delivers integrated solutions, actionable insights, and predictions that increase roadway safety. To learn more please visit our website: https://rekor.ai.
Forward-Looking Statements
This press release includes 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. 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. Important factors that could have such a result include a decline or weakness in general economic conditions, an outbreak of hostilities, the ongoing pandemic and responses thereto related to COVID-19, a decline or volatility in the securities markets or regulatory changes or other adverse developments with respect to the markets for the Company's products and services or an inability to obtain adequate financing. 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.
Media Contact:
Robin Bectel
REQ For Rekor Systems, Inc.
rekor@req.co
Company Contact:
Rekor Systems, Inc.
Eyal Hen
Chief Financial Officer
Phone: +1 (443) 545-7260
ehen@rekor.ai
Investor Relations Contact:
Rekor Systems, Inc.
Bulent Ozcan
bozcan@rekor.ai
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 35,102 | $ | 20,595 | ||||
Restricted cash and cash equivalents | 1,063 | 412 | ||||||
Accounts receivable, net | 2,434 | 1,038 | ||||||
Inventory | 1,822 | 1,264 | ||||||
Note receivable, current portion | 340 | 340 | ||||||
Other current assets, net | 2,156 | 469 | ||||||
Current assets of discontinued operations | 1 | 2 | ||||||
Total current assets | 42,918 | 24,120 | ||||||
Long-term assets | ||||||||
Property and equipment, net | 8,614 | 1,047 | ||||||
Right-of-use lease assets, net | 6,256 | 426 | ||||||
Goodwill | 49,860 | 6,336 | ||||||
Intangible assets, net | 22,768 | 7,038 | ||||||
Investments in unconsolidated companies | - | 75 | ||||||
Note receivable, long-term | 1,105 | 1,360 | ||||||
SAFE investment | 1,000 | - | ||||||
Other long-term assets | 127 | - | ||||||
Total long-term assets | 89,730 | 16,282 | ||||||
Total assets | $ | 132,648 | $ | 40,402 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 6,492 | $ | 1,772 | ||||
Notes payable, current portion | 994 | - | ||||||
Loan payable, current portion | 911 | 517 | ||||||
Lease liability, short-term | 101 | 253 | ||||||
Contract liabilities | 2,738 | 1,126 | ||||||
Other current liabilities | 3,478 | 2,126 | ||||||
Current liabilities of discontinued operations | 129 | 124 | ||||||
Total current liabilities | 14,843 | 5,918 | ||||||
Long-term Liabilities | ||||||||
Notes payable, long-term | - | 980 | ||||||
Loan payable, long-term | 46 | 469 | ||||||
Lease liability, long-term | 9,994 | 188 | ||||||
Contract liabilities, long-term | 978 | 958 | ||||||
Deferred tax liability, long-term | 34 | 24 | ||||||
Long term liabilities of discontinued operations | - | 5 | ||||||
Total long-term liabilities | 11,052 | 2,624 | ||||||
Total liabilities | 25,895 | 8,542 | ||||||
Series A Cumulative Convertible Redeemable Preferred stock, | - | 6,669 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Common stock, | 4 | 3 | ||||||
Preferred stock, | - | - | ||||||
Series B Cumulative Convertible Preferred stock, 0.0001 par value; authorized: 240,861 shares authorized at September 30, 2021 and December 31, 2020; issued and outstanding; 0 and 240,861 shares issued and outstanding at September 30, 2021 and December 31, 2020 | - | - | ||||||
Treasury stock, 19,361 and 0 shares as of September 30, 2021 and December 31, 2020, respectively | (319 | ) | - | |||||
Additional paid-in capital | 169,944 | 68,238 | ||||||
Accumulated other comprehensive income | 6 | - | ||||||
Accumulated deficit | (62,882 | ) | (43,050 | ) | ||||
Total stockholders' equity | 106,753 | 25,191 | ||||||
Total liabilities and stockholders' equity | $ | 132,648 | $ | 40,402 | ||||
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 2,615 | $ | 2,126 | $ | 11,105 | $ | 6,399 | ||||||||
Cost of revenue, excluding depreciation and amortization | 1,402 | 979 | 4,705 | 2,745 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | 6,813 | 2,676 | 16,094 | 7,518 | ||||||||||||
Selling and marketing expenses | 1,125 | 560 | 3,044 | 1,356 | ||||||||||||
Research and development expenses | 2,000 | 781 | 4,741 | 2,143 | ||||||||||||
Depreciation and amortization | 930 | 497 | 2,169 | 1,386 | ||||||||||||
Operating expenses | 10,868 | 4,514 | 26,048 | 12,403 | ||||||||||||
Loss from operations | (9,655 | ) | (3,367 | ) | (19,648 | ) | (8,749 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Loss on extinguishment of debt | - | (3,081 | ) | - | (3,281 | ) | ||||||||||
Interest expense | (21 | ) | (218 | ) | (72 | ) | (2,468 | ) | ||||||||
Gain on the sale of business | - | - | - | 3,631 | ||||||||||||
Other income | 66 | 6 | 103 | 27 | ||||||||||||
Total other income (expense) | 45 | (3,293 | ) | 31 | (2,091 | ) | ||||||||||
Loss before income taxes | (9,610 | ) | (6,660 | ) | (19,617 | ) | (10,840 | ) | ||||||||
Income tax provision | (3 | ) | (7 | ) | (10 | ) | (20 | ) | ||||||||
Equity in loss of investee | - | - | (150 | ) | - | |||||||||||
Net loss from continuing operations | (9,613 | ) | (6,667 | ) | (19,777 | ) | (10,860 | ) | ||||||||
Net loss from discontinued operations | - | (2 | ) | (4 | ) | (215 | ) | |||||||||
Net loss | (9,613 | ) | (6,669 | ) | (19,781 | ) | (11,075 | ) | ||||||||
Comprehensive loss: | ||||||||||||||||
Net loss from continuing operations | (9,613 | ) | (6,667 | ) | (19,777 | ) | (10,860 | ) | ||||||||
Change in unrealized gain on short-term investments | 3 | - | 6 | - | ||||||||||||
Total comprehensive loss from continuing operations | (9,610 | ) | (6,667 | ) | (19,771 | ) | (10,860 | ) | ||||||||
Total comprehensive loss | $ | (9,610 | ) | $ | (6,669 | ) | $ | (19,775 | ) | $ | (11,075 | ) | ||||
Loss per common share from continuing operations - basic and diluted | (0.23 | ) | (0.26 | ) | (0.52 | ) | (0.52 | ) | ||||||||
Loss per common share discontinued operations - basic and diluted | 0.00 | (0.00 | ) | (0.00 | ) | (0.01 | ) | |||||||||
Loss per common share - basic and diluted | $ | (0.23 | ) | $ | (0.26 | ) | $ | (0.52 | ) | $ | (0.53 | ) | ||||
Weighted average shares outstanding | ||||||||||||||||
Basic and diluted | 41,938,863 | 26,907,069 | 38,357,167 | 22,781,807 | ||||||||||||
SOURCE: Rekor Systems, Inc.
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FAQ
What were Rekor's revenue results for Q3 2021?
How has Rekor's performance obligations changed?
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