Rekor Systems, Inc. (REKR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. conference call. My name is Matt, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. Before we get started, I'd like to read you the company's abbreviated safe harbor statement. I'd like to remind you that statements made on this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, products and product releases, partnerships and any other statements that may be construed as a prediction of future performance or events are forward-looking statements. Such statements can involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimer in our earnings release. You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC. Non-GAAP results will also be discussed on the call. The company believes that the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. With that, I'll hand it over to Mr. Robert Berman, President and CEO of Rekor Systems.

Thank you, Matt, and good afternoon, everyone, and welcome. Thank you for joining us on such short notice today. And during today's presentation, we'll be referring to slides that we have just posted on our investor website, and I guess some of you are following along here. It's been a busy period for all of us. We are very pleased to announce that Rekor Systems has entered into a definitive agreement to acquire Waycare Technologies, Ltd., and we are delighted to welcome the entire Waycare team to our Rekor family. Rekor's vision has been to provide a platform for intelligent roadways, smart cities and as we like to refer to an intelligent infrastructure. Over 2 years ago, we introduced the concept of Rekor One to the investment community. Although we have had the opportunity to deploy our technology with many counterparties and very exciting opportunities, some of which we are still working on today. None of these have hindered our commercialization of Rekor One platform. And it sits along with the company's future that we're going to discuss today. So on Slide 4, you see Rekor One, it's a single system with multiple missions driving the world to be smarter, safer and more efficient. This modular platform provides intelligence for safety and incident management, traffic analytics, sustainability, green initiatives with multiple commercial and use cases. In the next slide, we show the secular tailwinds that we think will drive significant growth in a rapidly expanding sector. Engineers and infrastructure experts have been sounding the alarm for a renewed national focus on overhauling our country's infrastructure and the same can be said about other parts of the world. Rekor is disrupting the intelligent transportation sector, and this legacy industry has seen little change in decades. There are 3 pillars needed to be the leader in this emerging sector, including having an expanded geographic footprint, which means over time, real estate equals revenue. Having both holistic and real-time data, coupled with data from third-party sources, such as connected vehicles and crowdsourcing entities. And last, AI-driven software solutions. Next slide. So Waycare is a provider of cloud-based AI traffic and incident management solutions, which complement the Rekor One platform. Slide 8 provides a company snapshot of Waycare. Like Rekor, Waycare is a young company. It was founded in 2016 by Noam Maital and his partners, with the vision of utilizing technology to prevent fatalities due to traffic accidents. Waycare has constantly innovated to benefit the public as a whole by empowering traffic management centers, first responders and roadway maintenance to collaborate seamlessly on one platform and allowing them to better manage resources to be more impactful in their work. The team has grown to over 40 members, which include talented engineers, data scientists and management. Next slide. We Care platform is a cross-agency solution that serves various entities by providing interoperability platform modules. The user interface is map-based and easy to use. These various modules within the Waycare platform allow any traffic control center interact directly with first responders in the field as well as roadway maintenance teams. As you will see in the next slide, this has had a measurable positive result in incident identification and response time. We see from Slide 10 that Waycare that has successfully quantified the positive impacts of its platform. As you can see, these examples include a 9-minute reduction time in incident identification and an 18% reduction in primary crashes on monitor roads. And most importantly, funding is typically tied to the ability to demonstrate successful performance with the company's solutions. On Slide 10 (sic) [Slide 11] you can see the success that Waycare has had in the bottom based on its qualified results. Here, a $30,000 pilot program commenced in 2018 has grown to a $5.3 million multiyear contract. Both Rekor and Waycare are pursuing a land-and-expand strategy to grow our geographic footprint and monetize customers over time. Again, footprint means revenue. As you can see from this slide, WeCare has been very successful in converting its pilot programs into long-term contracts with virtually 0 churn by going from pilot to trusted partner. On the following slides, we'll explore the strategic rationale in more detail for this transaction. On Slide 14, we explained the foundation of the Rekor One platform previously as 3 pillars. Waycare fills all these buckets by expanding the geographic footprint, providing data and intelligence software. As you can see here, Waycare has been successful in rapidly expanding its footprint across the U.S. And last, Waycare's diverse data partnerships bring third-party source data, including connected vehicles through partnerships with Volvo and Wejo as well as crowdsourced information from Google's Waze. And as you can imagine, none of these agreements with these data partners happened overnight. Our Rekor One platform was built to generate a holistic view of the roadways, and now we can feed more data into our systems by leveraging Waycare's relationships. And conversely, Waycare's software solutions will be enhanced by Rekor's proprietary real-time data. Moving on to Slide 17. Here we compare our combined suite of solutions versus the legacy industry solutions. And as you can see, our technology is setting a new standard for the intelligent transportation sector. Rekor One is a comprehensive modular platform. And as you can see from this slide, it is a single system solving multiple missions for various end users, which will be enhanced by the addition of Waycare. Now just in closing, Waycare -- phenomenal step for Rekor. Perfect fit transaction value of $61 million, the majority was cash. Rekor has plenty of cash on hand to fund future growth, and we're going to continue to define the intelligent infrastructure sector for the foreseeable future. And given that we're releasing our earnings next Monday, it is best that we postpone the Q&A session on this call, and we'll take questions after presenting our second quarter results. We remind you that there is a video embedded in the press release we put out this morning premarket, which further explains the Rekor Waycare combination from a technology perspective. And we appreciate all your support and are excited about the future. And again, thanks for your time.