EX-99.1
2
rekr_ex991.htm
PRESS RELEASE DATED NOVEMBER 9, 2020
rekr_ex991
Exhibit 99.1
Rekor Systems, Inc. Reports Third Quarter of 2020 Financial
Results
Highlights:
●
Third quarter 2020 gross revenue increased 40% to $2.1 million as
compared to $1.5 million in the third quarter of 2019
●
Year-to-date revenue increased 60% to $6.4 million as compared to
$4.0 million in the prior year
●
Retired the remaining balance of the Company’s high interest
debt obligations
●
Raised $29.9 million in cash as part the Company’s
At-the-Market Sales Agreement year-to-date
COLUMBIA, MD – November 9, 2020 - Rekor Systems,
Inc,
(REKR)
(“Rekor”), a Maryland-based company providing real-time
roadway intelligence through AI-driven decisions,
today reported its unaudited
financial results for the third quarter of
2020.
“Our results in the third quarter have demonstrated a
remarkably high level of growth on a year-over-year basis,”
said Eyal Hen, Chief Financial Officer, Rekor. “We believe
this is a testament to the strategic realignment of the Company as
it has intensified its focus on the longer-term drivers of demand
from our commercial and government segments. Our sale of non-core
assets in previous quarters positions us as a 100% technology
focused organization with our eCommerce platform as a key channel.
Rekor's go-to-market strategy intends to reach a global customer
base with frictionless transactions and gives us great confidence
moving forward.”
“We are pleased with our results for the third quarter, which
demonstrate substantial ongoing year-over-year improvement across
our markets, and margin expansion for each of our product and
service areas,” said Robert A. Berman, President and CEO,
Rekor. “These results are further validated by the
announcement earlier today that the State of Oklahoma will
integrate the Company’s Rekor One™ platform across the
state to provide vehicle information associated with uninsured
motorists as part of the state’s Uninsured Vehicle
Enforcement Diversion (UVED) Program. Our unique ability to address
this important concern is a direct result of years of farsighted
engineering and the strength of our commitment to provide customers
with cost effective solutions that make intelligent use of the most
advanced technologies available.”
Since January 2020, Rekor has been selected by various resellers
and formed partnerships with various companies, including
Mastercard® and White Castle®, to use an array of AI
based technologies in retail, public safety, and parking
operations. The Company has used intensive machine learning for
over three years in developing its current suite of differentiated
product and service offerings and has recently filed for six
patents based on these products and services.
In July of 2020, the Company completed an exchange offer for 77% of
its 2019 Promissory Notes and paid off the remainder of this debt
with cash in September of 2020, relieving the company of any
significant debt obligations.
In November of 2020, Rekor and Vigilant Solutions, LLC agreed to
resolve the district court litigation and intellectual property
rights action between the parties pursuant to a confidential
settlement agreement. Rekor will have no material effect from its
obligations under the agreement.
Financial Summary
Third Quarter Results
Revenues
Revenue for the three months ended September 30, 2020 increased to
$2.1 million, compared to $1.5 million for the three months ended
September 30, 2019. This increase was a result of additional
products the Company offered during the period as it continued
expanding its technology offerings. The increase was also
attributable in part to substantial completion of the
implementation phase building infrastructure in connection with a
large software and hardware contract in Florida, which generated
up-front revenue, and to revenues earned through our eCommerce
platform. Revenues earned from the eCommerce platform organically
increased, $68,000 or 41%, to $235,000 from $167,000 for the three
months ended September 30, 2019.
Revenue for the nine months ended September 30, 2020 increased to
$6.4 million, compared to $4.0 million for the nine months ended
September 30, 2019. This increase was primarily attributable to the
expanded technology offerings and large contracts stated above, as
well as the fact that operational results from our OpenALPR
acquisition have only been included in our operations since March
2019. During the nine months ended September 30, 2020, revenue
attributable to OpenALPR was recognized for the full nine-month
period compared to only a six and half a month period in the
corresponding period in 2019. Additionally, part of the growth in
revenue for the nine months ended September 30, 2020 was
attributable to revenues earned through our eCommerce platform
which organically increased, $341,000 or 122%, to $621,000 from
$280,000 for the nine months ended September 30, 2019.
Cost of Revenue, Gross Profit and Gross Margin
Gross profit for the three months ended September 30, 2020 and 2019
remained consistent at $1.1 million. The consistent gross profit
was primarily attributable to building infrastructure in connection
with large software and hardware contracts for the corresponding
period.
Gross profit for the nine months ended September 30, 2020 increased
to $3.6 million, compared to $2.8 million the nine months ended
September 30, 2019. The increase in gross profit was primarily
attributable to the increase in revenue for the corresponding
period.
For the three and nine months ended September 30, 2020 the gross
margin decreased to 54% and 57%, respectively, which was primarily
attributable to building infrastructure in connection with large
software and hardware contracts. These contracts included
construction and assembly of fixtures for our vehicle recognition
cameras and the infrastructure necessary to support database and
communications operations on a shared basis with other
municipalities. As this early stage, the cost of building the
network is more costly than during later stages, and the initial
margins for such early stage projects are lower than expected than
for future operations that will be able to use the same
infrastructure.
Loss from Operations
Operating loss for the three months ended September 30, 2020
increased to $3.4 million, compared to $2.5 million in the same
period in 2019 and operating loss for the nine months ended
September 30, 2020, increased to $8.7 million, compared to $5.3
million in the same period in 2019. The increase in the operating
loss throughout the year is attributable mainly to the increased
expenses in connection with the implementation of our go-to-market
plan to develop and promote our technology products and services.
Additionally, during the last nine months the Company brought on
additional executives to support the Company’s growth plan
and solidify the corporate structure.
Performance Obligations
As of September 30, 2020, we had approximately $16,459,000 of
licensing and subscription contracts that were closed prior to
September 30, 2020 but have a contractual subscription period
beyond September 30, 2020. These subscription contracts generally
cover a term of one to five years, in which the Company will
recognize revenue ratably over the contract term. We currently
expect to recognize approximately 27% of this amount over the
succeeding twelve months, and the remainder is expected to be
recognized over the following four years. On occasion our customers
will prepay the full contract or a substantial portion of the
contract. Amounts related to the prepayment of the subscription
contract for a service period that is not yet met are recorded as
part of our contract liabilities balance.
The table below reflects the 69% growth in the unaudited remaining
contract value of licensing and subscription contracts from
September 30, 2019 through September 30, 2020 (dollars in
thousands):
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, 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):
Three Months ended September 30,
Nine Months ended September 30,
2020
2019
2020
2019
Net
loss
$(6,667)
$(3,528)
$(10,860)
$(9,036)
Income
taxes
7
12
20
35
Interest
218
1,182
2,468
2,724
Depreciation
and amortization
497
418
1,386
957
EBITDA
$(5,945)
$(1,916)
$(6,986)
$(5,320)
Loss
on extinguishment of debt
$3,081
$-
$3,281
$1,113
Share-based
compensation
202
76
539
314
Gain
on sale of business
-
-
(3,631)
-
Loss
on sale of Secure Education
-
3
-
3
Adjusted
EBITDA
$(2,662)
$(1,837)
$(6,797)
$(3,890)
Rekor has scheduled a conference call to discuss the third quarter
results on Monday, November 9, 2020 at 4:00 P.M.
(Eastern).
All interested parties may listen to a live webcast of the call
at:
By phone: Toll Free: 877-407-8033 or International:
201-689-8033
An archived webcast will also be available to replay this
conference call directly from the Company’s website under
Investors, Events & Presentations. Slides that accompany the
conference call will be available on the Company’s
website.
About Rekor Systems, Inc.
Rekor
(Nasdaq: REKR) is a Maryland-based company providing real-time
roadway intelligence through AI-driven decisions. Rekor provides
commercial and government customers with actionable, real-time
vehicle recognition data to enable informed decisions to be made
faster and provide better outcomes. Rekor is transforming
industries like Public Safety, Customer Experience and Smart Cities
in more than 70 countries across the globe with smarter, quicker,
cost-competitive vehicle recognition solutions for security,
revenue discovery and recovery, public safety, electronic toll
collection, brand loyalty, parking operations, logistics, and
traffic management. We use the power of artificial intelligence to
analyze video streams and transform them into AI-driven decisions
by our clients. Our machine learning software can turn most IP
cameras into highly accurate and affordable vehicle recognition
devices used to help protect lives, increase brand loyalty and
enhance operations and logistics, without the need to install
expensive new infrastructure. We make what was once considered
impossible, possible. 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.
Company Contact:
Rekor Systems, Inc.
Eyal Hen
Chief Financial Officer
Phone: +1 (443) 545-7260
ehen@rekor.ai
Investor Relations
Contact:
Rekor Systems,
Inc.
Charles Degliomini
ir@rekor.ai
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2020
December 31, 2019
ASSETS
Current Assets
Cash
and cash equivalents
$24,154
$1,075
Restricted
cash and cash equivalents
573
461
Accounts
receivable, net
966
776
Inventory
591
302
Note
receivable, current portion
255
-
Other
current assets, net
361
175
Current
assets of discontinued operations
3
7,441
Total current assets
26,903
10,230
Long-term Assets
Property
and equipment, net
554
442
Right-of-use
lease assets, net
276
283
Goodwill
6,336
6,336
Intangible
assets, net
7,429
8,244
Investments
in unconsolidated companies
75
-
Note
receivable, long-term
1,445
-
Long-term
assets of discontinued operations
-
3,457
Total long-term assets
16,115
18,762
Total assets
$43,018
$28,992
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts
payable and accrued expenses
$3,834
$3,678
Loan
payable, current portion
370
-
Lease
liability, short-term
232
148
Contract
liabilities
1,234
749
Current
liabilities of discontinued operations
114
5,757
Total current liabilities
5,784
10,332
Long-term Liabilities
Notes
payable, long-term
976
20,409
Loan
payable, long-term
504
-
Lease
liability, long-term
60
161
Contract
liabilities, long-term
936
775
Other
long-term liabilities
10
10
Long
term liabilities of discontinued operations
14
536
Total long-term liabilities
2,500
21,891
Total liabilities
8,284
32,223
Series
A Cumulative Convertible Redeemable Preferred stock, $0.0001 par
value, 505,000 shares authorized and 502,327 shares issued and
outstanding as of September 30, 2020 and December 31, 2019,
respectively
6,442
5,804
Commitments and Contingencies
Stockholders' Equity (Deficit)
Common stock,
$0.0001 par value, 100,000,000 and 30,000,000 shares authorized,
32,911,854 and 21,595,653 shares issued and outstanding as of
September 30, 2020 and December 31, 2019, respectively
3
2
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 September 30, 2020 and December 31, 2019,
respectively
-
-
Series
B Cumulative Convertible Preferred stock, $0.0001 par value,
240,861 shares authorized, issued and outstanding as of September
30, 2020 and December 31, 2019, respectively
-
-
Additional
paid-in capital
68,117
19,371
Accumulated
deficit
(39,828)
(28,408)
Total stockholders’ equity (deficit)
28,292
(9,035)
Total liabilities and stockholders’ equity
(deficit)
$43,018
$28,992
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months ended September 30,
Nine Months ended September 30,
2020
2019
2020
2019
Revenue
$2,126
$1,536
$6,399
$3,962
Cost
of revenue
984
390
2,753
1,152
Gross
profit
1,142
1,146
3,646
2,810
Operating
expenses:
General
and administrative expenses
3,168
2,600
8,896
6,259
Selling
and marketing expenses
560
587
1,356
1,081
Research
and development expenses
781
450
2,143
757
Operating
expenses
4,509
3,637
12,395
8,097
Loss
from operations
(3,367)
(2,491)
(8,749)
(5,287)
Other
income (expense):
Loss
on extinguishment of debt
(3,081)
-
(3,281)
(1,113)
Interest
expense
(218)
(1,182)
(2,468)
(2,724)
Other
income
6
157
27
123
Gain
on sale of business
-
-
3,631
-
Total
other expense
(3,293)
(1,025)
(2,091)
(3,714)
Loss
before income taxes
(6,660)
(3,516)
(10,840)
(9,001)
Income
tax provision
(7)
(12)
(20)
(35)
Net
loss from continuing operations
$(6,667)
$(3,528)
$(10,860)
$(9,036)
Net
loss from discontinued operations
(2)
(100)
(215)
(2,392)
Net
loss
$(6,669)
$(3,628)
$(11,075)
$(11,428)
Loss
per common share from continuing operations - basic and
diluted
(0.26)
(0.19)
(0.52)
(0.51)
Loss
per common share discontinued operations - basic and
diluted
