REKR - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. Conference Call. My name is Alicia, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. Before we start, I want to read you the company's abbreviated Safe Harbor statement. I want to remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, product 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 actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimers 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 the presentation of non-GAAP information, provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. I now would like to turn the presentation over to Mr. Robert Berman, CEO and Chair of Rekor Systems Board of Directors.

Hi, everyone. Thank you for joining us. We really appreciate your interest in us and the support so many of you have given us, over - the past year. Before we begin our discussion, I just want to mention a recent change we made in the scheduled date for our planned Investor Day. Originally, we announced that our investor conference will coincide with the date of our Annual Meeting, because we thought it would be convenient to take advantage of the facilities that we have reserved, for the Annual Meeting at NASDAQ's headquarters in New York. With a number of things that are moving forward at Rekor, we thought the timing for the Investor Day should be moved back a bit. As a result of the day change, we've decided to include some of the narrative on the investment thesis for Rekor in today's presentation. Before I turn the call over to Eyal, I'd like to take some time to tell you why I believe so strongly in what we're doing and in Rekor itself. For some of you, things may appear as if they aren't happening fast enough. Let me tell you, when you consider all the demands of working with government, progress is happening and at lightning speed. Having spent much of my career in businesses regulated by both state and federal governmental agencies, I can say that we've been well received and making progress at a rate that is much faster than one could expect and certainly nothing like I've ever experienced. I wish I could share all of what we're working towards with you. This just is impossible for many reasons, from disclosure rules, procurement requirements and frankly, our need to be careful to maintain our first mover status, and limit the efforts of our competitors to copy us, or pretend to be us. But there is a sea change coming, driven by a technology refresh that's needed in a massive global industry, an industry that has had its last tech refresh over 30 years ago. As you'll hear from David today, there have been many technological advances that gave Rekor, the ability to build the platforms we have. Our tech is best-in-breed and adoption is happening. The first wave of this refresh is on the horizon, and we can see it. I can say that we're in serious discussions and negotiations with multiple governmental agencies, and in many cases, we find that we are alone at the table. Our 2023 results are pretty damn good for a young company, judiciously managing its capitalization and accomplishing all that we have in such a short time frame. The first wave has already hit for sure, but I firmly believe there is tsunami on the horizon. Many of you call and reach out and offer helpful suggestions, or to suggest the company just does not communicate as much as it should. I'm sorry, some of you feel this way - and think that things just haven't happened fast enough. What I'm confident that in 2024 is going to be a year where Rekor breaks out and I hope you all get to enjoy the benefit of what's ahead. So let me now turn the call over to Eyal.

Thank you, Robert. Robert will be back shortly with our President and COO, David Desharnais, to give you some insight into the future. But first, I want to discuss Rekor Systems' year-end results for the period ending December 31, 2023. 2023 has been a landmark year for Rekor, marked by outstanding financial performance and strategic growth. We are thrilled to report another significant uplift in our top line, with a 75% increase in annual revenue, and a 21 rise over - and 21% rise over the preceding quarter revenue. The fourth quarter was particularly notable, with revenue reaching $11.1 million. This represents a substantial increase over both the prior year and the preceding quarters. Our total revenue for the year stood at $34.9 million, even though we are also focused on reducing our operational cash usage. Our adjusted gross margin improved markedly to 59.8%, showcasing the impact of our technological advancements and operational efficiencies, as well as the synergies achieved as we integrated the acquisition of STS. These improvements enabled us to significantly reduce our operating loss from $50.9 million in 2022 without goodwill impairment to $42.1 million in 2023. In addition, we saw a continued reduction of losses in adjusted EBITDA throughout the year, a testament to our sustained growth momentum and operational discipline. The year was highlighted by executing contracts worth of $49.1 million, a substantial increase from the previous year, with our remaining performance obligation at year-end standing at $26.4 million, ensuring a continued revenue stream. 2023 was also characterized by successful equity and debt transactions that enhance our liquidity. In January 2023, we completed a significant transaction involving senior secured notes of $12.5 million, led by our CEO, Robert Berman, alongside other new and existing investors. This notes were fully redeemed in February 2024, with part of the redemption price paid in common stock, at a conversion rate of $2.50 per share. In March 2023, we also completed a registered direct offering for $10 million. In July, a warrant holder exercised warrants, resulting in approximately $11 million of cash proceeds. In December 2023, we also closed on the sale of $15 million of our Series A prime revenue-sharing notes. This unique structure develops a financing mechanism for us that, unlocks the value of the strong revenue stream that our contracts provide, for scaling our business. We expect to issue additional series of notes under the same structure when required, as we sign more long-term contracts that require capital expenditure investments ahead of the motivation. We used a portion of the cash proceeds from the above, to acquire all traffic data or ATD in January 2024. In February 2024, we also completed a follow-on offering with William Blair, for a net amount of $26.5 million. We used some of the cash from the offering, to redeem the senior secured notes. The strategic financial management contributed to a cash balance of $15.4 million as of December 31, 2023, up from $1.9 million at the end of the previous year. Our working capital position also improved substantially, demonstrating our enhanced financial health and operational efficiency. In closing, 2023 was a year of dynamic growth, strategic achievements and solid financial health for Rekor, as we've built for the future of digital infrastructure and roadway intelligence. Looking forward, we continue to be confident in the potential of our technology development, strategic acquisitions and the continued support of our investors. Thank you for that. With the overview for 2023, I'm pleased to now give the floor to David for his remarks on our path forward in 2024. David?

Thank you, Eyal. Good afternoon, and thank you for joining us today. Rekor achieved many critical milestones in 2023, including several new major products and platforms launched to market, multiple new technology patents filed and awarded, a 3x expansion in our production and distribution capacity, and a 30% increase in new customers. As Eyal mentioned, this led to a 75% growth in revenue year-over-year, improved margins and a significant reduction in operating expenses. Also, in terms of customer acquisition costs versus long-term value, our CAC-to-LTV ratio brings in at an incredible 7.7 times, more than twice that of which is considered to be a well-run technology company. Despite aggressive moves from well-funded public and private legacy players in the market, Rekor has continued to stand out as the technology leader in the industry for each of our business lines in 2023. The fact is we consistently outperform all others in the industry when it comes to system capability, performance and accuracy on any road and in any mode. Now let me tell you why the conditions are excellent for continued and exceptional growth for Rekor in 2024 and beyond. We are at the nexus of two industry-wide transitionings happening right now. The first is a refresh of physical infrastructure, with digital infrastructure that is happening right now. A simple visit to the U.S. Department of Transportation website will confirm that after multiple decades of underinvestment, U.S. Roadways and Infrastructure are in bad shape, rated a C minus on the official U.S. DOT scorecard. This scorecard also calls out that 65% of existing roadways and 45% of bridges, are in a state of serious disrepair and highlights the negative impact that this is having on citizen safety, personal financial losses, and the competitiveness of the U.S. national economy. The roadway infrastructure isn't just about concrete, asphalt and steel. It also includes all the equipment, and tools that we all depend on to identify and count vehicles, shape and manage traffic, monitor, respond to incidents, and operate and plan roadways and communities. Every year, state DOTs must perform millions of federally mandated traffic studies in order to secure funding for roadway operations, maintenance, planning and projects. These studies are done using a combination of the multiple millions, of rubber tubes you see running across streets, antiquated CCTV cameras, inductive loops, piezoelectric sensors and radar devices that you see embedded in, on and around our roadways. All of this equipment was installed over the past 70 years in successive and massive waves of technology refresh every 15 to 20 years. The first wave started in the 1950s and '60s, with the advent of pneumatic tubes. This was followed by a second wave in the '70s and '80s with in-ground devices like loops and piezos and more. The most recent and massive refresh of technology for roadways, happened in the mid-90s, approximately 30 years ago now, with the introduction of side-firing radar devices that you can see today hanging from poles on the highway, at approximately every quarter mile or so. Due to being 30-year-old technology, these radar systems are known to have high failure rates and are raising safety concerns for drivers with multiple radar systems that are built into most cars today. And since these devices are yesterday's tech, they're not able to be updated, and can't fully capture and report on the vehicle classes, counts and speeds now required by the U.S. Department of Transportation and Federal Highways Administration. Like the previous waves of technology, these radar systems are analog and disconnected. They are no longer useful, practical or safe and are far beyond obsolescence. Between all three previous waves of technology refresh, there are literally millions of these obsolete sensors and devices littered across U.S. roadways today, and it's estimated that up to two-thirds of them don't even work at all. As a result, public safety and transportation agencies that are responsible to deliver safer, smarter, greener roadways and communities are being deprived of necessary and accurate data, they need to do their jobs effectively. They're eager for new tools, data and insights, they need to put everything in plain sight and in real time. As the rest of the world modernizes around them, public safety, urban mobility, and transportation management agencies, are struggling to keep up with ever increasing demand and the expectations of their job. You've likely experienced this yourself. Even with new technologies in our cars and smartphones, we face increasing challenges getting from point A to B predictably. Our news is filled with reports about congested roads, deteriorating road conditions, collapsing bridges, and the concerning fact that vehicles, are the primary sources of greenhouse gas emissions now reaching unprecedented levels, increasing a deepening sustainability crisis. And sadly, roadway collisions continue to be the leading cause of death among children and adults under 30. All of this and more can be faster improved with safer, smarter and greener roadway infrastructure. Roadway infrastructure is the backbone of public safety, transportation and competitive and smooth running economy. Currently, the U.S. is ranked number 13 in the world for infrastructure resiliency, and following further behind. Addressing this gap with urgency has become a categorical imperative for the federal government, and this has ticked off a whole new investment cycle and wave of technology refresh to build the next $1 trillion of infrastructure. In addition to the approximate $250 billion that is already dedicated to roadway infrastructure every year, and funded by the motor fuel excise taxes, the new bipartisan infrastructure law has authorized an additional $326 billion, for modernizing and digitizing roadways, another $15 billion for the electrification of transportation and tens of billions more for improving public safety and sustainability. This once-in-a-generation level of additional funding is expected to top $1.2 trillion. We expect approximately $350 billion of that new investment applies to the areas that Rekor technology serves. So as the first major trend, the transition to digital infrastructure is already well underway, and it is industry-wide. This brings me to the second trend. The increasing adoption of AI and other new technologies in what is another industry-wide transition. Simply put, the pace at which our customers are gaining confidence in embracing artificial intelligence, machine learning, computer vision, edge processing, 5G, cloud and even now generative AI is accelerating as they move along the S-curve of technology adoption. These are all areas of strength for Rekor. Our software, state-of-the-art NVIDIA GPU-based hardware systems, ability to fuse together and process trillions of data points of mobility data, sourced from key partners in the ecosystem, and our multimodal composite AI solution stack, extend seamlessly across edge IoT, cloud and on-premise environments. This means our customers can easily deploy Rekor within their existing workflows, data sets and infrastructure. We've taken a deliberate approach of radical simplification here, making the complex simple so our customers can gain immediate and obvious value. With multiple patents filed and granted already and others in the works, being the leader in digital infrastructure and roadway intelligence, is what we've been pioneering for some time now and it's working. The combination of these two industry-wide trends is opening up a whole new world of high-value applications that will translate into a very significant business over the time. As our 2023 results demonstrate, we're off to a strong start. Looking ahead in 2024, we expect to more strongly verticalize our go-to-market activities deliver margin improvement and cost leverage, as we drive continuous improvements in productivity and efficiency, and grow our expertise in managing product mix and pricing. All new products we launch this year, will be built on our existing platforms. So our investment curve can be less steep, and the time to profitability should reduce. As our customer base expands, we'll continue to build out our sales, technical support, production and field distribution infrastructure, to ensure that we can meet and exceed customer demand across the U.S. with improvements in technology, automation and roadside experience and expertise. We're also continuing to build our system capacity, partnering closely with global technology leaders, such as NVIDIA and AWS to prepare capacity for multibillion dollar scale, all while keeping our current customers and systems operating at the highest levels of performance on a 24/7 basis. We'll also continue to enhance the scope of our current product and service offerings. For example, monitoring of greenhouse gas emissions from vehicles, the largest contributor to greenhouse gas of any sort, is the most recent addition to our product and service offerings. We're now working with states and federal government so that the states will be able to prove, through accurate vehicle emission data on the roadways that they can clear the air, along with multiple other studies they must perform. We believe we stand alone in our ability to deliver this. In summary, we remain confident in our ability to execute on our plan for 2024, and are well positioned for another year of outstanding growth. I look forward to providing you continued updates and further details on our progress throughout the year ahead. At this point, I will turn the call over to Robert Berman, CEO and Chairman of Rekor for final remarks and Q&A. Robert?

Thank you, David. To sum things up, I want to go back to my opening remarks. This is a once in a lifetime opportunity, to participate in a massive technology refresh. It's impossible to control the timing of this day-by-day or even month-by-month. I'm certain, however, this will be as clear as it can be this year. Patience is rewarded along with hard work. We'll keep doing this hard work, and hope you'll continue your support and find the patience, to help us sail the ship into the harbor. I would like to add that management, has received nearly a dozen requests to have calls, with individual investors after this call. This is just not practical for us to do, and we'd greatly appreciate that you ask your questions here and now, and we'll do our best to answer them for the benefit of all of our shareholders. Thank you. Hello?

Operator?

Operator, do we have any questions?

We have some questions in the queue…

I apologize. Can you hear me now?

Yes, we can.

Yes, we can hear you. This is Robert.

I apologize. I apologize. I was prompting for Q&A, but I guess my microphone wasn't working. I apologize for the technical difficulties.

Let's get to it.

Let's get to it. And just what questions we have.

Our first question comes from the line of Louie DiPalma with William Blair. Please proceed with your question.

Good afternoon, Robert, Eyal, and David.

Hi, how are you?

Hi Robert, how are you?

Robert, you reported a 124% increase in contracts and David described how transportation modernization appears to be a major federal priority. Are you observing an acceleration in projects funded by the $550 billion IIJA Infrastructure Bill? And are we still in the early innings here of this modernization project?

Yes. David, let me take that first, and then David can follow-up. But I think there's two pieces here. The first is the program money from what the government requires, state, cities and other municipalities to do statewide, right? That's program money. And what we're seeing is an increase in the interest in using our technology to do that, as opposed to the legacy technology. And David, you can take the second piece with respect of new money…

Yes, if you can hear me, okay. Yes, we are starting - to see money freed up as a result of distributions from the IIJA, which is otherwise known as the Bipartisan Infrastructure Law, or BIL. It's about - I would say, about $300 billion has been deployed over 2022 - late 2022 and also coming into 2023. And so, there's a lot of - I'd say, a lot more to go, but the funds are already being released, and we are seeing that states are starting to reap the benefits of that freed up injection of capital.

Thanks David.

Can I just add to that, that there's - just for our shareholders on the call here, in the fall of 2023, the administration released its rules on measuring greenhouse gases and setting targets for 2030. And those rules went into effect in early January. I think January 6, or - if I'm not mistaken, it was either 6th or 8th and have to set their targets by '24, and they have to then show, how they measure those and get to where their targets are by 2030. And I think some of that may be related to the new money, but this is all new, it is very new, right? I mean it's just the beginning of the year, and it just set these rules, and they're just starting to operate on them now.

Great. And Robert and David, you referenced how highways and bridges are in desperate need of improvements. And as it relates to the traffic measurement over the past many decades antiquated and now obsolete radar and tube systems have been installed. What is the total market opportunity, to replace that outdated technologies with your like analytics software sensors?

David, do you want to take a shot at that or...

Yes. The states - every state has existing spend on roadside devices that they had deployed for many years, as I mentioned. These are going through a refresh. A state could have anywhere from a few hundred, to a few thousand. State by California, obviously, much larger, have a lot more devices there. As they are filling out, I'll give you an example, like a piezo sensor or an inductive loop. There's literally - I would say, hundreds and hundreds of thousands of these that are throughout the United States. And they often are ground up as the road gets repaved or moved or anything like that and/or they just simply fail, because they're a mechanical device that. And second, you put it in the ground, it starts to deteriorate as a mechanical moving thing. So, these will inevitably be replaced as they're filling out, and a lot of them are already filling out. And so, the size of opportunity depends on the types of devices, but it's literally in the billions of dollars of range, and they are long-term contracts. I mean, some of these devices have been installed for 30 years, 40 years, 50 years. And so, the opportunity to kind of get in, be able to deliver unique value based on our approach using AI will serve us well. Because as - what's different about AI is when it's out there, rather than deteriorate, it actually starts to improve every single time, it sees a new situation, it learns and continues to get better and stronger. So, we believe that on one dimension, just in a sheer replacement of technology, there's an enormous opportunity there. As partially funded from existing spend that $250 billion of existing spend. And also partially funded by the new injection of capital from the IIJA, or the Bipartisan Infrastructure Law. The thing that does not comprehend, is that the way that we approach the market and our technology is that with a single device, we have the ability to monetize multiple dimensions. As Robert mentioned things like greenhouse gas emissions, there's really nothing out there today on the road side other than like hundreds of thousands of dollars that you would spend for a greenhouse gas super right? There's no way to really do that today. And our technology actually does it today and on the same device that we do classification count and speed and other studies with. And so, our ability to monetize on a roadside unit that would be replacing it legacy tech and to continue to future proof that and expand upon that footprint is large and expanding.

Thanks. And Robert and David, you described the opportunity in the billions. Eyal, you grew revenue 71% year-over-year in the fourth quarter. And the team discussed, how new products will be built on to your existing platform. So with this large revenue opportunity and revenue growing so fast, how are you balancing revenue growth with margin expansion?

Yes, I'll take it. So basically, our revenue margins, we anticipate with the technologies, we penetrate more and more states and DOTs, with our technology anticipate the margin actually to go up as the margins on the technology, is higher than the loops and peizos that David described. So, we do anticipate as we increase revenues and is going up and the mix of revenues leaning more toward our technology that these margins will go up over time. In the short to mid-term period, we will see this improvement in margins, as we put more and more our IoT node devices roadsides. Does that answers the question?

Yes.

Let me just add to that. Let's be clear, right? So what we're doing is we're putting IoT nodes roadside. And it's a single system that can have multiple missions, right? So when we are asked to put a system in to do what's mandated like count class and speed and we install it, it's out there, it's done. If the state or the municipality decides they want to do greenhouse gas emissions, we turn it on. If they decide that they wanted to weigh a motion or a tonnage or origin destination, we turn it on. We don't have to go back out and touch the device, okay? It's out there, it's connected, it's a singular device, it's future proof. And as David mentioned earlier, the legacy technology that we're talking about, which hasn't been refreshed in the last time 30 years ago, okay. We don't have to go back out to the road and reinstall it and do anything. It's there. We just turn on additional functionality and it serves the purpose for their needs. So, the margins go up, because you're getting additional fees for our same device, just providing additional functionality.

Thanks, Robert. That's really helpful and I think that helps everybody on the call understand the fixed price, the mostly fixed price nature of your product suite.

Thank you.

Thank you. Our next question comes from the line of Michael Latimore with Northland Capital Markets. Please proceed with your question.

Great. Thanks. Yes and congrats again on the strong organic growth in the quarter. In terms of the bookings, can you just maybe give a little more detail there? Maybe what percent of the bookings are in this Discover product area? And then for those Discover wins, are they most expansions, new states? Just a little more color on bookings would be great?

Michael, maybe I'll let Eyal take a piece of this. But before we do, I just want to make it clear that, as we've always said, we started within our footprint, which was the acquisition of STS, and their relationships in the Southern states. And since then, we've added states outside of their footprint where we have no relationship whatsoever. So, we're starting to see adoption of this technology, by brand-new customers that are new to Rekor and we're new to them. So I think it's fair to say that this is new. It's - and it's not just our technology that's new. It's the whole concept of AI connected devices, and all these other things going on out there that customers have to get custom with, used to and whatnot. And it's just all - it's all happening and it's happening right now. So Eyal, do you want to answer from there?

Yes, yes. We talked about it before as well, the total contract value that we have close to $50 million is across all three segments, Michael. And we talked about it before. Yes, it's leaning more towards the cover, or the Urban Mobility segment that we have, because these are larger contracts or a longer period of time. But we see total contract value of the booking, as you call them, in our portfolio is really across all three segments as we see it. And you can see the growth in all three segments in revenues, and that's what we anticipate that this backlog, or booking will go up among all three segments and not just one. But the majority of it, you're right, is with Urban Mobility, because of the nature of the contract.

And Michael, maybe it's important, to make note of the fact that sometimes it's the Discover platform that leads to the customer or command. But what happens is once they get the technology out there, these three platforms that hand and glove, because it's public safety and its traffic management or mobility. And again, it's the same system that performs all these different functions. So, one leads to another, leads to another, leads to another, right?

Yes. Makes sense. And how about in terms of just the deployment resources you have? You obviously had your organic team, and I think you were building that and you've added in ATD here. But maybe can you just talk a little bit about how many, I don't know, people you have that can deploy your technology and how many systems they can do per month or something like that?

David, do you want….

David, do you want to take it?

Yes. So we've got - with the acquisition of ATD joining us in January, we have upwards of 75, 80 individuals that are in the field that are roadside experts and certified to do the work out there. But I would say that from a deployment perspective, we now have reached across pretty much every state in the U.S., which is a very important element for us. Otherwise, we would have had to build that office-by-office that's been for us. That's been a big advantage for us. But we're not limited to our own staff. We've got cases where we have third-party. And if third-party integrator is preferred for a state, we can use that. So it's really not a limitation on our own services. It's more of a hybrid. And we can do it. It can be done through a third-party integrator as well. So it's really not a limitation. But to answer your question, 75 to 80 in terms of roadside certified experts that are out there.

Great.

And Michael, it's important to note those are people that understand working roadside, working with DOTs and others to do this stuff every day. As David mentioned, integrators or adding field techs, frankly, it's not rocket science, right? It's more of the expertise and the trust that you have with dealing with the agency that knows it's getting done correctly. So there's no product span or labor force, if necessary or using integrators. It was more of the expertise that we were concerned about. And that's why adding ATD was so valuable.

Yes makes sense. Good. And then just - I think maybe Eyal, so you might not be able to guide on this, but can you give some sense of what the product versus service mix might be for the year? How you're thinking about that? And then also, at what quarterly revenue level you might get to EBITDA breakeven?

Well, the product is the service revenue. I know that may sound, kind of like what. But the - this is not an industry where a technology company just walks in and says, Hi, we're here, use our software, and you can do all the stuff that you need to do on the road. So the product and the service, they go hand and glove, right, without question, right? I think, so that's an important thing. And that's what makes Rekor unique, right? It's our ability to provide services to customers that want trust with the supplier that, they can maintain existing equipment and continue the flow of existing data, while they're transferring over to new systems, and getting data in the way so you can keep them operating. And that's a really important component of it. So, they really do go together, and it's hard to break it out. So, I'd say the service and the product, there almost one and the same. David, would you agree with that?

Yes. I mean, as we're learning here, the services that we would provide become more and more automated, right? So they always become productized through - again, through automation and just being able to simplify and cut down steps, and it just becomes a stamp or a peat. Typically, you think of a services something very customized and such. And of course, there's always going to be that element of it, as we work with states and cities and municipalities, and things that they particularly trying to get done. But more and more, we see automation coming to play there to automate steps and just make that more productized, so a lot more efficient. On the product side, the ability to make that more of a service, as well is an element that we're very cognizant of and we build for. And when you think of from a technology standpoint, you think of micro services and data services and even things like generative AI, or foundation model approaches here. It allows us to be very flexible. And just by the sheer nature of an IoT device, it has infinite flexibility to be whatever it needs to be on the roadside. And what I mean by that is you've got a very powerful product, a processor that sits on the side of the road, it's like a mini supercomputer and the ability to upload various services that are on there, like think of it as AI services, maybe greenhouse gas, maybe class count and speed. Maybe it's a vehicle identification, maybe it's a way in motion, maybe it's something else, the ability to create a very flexible environment, almost the product starts to be a service. So, we're seeing the services become more productized. We're seeing products become more like a service, just to give you a little bit more color on how we're building and structuring our path forward here. So efficiency is really the name of the game and being able to have something very flexible, and adaptable for the needs of our customers.

Got it. So you used to break out product versus recurring revenue that's - it's going to be one revenue line going forward?

No, there will be two. I guess your question was what is the mix between the recurring revenue and product and services revenues for the year, right?

For the year and what do you think it might be going forward?

I think right now, it's at the 60% level, and we anticipate this to be the mix. Approximately 60% to 70% between recurring and product and services revenue. That's really depends on some point of time sales that we may have. If there will be a big order of hardware and software that will change the mix. But for the long term, we anticipate the recurring revenue to be approximately 70% from our total revenue.

Got it. Okay. Thank you

Thank you, Mike.

Thank you. Our next question comes from the line of Michael Cohen, a Private Investor. Please proceed with your question.

Hi, Robert.

Hi, Michael.

I have two questions. First of all, I believe if I'm not mistaken, on the last conference call, you promised us today that, you would give us updated guidance on breakeven. So I was hoping that you could give us a sense of, when you'd be breakeven in 2024?

I think, what we said in the last calls, we thought that, that would be between Q1 and Q2. I don't think that's changed based on what we see.

Okay. My second question is, in the last equity ratio in February, in your presentation, you put out a revenue number of $85 million for 2024. As an investor, what confidence can you give me that, that number is attainable? You missed your 2023 guidance. You missed your breakeven guidance in 2023. The market obviously doesn't believe $85 million, because you wouldn't be trading at $2 a share. I'm also, if I'm not mistaken, William Blair in their recent initiation has $65 million of revenue. So what would you tell the market to give us confidence that $85 million is deliverable in 2024?

I think, Michael, that with any own company, okay, that has done what we've done in a few short years, to grow the way we've grown, with the products in the market that we have, I would say that, look, I'm proud of the team that's gotten us to where we are. Again, I think it's been a remarkable year. When you're dealing with government, state and federal level, they don't operate on the same calendars that the private sector does. And it's hard to pinpoint, to a specific date. But do I believe that we're going to get to that $85 million number this year. I do, okay? I can't say that it won't be lumpy along the way. But I think we get there based on what we know, what we're discussing. And I think I said in my remarks that we're - we have a lot of stuff going on, because of procurement and other things. We're just not at liberty to talk about stuff, because you can be DQed [ph] in a procurement based on making the wrong call to the wrong individual at the wrong time, right? So - and we think we get there. And we think that number is very realistic, and it's possible it could be higher. It's possible it could be a little bit lower, but it's not impossible that we get there based on what we've done in the last few years at all based on all the discussions that we have going on.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of [David Hargrave] a Private Investor. Please proceed with your question.

First of all, congratulations on the progress you guys have made. And thank you for everything you've done to kind of try to keep things on an even keel. There is a fair amount of going concern language it seems in the document. And I'm just wondering what your plans are for addressing that? And thank you and keep up the good work?

Thanks, David, and it's nice to have the compliment. We appreciate it. Look, the going concern is something that's pure dynamic. And as we got into the weeds with the auditors, we're looking at our pipeline, the accounting rules are very strict. And looking at what we had and we showed them, it just didn't meet the requirements of their guidelines. So, we were forced to take a haircut on our forecast. Well, conversely, you always look to mitigate and say well, we can cut expenses, right? And when we looked at that, we had difficulty saying that we can cut expenses based on the opportunities that we have in front of us that are very real that we're working on every day. And so, you have a classic chicken and egg conundrum here where we find ourselves in a box, but we see a path to get through this. It doesn't necessarily need to wait until the end of calendar 2024. It can happen in calendar 2023, and we believe it will. And we're going to continue to work hard to cross that bridge. I can't predict a day, but it's going to happen. So, but we also respect the accounting rules and how strict they are, and how difficult it is to do these things. And sometimes you just don't have choices, when you're put in a box and that's where we were put in a box. So, I hope that helps answer your question.

So just to quickly follow-up. If we put aside our accounting hats for a moment, could you talk about your comfort with liquidity and what options you think you might have to raise additional liquidity if needed? And thank you, that's my last question?

So with respect to raising capital, that is not something the accounting rules allow us to even look at, right? But we feel comfortable with where we are with the cash on our balance sheet, and the business that we have that we can make it through this. And our plan was always to do exactly what we did, okay? It was to construct and issue those prime revenue shine notes and to establish that as a program to grow the contract base and to continue to issue those. And that's what we're going to continue to work towards. And that's how we hope to fund implementations on contracts that are paid for data with states that have large contracts. And we feel good about it. But again, it's a tough situation, when you have this chicken and egg situation, with rules that are so black and white that you can't move right or you can't move left, right? So, we feel good about where we are, and we think we can make it through this, and we really don't have any concern about it.

Okay. Thank you very much and good luck.

Thank you. Yes. Thank you.

Thank you. Our next question comes from the line of [Ray Yickel], that is a Private Investor. Please proceed with your question.

Yes. Hi. Thanks for taking my call. I have just two questions. First one is, can you touch on the technology being used for train yards, seaports? Is its capable? And my second question would be, can we expect any overseas contracts or partnerships? Thank you.

Thank you. David, do you want to touch on these two questions?

Yes, no problem. Yes, I would say what our specialty is really object identification, and we do that through a multiple different ways. There's no reason why the technology could not be applied to really any object moving in a frame or on a roadway, whether that's in a shipyard, transit or train or rail whatever it may be. Our focus, though, the technology, it's not a limitation in technology. It's a limitation in where we choose to focus our finite resources to go to market. And so, we haven't focused on driving growth in those sort of planes and trains. We've been focused on automobiles, like a planes, trains and But definitely, as we look forward, there's no reason why the tech can apply there. It's just a matter of focus on where we see the money available now. I think the Infrastructure Bill or the Bipartisan Infrastructure Law, will provide additional funding there. But again, it's something that you have to be very vertically focused on in order to win the confidence of the customer set and our expertise is really roadway, and not ports and airports as it may be. Does that help give you some thoughts around that?

Yes, it does. And the other question I mentioned was any contracts or partnerships expected overseas?

Boy, I'll tell you, focusing here in the U.S. has really been primary for us, and we're always open to that, but it goes back to where we want to make sure we put the most wood behind the arrow. Robert, I don't know if you have any comments on that. But I would say right now, we're really focused…

I think - look, I think it's a fair question. So if you look at just the federal mandate for count class speed, which is how every government probably in a developed nation around the world, funds to roadways, right, they use something similar. So what we do here could be done elsewhere, but the market is just so massive here. We've not had to even think about that because we're focused also on our backyard. And should the right opportunity come, then, of course, we look at it. But right now, I think we've got enough potential growth ahead here that we don't need to think about that, but we wouldn't foreclose the opportunity either.

Okay. That's all I have. Thank you much. Appreciate it.

Thank you.

Thank you.

Thank you. [Operator Instructions] There are no further questions. I would like to turn the floor back over to Robert Berman for closing comments.

Everybody, thank you. Thanks for participating. I know it's getting late and it's been a long day, and we appreciate all your support. And as I said earlier, we'll continue to do the hard work, but it takes both patience as well. And something is going to make it. I mean we've had an amazing few years. And the technology is real. It's being adopted by entities that only some companies would hope to be able to do business with any of them, right? But we're here. And it's all new, and it's happening now. And it is, as David said, it's a technology refresh. This doesn't happen that often it happens once in a lifetime, frankly. And we're at the forefront of it, and we're going to try to maintain - the first mover status that we have, and continue to do our best to grow the company and continue onwards, and appreciate everybody's support. So thank you all for the time.