Rekor Systems, Inc.

Good afternoon, ladies and gentlemen, and welcome to RACOR Systems conference call. My name is Rob, and I'll be your coordinator for today. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes. Before we get started, I would like to read you the company's abbreviated safe harbor statement. I would like to remind you that statements made in 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 actual results to differ materially from those expressed or implied by such statements. We SDU 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 would now like to turn the presentation over to Mr. Eyal Hen, CFO of Raycor Systems.

Good afternoon, and thank you for joining us. Today we'll discuss Recourse results for the year ended December 31st, 2021, and provide you with an update on key business topics. On the call with me today, Robert Berman, CEO, and David Arne, President, who will be giving you additional color on our business after I go over our relevant metrics. 2021 was an important and defining year in Recourse's young history. In 2021, we had a follow-on offering, a large strategic acquisition, and our inaugural investor day, where we presented our Ricoh One platform to the investment community. The introduction of Ricoh One and the acquisition of the company formerly known as Waycare has put us in a position to jumpstart the adoption of our operating platform, accelerate our growth, and claim our place as the leader in the emerging intelligent infrastructure market. David will provide more detail regarding our go-to-market strategy and our near-term and forward-looking opportunities. In the second quarter of 2021, we've been moving from a product-oriented transactional revenue model to a solution-oriented recurring revenue model. The sale of solutions as compared to products spread revenues out over a longer period of time. thus reducing revenue in the short term. This shift from point-in-time revenue to recurring revenue has had an important impact on near-term revenues, but we continue to generate year-over-year revenue growth as our newly refined go-to-market strategy has also had a positive impact on our growth. With that, let me go over the financial results for the year ended December 31st, 2021. Our company achieved significant revenue growth for the year ended December 31st, 2021 compared to 2020. Revenue for the year ended 2021 was 14.3 million compared to 9.2 million in the same period last year, a robust increase of 55%. Recurring revenue was 4.6 million for the year ended December 31st, 2021 which represented an increase of $1 million, or 28%, compared to $3.6 million for the year ended December 31, 2020. The year-over-year increase in revenue is primarily due to the expansion of our product and service offerings. Our current sales model emphasizes SaaS revenues generated through direct sales. but we have also seen increases in our e-commerce revenue and customer support revenue. We benefited from the strategic marketing initiative that we launched at the beginning of 2021 and are seeing measurable results from our focus on recurring revenues. We expect the emphasis on SaaS-based revenue in our current go-to-market strategy to generate long-term growth well beyond of what we could have achieved under the previous model. We will, however, continue to monetize opportunities that are transactional in nature. Total operating expenses for the year ended December 31, 2021, were $39.3 million, compared to $17.6 million during the same period in 2020. We recorded a significant increase in payroll and payroll-related expenses. The addition of headcounts due to the Waker acquisition played a part in this increase. While we continue to add important new hires to our engineering and sales and marketing teams, we have expanded and we continue to expand our sales and marketing efforts as we add additional resources to promote our products and services. Finally, we have strategically expanded invested in research and development to develop new solutions and improve our line of products. This investment will enhance our competitive edge as we continue developing additional state-of-the-art solutions that address our customers' growing needs. Our adjusted gross margin for the year ended December 31, 2021, was 56%. A decline from the 62% was reported on December 31, 2020. The decline in margin for the year ended December 31, 2021 is primarily attributable to the evolution of our go-to-market strategy. As we continue to focus our near-term efforts on sales that generate high-margin recurring revenues, you should expect to see an improving in our adjusted gross margins. Adjusted EBITDA for the year ended December 31st, 2021 was a loss of $21.8 million as compared to a loss of $9 million the same period last year. This increase in loss was due to the investments to position record for future growth that I've just discussed. During 2021, we released enhanced key performance indicators to help provide visibility and a more concise view into our success and progress. We hope that over time, these KPIs will provide our shareholders better insight into our business. In 2021, we booked contract value at 8.9 million during the year ended December 31st, 2021. This is an increase of 35% compared to 6.6 million of total contract value won during the year ended December 31, 2020. As of December 31, 2021, remaining contract performance obligations were $22.6 million, an increase of 35% from the $16.7 million reported as of December 31, 2020. Moving to our financial condition and liquidity, our cash balance on December 31, 2021 was $25.8 million, up from $20.6 million as of December 31, 2020, raised $70.1 million in net cash proceeds in a public offering in February 2021, and used $39.9 million for the acquisition of the company formerly known as Waker Technologies in August 2021. Working capital on December 31, 2021 was $17 million, down from 18.2 million as of December 31st, 2020. The increase in cash and cash equivalent was primarily due to the net proceeds from our public offering in the first quarter of this year, partially altered by a cash payment as part of the total consideration offered for the weight care acquisition. The decrease in working capital was primarily due to an increase in accounts payable and accrued expenses to avoid supply chain issued and secured vital components of our product, as well as the expansion of our sales, marketing, and resource and development efforts. In summary, we are enthusiastic about our growth prospects. The enhanced sales team has been extremely busy winning new client relationships, dipping existing ones and forming new partnerships. We feel very good about our pipeline and the strong momentum we are experiencing. While the investments we are making in our go-to-market strategy will negatively impact our margins in the early years, we fully expect our margins to improve significantly in later years as we reap the benefits of these investments. There is significant operating leverage embedded in our business model, and we will remain focused on creating shareholder value and making decisions that will benefit our long-term shareholders. With that, I will now turn the call over to Robert. Robert?

Thank you, Eyal. Good afternoon, everyone, and welcome. Today, you are going to hear a brief overview of our business and the progress we have made during the past 12 months. First, I would like to highlight our strategic acquisition of WayCare in August of 2021. This important development has propelled our company forward. There's a lot going on here at ReCore that already marks us as an established big data company working in the intelligent infrastructure sector. ReCore is actively innovating and building to expand our software portfolio so that we can address not only our customers' current challenges, but also the evolving challenges they will face in the future. Make no mistake about it, we are a development stage company, yet we can compare ourselves to the other large cap, private equity, and venture capital backed companies that are scrambling to get off the launch pad. We've already cleared the launch pad and are miles ahead when it comes to understanding the intelligent infrastructure market. We excel at AI and machine learning as it relates to vehicle recognition, intelligent data processing, 5G, edge processing, and cloud computing. Technology is one of the three pillars of our business model. Technology stands alongside real estate and expertise. We will continue to grow our capabilities, adding to all three of these pillars. As ReCore begins the next leg of its journey, like most great companies with a bright future, we're attracting amazing talent. I'd like to mention how proud we are that David DeHarne has joined ReCore as our president. David's background is quite remarkable. I'll let him get into the details and more formally introduce himself. But with his vast tech product and marketing experience, as a seasoned veteran of the management teams at Idemia, American Express, and Amazon Web Services, we are pleased he has chosen to leave the world of blue chip companies and join ReCore as we begin to reimagine the future of intelligent infrastructure. With that, I will now turn the call over to our president. David?