Rekor Systems, Inc.

Good afternoon, ladies and gentlemen, and welcome to today's Recore 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. Should you 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 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 Recore 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've made in the scheduled date for our planned investor day. Originally, we announced that our investor conference would 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 RECOR, we thought the timing for the investor day should be moved back a bit. As a result of the day change, we decided to include some of the narrative on the investment thesis for RECOR 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 RECOR 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 isn't possible 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 ReCore 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 timeframe. The first wave has already hit for sure, but I firmly believe there's a 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. But I'm confident that in 2024 is going to be a year where ReCore 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, Oliver. Well, we'll be back shortly with our president and COO, David DeHarne, to give you some insight into the future. But first, I want to discuss Record Systems' year-end results for the period ending December 31st, 2023. 2023 has been a landmark year for Record, 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 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 quarter. Our total revenue for the year stood at $34.9 million, even though we also focus on reducing our operational cash usage. Our adjusted gross margin improved markedly to 59.8%, showcasing the impact of our technological advancement and operational efficiencies, as well as the synergies achieved as we integrated the acquisition of STS. These improvements enable 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 contract 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 enhanced our liquidity. In January 2023, we completed a significant transaction involving senior secure notes of $12.5 million, led by our CEO, Robert Berman, alongside other new and existing investors. These notes were fully redeemed in February 2024, with part of the redemption price paid in common stock at a conversion rate of $2.5 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 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 developed 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 monetization. We use the 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 31st, 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 Ripple, as we built for the future of digital infrastructure and roadway intelligence. Looking forward, we continue to be confident in the potential of our technological development, strategic acquisition, 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.