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spk04: 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.
spk11: 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.
spk07: 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.
spk02: Good afternoon, and thank you for joining us today. Ricoh 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 rings in at an incredible 7.7 times, more than twice that of what is considered to be a well-run technology company. Despite aggressive moves from well-funded public and private legacy players in the market, ReCore 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 Recorp in 2024 and beyond. We are at the nexus of two industry-wide transitionings happening right now. The first is the 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- 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 US 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 and 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 the 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 are 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 point 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 and creating 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 vastly improved with safer, smarter, 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 falling 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 trillion dollars 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 record 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. 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 and embracing artificial intelligence, machine learning, computer vision, edge processing, 5G, cloud, and even now, general AI is accelerating as they move along the S-curve of technology adoption. These are all areas of strength for ReCore. 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 extends seamlessly across edge IoT, cloud, and on-premise environments. This means our customers can easily deploy ReCore within their existing workflows, datasets, 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 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 multi-billion-dollar scale, all while keeping our current customers and systems operating at the highest levels of performance on a 24 by 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 ReCore, for final remarks and Q&A.
spk11: 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 date 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 would 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.
spk01: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Louis De Palma with William Blair. Please proceed with your question.
spk05: Good afternoon, Robert, Eyal, and David.
spk08: Hey, how are you?
spk05: 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?
spk11: Yeah. David, let me take that first. And then David can follow up. But I think there's two pieces here. you know, the program money from what the government requires state, cities, and other municipalities to do statewide, right? That's program money. And, you know, 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 to your money.
spk02: David, if you can hear me okay. Yes, we're 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.
spk11: 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 6th or, if I'm not mistaken, it was either 6th or 8th. And they have to set their targets by 24. And they have to then, you know, show, you know, 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. is very new, right? I mean, it's just the beginning of the year and they just set these rules and they're just starting to cooperate under them now.
spk05: 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 tube systems have been installed. What is the total market opportunity to replace the outdated technologies with your like analytics software sensors?
spk11: David, you want to take a shot at that?
spk02: Yeah. You know, 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. States like 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 a road gets repaved or moved or anything like that. And, or they just simply fail because they're a mechanical device that, you know, as second, you put it in the, in the ground, it starts to deteriorate as a, 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, You know, 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 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. And that's 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 come to mind is that the way that we approach the market and our technology is that, you know, 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 roadside 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 it's, 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 in legacy tech and to continue to future-proof that and expand upon that footprint is large and expanding.
spk05: Thanks. And Robert and David, you described the opportunity in the billions. You grew revenue 71% year over year in the fourth quarter, and the team discussed how new products will be built onto your existing platform. So with this large revenue opportunity and revenue growing so fast, how are you balancing revenue growth with margin expansions?
spk08: Yeah, I'll take it over.
spk07: So basically our revenue margins, we anticipate with the technology as 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 PS that David described. So we do anticipate As we increase revenues going up and the mix of revenues leaning more toward our technology, these margins will go up over time. In the short to mid-time period, we'll see this improvement in margin as we put more and more of our IoT Note devices roadside. Does this answer the question?
spk11: Yes. Let me just add to that. Let's be clear. What we're doing is we're putting IoT nodes roadside. It's a single system that can have multiple missions. 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, you know, greenhouse gas emissions, we turn it on. If they decide that they want it to weigh in motion or 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 the same device, just providing additional functionality.
spk05: 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.
spk08: Thank you.
spk01: Thank you. Our next question comes from the line of Michael Lattimore with Northland Capital Markets. Please proceed with your question.
spk10: Great, thanks, yeah. And congrats again on the strong organic growth in the quarter. In terms of the booking, 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 mostly expansions, new states? Just a little more color on bookings would be great.
spk11: You know, Michael, maybe I'll 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, you know, 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 ReCore and we're new to them. So I think it's fair to say that, you know, this is new. And it's not just our technology that's new. It's the whole concept of AI, you know, connected devices and all these other things going on out there that customers have to get, you know, accustomed with and used to and whatnot. And it's just all, it's all happening and it's happening right now. So AI, you want to answer from there?
spk07: Yeah, we talked about it before as well. The total contract value that we have, close to $50 million, is across all three segments, Mike. And we talked about it before. Yeah, it's leaning more towards the Discover or the urban mobility segment that we have because these are larger contracts for a longer period of time. But we see the total contract value or the booking, as you call them, in our portfolio, It's really across all three segments, as we see. And you can see the growth in all three segments in revenues. That's what we anticipate. This backlog or booking will go up among all three segments and not just one. But the majority of it, you're right, is because of the nature of the contract.
spk11: And, Michael, maybe it's important to make note of the fact that You know, 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 fit hand in glove because it's public safety and it's traffic management and urban mobility. And, again, it's the same system that performs all these different functions. So, you know, one leads to another, leads to another, leads to another, right?
spk10: Yeah, it makes sense. And how about in terms of just the deployment resources you have? You know, you obviously had your organic team, and I think you were building that, and then 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?
spk08: David, do you want to?
spk07: David, do you want to?
spk02: Yeah. 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 to reach 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, you know, office by office. So that's been a big advantage for us. But we're not limited to our own staff. We've got cases where, you know, third-party integrators, you know, 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 about 75 to 80 in terms of roadside certified experts that are out there.
spk00: Great, great.
spk11: And Michael, it's important to note those are people that understand working roadside, working with DOTs and others that do this stuff every day. As David mentioned, integrators or adding field techs, frankly, is not rocket science. It's more the expertise and the trust that you have with dealing with the agency that knows it's getting done correctly. So there's no problem expanding the labor force if necessary or using integrators. It was more the expertise that we were concerned about, and that's why adding ATV was so valuable.
spk10: Yeah, that makes sense. Good. And then just things may be evolving, 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 are you thinking about that? And then also at what quarterly revenue level you might get to EBITDA break even?
spk11: Well, you know, the product is the service revenue. I know that may sound kind of, you know, like what, but the, this is not an industry where a technology company just walks in and says, Hey, we're here to use our software and you can do all this stuff that you need to do on the road. So the product and the service, they go hand in glove without questions. I think that's an important thing, and that's what makes ReCore unique. 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 a new 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 are almost one and the same. David, would you agree with that?
spk02: Yeah, I mean, as we're learning here, the services that we would provide become more and more automated, right? So they almost become productized. you know, again, through automation and just being able to simplify and cut down steps, and it just becomes a stamp and repeat. And, you know, typically you think of a service as 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, you know, 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 microservices 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 of 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.
spk10: Got it. So you used to break out product versus recurring revenue. Is this going to be one revenue line going forward?
spk07: 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?
spk10: For the year, and what do you think it might be going forward?
spk07: I think, you know, right now it's at the 60% level, and we anticipate this to be the mix, you know, approximately 60% to 70% between recurring and product and services revenues. That really depends on some point of time cells that we may have. 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.
spk10: Got it. Thank you.
spk07: Thank you, Mike.
spk01: Thank you. Our next question comes from the line of Michael Cohen, a private investor. Please proceed with your question.
spk03: Hi, Robert. Hey, 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. Okay.
spk11: I think what we said on the last calls, we thought that that would be, you know, between Q1 and Q2, and I don't think that's changed based on what we see.
spk03: Okay. My second question is, in the last equity raise you did 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 in revenue. So what would you tell the market to give us confidence that 85 million is deliverable in 2024? I think, Michael, that
spk11: You know, with any young company, okay, that has done what we've done in a few short years to grow the way we've grown, to put the products in the market that we have, you know, I would say that, look, I'm proud of the team that's gotten us to where we are. And I think it's been a remarkable year. When you're dealing with government at state and federal level, they don't operate on the same calendars that, you know, the private sector does. And it's hard to pay 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, and my remarks that, you know, we're, we have a lot of stuff going on because of procurement laws and, and other things, you know, we're just not at Liberty to talk about stuff because, you know, you, You can be dequeued in a procurement based on making the wrong call to the wrong individual at the wrong time, right? So 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.
spk03: Okay, thank you very much. Thank you.
spk01: Thank you. Our next question comes from the line of David Hargraves, a private investor. Please proceed with your question.
spk06: 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 your plans are for addressing that. And thank you. And keep up the good work.
spk11: Thanks, David. And it's nice to have the compliment. We appreciate it. Look, the going concern is something that's very dynamic. And as we got into the weeds with the auditors, with looking at our pipeline, the accounting rules are very strict. And in looking at What we had and what we showed them, it just didn't meet the requirements of their guidelines. So we were forced to take a haircut on our forecast. But conversely, you always look to mitigate and say, well, we can cut expenses. 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, you know, we find ourselves in a box. But, you know, 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. Can't predict the day, but it's going to happen. 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. We were put in a box. So I hope that helps answer your questions.
spk06: 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.
spk11: Well, 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, the business that we have that we can make it through this. And our plan was always to do exactly what we did. It was to construct and issue those prime revenue sharing notes and to establish that as a program, to grow the contract base and to continue to issue those. um and and that's what we're going to continue to work towards and that's how we hope to you know fund implementations on contracts that are paper data with states that have large contracts and you know we feel good about it but again it's it's a tough situation when you you have this chicken and egg situation with um you know rules that are so black and white that you can't move right or you can't move left right so um 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.
spk06: Okay. Thank you very much, and good luck.
spk09: Thank you. Yep. Thank you.
spk01: Thank you. Our next question comes from the line of Ray . That is a private investor. Please proceed with your question.
spk09: 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, if it's capable? And my second question would be, can we expect any overseas contracts or partnerships? Thank you.
spk11: Thank you. David, you want to touch on those two questions?
spk02: Yes. Yeah, no problem. Yes, I would say yes. What our specialty is is really object identification, and we do that through 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, a transit, a train, a 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 for the go-to-market. And so we haven't focused on driving technology. growth in those sort of planes and trains. We've been focused on automobiles, planes, trains, and automobiles. But definitely, as we look forward, there's no reason why the tech can't 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 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?
spk09: Yes, it does. And the other question I mentioned was, any contracts or partnerships expected overseas?
spk02: Boy, I'll tell you, focusing here in the U.S. has really been primary for us. 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.
spk11: I think, look, I think it's a fair question. So if you look at just the federal mandate for count, class, and speed, which is how every government probably works, and they develop nation around the world, funds the 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 on what's in our backyard. And should the right opportunity come? And 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. we wouldn't foreclose the opportunity either.
spk09: Okay, that's all I have. Thank you much. Appreciate it.
spk08: Thank you. Thank you. Thank you.
spk01: Thank you. As a reminder, please press star 1 to ask a question at this time. There are no further questions. I would like to turn the floor back over to Robert Berman for closing comments.
spk11: 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's going to make it. I mean, we've had an amazing few years. The technology is real. It's being adopted by, you know, 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, you know, 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.
spk08: So thank you all for the time.
spk01: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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