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| 8-K - CURRENT REPORT - Rekor Systems, Inc. | rekr_8k.htm |
Exhibit
99.1
Rekor Reports First Quarter 2020 Financial
Results
Unique Products Deployed In Tightly Bundled Software and Hardware
Offerings Drives
Solid Growth with 58% Year-Over-Year Increase in
Revenue
COLUMBIA,
MD – May 13, 2020 - Rekor Systems, Inc, (REKR)
(“Rekor”), a Maryland-based company providing real-time
roadway intelligence through AI-driven decisions, today reported
unaudited financial results for the quarter ended March 31, 2020.
The quarter is the first quarter that reflects the Company’s
classification of all operations in its Professional Services
segment as held for sale or discontinued operations as the Company
moves forward with the decision to concentrate solely on its
Technology segment.
First Quarter 2020 Financial and Operational
Highlights
●
First quarter 2020
revenue increased 58% to $1.6 million as compared to $1.0 million
in the first quarter of 2019
●
First quarter 2020
gross profit increased to 69% as compared to 51% in the first
quarter of 2019
●
Remaining
performance obligations as of March 31, 2020 increased to $13.8
million from $10.1 million on December 31, 2019
Management Commentary
“Even
in the face of challenges presented by COVID-19, the essential
nature of our software and hardware has allowed us to make
continued progress on our go-to-market strategy. With our strong
footprint across multiple markets, in a short amount of time, Rekor
has begun to disrupt a mature market with AI-driven technology, an
innovative business model, and proven results. We have filled out
our management team and are providing municipalities and businesses
tools to increase safety and efficiencies by applying vehicle
recognition data to their workflows and operations,” said
Robert A. Berman, President and CEO of Rekor.
"The
first quarter was highlighted by strength and continuing growth in
our top line. We improved our balance sheet and feel confident we
can continue to increase market share in the public safety,
customer experience and smart cities markets. The solid performance
in our Technology Segment translated into a growth in revenue and
gross margin—58% and 34%, respectively,” said Eyal Hen,
CFO, Rekor.
All of
the Company’s operations related to the Professional Services
segment have been classified as “held for sale and
discontinued operations” and as of April 2, 2020, the Company
sold AOC Key Solutions, Inc.
On
April 14, 2020, the company received coverage from B. Riley FBR
with an initial Buy rating and $6 price target, stating that the
Company's technology is under-penetrated and well-positioned for
"significant growth.”
First Quarter 2020 Financial Results
Revenues
for the first quarter of 2020 and 2019 were $1.6 million and $1.0
million, respectively. The increase in revenue was primarily
attributable to the acquisition of OpenALPR in March 2019. During
the three months ended March 31, 2020, revenue attributable to
OpenALPR was recognized for the full three-month period compared to
only half a month of revenue recognized in the corresponding period
in 2019.
Gross
profit for the first quarter of 2020 was $1.1 million, representing
a 69% gross profit margin, compared to $0.5 million or 51% gross
profit margin, for the same quarter in 2019. The increase in gross
profit was primarily attributable to the inclusion of OpenALPR
since its acquisition in March 2019. We realize higher margins from
the revenues associated with licensing and subscription since there
are less labor costs incurred.
Loss
from operations for the first quarter of 2020 increased by 120% to
$2.6 million, compared to $1.2 million in the same quarter in 2019.
The increase in the operating loss during the year is attributable
mainly to the increased operating expenses in connection with our
plan to develop and promote our technology products and offerings.
As part of this effort, we brought on several new senior officers
and other executives of the Company to support our growth plan and
build our corporate structure.
Loss
per share from continuing operations for the first quarter of 2020
was $0.19, compared to loss per share of $0.15 in the same quarter
in 2019. Without non-recurring items, loss per share with Adjusted
EBITDA was level at $0.11 and $0.07 for the three months ended
March 31, 2020 and 2019, respectively.
Notable Wins and Achievements
Software and Services
During
the 1st
quarter of 2020, the Company:
●
Forged a
partnership with a major payment network processor to use Rekor
technology to improve drive-thru and curbside pick-up for the quick
service restaurant market
●
Launched new
reseller and partner program created to grow its product and
services channels and develop mutually beneficial
collaborations
●
Completed
automation of a new licensing platform enabling frictionless
distribution of our high margin SaaS products
●
Continued
international expansion of its iP360 Parking and citation
management solutions
●
Increased the
issuance of our Watchman software products to the United States
Department of Defense
Products and Systems Integration
The
Company has recently added over 50 new public safety clients and
executed:
●
Multi-year contract
with the City of Lauderhill, Florida
●
Multi-year contract
with the City of Mt. Juliet, Tennessee
●
Multi-year contract
with the City of New Rochelle, New York
EBITDA and Adjusted EBITDA
We
calculate EBITDA as net loss before interest, taxes, depreciation
and amortization. We calculate Adjusted EBITDA as net loss before
interest, taxes, depreciation and amortization, adjusted for (i)
impairment of intangible assets, (ii) loss on extinguishment of
debt, (iii) stock-based compensation, (iv) losses on sales of
subsidiaries, and (v) other unusual or non-recurring items. EBITDA
and Adjusted EBITDA are not measurements of financial performance
or liquidity under accounting principles generally accepted in the
U.S. (“U.S. GAAP”) and should not be considered as an
alternative to net earnings or cash flow from operating activities
as indicators of our operating performance or as a measure of
liquidity or any other measures of performance derived in
accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented
because we believe they are frequently used by securities analysts,
investors and other interested parties in the evaluation of a
company’s ability to service and/or incur debt. However,
other companies in our industry may calculate EBITDA and Adjusted
EBITDA differently than we do.
The
following table sets forth the components of the EBITDA, Adjusted
EBITDA and Adjusted loss per share for the periods included
(dollars in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
2019
|
|
Net
loss
|
$(3,774)
|
$(2,518)
|
|
Income
taxes
|
7
|
12
|
|
Interest
|
1,163
|
209
|
|
Depreciation
and amortization
|
423
|
198
|
|
EBITDA
|
$(2,181)
|
$(2,099)
|
|
|
|
|
|
Loss
on extinguishment of debt
|
-
|
1,113
|
|
Share-based
compensation
|
171
|
63
|
|
Adjusted
EBITDA
|
$(2,010)
|
$(923)
|
The
following table reconciles the loss per share to the Loss per share
with Adjusted EBIDTA for the periods included:
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
2019
|
|
Loss
per share
|
$(0.19)
|
$(0.15)
|
|
Income
taxes
|
-
|
-
|
|
Interest
|
0.05
|
0.01
|
|
Depreciation
and amortization
|
0.02
|
0.01
|
|
Loss
on extinguishment of debt
|
-
|
0.06
|
|
Share-based
compensation
|
0.01
|
-
|
|
Adjusted
loss per share (1)
|
$(0.11)
|
$(0.07)
|
(1)
Adjusted
loss per Share, which is a non-GAAP financial measure, is defined
as loss per share adjusted for the financial metrics to calculate
Adjustment EBITDA. Management uses Adjusted loss per share to
assess total Company operating performance on a consistent basis.
We believe that this non-GAAP financial measure, when considered
together with our GAAP financial results, provides management and
investors with an additional understanding of our business
operating results, including underlying trends.
About Rekor Systems, Inc.
Rekor (Nasdaq: REKR) is a Maryland-based company providing
real-time roadway intelligence through AI-driven decisions. Rekor
bridges commercial and government sectors with actionable,
real-time vehicle recognition data to enable informed decisions
faster, and with greater outcomes. Rekor is transforming industries
like Public Safety, Customer Experience, and Smart Cities in more
than 70 countries across the globe with smarter, quicker,
cost-competitive vehicle recognition solutions for security,
revenue discovery and recovery, public safety, electronic toll
collection, brand loyalty, parking operations, logistics, and
traffic management. We use the power of artificial intelligence to
analyze video streams and transform them into AI-driven decisions
by our clients. Our machine learning software can turn most IP
cameras into highly accurate and affordable vehicle recognition
devices used to help protect lives, increase brand loyalty, and
enhance operations and logistics, without the need to install
expensive new infrastructure. We make what was once considered
impossible, possible. To learn more please visit our website:
https://rekor.ai.
Forward-Looking Statements
This press release includes statements concerning Rekor Systems,
Inc. and its future expectations, plans and prospects that
constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including
statements regarding the impact of Rekor's core suite of AI-powered
technology and the size of the market for global ALPR systems. Such
forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
For this purpose, any statements that are not statements of
historical fact may be deemed to be forward-looking statements. In
some cases, you can identify forward-looking statements by terms
such as "may," "should," "expects," "plans," "anticipates,"
"could," "intends," "target," "projects," "contemplates,"
"believes," "estimates," "predicts," "potential," or "continue," by
the negative of these terms or by other similar expressions. You
are cautioned that such statements are subject to many risks and
uncertainties that could cause future circumstances, events, or
results to differ materially from those projected in the
forward-looking statements, including the risks that actual
circumstances, events or results may differ materially from those
projected in the forward-looking statements, particularly as a
result of various risks and other factors identified in our filings
with the Securities and Exchange Commission. All forward-looking
statements contained in this press release speak only as of the
date on which they were made and are based on management's
assumptions and estimates as of such date. We do not undertake any
obligation to publicly update any forward-looking statements,
whether as a result of the receipt of new information, the
occurrence of future events, or otherwise.
Media Contact:
Lisa Throckmorton
REQ
for Rekor Systems
lthrockmorton@req.co
703-287-7803
Investor Contact:
Charles Degliomini
Rekor Systems, Inc.
ir@rekor.ai
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
March 31,
2020
|
December 31,
2019
|
|
ASSETS
|
|
|
|
Current Assets
|
|
|
|
Cash
and cash equivalents
|
$1,087
|
$1,075
|
|
Restricted
cash and cash equivalents
|
415
|
461
|
|
Accounts
receivable, net
|
737
|
776
|
|
Inventory
|
488
|
302
|
|
Other
current assets, net
|
388
|
175
|
|
Current
assets held for sale and discontinued operations
|
7,408
|
7,441
|
|
Total current assets
|
10,523
|
10,230
|
|
Property
and equipment, net
|
480
|
442
|
|
Right-of-use
lease assets, net
|
383
|
283
|
|
Goodwill
|
6,336
|
6,336
|
|
Intangible
assets, net
|
7,993
|
8,244
|
|
Long-term
assets held for sale and discontinued operations
|
3,407
|
3,457
|
|
Total assets
|
$29,122
|
$28,992
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
Current Liabilities
|
|
|
|
Accounts
payable and accrued expenses
|
$3,264
|
$3,678
|
|
Lease
liability, short-term
|
231
|
148
|
|
Contract
liabilities
|
799
|
749
|
|
Current
liabilities held for sale and discontinued operations
|
5,787
|
5,757
|
|
Total current liabilities
|
10,081
|
10,332
|
|
Notes
payable
|
21,922
|
20,409
|
|
Lease
liability, long-term
|
172
|
161
|
|
Contract
liabilities, long term
|
775
|
775
|
|
Deferred
tax liability
|
10
|
10
|
|
Long
term liabilities held for sale and discontinued
operations
|
502
|
536
|
|
Total liabilities
|
33,462
|
32,223
|
|
Series
A Cumulative Convertible Redeemable Preferred stock, $0.0001 par
value, 505,000 shares authorized and 502,327 shares issued and
outstanding as of March 31, 2020 and December 31, 2019,
respectively
|
6,010
|
5,804
|
|
Commitments and Contingencies
|
|
|
|
Stockholders' Deficit
|
|
|
|
Common stock,
$0.0001 par value, 100,000,000 and 30,000,000 shares authorized,
22,786,757 and 21,595,653 shares issued and outstanding as of March
31, 2020 and December 31, 2019, respectively
|
2
|
2
|
|
Preferred
stock, $0.0001 par value, 2,000,000 authorized, 505,000 shares
designated as Series A and 240,861 shares designated as Series B as
of March 31, 2020 and December 31, 2019, respectively
|
|
|
|
Series
B Cumulative Convertible Preferred stock, $0.0001 par value,
240,861 shares authorized, issued and outstanding as of March 31,
2020 and December 31, 2019, respectively
|
-
|
-
|
|
Additional
paid-in capital
|
21,959
|
19,371
|
|
Accumulated
deficit
|
(32,311)
|
(28,408)
|
|
Total stockholders’ deficit
|
(10,350)
|
(9,035)
|
|
Total liabilities and stockholders’ deficit
|
$29,122
|
$28,992
|
REKOR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
2019
|
|
Revenue
|
$1,595
|
$1,010
|
|
Cost
of Revenue
|
494
|
490
|
|
Gross
profit
|
1,101
|
520
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
General
and administrative expenses
|
2,791
|
1,543
|
|
Selling
and marketing expenses
|
371
|
158
|
|
Research
and development expenses
|
543
|
5
|
|
Operating
expenses
|
3,705
|
1,706
|
|
|
|
|
|
Loss
from operations
|
(2,604)
|
(1,186)
|
|
Other
income (expense):
|
|
|
|
Loss
on extinguishment of debt
|
-
|
(1,113)
|
|
Interest
expense
|
(1,163)
|
(209)
|
|
Other
income
|
-
|
2
|
|
Total other
expense
|
(1,163)
|
(1,320)
|
|
Loss
before income taxes
|
(3,767)
|
(2,506)
|
|
Income
tax provision
|
(7)
|
(12)
|
|
Net
loss from continuing operations
|
$(3,774)
|
$(2,518)
|
|
Net
loss from held for sale and discontinued operations
|
(14)
|
(357)
|
|
Net
loss
|
$(3,788)
|
$(2,875)
|
|
Loss
per common share from continuing operations - basic and
diluted
|
(0.19)
|
(0.15)
|
|
Loss
per common share from held for sale and discontinued operations -
basic and diluted
|
-
|
(0.02)
|
|
Loss
per common share - basic and diluted
|
$(0.19)
|
$(0.17)
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
Basic
and diluted
|
21,929,768
|
18,800,496
|