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Rekor Systems, Inc. (REKR) Q4 2020 Earnings Call Transcript – The Motley Fool


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Rekor Systems, Inc. (NASDAQ:REKR)
Q4 2020 Earnings Call
Mar 10, 2021, 4:45 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to today’s Rekor Systems, Inc. conference Call. My name is Joe, and I will be your coordinator for today. [Operator Instructions] Before we get started, I’d like to read you the company’s abbreviated safe harbor statement.

I’d 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 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 would like to turn the presentation over to Mr. Eyal Hen, CFO of Rekor Systems.

Eyal HenChief Financial Officer

Thank you, Joe. Good afternoon. Thank you for joining us today. Today, we will discuss Rekor’s results for the year-end quarter ended December 31, 2020, as well as provide an update on key business topics.

On the call with me today is Robert Berman, president and CEO, will be giving you a further update as soon as I finish with the relevant metrics. Our company achieved significant revenue growth quarter-over-quarter and for the year ended December 31, 2020, compared to 2019. Revenues for the fourth quarter of 2020 was 2.8 million compared to $1.5 million in the same period last year, a robust increase of 88%. Revenue for year ended December 31, 2020, was 9.2 million compared to 5.5 million for the s e period last year, another healthy increase of 69%.

Our working capital increased to 18.3 million as of December 31, 2020, from negative 1.8 million as of December 31, 2019. And in February 2021, we raised 70.1 million in net cash proceeds in a public offering. The increase in our revenues is attributable primarily to the expansion of our product offerings during this period, and we also saw an organic increase in revenue to our SaaS e-commerce platform. Revenue from our e-commerce platform grew from 439,000 in 2019 to 865,000 in 2020, which represents over 97% growth on a year-over-year basis.

E-commerce revenue also grew from 159 in the last three months of 2019 to 244,000 for the last three months of 2020, which represents more than a 53% increase from this high-margin channel. This revenue growth was inbound as we work to enhance the channel and not the result of any significant strategic marketing initiatives. The enhancement completed strategic marketing initiative did launch at the beginning of 2021, and we are already seeing positive results of those initiatives. Gross margin for the year ended December 31, 2020, was 62% compared to 70% in the 2019 period.

The lower margin for the year ended 2020 is primarily attributable to the initial cost of building infrastructure in connection with large software and hardware contracts deployed in 2020. Because our Rekor One platform is designed as a land and expand platform, as we’ll discuss later, it makes sense for us to install infrastructure to serve a larger network when we begin service in an area. Gross margin for the fourth quarter was 72% compared to 67% in the same period last year. This high margin for the fourth quarter of 2020 is a result of an increase in the software revenue, which has higher margin.

We anticipate our long-term gross margin to be on the range of 60% to 65%. Total expenses for the fourth quarter of 2020 were 5.2 million compared to 3.3 million in the same period last year. The operating expense for the year ended December 31, 2020 was 17.5 million compared to 11.4 million in 2019. This rise is attributable mainly to recruiting additional manpower to support our growth, complete the reorientation of our strategic direction, and solidify our corporate structure.

We also more than doubled our R&D expenses as we continue to see opportunities to develop new technologies and improve our line of products that place us ahead of the curve in — as we serve. Adjusted EBITDA for the quarter was a loss of 2.2 million as compared to a loss of 1.6 million the same period last year. Adjusted EBITDA for the year ended December 31, 2020, was a loss of 9 million as compared to a loss of 5.5 million. The increase in loss was also due to the increases in manpower and R&D expenses.

Our cash balance on December 31, 2020, was 21 million, and our working capital was 18.3 million. During 2020, we aggressively retired all the debt for exchange in cash transaction. And currently, we are now essentially debt-free. Future revenue under existing contracts, which we track as our performance obligation balance, has grown to approximately $16.7 million as of December 31, 2020, from approximately $10.1 million as of December 31, 2019.

In February 2021, we also completed a public offering and raised 70.1 million in net cash flow, which significantly increased our capitalization and boosted our financial flexibility. In summary, we continue to see a lot of momentum in the market, our customer base is growing, and we are excited about the many opportunities that lie ahead of us. I would like to turn the call over to Robert. Robert?

Robert BermanPresident and Chief Executive Officer

Thank you, Eyal. Good afternoon, everyone, and welcome. In today’s call, I’m going to give you an update on some key developments and a brief overview of our business as it stands today. I’m going to review some highlights, but before I do, I want to start by addressing some of the news related to our offer to buy Iteris.

Many of our Rekor shareholders encouraged us to take a good look at Iteris, and we did. We considered the industrial logic of purchasing Iteris and found it to be compelling. We think we’ve developed a suite of products and services that can finally deliver the intelligent roadway systems and smart cities that everyone has been looking for, and Iteris’ sizable footprint at U.S. intersections could provide an avenue to turbocharge their adoption.

So we made a generous offer, and it was reflexibly rejected by Iteris’ board. And that is what it is. We’re not going to spend a lot of our Rekor shareholders’ cash and resources to pursue control over a reluctant company that doesn’t even have an interest in beginning a dialogue. We’ll continue to explore other M&A activity with counterparties who are generally interested in mutually creating accretive shareholder value and disengage with any company that does not share our vision.

We are living in a once-in-a-lifetime economy with a remarkable tech stack. And if we see what we have think can help each other, we’ll reach out. If they don’t get it, no sense trying to bypass the guardings of status quo. There will be enough issues with integration without active resistance.

Frankly, there’s an issue of whether we’re more capable of future growth on our own without the baggage of legacy operations. As we enter 2021, it’s important for you to know what Rekor is and what it is not. Iteris apparently dismissed us as a simple OCR-based ALPR company, competed in a crowded market. The way we operate, that kind of thinking is regressive and does not suture proof of any business.

Yet we compete in the public safety vertical because it’s low-hanging fruit, and we’re already established and do well there. But our products and services have been adopted around the world for smart cities, highways, parking systems, fleet management, campus safety, private security, drive-thru retail, just to name a few. So what really is Rekor, and if simply not an ALPR company, Rekor is a real-time Roadway intelligence platform, capable of enhanced anonymized metadata capture, groundbreaking insights and analytics built in, and most importantly, a scalable platform on which to construct the network for the future. 2020 was our runway year.

Transformative. And I can briefly review some of the highlights. During the second quarter of 2020, we sold two of our non-core businesses and completed the realignment we began in 2019 to focus on our technology. We also completed the retirement of debt and raised approximately $30 million through an ATM.

These activities position us to take opportunities and challenges that our technology has provided. Throughout the last year, we worked diligently to gain leading positions in the government and commercial segments. Our agreements with Mastercard and Verra mobility, and groundbreaking statewide programs such as Oklahoma and North Dakota, provide ample evidence of the superiority of our technology. And we had a unifying vision throughout that and included the Rekor One platform.

Like our revolutionary OpenALPR software that expanded license play recognition into rich vehicle data recognition, Rekor One is designed to reap new life into existing hardware while exploiting the latest advances in new systems. With its agnostic API interfaces and our groundbreaking edge processing, Rekor One can dramatically enhance the performance of an existing network of sensors while seamlessly accommodating the upgrade of the network to accommodate not only new equipment, emissions and includes the richest set of integrated privacy and security controls available in this multi-mission platform. Rekor One’s multi-mission architecture looks forward at the demands of the 21st century. It’s designed to land and expand.

With Rekor One, towns, cities, states, even nationwide, networks can pull discrete data from multiple purposes from a single camera and to analyze it to produce actionable insights in real-time and distribute the results to multiple agencies simultaneously and securely with strict privacy protocols. Rekor is not your grandfather’s ALPR company, and the state of Oklahoma chose Rekor not just to read license plate, but to deliver an end-to-end solution for uninsured driver diversion program that includes not only more accurate license plate reads, but real-time identification of uninsured vehicles, notification, processing and a convenient portal for vehicle owners to obtain insurance. As they said, Oklahoma, in their award, Rekor was the only bidder who service the entire needs of the program with a single source accountability. And they’ve already begun to explore sharing results with neighboring states and other agencies within Oklahoma.

With Rekor One, the same network of cameras can be used to manage lapped registrations and flexibly combined with other existing state networks to revolutionize roadway safety, maintenance and environmental assessments. We’re equally excited about our new pilot program with the State Park system in North Dakota. Here, we’ll have the chance to use many of our recently patented innovations to address the unique but pressing needs of the park systems around the world. We ultimately see networks that include solar-powered stations using Wimax Communications, helping to assist with perimeter traffic, fleet management, permit issuance and usage, fishing and hunting license alerts hazardous waste enforcement and even improvements in supplier monitoring With Rekor One, we enable our customers to unlock the many possibilities that full vehicle recognition as compared to your license plate recognition can’t provide.

And we’re further unlocking this potential with the launch of the new e-commerce platform, a sales channel that can provide a broad array of international customers’ quick access to our intelligent solutions with just a credit card and a click. Recently, we also launched Rekor Go, an application that brings the power of our accurate technologies to an individual iPhone or Android and other mobile devices. So today, we are well-positioned to bring the capabilities of a full vehicle recognition to bear on the needs of everything from smart parking lots in a developing nation, to the nationwide transportation system of an advanced and developed one. So at this point, I’d like to turn the call back to our coordinator for questions.

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Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is from Mike Latimore from Northland Capital Markets. Please proceed.

Mike LatimoreNorthland Capital Markets — Analyst

Hey. Good afternoon, and congratulations on the excellent year there. So I guess, first question just relates to Oklahoma. I guess, can you give us any metrics that you’re seeing or data that you’re seeing out of your Oklahoma deployment so far, whether it’s kind of number of notices going out a day or percent of those that are registering? Or kind of any metrics to kind of give a sense of how that’s going?

Robert BermanPresident and Chief Executive Officer

Sure. Thanks, Mike. So I just want to remind everyone that when Rekor won that contract in competitive bid, we were obligated to have the program up and operational by Q2. So we had the system standing up in early January.

We put in beta, and we launched it. No one’s ever run a program like this before. But I can tell you that all of the budgets, all of the expectations that we had for the program as it ramps, we have been exceeding all of those. We’ve got thousands of people that have entered the diversion program, and many of those have acquired insurance through our portal.

And the program is tracking as we expected it. The state is happy with it. We’re happy with it. And best of all, I think that there are people that are happy with it because they’re being given the opportunity to get the monkey off their back with respect to driving uninsured and all the problems that go along with that.

Mike LatimoreNorthland Capital Markets — Analyst

Great. And then maybe a little bit of an update on Mastercard and what’s the status of kind of the rollout with White Castle?

Robert BermanPresident and Chief Executive Officer

Mastercard is still tweaking their product. Remember, it’s their product. There are other technology providers that work for Mastercard as well. And I think that they’re getting there.

They’re expecting to, we believe, launch the product in April in Florida. And we think that they’re happy with it. And they’ve had a team of data scientists pouring over everything from the efficiencies to the restaurant to the customer experience. And when you’re dealing with AI and voice recognition and things like that, they’re going to tweak it and get it right because they’re not going to put a product out in the market that they can’t sell, and they’re not 100% behind, and we think they’re very close to getting there.

So we expect them to start a rollout in probably late April, early May.

Mike LatimoreNorthland Capital Markets — Analyst

Great. And then there’s been a couple of new bills introduced, I guess, in Florida, Texas, Tennessee. I guess what — maybe can you give us a little bit of sense of how you’re thinking about those processes when we get to RFPs and some potential announcements?

Robert BermanPresident and Chief Executive Officer

Yes. Fair question. Look, we’ve said all along that our goal was to add one additional state to Oklahoma in 2021. So our hope was that we would have one state past legislation, and they would do an RFP, and that we would successfully bid it and win it.

And as things look now, that there are four states tracking with legislation that is making progress. The legislation in Florida is moving through committee. And there are modifications being made to it. And I think when you have legislation moving and changes being made and language suggestions that are being adopted, well, then it’s real because they want to get it right.

And I think we had the same thing going on in Texas. The same thing going on in Tennessee. And in New York, we have a bill that’s now part of the state budget, so it’s part of the budget process. So we’ll see how the budget progresses and if it gets adopted with this bill in it.

We are working with other states, but they’re not at the same stage that those four are, but there is interest in Indiana and Michigan as well as a couple of others. But our focus has primarily been on Florida, Texas, Tennessee and New York.

Mike LatimoreNorthland Capital Markets — Analyst

Right. OK, great. Goodluck this year.

Robert BermanPresident and Chief Executive Officer

Yes. Appreciate it. Thank you.

Operator

Thank you. Our next question is from Zach Cummins of B. Riley FBR. Please proceed.

Zach CumminsB. Riley FBR, Inc. — Analyst

Yes. Thanks. Thanks for taking my question. Robert, I just wanted to get an update on your resellers.

I know that that was really kind of a big strategy throughout 2020 to really build out that network. So I was wondering if you could give an update on in terms of kind of the number of resellers that you’ve signed up and your expectations for that channel in 2021.

Robert BermanPresident and Chief Executive Officer

Well, we went into 2021 with less than a dozen. Right now, I believe we have over 40. And I think as we’ve talked before, Zach, it takes about 12 weeks to onboard a reseller, train them and get them out into the market selling. And I’m pleased to say that as we had planned, we were able to launch our partner portal early January.

So what is that, right? So that’s a place that our resellers can go and there’s a library there. There’s videos for training and to answer technical questions and so forth. And all these things took time to get in place, but we got them in place, and we’ve got a bunch of resellers actively out there selling now, and we’re starting to see business from them. So the more the merrier.

I think that we wouldn’t have expected that we’d be at the level that we’re at right now with resellers, but it’s progressing well. And it takes a lot of infrastructure to provide the support to resellers so that they can actively go out and actually do business. It requires sales technicians. It requires a whole host of things.

It requires an in-house RFP center so that the resources for these folks to bid on things when they come around. But it’s firing on all engines. And the same is true for our e-commerce platform now and the strategic partnerships that we’re working on as well. So I think we’ve made really good progress with the resellers.

Zach CumminsB. Riley FBR, Inc. — Analyst

Understood. That’s helpful. And then in terms of — just within the state of Oklahoma, I know in your prepared remarks, you mentioned that there was already some other conversations with different departments within that state. I mean, can you do a little more of a deep dive in terms of the progress of those conversations? And kind of what that could mean as you continue to expand your footprint there?

Robert BermanPresident and Chief Executive Officer

Well, so the whole purpose of the Rekor One platform is that without adding anything, you can apply different software applications for different things. And the data that has been running through the system for the UVED program for Oklahoma has made its way around the state to other state agencies that are, let’s say, involved with things like registration clients and other stuff. And they have asked us to look at some of those problems that they have. And what we’re doing is we’re running an analysis.

We told them that we wanted to run data for 60 days or 90 days and see if we can come back to them with some ideas on how they might approach that. And frankly, what that really is, is our trying to figure out how we’re going to price it because it’s a new product, right? It’s doing something completely different with the system. So it makes good sense because all of these states have the same issues, and all of them have antiquated systems, and all of them would like to have more compliant, modern vehicle departments with people that are registered and drivers and whatnot. And we’re going to help them get there.

So I think that some of the activity that we’ve seen in Oklahoma has spilled over into the other states that we’re talking to. I can’t tell you which ones, but states that are looking at UVED have reached out to Oklahoma to talk to them about the program. And it’s — all the conversations have been positive.

Zach CumminsB. Riley FBR, Inc. — Analyst

Understood. And then Robert, just, I know a lot of the near-term focus has been on the UVED program. But I mean, can you speak to some of the other opportunities in your pipeline and maybe some of the other progress that you’ve seen in other aspects of your business in terms of new wins?

Robert BermanPresident and Chief Executive Officer

Yes. I think, look, we’ve won a lot of small little contracts that we’ve decided that are just not — we’re just not going to throw press releases out there every time we win a contract. So we put a system in Tampa, Florida for the Super Bowl that came through Verra Mobility. It was really their contract.

So it wasn’t for us to announce. But we were approached at the end of the year to get a system stood up by the end of January prior to the Super Bowl for the city and for the police department down there. We did that. We won San Diego.

So we’ve had a bunch of continued progress with the public safety. And even most recently, the Oklahoma Turnpike reached out to us, the Turnpike Authority reached out to us on the basis of UVED. So there’s other stuff going on there, and we’re starting to see some scale. I think it’s hard for people to understand when a company is fledgling i a recourse size, OK? It takes time, OK? And everything that we’ve done in 2020 and late part of 2019, it was really to set ourselves up for going into 2021 to scale, but it requires a lot of infrastructure.

Requires a lot of people. It requires a very thoughtful, OK, approach to your systems. I mean, I’m sure many folks on this call saw the breach that Verkada had. They’re a Silicon Valley-backed company that plays in the security camera space.

So you just don’t throw the stuff out there. You got to get it right. And I think we’ve made really good progress, and I think we’ve built the foundation we need for the company to scale in ’21, and that’s exactly what we’re doing.

Zach CumminsB. Riley FBR, Inc. — Analyst

Understood. And then just a final question for me, geared toward Al. I know you had really strong growth in Q4, but the 2.8 million was just slightly below your preliminary range that you talked about. Is there any reason for that? Or did you have any sort of business that was pushed out —

Robert BermanPresident and Chief Executive Officer

Yes. Yes. No, there’s a good reason for it. So we had some orders that were shipped.

They were invoiced in 2020 toward the end of the year. And now that we’re sitting here in March, we can tell you that they were paid promptly. They were paid in less than, I think, even in one case in 32 days. But from the standpoint of revenue recognition in dealing with auditors, they didn’t meet their requirements for GAAP and booking that in 2020.

And I know people may be disappointed with that, but when you’re a small company and you’re growing little contracts here and there like that, that roll over into another quarter, you have a tendency to have an impact, and people shouldn’t go crazy over it because it’s — as the company gets larger, these things don’t really make much of a difference. And so that’s what happened there. And it happens to be one sizable with a repeat customer that has ordered more equipment from us even here in Q1.

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Zach CumminsB. Riley FBR, Inc. — Analyst

Got it. Well, thanks for the color, Robert, and best of luck as we go forward in 2021.

Robert BermanPresident and Chief Executive Officer

Thanks, Zach. Really appreciate it.

Operator

Thank you. Our next question is from Jaeson Schmidt from Lake Street Capital Markets. Please proceed.

Jaeson SchmidtLake Street Capital Markets — Analyst

Hey, guys. Thanks for taking my questions. Just circling back to the Oklahoma program. I think last time on the call, you mentioned hoping to get sort of just steady state rate of about 10% within three years.

And obviously, very early, but just based on sort of preliminary initial reception, I mean, do you think that timetable could actually be pulled forward?

Robert BermanPresident and Chief Executive Officer

I think it’s hard to say. I don’t think it could be pulled forward. I think it’s realistic that when you’re looking at three years, because you constantly have new people coming, especially when you’re in an economy like this, you have people that are becoming uninsured every day. And look, we feel for these people, and the program has done a great job of helping them, right? So — and Oklahoma’s been working with us, and we’ve been tweaking the program to make it work for the people that have to — they’ve got to pay this feet to the state to get in the program.

They’ve got to pay the, let’s just call it, the origination cost of the policy. We’ve been able to set a premium finance. So I think that three years is a reasonable period of time to get it down to a steady state as we thought. And I think that — right now, I can tell you that the models that we built for UVED in Oklahoma are tracking a little bit ahead of where we thought they would be.

So I think that we’re very pleased with it. The state’s very pleased with it, and it’s working. And — but we’re also learning every day because you’re dealing with people and our processors are dealing with people, and our insurance partner’s dealing with people. So we’re finding ways to tweak the program to make sure that we get these folks compliant, because it’s not enough to just get them in the program and have them pay a fee that we get some money from.

That doesn’t do it for us. We need to get them insured. And we’re finding a lot of people that have hardship that — a lot of it is COVID. I mean, they lost their job and they’re having to choose between paying one bill or another bill.

And it’s a scary thing when you’re driving uninsured and you get caught, your car could be impounded if they were pulled over by an officer. So I think we’re getting there. And I think the models that we built seem to be holding. So I would say that right now, we’ll stick with the three years.

And if we can accomplish that, it’s a phenomenal thing. And we look forward to hopefully getting to do that in some other large states where numbers are much bigger, and we can solve a much bigger problem for those states. But — so that’s the best way that I can answer that. And it’s also very early.

I mean, we got the program up and running early, but that doesn’t mean we just turned to light switch on, right? And we just started it. So we had ruminant data, and we’ve been making changes to it and tweaks to it almost daily. And it’s getting better. It’s actually — if you look at it, the numbers of people enrolling in the program are almost increasing daily.

So I think we’re getting better at running the program.

Jaeson SchmidtLake Street Capital Markets — Analyst

OK. That’s really helpful. And then I know you just mentioned a number of opportunities in the pipeline and one was San Diego. Just curious if you could sort of outline why you won that sort of RFP, or why you’re winning in the market for some of these deals? Is it pricing? Is it the robustness of the platform?

Robert BermanPresident and Chief Executive Officer

It’s the technology. I mean, look, so North Dakota was a highly unusual — and we talked about Oklahoma, right? But North Dakota is a statewide contract, right? It’s their parks. A lot of companies bid North Dakota, OK? Nobody had the technological ability to give them the system that they needed. San Diego had, I believe there may have been six bidders.

It could have been five, OK? And other than Rekor, all of those bidders, including our largest competitor in that space, were disqualified for their technology being what they call nonresponsive. So it wasn’t just price, it was the technology didn’t give the customer what they wanted, because things are changing and people — they want these systems to have the ability to do more, right? So that’s, I think, what makes Rekor different, right? We can do more with the systems we have. And I will say, it goes well beyond that. It goes into the realm of how you share, how you store and how your clients manage their data.

But if there was an article on the Wall Street Journal today, you guys can all read it, OK? Rekor was mentioned in it. But there’s a lot of privacy issues when it comes to vehicle recognition. And we have one way of approaching it. The legacy industry has another, and they do what they do and they run data lakes and they control the data.

We don’t see it that way. We think we provide the tools that our customers need to manage their own data. And we do it in a way that makes it extremely difficult to hack. Look, it’s possible that everybody can get hacked, right? But we think that we built the 21st century technology stack.

So it’s a combination of the way our data is stored and distributed and then shared. It’s alongside of the additional things that it does, OK? And then it’s the price as well, because the price is disruptive. But it’s all three of those.

Jaeson SchmidtLake Street Capital Markets — Analyst

OK. That makes sense. And then just last one for me, and I’ll jump back into queue. I know it’s going to vary by quarter, but how should we think about gross margin trending throughout this year, especially with the continued rollout of UVED and then Mastercard coming online later this year?

Robert BermanPresident and Chief Executive Officer

Eyal, I think you can better answer that.

Eyal HenChief Financial Officer

As we mentioned, we anticipate this to be 60 to 65% throughout the year. It depends on the mix between software and hardware. As you can see, Q4 is high because higher software revenues. But we anticipate it to be around the 60 to 65% for the next few quarters.

And it’s our long-term goal to keep this margin at this level.

Jaeson SchmidtLake Street Capital Markets — Analyst

OK. Thanks a lot, guys.

Robert BermanPresident and Chief Executive Officer

Thank you very much.

Operator

Thank you. [Operator instructions] Our next question is from Burton Weinstein of Cedarview Capital. Please proceed.

Burton WeinsteinCedarview Capital — Analyst

Hi, Robert and Eyal. How are you doing?

Robert BermanPresident and Chief Executive Officer

Hey, Burt.

Burton WeinsteinCedarview Capital — Analyst

Can you just give us an update on anything going on in the tolling space as well as in the school bus stop arm with the advent of the, hopefully, pandemic ebbing? Are you starting to get some more inquiry in that area? And also, if you can somehow just tell us if your first quarter’s tracking to expectations?

Robert BermanPresident and Chief Executive Officer

So let me start with the school bus stop arm. I think, again, we OEM our software to other companies for that business. And we’re frankly not paying attention to it. I think we’ll have to see how they roll out and what they do.

So it’s not something that we directly sell into. With respect to tolling, if you — we have become probably one of the largest image processors in the country for a couple of the largest tolling companies that there are doing their high-volume processing through our automated system, and it’s something that’s new and just started in 2021. And we had early adoption with tolling back when we signed up Colorado E470. And that’s led to these new relationships and so forth, both here and in Canada as well.

So the tolling business is growing. What’s nice about that business is, it’s software, it’s automated. And it’s big numbers. It’s small revenue from the standpoint of transaction.

It’s like millage, but the volume is large and it has a tendency that it can grow it very large. So I think that’s where we are with that. I think with respect to Q1, I think I’ll say the same thing that I said when we went out, we did the road show and what we were saying all through 2020, look, this company went through a remarkable transformation, OK? We decided to focus on our technology in late Q1, early Q2 of 2019. We spent the entirety of n2019 realigning the company to focus on that and all 2020 getting rid of other assets, other businesses while hiring in people and putting in systems and other things to be able to scale and grow.

And at the end of 2020, we had three ways that we intend to generate revenue, and that’s our e-commerce platform, our reseller program and the continuation of strategic partnerships, both the ones that we have and new ones that are always in the pipeline. Those things take a long time. But to have — they’re in various stages. It can take a year, but we may have one that’s 10 months into that year, right? So Q1 is tracking very well, OK? We’re very pleased with where we are in Q1 and 2021.

We’re pleased where we are overall in 2021. So I think, as I said, I mean, the 2020 was a transformative year for this company. And when you go back and you look at it and you look at the performance obligation of $16 million or $17 million, which is revenue that the company could shut down tomorrow and gain. And if folks would take a look at the balance sheet, OK, in RK and realize that we have an accumulated deficit of $43 million.

It goes all the way back to the founding of this company in 2016, and look at the net cost of building what we built and how much progress we’ve made. And I think it’s quite remarkable. So it’s the results of having a really good team, a good board and good technology, and good shareholders that support us. So it’s all those things.

Burton WeinsteinCedarview Capital — Analyst

Thanks.

Robert BermanPresident and Chief Executive Officer

Yes, thank you.

Operator

OK. And our next question is from KC Ambrecht from Shay. Please proceed.

Unknown speaker

Hi, guys. Thanks very much for hosting the call tonight. Three questions, if you could clarify. One, on the Oklahoma contract, what type of attachment points are you seeing on these insurance rediversion machines? Like somebody gets the ticket what percent are calling you? No 2, can you just remind us how big the Mastercard is potentially for quick service restaurants, how many lanes are, what you guys are getting a month? And No.

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3, there’s a lot of talk about an infrastructure package in time this year, 2 to 4 trillion is being thrown around. How do we think about Rekor’s kind of positioning in that type of property? And could you shave off 1% of that? Like how do you think — how should we think about that? Thank you.

Robert BermanPresident and Chief Executive Officer

KC, thank you. Those are really great questions. I’m going to start with the last first. So infrastructure.

One of the things that Rekor One does is it gives us the ability in real-time using video analytics to measure things like emissions and congestion, OK? So just think about that, but separated from congestion pricing because they’re different things, right? So we now have this administration. We know that the administration is green. And if they do an infrastructure bill, which is likely — one of the things they are likely to think about are green corridors. So how do you establish green corridors? Well, in order to establish green corridors you have to have a sense of who’s on the roadway, right, or who’s going to be on the roadway.

So our technology has the ability to identify electric vehicles, have — identify hybrid vehicles. Also identify vehicles that are emissions polluters and so forth. So if you think about that, in and by itself, there’s likely to be a good piece of this bill that’s going to relate to creation of green corridors and Rekor One fits really well into that. And then when you think about the infrastructure itself, they’re probably shovel-ready projects.

We all saw that when they passed the financial meltdown in 2008, that they were going to spend money on shovel-ready projects. But they’re not all that many of them, right? So you have to go out and you have to do the work first, right? So you have to do studies. So you have to make a determination as to which roads, bridges, tunnels you’re going to repair, replace, maintain whatever the case might be. And technology has to be a big part of that, OK? It has to be because you cannot do this the way that we’ve done it in the past, OK, where it’s done with either folks out on the road surveying or putting the rubber hose in the box on the side of the road, it’s going to be done using, we think, video analytics, and that’s what our products do.

So I think that we’re going to play well in the infrastructure bill. And I think for the shareholders that know us, they know that we have a very solid government affairs team here. And we’re not afraid to expend resources and time and bandwidth lobbying and doing capture. There’s nothing wrong with it.

And we’re out there doing it. We’re on the hill. We’re involved in the discussion of what people are thinking with respect to infrastructure. And we take the same approach with that as we do with the folks in the various states that we’re working with.

With respect to Mastercard, look, again, we’ve talked to, since we got involved with all this, half a dozen to maybe even 10 companies about how to use vehicle recognition or pay-by-plate types of things and fast-food restaurants. And then you had COVID and then everybody is saying, oh, you need to do this for curbside pickup and other things. But again, we’ve already been working on this with a bunch of folks. And we think that Mastercard has the right approach.

I mean, they’re clearly going to change the game of the way drive-thrus operate. It’s revolutionary because it deals both with the experience in the restaurant for the customer as well as the efficiency of the restaurant, which is all important. When you talk to some of these chains, they’ll tell you that saving 10 seconds in a drive-thru lane across their system, it’s a huge amount of money. So just in the U.S., to quantify it, there are 270,000 drive-thrus, 270,000 drive-thrus.

But Mastercard is looking at this, both in the U.S. and outside the U.S. We’re subject to what they do, right? We’re not in pilot with Mastercard. They’re products and pilot, OK.

Mastercard has an agreement with us. We’ve worked through all the SLAs and all the things you would need to have a full commercial relationship with a customer the size of Mastercard. So we’re ready to go once they’re ready to go, and we’re hopeful they’re going to get some penetration. So we can’t speak to what that might be.

We don’t even really know the cost of their product. But we can assume they’re smart people. They’ve got lots of people Mastercard working on it, and it’s likely going to have some type of pretty reasonable payback to the restaurants themselves, and it’s going to have to enhance customer experience. And that’s why they’ve got data scientists pouring all over the stuff.

And the early results from what we see seem to be that they’re pleased with the progress. They’re just — like we would do with putting our products in the market. I mean, folks are always want us to move a little bit quicker, but we’ve got to be careful that what we put out there works and that we don’t have huge value rates and system problems and other things. So we think they’re getting there.

With respect to attachment in insurance, I think it’s a bit early to put a number on that. I think that — I would say that it’s as expected. I think that we’re starting to see an increase almost daily. And we’re learning, because what we’re learning is when we first started, our partner didn’t have an automated system for quotes.

So they had to get that up first. And then finally, when they got the automated system of quotes where you’re getting multiple quotes when you put your information in, we were finding that there needed to be a premium finance component to it because, look, some of the folks that you’re dealing with, the ability to finance the premium and make simple monthly payment makes a difference. So we didn’t even get that up until, I think, less than 10 days ago. So it’s too early because I think we finally have all the pieces worked out.

Now we just had this one little change with Oklahoma, where they’re willing to defer they’re part of the fee for — to allow the person to make the insurance payments so long as it’s through our portal and they can confirm it and then they can pay the UVED fee a month later. We think — and that hasn’t been initiated yet. They just gave us approval to do that. So we’re going to see what that does.

We think that, that’s going to help dramatically because if somebody’s got to make a a $100 payment for the insurance policy, and then it’s $70 a month because there’s a cost of establishing the policy. And then they got to pay the 174 on top of it, the ability to pay the part of that feed down the road is probably going to make a difference. So it’s a bit early to tell. The good news is that it’s getting better every day.

And the attachment — the customer journey or the — I don’t really want to call them violators because I don’t see them personally that way. But these folks that are being sent through the UVED enrollment program, I think that we’re making the path easier for them to follow. And we’re going to be coming out with some testimonials from some of these folks that we’re going to share with some of the other states from people that actually enrolled in the program. And we may have the ability to post some of that stuff on social media, and you guys may be able to see it, but it’s helping a lot of people.

So let’s see where we are in — at the end of the quarter with the insurance side. Then hopefully, we’ll have some better numbers and better ideas. Hope that was helpful. Hello? Did I lose you guys?

Eyal HenChief Financial Officer

No, we hear you. Joe?

Operator

OK. Thank you. And ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back over to Robert Berman for closing remarks.

Robert BermanPresident and Chief Executive Officer

So look, everybody, thank you for spending time this afternoon. I know it’s late in the day and everybody wants to go relax. But look, we’re really confident that Rekor is well positioned to serve the needs of our customers. And while we’re maintaining the best discipline we can.

It’s not just financial discipline. It’s discipline in rushing to do something for the sake of immediate gratification versus making a mistake and letting a product loose a month early and then having a meltdown on a system or something, right? So we’re in a good place. And combined with the strong fundamentals that we have, we’ve got great margins with our software and our bundled products, it will give us the ability to enable long-term value to the shareholders. I mean, we’ll be looking at more strategic acquisitions.

We were looking at a number of them. At the same time, we were looking at Iteris, and many of you did bring up Iteris. So it put Eyal and I in an awkward place. So we did what we did.

But we’re intently focused on continuing to improve our business and with growing sales and expanding both our U.S. and global customer base. So look, the future really looks bright for this company. It’s early stage, for the idea of intelligent roadways in smart cities, OK? That’s nomenclature that many companies use — I won’t mention their name, we use it as well — smart mobility.

But it’s just coming, OK? And the technology stack that it takes to really implement that is something that’s new to some folks that don’t even understand the pieces of it exist. And — but we’re proving that we have adoption of the technology that we’re using, OK? With significant counterparties, significant governmental entities that are saying, yes, we want to work with you guys. So I think let us get into 2021. It’s going to be a good year.

And the sky is the limit with this company, and I couldn’t feel any better where we are with it, right? But we’re going to be conservative in our approach, and we’re going to do the right things. And we’re going to keep at it. So — but again, thank you all again for your support, right? We’ve got really a great shareholder base, the ones that we speak to and know, and we appreciate it. And we’re looking forward to a really exciting year.

So thanks, everybody.

Operator

[Operator signoff]

Duration: 50 minutes

Call participants:

Eyal HenChief Financial Officer

Robert BermanPresident and Chief Executive Officer

Mike LatimoreNorthland Capital Markets — Analyst

Zach CumminsB. Riley FBR, Inc. — Analyst

Jaeson SchmidtLake Street Capital Markets — Analyst

Burton WeinsteinCedarview Capital — Analyst

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