May 10, 2021
Rekor Systems, Inc. Reports First Quarter 2021 Financial Results
- First quarter 2021 gross revenue increased 164% to $4.2 million as compared to $1.6 million in the first quarter of 2020
- Raised $70.1 million in net cash proceeds during February 2021 with an underwritten public offering
Rekor Systems, Inc, (NASDAQ: REKR) ("Rekor"), a provider of real-time roadway, customer and public safety intelligence to enable AI-driven decisions, today announced its unaudited financial results for the first quarter of 2021.
“Our results in the first quarter have demonstrated a continuing high level of growth on a year-over-year basis,” said Eyal Hen, Chief Financial Officer, Rekor. “In the first quarter we stepped up our sales outreach by actively marketing our eCommerce platform and expanding our channel partners program along with continuing our aggressive direct sales efforts. These activities were key to increased revenue generation in the first quarter of 2021. Rekor's go-to-market strategy reaches a global customer base with frictionless transactions and gives us great confidence moving forward.”
“We are pleased with our results for the first quarter 2021, which demonstrate substantial ongoing year-over-year improvement,” said Robert A. Berman, President and CEO, Rekor. “This quarter we accelerated growth in both our commercial and government sectors.”
In February 2021, the Company completed an underwritten offering with resulting net proceeds of $70.1 million in cash.
The company has continued to expand its product and service offerings in recent quarters. The product suite incorporates intensive machine learning, which was been developed over the last three years and, which differentiates Rekor’s offerings from its competitors. Importantly, we also launched the beta version of the Rekor One platform, which is now ready for demonstration to all commercial and public sector potential customers.
First Quarter 2021 and First Quarter 2020 Financial Results
Revenue for the three months ended March 31, 2021, increased $2,621,000 or 164% to $4,216,000, compared to $1,595,000 for the three months ended March 31, 2020. The increase in revenue for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was a result of additional products and services the Company offered and increases in direct sales and Partner Program sales of our existing products and services. In the first quarter of 2021, we initiated services for the state of Oklahoma’s Uninsured Vehicle Enforcement Diversion (UVED) Program, which issued over 25,000 diversion notices of non-compliance and generated approximately $1,000,000 in revenue for the state and $245,000 of revenue for the Company in the current quarter. We also had significant growth in our eCommerce revenue, which is defined as revenue recognized through our eCommerce platform as well as from our solutions in the tolling industry. For the three months ended March 31, 2021 and 2020, the Company recognized eCommerce revenues of $442,000 and $177,000 respectively. The remainder of the increase was attributable to increased sales of hardware and software subscriptions through our Partner Program and direct sales channels.
Cost of Revenue, Gross Profit and Gross Margin
Gross profit for the three months ended March 31, 2021, increased to $2,254,000 with a gross margin of 53%, compared to $1,101,000 and a gross margin of 69% for the three months ended March 31, 2020. The increase in gross profit was primarily attributable to the increase in revenue for the corresponding period. The decrease in gross margin was attributable to a higher level of hardware sales that occurred during the three months ended March 31, 2021, as hardware sales typically have lower margins than software sales.
Loss from Operations
Operating loss for the three months ended March 31, 2021, increased to $5,308,000, compared to $2,604,000 for the three months ended March 31, 2020. The increase in the operating loss during the period is attributable mainly to the increased headcount to support our growth plan and professional services related to our merger and acquisition activities. In addition, we continue to increase our R&D expenses to keep developing new solutions and advancing our technology.
Loss per Share
Loss per share for the three months ended March 31, 2021 decreased to $(0.15), compared to $(0.19) for the three months ended March 31, 2020. The $(0.04) decrease in the loss per share was due to the increase in the weighted average of shares outstanding for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. During the period subsequent to March 31, 2020, the Company issued shares in connection with an At-the-Market sales agreement, the retirement of debt, the conversion of preferred stock and an underwritten public offering, all of which caused an increase in the weighted average of common shares outstanding for the three months ended March 31, 2021.
As of March 31, 2021, we had approximately $16,186,000 of contracts that were closed prior to March 31, 2021, but have a contractual period beyond March 31, 2021. These contracts generally cover a term of one to five years, in which we will recognize revenue ratably over the contract term. We currently expect to recognize approximately 32% of this amount over the succeeding twelve months, and the remainder is expected to be recognized over the following four years. On occasion our customers will prepay the full contract or a substantial portion of the contract. Amounts related to the prepayment of the contract for a service period that is not yet met are recorded as part of our contract liabilities balance.
The table below reflects the 17% growth in the remaining value of contracts from March 31, 2020, compared to March 31, 2021 (dollars in thousands):
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 or gains on sales of subsidiaries, (v) losses associated with equity method investments, (vi) merger and acquisition transaction costs and (vii) 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 and Adjusted EBITDA for the periods included (dollars in thousands):
Rekor has scheduled a conference call to discuss the 2021 first quarter results on Monday, May 10, 2021, at 4:30 P.M. (Eastern).
All interested parties may listen to a live webcast of the call at:
An archived webcast will also be available to replay this conference call directly from the Company’s website under Investors, Events & Presentations. Slides that accompany the conference call will be available on the Company’s website.