Knightscope, Inc. (NASDAQ:KSCP) Q2 2023 Earnings Call Transcript August 16, 2023
William Li: Hello, everyone. We’ve received a good amount of positive feedback from the first quarter town hall. So we plan to continue down this path of having a clear, easy-to-understand quarterly presentation followed by a frank and direct discussion. As a reminder, this town hall format is intended to provide an informal forum for our nationwide audience to ask questions from Wall Street to Main Street from Silicon Valley to Washington, D.C. If we’re going to achieve our long-term mission of making the U.S. the safest country in the world, we’re going to need the entire country engage. And part of that is communicating directly with you consistently. Of course, any and all figures presented today in this presentation are the financial highlights from our recently filed quarterly report on Form 10-Q should be read in full context of the company’s recent regulatory filings and risk factors all available for you at ir.nightscope.com.
All right. Well, before we get to the financial results, I wanted to cover two specific items. First, we did it. We successfully cleared both compliance efficiencies from NASDAQ and Knightscope is now back in good standing with the exchange. I wanted to take a moment to thank all of our supporters, as all of you are an integral part of the Knightscope extended team in helping make the long-term mission a reality. Without our investors, we can’t move forward, but with our investors, hey, the sky is the limit. Second, we are following through on our commitment to our investors that we stated on the 18th of July. Market manipulation, disclosure violations and tortious interference are serious crimes. Knightscope is conducting an investigation and is considering legal action in support of our stockholders.
To that end, we have begun the process of filing a formal complaint with the U.S. Securities and Exchange Commission in response to what we believe to be unethical and potentially illegal conduct against Knightscope and its investors. It’s unfortunate that we’re working hard to make communities in our country safer, but now we have to also deal with bad actors in the financial markets. Okay. With that said, let’s get to the numbers. Last year, in 2022, we recorded $5.6 million in aggregate revenue for the year, reflecting an over 60% growth rate from the prior year in ’21. For the 6 months ended June 2023, we booked approximately $6.5 million of revenue, putting us on an over $12 million annual revenue run rate, well over double last year. That’s right, not only double-digit growth over 2022, but literally potentially doubling the company’s revenue by the end of 2023.
As I often say, the rise of the robots is happening, and it’s happening now. Additionally, as of 30th of July 2023, the company had a total backlog of approximately $4.9 million, comprised of $2.1 million in new orders for related autonomous security robots or ASRs and $2.8 million related to new orders for our portfolio of K1B products, which include the K1 Blue light towers, E-Phones and Call Boxes. During the first quarter of ’23, we recorded $2.9 million in revenue for the first 3 months of the year, and I’m pleased to report that during the second quarter, we increased our quarterly performance and booked $3.6 million in revenue and over 20% quarter-over-quarter increase. Our ongoing efforts to reduce costs and improve our gross margins has also begun to take effect.
We reflected a gross loss during the first quarter of ’23 of about $0.2 million or negative 7% to now a gross profit for the second quarter of $9,000 or approximately 0.3%. Reaching slightly better than breakeven at the gross profit level, marks a significant milestone for the company as we continue to pave our path to profitability. On a 6-month percentage basis from 2022 to 2023, gross margins moved dramatically from a negative 62% to a negative 3%. A significant driver of this improvement is due to healthy margins attributed to K1B product sales and continued maintenance services across our installed base of over 7,000 units nationwide. As we communicated last year, we believe that the acquisition of Case Emergency Systems will be accretive, and we are pleased with the financial results posted for the first 6 months of this year.
Our continued focus on decreasing our cost contributed to producing and servicing ASRs has begun to yield results. As we often stated, the Machine as a Service or MaaS business model creates a unique set of circumstances. While the subscription model provides Knightscope with a predictable revenue stream, the technology we produce is not only highly complex, it also requires a certain fixed cost basis to operate. But as we scale, those fixed costs can be spread out over more and more units and eventually provide strong leverage for our recurring revenue business model. As the company continues to scale, we believe additional significant margin improvements will continue as part of our plan to reach profitability by end of 2024. And to reiterate, Knightscope delivers a recurring revenue business model for a recurring societal problem.
Comparing the first half of ’22 to first half ’23, on a per share basis, we improved significantly from a $0.26 loss per common share to a $0.14 loss per common share. As we prior noted, we plan to continue growing the company, and we believe our sales pipeline is healthy and increasing sales will allow us to grow, drive economies of scale and better leverage our fixed cost base. Although not yet completely addressed, some of the supply chain issues have begun to subside, which we also believe will aid in reducing lead times, enabling us to improve cash flow and recognize revenue in a much more timely manner. Our cash on hand at the end of 2022 was $4.8 million, and our cash and cash equivalents at the end of the second quarter of 2023 was approximately $5.8 million.
Also, as previously disclosed, the approximately $6 million of convertible notes secured in connection with the acquisition of Case were fully extinguished by the end of the second quarter of 2023. We’ll now transition to the live portion of the town hall for questions from our long-time investors, new retail investors, institutions and analysts. Thank you.
End of Q&A:
