Q4 2023 Rekor Systems Inc Earnings Call

Participants

Robert Berman; CEO and Chairman; Rekor Systems, Inc.

Eyal Hen; CFO; Rekor Systems, Inc.

David Desharnais; President and COO; Rekor Systems, Inc.

Louie DiPalma; Analyst; William Blair & Company LLC

Michael Latimore; Analyst; Northland Capital Management LLC

Michael Cohen

David Hargreaves

Ray Yuko

Presentation

Operator

You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC and 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 Rekor Systems' Board of Directors.

Robert Berman

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 made in the scheduled date for our planned Investor Day. Originally, we announced at our investor conference with 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 headquarters in New York. But with a number of things that are moving forward at record, 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 record in today's presentation.
Before I turn the call over to Dale, I'd like to take some time to tell you why I believe so strongly in what we're doing and then report itself for some of you think they appear as if they aren't happening fast enough. Let me tell you when you consider all the demands of working with governments, 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 experience. 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 record the ability to build the platforms.
We have our tech. This 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 is a tsunami on the horizon. Many of you call and reach out and offer helpful suggestions for to suggest the company just does not communicate as much as it should. I'm sorry, some of you feel this way and that and think that things just haven't happened fast enough While I'm confident that 2024 is going to be a year where record 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.

Eyal Hen

Thank you of both. We'll be back shortly with our President and COO, David Desharnais to give you some insight into the future. But first, I will discuss recourse 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 the 75% increase in annual revenue and a 21 rides over and a 21% rise over the preceding quarter revenue. The fourth quarter was particularly notable with revenue reaching $11.1 million, which represents a substantial increase over both the prior year and the preceding and the preceding quarter.
9iOur total revenue for the year stood at $34.9 million, even though we also focused on reducing operational cash usage. Our adjusted gross margin improved markedly to 59.8%, showcasing the impact of our technological advancements and operational efficiencies as well as the synergy achieved as we integrated the acquisition of SCM. 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 ports 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 enhance our liquidity in January 2023, we completed a significant transaction involving senior secured notes of $12.5 million, led by our CEO. with Belmont 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 and a warrant holder exercised warrants, resulting in approximately $11 million of 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 used a portion of the cash proceeds from the above to acquire all traffic data for 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 with this 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 record as we build for the future of digital infrastructure and roadway intelligence looking forward, we continue to be confident in the potential of our technological developments, strategic acquisitions and the continued support of our investors. Thank you for that with overview for 2023. I'm pleased to now give the floor to David for his remarks on our path forward in 2020 for dated.

David Desharnais

Thank you, Eyal. Good afternoon, and thank you for joining us today record achieved many critical milestones in 2023, including several new major products and platforms launch to market multiple new technology patents filed and awarded a three x expansion in our production and distribution capacity and a 30% increase in new customers. As Dale 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 track to LTV ratio rings and an incredible 7.7 times more than twice that of which is considered to be a well-run technology company. Despite aggressive moves, well-funded public and private legacy players in the market record has continued to stand out as the technology leader in the industry for each of our business lines in 2023 fact is we consistently outperformed 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 record in 2024 and beyond. We are at the nexus of two industry-wide transitions happening right now. First, we've been a refresh of physical infrastructure, digital infrastructure that is happening right now. A simple visit to the US Department of Transportation website will confirm that after multiple decades of underinvestment, U.S. roadways and infrastructure are in bad shape. We did a C minus on the official US 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 Citizens' safety, personal financial losses and the competitiveness of the U.S. national economy.
Our runway 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, ship and manage traffic monitor, respond to incidents and operate the plant, roadways and communities. Every year, state DOTs must perform millions of federally mandated traffic studies in order to secure funding for routine operations, maintenance planning and projects. These studies are done using a combination of the multiple millions of rubber to you see running across streets, antiquated, CCTV cameras, inductive loops, PAs, electrics 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. Of course, we started in the 1950s and 60s with the advent of pneumatic tools.
This was followed by a second wave in the 70s and 80s with in-ground devices like loops and PAs and more and 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 approximate 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 because these devices are yesterday's tech, they're not able to be updated and can fully capture and report on the vehicle classes counts and speeds now required by the US Department of Transportation and Federal Highway Administration.
Like the previous waves of technology, these radar systems are analog and disconnected. They are no longer useful practical or safe and far beyond obsolescence between all three previous waves of technology refresh. There are literally millions of these obsolete sensors and devices literally 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 on real time, as the rest of the world modernizes around the 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 that are cars and smartphones, we face increasing challenges getting from point A. to point B, predictably, our news is for the 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, goodly commissions continue to be the leading cause of death among children and adults under 30.
All of this and more to be fast will improve with safer, smarter and greener roadway infrastructure. But we infrastructure is the background backbone of public safety, transportation and competitive and smoothed running economy. Currently, the US 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 picked up a whole new investment cycle and wave of technology refresh to build the next trillion 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 require technology serves as the first major trend. The transition to digital infrastructure is already well underway and is this industry wide?
This brings me to the second trend, the 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 in embracing artificial intelligence, machine learning, computer vision, it's processing 5G cloud. And even now general, the big guy is accelerating as they move along the S-curve of technology adoption. These are all areas of strength for record software. It is the art and video GPU-based hardware systems, ability to fuse together and process trillions of data points of mobility data source from key partners in the ecosystem and our multi-modal competent AI solutions that extend seamlessly across edge IoT, cloud and on-premise environments.
This means our customers can easily deploy record within their existing workflows, datasets and infrastructure. We've taken a deliberate approach of radical simplification now making the complex simple so our customers can be an 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 rate trends is opening up a whole new world of high-value applications that will translate into a very significant business over time. As at 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. Our new products we launched this year will be built on our existing platforms. So our investment curve can be less steep and the time 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 in video and AWS to prepare capacity for multibillion dollar scale, all while keeping our current customers and systems operating at the highest levels of performance on a 24 by seven 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 as 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, and they can clear the air along with multiple other studies they must perform. We believe we stand alone in our ability to deliver.
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 and 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 Rekor for final remarks and Q&A. Robert?

Robert Berman

Thank you, Dave. And 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 to support and find the patients to help us sell the ship into the harbor. I would like to have 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.

David Desharnais

Thank you.
Hello, operator.

Robert Berman

Operator, do we have any questions?

Question and Answer Session

Operator

We have some questions. We'll bring you up pretty nicely.

David Desharnais

I apologize. Can you hear me now? Yes, we are targeting an enormous appeal. This is I have no idea holidays. I was prompting for Q&A, but I guess my microphone wasn't working. I apologize for the technical script. Let's go to what's going to give you an additional question here.

Operator

Louie DiPalma, William Blair.

Louie DiPalma

Good afternoon, Robert and David. As you heard from Robert, you reported a 124% increase in contracts and and David described how TRANSPORTATION modernization appears to be a major as a priority are you observing an acceleration in projects funded by $550 billion IAJ. infrastructure bill, and are we still in the early innings here of this on modernization project?

Robert Berman

Yes, David, let me take that first and then David can follow up with, I think on there's two pieces here. The first is on the program money from what the government requires on state cities and other our municipalities to do statewide, right? That's program money. And what we're seeing is an increase of the interest in using our technology to do there as opposed to the legacy technology.
And David, you can take the second piece with respect both on pneumonia.

David Desharnais

Yes, maybe if you can hear me okay, yes, whereas they're starting to use money freed up as a result of distributions from the IGAA., which is otherwise known as the bipartisan infrastructure law or BIL. It's about I would say about $300 billion has been deployed over 2020 to late 2022 and also coming into 2023. And so there's a lot of I'd say a lot 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 an injection of capital. Thanks, Andrea.

Robert Berman

Can I just add to that, that you know that there's, you know, just for, you know, our shareholders on the call here and in the fall of 2023 of the Administration released its rules on on measuring our greenhouse gases and setting targets for 2030. And those rules went into effect in early January. I think January sixth or if I'm not mistaken, it was either six or eight and they have to set their targets by 24 and they have to then show how they measure those and get to where their targets are by 2030. I think some of that may be related to the new money, but this is all new very new grain. I mean it's just beginning of the year and they just set these rules and they're just starting to cooperate on them now.

Louie DiPalma

Great. And for Robert and David, you referenced how on 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 and radar to have systems have it installed. What is the total market opportunity to replace the outdated technologies? You're like analytics, software sensors?

Robert Berman

David, you want to take a shot at that or?

David Desharnais

Yes, I know the states. Every state has some 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 state like California, obviously much larger of a lot more devices there as they are filling out. I'll give you an example. Like a though sensor or an inductive loops. 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 repaid or moved or anything like that and or they just simply fail because they're a mechanical device that is second, you put it in the ground.
It starts to deteriorate 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 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 able to deliver unique value based on our approach using AI, I would say it will serve us well because as was different about AI. is when it's out there rather than deteriorate, it actually starts to improve every single time. This is a new situation. It learns and continues to get better and stronger.
So we believe that on one dimension, just a sheer replacement of technology, there's an enormous opportunity there 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 IGA or the bipartisan infrastructure bill. But it does not comprehend is that the way that we've approached the market and our technology is that we don't with a single device, we have the ability to monetize multiple dimensions. As Robert mentioned, that greenhouse gas emissions, there's really nothing and out there today on the road side other than the hundreds of thousands of dollars that you would spend for a greenhouse gas, right?
And 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 counts and speed and other other studies with. And so our ability to monetize on a roadside unit that would be replacing legacy tech and to continue to future-proof that and expand upon that footprint. It is large and expanding.

Louie DiPalma

Thanks. And on for Robert and David, you described the opportunity in the billions and Eyal, you grew revenue 71% year over year in the fourth quarter. And on the team discussed how new products will be built onto your existing platform. So with this large revenue opportunity and revenue growing from so fast, how are you balancing revenue growth with margin on pension?

Eyal Hen

Yes, I'll take it over. So basically our revenues, our margins, we anticipate with the technologies we penetrate more and more state DOTs with our technology. We anticipate the margin actually to go up the margins on the technology is higher than the low 20 s., as David described. So we do anticipate, as we have increased revenues always going up and the mix of revenues leaning more toward our technology. This 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 our IoT node devices. Roadside of this answer question.

Robert Berman

Yes, you know, let me let me just add to that, Louis. Let's be clear, right. So what we're doing is we're putting IoT nodes inside. And it's a single system that can have multiple missions, right? So when we are has to put a system in to do what's mandated like count class and speed and we install it. It's out there just on the state or the municipality decides they want to do greenhouse gas emissions. We turn it on if they decide that they wanted 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 and the last time 30 years ago, okay. We don't have to go back out to the road and we install it and do anything it's there. We just turn on additional functionality and it serves them purpose for their needs. So the margins go up because you're getting additional fees for our same device just providing additional functionality.

Louie DiPalma

Thanks, Robert. That's really helpful. And I think that helps everybody on the call. Understand the the fixed price on the mostly fixed price nature of your your product suite.

Robert Berman

Thank you.

Operator

Michael Latimore, Northland Capital Markets.

Michael Latimore

Great. Thanks, Jeff, and congrats again on the strong organic growth in the quarter and in terms of the bookings, 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 most expansions, new states? Just a little more color on bookings would be great.

Robert Berman

Yes, Michael, maybe I'll let Dave take a piece of this, but before we do, I just want to make it clear that and as we've always said, we started within our footprint, which was the acquisition of STS. and our relationships in the southern states. And 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 record, and we're new to them. And so I think it's fair to say that know, this is new. It's and it's not just our technology that's new. It's the whole concept of a eye on connected devices and all these other things going on out there that customers have to get customer paying used to and whatnot. And it just all and that's all happening and it's happening right now. So a real answer from there?

David Desharnais

Yes. If we talk about it before as well, the total contract value that we have close to $50 million is across all three segments, Michael, and we talk about it before yet leaning more toward the cover or the Urban Mobility segment that we have because these are larger contracts or longer period of time. But we see our total contract value or the booking as you call them up in our portfolio, it's really across all three segments that we see. And you can see the growth in all three segments revenues. That's what we anticipate that this our backlog or our bookings will go up among all three segments and not just one, but the majority of EBITDA.

Robert Berman

And you're right, is with the automobile because the nature of the contracts I've got, Michael, maybe mortgage, 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 on. But what happens is once they get the technology out there, these three platforms fit hand and glove because it's public safety and traffic management or mobility. And again, it's the same system that performs all these different functions. So on one leads to another leads to another leads to another right now at Micron.

Michael Latimore

And how about in terms of just the deployment of resources you have you obviously had your organic team and I think you were building that and you've added an 82 year, 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 this is what they can do per month or something? Kevin Davidson, David, you want to because?

David Desharnais

Yes. So we've got with the acquisition of ATD joining us in January, we have upwards of 70, 75 to 80 individuals that are in the field that are outside experts and certified to do the work out there. But I would say that from a deployment perspective, we now have reached 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 office by office. That's been an issue for us, but we're not limited to our own staff and we've got cases where we have a third party and third party aggregator business is Pheno as a preferred for a state. We can do that. So it's really not a limitation, though, services. It's 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 the answer your question about 75 to 80 in terms of roadside certified experts that are out there, Michael, that it's important to note those are people that understand working roadside working with DOTs and others do this stuff every day on, you know, as David mentioned, integrators or adding field techs on, frankly, is not rocket science, right? It's more of 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 labor force. If necessary or using integrators who it was more the expertise that we were concerned about. And that's why adding ATV is so valuable that make them.

Michael Latimore

And then just Tom and things may be evolving, so you might not be able to guide on this, but can you give some sense of what product versus service mix might be for the year? Are you thinking about that? And then also on what KorAm quarterly revenue level you might get to EBITDA breakeven?

Robert Berman

Well, no, the product is the service revenues. I know that may sound kind of like what but the this is not an industry where technology companies just walks in and says, hey, we're here use our software and you can do all the stuff that you need to non-growth. So the product and the service on they go hand in glove, it is without question, I think. So that's that's an important thing. And that's what makes record unique, right? It's it's our ability to on provides services to customers that want trust with the supplier on that they can maintain existing equipment and continue the flow of existing data while they're transferring over to new systems and getting data new way. So you can keep them operating. And that's a really important component of it. So they really you go together, and it's hard to break it out. So I'd say the service and the product there on almost one the same. I mean, David, would you agree with that?

David Desharnais

Yes, I mean as we're learning here, that the services that we would provide become more and more automated, right? So they almost become productized through again through automation and just being able to simplify and cut down steps and it just becomes a step repeat or typically you think of a services 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 are 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, we have 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 AIR. Foundation model approaches here 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 second like a mini supercomputer and the ability to upload various services that are on there, like think of it as a services, maybe greenhouse gas, maybe class count and speed. Maybe it's a vehicle identification, maybe it's a wait and 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. As I used to break out product versus recurring revenue is going to be one revenue line going forward.

Eyal Hen

No, it will be to I guess your question was what is the mix between recurring revenue and products and services revenues for the year, right for the year and what do you think it might be going forward? I think you know right now it's at the 60% level and we anticipate this to be the mix of approximately 60% to 70% between recurring and product services revenue. That's really depends on some point of time so that we may have you know, if there will be a big order of our hardware and software, it will change the mix. But for the long term, we anticipate the recurring revenue to be approximately 70% from our total revenue kind of headcount. Thank you, Mike.

Operator

[Michael Cohen], private investor.

Michael Cohen

Robert A. meeting. 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 you could give us a sense of when you'll be breakeven in 2024. And I think what we said on the last calls, we thought that that would be between Q1 and Q2. And I don't I don't think that's changed based on what we see.
Okay. My second question is on the last equity raise you did in February in your presentation, you put out a revenue number of 85 million for 2024. And as an investor, what confidence can you give me that that number is attainable you, Mr. 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 not mistaken, William Blair and their recent initiation has $65 million. So what would you tell the market to give us confidence that it's $85 million deliverable in 2024.

Robert Berman

I think I think, Michael, that you know, with any young company, okay, has done what we've done in a few short years to grow the way we've grown with 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. Again, I think it's been a remarkable year when you're dealing with government at state and federal level and they don't operate on the same calendars that the private sector does, and it's hard to say to a specific date, but 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 in my remarks, that, you know where you have a lot of stuff come from off-net because we because of procurement laws and other things, you know, we're just not at liberty to talk about stuff because you can be queued and of procurement based on making a wrong call to the wrong individual at the wrong time, right? So you think we get there and we think the numbers are very realistic and it's possible it could be higher. It's possible it can be a little bit lower, but it's not impossible that we get there based on what we've done the last few years at all based on all the discussions that we have going on.

Michael Cohen

Okay. Thank you very much.

David Desharnais

Thank you.

Operator

[David Hargreaves], private investor.

David Hargreaves

First of all, congratulations on the progress you guys have made them and thank you for everything you've done to kind of tried 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 what your plans are for addressing that and then thank you and keep up the good work.

Robert Berman

Thanks, David. And it's nice to have the compliment. We appreciate a lot. The going concern is now something that's the current dynamic. And as you know, we got into the weeds on with the auditors with looking at our pipeline on the the accounting rules are very strict on and looking at what we had and we show them on it just didn't meet the requirements or guidelines. So we were forced to take a haircut on our forecast or conversely, you always look to mitigate and say, well, we can cut expenses, right? And when we looked at that on, we had difficulty saying we can expect consistency based on the opportunities that we have in front of us that are very real that we're working on every day on. And so you have a classic chicken-and-egg conundrum here where we find ourselves in a box?
Well, you know, we see a path to get through this. It doesn't necessarily need to wait until the end of calendar 2024, and it can happen in calendar 2023, and we believe it will, and we're going to continue to work hard to run across that bridge. Can't predict the date, but it's going to happen so on, but we also respect the accounting rules and now strict there are and how difficult it is to do these things. Sometimes you just don't have choices when you're putting in a box, and that's where we were then put Numax. So I hope that helps answer your question.

David Hargreaves

So just to quickly follow up, if we put aside or accounting heads 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.

Robert Berman

So with respect to raising capital, that is not something the accounting rules allow, Steven, I look at right, but we feel comfortable with where we are with cash on our balance sheet and the business that we have that on that we can make it through this in our planning on was always to do exactly what we did and candidly 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. And that's what we're going to continue to work towards. And that's how we hope to fund implementations on contracts that are paper data with states that have large contracts and we feel good about it. But again, it's it's a tough situation when you have this chicken and egg situation with some rules that are so black and white, which can move right or your family will or and so on, we feel good about where we are and we think we can make it through this and on we really don't have any concern about it.

David Hargreaves

Okay. Thank you very much and good luck.

Robert Berman

Thank you.

David Desharnais

Yes, thank you.

Operator

[Ray Yuko], private investor.

Ray Yuko

Yes, hi, thanks for taking my call. I had just two questions. First one is can you touch on the technology being used for train yards seaports that's capable? And my second question would be can we expect any overseas contracts or partnerships? Thank you.

Robert Berman

Thank you. David, you want to touch on that? There's two questions.

David Desharnais

Yes, yes, no problem. Yes. And yes, I would say what our specialty is really object identification, and we do that through multiple different ways. There's no reason why the technology cannot be applied to really any object moving in a frame on a roadway, whether that's in a shipyard or transit, a train or rail, whatever it may be. Our focus, though, the technology is that it's not a limitation and technology. It's a limitation in where we choose to focus on finite resources will go to market. And so we have focused on on driving growth in those sort of planes and trains. We've been focused on automobiles if you think of planes, trains and automobiles. But definitely as we look forward, there's no reason why the tech can apply there. It's just a matter of focus on where we see that 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 not to ports and airports as it may be. Does that help give you some some thoughts around that, but yes, it does. And the other question I had mentioned was our NEO contractual partnerships expected overseas and boy, I'll tell you it focusing here in the US has really been clamoring for us and 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 are really building it right I think look, I think it's a fair question.

Robert Berman

So if you look at ARM, just the federal mandate for count class and speed, which is and how every government probably developed nations around the world on funds 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 on the thing. Of course, we look at it. But right, right now, I think we've got enough potential growth ahead here that we don't need to think about that, but we wouldn't foreclose the opportunity either.

Ray Yuko

So. Okay, that's all I had. Thank you very much.

David Desharnais

Appreciate it. Thank you, Vijay.

Operator

(Operator Instructions)At this, there are no further questions. I would like to turn the floor back over to Robert Berman for closing comments on everybody.

Robert Berman

Thank you, and 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 patients as well and on, yes, sometimes will make it. I mean, we've had an amazing three years on the technology real, it's being adopted by our own in our entities that only some companies would hope to be able to do business with any of them right over 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 happens in off on once in a lifetime, frankly, and we're at the forefront of it, and we're going to trying to maintain the first mover status that we have and continue to do our best to grow the Company and continue onwards and appreciate your support. So thank you all for them.

Operator

Time concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.