Earnings Call Transcript - REKR Q2 2021

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Incorporated Conference Call. My name is Catherine, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded for replay purposes. Before we get started, I'd like to read you the company's abbreviated Safe Harbor statements. I'd like to remind you that the statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, product 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 in such statements. We ask that you refer to the full disclaimers in our earnings release. You should also review the description of the risk factors contained in our annual and quarterly filings with the SEC. Non-GAAP results will also be discussed on this 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 now like to turn the presentation over to Mr. Eyal Hen, CFO of Rekor Systems.

Eyal Hen, CFO

Thank you, operator, and good afternoon, everyone. Thank you for joining us. Today, we'll discuss Rekor's results for the second quarter ended June 30, 2021, as well as provide an update on key business topics. On the call with me today is Robert Berman, President and CEO, who will be giving you additional updates as soon as I finish with the relevant metrics. Following our prepared remarks, we'll take your questions. We continue to generate strong revenue growth year over year. Revenue for the second quarter of 2021 was $4.3 million, a healthy increase of 60% compared to $2.7 million in revenue for the same period last year. Revenue for six months ended June 30, 2021, was $8.5 million compared to $4.3 million for the same period last year. This is a robust growth of nearly 100% year-over-year. Our working capital increased to $39.8 million, up from $18.2 million as of December 31, 2020, as a result of our public offering in February 2021. Similar to the first quarter of this year, the increase in our revenues in the second quarter is primarily due to the expansion of our product and service offerings. We're also now reaping the benefits of the strategic marketing initiative we launched at the beginning of 2021. Revenue for our high-margin SaaS e-commerce platform increased to $405,000 for the three-month period ended June 30, 2021, up 106% year-over-year from $197,000 for the comparable period in 2020. The Oklahoma Uninsured Vehicle Enforcement Diversion (UVED) program generated revenue of $387,000 in the second quarter and $635,000 for the six months ended June 30, 2021. This is a program we began working on in January of this year to assist the State of Oklahoma in identifying uninsured vehicles on the road. This program can generate significant revenue for the state and more importantly, can play a significant role in improving highway safety as a contactless compliance measure. Other states and municipalities have shown an interest in this program and are studying it seriously. Our gross margin for the quarter ended June 30, 2021, was 66%, an increase from the 52% we reported in the comparable 2020 period. The increase in margin for the second quarter ended June 30, 2021, is primarily attributable to the higher margin software sales, including the increase in the e-commerce revenues, which were higher margin than those associated with our hardware product. Gross margin for the first half of the year ended June 30, 2021, was 60% compared to 59% in the same period last year. While we anticipate our long-term gross margin to be in the range of 60% to 65%, our gross margins can fluctuate quarter to quarter based on our sales mix. Total operating expenses for the second quarter of 2021 were $7.5 million compared to $4.2 million in the same year last year. We recorded a significant increase in payroll expenses as we continue to add to our headcount in our engineering and sales and marketing teams. In addition, we extended our sales and marketing efforts and added additional resources to promote our products and services. Finally, we grew our spending on research and development budget to develop new technologies and improve our line of products. We'll continue to invest in innovation to retain our competitive edge and continue to develop more and better state-of-the-art solutions to address the growing needs of our customers. Adjusted EBITDA for the second quarter ended June 30, 2021, was a loss of $2.9 million compared to a loss of $2.1 million in the same period last year. Adjusted EBITDA for the six months ended June 30, 2021, was a loss of $6 million compared to the loss of $4.1 million for the year-ago comparable period. The increase in loss was also due to the aforementioned investments in growth initiatives. Financial condition and liquidity. Our cash balance on June 30, 2021, was $69 million, up from $21 million as of December 31, 2020. We also have $13 million held in short-term investments, which have maturity dates greater than three months but less than 12 months. The increase was primarily due to net profits from our public offering in the first quarter of this year. Our working capital at the end of the quarter stood at $79.8 million. Obviously, this is more than what it necessarily support our near-term operations but has been held to support our M&A activity, which Robert will discuss shortly. In summary, we feel very good about the strength of our balance sheet, which provides us financial flexibility to pursue organic and inorganic growth opportunities. We continue to invest in our business in a disciplined manner to position Rekor to be a key participant in the market for intelligent infrastructure. Now, I would like to turn the call over to our Chief Executive Officer, Robert Berman.

Robert Berman, CEO

Thank you, Eyal. Good afternoon, everyone and welcome. Today, I want to provide a brief update on the path ahead and our strategy. Please note that we will be providing further details on our strategy following our Annual Shareholder Meeting on September 14th. When we decided to focus on our technology business in 2019, we began a journey with the goal of establishing Rekor as a leader in the emerging intelligent infrastructure sector, the backbone of smart cities. Smart cities are no longer an abstract idea but are becoming a reality due to necessity. Three years ago, the United Nations published a report which projected that 68% of the world's population will be living in urban areas by 2050, up from 55% today. This poses a significant challenge to the existing infrastructure and current approach to managing cities. Sustainable urbanization is key to successful development as the United Nations pointed out in its report. With the growth in urban population and a focus on sustainability, aging infrastructure and resource scarcities have become a severe challenge to governments. All this boils down to a very strong tailwind that can drive demand for our solutions in a rapidly growing market. Engineers and infrastructure experts in the United States have been sounding the alarm for renewed national focus on overhauling our country's infrastructure. The USA Interstate Highway System dates back to the 1950s. According to the American Society of Civil Engineers, crowding and poorly maintained roads cost the US more than $160 billion in wasted fuel and time each year. Since 2008, congestion on roads has increased at a compounded annual growth rate of 1% to 3%, outpacing population growth. The average American is estimated to spend 54 hours a year in traffic, up from 42 hours in 2014. Core road surface conditions result in motorists spending nearly $130 billion in extra vehicle repairs and operating costs each year. The American Society of Civil Engineers estimates that the US needs to spend as much as $2 trillion on infrastructure over the next five years alone. The Biden administration and a bipartisan coalition of Congress have recognized this and are finally seeing a willingness to allocate the billions, if not trillions of dollars, needed for the development of renewed infrastructure. Other developed and developing nations around the globe are also showing a willingness to meet these challenges and commit the funding necessary. A novel approach is needed to be taken to address these basic problems. The efficient movement of billions of people and the goods that sustain them through increasingly congested spaces requires the ability to capture, analyze, and act on vast amounts of relevant data quickly, reliably, and intelligently. This is important in every aspect from initial design to daily management. The foundation of smart cities and the networks that connect them in the future will be intelligent infrastructure that is designed and managed using the best data and analytical tools available. Our ambition here at Rekor is to be a leader in this effort to improve the lives, safety, and well-being of people living in large and small communities around the world. At Rekor, we're committed to providing the technology and solutions needed to build and maintain intelligent infrastructure and believe that three key pillars are necessary to be a leader in this nascent and promising industry. First, the ability to collect holistic and real-time data, combining this with third-party sourced information, connected vehicles, and crowd-sourced entities. Second, the ability to analyze this data using cutting-edge AI-driven software to provide customized solutions for real problems with measurable results. And last, the ability to monetize these solutions and rapidly expand our geographic footprint. All three pillars are essential to our building an artificial intelligence-based ecosystem around smart cities that will enable us to capitalize on the need to improve the efficiency and effectiveness of how cities and communities are run. By aggregating data, processing data, and ultimately providing immediate solutions to immediate problems, our goal is to optimize the use of limited resources while improving the well-being and safety of citizens around the world. The first pillar, the ability to collect real-time data, is the bloodline of our AI engine. Our hardware uses the latest cutting-edge technology to conduct on-device edge AI processing. We're able to aggregate real-time data with very high accuracy even in adverse conditions. Based on our clients' needs, we can then combine our data with acquired third-party data to create a holistic and accurate view of what's happening. Our customers have the ability to view real-time images and videos, as well as access historic videos on demand. Our edge processing with on-device AI allows us to offer solutions at a fraction of the data-related costs clients would have to pay for products that need consistent data transfer to the cloud. And the beauty of our approach is that our customers don't have to upgrade to sophisticated optical sensors for our solutions to be effective. We can integrate data from almost any IP camera into our solutions to lower the costs through legacy integration. This is especially important as we address the needs of our commercial clients. With the Waycare acquisition, we have significantly strengthened our ability to access third-party data. We can overlay this data with our own real-time data to provide a holistic view of the roads. The Waycare acquisition accelerated efforts that were already in progress and would have involved considerably more time and expense. In particular, it would have been difficult to replicate what Waycare has already achieved in terms of its vendor relationships. What sets us apart from the competition is our software and our algorithms. This is the second pillar: the ability to provide customized solutions via cutting-edge AI-driven software. Our AI-based solutions can analyze the status quo to provide immediate answers. To do so, the AI needs to be taught. This is not any different than how we humans develop. We crawl, we walk, and then we run. It takes time for AI to learn, and it becomes increasingly better and smarter. The more data the AI processes, the smarter it gets and more effective it becomes in providing optimized AI-driven insights and solutions. And that puts us years ahead of others who are just trying to start developing this technology, and is another reason why Waycare’s ad-based technology integrates so well with our overall effort. Finally, the third pillar is expanding geographic footprint. There is a significant first mover advantage as relationships tend to be sticky, resulting in recurring revenues. This is why we are focusing on growing our footprint. We can do this through acquisitions, as we will discuss later, or we can achieve this organically. This entails putting a stake in the ground, and we will do this town by town, county by county, and city by city. We get a lot of questions from investors who are asking about specific revenue opportunities from our pilot programs. Since we're building an ecosystem, I'd like to help you take a long-term view at our process. As we develop a relationship with a customer providing one solution, our clients typically ask for additional help in addressing their growing needs. This provides an opportunity to upsell our various products. There are no stronger advocates than happy customers. Word of mouth advertising is the best advertising. And what we have seen is that if one municipality buys your product and sees immediate benefits, the neighboring municipality wants the same one. There is a multiplier effect, which is not apparent when we initially sign a contract. Our experience is similar to that of Waycare. If you remember from the presentation we provided last week, Waycare entered a small pilot program in Southern Nevada, which expanded to Northern Nevada, growing total contract value by a factor of 161 times in only three years. This is similar to what we have experienced with other customers. Each market entry is an investment into future growth, and we are just getting going. We have seen the benefits of moving to a SaaS model with recurring revenue. A small revenue opportunity can grow to a stream of recurring revenues with the right solution. This will happen over time if we remain ready for it and continue to provide our customers with remarkable solutions to their problems. With Rekor One, we provide a complete disruptive intelligent platform that has no equals. We offer hybrid cloud-native solutions from the get-go that are system agnostic and able to integrate with a multitude of hardware and software products. We can also integrate and deploy our solutions across multiple agencies in a given region, incorporating our real-time data with third-party provided data to generate solutions for better outcomes. Rekor One uses a modular approach. We have the ability to turn on and off various modules to provide exactly what the client needs. Our roadway intelligence solutions, which are an element of what we define as intelligent infrastructure, can be provided within the same unified platform. Our short-term goal is to add additional functionality and solutions with each module. And our long-term ambition is to expand the platform to become a provider of all the holistic intelligent infrastructure solutions, which will form the foundations of smart cities. Each module that we add to the platform will depend on the needs of our clients. So we have provided solutions for a large number of use cases. This allowed us to monetize these relationships, assess our solutions, and make improvements as needed, whether this involves assisting with perimeter traffic and fleet management, permit issuance and usage, hazardous waste enforcement, or improving forest fire monitoring. The use cases are many, and we can use our technology to provide customized solutions to numerous challenges. However, with data comes responsibility. We take privacy concerns very seriously, and our proprietary algorithms are created to be in full compliance with the security and privacy requirements of each end user. All our data we collect passes through our sophisticated and proprietary Personally Identifiable Information (PII) filter that de-identifies and anonymizes the data in an irreversible way before it is incorporated into our roadway intelligence platform. With Rekor One, there are significant economies of scale to be had. Rekor One helps bridge gaps in information and communication, allowing humans to use technology more efficiently to better collaborate using data, monitoring, analysis, and ultimately collaboration. So we are intensely focused on three ingredients: data, software, and geographic footprint. With these, we can provide a multitude of products and solutions to reduce congestion, improve infrastructure, increase safety and security, promote sustainability, improve efficiency and enhance customer experience. We talked about this on our call last week, but I want to reiterate how the Waycare acquisition fits into our broader strategy. As we mentioned, there is a first mover advantage in this nascent industry. Time is money, and we can save both time and money by integrating with Waycare. We are accelerating speed to market by gaining expansive geographic footprint, faster access to third-party vendor relationships and diverse data sources, and adding an innovative software product that complements our offering and differentiates us from our competitors as we are building a comprehensive intelligence platform. Waycare's current footprint, as well as potential opportunities to further expand it and put flags on the map in more states, is very valuable. Once we have entered a market and established relationships, we can cross-sell and upsell products, gaining a larger share of customers' wallets. To provide the right solution, we need to feed our AI software an increasing amount of data. It would take us time to replicate what Waycare has already achieved in terms of its relationships, data partners, and its investment in analyzing that data. These partnerships include the leading OEMs, connected vehicle data providers, telematics solutions, and many more members and partners. Our Rekor One platform was built to generate a holistic view of roadways, and now we can feed more data into our system by leveraging Waycare's relationships. Each set of data makes our products smarter and our solutions more sophisticated and valuable. Coming to market with a broad range of products is a key differentiator and there is an advantage to speed to market and putting flags on the map, especially when dealing with public entities. On many calls, we get asked about the progress on various states and cities. Our answer is the same. When you're working with government, state cities and municipalities, it takes time to get a yes. It is a long sales cycle that involves proving yourself and building trust. However, once you have won a contract, the same long sales cycle creates a moat. Revenues tend to be recurring, and there is a significant opportunity to cross-sell to other agencies. While the Waycare acquisition nicely adds to our footprint, we continue to focus on organic growth and are executing smartly. In July, we announced that the capital of New York, the City of Albany, in partnership with the Albany Police Department, selected Rekor One as a solutions provider for vehicle recognition. We were selected to help maintain the safety and security of the community and its citizens. Some key takeaways from the press release we put out: first, we won a competitive bid process meeting and exceeding various performance requirements, including lane capture, solar power operation, integration with third-party applications, unlimited storage, and robust vehicle identification capabilities. This speaks to the strength of our hardware and software, and there should not be any doubts about the strength of our technology. Second, with this win, we have grown our footprint in the US. Our partnership with Albany followed successful implementation in 24 states nationwide. As mentioned earlier, wins like this generally result in additional wallet share for other cities and municipalities inquiring about our services. This leads me to the final point: is this a big revenue contributor? No, not at this point. But it allows us to build a relationship that can have a multiplier effect. The same is true regarding the press release we put out regarding Waukesha County Park System selecting Rekor One to help maintain the security of each of its eight public parks and to ensure entrance fee compliance. With each win, we grow our real estate. We gather additional data to help our AI learn, and we build relationships that could drive meaningful revenue opportunities. With each new win, we’re improving our product and enhancing our capabilities. This positions us well in pursuit of becoming a significant contributor to intelligent infrastructure. We will provide a strategic roadmap on how we plan on doing this following our upcoming Annual Shareholder Meeting on September 14th. And with that, I would like to turn the call back to our coordinator for questions.

Operator, Operator

Thank you, everyone. The floor is now open for questions. I would like to turn it back to Robert Berman while we collect questions.

Robert Berman, CEO

Operator, thank you. We want to take a couple of email questions first. The first is from John Knoll, and he's asking for an update on lawsuits. So I think that's an appropriate place to start. We hired Latham Watkins to defend the lawsuits. There has only been one case filed with a lead plaintiff that owns 50 shares. I think you all saw the filing that we did in New York court trying to unmask the folks that wrote the research reports that were the basis for the lawsuits because we believe that not only were they untrue, unfounded, inaccurate, misleading, but part of a short attack. As our lawyer, Chris Clark, likes to say, who has dealt with many of these unfair attacks, we are defending the lawsuits vigorously. It's unfortunate, but we don't think much of them and we'll continue to keep you updated as we move forward. The second part of the question is with respect to the bills in Florida and Texas. With respect to Florida, we have been engaged in dialogue with the Department of Highway Safety since the bill failed. They were one of the agencies that were involved in the process. As things happen, the way legislation comes together, sometimes it is very quick. At the end of the day, some agencies get spooked; they don’t realize the amount of work that they have to do or don’t do. So it also takes sometimes a legislative cycle or two before things pass, but there’s interest in Florida for sure. Actually, our Head of Government Affairs is going down there later this month to meet with them and to discuss moving this forward. The same is true for Texas and other states as well. We believe that contactless compliance, which is a module within the Rekor One platform, is something that we're going to see happen as things evolve. So, operator, with that we can move on to questions.

Operator, Operator

Your first question is coming from Steven Eisman with Neuberger Berman.

Steven Eisman, Analyst

Can you give us an update on the MasterCard pilot program?

Robert Berman, CEO

We get asked this all the time. Just again, we say over and over again, we are a vendor to MasterCard. We did several pilots with them. They tested their solution, they tested our technology. We haven't set all of our agreements, our pricing. I can say that they're satisfied with Rekor, they're satisfied with our performance. But it's their product and they're the ones working with these large fast food chains. We really can't speak to the rollout. They've asked us about everything from scheduling to large rollouts to small rollouts, to things in Europe and to things here; we provide them all the information, every question. They said, stand by, and that's what we're doing. We’re standing by. So we don't believe that MasterCard invested all the time, effort, and money they did in this product just for the sake of doing it. So we're hopeful that they're going to start rolling this out at some point in the near future, and we stand ready to provide the services to them they contracted us for.

Operator, Operator

Your next question is coming from Zach Cummins with B. Riley.

Aman Gulani, Analyst

This is actually Aman Gulani, I'm jumping in for Zach. So my first question is, can you go into the puts and takes for revenue being essentially flat on a sequential basis? Were there certain projects that did not go live as anticipated?

Robert Berman, CEO

It's like everything else. This is a development stage company. When your revenues, as you're starting to grow and scale, are the size of our revenues, sometimes when things get delayed a little bit, it has an impact on your quarter. We deal with a lot of governmental entities. We deal with a lot of large corporate entities. We deal with integrators that are dealing with the federal government. And things just sometimes take a little bit longer, and it is what it is. If we had $50 million in revenue in a quarter and we missed a little bit, you wouldn't notice. But when you're in a development stage and you're growing, you notice. The good news is that I would say that I've always thought that you can judge yourself by the company you keep, and I think Rekor keeps pretty good company with the partners we have and counterparties that we're in relationships with. So hope that's helpful.

Aman Gulani, Analyst

Could you maybe talk about the annual revenue run rate and gross margin profile of Waycare? And then maybe if you could touch on maybe the cross-selling opportunities with Rekor and Waycare?

Eyal Hen, CFO

Obviously, at this point, this transaction was not closed, and we can't talk or speak to their financial information. On Rekor, as we have always said, long-term, our gross margins that we anticipate are 60% to 65% as we grow.

Robert Berman, CEO

And I'd like to say that with respect to cross-selling, I mean, we're mostly in the same markets. We've created a platform that generates a large amount of holistic real-time data. Some of you may want to take a look at a company that went public today called Otonomo, right? They sell connected vehicle data, and Waycare gets data from them, as do others, and there's another company called Wejo. Otonomo went public today at an evaluation of about $1.3 billion. Their revenue last year was $400,000, and they're expecting $3 million today. Rekor generates a lot of holistic data, and Waycare uses a lot of connected vehicle data and other third-party data from crowd-sourcing entities and so forth. The value of using their applications over our data saved us literally years and a fortune for having to develop the AI applications necessary for predictive intelligence for that particular module, which is incident management and incident response time. The other thing that I'd say is really important and this is something that only Rekor can do, but a lot of Waycare's customers operate traffic management centers, so to speak. You can think about an entity that has a large video wall with hundreds of screens with people sitting there watching those. Those are all live video feeds coming into that traffic management center. We have the ability to put our algorithm on-prem, on a server, point the feeds to our server without interfering whatsoever with what the customer is using it for, then pull all the same data that we would get if we had a device operating on the edge right off of that server on-prem, which can feed back into the Waycare platform and give Waycare the additional ability to do things that they can't do today, like offering wrong-way alerts and other things related to speed and sustainability and congestion and so forth. There’s a huge amount of synergy between Waycare and Rekor. We've been looking at this market for the longest time, and it's an emerging sector. It's nascent and it's changing every day. You see all of a sudden all these companies in connected vehicle data and other crowd-sourced data becoming part of the discussion around how you create intelligent infrastructure. I will say that Waycare is a rare asset. It's a very rare asset because unlike Otonomo and others that provide just data, Waycare has both applications to make use of that data, so there’s actually a solution for the end user. It was really a great fit for us. We're lucky that we came across them, and we share a common vision for where the industry is headed. We're excited about it and we think it's going to help position Rekor as a leader in the space.

Operator, Operator

Your next question is coming from Jason Schmidt with Lake Street.

Jason Schmidt, Analyst

Robert, I just want to follow up on your comments on seeing increasing interest or additional interest from other states on uninsured driving programs. Just curious if you could quantify that at all, or if this interest has really accelerated the past three months or really remained stable?

Robert Berman, CEO

That's a really good question, and I'm glad you asked it. As I've said in the past, these types of programs, and it's not just uninsured, you've got to think about compliance and contactless compliance. We all know what happened in Minnesota when an officer pulled out what she thought was a taser and she pulled out her gun. She killed somebody pulling them over from expired tags. This is the 21st century. Maybe we ask our police to do too much, and the concept of having patrol cars make fewer stops and having technology replace that for expired tags, uninsured motor vehicles, registration compliance, license compliance, and so forth, makes a lot of sense. That's something that's going to happen. We see basically that that's the case. We see a lot of dialogue and discussion around that throughout the states and cities, just even over the last few months. Think of it like the lotteries. They rolled out and first you had one, then you had two, and now you have a whole bunch, and then they're starting to get together and do things together like Powerball and Mega Millions. The UVED Program in Oklahoma is an absolute success. For many who don't know, we came in and we replaced an existing vendor that was doing a terrible job. So that state had already been kind of mined, so to speak, from the standpoint of what the prior vendor did. The way that we had to come in and straighten that program out was not easy, but I think that the state is very happy with it. I can tell you that the number of uninsured motor vehicles in that state has reduced substantially just since we've been running the program for six months, and that's the goal of the program. It's helping people, and the state's happy about it. Others will see that and it will take its natural course.

Jason Schmidt, Analyst

And then just looking at the Waycare acquisition, I know you went through what attracted you to them, their footprint, their vendor relationships, and obviously a complementary product portfolio, but there are certainly other companies out there in that same sandbox. Just curious how long you have been familiar with Waycare and when they sort of got on your radar screen? Was it just a combination of these three things that ultimately made them attractive for you guys?

Robert Berman, CEO

We became aware of Waycare nearly nine months ago, largely due to our CFO's connections in Israel. We monitored their activities alongside other companies in the same space. While Waycare does have some OEM deals for connected vehicle data, their main focus is on enhancing safety by decreasing incident response times. This makes them a unique player in the market, as no other company offers the same services. We engaged with them for discussions and simultaneously explored what we refer to as me-too data for the Rekor One platform, including connected vehicles and crowd-sourced information, to integrate with our real-time holistic data. It was essential to combine both aspects to effectively serve municipalities. After analyzing various options over a significant period, Waycare stood out as the most logical choice for acquisition. It took some time to convince them to engage with us seriously, but their decision to skip their Series B round in favor of joining Rekor highlights the strength of our business strategy.

Operator, Operator

Your next question is coming from Robert Lewis.

Unidentified Analyst, Analyst

Just a couple of questions. From your request for proposals that come from these obviously government agencies, what is the normal turnaround time, let's say, for the municipality and the government business?

Robert Berman, CEO

So it could range from a few weeks to a few months and even longer, depending on the size of the contract. We have had some success recently with the new program. Once we launched Rekor One, which is not that long ago—it's only been a few months now—we've been able to secure some sole-source contracts because there isn't another company that provides the same service. Waycare has had a lot of success in that regard; almost all of what they’ve done has been sole sourced because again, there’s no other company that provides what they do. It may stay this way for a while. It could be a year or two because this is such a young, nascent industry. Government sales cycles are long, but what happens is you start with a small pilot or a contract. It evolves to an expansion, and then you end up being a trusted partner. Once you're a trusted partner, it is very difficult to dislodge the vendor. It's a very sticky business.

Unidentified Analyst, Analyst

How long did it take to cover the entire state of Oklahoma from when you initially started with what you just described? I believe you now have the whole state. What was the timeline for that entire process? And also…

Robert Berman, CEO

What was the second part? You can go ahead and ask, and I'll answer both.

Unidentified Analyst, Analyst

The second part is basically what is the requested proposals right now, and how many new proposals do you have in-house right now versus a year ago?

Robert Berman, CEO

With respect to Oklahoma, it was about six months. Oklahoma decided that they were going to terminate their prior vendor, which they did. Once they terminated that vendor, they put out an RFP in late summer of last year, maybe early fall of September. They awarded it in either late October or November, and we were obligated to have that system up and running by the end of the first quarter. We actually had it up and running at the beginning of January. That was a fairly short process for a contract of that size. But remember, Oklahoma is a relatively small state. When you talk about other states, I'm not sure that we can replicate the speed to get a whole state up and operating that quickly, but it's certainly not going to be years. As for how many RFPs we see, right now, I can tell you that our company is engaged in a dozen or two dozen pilots that were done without RFPs, and we have a pretty robust RFP center here, as we'd like to call it. While Waycare has one as well, we're going to combine both of those. I would say at any given time, we're constantly looking at half a dozen to a dozen opportunities.

Unidentified Analyst, Analyst

The revenue streams on these are what, roughly in the $200,000 to $300,000 range? I mean these pilot programs…

Robert Berman, CEO

They may start that way, but they evolve like—I look at Waycare's contract in Southern Nevada, which was granted in 2018. That was a $30,000 pilot, and that contract today is $5.3 million in less than three years. Again, you get in, and in a large part, many of these municipalities don't really know the problems they're trying to solve. They don’t really know how to solve them. Once you get in the door, the relationship tends to grow. I’ll say that the revenue opportunities can start small and then grow, and they're sticky. Several months back, Rekor decided to hire a very well-respected consulting firm to look at this entire space. The intelligent infrastructure, the concept of smart cities and intelligent roadways, and smart mobility, has been thrown around for more than two decades, and frankly, they've been meaningless until now. We commissioned a study to look at the total addressable market, the competitive landscape, and even our consultant, which for those of you that come to our Investor Day in September, on the same day as our shareholder meeting, you'll find out who that consultant is, and even they're saying how nascent this is and how quickly it’s evolving. This is all happening in real-time. I can't think of anything else that I've seen in my lifetime that actually evolved in real-time with companies trying to get into the mix other than the Internet back in the mid-'90s. So it’s an interesting time, and this is an interesting space, and folks need to have patience but they also need to be smart and realize who the companies are that are going to succeed in this sector.

Operator, Operator

Your next question is coming from Mike Latimore with Northland Capital.

Unidentified Analyst, Analyst

This is Aditya on behalf of Michael Latimore. Could you let me know if you recognized any border patrol revenue in this quarter?

Robert Berman, CEO

Did you say Customs Border Patrol?

Unidentified Analyst, Analyst

Border patrol, yes.

Robert Berman, CEO

So you're referring to the IT-II contract. Because it's public, we can talk about it. The Customs Border Patrol is issuing a five-year contract to update all of the technology on both inbound and outbound lanes, among other things. Rekor's team is one of the bidders. The CBP has not yet narrowed down the applicants. They were supposed to do that last month but haven’t. They're saying it will happen at the end of this month. The original award date was supposed to be the end of this month; now it's shifted to September 30th. We’ll have to see. However, with the federal government, the September 30th deadline can extend into October. We've seen a small amount of revenue from it this quarter, not much at all. We expected significantly more because we are also working with the incumbent. The incumbent is still responsible for replacing systems where there are values or other issues. We didn’t achieve as much revenue from it this quarter as we anticipated, but we’re hopeful that the contract will be awarded this fall because they're planning to overhaul everything. It represents a significant win for Rekor in the end, and given that everyone is teamed with us, I believe we have a strong chance.

Unidentified Analyst, Analyst

And also, Waycare, is it like the last acquisition for this year, or would you guys still be interested in making more acquisitions?

Robert Berman, CEO

I think that we have an awful lot of work to do to integrate Waycare, and there’s so much opportunity that Waycare and Rekor present together. We are always looking at things where it might be better to buy rather than build little pieces of tech and stuff like that, but I think our plate is full, and I think we're going to focus on what we have in hand.

Operator, Operator

Your next question is coming from Ray Yakel.

Unidentified Analyst, Analyst

I appreciate keeping the shareholders up to speed as often as you can. I've been a shareholder with the company since the FDI days. But a lot of my questions have been answered. But I have three. With the Waycare acquisition and the signed definitive agreement, are you able to start integrating the two into one or do we have to wait until it's completely finalized? My second question is how many applications does Rekor offer for solutions? And do you see that growing? And my third question is the Tesla relationship; we haven't heard much on that since I believe it was put out back in September. And that's all I have.

Robert Berman, CEO

Thank you, and thanks for being so patient being a shareholder for such a long time. The answer to the first question is that we have had lots of dialogue with the Waycare team; a really super bunch of smart people, some great talent, about how we would integrate if we had to build on. We’ve already started that road map, and we've started to work on some of those things, and are having meetings almost daily about that because we want to get going as quickly as possible as do they. We expect that the integration will get done in a relatively short period of time, but it’ll take a lot of work. That doesn’t mean we can’t start selling immediately because of the way these two technologies complement each other. Remember, one is sitting over the top of data, and the other provides data, so they really work well together. The second part of your question regarding solutions: Rekor has done a lot. This company has been around for a couple of years prior to that but that was a completely different business model. Our focus has always been on Rekor One platform for intelligent infrastructure, smart cities. That platform has over 20 different modules. It’s not just incident management; it’s event management, it’s wrong way detection, things related to sustainability and congestion, and the list goes on and on. Any of these things can be turned on or they could be turned off. That’s what’s nice about the platform, and that’s going to continue to grow because as we aggregate more data and as there’s more third-party data from companies, we’re going to come up with different applications that solve problems. I think that the answer is that we’ve got a lot of products out there; we’re not going to stop doing some of the things that we’ve been doing because we’re doing them already, but our focus is going to be on the intelligent infrastructure platform. Again, there’s probably close to a couple of dozen products there. Regarding Tesla, all I can tell you is that is still being worked on. If you think government is bad, when you work with large companies, and I know people say, where is MasterCard? We couldn’t even talk about it. If you think it’s difficult working with government, try working with companies the size of MasterCard and Tesla and others. We move at their pace. It doesn’t mean that things aren’t moving. We move at their pace, and I know that everybody on this call and everybody that is an investor in Rekor would like to see things happen sooner, and so would we, but we don’t control those things. When we’re able to say something about that stuff, we will do so. Thank you for the question, and I hope that was helpful.

Operator, Operator

This concludes the question-and-answer session. I would now like to turn the floor back to Robert Berman for closing remarks.

Robert Berman, CEO

Thank you, operator. We're so excited about where we're heading and the opportunity that lies ahead of us. The recent acquisition of Waycare significantly improves our capabilities and adds to our footprint. It's a transaction that's not going to result in a one and one is three sort of scenario, but we think it could be multiple of this. Together, we're creating a road map for others to follow. I think there's a lot of companies trying to figure this space out, and there’s a lot of money in it; look at what VCs have done in the last few months, throwing money into the sector; everybody's chasing it, but we think we got it right. We’ve never been so excited about the future. People and investors just have to have patience and recognize this as a development stage company that happens to be public. This is an opportunity. I don't think SoftBank is going to sell shares here or there in something that they're going to launch in three years. The core business is intelligent infrastructure, and it has always been. It’s early innings for this game. I'll say this: it’s not easy for us to do what we do every day, and we know that you all have lots of questions for good reason. You’re making an investment in us and giving us a chance. We want to communicate and let you know what is happening. Here's what we're doing. In September, on the same day as our shareholder meeting at 1:00 o’clock that afternoon, at the same place, we'll have an Investor Day. Additional invitations for the Investor Day are going to go out to shareholders as well. You got your proxy, but you're going to get invited to the Investor Day. You're going to have a half a dozen speakers there, we'll be able to release the findings of this report with a well-respected global firm that will be able to put a stake in the ground and say, here is what this new sector is, here's how big this market is, and here's where what we're doing fits. Even some of the large banks don't even understand the space yet. It’s nothing to do with the fact that they should because they can’t because nobody understands it. It’s all happening in real-time. We think we're going to surprise everybody in September, and I think people are going to walk out of there and recognize the fact that we’re a really good company, we’re in the right place at the right time, and we’ve got the right tools and the right people. We appreciate all the support from our shareholders and the opportunity to have success. Thank you for taking the time for this call, and look forward to seeing you in September.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.