Knightscope, Inc. Q2 FY2024 earnings call

Market

• Believes in a large, recurring market in public safety law enforcement and security, with potential for a multibillion dollar opportunity. Highlighted recurring revenue from machine as a service, high margins over 60% for autonomous security robots, client renewals, first-mover advantage, federal authorization, and crime-fighting wins.

Technology

• Has various machines and software, including K1 Hemisphere, K5 Outdoor, Automated Gunshot Detection, and K1 Laser. Working on platform commonality (ICM project) and portfolio expansion, integrating AI into all aspects of operations.

Operations

• Focused on reducing machine downtime, service costs, false positives, bill of materials, labor hours, and operating expenses. Made improvements in purchasing controls, production planning, QA processes, and team alignment.

People

• Emphasized the relentless nature of the team, ongoing changes to streamline decision-making, and the importance of retail investors' support.

For the second quarter of 2024, Knightscope reported total net revenues of $3.2 million, a 10% decline from the prior year. Services revenue increased to approximately $2 million due to ASR subscriptions and K1B maintenance, while product revenue, mainly from K1B, declined to ~$1.3 million as a large onetime sale in the prior year did not repeat. Cost of revenues was $3.8 million, resulting in a gross loss of $0.6 million. Total operational expenses were $6.2 million, with a loss from operations of $6.8 million and a net loss of $6.3 million for the quarter.

• Cleaned up the cap table by converting preferred shares, aligning with public company structure and qualifying for NASDAQ requirements. Focused on growing revenues, reducing costs, and scaling up to achieve profitability. Working on strategic initiatives like platform commonality and portfolio expansion to drive long-term growth.

• Technical difficulty of building and operating autonomous security robots, as seen by previous failures of competitors. Stock price volatility and potential issues with maintaining NASDAQ listing. Regulatory and contractual challenges, including dealing with toxic financings and cyberattack mitigation risks.

Q: How is Knightscope planning to help mitigate the risk of school shootings?

A: Through technology like automated gunshot detection and visible weapon detection, but also addressing budget issues as schools may lack funds to properly secure facilities.

Q: What is the status of the Draganfly partnership?

A: Draganfly is working on a prototype, and once ready, Knightscope will proceed with the partnership.

Q: Is Knightscope considering going into the residential market?

A: Already in the residential market through HOAs and apartment complexes, but business-to-consumer residential is not a current focus.