Release Date: August 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Knightscope Inc (NASDAQ:KSCP) reported an increase in services revenue by $0.1 million, reaching approximately $2 million for the quarter.
• The company has made strategic changes aimed at setting a path to profitability, focusing on reducing cost of goods and services.
• Headcount savings amounted to $0.6 million, contributing to operational efficiency.
• Excluding one-time costs, the operating loss would have been flat compared to the prior year, indicating efforts towards operational efficiency.
• The company is investing in R&D for new product development, exploring a new generation of product design.

Negative Points

• Total net revenues decreased by $0.4 million, a 10% decline compared to the same period in the prior year.
• Product revenue declined by $0.5 million due to the absence of a large one-time sale from the previous year.
• The company recorded a gross loss of $0.6 million, a significant change from the gross profit of $9,000 reported in the prior year.
• Cost of revenues increased by $200,000, driven by higher third-party costs, scrap fees, and other transition-related costs.
• Net loss for the quarter was $6.3 million, approximately $1.5 million higher than the prior year, due to increased other expenses and higher OpEx.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with KSCP.

Q: Can you elaborate on the reasons behind the decline in product revenue this quarter? A: Apoorv S Dwivedi, EVP and CFO, explained that the decline in product revenue was primarily due to a large one-time sale in the prior year that did not repeat. The current product revenue, mainly from the K1B product, decreased by $0.5 million to approximately $1.3 million.

Q: What strategic changes were made to set a path to profitability, and how have they impacted costs? A: Apoorv S Dwivedi noted that strategic changes were aimed at reducing the cost of goods and services. These changes initially resulted in higher short-term costs, with disruptions expected to affect the P&L throughout the year. Cost of revenues increased by $200,000 due to higher third-party costs and scrap fees, despite savings in materials and headcount.

Q: How did the restructuring charges impact operational expenses this quarter? A: Restructuring charges of $0.3 million were related to severance costs and moving fees as the company closed its Irvine, California facility to move production to Mountain View, California. Excluding these charges, operational expenses were flat compared to the prior year.

Q: What were the main drivers behind the increase in net loss this quarter? A: The net loss of $6.3 million was $1.5 million higher than the prior year, driven by a $0.7 million increase in other expenses and a $0.8 million increase in operational expenses. Other expenses included higher non-cash warrant valuation losses and interest on bonds closed in the first quarter.

Q: Can you provide more details on the company's efforts in new product development? A: Apoorv S Dwivedi mentioned that the company is investing in R&D for new product development, which contributed to a $0.2 million increase in R&D costs. This is part of Knightscope's strategy to explore a new generation of product design.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.