Description

Keeping it brief, and happy to have a discussion via messages.  Queue the snarky tags that bear no relationship to performance.  Rekor’s CEO, Robert Berman, owns 14.2% of the company and from what I can tell, appears to be a thoughtful capital allocator.  

Based in Maryland, Rekor is an AI software and services platform providing video analytics and real-time decision support solutions with primary focuses on vehicle identification, roadway monitoring, and public safety.  Rekor’s software is best in class, and because it is generally hardware agnostic, it can be deployed across existing camera infrastructure which removes a significant hurdle to municipality adoption.  As a SaaS play, most of its revenues are recurring in nature and should remain quite sticky.

Dynamic roadway tolling based on time of day and/or real time congestion is considered the holy grail of the industry.  Progress on this front has been limited to date however, and municipalities are now looking at easier ways to bring in revenue.  Enter real time scanning for vehicles being driven without insurance.  In this uninsured vehicle enforcement niche, Rekor leads the charge, with its Rekor One product.  Apparently 1 in 12 passenger vehicles in the US are being operated without insurance which creates a revenue opportunity to fine offenders and, as behavior changes, increase overall roadway safety.

Rekor has already signed up Oklahoma to run this program and is rapidly looking to expand into Texas, Florida, and Tennessee.  In fact, legislation has been introduced in each of these states that appears to be tailor written for the Rekor One product.  I would urge anyone digging in to check out the following links as well as product demos/use cases found on YouTube:

https://www.uved.org/uved-video

https://www.flsenate.gov/Session/Bill/2021/1230

https://capitol.texas.gov/BillLookup/History.aspx?LegSess=87R&Bill=HB1119

https://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=SB1571&ga=112

Rekor’s technology is not just applicable to finding and fining uninsured motorists.  Once installed it can be utilized for analysis and management of emissions and traffic flows.  Outside of government, it also holds promise in commercial applications (see REKR’s partnership with MasterCard/White Castle) whereby dynamic drive thru menus will be customized to a specific vehicle and can enable automatic payment.  I don’t know if this has legs, but I do appreciate how Rekor is thinking about adding value to its customer by either generating them revenue or reducing costs/friction.  

From a valuation standpoint, Rekor is now cash rich after a $65mm equity raise at $12.25 in early February.  Shares took off and broke $20 within days of the raise and have been sold down (erroneously in my opinion) to the tune of -35% in the recent market de-fluffing.  Unknown at the time, it appears the raise was to help finance an acquisition of Iteris (ticker: ITI).  It appears ITI said no thanks, and Rekor, comfortable in its technological superiority, has moved on.  From their perspective, it’s a fragmented market, and there are plenty of other fish in the sea to help them speed deployment.  Here’s some color on the ITI conversations (please see the three links this PR points to): https://www.rekor.ai/post/rekor-systems-comments-on-offer-to-purchase-iteris.

I have no idea what Rekor might ultimately be worth this early in its growth inflection, but I’m fairly certain it’s more than $450 (today’s EV).  The B Riley analyst puts some figures around the uninsured motorist opportunity and arrives at a $73mm value for this sleeve of Rekor’s TN opportunity alone.  

Catalyst

Continued growth / customer win announcements

Accretive M&A that will help speed to market and/or eliminate competitors