KSCP

Welcome everyone to Knightscope headquarters here in Silicon Valley. Excited to walk you through our first quarter financials for 2026. Before we do that, we're gonna get into the overall corporate strategy as we move to becoming a managed service provider. Before we do that, Shakur.

Thanks, Bill. This presentation contains forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Knightscope's strategy, the Event Risk acquisition and integration, expected revenue, gross margin, operating expenses, addressable market, and the company's ability to fund operations and continue as a going concern. Actual results may differ materially due to risks including operating losses and substantial doubt about the company's ability to continue as a going concern, the need for additional capital, integration of Event Risk, customer concentration, supply chain and labor conditions, competition, and Nasdaq listing requirements. Please see risk factors in the company's SEC filings at the sec.gov website. Pro forma information is illustrative only. Forward-looking statements may speak only as of today. The company undertakes no obligation to update them except as required by law.

Please refer to the Q1 2026 Form 10-Q for the complete disclosure. With that, Bill?

All right, let's get into it. We're really excited to talk about building the nation's first Autonomous Security Force, and that is a unique combination of hardware, software, and humans in an orchestrated format. Let's talk a little bit about the escalation levels and the model behind that managed service provider. Most folks may not know this, but 92%, 93% of alerts and the like are false in the security industry. You're dealing with. The teams are inundated with a massive amount of noise. What we wanna do is put that into a very thoughtful, let's call it seven-layer cake, which has three pieces: autonomous, remote command, and the physical response.

Let's see if we can, on the autonomous layer, basically have AI agents, autonomous robots, autonomous machines, and the like, resolve ongoing items that humans really shouldn't be having to deal with. When and if a decision needs to be made, then you can move on to having that escalated to the remote monitoring team. The remote monitoring then can review, approve, deny whatever changes need to be made, and if needed, then escalate it to the human agents, be them armed, unarmed, or law enforcement.

We wanna provide one managed service provider that, again, combination of hardware, software, and humans in an orchestrated format, and that's gonna be a new profound opportunity for us to provide positive outcomes, improved outcomes, and hopefully lower costs for our clients that seek a integrated solution and dealing with a lot of fragmented items today. Visually what that looks like is, basically what I just said, hardware, software, and humans. You've got stationary devices, autonomous machines and robots that patrol without remote control, and then augmented security agents that can then complement that entire solution. One of the really exciting things about not only the financial impact of the acquisition of Event Risk is just designing and strategizing what that next generation security agent might look like.

We have a small team working on a very exciting technology to take some of the capabilities that are on our robots today and actually put them on person exclusively for our security agents to be able to not only have them do their jobs much, much more effectively, also provide that data into a really interesting piece of unique software that we're developing to get all of that combined into one field of view. One of the other items similarly, not just on the human side, the team's actively working on making very good progress on the K7 autonomous security robot. This is intended to patrol much, much larger environments at higher speeds and be able to really secure that perimeter. All of that gets combined into one field of view.

One of the things that if you've ever had a Ring doorbell camera or the like, and you're looking at the app, you actually can't see to the left of you can't see to the right of you don't know what's behind. That's what you're asking a remote monitoring security analyst to do. They've never been to the location. They've never walked the premises, and somehow they're supposed to secure the facility with one single field of view. What that Signals platform that the team is developing is to provide a eye in the sky view of the entire facility in three dimensions.

You're combining video gaming technology, digital twins, and then all the significant amount of data coming out of the stationary devices, the robots, and our augmented security agents to keep that digital twin up to date as much as possible, so you can actually secure the facility and have that analyst be omniscient and omnipresent, know everything and be everywhere. We couldn't be more profoundly excited about this orchestration software that we intend to release for our own internal use here during the fourth quarter of this year. Moving on. For the 2026 highlights, thus far we're very exciting time. We were able to put up some pretty serious numbers on the filing last week.

We've got revenue up 106% to $6 million for the quarter, and we're just getting started. One of the other wonderful opportunities with the acquisition is it now has all four pillars of what we want that Autonomous Security Force to be all included and in place. You've got everything from autonomous machines, remote monitoring, orchestration, software, as well as armed and unarmed licensed agents. All that integration is underway, so we can have one single unified force. The image that you have there was a celebration there for Autonomous Security Force Day, our first annual. Hopefully we can do that every year going forward on our annual corporate birthday. The team is now very strong and growing. We're well over 400 employees.

That toast from that image was, "One team, one force." Very excited for what we hope to be a blockbuster 2026. Building that first, the nation's first Autonomous Security Force. This is intended to address that $230 billion total addressable market. The strategic logic is basically, as you increase the capabilities, 'cause technology can't do everything, humans can't do everything, but that combination is extremely powerful. This is that unlock for us to go after requests for proposals that normal technology-only companies would not be allowed to do. This also is a very unique land and expand, where we hope to become a trusted technical advisor to our clients and be able to implement additional technologies, again, to improve their outcomes and reduce their costs. Early validation, revenue's up.

We've got positive gross margins, and the strategy has a lot of traction. It's very interesting when the industry's excited, the team's excited, the board's excited, all our incoming recruits are excited. We're off to a very solid 2026. With that, I'm gonna turn it over to our trusty CFO. Apoorv, you wanna take it away?

Thanks, Bill. Good afternoon, everyone, and thank you for joining us. I'll walk through the financial detail behind the highlights Bill just mentioned. We'll cover the Event Risk acquisition, the economics, and the operational performance of the business as a whole. Please note that the figures in our financials are unaudited and presented in millions, unless otherwise noted. For complete financial details, please refer to the Q1 2026 Form 10-Q filed last Friday. No, see again, you guys are moving. I don't know why it's, like, moving.

Oh, can you put it here so we can see.

No, it says slide 13.

Yeah.

I think he moved too early.

I hear you.

When are you supposed to have the acquisition stuff up?

I think there's.

Right here.

There's an error.

Recording in progress.

Absolutely. Thanks. Thanks, Bill. Can you hear me okay?

Yep. Very good.

Good afternoon, everyone, and thank you for joining us. I'll walk through the financial details behind the highlights Bill just shared. We'll cover the Event Risk acquisition economics and the operational performance of the business as a whole. Now, as we announced the Event Risk acquisition, it closed on February 27th, 2026. To remind our investors, we wanted to provide the purchase consideration. The total purchase consideration in fair market net present value is approximately $18 million, comprising $5 million in cash at closing, the repayment of $1.1 million of seller debt, approximately $7.2 million in Class A common stock, representing 1.7 million shares issued. The balance is future deferred cash and contingent consideration. A working capital and non-compete adjustment of $1.4 million is reflected as an offset to the deferred purchase price.

On the top right-hand side, we've provided the accounting allocation of the purchase price. Important to note that this is preliminary and subject to measurement period adjustments. Client relationships of $13.5 million represents the largest component and it amortizes over about 10-year life. From a financial performance perspective, at the bottom right of the screen, in its first 32 days of contribution, the Knightscope Autonomous Security Force delivered $2.4 million in revenue, $400,000 in gross margin at a 17.5% margin, and $100,000 of net income accretive from day one. In addition, the acquisition resulted in about $1 million of one-time transaction costs to SG&A in the quarter. We do expect to continue to incur additional expenses related to the integration in the near term.

Also happy to note that on a pro forma combined basis, the Q1 revenue would have been approximately $10 million versus the $7.2 million in Q1 2025, a 39% year-over-year increase. Turning to cash position. Cash and cash equivalents stood at about $11.4 million as of March 31st, compared with $20.6 million at year-end 2025. This decline reflects approximately $6.1 million of cash outlay to fund the Event Risk transaction, closing payment, and debt repayment of and the $1 million in direct transaction costs. As well as continued investment in the Autonomous Security Force operations. Our at-the-market facilities remains active and continues to support our liquidity and operational flexibility. Turning to the Knightscope combined company performance.

Q1 2026 consolidated revenue was $6.0 million, up 106% year-over-year from $2.9 million in Q1 of 2025. This is a record quarter and the strongest in company history. Service revenue was $4.2 million, up 98% year-over-year, driven primarily by $2.4 million of contribution from the acquisition. Product revenue was $1.8 million, up 128%, driven by fulfillment of ECE orders that had been constrained, if you recall, by supply chain conditions in the second half of 2025. Excluding the acquisition, the core technology revenue grew 26% year-over-year from $2.9 million to $3.7 million. Gross margin turned positive in Q1 2026. This is the first positive consolidated gross margin in recent history.

Consolidated gross profit was $465,000 or 7.7% of revenue. This compares with a gross loss of $668,000 or negative 22.9% in Q1 2025, a $1.1 million year-over-year improvement in gross profit. The acquired Security Force segment contributed $400,000 of gross margin at a 17.5% segment margin on its $2.4 million of Q1 revenue. Core Technology, the margin inflected to a positive 1.5% from a negative 22% a year ago, driven primarily by volume and mix. A note of caution, service costs do include $1.8 million of new contracted labor associated with the acquired business. This point forward, this is expected to continue to be a recurring cost line.

While the inflection is encouraging, we are not yet at a sustainable run rate, and gross margin remains subject to supply chain variability. Total operating expenses in the quarter were $10.8 million. R&D expense was $4.7 million, up $2.6 million or 120% year-over-year. This investment is primarily directed at new product development, including the K7 and the Next Gen K1 portfolio. SG&A was $6.1 million, up $2.1 million or 51% year-over-year. Approximately $1 million of that increase represents one-time transaction costs related to the acquisition, legal, accounting, and evaluation services. Other drivers include approximately $400,000 of additional investor relations, advertising spend, $400,000 of professional services, $300,000 of acquired company G&A, and $200,000 related to this new Sunnyvale headquarters.

Normalizing for $1 million of non-recurring acquisition costs, operating expenses were $9.8 million in the quarter, 59% above prior-year run rate, reflecting our investment in future growth. Now on to net loss. The net loss for the quarter was $10.3 million, compared with $6.9 million in Q1 2025. The widening primarily reflects the higher operating expenses I just described, partially offset by the gross margin improvements and lower interest expense. On a per share basis, the loss improved to $0.74 from $1.28 in Q1 2025, reflecting a 42% improvement per share. Despite a 156% year-over-year increase in weighted average share count. Excluding the $1 million one-time acquisition transaction costs, the quarter's normalized net loss would have been approximately $9.3 million.

Following the acquisition, we adopted two reportable segments in Q1 2026. The table on this slide summarizes our Q1 revenue, gross margin, and gross margin % by segment. These include core technology development and operations, which yielded about $3.67 million in revenue and $54,000 in gross margin. The acquired Security Force segment, which added $2.4 million in revenue and approximately $400,000 in margin. Now, it is important to note that the two segments reported in Q1 are a GAAP requirement triggered by the acquisition. They do not reflect how Knightscope is managed and plans to be managed in the future. As Bill described, once fully integrated, we plan to operate the company as a single integrated Autonomous Security Force that provides managed services.

We expect our reporting structure to evolve toward a product and services framework that better reflects how the business is run. For a complete segment disclosure, please refer to note nine of the Q1 2026 10-Q filing. Bill, that concludes the financial review. Back to you for forward look.

Sure. What's next? Looking ahead, the team has been burning the candle on both ends. On the K7 side of things, we've got a lot of great work accomplished, still a lot ahead of us. We're looking at deploying a limited release of the K7 to select clients we have identified later this summer and to get some real-world deployment experience as another feed into the product development cycle. We're making good progress there. The integration of This is probably my 25th company I've bought. The deal, as I often say, is the easy part. The hard part is the integration, the day one and thereafter. Fortunately, we have very like-minded folks and teammates. We're all getting to know each other.

We've primarily been focused on a few key areas, but so far so good. In some cases, I think if you ask Eric or myself, we might be a little bit ahead of schedule of where we wanted to be. Still a lot of work yet for the balance of the year. GSX, we're going to be there in force. GSX is a major, one of the top two major security conferences here in the U.S. September, mid-September in Atlanta, we're going to unveil the Autonomous Security Force as one team and one force with one contract as a single managed service provider. Literally something all new for the industry that's never been done before. We're very excited about that.

Towards the fourth quarter, we're looking to have an investor day here physically at Knightscope headquarters, so you can come feel, touch, see, talk to the team, see the technology up close. Obviously we'll invite all of you as well as our bankers and our analysts and the like. Look forward to doing that. We had a good amount of questions come in. For purposes of being a little bit more efficient, we condensed them down to a few key items. I think the first one was to Apoorv, was around gross margin. How do you see that improving over time? What kind of pieces go into the puzzle here?

Absolutely, Bill. I think, you know, obviously the goal is gross margin improvement. We've, I believe, we believe that gross margin improvement will primarily come from a combination of operational scale, improved manufacturing absorption, supply chain normalization, and continued integration of our managed services platform. On the technology side, we expect better utilization of fixed manufacturing and support infrastructure as volume increases, while addition of the security force capabilities allow us to pursue larger, more comprehensive customer engagements, especially as we think about a land and expand strategy that combines technology, monitoring, and human response over time. We believe that the ability to cross-sell higher margin software and technology in addition to monitoring and the autonomous solutions into the broader managed services relationships can help improve overall customer economics and margin profile.

I think the combination of humans and technology, literally, with AI, it's gonna rewrite the economics for the industry and for us. There's all the stuff that you just spoke of, but there's also the not glamorous part of how do you get a security operation to run that much more efficiently. Us building an all-new effectively operating system for humans to be profoundly more effective and in combination with a good amount of AI agents and hardware and autonomous hardware, I think is going to make for some margin expansion over time. We need to build all that stuff out and then obviously integrate and deploy it. We're heading in a very exciting direction. That covers the first one. I think you had one on your side.

That's right, Bill. I think, you know, kind of expanding on what you just mentioned about the integration of the humans and technology. You know, a lot of analysts ask about the Knightscope security force integration. Where do we stand? How do you see it kind of coming to fruition in the short term as well as the long term?

I think there's a likely three steps. I think we wanted to do them in sequence over a much longer period of time, they've gotten a life of their own. There's the obvious, you know, financial accounting, audit related items that are key for us to do our regulatory reporting and managing of the company. That has certainly been more than underway. We have a component of information technology and human resources, and how do you combine systems, how do you think about recruiting profiles, employee handbooks. You know, there's a lot that needs to be done. The last piece, which isn't actually last, is the go-to-market. We've been experimenting on how do you propose something to a prospective client?

How do you spend time with an existing client on the Autonomous Security Force side that could benefit greatly from the technology, and vice versa? With someone that's already a technology client of ours, how do we add the human element to, again, improve overall outcomes and hopefully over time, reduce costs? We have a like-minded folks, a lot of work ahead of us, but things are, things are going a little bit ahead of schedule. We wanted to take the entire balance of the year. There's some bits and pieces. There's always gonna be issues, we're working through it. Feeling good.

I think to put it in Wall Street parlance, if we were a private equity shop, what we bought was a platform company. A really strong management team that's grown the business from scratch, knows the economics, knows the recruiting process, knows how to think about culture and recruiting the right team. I mean, if you think about it, most of these staffing companies, they call them staffing companies, they're supposedly security companies, are 100%-400% employee turnover rates. You gotta ask the question, like, why is our security force at 6%? Maybe we recruit it properly, maybe we train them properly. Health benefits, stock options, and what we intend to overlay is a significant amount of technology. We are gonna end up with a superior and elite team to deliver all of this.

We're in good spirits. A lot of work ahead, but so far, so good.

That's a good idea, Bill. Go ahead.

Yep. I think the other question was around capital formation and cash burn and kind of long-term view, how should we be thinking about the business?

Absolutely. You know, we expect to continue investing through the remainder of the year in areas that we believe are critical to long-term scale and competitive positioning, right? This includes product development, AI and software capabilities, operational infrastructure, and innovation initiatives associated with the broader Autonomous Security Force platform. In the near term, some larger customer deployments may also include a meaningful human services component as we establish and expand those relationships. However, I think that over time, we should expect operating leverage, improved utilization of our technology platform, and increased attachment of higher margin recurring services to help normalize and reduce that cash burn.

I think put a different way, we're if we're shooting for $1 billion of annual recurring revenue, you're gonna have to make some key long-term investments in order to get there and kinda work with a few hundred employees, not gonna work with a few thousand. We're making the right long-term bets on both the external technology that's out in the field, as well as our technology in-house to basically run the company. Our Chief Intelligence Officer is very much pushing the organization to become a fully agentic organization in the next few years. That is literally rewriting not only the economics for the industry, but rewriting the economics and standard operating procedures and the like of what we do internally.

Think about how one would go about building effectively an operating system for an all-new security provider that has I've got a blog I'm working on called One Throat to Choke. Can you get one vendor to focus on hardware, software, remote monitoring, licensed, armed and unarmed agents in one package so you can actually deliver what a Chief Security Officer is looking for? That is the groundbreaking corporate strategy change that we're really excited about so that we can As one hedge fund said to me on a call is, "Oh, so you're basically almost like a Trojan horse.

You're coming in with the normal type of security operation that most chief securities would be accustomed to seeing, and then you're gonna build, basically try to be a trusted advisor, a technical advisor, to then look at those operations, audit them carefully, site by site, client by client, and then prescribe the right technical solution regardless of if it's, if it's hardware, software, it's sensors, it's some other capabilities, so that we can actually deliver on what the client's looking for. And that'll be the best marketing and client experience dollars we ever spent, is to actually fix the client's problems.

That's absolutely right, Bill. I think, you know, we've talked about how, you know, the fragmented solution model makes it extremely difficult for clients to get the outcomes they seek, which is, I want to secure my perimeter, I want to promote safety, but I gotta cobble together, you know, different solutions from different vendors to make that happen. I think this approach allows us to do so in a unified way.

Exactly. I mean, if you're a chief security officer, likely, you spent a significant amount of time in law enforcement, maybe ex-FBI or ex-military. You're really focused on physical security. One vendor shows up and says, "Hey, would you like this radar?" Another vendor shows up and says, "Do you want this lidar? You should use this robot. You should use this AI agent. Do you think this sonar is appropriate?" You're kind of only trying to sell your widget to that person who really is not necessarily fluent in the latest technologies for physical security and getting them all to work together. Your single point solution might actually work for this one little thing, but what they really need is support and help.

You know, if CFOs continue to cut expenditures on the security side of things, and not giving the team the tools to be able to reduce incidents, and the incidents keep climbing, like, there's literally a huge problem here which we hope to be a part of that solution. I think the strategy sounds, teams excited. We just need to focus on execution.

The question came in, you know, based on this strategy and this path to revenue and margin growth. As you think about the broader, you know, strategic outlook, can you talk a bit about, you know, both commercial opportunities and how that's changed with this acquisition, as well as in the new economy security force dynamic government opportunities and then M&A?

I'll take those in a slightly different order, but M&A. I've done a roll-up in a past life, and usually a roll-up, if you don't know what a roll-up is, you basically buy the same type of company over and over again and make one, big one. You look at a very, very fragmented industry. I think there's maybe 6,000 guarding companies in the U.S. that have more than 100 employees. Most of them are owned by boomers that are retiring here in short order. Perhaps the kids don't wanna take over the business. Perhaps those are too small for the larger three staffing companies to buy them. That becomes an interesting, kind of dynamic. We wanna buy quality over quantity.

It's gonna have to pass the sniff test, more than just the sniff test of what we just went through with our first acquisition and that's intended to be the platform to set that standard so that we can go after repetitive additional acquisitions. I think other acquisitions that we're contemplating or looking at, and we've said this publicly before, is on the remote monitoring side of things, to see where, instead of growing something organically, it might be better for us to do a bolt-on or a carve-out. Working through that. We wanna continue that inorganic growth and be very careful and methodical about how we go doing that. I think on the government side of things, probably a couple two different aspects.

One is, you know, we cut a deal with Palantir last year. The overall corporate strategy is I want cybersecurity to be actually not the cost center, but an opportunity for us to market things better. You know, long story short, can we get all our private sector, local state government, to all have federal-grade cybersecurity? There's one standard across the nation, and that's what we're looking at, not only looking, actively investing in is why the expenditures for R&D have gone up and will continue is to re-architect that technology portfolio on hardware, software, and how we operate into something that is federal-grade for the entire nation. I think that brings cybersecurity to the forefront of a long-term sustainable competitive advantage over anyone else in the marketplace.

I think a second's the really hard one. I've been trying for a very long time to see if we can pass a national robotics strategy. I think there's enough interest in the administration and in Congress that I'm hopeful, you know, I don't control this. I am hopeful that something will happen this year. My controversial proposal, which some people get really excited about and some people get annoyed, is the U.S. federal government has within its own authority to fix the problem. No one in Congress or the administration wants to lose the robotics war, like we lost effectively lost the drone war. What do we need to do? We need to kind of fix a lot of things. Some of them just simply have to do with demand.

What I've been proposing is for the federal government to dictate/mini mandate to force every department and agency that thou shall take 1% of your operating budget, and you will use robotics and automation to stop wasting taxpayer dollars. All we're asking, we're not asking for the government to spend more money. We're asking you to use commercially available technology to improve the efficiencies in your own operations. If you do that catalyst, likely you could with one fell swoop, fix the supply chain issues and all these other issues that several different committees are all working on independently with, you know, one paragraph that I've already written and given to staff over there of how you would actually cure the problem. Big, big ask. I think there's enough interest that something will happen.

Not sure what will end up coming out the other side. At least the conversations are ongoing. To end on that last point, maybe the eternal optimist, in advance of hopefully that happening, we partnered with Carnegie Mellon University, one of the top robotics school of higher education in the entire world, to build a national security robotics lab here at Knightscope. We signed a five-year deal with CMU, and we've already got five graduate students working on some cool whiz-bang stuff for the upcoming K7. We're in this for the long haul, and we're making those long-term bets. We're in a very good position. I've never been literally this excited about the company's future.

More to come, as Apoorv often says.

Thanks, Bill. That's all the questions that we have today.

All right. Sorry, everyone, again, for the small technical mishap. We will be sure to get you a properly recorded version of this, so you have it for your files. Thanks for tuning in, and looking forward to seeing you next quarter 'cause there is more good stuff coming. Thanks, everybody.

Thanks, Bill. Thanks, everyone.

All right, let's get going. My name is William Santana Li, Chairman and CEO of Knightscope, and here with our trusty CFO, Apoorv Dwivedi. We're gonna do a little bit of a different format today. First, an announcement regarding this Thursday, then Apoorv will go through the 2025 financial results that we filed on a Form 10-K. Then we aggregated a bunch of questions that have come in, including from the three equity research analysts, and we'll try to put that in a much more efficient approach to answering questions. With that, I'll start it off with, we're gonna have our first annual Autonomous Security Force Day, and also celebrate our 13th year anniversary in business. I often like to say we're here in Silicon Valley.

There are 22,000 startups here. 95% of them fail despite having unbelievable ambition, financing, and the like. For us to be able to start the company, get it funded, grow it, take it public, buy two companies, and still be at it 13 years later is certainly a testament to the relentless nature of the Knightscope team. I couldn't be more excited about our future as we build out the nation's first Autonomous Security Force. This Thursday, we're going to have several VIP private sessions for previews as to what we're building during 2026 and intentionally to get some market feedback. Then we're gonna have an open house in the evening here in Sunnyvale at our new headquarters.

There's rumors flying around there's gonna be an ice cream truck and a bunch of other stuff. Hopefully, if you haven't RSVP'd, please be sure to check our social media channels or newsletters, and you can grab a spot there. That'll be at 6:00 P.M. this Thursday. All right. With that, I'll turn it over to Apoorv, who will walk you through history, meaning 2025, and kinda what happened then. Then we'll talk a little bit about the acquisition and the questions and why all the excitement for 2026 and beyond. With that, Apoorv.

Thanks, Bill. Good afternoon, everyone, and thank you for joining. I will begin with a review of our financial performance, first for the Q4, and then the full-year 2025, followed by commentary on liquidity and capital strategy. With that, let's jump right in. Q4 revenues declined approximately 9.8% year-over-year, reflecting primarily driven by supply chain constraints, which we've talked about in the past, that resulted in delays of ECD product deliveries. The services business remained materially unchanged. Gross loss of $1.6 million reflects ongoing margin pressure driven by elevated material and other input costs for production and by under absorption of fixed manufacturing overhead. These factors were consistent with full-year trends and underscore the need for improved scale and supply chain normalization to drive margin recovery for the company.

Our operating expenses of $9.7 million in the quarter increased approximately $3.8 million year-over-year, driven by higher investment in both R&D and SG&A functions. R&D spending reflects the company's deep commitment to continued advancement of our next generation platforms, such as the K7, the K1 Capsule, and the Signals software. SG&A increased primarily due to targeted investment in talent and organizational capabilities, which are critical to positioning the company for future scale and growth. Overall, the cost structure reflects a deliberate investment phase to support long-term expansion. Q4 2025 net loss of $11 million widened versus prior year due to a combination of lower revenue, continued gross margin pressure, and sustained operating investment. The quarter reflects a near-term financial impact of scaling the platform while revenue growth remains uneven. With that, moving on to full-year.

2025 full-year revenue grew approximately 4.9% to $11.3 million, driven primarily by the services revenue expansion in both the Machine-as-a-Service ASR offerings and our full-service maintenance plans on the ECD installed base. However, growth in the product revenue was modest due to the already discussed supply-chain-related constraints and shipment timing issues discussed earlier. Cost of revenue increased by approximately $1.1 million versus prior year, reflecting higher bill of material costs, supply chain inefficiencies, component shortages, and production variability. The lack of scale continues to pressure unit economics, reinforcing the importance of driving higher volume and utilization as we continue to grow. full-year operating expenses increased approximately 12.1% year-over-year, driven primarily by a $5.4 million increase in R&D investment compared to 2024.

This reflects continued focus on platform development and next generation products to support future scalability. The increase was partially offset by cost savings in SG&A expenses of approximately $1.8 million, as well as the absence of $500,000 in restructuring charges incurred in the prior year. This demonstrating progress in optimizing the company's cost structure while investing in growth. Full-year loss increased to approximately $33.8 million. This reflects a combination of modest revenue growth, continued gross margin pressure, and elevated investment levels consistent with the company transitioning to growth. Weighted average loss per share of $4 decreased by approximately 63.5% year over year. Finally, from a balance sheet and cash flow perspective, we used approximately $30.3 million in operating activities during 2025. Continuing to invest in product development, deployments, and now organizational scale.

Importantly, we raised $42.2 million through financing activities, allowing us to strengthen our balance sheet and support ongoing operations. We ended representing a significant increase from $11.1 million at the end of 2024. Looking ahead, our focus remains actively on managing liquidity through a combination of capital markets access, operational discipline, and strategic initiatives designed to improve cash generation over time. In summary, 2025 was a year of foundational investment. We strengthened the liquidity position, continued to grow revenue modestly, and made critical progress in evolving our business model towards a more integrated and scalable platform. While near-term financial performance reflects that investment phase, we believe the combination of our technology, software, and now human-enabled delivery capabilities position Knightscope to pursue larger opportunities and improve financial performance over time.

With that, I'll turn the call over to Bill as we go through the questions provided by our analysts ahead of time.

Yeah, Apoorv, I think there's some connectivity issues. So if you wanna kill the PowerPoint and turn your video back on would be great. While he does that, let me put things in context a little bit. We've been at this problem and tackling this issue of trying to see if we can make the U.S. the safest country in the world, utilizing technology, AI, robotics, electric vehicle technology, telecommunications, the whole gamut. After working on the problem for over a decade, it's become obvious to me that the nation's addicted to CCTV cameras, security guards, and video management systems running on Windows and are unwilling to change, or if willing to change at a snail's pace.

We wanted to try to be helpful to our clients to build a managed service provider that can take a lot of the technological burden, complexity, regarding the technology itself, installation, IT, cybersecurity, keeping things up to date, making sure it's all operating off of a chief security officer's hands, and come with go to market with a complete, full solution instead of having this disparate set of widgets all over the place that don't talk to each other, and the like. An accelerant and catalyst to do that was the acquisition of Event Risk that we recently announced. That's a transformative and strategic acquisition so that we can go to market as a managed service provider to actually fix a client's problems instead of doing the mix and match.

That's one of the reasons we're extremely excited about our future. You know, we've been at this for a very long time. I've never been this excited, and I kid around with the team here is like, I couldn't sleep before 'cause I had all kinds of problems and stuff. Now I can't sleep 'cause I'm too excited. The future looks genuinely bright. We have a lot of contracts signed and just focused very much on execution, both operationally and technologically. We've got a lot of new technologies that we're developing, and we're gonna showcase some of that this Thursday.

These coming years are going to create literally a new kind of entity that's never existed before, a managed service provider that can be the nation's first Autonomous Security Force. With that, we got a bunch of questions in from a variety of folks, including our research analysts. Apoorv, if you wanna read off the first easy question, we can get on it.

Absolutely. All these questions are easy.

Excellent.

The first one was basically, can you provide visibility on timing of supply chain issues clearing up? Basically, you know, are any supply chain disruptions anticipated due to the, you know, due to all the global conflicts happening across the Middle East and Europe?

I think there's volatility prior in the system, still in the system, and I would forecast going forward, we'll continue to have volatility. We need to better manage the volatility. Some of it has to do with tariffs, geopolitical instability, et cetera. Some of it has to do with an end-of-life component, and some of it has nothing to do with, "Hey, can you get the NVIDIA chip?" It's the one specific resistor or button or what have you, that ties up the whole thing, and it's not one strategic component. This continues to be a whack-a-mole kind of problem that we're working through.

We have a supply chain manager and a team that's proactively working the issue, so we're starting to plan better, buy in advance, replace components out, you know, outright replace suppliers if needed. To be on a cautionary note, we've had our struggles. I think we can try to minimize the damage, but a lot of it is not necessarily directly in our control. We're working through the problem. I don't know if Apoorv, you had a different take on that.

No, agreed, Bill. I think, you know, the volatility, you know, is driven primarily by macro events, and I think we're doing a lot of things internally to mitigate as much as possible, right? The broader electronics market in particular continues to be volatile. There's longer lead times, tighter availability in items like compute modules, networking hardware, memory, et cetera. So I think those are some things that are just outside of control or controlled directly.

We are putting in place a mitigation steps, so things like, you know, making sure we're not relying on single source, expanding our relationships to multiple vendors, making sure that we identify items that have the highest risk, and making sure that we have enough of those in stock, which is an investment in inventory. There's a lot we're doing, and we've been able to learn over the last few months that we're working through. I would say, you know, keeping supply chain and production in sync is important for us and we'll continue to adjust as things progress. We do expect that versus prior year, this year we'll have slightly better, if not much better outcomes, as we continue to invest in supply chain and our relationships.

All right. Next.

Next question was on the move. Is the move to Sunnyvale facility complete and up to operational efficiency?

Mostly done. We have a little bit of a challenging landlord situation with less flexibility than we want, but we're working through it. One of the reasons we're having this Autonomous Security Force Day here is to showcase the progress that we've made since we've moved into the building. Still a lot more that we wanna complete, but things are looking pretty good. I will confess that some of us are nervous that we're gonna run out of space a lot sooner than we were planning. That's a good problem to have in the coming quarters.

Next one is on the recent acquisition. Following the Event Risk acquisition, can you give us an estimate of how much your potential market has expanded? Do you have an estimate around the new TAM?

I've been wanting to do an acquisition like this for five years. The TAM that we actually put in the investor presentation, if you haven't seen the latest one, it's at knightscope.com/america. That $230 billion there is the TAM that we're going after and remains unchanged because this was kind of the overall plan. I think this all is an unlock or a catalyst for us to be able to go to market much more efficiently and much more aggressively. I think one of the enticing things that's gonna happen in the coming quarters is just to see genuine accelerated growth versus the less than optimal growth that we've seen to date. The idea is to be able to maybe two different steps here.

One, we have existing clients between the acquisition and our legacy clients, and there's a significant amount of opportunity to cross-sell technology or security agents back and forth. There's that kind of literal synergy. Once that's done, let's go to market together in specific verticals for us to be able to again bring a total solution. The TAM doesn't change the amount that we can go grab after the TAM, and we do it in accelerated fashion is I think dramatically increased. If you haven't heard, we're the team is well over 400 employees now, and we're on a pretty serious pace of growth.

Yeah, I agree, Bill. I think you know, the way to think about it is not whether the TAM has increased, but more our ability to penetrate that and grab a larger piece of that market share faster is definitely accelerated. You know, we've talked about this in the past where we've said, you know, generally, you know, when there are RFPs and RFQs out for security guards only, we were, for example, you know, excluded from those because we don't have guarding services. We don't have humans. We're only technology. When we would, you know, try to go after technology-only RFPs and RFQs, again, we didn't have a full-on solution, so it kinda limited us a little bit.

Now with the acquisition and being able to go to market in a way that allows us to provide that fully managed services or fully managed security services, it just allows us to go to market faster.

Yeah. A little bit more context for those newer to that conversation. There are, I think, rough numbers, more than 6,000 guarding companies in the U.S. that maybe have more than 100 employees, plus or minus. Our friends over at Lake Street helped us vet, you know, the first 100, and we came across Event Risk and Eric Rose. A lot of special things about why we got so animated and excited.

Having a combination of a serious operator who's been more than around the block has been able to work in large established guarding companies helped train the Navy SEALs, Marines, law enforcement and been able to grow and bootstrap an entire company onto himself with the team is an accomplishment in and of itself. If you add the growth, the continued double-digit growth that he's been able to enjoy over the past few years is another important bullet point. Another one that's very interesting, the industry's 100%-400% employee turnover rates. The Knightscope Security Force is at 6%. Very laser-focused on recruiting the right people, providing them health benefits, providing them the appropriate training.

In our case, we're gonna be adding a few more things. The Board of Directors kindly approved stock options for the entire team, so we can also attract more people and keep the people employed and engaged and have them be part of the winning solution here. We're working on some new technologies to add to those security agents. In the future, you'll be hearing us talk about ASAs or augmented security agents that really don't exist today. That allows all of that combined with the stationary technology, the autonomous robotic technology, the augmented security agents, all having that data fed into our upcoming new Signals software platform and our remote monitoring team is gonna give us an unprecedented capability to properly secure a facility.

Our security analyst that's remotely operating them now has machines to do things autonomously. They can escalate things to a different risk level to have some humans involved. Then there's a response element, both armed and unarmed. That's unprecedented in the industry. One of the reasons why we're in good spirits and more than rather excited about the future.

Question on the sales forces and how we mesh them together. Two questions, and I'll combine them here. What is the overall, you know, sales pipeline expected for the ASR, the ECD, and the Event Risk or now known as the Knightscope Security Force businesses? And then what is the timing around being able to sell Legacy Knightscope with the Knightscope Security Force services together?

I'm gonna want Wall Street, media, and our own team internally to really stop focusing on selling widgets. How many of these units did you sell? How many of this standard stationary device did you sell? What we really need to focus on is aggregate total revenue growth of providing an actual solution to our clients. That is the overall strategy for us to deliver a managed service provider and try to focus on fixing the client's problem, improving outcomes, improving quality, improving service levels, and hopefully there's some cost reductions in there for our client, depending on the location.

Overall manage this much better that's being done today and not focused on did you sell an agent or 10 agents or 100 or 300 agents with that contract or did you sell? The important part is are we fixing the client's problems? That is a bit different and why the change in strategy is to force that change in adoption that's needed across the country. Most humans and most large organizations don't wanna change. I told the Pentagon, DHS, and Congress the same thing. This whole country does not wanna change. Even when, you know, we're sitting here, Silicon Valley is a bunch of engineers. Like, you hand them electricity, fire, and the internet in terms of AI, it's like, "No, no, I'm good. I know what I'm doing." Like, I don't know.

I think we need to find a different path to make those changes and give some relief to the Chief Security Officers. If you really put yourself in their shoes, in this day and age, it was different 30 years ago. When, you know, if you're ex-law enforcement, ex-military, you're here to secure a property, that's kinda your go-to skill mix. This day and age, "Hey, you know, can you please talk to me about, you know, 4G and 5G versus Private LTE versus industrial Wi-Fi? And then I don't know about the drone, and then is this cybersecurity compliant? But does the DoD accept the Impact Level 5, or is it a FedRAMP thing? And you want the robot to work with the guard." It's just too much.

You're asking a CSO to be the Chief Technology Officer, the Chief Information Officer, the Chief Information Security Officer, the head of facilities, purchasing, and everything else, and then we're wondering why it's not working and it costs too much money. I really want the whole team, external and internal, to be focused on top-line revenue and bottom-line profitability as we get there.

From a modeling perspective, will you be breaking Event Risk into its own reporting line item, or will it be included within the services revenue? I can answer that one, Bill. Really, TBD, we're assessing the right way to reflect the Knightscope Security Force revenues and line items in the business. Most likely though, we do consider it to be a service and we would wanna include that in the services line. However, there are some GAAP rules that we're you know evaluating along with our auditors to make sure that we not only provide the right level of disclosures, but the right level of visibility as we go forth and draft up our 10-Qs and 10-Ks.

I think we missed part of the answer to the other question. The pipeline without-

Yeah.

Sorry, is rather healthy, let's put it that way. We're intentionally focused on execution as primary drivers. Changing the recruiting profile of the team, setting the standards of the team differently, changing processes, figuring out appropriate uses of AI implementation for specific areas, building new technologies. Everything's very much focused around execution because the pipeline's rather healthy.

Absolutely. Next question is, will you be announcing the contracts of the Knightscope Security Force when they are won?

I think that's also a TBD. As we mentioned during the sit down with Eric, if you haven't seen the interview, go on our YouTube channel. We wanna take a thoughtful balance-of-the-year process to think through the branding, through IT, through HR, through finance, accounting, audit, technologies, et cetera, instead of rushing decisions. So that also applies to press releases, public relations, external affairs, government relations, and investor relations. Something we'll ponder and think through as the company continues to mature as a premium managed service provider.

Next question kinda dovetails right into that, Bill. Can you provide a timeline for integration? How is the process so far? Are there any notable items to call out?

This is probably my, I've lost track, 24th, 25th, or 26th acquisition. As I often say, doing the deal is the easy part for those that have been around the block. It may not seem that way for people that participate, but it is actually the easier part. The hard part is day one after you close the transaction. I will say it has gone a lot more smoothly than all of us expected. We have willing folks who want to work together who want to make changes, who need additional support and changes. As I just stated, the integration plan is to try to get everything sorted in a reasonable timeframe over the balance of the year.

In terms of priorities, let's call it finance, accounting, audit, related stuff first. Probably dovetail HR and IT kinda the same time. Then the last is the go-to-market branding, marketing, and that sort of thing. We are planning to be at GSX in Atlanta in September, so that you'll start getting a good more than a sneak peek then as to how the integration's going.

Yeah. Yeah, Bill, I think, you know, being super deliberate in how we merge the two-

Mm-hmm.

Organizations, primarily around culture, around go-to-market strategy, and obviously the backend support needed to support the growth of the combined organization are things that we're looking at. From a timeline perspective, I think, you know, it will take a couple of quarters, if not more, for us to kinda get our hands around how we wanna move forward as a combined company. We are looking at internally some of the things we talked about, for example, finance first, just integrating the finance functions. Then looking at HR, IT, and then finally as we move into the client-focused or public-focused face of the combined company. Any outlook for any more M&A over the next year?

We continue to look for accretive opportunities. Typically probably around two or three subjects. One is on the technology side. Again, living here in Silicon Valley, there's always some interesting items that might be easier to buy than to build. We continue to look on the core, just core technology front. Those often may not be, you know, top-line revenue focus. It's more the nugget of talent or technology that we want. Another would be on the remote monitoring side of things. We wanna continue to build up the RTX capabilities as we build out the security force. We're actively looking there. I think the growth on the security force itself is, as I said, healthy.

I'm not sure we wanna do a bolt-on just yet, but we have a lot of activity going on. M&A open for business, but always wanna make sure it's gonna be helpful for our shareholders and the overall growth of the company and be mindful and careful and make sure we get a good deal.

Last question, Bill. What are some key milestones that investors should watch out for in 2026?

I can start. Maybe you wanna finish. I think the 10-Q that we file in the second quarter that will reflect part of the activity from the security force side of things would be in the following 10-Q and then the following 10-Q. I think keeping an eye on the regulatory filings starting mid-May would be important. Maybe there are folks in the audience that don't realize this, but usually when you make an acquisition, there's like this 71-day rule. I'm sure I'm gonna screw this up. Within 71 days you need to file the kinda overall impact. We're working on that.

That'll occur in the coming weeks, probably in the May timeframe. That to us is gonna be really important because that'll show if the strategy is working or not. Is the company growing and heading towards profitability. Second, the technology, this all gets very exciting if you can have a pretty serious competitive advantage in a very large marketplace with capabilities that no one else can do. We probably wanna keep an eye on did the beta prototype testing actually occur in the second half of the year for the K7, which we're spending a lot of time on.

When the board's excited, the management team's excited, the team's excited, our suppliers and vendors are excited, and all the recruits that we're hiring. Oh, by the way, go to knightscope.com/careers. We've got a lot of openings. They are all excited and dying to work on the K7. Like, hey, maybe we're onto something. Keeping an eye on the K7 progress important. On the stationary side, we're unveiling the K1 Capsule in K1 Super Tower here this Thursday. Progress there is important. And then also on the Signals platform. I think those three that we can publicly talk about are things to keep an eye on. Basically two answers to the question, like is Knightscope doing well or not?

Is the revenue going up, yes or no? Not based on press releases or anything else. I wanna see the regulatory filing. Are the numbers going up, yes or no? Are you making serious progress on technology development that'll give us a sustainable competitive advantage? I think those probably should be the two key items to keep an eye on, unless Apoorv, you've got another one.

No, Bill. I think, you know, at the end of the day it comes out to, you know, improvements in execution, and how does that reflect in the company's financials and the way we are perceived in the market and by our investors, and customers, and clients, and vendors. It's really our ability to go out and, you know, grow revenue. With the combined company, we have a theory that this will actually accelerate this. You know, look out for the second half to see some of that proof. Obviously, product launches and commercialization of our new product development that the team is working really hard on, that's gonna be important.

Overall, hopefully as we do these things the right way over the next few quarters, especially going into the latter half of 2026 and in 2027, we should see, you know, improvements across all of our P&L line items, both on the revenue side as well as the cost mitigation side. That's gonna be the sum of all things we do from an execution perspective. If we do that right, it will show up in the financials.

Then I've gotten a lot of questions asynchronously here on hey what does Bill and Apoorv and Mercedes know about running a guarding business? Well, keep in mind that the idea and how we approach this is very similar to how a private equity firm would look at it, which is basically we wanna go buy a solid business that's run by stellar management. We give them the tools and support and technology for them to grow and give them the autonomy frankly to be able to do that. We found that in Event Risk. The management team is very strong. They've been growing very quickly. The client retention rates are astronomically good. The employee retention rates are astronomically good.

We got real hitters that we're betting on to continue to grow the business. What we're gonna come with is technology that will ensure that it's not a commodity staffing business of headcount the way it's kind of the industry has been run today. We're reimagining and rearchitecting how physical security gets delivered to a client. Our initial interactions with folks that are in the know or prospective clients who are in the pipeline, we know we're on the right path. Our focus right now is just heads down on execution.

The balance of the year to just kind of wrap this up is you know focus on technology development, focus on growth, finish up the integration so that 2027, 2028, 2029 are hopefully some epic years for us. We're in great spirits. The market, I think, is trying to understand what we just did, both on Wall Street and in the security industry. The proof's gonna be in the pudding, and I'm betting on this team, and we're highly confident that the future is bright. Apoorv, did you have any last remaining thoughts?

No, same, Bill. I echo both your sentiment and the team's sentiment in that, you know, we have a lot to do, we have a lot going on and, you know, we just have to keep our heads down and focus.

Yeah. Lastly, I wanna publicly thank our Board of Directors and the management team for the support in doing this strategic acquisition. Again, I've been wanting to do this for half a decade and finally got the brave pill to do it, and now I'm just kicking myself that we didn't do it five years earlier. This is going to be a lot of fun. Hopefully, for those of you that can join, we'll see you Thursday night for our first annual Autonomous Security Force Day. Please be safe. Thanks, everybody.

Welcome, everybody, to the Third Quarter 2025 Knightscope Earnings Call. My name is Alison Schwanke, I'm the VP of Marketing here at Knightscope. And I'm joined by our Chairman and CEO and CFO. We're excited to go through the results and some exciting news for us here at Knightscope. I'll hand it over to you, Bill.

Thanks, Ali. Welcome, everybody. We're livestreaming from our brand spanking new Knightscope headquarters here in Silicon Valley. If you see some noise or stuff going on in the background, we're getting ready for KHQ night, have friends and family here this evening, and we're excited to get everyone to come visit the new facility. So the other important thing to note, we will not be covering any MNPI during the call, so no material non-public information. If you ask a question after the discussion on the earnings, if we can't answer the question, we'll try to rephrase it so we can. But Ali is here to moderate and make sure we stay out of trouble.

If you do have any questions, please use the Q&A feature inside of the webinar, and we'll make sure and line those up so we can answer after we address some of the initial findings.

So with that, we're going to turn it over to Apoorv, who's going to walk us through the third quarter.

Thanks, Bill. So as we look into our third quarter financials, there's 3 primary themes that are emerging. On one side of revenue, we saw modest revenue growth. Company is still largely early stage in an industry where there's a lot of excitement around robots. However, the adoption is still uneven. We believe that we will be able to better penetrate existing markets and enter new markets with innovative technologies that the company is bringing forth in the near future. On the margin side, on the margin side has been challenged as we continue to build scale economics in manufacturing -- wait 1 second -- in manufacturing, in the field servicing and in our material manufacturing. Historically, our team has been exceptionally scrappy, doing whatever it takes to meet growing demand. This scrappiness has been our superpower, but it doesn't scale. So as we prepare for our next phase of growth, we're completely overhauling how we build and deliver our products. In Q3, we saw a temporary dip in our margins as a direct result of the deep dive we took in our manufacturing operations. Lastly, our investment in product development and innovation. We are investing in innovation and product development, and we believe that innovation will be a critical engine of our growth in the near future. With that, let's jump into the financials. Total revenue of $3.1 million grew by 23.5% versus prior year. This was driven by increase in both sides of the business. Services revenue grew modestly by 2%, while product revenue grew by 82%, largely as the company delivered higher production to catch up from prior quarter's component shortages. Gross loss of $1.6 million is largely driven by $600,000 write-off of slow-moving and obsolete inventory that we identified as part of the move from Mountain View to Sunnyvale, in addition to recognizing higher material costs incurred to meet production demands of the third quarter. OpEx increased by almost 13% and ended at $7.9 million, largely due to intensified investment in R&D, primarily in the next-generation 4-wheeled K7 robot. As such, our R&D investment increased by $2 million as compared to prior year. However, this was offset by cost savings of about $1.1 million across SG&A, primarily in lower third-party professional fees and in lower IR expense. As a result of these dynamics, our loss from operations came in at $9.5 million as compared to $7.7 million prior year. Additionally, our net loss of $10 million came in $1 million better than prior year, primarily due to the $3 million expense hit that we took last year as part of the change in fair values of the warrant liabilities, which are no longer on our books. EPS came in at $0.98 -- negative $0.98 as compared to a loss of $3.58 prior year. And finally, on a great note, our cash balance continues to increase as the company relies on its ATM as well as cost management. So we ended our cash balance at about $20.4 million this quarter versus $5.3 million last year at the same time. With that, I will pass it on to Bill for the next -- for Q&A.

No, before we go to the Q&A, I really think we might have a video at this show.

Oh, interesting. Let's do it.

Let's roll it. [Presentation]

All right. Well, hopefully, everybody enjoyed that. We've been working on the Knightscope K7 for a very long time. We're excited to announce that we're going to start a limited series production second half of '26. And we're in very good spirits here as building on what Apoorv said, kind of resetting the stage and foundation for growth of Knightscope. I've never been this excited about the company's future even since inception. So things are looking up here. Ali, do you want to hit us with the easy questions first?

Yes, absolutely. Well, the first one I already answered, but I'm going to go ahead and read it again. Robin was excited for us to speak about what was coming. I think maybe that was the video that we referred to, but the earnings were released this morning. So what other news is behind that?

Literally behind us. All new K7 autonomous security robot. We're really excited about building a new foundation to be able to handle much larger environments at much higher speeds with a ton more capabilities. And I think you and I are going to be sharing a little bit more over the next coming months and feeding some exciting news ahead of the launch in the second half.

Yes, absolutely. Well, there's a couple of questions here regarding some of the financials. So let's go into those. So Greg says, is the company building first, then selling the inventory or building inventory and then selling products?

Well, that's a great question. It's -- traditionally, we've sold the products first, then built them. However, as we kind of move forward towards scaling, I think one of the things we want to do is figure out how do we build the stock and then sell the inventory as demand comes in. It's important for us to be able to -- as we scale to do that because that allows us to then turn the bookings into revenue much faster.

I think historically, if you look at the numbers, we -- at the peak and maybe $6 million worth of backlog. We brought it down to about like $1 million or $2 million. We want to get that down as much as possible and start building finished goods inventory so that we can actually ship quicker and actually the whole operations, the financials, everything get improved. So that was one of the other reasons to move here to a much, much larger facility. In Mountain View, we had about 13,000 square feet. Here in Sunnyvale, we're at 33,000 square feet and a lot more capacity for us to continue to grow.

There's a question here about the stock. The stock is down over 99% from the IPO price. How can you justify C-level salaries with such dismal performance?

Look, the stock price is rarely an indication, especially for a company like our size. It's really an indication or a performance of the company itself. It's really more driven by market dynamics and what people think the stock and the company will do and what they're seeing. Now the salary expectations and the compensation is really driven by Board. The Board determines what they think we've done and how we perform and how we've done, and they determine that. I think overall, the company has been in a really great point so far. We took us a lot to get here. We're looking forward to the growth. And I think what we're seeing is the compensation reflects where the Board feels that the company is going to be.

Fantastic. Let's talk a little bit about the K7 capabilities. There are some questions here about what all can it do what are the capabilities of the new K7?

We're not going to unveil everything today, but it will go up to 10 miles an hour, so much faster than the K5. They handle much more difficult terrain, so light-duty off-road as well as kind of street level type of environments. We're going to -- we're still working on this. It's not ready for prime time just yet, but we're going to work on off-grid capabilities for us to deploy these in much larger environments that don't have power infrastructure. That's another big R&D investment for the next year plus for us to be able to deliver on that capability, still at the R&D stage. We have a few things up our sleeves. But remember what I've often said, we want to put 1 million machines in network that can see, feel, here, smell, speak and autonomously cooperate. And the K7, this next generation of technology is a massive step towards that vision.

Yes. One more quick thing to add is the amount of hours that we've now acquired and experience in the field of controlling.

I think if we would have tried to build this much earlier in our development cycle, it would have been that much more difficult. We've now operated well over 4 million hours fully autonomously across every time zone in the U.S. and multiple winters and summers. And it's important to have that field experience and that literally gives us a competitive advantage because we can see designs from science fair projects to start-ups and the like that might have an interesting thing to look at. One quick review, we know this is going to fail, that's going to fail, and this is going to fail and they're going to find out real quick why you're not going to want to go down that path. So having that intelligence and understanding from being out in the field is really, really important. You cannot develop the stuff in a laboratory.

Absolutely. Well, let's pivot a little bit back to some shareholder questions. So we have a couple here about what we're doing to drive or specifically address shareholder value.

Sure. So shareholder value, again, comes from execution, right? We, as a team, are going to have to figure out how do we execute and deliver on the promises of growth that we're giving to the shareholders. And that's just a process. It doesn't happen in a quarter. It doesn't happen in 2 quarters. It takes a while. The company, as we've talked about in the prior few calls, is going through a true transition period. We grew for the last 10 years through being scrappy. Scrappy is great for innovation. However, in order for us to move forward to the next phase of growth requires us to set in processes, structure and basically set up for scale. And to do that, we need shareholder support to continue to believe in us. But what we'll deliver in the future is higher revenues. We're focusing on that. We're focusing on penetrating new markets. We're focusing on driving our margins lower. Again, right now, it's kind of an interesting time because we have to clean up some backlog and some other just things that have happened in the past. But as we kind of go through that cleanup phase, as we set up for scale, that's how we add shareholder value by showing growth and through innovating.

I think maybe it might be worthwhile recapping what we've done over the last 2 years and why we're excited we've literally turned Knightscope inside out and upside down, going through every single functional area, every single department. We brought in a new seller board. We've got rid of about 40% of the management team. We took about 30% of the payroll out and brought in new talent. We shut down a few facilities. We moved into a brand-new one. We set up a new remote monitoring department, new sales team, new accounting team, new CFO, new VP of Marketing. And now we've got a huge product launch that we're working on with the K7. There's the K1 stuff that we'll talk about next year. So it's a focus on growth, but you need to kind of have a stable foundation that Apoorv was trying to get at. We literally changed everything in the building, including the address of the building. And if you haven't noticed the actual logo of the company, nothing -- no stone unturned to make sure that we're set up for success. And our 3 growth strategies to be abundantly clear. One, organic growth is to grow the base business, the current business that we have and all the blocking and tackling that needs to get done for that. Second is new product development-led growth. So new products, new technologies, new capabilities that give us a sustainable competitive advantage in the marketplace. And then the last one, inorganic growth. A lot of focus on mergers and acquisitions that can build on that top line revenue or give us additional technical capabilities.

So that actually is a good parallel to what's being asked here, which is, are you working on any M&A opportunities?

Never crossed my mind. Do you want to cover that one?

Sure. So there we are absolutely looking at M&A opportunities. There are 2 primary areas that we're focused on. One is do we -- how do we -- so the way we think about growth engine is really hardware, software, humans, right? Those are 3 critical components of our growth in the future. On the hardware side, we have development here. On the software side, we're looking for partners and/or companies to acquire that allow us things like perception AI or audio AI or sense AI. So those are the things that are going to help us become better at the analytics and being able to give our machines the capabilities to perceive the environment around them in a better way. Third part of it is the human side. We -- as you guys know, as Bill just mentioned, this year or last year, we invested in something called the RTX group, which put humans in the loop. We do believe that really this idea that robots will somehow replace humans is the answer. It really isn't. The answer is you got to pair humans with robots. You got to augment them so humans can become better, right? Humans can become faster at what they do. So we're looking at industries or at least companies where we can find some great humans to work with us.

I think defining the next-generation augmented security guard is certainly a path that we're considering the remote monitoring. And at the end of the day, we had a large VIP client here yesterday. At the end of the day, clients don't care. They say please fix my problem in a way that I can afford it. And all the solutions today really aren't delivering what clients actually need. So what we're off building is that solution that will be comprehensive to actually permanently fix the problem for the clients as opposed to pushing a certain technology or a certain strategy.

So this question plays into that a little bit, and it's about autonomous driving. So the fact that it's already being adopted by much larger companies, was there a consideration in teaming up with them in terms of incorporating Knightscope tech into one of theirs? Or are we totally set on developing our vehicles or the vehicles from the ground up in-house? I guess, totally in-house was the clarifier there.

Totally in-house. I think as I often said, there's going to need to be a very large portfolio of technologies. This is what's behind us is just the beginning as was the K5 and the K1. The easy way to think about it is it's very different to secure and protect the school as it might be to secure an underpass of a bridge or a federal court house. You can't have one single technology and fla-la, that's just going to fix everything. If that was the case, then all the camera is going to fix something. Well, there's 85 million cameras in the U.S. I don't think it's fixing much. So I think you need a large portfolio and either we're going to do it ourselves. We may partner with folks or we may buy it. But one way or another, we need to achieve the mission and ends up being a make-buy decision. In some cases, we know a little bit more than what's out in the marketplace. And we're in a little bit of an odd space, right? So you've got the delivery robots making some good progress on sidewalks, less than 5 miles an hour on sidewalks. Then you've got the autonomous vehicle folks and the trucking folks. They're primarily focused at 35, 50, 75 miles an hour on city streets and highways. That's a very different profile than 10 miles an hour around the perimeter of a security location that needs security. So we're still specializing. We're certainly open to partnerships. We've been evaluating them as part of our M&A strategy or as part of our technology development.

Fantastic. There's several questions here around government and government contracts. So I'll group these together and people asking, do we have any government contracts that we're pursuing? Or what has been the latest of some of the work you did on Capitol Hill?

So yes, we have local state federal contracts in the stationary side, a good portion of them. The federal side, to be frank, as we always are, rather frustrating. We're in the middle of a whole conversation and then to have the government shutdown is really not productive. So we'll restart those conversations, but that certainly was a little bit of a setback. At the same time, the problem still persists, right? All these military bases need to be hardened. The 10,000 federal security -- sorry, the 10,000 federal buildings still need improved security. And so I think the solutions that we're building, inclusive of us partnering with our friends over at Palantir to get our technology on their FedStart platform is also a huge enabler for us to grow the federal side of things. But as I've said, this is a medium, long-term type of thing. You're not going to all of a sudden have a significant growth on a client that moves very slowly.

Yes. Well, speaking of this may be related to that. So how do we think about the K7 having an applicability for border security? Is that rugged enough?

Well, light-duty off-road is really important. The other reason we're looking at the off-grid charging, autonomous charging is also important because you don't necessarily have power out in the middle of nowhere. And I think the Department of Homeland Security is looking out to put a request for a proposal on certain autonomous technologies to do that capability to support our friends over at CBP. So it's certainly on the road map for us.

Great. What about the ability for us to share K7 preorder numbers as part of future quarterly reports?

I mean, look, I think we traditionally just haven't been forward-looking. Again, the key is we want to execute first and then talk about what we've done. And I think that's going to stay our course for now. I think over the years, we've had -- we have a lot of existing clients and former clients that have expressed a great deal of interest. So reengaging those folks is certainly at top of mind, inviting them here, doing some beta testing in some of these locations, et cetera. We wouldn't build this if we didn't think there was strong demand for it. But I'll agree with Apoorv, we'll probably make sure these get deployed, and then we'll talk about the actual numbers.

Yes, there is a wait list open right now. So if there is interest, people can go and it's on the website, a head under the Autonomous Security tab on the website, it's also on the homepage.

Knightscope.com/...

/K7 or again, if you don't have any extra clicks in you today, just go to the homepage and there's a button right on there, you can go see it. Cool. Let's talk about how the K7, maybe just the robots K lines are made in terms of components. So our K components sourced in relation to tariffs versus U.S.-made?

So to be clear, we design everything, we engineer it, we manufacture it, we deploy and we support it. For a majority of our products, if not all of them, were BAA or Buy American Act compliant, and that is the strategy for these machines. And need to be careful with other companies that love to import stuff from China and then have that surveilling your own property without the proper cyber controls or point of origination type of discussion. And so we're being very careful with that. This is technology built and designed in America to protect Americans.

Let's talk about the facility that we have here. We have a couple of questions on if it's available to come in for a tour if people aren't able to make it to the event.

I think we're going to have to set that up because we get that request a lot. I haven't talked to you about this, but -- so April 4 or -- April 4.

The first week in April.

First week in April is probably the next time we'll do an event. So that will be our 13th year anniversary. So we'll work to have Apoorv do some karaoke that night and get you all here to visit us here at Knightscope. What we want to do for our prospective clients and existing clients is actually have the facility amenable to or set up properly for you to understand and view the technology. You can only PowerPoint and Zoom people to death and e-mail them so much. Sometimes they need to come and see and touch and feel and experience. So we're going to be spending the next probably 3 to 6 months finishing up the setup of what's planned here for Knightscope headquarters, and we'll certainly have an invitation out for you.

Robert has a question about our sales force. Have we reassigned your sales force to specialize in different industries, federal, state, et cetera, or local governments and education kind of in the vertical strategy, I guess?

Mixed bag. So we've tried vertical only sometimes has been successful. We've done more regional. We just brought on a new director who specializes on local and state. So kind of a mixed bag, and I think we'll continue to do that. Again, this is new technology. No one in the history of mankind has done this before. So there's a lot of experimentation. Something that works in one region may not work in a different region or one vertical in another vertical. So kind of working our way through that.

Do you feel the new K7 will put our competitors such as -- I won't name the competitors specifically in this call, but will we put the competitors in the rearview mirror? And if so, how?

What competitor?

Do you want to name them?

No. I don't acknowledge any viable products out in the field. Millions of hours of operation. I'm kidding. So I think first and foremost, most people don't like the next assertion, but we're serious about making the U.S. the safest country in the world. Anyone and everyone who's trying with a new public safety technology, a new law enforcement capability or physical security, we want to support them. We're not that company. It's like, oh, well, everything is cut-throat. It's a zero-sum game. And if you win -- if we win, you lose and you win, we lose. That's not the game here. I want to make it miserable for anyone who wants to cause harm to an American citizen to understand that they can't do that here anymore. And so we want to be supportive. We're always going to have some fun conversations with competitors and so-called competitors. But I think we're very confident in the K7 and its capabilities, and we're also excited to get it out on the road.

Competitive-wise, one of the things that is important for us to remember that substitute competitors and our people's perceived behavior and the way that they've always done things is one of our biggest competitors.

That's a great point. I think the actual real problem and kind of what I told Congress on when I was on Capitol Hill is the biggest fear I have of AI is not the technology. The technology is moving very quickly in an exciting fashion. The actual problem is humans. Humans don't want to change. Large organizations don't want to change. I don't think it's new news, like we've been arguing with the Department of Veterans Affairs for 5 years now. I literally went to go see the Secretary of the VA to continue to plead our case, to spend half a decade to try to convince a client that you have a problem you have a budget problem, you have a staffing problem, you have a security problem and the organization continues to want to do business the old way is problematic. And so that's why I've been pushing for a national robotic strategy to basically be that catalyst for the federal government to unstuck this because this continues to happen. And it's not just us. It's everyone that's working on robots or automation or AI or any kind of technology. You have an industry that doesn't want to change. And new news coming for you, it's going to change one way or another.

Yes, I think that's what I mentioned earlier in my -- when I opened up the financial themes. The adoption is uneven, especially in the safety and security world, right? And as you mentioned earlier, the more people, the more industries that are out there adapting and adopting to what robots and machines and technology can help them with, the easier actually it becomes for us to go out there and put forth a value proposition. Otherwise, we are competing again against status quo and sometimes it's a harder sell.

Actually, I'll go down a path. I think we shared this with the analysts, I think it would be fair to share it with the audience here. If I can have you visualize a bar chart, and if I put a very large bar here of 3 companies, top 3 guarding companies in the U.S., 1/3, 1/3, 1/3, plus or minus, these 3 companies alone generate, what is it?

$30 billion.

$30 billion worth of revenue and employ 0.5 million humans in the U.S. alone. Now if you go over here and you make a little chart here, if you add up all the competitors, folks that have new technologies, anyone working in public safety, law enforcement kind of technology, physical security, you're like almost about 1% of this. And that's pretty much stayed steady for a decade. And that proves my point. Folks don't want to change. The countries addicted to video management systems running Windows are humans and cameras. And then we're wondering why everything costs so much and a violent crime occurs every 26 seconds and a property crime every 4 seconds. Like the system is broken. You've got 1.5 million guards, 1 million law enforcement professionals, 85 million cameras, 300,000 cop cars, not working. We need to change.

So this is a question that most likely a lot of companies like us receive, but it goes to you, Bill. Some of these goals, Bill has been saying for years, we've struggled to deliver on them. Why will this time be different?

So I live here in Silicon Valley. There are 22,000 start-ups here, literally 95% fail. So the statistical probability of someone starting a company, getting it funded, growing it, taking it public and still be alive and kicking 12, 13 years later is almost near 0. So first and foremost, I want to thank our investors that have stayed with us all this time, our vendors, our suppliers, the relentless Knightscope team and all our supporters because what we're doing is technically very difficult. Operationally, it's extremely taxing and there's an industry that doesn't want to change. That said, now that we've built that foundation that Apoorv was speaking of earlier, now we have that foundation to actually grow to the next level. I think another thing to put in context, people take for granted that the autonomy side is kind of really easy to do. Okay. Well, about half a dozen folks have tried to literally do what we're doing and no longer exist and given up. And half of them were large corporations and half of them start-ups. I think on the self-driving type of thing, started 2007, '13 started getting some traction. Everybody will be in a self-driving vehicle by 2020. Hey, folks, it's almost 2026. Like it's not scaling across the nation. There's some great progress being done by the team over at Waymo, at Nuro, et cetera. But -- and by the way, the team at Tesla is doing awesome work, but it's extremely difficult problem. So if you think this is just going to over 1 decade, just miraculously appear and it's going to work and Bill just keeps saying the same thing over and over again. Well, you can take it 2 different ways, like Bill is delusional. This will never work. You can try to bet against us, you will fail or maybe he's on to something and this is just going to take some time, but if we can stick with it, crime is not going away. Like there's not a market risk here, right? Technology, yes, can it be improved? Sure. And the last part of the risk is execution, and that's what we really need to focus on. So yes, I've been saying it for a long time. We're focused. We're relentless. And because we're focused and relentless, we're going to get where we told everyone we're going to go. Is it taking longer than we want? Sure. The team at Tesla has promised all kinds of things. Eventually, they get there. And we applaud them for that effort, and we hope to follow in their footsteps.

So this question follows that up, might be more in my territory, but Francis says, what are some of the new marketing strategies?

First marketing, new marketing strategy. Go higher [indiscernible] marketing that's a genius. So go for it, Ali.

Sure. Well, thanks for that question. There is a lot of foundational work that we are building right now. We have a lot of focus on data and integration of systems to see the whole entire customer journey across the -- knowing about the product to even creating demand and then eventually through the customer experience. So I have got a lot of things planned out for next year. Right now, we're seeing the K7 launch as you've seen hopefully in your e-mail and on social today. But we have a lot of vertical work that we're doing, pairing that with a lot of content and then the new focus on how people are actually finding information online. So we've got -- search engines are changing. We're now looking at how that feeds into ChatGPT and AI discovery. But ultimately, you're going to see a lot more of us at the industry-specific presence next year. So we've got a big focus on trade shows and events and field sales as a lot of people are getting a little bit tired of that digital environment. So we're going to see a lot of more faces in person. And just like we had yesterday here on site with the group that came and toured, lots of excitement. And I think we're seeing the public wake up to the idea that robots are here, and we need to see them in person.

Yes. Robots will be everywhere, taking a little longer than we want. We'll get there.

Yes. We're also working on some content production. So we're working on a podcast studio. This is a make shift set up today to show you the K7, but we do have some details that we're working on so we can create content and actually use some of that AI.

Are we getting Apoorv on TikTok?

He already knows how to do karaoke, but I'm really excited as a strategic marketer to build out a team that's really data-focused. So Apoorv and I speak the same language of if it's not a number and it didn't actually put up on -- end up on a report, it didn't happen. So that's a big difference that I'm bringing to the team here.

Excellent.

All right. Well, we have a couple of questions about drones. So this person has been following for about 8 years. Now are we thinking in surveillance? Is surveillance drones, are they possible?

There's a lot of companies that have been working on it. There's a few technical issues that folks are overcoming. I think you still have the end user desire not to change. There are some law enforcement agencies that have been using it, drone as a first responder. I'm excited to see that work being done to kind of enable a different approach. I think eventually, there'll be drones flying out of these machines. But for persistent 24/7, it's not really yet a thing in the physical security side of things, which is different than law enforcement. I think on the law enforcement side, there's certainly a lot more traction. I think the opposite on the federal side, it's not the drones or drone capability, it's the never-ending drones showing up on military bases that aren't supposed to be there. And so there's actually a more poignant approach on anti-drone technology. And it's getting to be a real serious problem for all the military bases. I don't think this is kind of new news, but there's -- I won't give you the number, but there's thousands of foreign nationals that try to get on U.S. military bases every year. And those bases need to get hardened, not just from the human element, but from the drones as well.

There's a question here about our goal of achieving 100-plus K5s in the field. And this was a goal several years ago, but it doesn't seem like we're there. What are the greatest obstacles?

I mean I think the -- we have more than 100 total ASR devices out in the field. Really, the biggest challenge comes out to adoption, right? It's the same theme that we go across when you have new technologies. We have certain early adopters that continue to renew and continue to expand. And then there are certain places where we still struggle because, again, it's such a new territory for our potential clients that they just need to get more comfortable. Again, it's just time, as you mentioned earlier, Bill. We just need time to be in the open. We need time to be in front of customers and clients, and we need them to see this our devices in front of them.

So I shared that with Ali when she first joined and woe is me, we're having struggles with these type of clients or having struggles with these type of clients. And I don't understand, we've had clients renew for 3, 4, 5, 6, 7, 8. I think we're coming on a ninth year renewal with the same client. She's like, I want to hear about the struggles. Who are the people that keep renewing for half a decade or almost a decade, like we need to go understand that better. And that's the kind of right attitude and question to ask and kind of where we're going to be very much focused.

Yes. And some of the anecdotal feedback from the field is we're seeing a lot more adoption of the technology of what it can do versus it being sort of a shiny object. So I'm really excited for that we're seeing a lot of that happen.

And because there are a lot of investors on the call, I think one other analysis that Apoorv and I did when he first arrived is for those clients that did renew for 3, 4, 5, 6, 7, 8, 9 years, what do the financials look like for those units? And actually, it's lucrative and kind of what we planned. So we're just going to need to do a rinse and repeat on that type of approach.

We have one question about maybe what can be done to overcome the fear of the robots. I think it's maybe a general question.

Congress asked me the same thing. I think there's one soft thing to do and then one harder thing to do. The soft thing to do is just communicate, spend the time, do the webinars, invite people over, do the lunch and learn, educate, put out the content, get people to share the content, for places that we've been deployed for a long time, people are bored with it because it's -- yes, it's a robot. It's supposed to be here. It's fine. Move on to the next subject. For a lot of places where we go, it's still a novelty. It's something from science fiction that's off the movie screen and now in front of me. I think educating is probably one of the most important things to do. I think the harder thing, which is my ask of the administration and the folks on Capitol Hill is we need to pass the national robotic strategy to basically have a mini mandate to require every department and agency to take 1% of their operating maintenance and service kind of budgets and thou shall use it for robotics, automation and autonomy. And this is not an ask to increase expenditures for the federal government, it's actually to reduce it. Can you please stop being inefficient with our own tax dollars and use commercially reasonable and commercially available technology that's already proven in the marketplace so we can save taxpayer dollars and you guys can still spend that money elsewhere. And if we can get Congress to actually put that mandate in, we can actually get some footing in this industry, which then has a bunch of positive repercussions.

So I'm going to put these 2 questions together. One is about who will be the customer of the K7 and then the other is a question about whether or not the red and blue lights are restricted to law enforcement, only seeing that on the video.

There's no restrictions. I mean you can go look at a security vehicle sometimes has those. And in terms of who the clients are, we're not ready to disclose that yet, but probably the easiest sale you might ever get is from an existing client. So we'll probably start there and do some good amount of beta testing before we do a wider release.

Do you envision any entry into the K-12 education market?

I struggle with the K-12 situation, which is different than higher education. Our country, unfortunately, can't pay our teachers properly. The schools don't have enough budget to buy the appropriate computers and tools. And then someone is going to show up and say, you need 6 or 7 figures to come out of nowhere to pay to properly secure this facility. Like this is more of a almost now defunct Department of Education discussion because the schools don't have the budget to do it. That's kind of the first issue. Second issue is we operate primarily very well in 24/7 operations. So health care, casinos, airports, et cetera, work a lot better for us. K-12 don't necessarily run 24/7, I think they should, but they don't actually run 24/7. So I think that's a challenge. Where we've spent a lot more time is with universities and colleges. And sometimes there, there is the actual budget. They run closer to 24/7 and is a better match. It's still, I think, a sore point that needs to get addressed.

Can you talk about the other side of the business? It is 2/3 of revenue. I think they're asking that -- is it? Please clarify?

Yes. The ECD devices continue to be the primary driver of our revenue today. It's about 60% of overall revenue.

And I think there, we talked about growth being organic. It just basically blocking and tackling kind of the same approach. That said, I think we said earlier in the year that we're looking to revamp the K1 stationary lineup. Today is about the K7. Perhaps sometime in the future, we'll have a Knightscope briefing on a new product launch to discuss the K1 separately.

And if I can expand on that, Bill. The other part of it is the dynamics of how the revenue is recognized across both products, right? So on the ECD devices, primarily we recognize revenue as we sell it as a transactional sale. On the robots, it's really the revenue is over a course of time, whether it's every month is 1/12 of the annual revenue or every year is the full subscription price. So as you think about that, obviously, the onetime sales of the ECDs will have a higher percentage -- it will be a higher percentage of our revenue. One of the things that company is also doing very -- as we continue to grow is how do we grow more of our revenues to be recurring. So even on the ECD side, we are growing the services side of that business solely but surely. So we're focused on things like our KEMs that allows our customers and clients to see their -- the health of their ECD devices in real time. We are expanding on the full services maintenance model that allows our clients to essentially be hands-off and pay a monthly subscription fee or an annual subscription fee for us to take care of their units for them. And we believe there's growth there. There's demand there and there's growth there. So that's going to continue to happen. But for now, because the way we sell these devices, the revenue on the ECD devices continues to be higher.

So Kevin asks, given so many of our competitors have not been successful in this area, what should we be watching as an indicator that the market has matured enough for Knightscope to succeed?

So what we've been talking about is it's adoption. It's -- once again, it's boring, would be a good thing. At some point in time, there will be a tipping point where if you don't have an autonomous security robot, you're like the outcast weirdo, like the insurance company is going to look at you and go, you don't want to pay the $5, $10, $15 an hour to properly secure your facility, like we're not going to underwrite this policy. At some point, it's going to have a tipping point, no different than like you don't build a building today without fire extinguishers and smoke detectors and fire detectors and that sort of stuff. But I think what you need to really kind of focus on is adoption and use cases, and that's kind of what we're working on.

One quick administrative thing. It sounds like your microphone is a little bit lower than Apoorv and myself. So if you can adjust that for us, that would be wonderful. There's a question from Nataniel about he references like the PC was offered to the public, have we created anything for the home?

So we intentionally started business to business because if you start with a new product, business to government, you will fail or like much higher risk of failing. So we started business to business. We've slowly been adding business to government, which is a different animal. Business to consumer, that's a wildly different process, wildly different marketing sales and service, distribution, price points, et cetera. I think we are slowly getting in there, but not on purpose. So we've had clients that have very large estates that look more like a business than a home or an HOA or apartment complex and that sort of thing. I think once we're comfortable with our operating in all 50 states, we're happy where we are with the federal side of things and the local and state government. We've got good penetration in all the rest of the business to business. I think we can start discussing business to consumer, but that's a very, very long time from now.

Apoorv, I think this one is for you. A financial question. Greg says, what -- this might be a typo in here, but what was the company last fourth income versus the development expense investments? If expense is greater than income, how is that sustainable?

So I didn't quite catch the first part. But the second part of the question is it's -- long term, it's not sustainable, right? That's what we have to figure out is how do we continue to drive business growth, to drive business margins and then obviously drive EBITDA or net income for the -- so be positive cash flow. The challenge is we're a hardware company. Software companies can develop a product and then put it out and get 70%, 60%, 90% margins. As a hard tech company, we have to scale. That's really -- what it comes down to is we got to scale. Once we scale large enough, we can use economics on the manufacturing side, on the vendor management side, on humans and use that to then drive gross margin and EBITDA. And that's really the -- it's an execution challenge and its execution strategy for us. That's really what we have to do.

Take a slightly -- maybe a different nuanced approach for 12 years on every single call, you guys don't have enough money, you're going to run out of money, you're going to hit the wall, it's never going to work. And we've never missed the payroll, never run out of money. We literally have the most cash on hand that we ever had in the history of the company. We actually have the resources now to do what we had planned to do. We're working on improving the gross margins. We're improving the product our fixed cost basis and everything else. And that's why we're excited and that's why the Board is excited is because we actually have a plan to move the company forward in a very exciting way. You don't get talent like this and the rest of the entire management team and the whole team to go work on a very difficult problem if you don't have a way to get from A to B. We've got a way to get from A to B and it's kind of exciting. So I'm in the -- that's not a conversation point anymore of, oh, well, you don't have enough cash on hand to make whatever next quarter, we're not having that conversation. The conversation now is you have the resources, you have the management team, you need to focus on execution.

There's a couple of questions around shareholder value from earlier investments. So I'll group them together, and how is Knightscope helping early investors recover losses?

Continue to be investors. I mean I think this is a long game, right? So over the long course, as we continue to, again, do the things that Bill talked about, new product innovation, growth in revenue, drive margins, drive EBITDA, drive execution, our share price will reflect that over time. Again, one of the first questions you asked is why is the share price where it is? The share price isn't reflecting today where the things -- where the company is and what things that we've accomplished. It's really more of a -- there are certain players in the market that are able to influence the stock price to where it is, which is outside of our control. That being said, the only way we can continue to combat that or to address it is to really execute. And that's all we're going to focus on.

There's also a couple of questions here about pairing drones or additional technology with land-based units or pairing those with police. And so I think the questions revolve around how might we be thinking about that? Or what are your thoughts on those topics?

I would say we just got to focus on what we have today. That stuff is in the future. But I'll follow your lead, Bill.

I'm going to -- I'll leave it there.

Okay. Fantastic. There's a personal question for you, Bill. How are you doing as a CEO? There's been some dark times in the company history. What makes you want to do this every day for so long?

Thanks for that. Yes, it's been a long 12-plus years. I think I've said this publicly, I'll say it again. I think the first 9 years, I was primarily very focused externally to just get the capital to do what we wanted to get done. And we didn't get the support here from all the VC establishment. So we turned to 35,000 retail investors to give us the capital and invest the capital where we need it to at least get to this point, and we're forever grateful. If you're upset with us, I'm upset too. We're not where we need to be, but I can't fix the past. I got to fix the future. And if you're still a long-term hold with the team, I hope you continue to do so. I think kind of is the first point. The 2 years right after taking the company public were probably the 2 most miserable of my professional career. I won't go through into all the drama associated with it. But one of our largest investors called me and he basically said, hey, Bill, this is not a leeping, leeping, leeping -- this is not a democracy, like take control and go do what you need to go do. And then a couple of our executives, [indiscernible] also called me and said like you need to like go with your gut. And one of the things I hate about getting old is getting older. But one of the things I love is having all this experience. And I think we're going to get out of the mess that was created and being extremely, extremely exciting force in public safety. And what gets me up is I made a commitment that we're going to go try to make the U.S. the safest country in the world. It sounds absolutely freaking ludicrous. But what I told Congress and what I'll tell you is now that we've worked the problem for like 12 years, we actually have a plan on how to get there. There's a line of sight on how to actually physically do it. So that gets me motivated and excited. I think the second thing that gets me motivated and excited is the people that I get to work with every day -- I get to work with and the technology that I get a chance to participate in. I love what we're doing. I know down to my [indiscernible] that we're going to be extremely successful. It's been painful, but that's what will make the victory that much sooner.

We have a couple of questions about the K7 in this market, so...

So many questions about the K7?

Yes.

Do you think there's maybe something there? I don't know.

We have a couple of questions about what it -- could we use it in neighborhoods? How do you keep it from, let's say, people trying to do bad things to it or harm the device?

Similar to what we've done with the K5, you end up behind bars, and we have all the evidence to prosecute to the fullest extent of the law. We have and we will continue to do so. You are not to graffiti a police car. You are not to knock over a law enforcement motorcycle. You are not to break a camera or break a fence or a gate. And if you mess with the security robot, like you're going to end up a night in jail. Don't do it.

Has the IP been valued?

Most people don't like this answer, but we have like maybe close to a dozen patents. I'm not a big fan. I'm going to get in trouble with the next statement. But typically, investors on the East Coast have a lot more either actual or sentimental value with patents. Folks on the West Coast like the technology moves so fast, like it's not worth it doing. We did some of the basics. If we would have just sat here and literally patented everything we could, there's probably 100 to 120 patents we could have done, and we would have spent an arm and a leg and a massive amount of staff time is not worth the trip. And I'm kind of with the Tesla team in some cases, like the technology is moving so fast. We actually want the country to be successful, like here's our patents, go do what you need to do. It's not kind of very much where we're focused. So we're not like a pharmaceutical where we have like secret ingredients. And the ingredients change. Like 6, 12, 24 months, everything is completely redone. Like why do I want to use the recipe from last year?

And I think the other part is, to your point, Bill, is in a world where resources are constrained, where do you allocate the resources for the most result on your investment? Is patent protection the thing that's going to drive this company and give us returns we need. I think our view is that it probably won't. We would rather invest that money in innovation, in people, in talent, in process, and that's where we get the biggest bang.

So this question is about the way the company is evolving. And it seems -- so Michael says, it seems like the company is still engineering led. At every shareholder meeting, we talk about R&D, new product development, new tech. Have we ever -- I'll paraphrase this question. Have you really achieved product market fit or a repeatable business model? Are we fundamentally too early or better off embedded in Google X or similar?

I think it's a good question. We've talked about adoption problems. But I still go back to client. It's not a $0.99 download of an app. You can get a client to pay you for 3, 5, 7, 10 years in a row, full price and continue to renew. Like I think we got product market fit. You just got to make sure that the sales team is aligned with the marketing team, is aligned with the client experience team, et cetera, to go after the market that has the best fit as opposed to trying to sell to everyone and every Tom Dick and Harry that would like a robot. Like I make fun of this, but to make the point, one of our worst clients we could ever have is the Chief Innovation Officer that has budget and needs a shiny object to show that here, she did a great job but bringing in new technology and then a year later, I don't want to renew. Well, why not? Well, you didn't fix any problems. Well, you didn't have any problems in the first place, so we shouldn't have sold you the technology. I think bringing Ali in to be like super laser-focused on getting that accelerating where we do have product market fit will alleviate that situation. I think one of our first employee, Mercedes Soria, for the first, I want to say, 10 years, she literally was like, we're too early, we're too early, we're too early. The last couple of years, we were right on time, but we better pick up the pace. She's a lot more conservative in kind of business approach than I am. So to me, that's an important gauge as she focuses on our AI strategies and the like. So it's been a long haul, like it's been very difficult. But I'm telling you, this next 5, 10 years is going to be absolutely freaking epic.

And to be honest, what company grows that doesn't invest in innovation? Like how do you drive growth? How do you drive revenue? How do you drive market adoption if you're not constantly investing in R&D? I would say, if anything, we should be doing more because that's exactly where we're going to get things like the K7 and all the things we want to do with the new sets of technologies we're going to bring forward.

That's right.

Well, one of the biggest pieces of the data work that we're doing is having that feedback loop actually, then feedback into a lot of the engineering. So I think that, that's going to help us position product market fit even more effectively going forward. We have one question about if we have reached out, so I'm going to read this for verbatim. Have you considered reaching out directly to President Trump? Perhaps Congress was a waste of time, but our efforts might be received better elsewhere?

Tried not to give play by play on a lot of the government relations type of things. I think there's a need for an executive order. And I know this administration has used it to great effect and in some cases, maybe overused. But in this particular case, it probably needs to be both by legislation and by executive order. Remember, an executive order doesn't last. It's not a sustainable type of thing. So we will probably want to do both, but it's very difficult to have those conversations when the government shut down.

Sure. We have time for a couple more questions. There's a couple of questions here about expanding to the European market or perhaps Chile. What are your thoughts on expansion?

Absolutely not. And this gets some people on the team and our investors frustrated. But listen, when we've achieved our mission, which is to secure the U.S., we're operating in all 50 states, we've got $500 million cash on hand, we're bored out of our minds, and we have nothing else to do, like we'll go work on Chile and Argentina and Japan and everything else. Having worked on 4 continents, I can tell you, forcing to go do that now, you're near 100% chance of a BTE, nearly a 100% chance of a business terminating event. This is not just software that you just go pop over in South Africa or Japan, and it's just going to work. Like tell me who's going to do all the translation? Have you done all the IHR stuff? Have you done all the import-export things? Oh, great, now you guys set up a subsidiary in Tokyo. You understand the insurance requirements there. Have you done the market research? We shouldn't be there in Americans to think our technology just sticking in Tokyo and it's going to work perfectly. We have the right font. We have the right [indiscernible] on the products and everything else. Then he's going to be arguing about transfer pricing and oh great, now we got to tell the auditors like, hey, go audit the subsidiary in Tokyo, like not doing that. And it looks great on the PowerPoint. Some bankers will push us to go do it. Absolutely, freaking not. I work for the shareholders and the Board, and I'm telling you that's a good way to cause a massive distraction and a massive level of difficulty. So that is not in the cards in the short, medium or possibly long term.

So we have several questions here that are more specific to maybe your individual situation. So I encourage you to reach out to us if that can be answered offline. But the last question we have since we'll keep you at time here is there is this concept we've talked about the autonomous security force. Is that the same thing as the K7 or isn't? What does that mean?

I guess since I told Congress, I can tell all of you that tuned in, and we've been hinting at it for the past year. Apoorv has mentioned it on some remarks with the analysts. We've mentioned in some of our communications. And I think in order for us to really bring a software plus hardware plus humans approach, we really need to build the nation's first autonomous security force that can bring the entire portfolio of technologies to bear with almost every element of the human possibly involved that may or may not influence our M&A strategy. But if you're able to bring in a solutions provider that actually has a solution to fix the problem and you need to uniquely combine hardware, software, robotics, AI technologies, perhaps with a future augmented security guard, I think that probably is the right mix and one of the reasons we're very excited about our future. And now I'm going to put Apoorv on the spot and see if he'll elaborate.

I mean this kind of goes back to the question we were answering earlier about like how do we look at M&A, how do we look at -- how do we become a force multiplier. The reality is when you were talking about that graph with the $30 billion and the $1 billion, it's -- one of the reasons why the technology firms continue to have a challenge in growing is really each one of us are providing one part of a really complex solution, right? Somebody's got cameras, someone's got a robot, someone's got a LiDAR detector. And if you then go to the Head of Security, we talked about this, they're like, well, now I have -- I don't know which dashboard to look at. I don't know which one is giving me the right information at the right time. And sometimes I miss things. We've come to the conclusion that really for us to be effective in the future, especially in the long run, we need to really create a fully perimeter, a secure solution that combines not just 1 or 2 things, but multiple things and multiple parts of the process of what it takes to secure a perimeter, and that includes, again, hardware, software and humans. So that's what the force is going to be. It's going to be all 3 of those things and under a platform of technology, data insights that perhaps today may exist, but they're definitely fragmented.

And that is what we plan to do to unstuck the adoption problem. If the clients are unwilling to adopt the technology outright, maybe we can -- not maybe, we will put it in a format that they're more accustomed to doing and will be that much more effective in us delivering what we're promising that we want to do from a long-term mission standpoint. So we're well on our way. There's, as you often say, more to come during 2026 and 2027 about that. But just think about those 3 words, and we literally mean it, an autonomous security force.

All right. Well, I think we've got some folks on the call that wanted to see more about this K7. Would it be possible for you to give us a little bit of a walkaround?

We got to move the chairs.

I mean, I think that -- we've got our producer, Eric, if you'd be able to give us...

You got promoted.

If you have to log up, we will continue to do this, but we'll also have additional videos online. So Bill, give us a little tour of what's behind us?

This is the all new Knightscope K7 autonomous robot standing right in front of it. Obviously, it's not too small. And it has a lot of capabilities. I'm going to cut this in half maybe. First, let's talk about the autonomy side of things. It's very important for us internally and operationally, the clients don't care, the clients just want the technology to work and fix their problem. We care because we need these things to run 24/7 and autonomously recharge and be completely hands off. So there's a unique combination of sonar technology, LiDAR technology, actually multiple LiDAR is one up from here. There's a GNSS RTK with monocular camera that will help us with some visual adoption, a good amount of technology, all the camera, all the wheel encoder stuff and combine that so that we can control analogously to what self-driving car might do. And this is a next generation, all new complete do over of the [indiscernible], which we're really excited about. I was mentioning is that we've learned a lot over operating 4 million [hours]. And in some cases, it's making mistakes is how you learn. So what we ended up doing is putting a kind of test procedure in place. There is 1 or 2 or more challenging client locations where with the K5 and the older technology navigation stack, we're having some difficulties. So we literally came up with a test procedure to see if we can get the right sensor stack for the K7 to be able to successfully operate that. And on top of that, do that both in the real world and in simulation. So we're really excited about the autonomous stack on here. It's got 4-wheel steering.

So having some challenges with the [indiscernible]. So I just want to make sure I know folks are seeing a little bit late. So would you just want to hold this in your mouth when you're speaking, would that be okay? There you go. Yes. So folks that gave us questions or notes in the chat, let us know if that's a little bit...

Yes, Ali. All right. And [indiscernible] on the video, tons of lights. That's also a different way of doing the physical deterrents, 360-degree view. And what we'll do over the next few months is to start sharing more about what the vehicle sees, how it operates, et cetera. I know of some folks who have already been asking like, I want to see what the detections look like. So we'll work on that. A really loud public address system, so we can do top down through broadcast messages, prerecorded or speech to text or text to speech rather. And I mention it's 4-wheel steering. This will go up to 10 miles an hour. We'll work on higher speeds a little bit later. And this is intended to handle terrains that we haven't been able to control prior. So gravel, dirt, sand, think of light-duty off-road. We're not off-roading like craziness type of thing, not a lot of crimes going out in the middle of nowhere, but enough to be able to handle something like the border or solar farms, really large environments. And so there's also something I forgot to mention here. There's a pencil zoom camera on here. We're working on some capabilities for acoustic event detection. There's maybe some other sensors that we're going to add. We'll talk about that later in an future briefing in terms of new products. But this is going to be able to handle much, much larger environments at higher speeds, providing the physical -- what we included standard is RTS, the risk and threat exposure monitoring. So we will monitor because if most law enforcement agencies or security operations centers are wildly in the shack. And as one of my friends likes to say, you have 1 million cameras and you're literally blind. You can't see because you've got too much data. So if we're able to help with that, it's going to be very important. So more to come, and we're excited to have a huge -- I don't know if it's huge, but we will see how big it's going to be this evening. We've got a good amount of friends and family coming over to Knightscope headquarters to see the K7 in person and check out our new facility and you all get an invite for April for the unauthorized anniversary, a thing that our CFO hasn't signed off on. I think other than that, we can do a wrap.

Yes, that sounds good. So we've had a lot of interest, I think, in people having touring of the K7. So in the future, we will actually do more of the video about the K7. So we've got some focus on that. And with that, any closing comments, Apoorv?

Well, thank you for joining us. We appreciate the opportunity to talk to you all about what we’re going. And we are excited for you to continue to join us.

To wrap it up, our investors always ask why should I be interested in Knightscope? There's usually 3 risks. Is there a market? No. Execution risk? Well, as I'’ve often said, there’s not a market risk here. Crime’s not going away. Technology, we’'re at the bleeding edge of capabilities and now we have a new strategy with that autonomous security force approach that we think is going to be a big unlock. And on the execution side, I will bet on the Knightscope team every single time. Thank you very much.

Thank you.

Thank you.