KSCP

Second quarter 2026 earnings call. I'm Apoorv Dwivedi, Executive Vice President and Chief Financial Officer, and I'm joined by William Santana Li, Founder, Chairman, and Chief Executive Officer. By now, you should have had a chance to review our second quarter 2026 earnings release, which was published at 1:05 P.M. Pacific Time, just after markets closed. Before we begin, please note that today's discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our goals, growth, prospects, product roadmap, and outlook. Actual results may differ materially due to the risks and uncertainties described under Risk Factors in our most recent annual report on Form 10-K, as updated by our other SEC filings. Forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law.

With that, it is my pleasure to turn this call over to Bill.

Thank you, Apoorv, and good afternoon, everyone. Thank you for spending part of your day with us. I'm going to start with the business and marketing highlights from the second quarter, what we won, what we built, and how we're setting up the second half of the year. Then I'll hand the call back over to Apoorv, who will take you through the financials in detail. So let's dive right in. The second quarter of 2026 was the best quarter in Knightscope's history. Revenue came in at $9 million, up more than 200% from $2.7 million in the same quarter last year, and a new quarterly record for the company. We now serve 434 clients across 42 states. That marks two consecutive record quarters following first-quarter revenue that was up 106% year-over-year.

Back in May, I stood in front of institutional investors in New York and made a simple commitment. Each quarter, better than the last. We have delivered exactly what we said we would do. In the second quarter, we built on the momentum from the first quarter of 2026, and we believe that we have laid the groundwork to keep it going forward. This compounding effect is the result of relentless commitment to execution across the entire organization. Apoorv will walk you through the drivers behind those numbers in just a few minutes. The integration of our recent acquisition, now known as our Knightscope Security Force, is proceeding as planned, and the collaboration between the teams is amazing to witness. Seeing firsthand the team collaborate on our new H1 wearable that will define the future augmented security agent, or ASA, is truly invigorating.

The teams are operating and beginning to work as one as we look to expand our offerings with our current client base. This was our second acquisition as a public company, and the discipline the team has shown, closing it, filing it, and now integrating it without missing a beat tells you a lot about the caliber of the team. More importantly, it strengthens exactly how we intend to differentiate Knightscope, the unique combination of hardware, software, and humans delivered as one managed service. This team has been working on efficiencies and delivering tangible results, including cutting the assembly time for one of our product lines by almost 80%. We've grown the depth of our technical team significantly as we're seeing interest in Knightscope grow significantly.

We restructured our field service network in Northern California and the Northeast region by building relationships with local service providers and by insourcing field services in Southern California to provide better services while lowering our service delivery costs. We also strengthened the leadership in the company, recruiting multiple senior executives with a track record of scaling companies. Growth with discipline. That is the operating model. The K7, our all-new autonomous security robot, passed its alpha prototype gate review, and we remain on track for initial deployments in the fourth quarter of 2026 as we move into the beta prototype phase. in April, we announced our partnership with Carnegie Mellon University, the top robotics institution in the country, whose graduate robotics program is now working directly on autonomous patrol technology under the guidance of our engineering team.

We're taking a disciplined approach to the K7's market introduction focused on success in the field. Client interest in the K7 deployment continues to grow. Simultaneously, significant work is well underway on an all-new Signals platform designed to orchestrate our autonomous robots, stationary devices, sensors, augmented security agents, and our mission intelligence remote monitoring. An industry first that combines pioneering proprietary 3D digital twin technology with AI agents to eliminate blind spots and provide an auditable trail for proof of work. Hardware, software, and humans working as one. One team, one force. Now let me spend a few minutes on the brand, because security is not sold, it is adopted through trust. Building trust at a national scale requires showing up everywhere. With clients, with the media, with communities, with recruits, and with Wall Street. This quarter, we sharpened our positioning.

Knightscope is a managed service provider, the only company uniquely combining hardware, software, and humans into one integrated offering. We are building the nation's first Autonomous Security Force. That message resonated strongly with institutional investors during our non-deal roadshows in New York, and its momentum is building. The team has been hard at work preparing for GSX 2026, the security industry's largest gathering, September 14th through the 16th in Atlanta, Georgia, where we'll officially launch the Autonomous Security Force on the biggest stage in our industry. If you're attending, come and see us. One more signal of momentum. In June, we hosted a career night at our headquarters here in Silicon Valley, and there was literally a line around the building to get in. The best people in the country want to work on this mission, and we're hiring the best of the best.

With that, I'll turn it over to Apoorv to take you through the numbers.

Thanks, Bill. Revenue for the second quarter was $9 million, an increase of 228% compared with $2.7 million in the second quarter of 2025 and a new quarterly record. Growth was driven by the full quarter contribution from the Security Force acquisition, in addition to our core ASR subscriptions and ECD deployments. Gross margin was $0.7 million, or approximately 7% of revenue, compared with a gross loss of $0.9 million in the prior year period. This marks our second consecutive quarter of positive gross margin, driven by full quarter impact of the immediately accretive Security Force acquisition and margin expansion across both technology product lines, demonstrating that our integrated technology plus services model is structurally more profitable than either business alone. Operating expenses were $13.8 million, compared with $5.4 million in the second quarter of 2025.

Primarily driven by investments in R&D to support the development of our next generation technology, as well as increased headcount across all departments and the integration of the Security Force. Despite the $3.9 million increase in R&D expenses from last year, the acquisition improved our operating leverage by adding higher margin revenue and leveraging our existing operating infrastructure. We expect these benefits to continue and strengthen as we achieve our new product development milestones. Net loss for the quarter was $14.1 million, or $0.79 per share, compared with a net loss of $6.3 million, or $0.90 per share in the prior year period. This was primarily due to the higher OpEx highlighted earlier, as well as approximately $1 million in other expenses related to the fair value and the change in the fair value of the contingent consideration or earn-out due to the seller of the recent acquisition.

Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $8.2 million. This is flat to prior year and with an improving cash conversion cycle due to the effects of the acquisition. In summary, record revenue, immediately accretive margins from the acquisition, expanding margins from maturing machines and network and service efficiencies, and continued discipline in expense management. The financial profile of the company is strengthening in step with the operational execution Bill described earlier. Now we'll open it up to Q&A. Bill, what I'll do is I'll read the questions to you.

You'll give me all the easy questions.

I'll give you all the easy questions.

All the hard questions go to you.

Okay.

The really bad ones.

We'll send an email. The first question from the Autonomous Security Force strategy bundles machines, software, and licensed human agents. What are the unit economics? What is the blended ASF contract more profitable per client than a standalone robot lease?

Okay. I think we start off where humans can't do everything and technology can't do everything.

Yeah.

But that combination is extremely powerful. What we need to think about is how do we solve the problem for the client, not trying to optimize margins for individual discrete items. If you go pull just the contracts and the margins for traditional guarding unarmed, they're not very attractive, right?

Yeah.

They're positive, but they're not software margins. If you're able to scale software, your 60%, 70%, 80% gross margins, probably on the low end, you're 10%, 20% on the human guarding side. If you're able at scale, and we've done this, remember-

Yep

... We did the analysis of our longest standing clients.

That's right.

You're somewhere in the 50%, 60%, 65% gross margin over that five-year period. The Jedi mind trick is to be able to land with what a chief security officer would accept today, which are licensed, armed, and unarmed agents. Then over time, become that trusted advisor. "Hey, we've operated at your facility for quite some time now. I wouldn't really stretch the staff that way. You might want to consider based on the data that we have, you might want to shuffle some things around and add some technology, maybe pay the team more appropriately." Over time, I want to see, and this is going to take some time to scale, but I want to see us in the 50%, 55%, 60% gross margin net when all is said and done.

Yeah.

Again, we need to focus on solving the client's problem and stop, as I keep driving my team crazy, stop selling widgets.

Yeah.

Don't, "Please buy my robot, please buy my sensor. Please hire my agent." We really need to focus on positive outcomes for our clients. Hopefully, significantly improved quality, and over time, reduce those costs. The last bit I would say, it's deter. You want to deter negative activity before it occurs, and that could be a human presence, it could be technology. You want to be able to detect. Mostly that's technology, where you're able to do, say, superhuman capabilities that a human wouldn't be able to process. Then you need to actually respond.

Yeah.

You saying, "Hi, all these alerts and stuff," and you don't respond, or 90% of the alerts are false, kind of problematic. But the key here is the data wheel, is being able to learn over time. So deter, detect, respond, learn.

Learn, yeah.

Improve the algorithms, improve the technology, improve our standard operating procedures, and over time you become that much more effective for the client. If you do that really well, that client will tell the next client.

Yeah. I think part of that also is, going back to the outcome. Unit economics work when we are selling to a traditional audience, and we kind of are, but the expectations are traditional. "Oh, I am going to go buy a camera. I am going to go buy a guarding service. I am going to go buy access control. I am going to go buy something else." Each one has its own unique unit economics.

The cameras do not talk to the guard, the guard does not talk to the remote monitoring team, the remote monitoring team doesn't talk to the investigation team. Why is the chief security officer having to manage eight, 10, 12 different vendors?

Yeah

They're all very competent in invoicing you, but can you actually account for everything that happened with an auditable proof of work and a track record of everything that happened at that location?

Yeah. I think that's what we'll prove out, is that a solutions-based sales approach takes away the unit economics.

Yep

... and focuses on outcomes.

Yep.

Next question is, what is the appetite for additional M&A, and what criteria would you be looking for in a potential transaction? Is the incremental revenue the priority or something else?

Okay, this recent acquisition was the 25th in my professional career. Doing deals, as I often say, the deal part is actually, relatively speaking, easy. It's the day 1 and integration after is going to make or break a deal.

Yeah.

You got to be very careful what you pick. I think it probably sits in three buckets. The first bucket, somebody's going to do the research here, but plus or minus maybe 8,000 guarding firms in the U.S., plus or minus maybe 6,000 have more than 100 employees. I believe most of them are owned by boomers that are retiring. The kids don't want to take over the business. And the large big box staffing companies aren't likely to buy them, so you literally have an illiquid market-

Yeah.

... Which is an interesting dynamic for doing a roll-up. I think if we're a private equity shop, you'd look at the recent acquisition as you bought a platform company. You've got a growing company, a strong management team, actual results, and something that you want to build on. So I think there's opportunities for us to organically grow the security force. Maybe there's some bolt-on acquisitions as we get further along. So that's the first bucket. Second bucket, we've been actively looking at remote monitoring companies. This could be immediately accretive because that remote monitoring company likely does not have a security force component.

Yep.

... and likely does not have a technology or robotics component.

Yep.

... but does have a client base, cash flowing, and could be highly synergistic. Again, we need to be kind of a little picky here.

Yeah.

Make sure we're careful. But we've been shopping for that. I think lastly, we live here in Silicon Valley. 22,000 startups, as I often say. Some of the most brilliant minds in the world.

True.

Backed by millions and sometimes billions of dollars. Literally 95% fail. There's all kinds of goodies and assets sitting around at any point in time. It could be a piece of technology, it could be a particular algorithm, it could be a sensor.

Yeah.

It could be a team. We're always on the lookout there. So those would be the three buckets. Continued inorganic growth on the security force side. Remote monitoring opportunities that are likely to be highly synergistic, and the last one would be on the technology side.

Yeah. I would probably even go a little bit to summarize that, if you think about our strategy, which is hardware plus software plus humans, right? We're really good at the hardware. The hardware we have. The humans piece, we're working on that, and that's where the opportunity is. The software is where the opportunity is because again, there's so many people working on some really brilliant technologies and analytics and software that if we can find the right one to plug in- Why don't we just do that?

Yeah. If you go on our brand new shiny website at knightscope.com, it literally says on the homepage, "For you, the chief security officers of the United States of America." Any decision that we would be making would be in your interest for us to build the most powerful Autonomous Security Force offering to really fix the client's problems and frankly, our nation's problems.

Right. Next question. Let's talk about clients. Can you give your perspective on client retention, renewals among the legacy security force client base?

I'm sure this is not 100% accurate, but one of the reasons we made the acquisition was, very rarely to zero have the Security Force losta client. They may have fired a client, which is different.

That's different. Yep.

Their retention has been really strong there, I think, one. I look at our client base, we are now 434 plus clients across 42 states. There is a new investor updated deck. If you go to ir.knightscope.com, our new IR site, you can pull that down. I think there is a slide on there that reflects something to the effect of, if you take the top five

Yeah

... of the 434 clients, their security spend is on the order of about $850 million. What is the easiest sale you are ever going to get?

Existing client.

Frankly, an existing client.

Yep.

I've been very much focused on thinking through strategies and approaches on how do we leverage the 434 and see what good we can do for them. Along the way, we've met a lot of folks that are struggling with the existing kind of setup. So there's going to be primary focus on existing clients with some additional new clients as we go along. But the opportunity is certainly there. It's taken a very long time to go build the foundation to make all this happen. But this is a unique opportunity and time, and a unique company. This is a managed service provider for physical security that's never existed. Knowing what we know, let's just say everyone in the building's in good spirits, right?

Yep. Number four, can you expand on the meaningful synergies from the Security Force acquisition? This is an easy one.

It is easy?

Yeah.

Do it then. Meaningful synergies. So I think we want to look at it from a few different angles. Obviously, you've seen the numbers. There's a significant component on the revenue growth. Triple digit growth two quarters in a row is kind of not normal. Over time, Wall Street will begin to learn that you cannot ignore a company growing triple digit in a market with a $230 billion TAM, and working on robotics and AI, and a unique set of humans in the loop. That's not something you're going to be able to ignore.

Yeah.

The best thing that we can do, continue to improve the financial performance of the company, continue to grow, communicate, communicate. But at the end of the day, we know we're right. We just need to execute. In terms of the synergies, there's 434 clients. You might imagine a large portfolio of nationwide blue chip clients that have only had Knightscope Security Force kind of footprint.

Yeah.

I guess pun intended, and no technology.

Yeah.

There's a significant opportunity for, we already landed.

Yep.

... let's go expand and be very thoughtful about-

Yeah

Please tell us what issues you're having. Not by generalities, that particular address and that particular location. What incidents have you had? What's the budget? Where are you struggling? How can we be helpful? Have you thought about X, Y, and Z? What's the lighting look like? What's the signage look like? Try to be that thoughtful, trusted advisor that hopefully we can win that trust over time, and go expand with technology. Similarly, you're kind of cross-selling, doing the other way.

Yeah.

We have a lot of clients that have only technology, that have an existing security, I'll say staffing model with a lot of the big box staffing companies, and aren't too particularly fond of the quality of service.

Yeah.

For us to say, "Hey, listen, we offer executive protection. We have armed agents, we have unarmed agents." We will be unveiling the H1 wearable here shortly, so we'll have augmented security agents, and no one in the industry will have. How can we help you with that?

Yeah.

There's that kind of cross synergy is really important. I think the second one, or third one. First was financial, second cross-selling, third is just cultural.

Yeah.

One of the most difficult parts of M&A is, again, not just the integration, it's people. It's people, people. Trying to get everyone in the same boat rowing in the same direction is not easy.

Yeah.

Sometimes public companies have to do stuff that a normal private company would never do, and vice versa. Little by little, we got to kind of get that to work. I'll say this in good form, the Knightscope Security Force team is highly disciplined. Command and control.

Yeah.

Follow orders, and off you go. The original technology side of Knightscope, Silicon Valley, Scrum, let's kind of pie in the sky, think about how we're going to do this, let's collaborate and all this other thing. For this to be successful-

Yeah

... it's not one or the other. You actually need to think about-

Nailed it. Yep.

... how to do this so that you can get the best of both worlds.

Absolutely.

You need to add some discipline, command, and control on a little bit too much of a loose process. At the same time, you can't stifle everything.

Right.

Right. I do not know if this is going to be true, we are going to find out, but my gut tells me that it is probably two thirds command and control because we are going to have a very large footprint out in the wild, and you cannot just tell an agent to say, "Go be autonomous.

Right.

Do whatever you kind of feel is-

Right.

That is not going to work. But at the same time, the security force team has so much knowledge, experience, and relationships, and insights from the industry, and that influence on the technology, we are already seeing some benefits of that. We actually have agents here today testing out the prototypes for the H1 wearable. I think that's where one plus one equals seven.

I agree. I think on the top line, if you think about our go-to-market strategy, we're uniquely positioned to go after that outcome based approach, which we think we have the right positioning to do so.

Yep.

Simultaneously, we have talked about this, if you look at the P&L below the gross margin, the OpEx side, we are already integrating finance, integrating HR. So those synergies in the shared services model internal to the corporation allows us to do some of the cultural things that you were talking about.

Financially, I think it is also really important that in order to be public it costs literally millions of dollars, right?

Absolutely.

Just because we add more revenue and more capabilities, more everything, we can now sweat the assets that we have. So, a crude example would be if we had solely one client, but we needed to remotely monitor the health of those machines and the security aspects of it, you still need four people to run 24/7, right?

Right.

But if you added 30 more clients, do you need to 30 times 40? No.

Yeah.

You don't need to do that. So there's some scaling. There's more efficiencies as we continue to scale-

Absolutely.

... and you're not going to quintuple the marketing department because you quintuple the revenue, right?

Right.

There's a lot of leverage coming, and, as we committed during the recent non-deal roadshows, every quarter is going to be better than the last. That's a tall order. We've been working very hard, and we've got two quarters to prove it. We just need to keep at it.

A question on pipeline. Any thoughts on I know we don't share pipeline data, but it looks like we're getting asked for some indication.

I think the best thing for us to say is we have 434 clients.

Yep.

Somebody can go do a guesstimate with Claude or whatever. I might have done that. I don't know. This is not an auditable number because it's literally a guesstimate from AI, but those 434 is probably $3 billion-$6 billion of annual security spend. If five is 850-

Yeah

... right, you can imagine it's somewhere in the billions range.

Yeah.

I think that's the most important focus, and then we need to focus on the technology itself. We're at an all-time high, as Apoorv noted, on expenditures in R&D. Why is that? Well, we've got an all-new K7 that everyone's really excited about.

Yeah.

Takes time and money to go do that. We've got an all-new H1 wearable that's going to go on our agents and our agents only. That's going to also take some time and money.

Yep.

We've got the all-new Signals platform, a piece of software that's going to orchestrate everything, hardware in terms of the robots, the stationary devices, the sensors, plus our agents, plus our mission intelligence remote monitoring. That piece of software is an industry first. This is literally we're going to remotely monitor a location in three dimensions. This is going to be absolutely exhilarating and invigorating to showcase this at GSX and actually put it into the field, not a science fair project. All that R&D, is going to have, I think, a very handsome return on investment-

Absolutely

... over the coming years.

Absolutely. I think the last question is, somebody asked, "I would love to hear Bill's thoughts on when he believes the public will catch on and the stock price will rise.

Oh my. Like I said, despite all the emails, texts, and voicemails, I don't control the stock price. You do. All I can do, and the team can do, is improve our financial performance of the company, we can grow the company, and we can communicate, communicate. The rest is literally up to the market. I'll just restate what I said earlier. If you think about where the company is going, we have all the pieces all now beginning to get integrated into one holistic managed service provider. We know that this is a massive pain point for this multi-billion dollar industry.

Yeah.

If we just focus on fixing the damn problem, you're going to get rewarded for it. The best thing the team can do is continue to focus on execution. Top line revenue growth up, cost of goods down, careful with our fixed cost basis, scale things up and get the technology to do magical things that no one in the industry is going to be able to do or can do. Then put the numbers up on every Q and every K. Then the way the stock should respond is simply on the numbers. That is why we urge you to look at the changes from all these years prior to what happened in the first quarter.

Yeah

... What happened in the second quarter, and now start thinking what the third, fourth quarter, and next year is going to look like. We are building something extremely special, and all the pieces of the entire puzzle are falling in together. I have literally, and this is not the founder being the founder and glass half full or building a glass factory, I have never literally been this excited about Knightscope's future in all 13 years of my career here. We have got an unbelievable team. We have got unbelievable technology. We have got existing clients. We just need to focus on execution. On that last point, how do you de-risk the execution side? You hire brilliant people.

Yeah. Absolutely. With that, I think this concludes your Q&A. I will hand it back to you if you have any comments.

Thank you, Apoorv, for doing this. Let me leave you with this. In the second half of the year, we expect to deliver on these four things. First, initial K7 deployments in the fourth quarter. Second, the official launch of the Autonomous Security Force at GSX in September. Third, the initial launch of Signals, our software orchestration platform. Fourth, the same thing you have seen the last two quarters. So thank you to our clients for their trust, to our shareholders for their support, and most of all, to the absolutely relentless Knightscope team. One team, one mission, one force.

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.