Knightscope Inc
NASDAQ:KSCP
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Knightscope Inc
Earnings Call Analysis
Summary
Q2-2024
Knightscope reported Q2 2024 revenues of $3.2 million, a 10% drop from last year, largely due to lower product revenue. Services revenue saw a slight increase, but product revenue fell because of the absence of a large prior-year sale. The company recorded a gross loss of $0.6 million, down from a $9,000 profit last year, and operational expenses reached $6.2 million. Knightscope is undergoing strategic changes aimed at long-term profitability, including cost reduction and facility consolidation. The net loss increased to $6.3 million, with a loss per share of $0.05.
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Thanks, Bill. We know that this journey is challenging, but Knightscope is well positioned for long-term success. With that, let's jump into our second quarter financial performance results.
I'm Apoorv Dwivedi, EVP and CFO at Knightscope. For the second quarter of 2024, we reported total net revenues of $3.2 million. This represents a decrease of $0.4 million or a 10% decline compared to the same period prior year, primarily because the gain in our services business was offset by lower year-over-year product revenue.
Services revenue increased by $0.1 million to reach approximately $2 million for the quarter, primarily due to ASR subscriptions and as more clients in the K1B product line signed up for recurring maintenance. However, total product revenue, which currently consists mainly of the K1B declined by $0.5 million, coming in at approximately $1.3 million because a large onetime sale in the prior year did not repeat.
Moving on to costs. If you recall, the company made a few strategic changes in the first quarter aimed at setting a path to profitability. Many of these were directly aimed at reducing our cost of goods and our cost of services. We also acknowledged that these initiatives would initially result in higher short-term costs and that we also expect the disruptions in the impacted activities at the business to directly affect our P&L throughout the year. As a result, we fully expect 2024 to continue to be a transition year.
Our cost of revenues came in at $3.8 million, which is an increase of approximately $200,000 from the prior year. This was driven primarily by cost savings that include $0.5 million in lower cost of materials and $0.5 million -- $0.4 million in headcount savings that were offset by $0.6 million in higher third-party costs, $0.3 million in scrap fees and $0.2 million in other costs associated with the transition.
On to gross profit. This quarter, we recorded a gross loss of $0.6 million, a significant change from the gross profit of $9,000 reported in the prior year second quarter. The decrease in gross margin was driven by $0.4 million in lower year-over-year revenues and $0.2 million higher cost of revenues.
It's important to note that our gross loss would have been between $0.1 million and $0.3 million if we exclude the onetime scrap fees of $0.3 million and the onetime transition costs of $0.2 million.
Moving on to OpEx. Total operational expenses came in at $6.2 million for the quarter ended June 30. Excluding the $0.3 million in restructuring charges that we took, our OpEx was flat to prior year as it came in at $5.9 million for this quarter.
Overall, we saw headcount savings of $0.6 million offset by $0.4 million in higher third-party expenses, primarily legal and financial support costs and $0.2 million in higher R&D costs related to product development as the firm explores a new generation of product design.
Restructuring charges of $0.3 million were primarily related to severance costs and moving fees as we closed down the Irvine, California facility to move our production to Mountain View, California. Loss from operations of $6.8 million was approximately $0.9 million higher than prior year because of the drivers discussed earlier.
It's important to note that excluding the onetime restructuring costs of $0.3 million and the scrap fees of $0.3 million and investment in new product development of $0.2 million, our OpEx or operating loss would be flat to prior year on $0.4 million in lower revenues, indicating that the company is working hard to deliver on its operational efficiencies.
Net loss of $6.3 million for the quarter came in approximately $1.5 million higher than prior year, primarily due to the $0.7 million increase in other expenses, coupled with the $0.8 million higher OpEx versus prior year. The increase in other expenses includes $0.5 million in higher noncash warrant valuation losses and $0.2 million in interest on the bonds that we closed in the first quarter.
Finally, Knightscope's basic and diluted net loss per common share was $0.05 as compared to a loss per share of $0.08 prior year.