Robots will be everywhere. Literally. The time is now, not in some distant future. The convergence of numerous technologies maturing at the same time is setting the stage for decades of profound growth. From sensors, batteries, computing capabilities, artificial intelligence, data transfer and data storage to the realization of autonomy in real world applications - all the key factors are in place. And Knightscope is perfectly positioned at the intersection of these key technologies with an inspiring long-term mission to make the United States of America the safest country in the world (the “Mission”).
Knightscope’s initial portfolio of crime fighting technologies has logged millions of hours in the field, garnered numerous wins for our clients and communities across the country, and has generated well over $30 million in lifetime revenue. It was an arduous, but much needed “Large Scale Proof of Concept,” to prove to the country (and to ourselves) that reimagining public safety was indeed a possibility utilizing new technologies. We can now declare successful completion of Phase 1 of our plan.
Many of our supporters, investors and clients may not know that our long-term plan is to build a wide range of technologies that include the smallest of devices that are incognito by nature, to those patrolling entire cities and highways, plus everything in between. Since criminals and terrorists can be anywhere, then Knightscope must be everywhere if it is to fulfill our Mission. Full spectrum dominance that will overwhelm anyone intending to cause harm to Americans and our communities is our goal.
Crime has a $2+ trillion negative economic impact on the U.S. every single year. It is a hidden tax that we as a Nation pay in blood, tears and treasure. A violent crime occurs every 26 seconds and property crime every 4 seconds. Every. Single. Day. The Founders of our country would be horrified to witness the level of crime, violence and terrorism in our society today.
Every American has a fundamental and basic right to live in a safe community in a safe country. We do not have to live this way. We can do better. We must do better.
In Phase 1 of our plan, we demonstrated that Knightscope has the technology, the people and the support to tackle our Mission effectively. Our next step is to scale.
As we enter Phase 2 of our plan, our focus is on profitable growth of Knightscope. That includes scrubbing the entire income statement for a concert of small changes that combined will deliver a step-change in performance, while at the same time making bold investments in the future of the business.
We already have a track record of consistent double-digit growth, have made our first successful acquisition, and our nearly 3-year investment in FedRAMP yielded an Authority to Operate from the U.S. Federal Government, significantly increasing our TAM (Total Addressable Market). We are on the right path and need to focus on the following 4 areas next:
Organizational Effectiveness – having me reassume numerous operational duties is only the beginning of changes I am making that will streamline management decision making, focus and performance. We are seeking to cut at least $1 million to $2 million in annual fixed costs while making investments in engineering and manufacturing.
Margins – for our K1B portfolio of Blue Light Towers, E-Phones and Call Boxes, we are setting a 50% margin target; for our ASRs, we continue to target a 67% margin over the life of the machine. We seek to achieve both targets over the long-term by consolidating purchasing activities; re-engineering our supply chain; reducing assembly hours; maintaining an efficient IT infrastructure; redesigning / rearchitecting systems and sub-systems; reducing maintenance, service and telecommunications costs; and changing material specifications and manufacturing processes. Hundreds of improvements that, together, will deliver improved financial results. Additionally, given the nature of our Machine-as-a-Service (MaaS) subscription model, scaling up our operations will also have a positive impact on margins. Although there is a lot of work ahead for us, we are still targeting profitability by the end of the year.
K7 ASR – part of our growth plan includes introducing new, innovative products and technologies with attractive margins. We’ve begun to scale up the business, started shipping the 5th generation K5 and the all-new K1 Hemisphere, showed the benefits of the K1B portfolio through an acquisition, and most recently commenced selling Automated Gunshot Detection. We know a number of you have been waiting a long time to hear that we have kicked off the all-new K7 ASR for private roads and properties. If all goes according to plan, we aspire to begin taking pre-orders for the K7 in 2025.
Acquisitions – having bought over 2 dozen companies in my career, it can be wonderfully exciting as well as a profound amount of work and disruption. That said, living here in Silicon Valley with over 20,000 active startups, there are so many opportunities to evaluate acquisitions that could fuel additional growth and technology development for Knightscope (I have a long list).
One area in particular that I’m keeping an eye on is the autonomous space for full-sized vehicles. I believe we’ve entered into a “Self-Driving Winter” where my predictions from 10 years ago are coming true. Although I applaud the efforts and wish for everyone to succeed, I believe numerous folks took the wrong approach to the autonomy problem, and now will suffer the consequences as billions in funding dries up – and almost none of the 200 companies has yet to ship anything meaningful or are generating any significant revenue.
Perhaps for part of Phase 3 of our plan, the right acquisition could accelerate Knightscope’s technology and product development towards a future that brings the K10 ASR into production faster, to help autonomously patrol our cities and highways.
I’ve been looking forward to Phase 2, as I know so many of you have, too! As we enter the second decade since our founding, we are excited about growing Knightscope to the next level and we are grateful to be able to count on your unwavering support. Let’s go!
William Santana Li
Chairman and CEO
Knightscope, Inc. (NASDAQ: KSCP)
