Cloudastructure, Inc. Class A Common Stock Water Tower Research Virtual Insights Conference

CFO Greg Smitherman have both joined us before, and we have two executives making their first appearance with us, Chief Revenue Officer Nile Coates and Chief Security and Operations Officer Ed Burnett. Welcome everyone, and thank you for joining us.

Thanks for having us. Thanks, James.

Thank you. Thank you. Appreciate it.

Before we dive in, I must note that Cloudastructure's safe harbor statements are available in the investor presentation on their website. This fireside chat is not to be reproduced, nor may a transcript be distributed without prior written consent from Water Tower Research. As always, investor questions are encouraged. Please enter them in the chat box. Those wishing to request a meeting with Cloudastructure can do so through the conference portal. With these items addressed, let's move forward, gentlemen. All right. I'm going to start with you, James.

Just again, for investors who are new to the story, just give us a quick refresher on what Cloudastructure does today, and then perhaps paint the bigger picture. What kind of company are you building over the next three to five years, and how will it differ from the Cloudastructure of today?

Yeah, sure. As a refresher, what we do, we are a video surveillance company using artificial intelligence and, where appropriate, human-in-the-loop to provide proactive security coverage for our enterprise customers, right? In regards to where we're at today and where we see ourselves going in the future, our first beachhead, if you will, into revenue was multifamily housing. We do work with eight of the top 10 multifamily property management companies in the U.S., so that is a huge revenue source and vertical for us. We think over the next, frankly, two to five years, you're going to see that shift.

Not that multifamily won't be an important revenue stream for us, but there's additional verticals that we have current installations in that we see expanding at a more rapid clip, including active construction sites, commercial buildings, transportation and logistics, those sorts of things.

That's a great overview. Thank you. Let's talk about Q2 for a second.

High mix of recurring revenue in Q2, and subscription services were 62% of total revenue. Just setting any one quarter aside, just how are you thinking about the mix of the business over the long run between- Mm-hmm.

Yeah. Subscription services, hardware, installation?

What does the revenue model look like at scale?

Mm-hmm. Yeah. Interesting question. Many ways to answer it, but historically what we saw is that the components of revenue were split sort of evenly, I guess you would say, right? Hardware, installation, subscription revenue. One-third, one-third, one-third. Q2, first half of the year, recurring revenue, there was a shift. There are very specific reasons for that. Greg can talk about that in a little bit. But we think over time a couple things are going to happen. We actually like installation revenue because that means we have a new customer, right? Or we have a further deployment inside the portfolio of an existing customer. We actually like that. When we sell hardware, we actually make decent margins on hardware, right?

The real gem, the thing that we are starting to get more and more excited about because we are seeing demonstrable proof points, is the increase in the SaaS or recurring revenue piece, and we expect that to continue to grow as a percentage of revenue over time. So we will see, but that one-third, one-third, one-third will probably be weighted more towards the recurring revenue piece. Again, not to give too much away, but we have a very high customer retention rate, so once we get a customer and prove the efficacy of our solution, they do not go away. So that would imply that we should continue to see that SaaS component increase.

Yeah. There's obviously a lot of opportunity out there for a greenfield opportunity for installation.