Cloudastructure Q2 2026 Earnings Report

Cloudastructure EPS Results

• Actual EPS: -$2.32
• Consensus EPS: -$2.70
• Beat/Miss: Beat by +$0.38
• One Year Ago EPS: N/A

Cloudastructure Revenue Results

• Actual Revenue: $1.23 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Cloudastructure Announcement Details

• Quarter: Q2 2026
• Date: 8/18/2026
• Time: Before Market Opens
• Conference Call Date: Monday, August 17, 2026
• Conference Call Time: 12:00PM ET

Cloudastructure (NASDAQ:CSAI), Inc. (NASDAQ: CSAI) is a technology company specializing in cloud-based video security and surveillance solutions. The company’s core offering is a subscription-based Video-as-a-Service (VaaS) platform that enables customers to deploy, manage and monitor high-definition cameras and environmental sensors through a unified cloud interface. By leveraging scalable cloud infrastructure, Cloudastructure eliminates the need for on-site video recording hardware and simplifies system maintenance and updates.

In addition to managed hardware, Cloudastructure provides advanced analytics capabilities powered by artificial intelligence and machine learning. These features include real-time motion detection, object identification, and automated alerting, which are delivered via web and mobile applications. The platform also supports integration with third-party access control and building management systems, allowing organizations to extend their security ecosystem and centralize operations.

Cloudastructure serves a broad range of end markets, including small and medium-sized businesses, enterprise enterprises, retail outlets, transportation hubs and government facilities. Its cloud-native architecture supports multi-site deployments and remote monitoring, making it well suited for geographically dispersed operations. The company distributes its solutions through a network of technology partners and value-added resellers across North America, Europe and select regions in Asia Pacific.

Founded in 2016, Cloudastructure is led by a management team with deep experience in cloud computing, video technology and enterprise security. The company is headquartered in the United States and continues to enhance its platform with new analytics modules and integrations to address evolving customer needs in the physical security market.

Cloudastructure Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Recurring revenue rose 164% year over year to approximately $764,000, lifting recurring revenue to 62% of total revenue from 27% a year ago and increasing annualized recurring revenue to about $3.1 million.
• Positive Sentiment: The shift toward subscriptions improved profitability metrics, with gross profit up 51% and gross margin expanding to approximately 49% from 37%, although the company remains unprofitable.
• Positive Sentiment: Cloudastructure cited customer retention of approximately 99%, portfolio expansion opportunities, and growing traction in commercial real estate, construction, transportation, and critical infrastructure; management expects the second half of 2026 to generate substantially more revenue than the first half.
• Neutral Sentiment: The company appointed Nile Coates as chief revenue officer to strengthen sales execution and convert its expanding pipeline into deployments and recurring revenue, while installation capacity remains scalable through third-party providers.
• Negative Sentiment: Second-quarter revenue grew only 13% to about $1.2 million as hardware and installation revenue declined, while operating expenses increased, adjusted EBITDA loss widened to approximately $3.8 million, cash ended at $3.8 million, and the Q2 results remain preliminary pending the delayed Form 10-Q.

Presentation

[Operator]

Good day. Welcome to Cloudastructure Inc.'s second quarter 2026 business update conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Rob Kelly, Vice President of Investor Relations at KCSA. Rob, you may begin.

[Rob Kelly, VP of Investor Relations at KCSA]

Good afternoon, everyone. Thank you all for participating in today's conference call. On the line with us today are James McCormick, Chief Executive Officer of Cloudastructure, and Greg Smitherman, Chief Financial Officer. Earlier today, the company issued a press release announcing its operating results for the second quarter ended June 30th, 2026. The release is available on our website at cloudastructure.com. Also earlier today, the company filed a Form 12b-25 with the SEC, notifying the commission that it requires additional time to complete the review of its financial results for the quarter. Cloudastructure expects to file its Form 10-Q within the five calendar day extension period provided under that rule, and the report will be available on our website and at www.sec.gov once filed. Because the review is ongoing, the results discussed on today's call are preliminary and potentially subject to change.

[Rob Kelly, VP of Investor Relations at KCSA]

Please also note that on July 31, 2026, the company affected a one for 30 reverse stock split of all classes of its issued and outstanding common stock. Unless otherwise noted, per share figures discussed on today's call reflect that adjustment. Before Mr. McCormick reviews the company's operating results for the second quarter ended June 30, 2026, and provides a business update, I want to remind everyone that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding our expected business performance, strategy, market opportunities, customer demand, deployment activity, recurring revenue, operating results, liquidity, and growth plans.

[Rob Kelly, VP of Investor Relations at KCSA]

Forward-looking statements are based on the current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Important factors that could cause actual results to differ materially are described in today's earnings release and Cloudastructure's filings with the SEC, including the risk factors discussed in our most recent annual report on Form 10-K and subsequent filings. Forward-looking statements made on this call speak only as of today, and Cloudastructure undertakes no obligation to update them except as required by law. We may also discuss non-GAAP financial measures on today's call. Reconciliations to the most direct comparable GAAP measures, where applicable, are included in today's earnings release and related materials available on our investor relations website. I would now like to turn the call over to James McCormick, Chief Executive Officer of Cloudastructure. James?

[James McCormick, CEO at Cloudastructure Inc]

Thank you, Rob, and thank you all for joining us today. We spoke with many of you just four weeks ago on our first quarter call, so I'll keep the background brief and focus our time on what changed during the second quarter. Turning to the second quarter, the most important development was the continued growth of the recurring portion of our business and the impact that is beginning to have on our revenue mix and margins. Our annualized recurring revenue run rate increased to approximately $3.1 million exiting the second quarter, compared with approximately $2.6 million exiting the first quarter. Revenue for the quarter was approximately $1.2 million, representing a 13% year-over-year growth rate.

[James McCormick, CEO at Cloudastructure Inc]

Recurring subscription revenue increased 164% year-over-year to approximately $764,000, while hardware revenue declined 49% and installation revenue declined 32%. Recurring revenue now represents approximately 62% of total revenue, compared with 27% a year ago. That growing mix of recurring revenue is translating directly into improved economics. Gross profit increased 51% year-over-year, while gross margin expanded approximately 13 percentage points to nearly 50%. The decline in hardware and installation revenue is a direct result of the kind of business we are winning, and it reflects a deliberate choice about how we compete.

[James McCormick, CEO at Cloudastructure Inc]

In 2025, 57% of the cameras we signed in new contracts were taking over from a previous vendor. Through the first six months of 2026, that figure is 77%. We do not require a customer to rip out equipment that still works in order to adopt our platform. That is central to how we win competitive displacements, and it is why that percentage is climbing. Excuse me. The trade is straightforward. A takeover generates Apologies. I just had a blip in my communication line. A takeover generates materially less hardware and installation revenue up front, and it gets us to the recurring subscription faster and at a higher margin. We are not walking away from installation work, though.

[James McCormick, CEO at Cloudastructure Inc]

Where a customer needs infrastructure built, as in Southern California and Baltimore, we build it, and we capture that revenue as well. But we would rather win the recurring seat on a customer's existing camera system than lose the account defending a hardware sale. It's also worth putting that growth in context. Our customer retention rate is approximately 99%. That means substantially every dollar we add is a net new dollar rather than a dollar replacing something we lost. Many companies at our stage have to rebuild a meaningful portion of their revenue base each year before they grow at all. We do not.

[James McCormick, CEO at Cloudastructure Inc]

Combined with expansion inside existing accounts, that is what allows growth that looks modest in any single quarter to compound into a durable recurring base. Our objective for the second half is straightforward: convert more of the pipeline we have already built into deployed customers and recurring revenue. More on this shortly. Multifamily remains our largest and most established vertical, and we continue to see meaningful opportunity within the customer relationships we have already built. Earlier this month, we announced our third deployment with a luxury multifamily operator in Houston, bringing Cloudastructure into approximately 38% of that customer's Texas portfolio. That progress is important.

[James McCormick, CEO at Cloudastructure Inc]

We started with an individual property, demonstrated the platform's value in production, and earned subsequent deployments across the portfolio. That is the land and expand model we have discussed in the past, and we are pleased to continue to see tangible evidence of it within our customer base. Because our retention is high, expansion inside an existing account adds to the base rather than replacing something that left it. We also continue to serve eight of the 10 largest NMHC-ranked multifamily property managers in the United States. We are also beginning to see our platform gain traction beyond multifamily, particularly in commercial real estate.

[James McCormick, CEO at Cloudastructure Inc]

Earlier this month, we announced a five-building Southern California office portfolio managed by one of the world's largest commercial real estate services and investment firms. What makes this deployment particularly important is that we are not replacing another technology provider. We are replacing the property's dedicated on-site security guards with AI-powered surveillance and live remote guarding. This represents our first commercial office portfolio where remote guarding is replacing an on-site guard program outright across multiple buildings. We will also design and install the camera infrastructure across all five properties from the ground up, creating both installation revenue and a larger recurring subscription footprint.

[James McCormick, CEO at Cloudastructure Inc]

The opportunity came through a referral from a sister property within the same institutional portfolio, providing another example of how successful deployments can create additional opportunities within an existing customer ecosystem. More broadly, we believe rising labor costs, staffing challenges, and demand for consistent 24/7 coverage are creating a meaningful opportunity for technology-enabled remote guarding to replace portions of the traditional on-site guard model. One of the advantages of our cloud-native architecture is that it allows us to engage customers at multiple points in the life cycle of a property.

[James McCormick, CEO at Cloudastructure Inc]

In Southern California, we are designing and installing an entirely new surveillance infrastructure across a five-building office portfolio where no lobby camera coverage previously existed. Last week, we also announced another example of that flexibility with a new multifamily development in Baltimore, where we were selected during the construction phase based on the performance of our platform across the developer's existing portfolio. Because the property is still under construction, the initial phase consists of the surveillance installation, with AI surveillance and remote guarding expected to be added as the building nears completion. Being specified into a project before a building is completed changes how early we can establish a customer relationship. Rather than competing to replace an incumbent system after the fact, we are becoming part of the property's security infrastructure from the beginning.

[James McCormick, CEO at Cloudastructure Inc]

More broadly, these engagements demonstrate that customers can adopt Cloudastructure at multiple stages of a property's life cycle, from new construction to existing portfolios that expand over time as customers gain confidence in the platform. While the Southern California deployment is expected to begin contributing this year, the Baltimore installation aligns with the property's construction schedule and is expected to begin in the first half of 2027. That timing difference is important, but both engagements reflect the same underlying trend. Customers are bringing Cloudastructure into their portfolios earlier and expanding the relationship over time.

[James McCormick, CEO at Cloudastructure Inc]

As we scale our business, we are also strengthening the team responsible for converting this opportunity into revenue. Separately this morning, we were pleased to announce the appointment of Nile Coates as Chief Revenue Officer. Nile joins us from ECAMSECURE, a GardaWorld company and one of the largest physical security services organizations in the world, where he most recently served as vice president of sales for the United States. In that role, he led the U.S. sales organization and oversaw the integration of the ECAMSECURE and Stealth Monitoring sales teams. Before that, he spent nearly 18 years at Reynolds and Reynolds, most recently as director of sales for the East.

[James McCormick, CEO at Cloudastructure Inc]

Across his career, he has built and scaled enterprise sales organizations and closed complex multimillion-dollar agreements. His experience is especially relevant because he understands both sides of the market we are addressing, traditional security service and technology-enabled remote monitoring. Nile's mandate at Cloudastructure is very clear. We have established meaningful customer relationships and built a growing pipeline across multiple verticals. The next step is converting those opportunities into deployments and recurring revenue more consistently at a greater scale. Nile will be responsible for building the sales organization, processes, and channel strategy required to accelerate that conversion.

[James McCormick, CEO at Cloudastructure Inc]

We believe bringing in a revenue leader with experience operating at substantially greater scale is an important step as we move into the next phase of Cloudastructure's growth. Across these deployments, the common thread is that customers are looking for a more proactive, scalable and cost-efficient approach to physical security. Whether we are protecting a multi-family property, commercial office portfolio, or critical infrastructure site, the proposition remains the same. Use AI to identify activity earlier, combine that intelligence with live intervention, and provide customers with consistent coverage without relying exclusively on on-site personnel. Overall, Q2 demonstrated meaningful progress in the underlying economics of our business.

[James McCormick, CEO at Cloudastructure Inc]

Recurring revenue increased 164%, gross profit increased 51%, and gross margin expanded approximately 13 percentage points. Just as importantly, that recurring revenue is not a spike in a single period. It is the base we carry into every quarter that follows and add to. At the same time, we recognize that the pace of top-line revenue growth needs to accelerate. We've built significant customer relationships, established a growing presence across multiple verticals, and demonstrated that customers are willing to expand after initial deployment. The work now is converting that opportunity into deployed, recurring revenue more consistently and at greater scale, and strengthening our commercial leadership through Nile's appointment is an important part of that effort. With that, I'd like to turn the call over to Greg Smitherman.

[Greg Smitherman, CFO at Cloudastructure Inc]

Thanks, James. With that context, let me walk you through our financial results for the quarter. Revenue in the second quarter was approximately $1.2 million, as James said, representing a 13% growth compared to the same period last year. As James had also said earlier, the composition of our revenue continued to shift during the quarter. Subscription revenue increased a 164% year-over-year to approximately $764,000, driven by continued strength in both our cloud video surveillance business and our remote guarding business. While hardware and installation revenue declined compared to the prior year as customer activity shifted towards higher value recurring services.

[Greg Smitherman, CFO at Cloudastructure Inc]

As we've discussed in prior periods, our business includes a mix of recurring subscription revenue and deployment-related revenue, and the balance between those revenue streams will vary from quarter to quarter, depending upon customer implementation, timing, type of deal, etc. Cost of goods sold decreased 9% year-over-year to approximately $623,000, primarily reflecting lower hardware and installation activity during the quarter, which carry a higher cost of sale than our recurring services. At the same time, gross profit increased 51% year-over-year to approximately $610,000, supported by the continued growth in our recurring subscription business. Gross margin expanded to approximately 49%, compared to approximately 37% in the prior year period, as recurring revenue represented a larger percentage of total revenue.

[Greg Smitherman, CFO at Cloudastructure Inc]

We believe this continued improvement in revenue mix is an important component of our path forward to improved operating leverage and profitability. Operating expenses for the quarter totaled approximately $2.7 million, compared to approximately $2.3 million in the prior year period. These increases primarily reflect continued investment in the business, including expanding our sales and marketing organizations, increased operational capacity to support deployment activity in remote guarding, and continued investment in the infrastructure required to support future growth. General and administrative expenses declined approximately 15% year-over-year, reflecting lower professional services costs. Loss from the operations for the quarter was $2.1 million, compared to approximately $1.9 million in the prior year period. Net loss was approximately $1.8 million, compared to approximately $2.2 million in the prior year period.

[Greg Smitherman, CFO at Cloudastructure Inc]

The improvement reflects stronger gross profits, partially offset by higher operating expenses, together with a non-cash gain related to the change in fair value of derivative liabilities. For the quarter, adjusted EBITDA loss was approximately $3.8 million, compared to approximately $3.1 million in the prior year period. Stock-based compensation was approximately $376,000 this quarter, compared to approximately $542,000 a year ago, and remains our largest non-cash expense. From a balance sheet perspective, we ended the quarter with approximately $3.8 million in cash and approximately $4.5 million in working capital. We believe our current cash position, together with available financing under our equity line, and at-the-market facility provides flexibility as we continue investing in the business. Although our ability to access additional capital remains subject to market conditions and the terms of those facilities.

[Greg Smitherman, CFO at Cloudastructure Inc]

On July 31st, we completed a one for 30 reverse stock split of all classes of our capital stock. Our common stock continues to trade on Nasdaq Capital Market under the symbol CSAI, and the reverse split supports our efforts to maintain compliance with Nasdaq's minimum bid price requirement. Overall, we are encouraged by the continued growth in recurring revenue, meaningful gross margin expansion, improved profitability, and the progress we are making towards building a stronger, more scalable business. With that, I will turn it back over to James.

[James McCormick, CEO at Cloudastructure Inc]

Okay. Thank you, Greg. Well, we're demonstrating two important paths to growth. Expanding within customers that already use the platform and entering new verticals where our technology can replace or modernize traditional security infrastructure. Our priority for the balance of 2026 is converting those opportunities into deployed revenue at a faster and more consistent pace. With Nile joining the organization to lead that effort, a growing recurring revenue base, and an expanding addressable market, we believe we have the right pieces in place to drive the next stage of the business. With that, operator, we'll open the line for questions.

[Operator]

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question today is coming from Jack Vander Aarde from Maxim Group. Jack, your line is live.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay, great. Good morning. Good afternoon, Greg and James. Great results on the growth engine from the SaaS side of the business. Maybe just a quick housekeeping question. I'm not sure if I missed it. Is the 10-Q, will that be filed in the coming days or today?

[Greg Smitherman, CFO at Cloudastructure Inc]

Yes.

[Jack Vander Aarde, Analyst at Maxim Group]

Just wondering-

[Greg Smitherman, CFO at Cloudastructure Inc]

That is-

[Jack Vander Aarde, Analyst at Maxim Group]

What to expect

[Greg Smitherman, CFO at Cloudastructure Inc]

That is imminently to be filed, Jack.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay.

[Greg Smitherman, CFO at Cloudastructure Inc]

Yeah.

[Jack Vander Aarde, Analyst at Maxim Group]

Excellent. And so that will have a full financial statement breakout. But there is great detail here in the press release, obviously, and you have covered a lot of this. Can we touch on maybe, has anything changed in terms of how you are thinking about the installation in hardware side of the business, or is it still lumpy, or is there an intentional focus to shift more towards SaaS, just pure play? Just would like to get your-

[James McCormick, CEO at Cloudastructure Inc]

Yeah. Sure. The answer is sort of a hybrid, right, of a number of things you just posited, Jack. We are not specifically looking at deals, right. Takeovers, as we call them, that would essentially boost the recurring revenue piece. Our model is the same, right. And we said that earlier in our remarks, which is we approach customers. Some have existing infrastructure, some do not. For the ones that do not, where a facility is already built or it is new construction, we are happy to provide installation and hardware components.

[James McCormick, CEO at Cloudastructure Inc]

What we were just seeing in the first half of this year is that a substantial portion of the transactions that we closed on were takeovers, and people understood our differentiation, what we could do better, and accordingly, it was easier for us to take over those cameras, install our Cloud Video Recorder, and get up and running with the customer very quickly. Not really a fundamental change in anything we are doing. It is just the way that things played out in the first half of this year, is how I would put it.

[Greg Smitherman, CFO at Cloudastructure Inc]

Yep. And it is a positive, right. It is a bit lumpy, right, just because you just do not know what does a customer. When we talk to customers, what are their particular needs? And it really does vary.

[Jack Vander Aarde, Analyst at Maxim Group]

Yep. No, it makes sense to me because I was just curious because the mix is definitely noticeable in terms of the SaaS stuff for the quarter. I guess as I look at your operating expenses as well, it looks like you guys have been doing a good job of controlling those. I think they dipped down quite a bit this quarter. Is there any takeaways there from, especially the G&A line? Is this a new kind of normal base level, or is this just a snapshot of this quarter?

[Greg Smitherman, CFO at Cloudastructure Inc]

No. I think especially when you are comparing it to last year, where we had just come out of our direct listing and a lot of expenses of switching from a private company to a public company, right? It is not an inexpensive endeavor. They were substantially higher last year. I think as you said, we have got them under control. Everything is smoothing out. Obviously, cost control for any business is something to really pay attention to, and it is something we always have our eye on.

[Jack Vander Aarde, Analyst at Maxim Group]

Another thing, just if I double-click on the gross margins here, I am not sure if I have a full breakout of every revenue segment stream, but the 49%, blended average, it seems like things are picking up again, I guess, year-over-year there. I am not sure what the breakout is there for hardware and other. Can you talk about maybe kind of the threshold, the range, remind us, for the cloud video and the remote guarding gross margin levels as you continue to gain scale?

[Greg Smitherman, CFO at Cloudastructure Inc]

It does vary by quarter. For the service side of business, like any SaaS business, the bigger that gets, the better the margins get because you do have fixed infrastructure costs. When you can apply more revenue to that same fixed infrastructure, your margins go up. It is straightforward. Although, given the growth that we are seeing, we will be, and actually have already ordered some additional infrastructure equipment to deal with the continued customer increases, which is great.

[Greg Smitherman, CFO at Cloudastructure Inc]

Our hardware margins are pretty substantial. They are generally north of 50%. It is the installation revenue that is generally pretty small. It is in the 10% range, we will call it. Again, varies by deal. Some a little more, some a little less, but it is a ballpark figure, but the bulk of it is, the more we can continue to build and drive to just be pure SaaS, those margins will continue to move upward.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay, great. And maybe a follow-on for James. The large project that was kind of emphasized here, you put a press release out on it. You are now 38% of this customer's Texas portfolio, I guess once that is installed-

[James McCormick, CEO at Cloudastructure Inc]

Yeah.

[Jack Vander Aarde, Analyst at Maxim Group]

...And I think it is early 2027 that is on track for?

[James McCormick, CEO at Cloudastructure Inc]

Yep.

[Jack Vander Aarde, Analyst at Maxim Group]

How does this compare across your entire, I guess, installed base of properties and opportunity? Is this a good, I guess, case study of what to expect? And also just kind of how much higher can you penetrate a customer like this?

[James McCormick, CEO at Cloudastructure Inc]

Yeah.

[Jack Vander Aarde, Analyst at Maxim Group]

Not a hypothetical-

[James McCormick, CEO at Cloudastructure Inc]

Yeah.

[Jack Vander Aarde, Analyst at Maxim Group]

...but this specific customer.

[James McCormick, CEO at Cloudastructure Inc]

Yeah. Excellent question. Hard to put definitives around it, right? Because we're sort of experiencing some of this in real time. Let's start with the basics, right? We've talked for the past year about land and expand, right? And indeed, that is exactly what's happening. So with this Baltimore property, right? We're across 38% of their portfolio. If you're asking for modeling purposes or just general thinking purposes, is 38% a good number to use for all the multi-family partners that we have? I'd say it's too early to assume that, right? Just think about it. We work with Cushman & Wakefield. 38% of their properties, by golly, that'd be a heck of a business, wouldn't it?

[Jack Vander Aarde, Analyst at Maxim Group]

That's what I'm exploring here. Exactly.

[James McCormick, CEO at Cloudastructure Inc]

No, I understand. I would put it this way, Jack. Each customer or partner, if you will, that we work with, each one moves at their own pace and their own velocity. I can tell you that for the larger customers that we have, we do have a concerted effort in meeting with those folks and building relationships at the highest levels of their organizations to facilitate that additional expansion. And it's going pretty well. I think it's just a little too soon for us to start giving some guidance on what we think percentage expansion in a particular customer portfolio might look like. But we think you should see additional expansion opportunities across a broad range of our customer base in the second half of this year.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay, excellent. And maybe just one more follow-up, and then I'll hop back in the queue. Is there any bottlenecks that you're working on to unlock an acceleration of growth even further? You're growing very fast. Just curious with your footprint, your overhead, and your remote guards themselves.

[James McCormick, CEO at Cloudastructure Inc]

Yeah.

[Jack Vander Aarde, Analyst at Maxim Group]

They have quite a bit of scale, I believe, that they can service.

[James McCormick, CEO at Cloudastructure Inc]

Yep.

[Jack Vander Aarde, Analyst at Maxim Group]

Anything that you are working on that could speed up installations, or do you need more personnel as well? I would just be curious to know if that is a growth driver.

[James McCormick, CEO at Cloudastructure Inc]

Yeah. Indeed, Jack, that is something that we focus on, right? Time to complete installations, number of installations, that we believe as we model things out, we can get to during the course of a month, right? We announced previously that we brought Ed Burnett on board as our Chief Security and Operations Officer, and Ed is heading those efforts from an installation standpoint. Internal personnel, yeah, we constantly look at that, right, to support the installations. That is a small handful, right? That is not hundreds of people. Remember, we outsource most of our installations to third-party providers.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay.

[James McCormick, CEO at Cloudastructure Inc]

People that we have worked with and we trust, and that is relatively easy to scale as we continue to expand our footprint across the United States. I will also say we are at the front end of conversations with a third party that might give us the opportunity to tap into their complete nationwide installation network, just to further that momentum, if you will. But we are pretty satisfied with where we are at right now from a monthly installation standpoint. When we have everything hitting on all cylinders, that number is probably something, Jack, like 45 installations a month or so, theoretically. So there is a lot of untapped capacity that as we bring in new sales opportunities, we should be able to get implemented in the customer up and running.

[Jack Vander Aarde, Analyst at Maxim Group]

Okay. No, that sounds great. I look forward to the next update, and that is it for me. Thanks, guys.

[James McCormick, CEO at Cloudastructure Inc]

All right. Thanks, Jack.

[Operator]

Thank you. The next question will be coming from James Kisner from Water Tower Research. James, your line is live.

[James Kisner, Analyst at Water Tower Research]

Hi, thanks for taking my questions, and congrats on the very nice gross margin here, and the recurring revenue. It's been a month here, I think, since your last call, and you talked about the second half being stronger than the first. I'm just kind of wondering if you can maybe update on your confidence in the last four weeks, how pipeline may have changed. Just some general commentary on how the second half might be looking versus even a month ago, but obviously versus the first half.

[James McCormick, CEO at Cloudastructure Inc]

Well, I could take a shot at that, James. Again, I just want to start by saying, as you well know, we don't provide revenue guidance, right? Generically. But I think what we would say is multifamily, as well as the other verticals that we're working to operate in, right? Commercial properties, construction, etc., none of those are instantaneous, like you do a site walk, you give a proposal to the customer, and boom, right, you're ready to go. We would say the pipeline continues to build. It continues to build as we add senior members to our sales organization, and I'm talking about direct reps, right?

[James McCormick, CEO at Cloudastructure Inc]

All of that on top of the new guidance and leadership of Nile Coates, all has us feeling very optimistic about the second half of this year. I'm trying to say something without saying something, James. We believe the second half of the year will equate to substantially more revenue than the first half of the year and the numbers that were reported and I think that's as far as I can push it without really getting deeper.

[James Kisner, Analyst at Water Tower Research]

Okay.

[James McCormick, CEO at Cloudastructure Inc]

The pipeline continues to build. We continue to add salespeople. We continue to monitor every active transaction, and we're confident that that will translate to demonstrable growth as we go forward in the future, in the second half.

[James Kisner, Analyst at Water Tower Research]

Yeah, that's helpful. Nile looks like a great addition here. Background is a good fit. Anything that is changing, perhaps, in terms of focus in the go-to-market motion here potentially, or is this kind of more of executing the current playbook better? Any kind of general thoughts on what that might signify, that hire?

[James McCormick, CEO at Cloudastructure Inc]

Yeah. Mm-hmm. Well, I think a few things. I think a few things, James. One, yes, it's taking the playbook and making it better. It's kind of like a coaching change in the NFL, right? Where you read that the quarterback's like, "Well, geez, I had this system that I played under for six years with a previous coach, and I got this new guy with all these crazy ideas." And it takes a while to learn the new playbook, right? I think that's part of what Nile brings to the equation as well. He has his own thoughts and experiences from companies exactly in our space, but generating significantly more revenue. I believe we all see his guidance and where he wants to take the organization.

[James McCormick, CEO at Cloudastructure Inc]

In a short period of time, we can already see demonstrable actions and results, for lack of a better phrase, right? I think it's two things. I think it's improving the old playbook, but also adding a bunch of things to it. Honestly, James, when it goes to sales, and I'm not undermining anything from the hard efforts that our really great sales team puts in, but at the end of the day, it's just good old-fashioned hard work, right? Understand the product, get in front of customers, be passionate about explaining the value proposition, and be relentless, or, as someone said to me recently, professionally persistent. That's what our team is doing.

[James Kisner, Analyst at Water Tower Research]

Yeah, that makes sense. As we're kind of looking here at your recurring revenue growth, it's pretty substantial year-over-year. Looks like something like $500,000 or so. I don't know if there's any way to kind of, if you look at it this way at all, but is there a way to look at how much of this is coming from new deployments versus expansion with existing customers? I know you've said there's a pretty massive penetration opportunity with your existing customers, but maybe you could double-click and give us just some perspective on how much of that is coming from kind of same store sales, for lack of a better term, versus totally new deployments, new customers.

[James McCormick, CEO at Cloudastructure Inc]

Yeah. Greg, do you want to-

[Greg Smitherman, CFO at Cloudastructure Inc]

Yeah

[James McCormick, CEO at Cloudastructure Inc]

...take that one?

[Greg Smitherman, CFO at Cloudastructure Inc]

Sure. We do not break out the numbers exactly that way. But if we look at, let's just talk about our eight of the top 10.

[James McCormick, CEO at Cloudastructure Inc]

Excuse me.

[Greg Smitherman, CFO at Cloudastructure Inc]

If we look at the sites that were deployed year-over-year since Q2 of last year, we're up 150%, which is spectacular. We continue to build that. While land expand is very important to us, especially since we have so many of the top properties,

[James McCormick, CEO at Cloudastructure Inc]

We're not solely focused on that, so we continue to build from all aspects. Any customer is a good customer, put it that way, right? We haven't said, "Oh, of the incremental revenue, how much is one versus the other?" But anecdotally, I'd say it's kind of split evenly, right? Good land and expand, but still new good logo growth.

[James Kisner, Analyst at Water Tower Research]

Actually, really good texture.

[James McCormick, CEO at Cloudastructure Inc]

Right. You want both of those, right? You don't want to limit yourself to any one component. It's a tremendously large market.

[James Kisner, Analyst at Water Tower Research]

That makes sense. One more, sort of a different angle on the same question. I'm kind of guessing here the multifamily is the vast majority of the revenue here, but you've had some forays into transportation, logistics, and retail. I'm guessing those are pretty de minimis right now and are mostly on potentially upside. Any kind of update on the verticals, ones that may be kind of already contributing or more likely to contribute sooner than others? Just general thoughts on the kind of the vertical strategy.

[James McCormick, CEO at Cloudastructure Inc]

Yeah. I can take that one. Already contributing. Again, it's all about scale, right? Takes a while, as we mentioned earlier, to get up to speed, and really penetrating things from a new vertical standpoint. But already contributing would be critical infrastructure, commercial properties, transportation and logistics, and construction. Are the dollars smaller? Yeah. But like the commercial property deal that we announced about five open-air shopping malls, the portfolio of that particular company is pretty large, and once they have a little bit of experience under their belt with using our system, we're confident that we will get additional opportunities in that portfolio.

[James McCormick, CEO at Cloudastructure Inc]

Same with transportation and logistics, right? We're deployed at a few of these higher-end remote truck parking lots, and their plan is to grow exponentially throughout the United States, and we are their selected security provider, right? Yes, it's still a bit nascent, as you said, some of these new verticals, but we're excited at the head of steam we're starting to see with them, all while multifamily keeps cranking away in the background.

[James Kisner, Analyst at Water Tower Research]

All right. Great perspective. Thanks. Those are my questions.

[James McCormick, CEO at Cloudastructure Inc]

Okay, James.

[Operator]

Thank you. There were no other questions at this time, and this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• James McCormick, CEO
• Greg Smitherman, CFO

Analysts

• Rob Kelly, VP of Investor Relations at KCSA
• Jack Vander Aarde, Analyst at Maxim Group
• James Kisner, Analyst at Water Tower Research