Welcome to today's fireside chat with Cloudastructure. I'm your host, James Kisner. I'm a Senior Analyst at Water Tower Research. Today, I'm joined by James McCormick, Chief Executive Officer, Greg Smitherman, Chief Financial Officer, and Lauren O'Brien, Chief Revenue Officer at Cloudastructure. Welcome back, everyone.
Thanks so much, James. It's good to see you again.
Before we begin, please note that Cloudastructure's safe harbor statements can be found in the investor presentation on the investor tab of their company website. Also, this fireside chat may not be reproduced, nor may a written transcript be distributed without the express consent of Water Tower Research. We'll aim to address investor questions submitted during today's conversation, or in the management series report that will follow. Please enter your questions in the chat. Investors interested in scheduling a meeting with Cloudastructure can indicate their interest within the conference portal. With those housekeeping items covered, let's jump in. For listeners joining us for the first time, Cloudastructure is a Palo Alto-based Nasdaq-listed company that provides an AI-powered cloud video surveillance and remote guarding platform.
The company's technology enables trained remote guards to monitor significantly more camera feeds than traditional setups, intervene in real time through integrated speakers, and deliver what the company reports as a 98% crime deterrence rate, stopping crime before it happens. James, just for listeners who may not have heard our last conversation, can you say more on what I just said? Just give a brief refresher on what Cloudastructure does and who your customers are.
Sure. Well, I think you did a fine job of explaining what we do with your opening statement. Just to reiterate, we are a video surveillance company using artificial intelligence to identify what we've trained our models to pick up as our threatening events. When there is something identified as a threatening event, it goes to the humans in the loop or our remote guarding team who actually evaluate what's going on, and if they determine that it needs further action, they can either talk down to the people that are trying to perpetrate something, or notify local authorities, whatever the case might be. As you stated, we have a demonstrated 98% deterrence rate. What we're doing is we are being proactive in stopping threatening activities before they become a problem for our customers, as opposed to just being reactive, right?
Like a traditional alarm system or just capturing video for the sake of going back and doing forensic evaluation. Types of customers, we're dealing with a number of customers in different verticals. Think large enterprise customers. One of our main verticals right now, historically, is multifamily housing. We work with six of the top 10 property management groups in the United States. That's been just a wonderful vertical for us. Then, of course, there's additional things that we started tackling at the end of 2025, and we're making great progress, great momentum in 2026, and I think Lauren will speak to some of that stuff in a bit.
All right. Well, that's a great segue, kind of just digging into the year-end here.
Yeah.
Q4, you grew revenue 306% year-over-year, and impressively, total contract value is up 342% for the full year. Can you kind of just unpack what's driving that increase in contract value?
Yeah, I think there's a couple things, James. One, we're starting to deal more with larger enterprise customers, right? That obviously drives contract value up. Second thing we would say is, we've talked about this in the past, with multifamily properties, we've been progressing through what we call a land and expand strategy, which is start with a property and then get additional properties online and contracts awarded from that, a particular property management group. We're seeing the pace for that land and expand strategy accelerating, right, towards the second half of 2025 and into 2026 as well.
Wow, that seems like pretty good news for deal size.
Mm-hmm.
Going forward. Sort of related here, you mentioned targeting a roughly 50% increase in deployment capacity by the second half of the year. I think up-
Yeah.
-from $20 / month today.
Mm-hmm.
Where are we standing on that? How is the build-out of the kind of your third-party installation partner network progressing-
Mm-hmm,
-to do that?
Yeah. $20 or so may be a little bit of a conservative number for number of installations per month. We've seen ranges go from $20 to mid-$30s, but let's just use $20 as a good number. I think conservatively, we believe by the second half of 2026 that we can increase that by 50% or so. Obviously, there's a number of factors that go into that, right?
That includes sales engineers that are employees of ours, that evaluate what equipment and what the placement of that equipment looks like at a customer site. Then ultimately, the installation piece, we just find the most efficient thing to do is to work with a network of third-party providers. That build-out is going very well right now. I guess what we would say is this, those third-party installers become an extension of us, of our company, right? We work very diligently to make sure that we are working with quality partners who will represent us favorably at the customer site and deliver impeccable service.
Okay. That's helpful. Maybe on a related point, I'm going to pull Greg off the bench here for a minute and then put him back for a later part of the conversation. You kind of talk about product mix and just kind of related to the installations. You had really nice growth in recurring revenue. I think it's over $2 million / year, kind of annual run rate in Q4. You had really strong installations. I think on the call you also described installations as kind of a leading indicator of recurring revenue. You need it to get the recurring revenue. Can you maybe talk about that, Greg, how your sort of mix might evolve knowing that the future's uncertain and these things move around. Just directionally what are you thinking?
Yeah. The way we think about sort of the product mix right now, and just in rough numbers to simplify it's roughly when we sign a new contract, 1/3 recurring revenue, 1/3 hardware, and 1/3 installation. Roughly. Every project's different. Numbers shift around a little bit, but ballpark, that's where it comes in. Now, obviously, as we continue on, and that customer stays with us, which we've had 99% customer retention, that initial contract value turns into recurring revenue. As you pointed out, we're starting the year with over $2 million in sort of recurring revenue going forward for 2026. Obviously, that will increase over the year. The only way we get more of that recurring revenue is to have more installations, and we have some pretty aggressive growth targets for this year internally.
We want to keep that installation and hardware component large because that means we're getting new projects, we're getting new locations, and we are ultimately building that recurring revenue base, and making it larger and larger, which is our goal. For the year, while yes, over time, those percentages will drop a little bit because recurring revenue will eventually start to dwarf the installation and the hardware sales. We're not at that point yet, and we don't want it to be at that point yet. I would expect for this year that that general rule of thumb will remain true.
Yeah. That's helpful for us folks that are building models. Let's turn to Lauren, who arguably helps keep the lights on for you guys as a Chief Revenue Officer. You recently announced deployments in some very different environments. Luxury high-rises in Houston, a commercial truck parking network, construction sites across multiple states, even a solar-powered enclosure for critical infrastructure. Just walk us through a couple use cases in more detail. Like what did the customer need, what'd you deploy, and what were the kind of measurable results?
Yeah. The one that I really get excited about is one of our newer verticals, truck parking lots. We recently secured Riggy's, who's a very large truck parking customer. Their main problem is cargo theft, which you might know is a $35 billion-$50 billion industry. It's a really big problem at trucking lots. Organized crime, tailgating, jumping over the fence, all kinds of things. That's their main problem. We have, in a very short period of time, three months, stopped 75 tailgaters. Those tailgaters are coming in hoping to steal a trailer, as an example, and those trailers have about $150,000-$300,000 worth of value inside. Let's just assume of those 75 tailgaters, that 50% were people who just didn't happen to have their access cards or what have you. 50% had an intent to steal, right?
For us, we have a process where we identify those tailgaters. We immediately let the client on-site know that there's been a tailgater, and we follow them. Our guards will follow them to make sure nothing's happening along the way. We're talking to them. We have speakers there, and we're letting them know we're watching them. As a result, there's been zero thefts since they've had our solution in place. 100% deterrent so far. If I take that 50% of the 75 trailer tailgating incidents, that's about $5 million in savings from theft in just three months. Needless to say, that customer is over the moon excited about what we're doing. They are amazed at our fast incident reporting, the fact that we're tracking and we're following up with them.
We have an opportunity with them to go to another 150 locations in very short order due to some of this initial results. I'm very excited about that one. Another market is construction. Similarly, it's theft. A lot of these, it's just theft. On construction sites, equipment can be stolen that costs tens of thousands of dollars. Again, with a 98% deterrence rate, and we can stop theft, the ROI on these properties is very, very significant.
Man, very helpful. You guys are kind of in the pre-crime business.
Yeah.
Last time we spoke, you kind of shared an eye-opening figure, that there was a billion-dollar expansion opportunity from existing customers. I'm sure after we spoke, you announced a 50% expansion with a top 25 multifamily owner/operator to nine properties from six. On Q4 call, James also described customers in Denver are moving straight to portfolio-wide rather than just single site. I guess, is that a trend now? Is that happening more and more?
Yeah. In fact, we hope to do some analysis on how fast it's actually growing. As I mentioned on the last webinar we did with you, we have a new division focused on enterprise customers, and the main focus is on delivering MSAs. It's no longer single contracts. We are seeing some existing customers who have been with us for two years and going at a slower pace, let's say two to five locations a year. They're now saying, "Okay, here's my next 16-20." Now because we have an MSA, we just do the scope of work and we're off and running. We also recently, just a side note, signed a commercial retailer on an MSA, and that has an opportunity to grow to over 200 locations. Very excited about that one, and I'll probably talk about that in one of your follow-up questions.
Yeah. That's okay. Let's get some foreshadowing.
Yes.
It hasn't been even quite two months here since we last spoke, Lauren. We just want to touch on customer logos. Any sort of customers you'd like to talk about in more detail and what drove the win?
Yeah. We had a great Q1. In terms of big new logos, we secured eight new big logos. ZRS is one of the top 10 multifamily property ownership groups, so we secured them. Many properties with ZRS, so super excited about that one. We, like I just mentioned, secured a major U.S. retailer with over 150 locations, and we intend to really partner with them technologically, to help expand across their business. Campbell's, that's a mobile surveillance solution. Again, stopping theft in sort of their lot areas. Inland Construction, very large multifamily construction company. Southern Land, some of you folks might know them. They're a private, full service real estate development company. P. G. County, we continue to make progress in P.G. County where they have significant mandates. We secured HallKeen, which is an affordable housing property that's very dominant in that area.
When I look at that billion-dollar number that I gave you last time, if I were to add all of our new locations that are coming on board and how large they are, I haven't done the numbers yet. Maybe next time we'll report back. Let's just say it's significantly higher than what I said a couple of months ago.
No, that's great to hear the opportunity's expanding. I'm glad you mentioned P.G. or Prince George's County, because the next question is on that. They're in Maryland, and they adopted a surveillance ordinance for multifamily properties, and it kind of makes you wonder about regulatory tailwinds, given that you won some appointments there. Just how significant is the regulatory angle as a demand driver? Are you seeing those dynamics in other jurisdictions?
Yeah. Did you say how significant is the what?
Sure. The regulatory-
Oh, regulatory. Yeah.
-tailwind.
I want to make sure I got the question.
I thought that was-
Yeah.
Yeah.
Yeah. We have seen P.G. County has a mandate, for example, on you must have security cameras if you're a certain size property. We're actually seeing those mandates across the country now. It's really interesting because three years ago, that was not the case. The case was actually some of our prospects were concerned that if they did have cameras, they would be held liable for not catching something. They had more of a reversed risk association with cameras, and now they're all in on, "Okay, I need the cameras. I need to stop something." Counties are actually putting mandates in place for that, and we're benefiting from that, specifically in P.G. County, but in others. We're seeing expedited squatter laws, so again, getting customers that want us to catch squatters and remove them in a nice way.
A new one that has recently come up is graffiti. There's a mandate in Cincinnati that says if you don't get rid of your graffiti, we can actually come in and take over your property. Graffiti is very expensive. It can be $8,000-$15,000 / graffiti experience. When we look at this, I think what people are seeing is the power of surveillance.
That it can be applied across many, many things, and people are grasping that now. I think you'll see more and more ordinances that say, "You need to be doing this." Companies like ours with the artificial intelligence and the proactive monitoring can really address the ordinances that are coming down the line.
Yeah, I think it's sort of the difference is now you can do something about it. Nobody wanted to have a camera in their pool because somebody would climb into it and die, and you could do nothing, whereas you guys can actually intervene. I think that probably makes it a lot more palatable for-
Pools is a very big one for us, actually. We get a lot of wins in that area, and the people leave. They're jumping over the fence at midnight, soaking in the pool, and then they leave once we tell them that we can see what they're doing, and they're not supposed to be there. Yeah, we can save lives and also just increase security in general.
Yeah, that makes a ton of sense. All right. Well, thanks for that, Lauren. I'm going to head back to James for a technology question. Being an AI company, it's always good to talk about technology and the roadmap. You guys have been really busy. You've had a mobile trailer. You've done new video compression. You got the powered security enclosure-
Mm-hmm.
Powered enclosures, autonomous drone integration. I think you're keeping your R&D people pretty busy. On the call you singled out the enclosures and mobile trailers as kind of seeing the most early traction, I think. Just, can you kind of give a sense of how meaningful those are becoming of the share of deployments? Is it still early days? Looking ahead, where is the tech team most focused? Are there product categories beyond, kind of what you launched that you're comfortable talking about, that you're maybe working on?
Sure. I think the key point is what we're comfortable talking about.
Yeah, that's fair.
Right? A few things. Depending on the vertical, depending on the customer, we are seeing accelerating demand for enclosure products and for trailers. Right? Lauren had mentioned it with a customer, Campbell's, that has certain security requirements that a trailer is just a natural fit for, I guess you would say. We're also in conversations right now with different large companies, think package delivery companies, to protect initially the outside of their distribution centers. We believe over time we'll have an opportunity to get inside as well. Right? Why is that important? Well, the outside makes sense, right? Just from a theft standpoint or potential theft, monitoring what's going on, right? Internally, it's frankly just keeping the employees honest, for lack of a better phrase, right?
If people know that there's a potential of them being observed and/or coordinating some sort of theft, in our experience, that issue tends to go away or greatly diminished. Now, in regards to future technologies, roadmaps, those sorts of things, this is where we want to be a little cautious, but let's just generically put it this way. I think the way that we look at working with large enterprise customers is it's a partnership, right? If they have particular requirements, us as a emerging company, we are wide open to working with them to address their needs and whatever comes out of that. Either a new hardware offering, modifications to what we're doing from a software standpoint, et cetera, that's what we will work to deliver to be successful with that customer and continue to grow our business.
I'm sure those customers appreciate that agility, the advantage of a small company.
Mm-hmm.
Let's turn to Greg for a couple financial questions. Let's talk about where you're investing for growth. You now have, I think, 28 states, multiple verticals, a range of hardware form factors. Just what are the highest priority investment areas for 2026, and how do you kind of think about balancing growth and investment against the path to cash flow breakeven?
Yeah. It's a great question that we wrestle with kind of continually, because every company wants to be at a cash flow breakeven. That is always in our thoughts. We're always driving towards that. Given the stage of company we are at, growth really does trump that, and growth will lead to cash flow positive situation. While we are very careful in where we put our investment dollars, we are more focused on growth than if there was a trade-off between, well, do we want to save a little money or do we want to grow? Grow always wins. What that growth is though, it's not random, it's very targeted. We are investing a lot in our sales team. We are investing a lot in technologies and applications that are customer-driven, that are solving real customer problems.
We still do have a component though that is keeping us at the leading edge of AI technology and AI development. Right. There are things that people don't know they need yet, and there are projects ongoing that will give us greater capability, ultimately will drive costs down, will improve customer service, and customer experience. It's a wide range. It's a lot to keep track of, but we feel we've got a pretty good handle on it, and are investing wisely in our growth this year.
Right. Here's a great segue in that answer about sort of getting costs down. You launched the Global Guard Center in Kolkata. Have I pronounced that right? To help you scale your remote guarding more efficiently. As you head into 2026, what are the most important drivers of cost reduction or expansion of margin? Where do you see gross margins trending over the next couple of years? It sounds like, on the Q4 call, you'd rather lean into installation growth, even if it kind of is a near term hit on the margin because that results in higher margin revenue down the road. How should we think about the trade-offs for the recurring revenue base as it gets larger?
Yeah. The push to drive margins up, and kind of I alluded to it a little bit before, can kind of get you in trouble because installation is our lowest margin product, right? We really don't make a lot there. It's the best indication for us that we're driving our recurring revenue, which is very profitable. Hardware is a nice business. We make a nice margin on it. Ultimately, it's all about driving recurring revenue and getting that larger and larger, because it becomes the relentless powerhouse that drives profitability. Do we track what we're doing on gross margins? 100%. Am I worried that gross margins might be a little bit lower because we have an explosion in installations? Absolutely not. I celebrate that, right? That is exactly what we want because that's going to drive everything else.
We do look at things, as you highlighted, right? What can we do in our existing services to make them more efficient and drive margins? We're looking at things like how many cameras can one guard watch? How can we improve our AI so we can drive that to a higher number? What other operational efficiencies can we obtain? We've done things like we released a software release last year that dramatically increased the number of cameras that a single CVR, or Cloud Video Recorder, could handle, which saves our customer money, but it also makes our system more efficient. There are a host of things that we are focused on driving operational margins, but from an overall corporate margin, it will be a little bit slower growth because we want to drive new installations. We want to drive new sales. We want to build that customer base.
Right. Thanks a lot for that, Greg. I think we have time for one more kind of closing question here with James. As you look at the momentum heading into 2026, what are the two or three things that give you the most confidence in continued strong revenue growth?
Only two to three things? Before I answer that, let me start with one of my new favorite set of statistics, right, that was reported in The Wall Street Journal. Right? Just to give you a sense of where we sit and how big the opportunity is for a company like Cloudastructure. The Wall Street Journal estimated that on a worldwide basis, there's about 1 billion security cameras deployed on a worldwide basis. Okay? Those 1 billion cameras capture, every day, 1.44 trillion minutes of video. That's staggering numbers. The question, which we don't have a crisp answer for, but what portion of those 1.44 trillion minutes on a daily basis are actively being proactively analyzed, right? The answer, we could all postulate, but my feeling is it's a small percentage, right?
That just shows and speaks to what we think is the larger overall opportunity for solutions like Cloudastructure provides. Okay? Now, two or three things we're excited about. I think we talked about it in the earlier parts of this conversation. We're seeing new logos, larger logos, large enterprise customers, quicker pace of land and expand strategy. You put that all together with our product offerings and our consultive approach to working with larger customers, and we're very excited about where things are heading, from a business standpoint in 2026 and beyond. We're very excited.
All right. Thanks for that. Yeah, it sounds like you've got a lot of things working for you guys this year. Thank you, James, Greg, and Lauren. We really appreciate you joining us for this session of the Water Tower Insights Conference. Thanks everyone else who participated in the webcast. Please look for additional content on Cloudastructure at www.watertowerresearch.com. For those with further questions or for investors wishing to meet with management after the event, again, please reflect that interest through the conference portal. Our next conference session will be starting shortly, and we invite you to stay with us. Thanks, guys.
Thank you.
Thank you.
Thank you.