Good afternoon, everyone. And thank you for joining Knightscope's second quarter of 2026 earnings call. I am Apoorv Dwivedi, Executive Vice President and Chief Financial Officer. I am joined by William Santana Li, Founder, Chairman, and Chief Executive Officer. By now, you should have had a chance to review our second quarter of 2026 earnings release, which was published at 1:05 p.m. Pacific Time just after the market's close. Before we begin, please note that today's discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our goals, growth, prospects, product roadmap, and outlook. Actual results may differ materially due to the risks and uncertainties described under Risk Factors in our most recent Annual Report on Form 10-K as updated by our other SEC filings. Forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law. With that, it is my pleasure to turn this call over to Bill.
Thank you, Apoorv, and good afternoon, everyone. Thank you for spending part of your day with us. I am going to start with the business and marketing highlights from the second quarter: what we won, what we built, and how we are setting up the second half of the year. Then I will hand the call back over to Apoorv who will take you through the financials in detail. So let's dive right in. The second quarter of 2026 was the best quarter in Knightscope's history. Revenue came in at $9 million, up more than 200% from $2.7 million in the same quarter last year, and a new quarterly record for the company. We now serve 434 clients across 42 states. That marks two consecutive record quarters following first quarter revenue that was up 106% year-over-year. Back in May, I stood in front of institutional investors in New York and made a simple commitment: each quarter, better than the last. We have delivered exactly what we said we would do.
In the second quarter, we built on the momentum from the first quarter of 2026 and we believe that we have laid the groundwork to keep it going forward. This compounding effect is the result of relentless commitment to execution across the entire organization. Apoorv will walk you through the drivers behind those numbers in just a few minutes. The integration of our recent acquisition, now known as our Security Force, is proceeding as planned and the collaboration between the teams is amazing to witness. Seeing firsthand the team collaborate on our new H1 wearable that will define the future Augmented Security Agent, or ASA, is truly invigorating. The teams are operating and beginning to work as one as we look to expand our offerings with our current client base. This was our second acquisition as a public company, and the discipline the team has shown closing it, filing it, and now integrating it without missing a beat tells you a lot about the caliber of the team.
More importantly, it strengthens exactly how we intend to differentiate Knightscope: the unique combination of hardware, software, and humans delivered as one managed service. This team has been working on efficiencies delivering tangible results, including cutting the assembly time for one of our product lines by almost 80%. We have grown the depth of our technical team significantly, as we are seeing interest in Knightscope grow significantly. We restructured our field service network in Northern California and the Northeast region by building relationships with local service providers and by insourcing field services in Southern California to provide better service while lowering our service delivery costs. We also strengthened the leadership in the company, recruiting multiple senior executives with a track record of scaling companies and achieving growth with discipline. That is the operating model.
The K7, our all-new autonomous security robot, passed its alpha prototype gate review, and we remain on track for initial deployments in the fourth quarter of 2026 as we move into the beta-prototype phase. In April, we announced our partnership with Carnegie Mellon University, the top robotics institution in the country, whose graduate robotics program is now working directly on autonomous patrol technology under the guidance of our engineering team. We are taking a disciplined approach to the K7's market introduction focused on success in the field. Client interest in the K7 deployment continues to grow. Simultaneously, significant work is well underway on an all-new Signals platform, designed to orchestrate our autonomous robots, stationary devices, sensors, Augmented Security Agents, and our Mission Intelligence remote monitoring. An industry first that combines pioneering proprietary 3D digital twin technology with AI agents to eliminate blind spots and provide an auditable trail for proof of work.
Hardware, software, and humans working as one team, one force. Now let me spend a few minutes on the brand: because security is not sold; it is adopted through trust. Building trust at a national scale requires showing up everywhere — with clients, with the media, with communities, with recruits, and with Wall Street. This quarter, we sharpened our positioning: Knightscope is a managed service provider, the only company uniquely combining hardware, software, and humans into one integrated offering. We are building the nation's first autonomous security force. That message resonated strongly with institutional investors during our non-deal roadshows in New York, and its momentum is building. The team has been hard at work preparing for GSX 2026, the security industry's largest gathering, September 14 through 16 in Atlanta, Georgia, where we will officially launch the Autonomous Security Force on the biggest stage in our industry.
If you are attending, come and see us. One more signal of momentum: in June, we hosted a career night at our headquarters here in Silicon Valley, and there was literally a line around the building to get in. The best people in the country want to work on this mission, and we are hiring the best of the best. With that, I will turn it over to Apoorv to take you through the numbers.
Thanks, Bill. Revenue for the second quarter was $9 million, an increase of 228% compared with $2.7 million in the second quarter of 2025, and a new quarterly record. Growth was driven by the full-quarter contribution from the Security Force acquisition, in addition to our core ASR subscriptions and ACD deployments. Gross margin was $700 thousand, or approximately 7% of revenue, compared with a gross loss of $900 thousand in the prior-year period. This marks our second consecutive quarter of positive gross margin, driven by the full-quarter impact of the immediately accretive Security Force acquisition and margin expansion across both technology product lines, demonstrating that our integrated technology-plus-services model is structurally more profitable than either business alone. Operating expenses were $13.8 million compared with $5.4 million in the second quarter of 2025, primarily driven by investments in R&D to support the development of our next-generation technology, as well as increased headcount across all departments and the integration of the Security Force.
Despite the $3.9 million increase in R&D expenses from last year, the acquisition improved our operating leverage by adding higher-margin revenue leveraging our existing operating infrastructure. We expect these benefits to continue and strengthen as we achieve our new product development milestones. Net loss for the quarter was $14.1 million, or $0.79 per share, compared with a net loss of $6.3 million, or $0.90 per share in the prior-year period. This is primarily due to the higher OpEx highlighted earlier as well as approximately $1 million in other expenses related to the fair value and the change in fair value of the contingent consideration or earn-out due to the seller of the recent acquisition. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $8.2 million. This is flat to the prior year, with an improving cash conversion cycle due to the effects of the acquisition.
In summary: record revenue, immediately accretive margins from the acquisition, expanding margins from maturing machines and network and service efficiencies, and continued discipline in expense management. The financial profile of the company is strengthening in step with the operational execution Bill described earlier. And now, we will open it up to Q&A. So, Bill, what I will do is I will read the questions to you.
You will give me all the easy questions.
I will give you all the easy questions. All the hard questions go to you.
The really bad ones.
We will send an email. So the first question, from the Autonomous Security Force strategy: bundles machines, software, and licensed human agents. What are the unit economics? Is the blended Autonomous Security Force contract more profitable per client than a standalone robot lease?
Okay. I think we start off where humans cannot do everything, and technology cannot do everything, but that combination is extremely, extremely powerful. What we need to think about is how we solve the problem for the client, not trying to optimize margins for individual discrete items. If you pull just these contracts in, the margins for traditional unarmed guarding are not very attractive. They are positive, but they are not software-like margins. If you are able to scale software, you can see 60%, 70%, 80% gross margins. On the low end, human guarding is maybe 10% to 20%. If you are able to scale, and we have done this analysis with our longest-standing clients, you are somewhere in the 50% to 65% gross margin range over a five-year period. The key is to focus on the client's outcome. Do not drive the team crazy selling widgets: do not just sell a robot, or a sensor, or hire an agent.
We need to focus on positive outcomes for our clients, significantly improved quality, and over time reduce those costs. The last bit I would say is the data wheel: deter, detect, respond, learn. You want to deter negative activity before it occurs; that could be a human presence or technology. You want to detect — mostly that is technology, where you get superhuman capabilities a human would not be able to process. Then you need to actually respond. If you get all these alerts and you do not respond, or if 90% of the alerts are false, that is problematic. But if you are able to learn over time, improve the algorithms, the technology, and our standard operating procedures, you become much more effective for the client. If you do that really well, that client will tell the next client.
So the JEDI mind trick is to be able to land with what a chief security officer would accept today, which is licensed armed and unarmed agents, and then over time become that trusted adviser. We have operated at your facility for quite some time now. I would not dramatically change your staffing right away, but you might want to consider changes based on the data that we have.
You might want to shuffle some things around and add some technology, maybe pay the team more appropriately. Over time, I want to see us, as we scale, in the 50% to 60% gross margin net when all is said and done. Again, we need to focus on solving the client's problem. The goal is to deter negative activity, detect with technology, respond effectively, and learn. Improve the algorithms, improve the technology, improve our standard operating procedures. Over time you become much more effective for the client, and if you do that really well, that client will tell the next client.
I think part of that also is going back to the outcome. Unit economics work when we are selling to a traditional audience because expectations are traditional: 'I'm going to buy a camera, I'm going to buy a guarding service, I'm going to buy access control,' and each has its own unique economics. The cameras do not talk to the guard. The guard does not talk to the remote monitoring team. The remote monitoring team does not talk to the investigation team. Why is the chief security officer managing eight, ten, twelve different vendors? They are all competent at invoicing, but can you actually account for everything that happened with an auditable proof of work and a track record of everything that happened at that location? A solutions-based sales approach takes away the unit economics argument and focuses on outcomes.
Next question: what is the appetite for additional M&A? What criteria would you be looking for in a potential transaction? Is incremental revenue the priority or something else? This recent acquisition was the 25th in my professional career. Doing deals, the deal part is relatively straightforward; day one and integration after is what makes or breaks a deal, so you must be careful what you pick. I think it probably sits in three buckets. First, there are many guarding firms in the U.S. — plus or minus maybe 8,000 — and many are owned by boomers that are retiring. The market is illiquid, which is an interesting dynamic for doing a roll-up. If we were a private equity shop, you would look at the recent acquisition as a platform company with a growing management team and real results to build on. So there are opportunities to organically grow the Security Force and pursue bolt-on acquisitions.
Second, we have been actively looking at remote monitoring companies; these could be immediately accretive because they likely do not have a security force component or a technology/robotics component, but they have a client base and cash flow that could be highly synergistic. We have been shopping in that area. Third, we live in Silicon Valley where there are thousands of startups; some have brilliant technologies, analytics, sensors, or teams backed by venture dollars, but many fail. There are opportunities to acquire pieces of technology, algorithms, sensors, or teams. So the three buckets are continued inorganic growth on the Security Force side, remote monitoring opportunities that are highly synergistic, and technology acquisitions to plug into our stack.
I would summarize our strategy as hardware plus software plus humans. We're very good at hardware. The human piece is where we're building, and software is an opportunity because so many brilliant technologies and analytics exist; if we can find the right product to plug in, it makes sense to acquire it. Our website now says on the home page: 'For you, the chief security officers of the United States of America.' Any decision we make will be in the client's interest as we build the most powerful Autonomous Security Force to fix client problems and, frankly, some of the nation's security issues.
Next question: let's talk about clients. Can you give your perspective on client retention and renewals among the legacy Security Force client base? One reason we made the acquisition was retention: they very rarely lost a client. They may have fired a client, which is different, but retention has been really strong. We now have 434 clients across 42 states. If you look at our investor deck on our IR site, there's a slide that reflects that if you take the top five of the 434 clients, their security spend is on the order of about $850 million. So the easiest sale you'll ever get is to an existing client. My focus has been on strategies to leverage the 434 clients to see where we can add value. Along the way, we've met many folks struggling with their existing setup. Primary focus will be on existing clients with additional new clients as we go. This is a unique opportunity and a unique company: a managed service provider for physical security that has not existed before.
Number four: can you expand on the meaningful synergies from the Security Force acquisition?
This is an easy one. There is a significant component on revenue growth — we have had triple-digit growth two quarters in a row, which is uncommon. Over time, Wall Street will learn you cannot ignore a company growing triple digits in a market with a large TAM and working on robotics and AI with humans in the loop. The best thing we can do is continue to improve financial performance, grow, and communicate. The synergies: first, revenue cross-selling. There are 434 clients with a large portfolio of nationwide blue-chip clients that had only the Security Force footprint and no technology. We can expand in those accounts thoughtfully: ask what issues they have at particular addresses, incidents they've had, budgets, where they are struggling, and how we can help. Be that trusted adviser and expand with technology. Second, cross-selling the other way: many clients have only technology and a staffing model with big-box staffing companies; for those unhappy with quality, we can offer executive protection, armed and unarmed agents, and augmented security agents supported by our H1 wearable — nothing in the industry will match that.
Third, cultural synergies: people integration is one of the most difficult parts of M&A. Getting everyone aligned is hard. The Security Force team is highly disciplined — command and control — while the original Knightscope technology side is more of a fast-moving, collaborative engineering culture. For success, you need the best of both: add discipline and command and control around certain processes, but do not stifle innovation. We are already seeing benefits: agents are here today testing prototypes for the H1 wearable. Where one plus one equals more than two, we can create real value.
On the top line, our go-to-market is outcome-based, which we believe positions us well. Below gross margin, on the OpEx side, we have started integrating finance, HR, and other shared services. Those shared services within the corporation allow us to achieve cultural and operational synergies. Financially, being public costs money, so adding more revenue and capabilities lets us sweat our assets. For example, if you needed four people to remotely monitor one client, adding 30 clients does not require 30 times four people; you scale more efficiently. There's leverage as we add clients and scale operations. We committed during the non-deal roadshows that each quarter will be better than the last, and we are working hard to prove that across the next two quarters.
Question on pipeline: any thoughts? We do not share pipeline data, but it looks like investors are asking for an indication. The best thing to say is we have 434 clients. If you do some rough math, the total addressable security spend associated with those clients is likely in the billions — if the top five spend about $850 million, you can easily imagine the broader number is in the billions. Our focus then needs to be on technology. We are at an all-time high for R&D expenditures for good reasons: we have a new K7, which takes time and money; we have the H1 wearable that will go on our agents only; and we have the Signals platform — software to orchestrate everything: robots, stationary devices, sensors, agents, and Mission Intelligence remote monitoring. This is an industry-first; we'll be able to remotely monitor a location in three dimensions. We plan to showcase this at GSX and put it into the field, not as a science fair project. All that R&D should produce a handsome return over the coming years.
I think the last question is someone asked: 'I would love to hear Bill's thoughts on when he believes the public will catch on and the stock price will rise.'
Despite all the emails, texts, and voicemails, I do not control the stock price; you do. All the team can do is improve our financial performance: grow the company and communicate. The rest is up to the market. If we focus on fixing the problem, you will get rewarded. So the best thing the team can do is continue execution: top-line revenue growth up, cost of goods down, careful management of our fixed cost base, scale things up, and get the technology to do magical things no one in the industry can do, then put the numbers up in every quarterly filing. The way the stock should respond is based on the numbers. Look at the changes from the first quarter to the second quarter and start thinking what the third and fourth quarter and next year will look like. We are building something extremely special. All the pieces are coming together. I have literally never been this excited about Knightscope's future in all 13 years at the company. We have an unbelievable team, unbelievable technology, and existing clients. We just need to focus on execution. How do you de-risk execution? You hire brilliant people. With that, I think this concludes our Q&A. I will hand it back to you if you have any comments. Thank you, Apoorv, for doing this.
Let me leave you with this. In the second half of the year, we expect to deliver on these four things: first, initial K7 deployments in the fourth quarter; second, the official launch of the Autonomous Security Force at GSX in September; third, the initial launch of Signals, our software orchestration platform; and fourth, continued performance as you have seen over the last two quarters. Thank you to our clients for their trust, to our shareholders for their support, and most of all, to the absolutely relentless Knightscope team. One team, one mission, one force.