Welcome, everyone, to Knightscope headquarters here in Silicon Valley. Excited to walk you through our first quarter financials for 2026. But before we do that, we're going to get into the overall corporate strategy as we move to becoming a managed service provider. But before we do that, Apoorv?
Thanks, Bill. This presentation contains forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Knightscope's strategy, the Event Risk acquisition and integration, expected revenue, gross margin, operating expenses, addressable market and the company's ability to fund operations and continue as a going concern. Actual results may differ materially due to risks, including operating losses and substantial doubt about the company's ability to continue as a going concern, the need for additional capital, integration of Event Risk, customer concentration, supply chain and labor conditions, competition and NASDAQ listing requirements. Please see risk factors in the company's SEC filings at the sec.gov website. Pro forma information is illustrative only. Forward-looking statements may speak only as of today. The company undertakes no obligation to update them, except as required by law. Please refer to the Q1 2026 Form 10-Q for the complete disclosure. With that, Bill?
All right. Let's get into it. We're really excited to talk about building the nation's first Autonomous Security Force. That is a unique combination of hardware, software and humans in an orchestrated format. So let's talk a little bit about the escalation levels and the model behind that managed service provider. Most folks may not know this, but 92 to 93 percent of alerts and the like are false in the security industry. Teams are inundated with a massive amount of noise. What we want to do is organize that into a thoughtful seven-layer approach with three core pieces: autonomous, remote command and physical response. On the autonomous layer, we aim to have AI agents, autonomous robots and autonomous machines resolve ongoing items that humans shouldn't have to handle. When a decision needs to be made, it can be escalated to the remote monitoring team. The remote monitoring team can review, approve or deny necessary changes and, if needed, escalate to human agents, whether armed, unarmed or law enforcement.
We want to provide a single managed service provider that combines hardware, software and humans in an orchestrated format, creating a new opportunity to deliver better outcomes and lower costs for clients seeking an integrated solution to many fragmented problems today. Visually, that looks like hardware, software and humans: stationary devices, autonomous machines and robots that patrol without remote control, and augmented security agents who complement the entire solution. One of the exciting aspects of the Event Risk acquisition is the chance to design the next-generation security agent. We have a small team working on technology to take capabilities from our robots and put them on a person, exclusively for our security agents, to help them do their jobs far more effectively and to feed that data into a unique software product we're developing to combine everything into one field of view.
Similarly, the team is making strong progress on the K7 autonomous security robot, designed to patrol much larger environments at higher speeds and secure perimeters. All of that data is combined into one field of view. If you've ever used a doorbell camera app, you know you can't see left, right or behind you. Remote monitoring analysts have never been to the location and are expected to secure a facility from a single field of view. The platform we're developing will provide an eye-in-the-sky, three-dimensional view of the entire facility. We're combining video-gaming technology, digital twins and the significant data coming from stationary devices, robots and augmented agents to keep that digital twin as up to date as possible so an analyst can effectively know everything and be everywhere. We couldn't be more excited about this orchestration software, which we intend to deploy for internal use during the fourth quarter of this year.
Moving on to 2026 highlights, it's a very exciting time. We posted strong numbers in the filing last week: revenue up 106 percent to $6 million for the quarter, and we're just getting started. The acquisition now gives us all four pillars of the Autonomous Security Force: autonomous machines, remote monitoring, orchestration software and armed and unarmed licensed agents. Integration is underway so we can present one unified force. The image you see was from our first annual Autonomous Security Force Day celebration, which we hope to make a yearly tradition on our corporate birthday. The team is strong and growing—we're well over 400 employees. The toast in that image was one team, one force. We're very excited for what we hope will be a blockbuster 2026. Building the nation's first Autonomous Security Force is intended to address a $230 billion total addressable market. The strategic logic is to augment capabilities—technology can't do everything and humans can't do everything, but together they are extremely powerful.
This approach allows us to pursue RFPs that technology-only companies cannot, and it creates a land-and-expand opportunity to become trusted technical advisers to our clients, implementing additional technologies to improve outcomes and reduce costs. Early validation is visible: revenues up, positive gross margins, and strong strategic traction. The industry is excited, the team is excited, the board is excited, and our incoming recruits are excited. We're off to a very solid 2026. So with that, I'm going to turn it over to our trustee CFO. Apoorv, you want to take it away?
Thanks, Bill. Good afternoon, everyone, and thank you for joining us. I'll walk through the financial detail behind the highlights Bill just mentioned. We'll cover the Event Risk acquisition, the economics and the operational performance of the business as a whole. Please note that the figures on our financials are unaudited and presented in millions unless otherwise noted. For complete financial detail, please refer to the Q1 2026 Form 10-Q filed last Friday. Now see again, you guys are moving. I don't know why it's like moving.
Well, can you put this here so you can see.
No, but it says Slide 13. I think he moved too early. When are you supposed to have the acquisition stuff up? When is it supposed to be up?
Absolutely. Thanks, Bill. Can you hear me okay?
Yes.
Good afternoon, everyone, and thank you for joining us. I'll walk through the financial details behind the highlights Bill just shared. We'll cover the Event Risk acquisition economics and the operational performance of the business as a whole. Now as we announced the Event Risk acquisition, it closed on February 27, 2026. To remind our investors, we wanted to provide the purchase consideration. So the total purchase consideration in fair market net present value is approximately $18 million, comprising $5 million in cash at closing, the repayment of $1.1 million of seller debt, approximately $7.2 million in Class A common stock, representing 1.7 million shares issued. The balance is future deferred cash and contingent consideration. A working capital and noncompete adjustment of $1.4 million is reflected as an offset to the deferred purchase price. Now on the top right-hand side, we've provided the accounting allocation of the purchase price.
Important to note that this is preliminary and subject to measurement period adjustments. Client relationships of $15.5 million represents the largest component and amortizes over their estimated useful lives. From a financial performance perspective, at the bottom right of the screen, in its first 32 days of contribution, the Knightscope Security Force delivered $2.4 million in revenue, $400,000 in gross margin at a 17.5% margin and $100,000 of net income accretive from day 1. In addition, the acquisition resulted in about $1 million of one-time transaction costs to SG&A in the quarter. We do expect to continue to incur additional expenses related to the integration in the near term. Also happy to note that on a pro forma combined basis, the Q1 revenue would have been approximately $10 million versus the $7.2 million in Q1 2025, a 39% year-over-year increase. Turning to cash position. Cash and cash equivalents stood at about $11.4 million as of March 31 compared with $20.6 million at year-end 2025.
This decline reflects approximately $6.1 million of cash outlay to fund the Event Risk transaction, closing payment and debt repayment and the $1 million in direct transaction costs as well as continued investment in the security force operations. Our at-the-market facility remains active and continues to support our liquidity and operational flexibility. Now, turning to the Knightscope combined company performance. Q1 2026 consolidated revenue was $6.0 million, up 106% year-over-year from $2.9 million in Q1 of 2025. This is a record quarter and the strongest in company history. Service revenue was $4.2 million, up 98% year-over-year, driven primarily by $2.4 million of contribution from the acquisition. Product revenue was $1.8 million, up 128%, driven by fulfillment of ECD orders that had been constrained, if you recall, by supply chain conditions in the second half of 2025. Excluding the acquisition, the core technology revenue grew 26% year-over-year from $2.9 million to $3.7 million.
Gross margin turned positive in Q1 2026. This is the first positive consolidated gross margin in recent history. Consolidated gross profit was $465,000 or 7.7% of revenue. This compares with a gross loss of $668,000 or negative 22.9% in Q1 2025, a $1.1 million year-over-year improvement in gross profit. The acquired Security Force segment contributed $400,000 of gross margin at a 17.5% segment margin on its $2.4 million of Q1 revenue. Core technology margin inflected to a positive 1.5% from a negative 23% a year ago, driven primarily by volume and mix. A note of caution, service costs do include $1.8 million of new contracted labor associated with the acquired business. This point forward, this is expected to continue to be a recurring cost line. While the inflection is encouraging, we are not yet at a sustainable run rate and gross margin remains subject to supply chain variability. Total operating expenses in the quarter were $10.8 million.
R&D expense was $4.7 million, up $2.6 million or 120% year-over-year. This investment is primarily directed at new product development, including the K7 and the next-gen K1 portfolio. SG&A was $6.1 million, up $2.1 million or 51% year-over-year. Approximately $1 million of that increase represents one-time transaction costs related to the acquisition, legal, accounting and the valuation services. Other drivers include approximately $400,000 of additional investor relations, advertising spend, $400,000 of professional services, $300,000 of acquired company G&A, and $200,000 related to the new Sunnyvale headquarters. Normalizing for $1 million of nonrecurring acquisition costs, operating expenses were $9.8 million in the quarter, 59% above prior year run rate, reflecting our investment in future growth. Now on to net loss. The net loss for the quarter was $10.3 million compared with $6.9 million in Q1 2025.
The widening primarily reflects the higher operating expenses I just described, partially offset by the gross margin improvements and lower interest expense. On a per share basis, the loss improved to $0.74 from $1.28 in Q1 2025, reflecting a 42% improvement per share despite a 156% year-over-year increase in weighted average share count. Excluding the $1 million one-time acquisition transaction costs, the quarter's normalized net loss would have been approximately $9.3 million. Following the acquisition, we adopted two reportable segments in Q1 2026. The table on this slide summarizes our Q1 revenue, gross margin and gross margin percentage by segment. These include core technology development and operations, which yielded about $3.67 million in revenue and $54,000 in gross margin and the acquired Security Force segment, which added $2.4 million in revenue and approximately $400,000 in margin.
Now it is important to note that the two segments reported in Q1 are a GAAP requirement triggered by the acquisition. They do not reflect how Knightscope is managed and plans to be managed in the future. As Bill described, once fully integrated, we plan to operate the company as a single integrated Autonomous Security Force that provides managed services. We expect our reporting structure to evolve toward a product and services framework that better reflects how the business is run. For a complete segment disclosure, please refer to Note 9 of the Q1 2026 10-Q filing. Bill, that concludes the financial review. Back to you for forward look.
Sure. Looking ahead, the team has been working around the clock on the K7. We’ve accomplished a lot but still have much to do. We plan to deploy a limited release of the K7 to select clients we’ve identified later this summer to get real-world deployment experience and feed that back into the product development cycle. So we’re making good progress there. The integration is the challenging part; completing the deal is the easy part, as I often say. This is probably the 25th company I’ve acquired, and the hard work is the integration on day one and beyond. Fortunately, we have very like-minded teammates who are getting to know each other. We’ve been focused on a few key areas, and so far, so good. If you ask Eric or me, we might be a little ahead of where we expected to be, but there’s still a lot to do for the rest of the year. We’ll be at GSX in force. GSX, one of the top two security conferences in the U.S., will be in mid-September in Atlanta.
We’re going to unveil the Autonomous Security Force as one team and one force with a single contract as a single managed service provider, which is truly new for the industry. Toward the fourth quarter, we’re planning an Investor Day at Knightscope headquarters so you can come see, touch, and speak with the team and experience the technology up close. We’ll invite all of you as well as our bankers and analysts, and we look forward to that. We had a good amount of questions come in. For purposes of being a little bit more efficient, we condensed them down to a few key items. And I think the first one was top was around gross margin. How do you see that improving over time? Or what kind of pieces go into the puzzle here?
Absolutely, Bill. I think obviously the goal is gross margin improvement. And I believe and we believe that gross margin improvement will primarily come from a combination of operational scale, improved manufacturing absorption, supply chain normalization and continued integration of our managed services platform. On the technology side, we expect better utilization of fixed manufacturing and support infrastructure as volume increases, while addition of the security force capabilities allows us to pursue larger, more comprehensive customer engagements, especially as we think about a land and expand strategy that combines technology, monitoring and human response over time. We believe that the ability to cross-sell higher-margin software and technology in addition to monitoring and the autonomous solutions into the broader managed services relationships can help improve overall customer economics and margin profile.
I think the combination of humans and technology literally with AI, it's going to rewrite the economics for the industry and for us. There's all the stuff that you just spoke of, but there's also the not glamorous part of how do you get a security operation to run that much more efficiently and us building an all-new effectively operating system for humans to be profoundly more effective and in combination with a good amount of AI agents and hardware and autonomous hardware, I think, is going to make up for some margin expansion over time. But we need to build all that stuff out and then obviously integrate it and deploy it. But we're heading in a very exciting direction. So that covers the first one. I think you had one on your side.
That's right, Bill. I think kind of expanding on what you just mentioned about the integration of the humans and technology, a lot of analysts asked about the Knightscope security force integration. Where do we stand? How do you see it kind of coming to fruition in the short term as well as the long term?
I think there's likely kind of three steps. I think we wanted to do them in sequence over a much longer period of time, but they've gotten a life of their own. So there's the obvious financial accounting, audit-related items that are key for us to do our regulatory reporting and managing of the company. That has certainly been more than underway. We have a component of information technology and human resources and how do you combine systems, how do you think about recruiting profiles, employee handbooks. There's a lot that needs to be done. And then the last piece, which isn't actually last, is the go-to-market. We've been experimenting on how do you propose something to a prospective client. How do you spend time with an existing client on the security force side that could benefit greatly from the technology and vice versa, with someone that's already a technology client of ours, how do we add the human element to, again, improve overall outcomes and hopefully, over time, reduce costs.
We have like-minded folks, a lot of work ahead of us, but things are going a little bit ahead of schedule, I would say. We wanted to take the entire balance of the year. And there are some bits and pieces. There's always going to be issues, but we're working through it. So feeling good. I think to put it in Wall Street parlance, if we were a private equity shop, what we bought was a platform company, a really strong management team that's grown the business from scratch, knows the economics, knows the recruiting process, knows how to think about culture and recruiting the right team. I mean, if you think about it, most of the staffing companies, I call them staffing companies, and supposedly security companies have 100% to 400% employee turnover rates. You got to ask the question like why is our security force at 6%? Maybe we recruit it properly, maybe we train them properly, health benefits, stock options and what we intend to overlay is a significant amount of technology, we are going to end up with a superior and elite team to deliver all of this. So we're in good spirits, a lot of work ahead, but so far, so good.
That's the idea, Bill. Go ahead.
Yes. And I think the other question was around capital formation and cash burn and kind of long-term view, how should we be thinking about the business?
Absolutely. We expect to continue investing through the remainder of the year in areas that we believe are critical to long-term scale and competitive positioning, right? This includes product development, AI and software capabilities, operational infrastructure and integration initiatives associated with the broader Autonomous Security Force platform. In the near term, some larger customer deployments may also include a meaningful human services component as we establish and expand those relationships. However, I think that over time, we should expect operating leverage, improved utilization of our technology platform and increased attachment of higher-margin recurring services to help normalize and reduce that cash burn.
I think, put a different way, if we're shooting for $1 billion of annual recurring revenue, we're going to have to make some key long-term investments to get there and operate with a few hundred employees, not a few thousand. We're making the right long-term bets on both the external technology out in the field and our in-house technology to run the company. Our Chief Intelligence Officer is pushing the organization to become a fully agentic organization in the next few years, and that is literally rewriting not only the economics for the industry but also our internal economics and standard operating procedures. Think about how one would go about building an operating system for an all-new security provider. I have a blog I'm working on called "Throes of the Choke." Can you get one vendor to focus on hardware, software, remote monitoring, and licensed armed and unarmed agents in one package so you can actually deliver what a Chief Security Officer is looking for?
That is the groundbreaking corporate strategy change we're really excited about. As one hedge fund said to me on a call, you're basically almost like a Trojan horse: you come in with the normal type of security operation most security teams are accustomed to seeing and then try to be a trusted technical adviser to audit those operations side by side, client by client, and prescribe the right technical solution—whether hardware, software, sensors, or other capabilities—so we can actually deliver what the client is looking for. That will be the best marketing and client experience dollars we ever spend: actually fixing the clients' problems.
That's absolutely right, Bill. I think we've talked about how the fragmented solution model makes it extremely difficult for clients to get the outcomes they seek. They want to secure their perimeter and promote safety, but they have to cobble together different solutions from different vendors to make that happen. I think this approach allows us to do so in a unified way.
Exactly. I mean, if you're a Chief Security Officer, you likely spent significant time in law enforcement, maybe the FBI or the military, and you're really focused on physical security. Then one vendor shows up and asks, would you like this radar? Another vendor asks, do you want this LiDAR? Do you use this? You should use this robot. You should use this AI agent. Do you think this sonar is appropriate? They are trying to sell their widget to someone who may not be fluent in the latest physical security technologies or how to make them work together. A single-point solution might work for one small thing, but what they really need is support and help. If CFOs keep cutting security budgets and don't give teams the tools to reduce incidents, the incidents will keep climbing, and there's a huge problem here that we hope to help solve. I think the strategy is sound. The team is excited. We just need to focus on execution.
Bill, a question came in based on this strategy and this path to revenue and margin growth. As you think about the broader strategic outlook, can you talk a bit about both commercial opportunities and how that's changed with this acquisition as well as in the new Autonomous Security Force dynamic, government opportunities and then M&A?
I'll take those in a slightly different order, starting with M&A. I've done a roll-up in the past, which basically means buying the same type of company repeatedly and combining them into one larger business. You look at a very fragmented industry—there are maybe 6,000 guarding companies in the U.S. that have more than 100 employees. Most are owned by boomers who are retiring soon, and often the next generation doesn't want to take over, or they're too small for the big staffing firms to buy. That creates an interesting dynamic. We want to buy quality over quantity, so targets will have to pass a thorough sniff test, more than what we've done with other deals. Our first acquisition is intended to be the platform that sets that standard so we can pursue additional, repetitive acquisitions. We’re also looking at acquisitions on the remote monitoring side, where a bolt-on or carve-out might be a better path than growing organically.
We want to continue inorganic growth but be careful and methodical about it. On the government side, there are a couple of things. We cut a deal with Palantir last year. Our corporate strategy is to make cybersecurity not a cost center but an opportunity to market our capabilities. The goal is to get private sector, local, and state government customers to have federal-grade cybersecurity so there's one standard across the nation. That is exactly what we are actively investing in, and it’s why R&D spending has increased and will continue to increase: we are rearchitecting our technology portfolio—hardware, software, and operations—into something that is federal grade for the entire country. That would make cybersecurity a long-term sustainable competitive advantage. The other, harder initiative is the national robotics strategy. There’s enough interest in the administration and in Congress that I’m hopeful something will happen this year, though I don’t control the process.
My controversial proposal, which some people like and some find annoying, is that the federal government could use its authority to address the problem. No one in Congress or the administration wants to lose the robotics race like we effectively lost the drone war. One practical step would be for the federal government to require each department and agency to dedicate 1% of its operating budget to robotics and automation to improve efficiency and stop wasting taxpayer dollars. We’re not asking for more spending; we’re asking agencies to use commercially available technology to improve their operations. That kind of demand signal could, in one move, help fix supply chain issues and other problems that numerous committees are separately trying to address. I’ve already written a paragraph for staff describing how this would work. It’s a big ask, but there’s enough interest that something may come of it, and the conversations are ongoing.
Meanwhile, anticipating positive movement, we partnered with Carnegie Mellon University, one of the top robotics schools in the world, to build a national security robotics lab at Knightscope. We signed a five-year deal with CMU, and we already have five graduate students working on some innovative work for the upcoming K7. We’re in this for the long haul, making long-term bets, and we’re in a very good position. I’ve never been this excited about the company’s future. More to come, as Apoorv often says.
Thanks, Bill. That's all the questions that we have today.
All right. Sorry, everyone, again for the small technical mishap. We will be sure to get you a properly recorded version of this. So you have it for your files. And thanks for tuning in and looking forward to seeing you next quarter because there is more good stuff coming. Thanks, everybody.
Thanks, Bill. Thanks, everyone.