Cloudestructure achieves 267% revenue growth in Q2 2025, secures $2.69 million in new contracts, and expands customer base amid rising demand for proactive security solutions.

OPERATOR - (00:01:33)

Greetings and welcome to the Cloudastructure Incorporated second Quarter Business Update Conference Call. At this time all participants are in a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. And please note this conference is being recorded. I will now turn the conference over to your host, Mr. Ted Avaz from Crescendo Communications. Sir, the floor is yours.

Ted Avaz - Moderator - (00:02:08)

Thanks Ali Good morning and thank you for joining Cloudastructure Inc. Q2 2025 earnings conference call and Business Update. On the call with us today are James McCormick, chief executive officer of Cloudestructure and Greg Smitherman, Chief Financial Officer. Earlier today, the Company issued a press release announcing its operating results for the three months ended June 30, 2025. The release is available on our website at www.cloudastructure.com and our Form 10Q can be found both there and at the SEC website www.sec.gov. if you have any questions after today's call, please contact Crescendo Communications at 212671. Before Mr. McCormick reviews the company's operating results for the quarter ended June 30, 2025 and provides a business update, I would like to remind everyone that this conference call may contain forward looking Statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans and our expectations for future operations are forward looking statements. The words aim, anticipate, believe, could, expect, may, plan, project, strategy, will and the negative of such terms, in other words and terms of similar expressions are intended to identify forward looking statements. These forward looking statements are based largely on the Company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, short term and long term business operations and objectives, and financial needs. These forward looking statements are subject to several risks, uncertainties and assumptions as described in the Company's filings with the SEC, including the company's annual report on Form 10K for the year ended December 31, 2024. Because of these risks, uncertainties and assumptions, the forward looking events and circumstances discussed in the conference call may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward looking statements. You should not rely upon forward looking statements as predictions of future events. Although the Company believes that the expectations reflected in the forward looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements in addition, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward looking statements. The Company disclaims any duty to update any of these forward looking statements except as required by law. All forward looking statements attributable to the Company are expressly qualified in their entirety. By these cautionary statements as well as others made on this conference call, you should evaluate all forward looking statements made by the Company in the context of these risks and uncertainties. I would now like to turn the call over to Mr. James McCormick, Chief Executive Officer of Kaleidostructure. James.

James McCormick - Chief Executive Officer - (00:04:58)

Thanks Ted. Well, good afternoon everyone and thank you for joining us today for what is our first earnings call since Cloudastructure shares began trading on NASDAQ in January of this year. This is an important milestone for our team, our customers and our shareholders and we appreciate your interest as we update you on our progress. For those of you who are newer to our story, cloudestructure is a leading provider of AI powered video surveillance and remote guarding solutions. We combine computer vision, AI analytics and human intervention to detect threats in real time, engage directly with suspects through live audio, and in most cases stop incidents before they escalate. It has been our experience that this proactive approach stops 98% of threatening activity, transforming security from a cost center to into a real competitive advantage for our customers. We operate in a massive and fast growing space. Cloudastructure sits right where the worldwide security, public cloud and the AI markets overlap and all three are expanding at double digit rates. According to Gartner, the global AI market is already worth over $430 billion. The public cloud market is on its way to $920 billion and the security market has exceeded $200 billion a year. With that kind of scale and momentum, we have a tremendous Runway for growth opportunities ahead. Q2 was a standout quarter where the investments we've made in the foundation we've built truly paid off, which reinforces our strategy. We have been firing on all cylinders. Growth execution, customer wins and product innovation. All aligned revenue surged 267% year over year. We realized our second straight quarter of positive gross margins and in just the first half of 2025 we signed 2.69 million in new customer contracts for products and services which will be delivered over the next 12 months. This marks a 274% increase over the same period last year and this six month value represents a 79% gain over the full year 2024 totals. The momentum we're seeing is being fueled by a major shift in the industry. Property owners and operators are realizing that traditional surveillance systems that simply record video aren't enough. They need solutions that actively prevent problems, reduce liability and protect people in real time. And that's exactly what the Cloudastructure platform delivers. During the quarter, we made progress across every major vertical that we serve in affordable housing. We partnered with a respected nonprofit housing authority in Colorado to deploy our AI powered remote guarding solution at four communities dealing with loitering, illegal dumping and curfew violations in shared spaces. Our system, which has deterred 98% of threatening activity year to date, brought them real time threat detection, live intervention capabilities and a safer environment for residents. For two of the sites, we offered flexible financing so they could upgrade to our platform without heavy upfront costs in mixed use developments. We were selected by one of the nation's top ranked property developers to secure a flagship community that seamlessly combines residential, retail and commercial spaces. This high profile property had been contending with serious security challenges from recurring vehicle break ins and unauthorized access through retail entrances to to the trauma of an active shooter incident in the vicinity. After evaluating options, they chose our AI powered platform for its ability to deliver real time threat detection, proactive intervention and long term operational efficiency. This installation gives the company the opportunity to scale across their entire 15 state portfolio including Washington D.C. of over 30,000 units and 152 communities. We also entered the construction market with the launch of our Alpha Mobile Surveillance Trailer. Developed in partnership with Flex Security, this solar powered AI enabled unit was purpose built for high risk job sites featuring cameras with auto detection, intelligent object tagging and multiple power options including solar battery and backup generator to ensure uninterrupted operation even in remote or challenging environments. Our first sale of this unit went to a national renewable energy contractor that was seeking a faster, more reliable and more responsive alternative to traditional monitoring services. By combining real time AI threat detection with proactive remote intervention, Alpha addresses one of the industry's most pressing problems which is construction site theft which costs up to $1 billion annually. With strong early interest and proven capabilities, Alpha is already demonstrating its potential as a significant new growth driver for our business. Operationally, July was a record breaking month where we completed more installations in just 30 days than in any month in our history. A standout project was a major multi use luxury complex where we deployed more than 100 security cameras across 375,000 square feet while completing the job an entire month ahead of schedule. This achievement reflects not only the efficiency of our team, but also the growing demand for our solutions, and to meet that demand, we've doubled the size of our implementation team and are continuing to expand our certified installer network, ensuring we can deliver faster at scale without compromising quality. From January through June, Our platform generated 5.37 million alerts and facilitated approximately 60,000 live audio interventions. By pairing AI driven threat detection with trained human response, we achieved a 98% deterrence rate, stopping incidents before they escalated. These interventions addressed everything from trespassing and theft attempts to more serious threats, demonstrating the real world impact and reliability of our technology in protecting people and property. Finally, our leadership in AI was recognized on a global stage when cloudestructure received the AI Breakthrough Award for Imaging Processing Solution of the Year. This award highlights how we bring together smart technology and human expertise to create a proactive security solution that delivers real, measurable results. We view this as a clear acknowledgment of the impact we're having for our customers and the innovation driving our success. In short, we're scaling fast and doing it the right way without sacrificing quality. With the strong foundation we've built, we're ready to seize the opportunities ahead and carry this momentum into an even stronger second half of 2025. I would now like to turn the call over to Greg Smitherman, our Chief Financial Officer, who will review the financial results for the quarter ended June 30, 2025.

Greg Smitherman - Chief Financial Officer - (00:14:35)

Thanks, James James and good afternoon everyone. Really appreciate you joining us here. So bear with me as we go through a little bit of numbers, a lot of numbers, very positive from our perspective. For the quarter ended June 30, 2025, revenue totaled $1.1 million, up from $300,000 in the same period last year, a 267% increase. This strong growth was driven by a 58% expansion in our customer base and solid contributions from every segment of the business. Subscriptions rose 133%, hardware sales surged 863%, and installation and other services grew 167%. If we look at it from a six month basis, the six months for June 30, 2025, revenue totaled $1.8 million, which is up from $533,000 in the same period last year, a 243% increase. So if we look at it comparing the six months of 2025 to the full year of 2024, we beat in six months, a full year revenue by approximately half a million dollars. So, you know, great start to the year. Getting back to the quarter numbers cost of goods sold for the quarter totaled 700,000, up from 200,000 in Q2 of 2024, reflecting our significantly higher sales volumes and installation activity. Our costs were partially offset by a 15% reduction in hosting and data center bandwidth costs due to our infrastructure transition and our operational efficiencies. Gross profit was $400,000 compared to 100,000 in Q2 of 2024, up 274% year over year. This marks our second consecutive quarter of positive gross margins fueled by strong revenue growth and continued efficiency gains. G and A expenses rose to 636,000 from 390,000 last year, primarily due to higher personnel costs and increased legal, audit and tax services. It's the joys of being a public company. Net loss for the quarter was 2 million compared to 1.9 million in quarter a year ago. The slight increase was driven by higher operating expenses, including added professional personnel, professional services, and our expanded sales and marketing effort, which drove our revenue. This was offset by revenue gains from a significantly larger customer base and growth across all of our major product lines. This concludes our prepared remarks. Operator, Please open the line for questions.

OPERATOR - (00:17:28)

Thank you. At this time we will be conducting our 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. And 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. Thank you. Our first question is coming from Jack Van der Aarde with Maxim Group. Your line is live.

Jack Van der Aarde - Equity Analyst - (00:18:08)

Hey. Okay, great. I appreciate the 2Q update, gentlemen, and congrats on your debut as a public company. Great to see the strong growth momentum continuing here. You know, I have a couple questions I'd like to get into. I think at this stage of the business, what would be interesting to hear is just who are your largest customers currently? If we can just get like a high level overview of just the sense of the scale of those customers, the property management companies, and then also just like what inning are we in if this is a baseball analogy or just how, how quickly are you ramping and expanding and how much opportunity is still blue sky in your opinion? Just with the existing customers?

James McCormick - Chief Executive Officer - (00:19:00)

Yeah, I'll start. Thanks Jack. Appreciate you joining the call and leading us off with the first question. So, you know, as we said in the prepared remarks, we're seeing growth in a number of different verticals, obviously, the primary one is multifamily properties. And from that perspective, we have landed some of the largest property management companies in the United states. We have five of the top 10 largest that are customers. And what's interesting about those, the initial sales take time. But once you're in and you've proven the efficacy of your solutions, the opportunity to expand across those portfolios is just massive. You know, as we mentioned, you know, earlier in the remarks, we have one customer operating in 15 states that has 152 properties, and we're in a small subset of those properties today. So will we get them all? Probably not. But is there an opportunity to expand into a great number of additional properties? Yes, there is. And we are starting to see that right now. To use your analogy, from a baseball standpoint, I would say top of the second inning. Right. Is where we're at from that standpoint right now. And then just very quickly, you know, additional verticals, some of which we mentioned. Right. We're starting to see some, some success in the construction market. We've got some very exciting opportunities in transportation and logistics. And also we're also looking at some commercial applications as well. So we're, we're very, very excited about where we're positioned right now and our prospects for future growth. And Greg, anything you'd add to that?

Greg Smitherman - Chief Financial Officer - (00:21:11)

I think the only thing I would add is really the huge scope of just one of these segments, not even including all the other ones that we are moving into. But if we just look at multifamily and the customer bases that we've got, we estimate they have over 10,000 property locations, and we're in a pretty small fraction of that. And we hear in conversations like wanting to expand significantly within their portfolio, wanting to consolidate on small number of vendors, we think that we have just really scratched the surface of penetrating this customer base. And with the market or with the world in its current environment, security remains top of mind for most people, especially security at home. So we think there really are some huge opportunities for us to still go out and tackle.

Jack Van der Aarde - Equity Analyst - (00:22:22)

Okay, great. I appreciate that. That's helpful. You know, if I'm just looking through, I'm just scanning through your press release right now, and obviously you've put out a ton of press releases, lots of filings over the last. Seems like every day or every week, there's, there's a new, you know, I guess, supporting announcement that's either a new catalyst, a new opportunity. Something about your sales team ramping up. Just curious if we could touch on. You know, it sounds like demand is a good problem to have. You have a ton of demand and as an early stage company, it looks like you're really ramping up here to actually satisfy that demand. So can we just touch on how you install. You talked on one example of how you install the whole property, I believe a month sooner than you originally estimated. And I know you are growing the sales force as well as your resources, maybe channel partners as well. Can you just touch on that sort of initiative there? Where are we today with the headcount? And then also what are you focused on in terms of growing and ramping your ability, your resources, your headcount to meet that demand?

James McCormick - Chief Executive Officer - (00:23:38)

Yep. Great, Great question. We'll come back to the headcount question. I'll let Greg handle that one. But essentially, Jack, as you would expect, we're looking at all areas of the business from an expansion standpoint, including sales, installations, customer success, engineering, organization and marketing. So we're looking at NGA in certain instances. So we're looking at all the areas of.