Group 1 - The stock market is experiencing fluctuations with a tendency towards positive territory amidst macroeconomic uncertainty and tariff issues [1] - The rebound in the stock market is primarily concentrated in large-cap stocks, especially those benefiting from favorable industry trends [1] - The experience of analysts covering technology companies and working in Silicon Valley is influencing the understanding of current industry themes [1] Group 2 - The article is authored by an analyst with a long position in REKR shares, indicating a personal investment interest [2] - The opinions expressed in the article are solely those of the author and not influenced by external compensation [2] - There is no business relationship between the author and any company mentioned in the article, ensuring an independent viewpoint [2]

Core Insights - Rekor Systems, Inc. has announced a transformative deployment of 150 Rekor Discover® systems under a one-year Data-as-a-Service contract valued at $1.2 million with a Sun Belt state transportation agency, expecting installation within 60 days [1][2] Group 1: Technology and Implementation - The Rekor Discover® platform utilizes AI-enabled roadside sensors to collect detailed per-vehicle data while ensuring compliance with Federal Highway Administration requirements, thus eliminating the need for intrusive in-road sensors [2][5] - The deployment represents a significant advancement in traffic data collection and monitoring, allowing for safer and more efficient operations without disrupting traffic or posing risks to roadway workers [5][6] Group 2: Market Expansion and Adoption - Rekor Discover® is gaining traction across various states in the U.S., including Arizona, Colorado, Georgia, New Mexico, New York, Florida, and South Carolina, indicating strong momentum in the market [3][4] - The company aims to replace outdated single-function roadway devices with a scalable, AI-powered platform, which is increasingly being recognized by international transportation authorities, suggesting potential for global expansion [3][4] Group 3: Vision and Future Potential - The International Road Federation's World Road Statistics indicates that over 60 countries are actively collecting traffic data, positioning Rekor to serve both domestic and international markets seeking modern alternatives to legacy traffic technologies [4] - The company's vision includes creating a digitally-enabled operating system for roadways, leveraging AI and big data analytics to provide actionable insights for safer and more efficient transportation planning [6]

Core Insights - Rekor Systems, Inc. has been awarded a multi-year statewide contract by the Texas Department of Transportation (TxDOT) to implement its advanced incident management platform, Rekor Command®, across all TxDOT districts [1][5] - The contract includes an eight-figure blanket purchase order, allowing immediate deployment of the technology to enhance traffic operations, reduce congestion, and improve roadway safety [1][5] Industry Context - Texas operates the largest state-maintained roadway network in the U.S., with over 80,000 miles of highways, facing increasing pressure to enhance operations due to population growth and traffic volume [2] - The state has a history of adopting advanced transportation technologies, making it an ideal environment for deploying Rekor's platform [2] Performance Metrics - Rekor Command® has shown significant operational improvements in Texas, including a 159% increase in incident detection, an 8.4-minute reduction in median incident detection time, and an 83% incident detection accuracy [7] - The platform has also achieved a 44-minute reduction in incident clearance time and a 29% reduction in secondary crashes [7] New Features and Enhancements - Under the expanded contract, TxDOT will deploy new features such as a Traffic Impact Module, which uses AI to assess and visualize incident impacts on traffic flow in real-time [6][8] - The Work Zone API will enhance safety by providing real-time insights into work zone activity and integrating with the USDOT FHWA's Work Zone Data Exchange [8] Strategic Importance - The contract reinforces Rekor's role as a trusted partner for large-scale transportation agencies, contributing to smarter, safer, and more resilient roadways in Texas [9]

Core Viewpoint - Rekor Systems, Inc. reported a quarterly loss of $0.10 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.08, marking a 25% earnings surprise [1] - The company has struggled with revenue, posting $9.2 million for the quarter, missing estimates by 20.30% and down from $9.78 million a year ago [2] Financial Performance - The company has only surpassed consensus EPS estimates once in the last four quarters [2] - The stock has declined approximately 34.6% year-to-date, contrasting with the S&P 500's slight gain of 0.1% [3] Future Outlook - The earnings outlook for Rekor Systems is currently unfavorable, with a Zacks Rank of 4 (Sell), indicating expected underperformance in the near future [6] - Current consensus EPS estimates for the upcoming quarter are -$0.07 on revenues of $13.14 million, and -$0.25 on revenues of $51.67 million for the current fiscal year [7] Industry Context - The Internet - Software industry, to which Rekor Systems belongs, is ranked in the top 35% of over 250 Zacks industries, suggesting a relatively strong industry performance [8]

Financial Data and Key Metrics Changes - The company reported revenue of $9.2 million for Q1 2025, representing a 6% decrease compared to the same quarter last year [17] - Adjusted EBITDA loss improved by $2 million to $7.4 million from $9.4 million in Q1 2024, attributed to significant reductions in operating expenses [17][19] - Adjusted gross margin for Q1 2025 was 48.2%, up from 46% in the same period last year, driven by a higher mix of margin-accretive offerings [18] Business Segment Data and Key Metrics Changes - Revenue was impacted across all three business segments due to adverse weather conditions, delays in contract signings, and budget constraints from public agencies [17] - Recurring revenue totaled $5.1 million for the quarter, showing a modest 3% increase from Q1 2024 [18] Market Data and Key Metrics Changes - The company faced significant headwinds in sales execution due to external factors such as weather and political uncertainties affecting public safety agencies [17] - The sales pipeline remains strong, particularly with State Departments of Transportation and public safety agencies, indicating potential for future revenue growth [21] Company Strategy and Development Direction - The company is implementing a new general manager structure to sharpen focus on customers and accelerate product adoption, aiming for sustainable revenue growth [9][10] - The focus is shifting towards exploiting the commercial potential of existing products rather than future projects, with an emphasis on operational accountability and customer-centricity [6][14] - The company plans to maintain discipline in managing costs while balancing growth investments, targeting breakeven adjusted EBITDA in the foreseeable future [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q1 performance was below expectations but emphasized a clear plan for growth and margin improvement [23] - The company anticipates continued improvement in adjusted EBITDA as revenue grows, supported by expanding gross margins and ongoing cost optimization efforts [20][21] - Management expressed confidence in achieving profitability before the end of the year, citing structural changes and a focus on delivering existing products [72] Other Important Information - The company is actively pursuing international markets and partnerships, leveraging the expertise of new leadership to enhance global market penetration [11][60] - The management team is focused on building shareholder value and rewarding investor trust through improved performance in the coming quarters [24] Q&A Session Summary Question: Can you provide insight on the pipeline for Scout and its bookings in Q1? - Management noted that Scout has grown significantly since its launch in 2019, and there will be increased activity in the next 30 to 60 days as the focus shifts back to commercial applications [28] Question: What are the expectations for organic sales growth this year? - Management indicated that they expect substantial growth with Discover due to modifications in pricing and go-to-market strategies, acknowledging a learning curve in dealing with government procurement [38] Question: How much of the $15 million annualized cost savings have been implemented? - Management confirmed that the cost savings will be realized throughout the year, with continued reductions expected as revenue grows [41] Question: Is there potential to monetize the data collected for Roadway Intelligence? - Management highlighted that there is significant demand for their existing product platforms and that they will focus on selling what they have rather than expanding into new data services at this time [45] Question: Are there plans for international sales? - Management confirmed that there is demand for their products internationally and that they are actively pursuing opportunities in developed nations [60] Question: Will there be updates regarding the QSR sector? - Management affirmed that the QSR sector remains a focus, with potential for valuable data services to retail businesses [70]

Financial Data and Key Metrics Changes - The company reported revenue of $9.2 million for Q1 2025, representing a 6% decrease compared to the same quarter last year [17] - Adjusted EBITDA loss improved by $2 million to $7.4 million from $9.4 million in Q1 2024, attributed to significant reductions in operating expenses [17][19] - Adjusted gross margin for Q1 2025 was 48.2%, up from 46% in the same period last year, driven by a higher mix of margin-accretive offerings [18] Business Segment Data and Key Metrics Changes - Revenue was impacted across all three business segments due to adverse weather conditions, delays in contract signings, and budget constraints from public agencies [17] - Recurring revenue totaled $5.1 million for the quarter, showing a modest 3% increase from Q1 2024 [18] Market Data and Key Metrics Changes - The company faced significant headwinds in sales execution due to external factors such as weather and political uncertainties [17] - The sales pipeline remains strong, particularly with State Departments of Transportation and public safety agencies, indicating potential for future revenue growth [21] Company Strategy and Development Direction - The company is implementing a new general manager structure to enhance customer focus and accelerate product adoption, aiming for sustainable revenue growth [8][12] - The focus is shifting towards exploiting the commercial potential of existing products rather than future projects, with an emphasis on operational accountability and innovation [6][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the first quarter performance was below expectations but emphasized ongoing efforts to improve execution and deliver results [22][23] - The company anticipates continued improvement in adjusted EBITDA as revenue grows, supported by expanding gross margins and ongoing cost optimization initiatives [20][21] Other Important Information - The company is targeting breakeven adjusted EBITDA in the foreseeable future and aims to exit 2025 on a significantly stronger financial footing [22] - The management team is focused on building shareholder value and rewarding investor trust through actions and results in the coming quarters [24] Q&A Session Summary Question: Can you provide insight on the pipeline for Scout and its bookings in Q1? - Management noted that Scout has grown significantly since its launch in 2019, and there will be increased activity in the next 30 to 60 days as the focus shifts back to commercial applications [28] Question: Are there any partnerships in development similar to Sound Thinking? - Management confirmed ongoing discussions for partnerships, particularly with Scout and Discover, but details could not be disclosed as they are nonpublic [30] Question: What is the expectation for organic sales growth this year? - Management indicated that the reorganization and new pricing strategies for Discover are expected to drive substantial growth, particularly as government adoption increases [36][38] Question: How much of the $15 million annualized cost savings have been implemented? - Management stated that the cost savings will be realized throughout the year, with continued reductions expected as revenue grows [40][41] Question: Is there potential to monetize the data collected for Roadway Intelligence? - Management acknowledged the potential for additional services but emphasized the current focus on selling existing products to meet demand [44][46] Question: What is the outlook for international sales and partnerships? - Management confirmed that there is demand for products internationally and that efforts are underway to penetrate these markets [63][65] Question: Will there be updates regarding the QSR sector? - Management indicated that the QSR sector remains a focus, with potential for increased data monetization opportunities [72][74] Question: Is the company on track for profitability by the end of the year? - Management expressed confidence in achieving profitability before the end of the year, emphasizing the need for operational efficiency and effective product delivery [75][76]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ (State or other jurisdiction of incorporation or organization) Delaware 81-5266334 (I.R.S. Employer Identification No ...

[Company Overview and Q1 2025 Highlights](index=1&type=section&id=Company%20Overview%20and%20Q1%202025%20Highlights) Rekor Systems' Q1 2025 saw a slight revenue decline but significant improvement in adjusted EBITDA loss, alongside a strategic shift to a GM structure for scalable growth [Q1 2025 Business and Financial Highlights](index=1&type=section&id=Q1%202025%20Business%20and%20Financial%20Highlights) Rekor Systems' Q1 2025 revenue slightly decreased, but operational efficiency significantly improved, narrowing adjusted EBITDA loss, and a new GM structure was implemented for predictable, scalable growth - Company revenue slightly decreased to **$9.2 million**, but operational efficiency significantly improved, with adjusted EBITDA loss narrowing from **$9.4 million** in Q1 2024 to **$7.4 million** in Q1 2025[3](index=3&type=chunk)[7](index=7&type=chunk) - The company is undergoing a strategic transformation by implementing a General Manager (GM) structure, clarifying P&L responsibilities for business units to enhance operational agility, accelerate innovation, and scale markets more effectively[4](index=4&type=chunk) [About Rekor Systems, Inc.](index=3&type=section&id=About%20Rekor%20Systems%2C%20Inc.) Rekor Systems leads in road intelligence, leveraging AI-driven computer vision and machine learning through its Rekor One® engine to collect, connect, and organize global mobility data, providing actionable insights for safer, greener, and more efficient road systems for governments and enterprises - Rekor Systems is a leader in developing and implementing advanced road intelligence systems using AI-driven computer vision and machine learning technologies[14](index=14&type=chunk) - The company's core technology is the Rekor One® road intelligence engine, which transforms vast amounts of data into intelligence, powering platforms and applications[14](index=14&type=chunk) - Rekor's solutions aim to provide governments and enterprises with a comprehensive road view and collaborative environment to drive a safer, greener, and more efficient world[14](index=14&type=chunk) [First Quarter 2025 Financial Performance](index=1&type=section&id=First%20Quarter%202025%20Financial%20Performance) Rekor Systems' Q1 2025 financial performance reflects a revenue decline, improved gross margin, and significantly reduced operating and net losses, driven by cost control and operational efficiency [Revenue and Cost of Revenue Analysis](index=1&type=section&id=Revenue%20and%20Cost%20of%20Revenue%20Analysis) In Q1 2025, Rekor Systems' revenue decreased 6% year-over-year to $9.2 million, primarily due to adverse weather and slower government project activity, yet cost of revenue declined 10%, boosting adjusted gross margin by 2.2 percentage points to 48.2% Revenue and Cost of Revenue (Excluding Depreciation and Amortization) | Metric | Three Months Ended March 31, 2025 (thousand USD) | Three Months Ended March 31, 2024 (thousand USD) | Change ($) | Change (%) | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :------- | :------- | | Revenue | 9,198 | 9,778 | (580) | -6% | | Cost of Revenue (excluding D&A) | 4,761 | 5,285 | (524) | -10% | | Adjusted Gross Profit | 4,437 | 4,493 | (56) | -1% | | Adjusted Gross Margin | 48.2% | 46.0% | 2.2% | 4.8% | - Revenue decline is primarily attributed to adverse weather conditions and slower engineering activity due to ongoing uncertainty in the government sector[8](index=8&type=chunk) - The decrease in cost of revenue is mainly due to reduced direct costs such as personnel and hardware, correlating with the revenue decline[9](index=9&type=chunk) [Operating Expenses and Loss from Operations](index=2&type=section&id=Operating%20Expenses%20and%20Loss%20from%20Operations) In Q1 2025, Rekor Systems' operating loss significantly narrowed by 22% year-over-year to $10.1 million, primarily driven by reduced salaries and related costs due to cost control measures Loss from Operations | Metric | Three Months Ended March 31, 2025 (thousand USD) | Three Months Ended March 31, 2024 (thousand USD) | Change ($) | Change (%) | | :--------------- | :---------------------------------- | :---------------------------------- | :------- | :------- | | Loss from Operations | (10,139) | (12,916) | 2,777 | 22% | - The reduction in operating loss is primarily due to lower salaries and related costs resulting from cost control measures[10](index=10&type=chunk) [EBITDA and Adjusted EBITDA Reconciliation](index=2&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) Rekor Systems significantly improved its EBITDA and Adjusted EBITDA in Q1 2025, with Adjusted EBITDA loss narrowing from $9.37 million in the prior year to $7.36 million, reflecting enhanced operational efficiency - EBITDA and Adjusted EBITDA are non-GAAP financial measures used to assess the company's ability to service debt, but calculation methods may vary across companies[11](index=11&type=chunk) EBITDA and Adjusted EBITDA Reconciliation Table | Metric | Three Months Ended March 31, 2025 (thousand USD) | Three Months Ended March 31, 2024 (thousand USD) | | :----------------------- | :---------------------------------- | :---------------------------------- | | Net Loss | (10,874) | (18,614) | | Interest | 590 | 1,054 | | Depreciation and Amortization | 1,556 | 2,332 | | **EBITDA** | **(8,728)** | **(15,228)** | | Stock-based Compensation | 1,370 | 1,167 | | Loss on Debt Extinguishment | - | 4,693 | | **Adjusted EBITDA** | **(7,358)** | **(9,368)** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) In Q1 2025, Rekor Systems' net loss significantly narrowed year-over-year from $18.61 million to $10.87 million, with loss per share decreasing from $0.24 to $0.10, primarily due to reduced operating loss and the elimination of debt extinguishment losses Condensed Consolidated Statements of Operations (Excerpt) | Metric | Three Months Ended March 31, 2025 (thousand USD) | Three Months Ended March 31, 2024 (thousand USD) | | :--------------------------------- | :---------------------------------- | :---------------------------------- | | Revenue | 9,198 | 9,778 | | Cost of Revenue (excluding D&A) | 4,761 | 5,285 | | Total Operating Expenses | 14,576 | 17,409 | | Loss from Operations | (10,139) | (12,916) | | Loss on Debt Extinguishment | - | (4,693) | | Interest Expense, Net | (590) | (1,054) | | Other (Expense) Income | (145) | 49 | | Total Other Expenses | (735) | (5,698) | | **Net Loss** | **(10,874)** | **(18,614)** | | **Loss Per Common Share** | **(0.10)** | **(0.24)** | | Weighted Average Shares Outstanding (Basic and Diluted) | 106,815,912 | 78,894,017 | [Financial Position](index=5&type=section&id=Financial%20Position) As of March 31, 2025, Rekor Systems' total assets and liabilities slightly decreased, while shareholder equity also saw a minor reduction, with shifts in cash, receivables, and contract liabilities [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Rekor Systems' total assets slightly decreased to $79.80 million, total liabilities reduced to $46.44 million, and shareholder equity also slightly decreased to $33.36 million, with a decrease in cash and cash equivalents but an increase in accounts receivable and contract liabilities Condensed Consolidated Balance Sheets (Excerpt) | Metric | March 31, 2025 (thousand USD) | December 31, 2024 (thousand USD) | | :--------------------------------- | :---------------------------------- | :---------------------------------- | | **Assets** | | | | Cash and Cash Equivalents | 3,851 | 5,013 | | Restricted Cash | 458 | 316 | | Accounts Receivable, Net | 7,582 | 7,232 | | Inventory | 4,196 | 4,297 | | Other Current Assets | 3,526 | 2,732 | | **Total Current Assets** | **19,953** | **19,930** | | Total Long-Term Assets | 59,849 | 62,545 | | **Total Assets** | **79,802** | **82,475** | | **Liabilities and Stockholders' Equity** | | | | Accounts Payable and Accrued Expenses | 4,545 | 4,330 | | Contract Liabilities | 4,574 | 3,439 | | Other Current Liabilities | 4,900 | 5,129 | | **Total Current Liabilities** | **16,880** | **18,223** | | Total Long-Term Liabilities | 29,563 | 30,111 | | **Total Liabilities** | **46,443** | **48,334** | | Common Stock | 11 | 10 | | Additional Paid-in Capital | 305,119 | 294,935 | | Accumulated Deficit | (270,967) | (260,093) | | **Total Stockholders' Equity** | **33,359** | **34,141** | | **Total Liabilities and Stockholders' Equity** | **79,802** | **82,475** | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section provides details on the Q1 2025 earnings call, forward-looking statements, and company contact information for investors and media [Conference Call and Webcast Information](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Information) Rekor Systems scheduled a conference call for March 15, 2025, to discuss Q1 2025 results, with call replay and webcast archive available - The Q1 2025 earnings conference call is scheduled for **March 15, 2025, at 4:30 PM ET**[12](index=12&type=chunk) - North American and international dial-in numbers, along with webcast links and replay information, are provided[13](index=13&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding Rekor Systems' future expectations, plans, and prospects, cautioning investors about risks and uncertainties that could cause actual results to differ materially - Statements in this press release constitute "forward-looking statements" as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934, protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[15](index=15&type=chunk) - Forward-looking statements involve future expectations, plans, and prospects, but are subject to various risks and uncertainties, and actual results may differ materially from projections[15](index=15&type=chunk) - The company undertakes no obligation to publicly update any forward-looking statements[15](index=15&type=chunk) [Company and Investor Contacts](index=4&type=section&id=Company%20and%20Investor%20Contacts) Contact information for Rekor Systems' Chief Financial Officer, Eyal Hen, and the Media and Investor Relations department is provided - Company Contact: Eyal Hen, Chief Financial Officer, Phone: **+1 (443) 545-7260**, Email: **ehen@rekor.ai**[16](index=16&type=chunk) - Media and Investor Relations Contact: Charles Degliomini, Email: **ir@rekor.ai**[16](index=16&type=chunk)

Core Insights - Rekor Systems, Inc. reported a first quarter revenue of $9.2 million, a 6% decrease from $9.8 million in the same period last year, attributed to adverse weather conditions and a slowdown in project activity [2][6][20] - The company narrowed its Adjusted EBITDA loss from $9.4 million in Q1 2024 to $7.4 million in Q1 2025, indicating improved operational efficiency [2][6] - A new General Manager structure has been implemented to enhance accountability and focus on customer needs, allowing for greater agility and innovation [3] Financial Performance - Revenue for the three months ended March 31, 2025, was $9,198 thousand, down from $9,778 thousand in 2024, reflecting a decrease of $580 thousand [5][20] - Cost of revenue, excluding depreciation and amortization, decreased from $5,285 thousand in 2024 to $4,761 thousand in 2025, a reduction of $524 thousand [5][20] - Adjusted Gross Profit was $4,437 thousand, slightly down from $4,493 thousand, with an Adjusted Gross Margin improvement from 46.0% to 48.2% [5][20] Operational Changes - The loss from operations decreased from $12,916 thousand in Q1 2024 to $10,139 thousand in Q1 2025, a reduction of $2,777 thousand, primarily due to cost containment efforts [8][20] - Total operating expenses decreased from $17,409 thousand in 2024 to $14,576 thousand in 2025, reflecting a focus on operational efficiency [20] - The company is building on a solid financial foundation with a commitment to enhancing its technological capabilities and operational efficiency [3] Future Outlook - The management emphasizes a strategic focus aimed at driving stronger, more predictable, and scalable growth moving forward [3] - The company is confident in its ability to deliver near-term results on its growth plans, supported by a comprehensive evaluation of operations and a new organizational structure [3]

Core Viewpoint - Rekor Systems, Inc. will release its financial results for Q1 2025 on May 14, 2025, after market close, followed by an earnings conference call at 4:30 p.m. Eastern Time [1] Group 1: Financial Results Announcement - The financial results for the first quarter of 2025 will be announced on May 14, 2025 [1] - An earnings conference call will take place on the same day at 4:30 p.m. Eastern Time to discuss the financial and operating results [1] Group 2: Conference Call Information - Participants can join the call by dialing in approximately 10 minutes before it starts, with specific numbers provided for North America [2] - A replay of the call will be available online approximately two hours after the live event for two weeks [2] Group 3: Company Overview - Rekor Systems, Inc. specializes in roadway intelligence systems utilizing AI-enabled computer vision and machine learning [3] - The company aggregates and transforms vast amounts of mobility data into actionable insights, aiming to enhance roadway safety, efficiency, and environmental sustainability [3]