Core Viewpoint - Rekor Systems, Inc. has extended its Rekor Command® contract with the Central Texas Regional Mobility Authority for $1.4 million over five years, emphasizing the commitment to enhance roadway safety and incident response across Central Texas toll roads [1][4]. Group 1: Contract and Implementation - The renewed contract reflects the Mobility Authority's ongoing investment in advanced technologies for incident detection and response [1][4]. - Rekor Command® has been operational since 2021, providing real-time insights and improving coordination for the Mobility Authority's Traffic Incident Management team [2][5]. Group 2: Performance Metrics - The implementation of Rekor Command® has led to a 324% increase in incident detection and an 11-minute faster average response time [7]. - On average, 641 incidents are detected monthly, showcasing the platform's effectiveness in managing roadway incidents [7]. Group 3: Features and Benefits - Rekor Command® offers advanced analytics, real-time situational awareness, and seamless coordination tools, transforming traffic operations and enhancing public safety [5][6]. - The platform includes features like Driver Connect for bi-directional communication with drivers and AI-powered predictive insights for quicker incident response [7]. Group 4: Future Developments - The Mobility Authority plans over 35 major infrastructure projects through 2032, with Rekor Command® supporting efforts to reduce congestion and improve safety during this development phase [6].

Company Overview - Rekor Systems (NASDAQ: REKR) provides solutions aimed at enhancing public safety and traffic management globally through the deployment of hardware devices that feed data into their software engine [1]. Investment Focus - The analysis emphasizes the importance of identifying investment opportunities where intrinsic value diverges from market price, particularly focusing on undervalued companies relative to their fundamentals [1]. Sector Specialization - There is a noted specialized interest in Real Estate Investment Trusts (REITs), which are believed to present significant opportunities for investors due to their unique dynamics and potential for long-term growth [1]. Investment Philosophy - The investment approach is grounded in rigorous analysis and a long-term perspective, prioritizing thorough due diligence on financial health, competitive positioning, and management quality [1].

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]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details the company's Form 10-Q filing, including registrant information, filer status, and common stock outstanding [Registrant Information](index=1&type=section&id=Registrant%20Information) Rekor Systems, Inc. filed its Quarterly Report on Form 10-Q for the period ended March 31, 2025, identifying as a non-accelerated and smaller reporting company with 118,075,944 common shares outstanding Registrant Information | Indicator | Value | | :--- | :--- | | Filing Type | Quarterly Report (10-Q) | | Period Ended | March 31, 2025 | | Registrant | Rekor Systems, Inc. | | Commission File Number | 001-38338 | | Filer Status | Non-accelerated filer, Smaller reporting company | | Common Stock Trading Symbol | REKR | | Common Stock Outstanding (May 13, 2025) | 118,075,944 shares | [SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS](index=3&type=section&id=SPECIAL%20NOTE%20ON%20FORWARD-LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements, highlighting inherent risks that may cause actual results to differ [Forward-Looking Statements Disclaimer](index=3&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section cautions readers about the inherent risks and uncertainties in forward-looking statements, advising against undue reliance and recommending a review of detailed risk factors - The report contains forward-looking statements subject to substantial risks and uncertainties, which may cause actual results to differ materially[7](index=7&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements and are urged to review risk factors in the Annual Report on Form 10-K[7](index=7&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Rekor Systems, Inc.'s unaudited condensed consolidated financial statements, encompassing balance sheets, operations, equity, cash flows, and detailed notes [UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's unaudited condensed consolidated balance sheets as of March 31, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Unaudited Condensed Consolidated Balance Sheets | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :--------------- | :---------------- | | Total Assets | $79,802 | $82,475 | | Total Liabilities | $46,443 | $48,334 | | Total Stockholders' Equity | $33,359 | $34,141 | | Cash and cash equivalents | $3,851 | $5,013 | | Accounts receivable, net | $7,582 | $7,232 | | Total current assets | $19,953 | $19,930 | [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section presents the unaudited condensed consolidated statements of operations for the three months ended March 31, 2025, and 2024, detailing revenue, expenses, and net loss Unaudited Condensed Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $9,198 | $9,778 | | Cost of revenue | $4,761 | $5,285 | | Total operating expenses | $14,576 | $17,409 | | Loss from operations | $(10,139) | $(12,916) | | Net loss | $(10,874) | $(18,614) | | Loss per common share | $(0.10) | $(0.24) | [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This section presents the unaudited condensed consolidated statements of stockholders' equity, detailing changes in common stock, additional paid-in capital, and accumulated deficit Unaudited Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | March 31, 2025 | January 1, 2025 | | :-------------------- | :--------------- | :-------------- | | Common Stock (shares) | 110,912,209 | 104,541,073 | | Common Stock (value) | $11 | $10 | | Additional Paid-In Capital | $305,119 | $294,935 | | Accumulated Deficit | $(270,967) | $(260,093) | | Total Stockholders' Equity | $33,359 | $34,141 | - Stock-based compensation for the three months ended March 31, 2025, was **$1,370,000**[13](index=13&type=chunk) - Issuance of common stock pursuant to the 2025 Sales Agreement contributed **$7,659,000** to equity[13](index=13&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section presents the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2025, and 2024, detailing operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(8,079) | $(7,886) | | Net cash used in investing activities | $(337) | $(9,130) | | Net cash provided by financing activities | $7,396 | $13,570 | | Net decrease in cash, cash equivalents and restricted cash | $(1,020) | $(3,446) | | Cash, cash equivalents and restricted cash at end of period | $4,309 | $12,267 | [NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering accounting policies, acquisitions, leases, debt, and disclosures [NOTE 1 – GENERAL, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%201%20%E2%80%93%20GENERAL,%20BASIS%20OF%20PRESENTATION,%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Rekor Systems, Inc.'s business, financial statement basis, significant accounting policies, and addresses liquidity concerns, including insufficient cash for the next twelve months - Rekor Systems, Inc. operates in the roadway intelligence sector, aiming to revolutionize public safety, urban mobility, and transportation management through AI-powered solutions[22](index=22&type=chunk) - The Company's existing cash is insufficient to fund its current level of operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern[31](index=31&type=chunk) Revenue by Type | Revenue Type (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Recurring revenue | $5,106 | $4,963 | | Product and service revenue | $4,092 | $4,815 | | Total revenue | $9,198 | $9,778 | Revenue by Customer Type | Customer Type Revenue (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Urban Mobility | $5,529 | $5,614 | | Transportation Management | $423 | $665 | | Public Safety | $3,246 | $3,499 | | Total revenue | $9,198 | $9,778 | - Customer A accounted for **11%** of consolidated revenue for the three months ended March 31, 2025[71](index=71&type=chunk) - Customer B accounted for **11%** of accounts receivable as of March 31, 2025[72](index=72&type=chunk) [NOTE 2 – ACQUISITION](index=20&type=section&id=NOTE%202%20%E2%80%93%20ACQUISITION) This note details the January 2, 2024, acquisition of All Traffic Data Services, LLC (ATD), accounted for as a business combination, resulting in recognized goodwill and intangible assets - The Company acquired All Traffic Data Services, LLC (ATD) on January 2, 2024, for approximately **$20,576,000**[79](index=79&type=chunk)[80](index=80&type=chunk) - The acquisition resulted in the recognition of **$3,720,000** in goodwill and **$12,100,000** in intangible assets[82](index=82&type=chunk) [NOTE 3 - LEASES](index=21&type=section&id=NOTE%203%20-%20LEASES) This note details the company's operating and financing leases, including costs, weighted-average terms, discount rates, and a Q1 2025 lease modification Lease Cost | Lease Cost (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease cost | $710 | $672 | | Finance lease cost | $353 | $221 | | Total lease cost | $1,063 | $893 | Lease Metrics | Lease Metric | March 31, 2025 | December 31, 2024 | | :------------- | :------------- | :---------------- | | Operating leases (weighted-average remaining lease term) | 7.05 years | 7.56 years | | Financing leases (weighted-average remaining lease term) | 2.51 years | 2.19 years | | Operating leases (weighted-average discount rate) | 12.0% | 9.2% | | Financing leases (weighted-average discount rate) | 9.0% | 9.0% | - A lease amendment in Q1 2025 decreased both operating lease liability and the corresponding right-of-use asset by **$1,344,000**[84](index=84&type=chunk) [NOTE 4 – SUPPLEMENTAL NON CASH DISCLOSURES OF CASH FLOW INFORMATION](index=21&type=section&id=NOTE%204%20%E2%80%93%20SUPPLEMENTAL%20NON%20CASH%20DISCLOSURES%20OF%20CASH%20FLOW%20INFORMATION) This note provides supplemental disclosures of non-cash activities, including cash paid for interest and taxes, and significant non-cash financing events like ATD Holdback Shares settlement Non-Cash Financing Activities | Non-Cash Financing Activities (in thousands) | 2025 | 2024 | | :------------------------------------------- | :--- | :--- | | Settlement of ATD Holdback Shares with common stock | $(1,156) | - | | Fair value of shares issued in connection with the acquisition of ATD | - | $8,893 | | Fair value of ATD Holdback Shares at the acquisition date | - | $1,635 | | 2023 Promissory Note redemption premium settled in shares | - | $1,875 | [NOTE 5 – INTANGIBLE ASSETS AND GOODWILL](index=23&type=section&id=NOTE%205%20%E2%80%93%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) This note details the company's intangible assets and goodwill, including the ATD acquisition purchase price allocation, identifiable asset breakdown, net values, and amortization expenses - Goodwill of **$3,720,000** was recognized from the ATD acquisition[88](index=88&type=chunk) Identifiable Intangible Assets | Identifiable Intangible Assets (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :--------------- | :---------------- | | Customer relationships | $15,300 | $15,300 | | Marketing related | $900 | $900 | | Internally capitalized software | $247 | $247 | | Total | $16,447 | $16,447 | | Less: accumulated amortization | $(2,297) | $(1,997) | | Identifiable intangible assets, net | $14,150 | $14,450 | - Amortization expense for intangible assets was **$300,000** for the three months ended March 31, 2025, a decrease from **$1,172,000** in the prior year[89](index=89&type=chunk) [NOTE 6 – DEBT](index=24&type=section&id=NOTE%206%20%E2%80%93%20DEBT) This note outlines the company's debt obligations, including STS Notes and Series A Prime Revenue Sharing Notes, detailing principal, interest rates, maturities, and associated expenses - The aggregate balance of STS Notes payable was **$1,000,000** as of March 31, 2025, maturing on June 17, 2025[92](index=92&type=chunk) - Series A Prime Revenue Sharing Notes totaling **$15,000,000** were issued on December 15, 2023, with a fixed annual interest rate of **13.25%** and a maturity date of December 15, 2026[94](index=94&type=chunk) Interest Expense | Interest Expense (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Contractual interest expense | $565 | $794 | | Amortization of debt issuance costs | $49 | $399 | | Total interest expense | $614 | $1,193 | | Less: interest income | $(24) | $(139) | | Total interest expense, net | $590 | $1,054 | Principal Amounts Due | Principal Amounts Due (in thousands) | 2025 (remaining) | 2026 | 2027 | 2028 | Total | | :----------------------------------- | :--------------- | :--- | :--- | :--- | :---- | | Long-term notes payable | $1,060 | $15,083 | $86 | $25 | $16,254 | [NOTE 7 – INCOME TAXES](index=26&type=section&id=NOTE%207%20%E2%80%93%20INCOME%20TAXES) This note explains the company's income tax position, including a full valuation allowance against net deferred taxes due to historical losses, resulting in no recorded tax expense or benefit - The Company maintains a full valuation allowance against its net deferred taxes due to the unlikelihood of realizing future benefits from these assets[101](index=101&type=chunk) - No income tax expense or benefit was recorded for the three months ended March 31, 2025, and 2024[103](index=103&type=chunk) [NOTE 8 – COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%208%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note details legal commitments and contingencies, including a breach of contract lawsuit and an OSHA claim, which the company intends to vigorously defend - H.C. Wainwright & Co., LLC filed a breach of contract lawsuit seeking damages of at least **$825,000** cash and warrants for **481,100** shares, plus an additional **$2,156,000** and warrants for **805,000** shares related to the 2024 Public Offering[108](index=108&type=chunk)[109](index=109&type=chunk) - An OSHA claim, initially dismissed, was appealed by claimants; a liability hearing was held, and a damages hearing was cancelled pending the court's findings on liability[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [NOTE 9 – STOCKHOLDERS' EQUITY](index=29&type=section&id=NOTE%209%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note outlines significant changes in stockholders' equity, including authorized common stock, At Market Issuance Sales Agreement, ATD holdback shares, 2024 Public Offering, and 2023 Promissory Note redemption - Authorized common stock increased from **100,000,000** to **300,000,000** shares on April 22, 2024[115](index=115&type=chunk) - Under the At Market Issuance Sales Agreement, the Company issued **5,148,600** shares for net cash proceeds of **$7,659,000** as of March 31, 2025[117](index=117&type=chunk) - On January 2, 2025, **664,329** holdback shares were issued to ATD's former owners, completing the ATD Acquisition purchase price[118](index=118&type=chunk) - The 2024 Public Offering generated approximately **$26,362,000** in net proceeds from the sale of **11,500,000** shares[120](index=120&type=chunk) - The redemption of 2023 Promissory Notes resulted in a **$4,693,000** loss on extinguishment of debt, including a **$1,875,000** redemption payment settled with **750,000** common shares[126](index=126&type=chunk) [NOTE 10 – EQUITY INCENTIVE PLAN](index=31&type=section&id=NOTE%2010%20%E2%80%93%20EQUITY%20INCENTIVE%20PLAN) This note describes the 2017 Equity Award Plan, detailing equity grants like stock options and RSUs, including compensation expense and activity, aimed at attracting and retaining personnel - An additional **7,912,216** shares were registered for issuance under the 2017 Equity Award Plan on April 29, 2024[130](index=130&type=chunk) - No stock compensation expense was recognized for stock options for the three months ended March 31, 2025 and 2024[132](index=132&type=chunk) - Stock compensation expense related to RSUs was **$1,370,000** for the three months ended March 31, 2025, an increase from **$1,167,000** in the prior year[135](index=135&type=chunk) RSU Activity | RSU Activity (shares) | Outstanding Jan 1, 2025 | Granted | Vested | Forfeited | Outstanding Mar 31, 2025 | | :-------------------- | :---------------------- | :------ | :----- | :-------- | :----------------------- | | Number of Shares | 5,776,426 | 46,300 | (622,434) | (783,367) | 4,416,925 | [NOTE 11 – LOSS PER SHARE](index=33&type=section&id=NOTE%2011%20%E2%80%93%20LOSS%20PER%20SHARE) This note presents the calculation of basic and diluted loss per common share, excluding potentially dilutive securities due to their anti-dilutive effect resulting from the net loss Loss Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net loss attributable to shareholders | $(10,874) | $(18,614) | | Weighted average common shares outstanding - basic and diluted | 106,815,912 | 78,894,017 | | Basic and diluted loss per share | $(0.10) | $(0.24) | - **9,234,891** potentially dilutive securities (warrants, options, RSUs) were excluded from diluted loss per share for Q1 2025 due to their anti-dilutive effect[139](index=139&type=chunk) [NOTE 12 – SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses subsequent events after the reporting period, specifically additional common stock issuances under the At Market Issuance Sales Agreement - From March 31, 2025, to May 13, 2025, the Company issued **5,716,600** shares of common stock for net cash of **$4,995,000** under the Sales Agreement[141](index=141&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's discussion and analysis of Q1 2025 financial condition and operating results, including business overview, opportunities, trends, and liquidity [Cautionary Note Regarding Forward-Looking Statements](index=34&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section outlines specific factors that could cause actual results to differ from forward-looking statements, including operating, reputational, and financial market risks - Specific factors that might cause actual results to differ from expectations include operating risks, reputational risks, financial market conditions, acquisition integration, capital access, political/legal/economic conditions, litigation, competition, product development, strategic plan execution, profitability, personnel retention, cybersecurity, and intellectual property claims[144](index=144&type=chunk)[153](index=153&type=chunk) [General](index=35&type=section&id=General) This section provides a general overview of Rekor's business, its vision for roadway intelligence, and its approach to transforming infrastructure [Overview](index=35&type=section&id=Overview) Rekor leads in roadway intelligence, leveraging AI to modernize public safety, urban mobility, and transportation management, aiming for safer, smarter, and more sustainable roadways - Rekor is at the forefront of modernizing public safety, urban mobility, and transportation management with AI-powered solutions[147](index=147&type=chunk) - The company's vision is to improve lives by enabling safer, smarter, and more sustainable roadways and communities through actionable mobility data[148](index=148&type=chunk) [A New Operating System for Roadways](index=35&type=section&id=A%20New%20Operating%20System%20for%20Roadways) Rekor is deploying AI solutions to transform transportation infrastructure into a new digital operating system for roadways, aiming for enhanced safety, optimized traffic flow, and cost savings - Rekor is building a new digital infrastructure operating system for roadways through public-private collaborations, deploying AI solutions since 2018[151](index=151&type=chunk)[152](index=152&type=chunk) - Key benefits include enhanced roadway safety, optimized traffic flow, cost savings & efficiency, improved data accuracy & insights, border & freight management, and uninsured driver reduction[154](index=154&type=chunk) [Roadway Intelligence](index=37&type=section&id=Roadway%20Intelligence) Rekor leads in roadway intelligence, using its Rekor One® engine to transform vast mobility data from IoT devices, sensors, and cameras into real-time, actionable insights - Rekor One® roadway intelligence engine aggregates and analyzes trillions of data points from IoT devices, roadway sensors, cameras, and partner networks[160](index=160&type=chunk) - Solutions support various use cases including traffic analysis, operations & management, enhanced roadway safety, border & freight management, and insurance compliance & public safety[161](index=161&type=chunk)[162](index=162&type=chunk) [Opportunities, Trends and Uncertainties](index=38&type=section&id=Opportunities,%20Trends%20and%20Uncertainties) This section identifies key opportunities like the smart city market and AI for infrastructure, alongside challenges such as market adaptability, profitability, and cybersecurity risks - Opportunities include the growing Smart City Market, AI for Infrastructure, new and expanded uses for vehicle recognition systems, connected vehicle data, GPU improvements, edge processing, accelerated business development, and benefits from the IIJA and BIL[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - Challenges include the adaptability of the market, difficulties in executing corporate strategy, inability to achieve profitability, retaining qualified personnel, competing effectively, cybersecurity risks, and intellectual property claims[164](index=164&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Components of Operating Results](index=41&type=section&id=Components%20of%20Operating%20Results) This section defines the components of operating results, including revenues from roadway data and traffic management, direct costs, various operating expenses, other income/expense, and income tax provisions - Revenues are primarily derived from licensing and sale of roadway data and traffic management products/services, recognized upon transfer of control[169](index=169&type=chunk) - Operating expenses consist of general and administrative, sales and marketing, research and development, and depreciation and amortization, with personnel costs being the most significant component[171](index=171&type=chunk) - Other income (expense) includes legal settlements, interest income/expense, debt extinguishment costs, and gains/losses on asset sales or fair value changes[177](index=177&type=chunk) - The company maintains a full valuation allowance against deferred tax assets due to a history of losses[179](index=179&type=chunk) [Critical Accounting Estimates and Assumptions](index=43&type=section&id=Critical%20Accounting%20Estimates%20and%20Assumptions) This section refers to the Annual Report on Form 10-K for a comprehensive discussion of the company's critical accounting estimates and assumptions - A comprehensive discussion of critical accounting estimates and assumptions is included in the Annual Report on Form 10-K for the year ended December 31, 2024[180](index=180&type=chunk) [New Accounting Pronouncements](index=43&type=section&id=New%20Accounting%20Pronouncements) This section directs readers to Note 1 of the unaudited condensed consolidated financial statements for information on new accounting pronouncements - Information regarding new accounting pronouncements is provided in Note 1 to the unaudited condensed consolidated financial statements[181](index=181&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) This section analyzes the company's operating results for Q1 2025 compared to the prior year, detailing revenue, expenses, and net loss [Comparison of the Three Months Ended March 31, 2025 and the Three Months Ended March 31, 2024](index=44&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202025%20and%20the%20Three%20Months%20Ended%20March%2031,%202024) The company saw a **6% revenue decrease** and **16% operating expense reduction** in Q1 2025, improving net loss due to cost containment and no prior debt extinguishment loss Comparison of Operating Results | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Revenue | $9,198 | $9,778 | $(580) | -6% | | Cost of revenue | $4,761 | $5,285 | $(524) | -10% | | General and administrative expenses | $7,286 | $7,662 | $(376) | -5% | | Selling and marketing expenses | $1,757 | $2,414 | $(657) | -27% | | Research and development expenses | $3,977 | $5,001 | $(1,024) | -20% | | Depreciation and amortization | $1,556 | $2,332 | $(776) | -33% | | Total operating expenses | $14,576 | $17,409 | $(2,833) | -16% | | Net loss | $(10,874) | $(18,614) | $7,740 | 42% | - The decrease in revenue was primarily attributable to adverse weather conditions and a slowdown in project activity, partially driven by ongoing uncertainty within the government sector[184](index=184&type=chunk) - The decrease in operating expenses was primarily due to cost containment efforts, including reduced professional services and payroll-related costs, and a prior impairment affecting depreciation and amortization[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - The significant improvement in other income (expense) was mainly due to the absence of a **$4,693,000** loss on extinguishment of debt recorded in the prior year[191](index=191&type=chunk)[192](index=192&type=chunk) [Non-GAAP Measures](index=45&type=section&id=Non-GAAP%20Measures) This section defines and reconciles non-GAAP financial measures like EBITDA, Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin [EBITDA and Adjusted EBITDA](index=45&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) This section defines and reconciles EBITDA and Adjusted EBITDA, non-GAAP measures used to assess debt servicing ability, both showing improvement for Q1 2025 - EBITDA is calculated as net loss before interest, taxes, depreciation, and amortization[193](index=193&type=chunk) - Adjusted EBITDA further adjusts for impairment, debt extinguishment loss, stock-based compensation, and other unusual items[193](index=193&type=chunk) EBITDA and Adjusted EBITDA | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(10,874) | $(18,614) | | Interest | $590 | $1,054 | | Depreciation and amortization | $1,556 | $2,332 | | EBITDA | $(8,728) | $(15,228) | | Share-based compensation | $1,370 | $1,167 | | Loss on extinguishment of debt | - | $4,693 | | Adjusted EBITDA | $(7,358) | $(9,368) | [Adjusted Gross Profit and Adjusted Gross Margin](index=45&type=section&id=Adjusted%20Gross%20Profit%20and%20Adjusted%20Gross%20Margin) Adjusted Gross Margin increased to **48.2%** in Q1 2025 from **46.0%** in Q1 2024, driven by a higher mix of software sales - Adjusted Gross Profit is revenue less cost of revenue, excluding depreciation and amortization[195](index=195&type=chunk) - Adjusted Gross Margin is Adjusted Gross Profit divided by revenue[195](index=195&type=chunk) Adjusted Gross Profit and Adjusted Gross Margin | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $9,198 | $9,778 | | Cost of revenue, excluding depreciation and amortization | $4,761 | $5,285 | | Adjusted Gross Profit | $4,437 | $4,493 | | Adjusted Gross Margin | 48.2% | 46.0% | - The increase in Adjusted Gross Margin is typically correlated to a higher mix of software sales versus service-type work[197](index=197&type=chunk) [Key Performance Indicators](index=47&type=section&id=Key%20Performance%20Indicators) This section discusses key performance indicators, including recurring revenue growth and remaining performance obligations, offering insights into operational efficiency and future revenue [Recurring Revenue Growth](index=47&type=section&id=Recurring%20Revenue%20Growth) The company prioritizes recurring revenue for predictability, achieving **3% growth** in Q1 2025, and plans continued focus on long-term contracts for future expansion - Recurring revenue increased by **3%** to **$5,106,000** for the three months ended March 31, 2025, from **$4,963,000** in the prior year[199](index=199&type=chunk) - The company expects to continue focusing on long-term contracts with recurring revenue to drive future growth[199](index=199&type=chunk) [Performance Obligations](index=47&type=section&id=Performance%20Obligations) Total remaining performance obligations as of March 31, 2025, were approximately **$14,485,000**, an increase of **0.2%** from December 31, 2024 - Total remaining performance obligations as of March 31, 2025, were approximately **$14,485,000**, an increase of **0.2%** from December 31, 2024[200](index=200&type=chunk) - Approximately **89%** of this amount is expected to be recognized as revenue over the succeeding twelve months, with the remainder over the following four years[200](index=200&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's liquidity and capital resources, including cash flow activities and its going concern assessment [Cash Flow Summary](index=48&type=section&id=Cash%20Flow%20Summary) Net cash used in operating activities slightly increased, while investing activities significantly decreased due to the prior ATD acquisition, and financing activities saw a reduction from lower equity offering proceeds Cash Flow Summary | Cash Flow Activity (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Net cash used in operating activities | $(8,079) | $(7,886) | $(193) | -2% | | Net cash used in investing activities | $(337) | $(9,130) | $8,793 | 96% | | Net cash provided by financing activities | $7,396 | $13,570 | $(6,174) | -45% | | Net decrease in cash, cash equivalents and restricted cash | $(1,020) | $(3,446) | $2,426 | -70% | - The decrease in net cash used in investing activities was primarily due to the **$8,969,000** net cash outflow related to the ATD acquisition in the prior period[203](index=203&type=chunk) - Net cash provided by financing activities decreased due to lower proceeds from the 2025 Sales Agreement (**$7,659,000**) compared to the 2024 Public Offering (**$26,362,000**) in the prior year[204](index=204&type=chunk) [Liquidity](index=49&type=section&id=Liquidity) The company's liquidity assessment indicates insufficient cash for the next twelve months, raising substantial doubt about its going concern ability, prompting active exploration of external financing and expense reduction plans - As of March 31, 2025, the company had working capital of **$3,073,000** and a net loss of **$10,874,000**[207](index=207&type=chunk) - Existing cash is insufficient to fund current operations for the next twelve months, leading to substantial doubt about the company's ability to continue as a going concern[211](index=211&type=chunk) - The company is actively reviewing and exploring external financing options and has contingency plans to reduce or defer expenses[32](index=32&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=50&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Rekor Systems, Inc. is exempt from providing quantitative and qualitative disclosures regarding market risk - Rekor Systems, Inc. is not required to provide quantitative and qualitative disclosures about market risk as a 'smaller reporting company'[214](index=214&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=50&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section reports on the effectiveness of disclosure controls and procedures, concluding they were effective as of March 31, 2025, with no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=50&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025 - Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[215](index=215&type=chunk)[217](index=217&type=chunk) [Changes to Internal Control over Financial Reporting](index=50&type=section&id=Changes%20to%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes in internal control over financial reporting during the most recent fiscal quarter - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[218](index=218&type=chunk) [PART II – OTHER INFORMATION](index=51&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides additional information, including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, and other corporate details [ITEM 1. LEGAL PROCEEDINGS](index=51&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section details ongoing legal proceedings, including a breach of contract lawsuit and an OSHA claim, which the company believes are without merit and intends to vigorously defend - H.C. Wainwright & Co., LLC filed a breach of contract lawsuit seeking compensatory and consequential damages, including cash fees and warrants, related to capital raises and the 2024 Public Offering[222](index=222&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - An OSHA claim, initially dismissed, was appealed; a liability hearing was held, and a damages hearing was cancelled pending the court's findings on liability[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - The Company believes these claims are without merit and intends to vigorously defend itself[226](index=226&type=chunk)[230](index=230&type=chunk) [ITEM 1A. RISK FACTORS](index=53&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section introduces a new risk factor regarding tariffs and trade policy changes, which could adversely impact the company's supply chain and financial performance, and refers to the Annual Report on Form 10-K for comprehensive risks - A new risk factor highlights that tariffs and trade policy changes could significantly increase hardware component costs, potentially reducing gross margins and adversely affecting financial performance[231](index=231&type=chunk) - Investors are encouraged to review the risk factors disclosed in the Annual Report on Form 10-K, supplemented by this Form 10-Q[232](index=232&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=53&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - There were no unregistered sales of equity securities or use of proceeds to report[233](index=233&type=chunk)[234](index=234&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=54&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[235](index=235&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=54&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item regarding mine safety disclosures is not applicable to the company - Mine safety disclosures are not applicable to the company[236](index=236&type=chunk) [ITEM 5. OTHER INFORMATION](index=54&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reported no adoption, modification, or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers during Q1 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter ended March 31, 2025[237](index=237&type=chunk) [ITEM 6. EXHIBITS](index=54&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including amendments to corporate documents, various certifications, and XBRL documents - Exhibits include amendments to the Certificate of Incorporation, Amended and Restated Bylaws, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[238](index=238&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) This section contains the official signatures of the company's executive officers, certifying the report's accuracy and completeness [Report Signatures](index=56&type=section&id=Report%20Signatures) The report was signed by Robert A. Berman, Interim President Chief Executive Officer and Chairman of the Board, and Eyal Hen, Chief Financial Officer, on May 14, 2025 - The report was signed by Robert A. Berman, Interim President Chief Executive Officer and Chairman of the Board, and Eyal Hen, Chief Financial Officer, on May 14, 2025[243](index=243&type=chunk)

[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)