Rekor Systems, Inc. Q2 FY2025 earnings call

• Announced a major statewide blanket purchase order with the Texas Department of Transportation, with adoption across districts unfolding over quarters.
• Secured and began executing 2 additional deployments: Central Texas Regional Mobile Authority $1.4 million contract expansion with 324% increase in incident detection and 11-minute faster average response time; a major deployment of Rekor Discover in a Sunbelt state with 150 systems under a $1.2 million Data-as-a-Service contract.
• Rolled out Rekor Road View for cities and counties, providing real-time alerts.
• Expanded Data-as-a-Service model for Rekor Discover, offering FHWA compliant traffic data subscription.
• Participating in ITE 2025 in Florida and ITS World Congress in Atlanta to demonstrate connected intelligence suite.

Total revenue for Q2 2025 was $12.4 million, consistent with the same quarter of last year. Year-to-date revenue was $21.6 million, down 3% from the first half of 2024. Recurring revenue for Q2 totaled $5.9 million (48% of total revenue), and for the 6 months ended June 30, 2025, it was $11 million, a slight decline of 2% from the prior year. Adjusted gross margin for Q2 was 49.5%, down from 53.5% in Q2 2024. For the first 6 months of 2025, adjusted gross margin was 48.9% versus 50.2% in the prior year period, due to revenue mix with more hardware-based contracts.

• Expect continued sequential growth in the second half of 2025 across Discover, Command, and Scout.
• Anticipate margin increases over time as SaaS and data businesses grow.
• Confident in exiting 2025 on a stronger financial footing and moving closer to breakeven adjusted EBITDA.

Weather conditions can impact business, though as the company scales, impact may lessen; weather can affect implementation of roadside systems like Discover differently than SaaS-based Command.

Q: So there was solid -- really strong sequential growth in the quarter. Was that just kind of better weather? Or is there somebody else driving that?

A: It's the pipeline that we have in Q1, I think, change as we said, Q1 was depressed a little bit by the diverse weather that impact our portable business. And Q2 is stronger, and we anticipate the remainder of the year to be stronger with the pipeline that we have currently.

Q: And what would be a more important sort of second half driver? I think you talked about sequential growth generally, but we would -- Discover or Command be more important to kind of second half here?

A: It will be across actually Discover, Command and Scout, we anticipate to have the sequential growth on all 3 business lines.

Q: And then on Scout and the public safety space, what are some of the more interesting use cases you're seeing there and types of customers you're seeing.

A: All right, well, good, mostly commercial, Mike. We're focused on the commercial sector, which is really where we're seeing a lot more use of vehicle recognition. Marking everything from parking to kind of -- yes, businesses like car washes, rental car companies, fleet management for a lot of different businesses and still forward. So that's where the focus is.

Q: You talked about the Data-as-a-Service option for Discover. How important is that to the Discover pipeline relative to more traditional models there?

A: Very important, well, like everything else, it is taking a lot of time to convince the government to change the way they do business. And Data-as-a-Service is the right way for them to do business. And it's a much better business for us because it's all recurring revenue.

Q: Do you guys have any large pilots or studies that you did in the last 12 to 24 months. Besides Austin, that is nearing a contract or some type of larger pilot with a meaningful revenue contribution that we should be aware of?

A: I talk about that because those are procurement right now. So it's just the nature of business. But yes, we're with a lot of we're piloting and using POCs, have done REs, RFOs once it enters the RFP stage...

Q: Can you provide any color on the progress with PlateRanger and your partnership with SoundThinking.

A: Currently, not much. We are working with them. But currently, there is not much progress right now with the test.

Q: The IIJ bill continues to deploy funds. Does this give you confidence like when you go to the ITS conference in a month or so that the conversations are going to be more optimistic and 2026 and beyond will be you'll see more traction with your products?

A: Well, it's interesting because Eyal and I are sitting right now at IT in Orlando conference before. And then we have ITS coming up in America at the end of the month. But IT for me, is much different. There's over 100 vendors here. The dialogue is completely different. And the reason for it is it's being driven by the present administration, which has realized that the federal government has mismanaged to start with the $100 billion trust fund they operate every year, which is the ecosystem for recycling gasoline excise taxes and they're putting much more focus on the data, okay? Because the data drives where you spend money and you can't manage what you can't measure. So hearing the dialogue, listening to the speakers, just seeing the discussion on the floor, completely different focus now. It's on the data, and that's what our company is all about. We're building an ecosystem for the data so that they can manage the roadway so that they can plan and operate them. And it's nice to hear people talking this way.

Q: I was curious at the beginning when you spoke about the difficulties and challenges associated with unpredictable weather. Have you developed any plan or strategy if this happens again?

A: Yes. Look, that's a fair question. The company is small and is starting to scale. And a small amount of our revenue comes from a certain number of customers that are in areas where the weather can get dicey, right? But as the company scales, the weather won't really impact the implementation systems. And also implemented Command versus Discover. Command is a SaaS product that's installed inside buildings on computers and ATMS platforms, whereas Discover is being installed roadside. So I think a lot of that has to do with the company's size, right? When you're smaller, little impact can have big change in your numbers. So I hope that -- hopefully, that's helpful. But it's not a seasonal business, if that's kind of where you're going.