Rekor Systems, Inc. Q3 FY2025 earnings call

• Eyal Hen stepped down as CFO, with Joel (former Corporate Controller) taking over. Joel has 6.5 years of experience at Rekor.
• Record revenue, recurring revenue growth, improved gross margin, reduced operating expenses, and improved EBITDA.
• Secured largest statewide multiyear contract with Georgia Department of Transportation valued at a minimum of $50 million over the contract's full term.
• South Carolina's virtual way station network using Rekor technology awarded a State Technology Innovation Award.
• New states beginning to use Rekor Discover.
• Rekor Labs working on deep fake detection product, expected to be in the market in 2026.
• Jennifer Candelaria joins as General Manager of Scout, bringing over a decade of global leadership experience.

In the third quarter of 2025, Rekor delivered record revenue of $14.2 million, a 35% increase compared to Q3 2024 and 15% compared to Q2 2025. Year-to-date revenue was $35.8 million, up 9% from the first 9 months of 2024. Recurring revenue for Q3 2025 totaled $6.5 million, an 18% increase from Q3 2024, and YTD recurring revenue was $17.5 million, up 5% year-over-year. Adjusted gross margin for Q3 2025 was 63% vs. 44% in Q3 2024, and YTD adjusted gross margin was 55% vs. 48% in the prior year period. Total operating expenses excluding depreciation and amortization declined 24% quarter-over-quarter in Q3 2025. Adjusted EBITDA loss for Q3 2025 was $1.5 million, an improvement of $7.9 million from Q3 2024.

• Expect margins to continue improving and stabilize as software and data as a service businesses become a larger share of total revenue.
• Confidence in continued growth from strong sales pipeline and active deployments.
• Working on revenue sharing note with Georgia and Texas contracts to improve liquidity, with efforts ongoing with the banker.

Q: What type of product does the Rekor team envision developing with the deep fake detection division?

A: Robert Berman said they started developing technology around it for customers earlier, expect a product in the market in '26 but are being careful with details.

Q: How should we think about the EBITDA trajectory and margins over the next several quarters?

A: Robert Berman said margins will increase and stabilize higher as things progress, with data-as-a-service model driving higher margins.

Q: Do you see many other contracts similar to the Georgia contract in your pipeline?

A: Robert Berman said states follow each other, and Rekor is uniquely positioned to offer services and solutions as they're seeing unprompted RFPs for their offerings.

Q: Is Austin starting to ramp up with the Command win?

A: Robert Berman said Austin has issued a PO under the RFP, and they're working with TxDOT procurement team for rollout beyond Austin.

Q: Do you expect to do a revenue sharing note again?

A: Eyal Hen said they're working with the banker on another series of revenue sharing notes with Georgia and Texas contracts adding to the pool.

Q: Do you expect a full pro rata portion of the new Georgia contract in the fourth quarter?

A: Eyal Hen said yes, Georgia contract is in full effect since October and they anticipate billing under the new contract.

Q: Status of the Discovery deployment in Georgia?

A: Eyal Hen said there are new Discover deployments in Georgia and other states, with resources shifted around seasonally.

Q: Are cities joining the Georgia procurement contract yet?

A: Eyal Hen said the Georgia contract is in full effect with a PO from them for the next year.

Q: Feedback on international market and QSR sector?

A: Robert Berman said actively engaged with European customers and focused on commercial application of Scout's vehicle recognition software for property owners, including anonymized information extraction.

Q: Do you see the technology being used elsewhere like shipping containers?

A: Robert Berman said state DOTs and federal government are interested in tracking via ports, which Rekor's technology can address.

Q: Do you believe profitability is what's holding the elevation in the share price?

A: Robert Berman said Rekor has proven ability to grow revenue, control costs, and drive to profitability, with value of technology expected to monetize in share price.