Rekor Systems, Inc. Q4 FY2025 earnings call

• Shifted focus to executing a pragmatic, profitable business model. - Onshored engineering efforts to optimize operations and incur $3.8 million non-cash asset impairment charge. - Total operating expenses excluding certain charges declined 20% year-over-year. - Adjusted EBITDA loss improved throughout the year, with first half loss of $13.1 million and second half loss of $5 million. - Entered 2026 with strong momentum, expect to ramp sales execution in back half of 2026. - Reduced R&D to 7% to 10% of gross revenue by back half of 2026. - Onshoring engineering team delivering faster development cycles, improved responsiveness, and stronger customer engagement. - Integration of acquisitions completed, operating on unified platform. - Launched ReCore Labs focused on deep fakes, with Professor Sanjay Sarma chairing.

For the year ended December 31st, 2025, revenue was $48.5 million, up 5% from $46 million in 2024. Reoccurring revenue was $23.9 million, up 6% year-over-year. Adjusted margin was 56% in 2025 versus 49% in 2024. Total operating expenses excluding depreciation, amortization, and asset impairment charges declined 20% year-over-year. Adjusted EBITDA loss for 2025 was $18.1 million, an improvement of $11 million from 2024. Remaining performance obligations as of December 31, 2025, were $25.9 million, a nearly 80% increase from 2024.

• Anticipate one-time charges in first and second quarters of 2026 related to cancellation and restructuring of existing agreements. - Expect to continue building on momentum from end of 2025, with additional cost savings from onshoring engineering and other efforts. - Focus on ramping sales execution in back half of 2026 to drive accelerated growth. - R&D to be reduced to 7% to 10% of gross revenue by back half of 2026.

• Known and unknown risks, uncertainties, and other factors may cause actual results to differ from forward-looking statements. - One-time charges in first and second quarters of 2026 related to business restructuring could impact financials. - Quarter-to-quarter variability may occur as rightsizing process is completed. - Political and regulatory resistance to ALPR technologies in law enforcement could potentially impact sales cycles and opportunities.

Q: Congrats on getting cash flow positive in fourth quarter, expect 2026 to be cash flow positive excluding one-time items?

A: Don't want to provide specific profitability guidance, but encouraged by progress at end of 2025, hope to build on momentum, expect additional cost savings from onshoring and other efforts, but aware of one-time charges.

Q: Update on Georgia deployment, any deployments in fourth quarter and playout through 2026?

A: State agencies usually shut down between Thanksgiving and New Year's, started ramping up towards second half of first quarter, working down there at a faster pace than before.

Q: Describe important public safety customers in 2025?

A: Couple of large OEM customers using engine and software for years, LPR business growing, more licensing of software.

Q: View on political and regulatory resistance to ALPR technologies?

A: Majority of software license sales not in law enforcement arena, in law enforcement it's an issue but don't have data lakes or sell data to third parties.

Q: Update on receptivity of other big cities in Texas to command?

A: Moving forward but very slow grind, have meetings coming up in April with districts, working on new contracts and renewals, onshoring command brought closer to customer and fixed bugs.

Q: Progress of Florida rollout, prospects, and 2025 revenue split between recurring and equipment revenue and growth?

A: Deployed 150 systems in District 7, more cameras in Florida, deployed additional 50 or more, 2025 revenue was 50-50 split, recurring revenue grew 6% year-over-year, expect trend to continue in 2026 as part of strategy to push to reoccurring revenue model.