Earnings call transcript: Rekor Systems reports Q2 2025 earnings miss

Rekor Systems Inc. reported its second-quarter 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company’s actual EPS was -$0.07, compared to a forecast of -$0.06, representing a 16.67% negative surprise. Revenue came in at $12.36 million, below the expected $13.28 million, marking a 6.93% shortfall. Following the announcement, Rekor Systems’ stock experienced a 1.83% increase to $1.11 in after-hours trading, despite the earnings miss. According to InvestingPro data, the company’s overall financial health score is rated as WEAK, with particularly concerning metrics in profitability and cash flow.

Key Takeaways

• Rekor Systems missed both EPS and revenue forecasts for Q2 2025.
• The company saw a 17% reduction in operating expenses year-over-year.
• Stock price rose by 1.83% in after-hours trading post-announcement.
• Rekor Systems anticipates sequential growth in the second half of 2025.

Company Performance

Rekor Systems reported flat year-over-year revenue for Q2 2025 at $12.4 million. Year-to-date revenue was down 3% compared to 2024, totaling $21.6 million. Despite the revenue shortfall, the company reduced its operating expenses by 17% year-over-year, focusing on cost containment and operational efficiency. The adjusted EBITDA loss remained at $5.8 million, consistent with the previous year.

Financial Highlights

• Revenue: $12.4 million (flat year-over-year)
• Earnings per share: -$0.07 (missed forecast by $0.01)
• Adjusted Gross Margin: 49.5% (down from 53.5% in Q2 2024)
• Operating Expenses: Reduced by 17% year-over-year
• Recurring Revenue: $5.9 million (48% of total revenue)

Earnings vs. Forecast

Rekor Systems’ Q2 2025 EPS of -$0.07 was slightly below the forecast of -$0.06, resulting in a 16.67% negative surprise. Revenue also fell short, reaching $12.36 million against the expected $13.28 million, a 6.93% miss. This performance contrasts with the company’s historical trend of meeting or exceeding forecasts in previous quarters.

Market Reaction

Despite the earnings miss, Rekor Systems’ stock price increased by 1.83% to $1.11 in after-hours trading. The stock’s movement may reflect investor optimism about the company’s cost-cutting measures and future growth prospects. The current price remains below its 52-week high of $2.67 but above the low of $0.621. InvestingPro analysis indicates the stock is currently overvalued, with a concerning six-month decline of nearly 49%. InvestingPro Tips highlight that stock price movements have been quite volatile, which investors should carefully consider.

Outlook & Guidance

Looking ahead, Rekor Systems anticipates sequential growth across its product lines, including Command, Discover, and Scout, in the second half of 2025. The company is focused on expanding its presence in Texas Department of Transportation (TxDOT) districts and securing additional contracts. The guidance for future quarters suggests a gradual improvement in EPS and revenue, with an aim to approach breakeven adjusted EBITDA by year-end.

Executive Commentary

CEO Robert Berman highlighted the company’s role in solving real problems and delivering value: "We’re solving real problems, delivering value and helping agencies rethink how they manage and secure the most vital public assets, our roads." CFO Eyal Henn emphasized the company’s strategic execution: "We have a clear strategy and we are executing on that plan."

Risks and Challenges

• Revenue Miss: Continued revenue shortfalls could pressure financial performance.
• Market Competition: Increasing competition in transportation data and intelligence.
• Economic Conditions: Broader economic factors could impact spending on infrastructure.
• Technology Adoption: Challenges in scaling new technology solutions.
• Regulatory Changes: Potential impacts from changes in transportation regulations.

Q&A

During the earnings call, analysts inquired about the company’s growth pipeline and the impact of weather on operations. Executives confirmed a strong pipeline and expressed confidence in second-half growth, while acknowledging limited progress in the PlateRanger partnership and emphasizing a focus on transportation data management.

Full transcript - Rekor Systems Inc (REKR) Q2 2025:

Robert, Conference Call Coordinator: Good afternoon, ladies and gentlemen, and welcome to today’s Recor Systems Incorporated Conference Call. My name is Robert, and I’ll be your coordinator for today. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded for replay purposes.

Before we start, I want to read you the company’s abbreviated Safe Harbor statement. I want to remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, products and product releases, partnerships and any other statements that may be construed as a prediction of future performance or events are forward looking statements. Such statements can involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimers in our earnings release. You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC.

Non GAAP results will also be discussed on the call. The company believes the presentation of non GAAP information provides useful supplementary data concerning the company’s ongoing operations and is provided for informational purposes only. I would now like to turn the presentation over to Mr. Robert Berman, Interim President and CEO of RECORE Systems.

Robert Berman, Interim President and CEO, Recor Systems: Thank you, operator, and good afternoon, everyone. We appreciate you joining us to review Recor Systems’ second quarter twenty twenty five results. We typically begin these calls with our CFO, Eyal Han, walking through the financials. But as we did last quarter, I’d like to first provide some broader context to help frame the numbers you’ll hear shortly. With that, I’m pleased to kick off the conversation this afternoon.

Earlier this year, we announced a major statewide blanket purchase order with the Texas Department of Transportation, one of the most influential and sophisticated departments of transportations in the country. This marks a transformative moment not just for RECORE, but for the broader transportation industry. TxDOT’s adoption of the RECORE Command platform sets a new standard for how large agencies can leverage AI and data fusion to improve roadway decision making safety and operational efficiency. That said, it is important to recognize that the expanded adoption across the rest of TxDOT’s 25 districts is not a switch flip overnight. We expect the process of bringing additional districts on board to unfold over the coming quarters and as stakeholders gain confidence in the results and operational benefits demonstrated in Austin and other future early deployments.

In that regard, we also secured and began executing two additional deployments that validate our broader market traction. The Central Texas Regional Mobile Authority has entered into point $4,000,000 contract expansion for over five years, demonstrating the authority’s continued trust and investment in its RECORP Command technology. The implementation of RECORP Command for this agency has led to significant measurable results, including a 324% increase in incident detection and an eleven minute faster average response time highlighting the effectiveness of the technology in improving roadway safety. The new contract expansion enhances their use of the platform by adding advanced features such as bidirectional driver communication and AI powered predictive insights to the capabilities they now use and will enhance its contribution to the roadway management. This partnership aligns with broader regional growth supporting over 35 major infrastructure projects in Central Texas through enhanced technology, which can lead to increased demand for RECOR services.

Another notable development for RECOR in the second quarter has been a major deployment of RECOR Discover in a Sunbelt state. As part of new statewide initiative to modernize traffic operations, the agency is installing 150 Discover systems under a one year $1,200,000 data as a service contract. Our installations are expected to be completed shortly. This deployment reflects growing momentum for transportation agencies seek safer, non intrusive FHWA compliant solutions to replace older in road technologies. In addition to this project, Discover is now active in multiple states including Arizona, Colorado, Florida, Georgia, New Mexico, New York, South Carolina, further strengthening our national footprint and supporting future international expansion.

On a local level, we’ve continued rolling out RECORE RoadView, our situational awareness platform built specifically for cities and counties that don’t operate 20 fourseven traffic management centers. RoadView provides real time alerts for incidents, congestion and work zones allowing smaller agencies to take timely action and improve operational response without heavy infrastructure investments. Feedback from the early adopters has been very encouraging. We also expanded our data as a service model for RECORE Discover, giving users access to accurate FHWA compliant traffic data being subscription. No hardware, no installation and no maintenance, just the data they need when they need it.

It’s a win win that will reduce agencies costs and complexity and allow us to increase recurring revenue while delivering high value insights at scale. The transportation landscape is evolving quickly and RECORE is playing a leading role increasing transportation data is being viewed not just as a planning tool, but as a national asset with implications for safety, resilience and economic development. That recognition is shaping our conversations with agency partners and opening doors to new opportunities. RECOR is well positioned to meet this moment with the technology, credibility and policy alignment required to help agencies modernize responsible and securely. As we look to the 2025, we’ll continue to executing against current deployments while deepening those relationships.

We’ll work to bring new TechStop districts online over time. We’ll build on our momentum to secure additional Discover contracts at the state and regional levels. And we’ll continue participating in the national dialogue around AI transportation and infrastructure modernization and developing new products and services to address these important needs. Two major milestones ahead. First, the ITE twenty twenty five in Florida this week and the ITS World Congress in Atlanta later this month.

We’ll be demonstrating our full connected intelligence suite and engaging with global transportation leaders to reinforce RECORE’s leadership position. In closing, RECORE is continuing to advance as a connected intelligence partner for the public sector. We’re solving real problems, delivering value and helping agencies rethink how they manage and secure the most vital public assets, our roads. Thank you again for your continued support. And with that, I’ll turn it over to our CFO, Eyal Henn, for a review of the financials.

Eyal?

Eyal Henn, CFO, Recor Systems: Thank you, Oleg, and good afternoon to everyone joining us. Today, I’ll walk you through our financial results for the three and six months ended 06/30/2025. While the macro environment remains somewhat challenging, particularly due to continued uncertainty in the government sector, we remain focused on execution and operational efficiency, and we are encouraged by the progress we continue to make in this challenging environment. Total revenue for Q2 twenty twenty five was $12,400,000 consistent with the same quarter of last year. On a year to date basis, we recorded 21,600,000 down 3% from the 2024.

This modest decline was primarily driven by slower project activity and weather conditions at the beginning of the year. However, we continue to see strength in our sales pipeline and current deployment and are confident in our ability to drive sequential growth in the second half of the year. Recurring revenue for Q2 totaled $5,900,000 representing 48% of total revenue compared to 50.6% in Q2 twenty twenty four. For the six months ended 06/30/2025, recurring revenue was $11,000,000 a slight decline of 2% from the prior year. These fluctuations reflect some recent increases in point in time sales.

However, our long term strategy remains focused on growing our recurring revenue base through SaaS and data subscription models. Adjusted gross margin for the quarter was 49.5% compared to 53.5% in Q2 twenty twenty four. For the first six months of 2025, adjusted gross margin was 48.9% versus 50.2% in the prior year period. The decline in margin is largely attributable to the revenue mix with a greater proportion of hardware based contracts compared to high margin software sales. We continue to expect margin increases over time as our SaaS and data businesses grow and account for a larger share of revenue.

A key highlight this quarter is our continued focus on operating efficiency. Total operating expenses for Q2 declined 17% year over year, representing a $2,900,000 reduction. Year to date, we have reduced operating expenses by $5,700,000 also a 17% improvement. These savings were achieved across all major areas of the business. G and A expenses decreased 6% in Q2 and 5% year to date.

Sales and marketing expenses were down 16% for the quarter and 22% year to date. And R and D expenses decreased 27% in Q2 and 24% for the first six months. These results reflect disciplined cost containment and deliberate realignment of resources to match our operating model and growth strategy. Adjusted EBITDA loss for Q2 twenty twenty five was $5,800,000 in line with the prior year. On a year to date basis, adjusted EBITDA improved by $2,000,000 narrowing to $13,100,000 compared to $15,200,000 in the same period last year.

With our commitment to continued cost discipline and size on higher revenue in the current quarter, we anticipate continued improvement in adjusted EBITDA for the remainder of 2025. Looking ahead, we are very optimistic. Our pipeline remains strong, particularly with our State Department of Transportation and Public Safety verticals. We expect these relationships to continue to expand and contribute more meaningfully to revenue in the second half of year. We also continue to identify opportunities for additional operational efficiencies to help improve our bottom line.

With our focus on revenue growth, extended SaaS offerings and disciplined execution, we remain confident in our goal of exiting 2025 on a stronger financial footing and moving closer to breakeven adjusted EBITDA. Before I turn it back to Overt, I want to thank our shareholders for their continued support. We recognize the challenges of the past year, but we are proud of the operational and financial progress made in the 2025. We have a clear strategy and we are executing on that plan. Your trust and patience are invaluable and we remain committed to delivering long term shareholder value.

Thank you for your attention. Over back to you.

Robert Berman, Interim President and CEO, Recor Systems: Thanks, Eyal. Now I’d like to open the floor for any questions you may have. Operator?

Robert, Conference Call Coordinator: Thank you. At this time, we’ll be conducting a question and answer session. Our first question comes from Michael Latimore with Northland Capital Markets. Please proceed with your question.

Michael Latimore, Analyst, Northland Capital Markets: Great. Thanks. Thanks a lot. Yes. So the there was solid really strong sequential growth in the quarter.

Was that just kind of better weather? Or was there something else driving that?

Eyal Henn, CFO, Recor Systems: It’s our plan. The pipeline that we have in Q1, nothing changed. As we said, Q1 was depressed delivered by the diverse weather that impacted our portable business. And Q2 is stronger, and we anticipate the remainder of the year to be stronger as with the pipeline that we have currently.

Michael Latimore, Analyst, Northland Capital Markets: Got it. And what would be a more important sort of second half driver? Think you talked about sequential growth generally, but would Discover or Command be more important to kind of second half

Eyal Henn, CFO, Recor Systems: It will be across actually, Discover, Command and Scout. We anticipate to have the sequential growth on all three business lines.

Robert, Conference Call Coordinator: Great. And then on Scout in

Michael Latimore, Analyst, Northland Capital Markets: the public safety space, what are some of the more interesting use cases you’re seeing there and types of customers you’re seeing?

Robert Berman, Interim President and CEO, Recor Systems: Mike, it’s Robert. How are you?

Michael Latimore, Analyst, Northland Capital Markets: All right.

Robert Berman, Interim President and CEO, Recor Systems: 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, parking, everything from parking to businesses like car washes, rental car companies, fleet management or variety of different businesses and so forth. So that’s where the focus is.

Michael Latimore, Analyst, Northland Capital Markets: Great. And just last one for me.

Robert, Conference Call Coordinator: I’m sorry?

Michael Latimore, Analyst, Northland Capital Markets: And then just the last one for me. Okay. 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?

Robert Berman, Interim President and CEO, Recor Systems: Very important. Like everything else, it takes a lot of time to convince government to change the way they do business. And it as a service, this is the right way for them to do business. And it’s a much better business for us because it’s all recurring revenue.

Michael Latimore, Analyst, Northland Capital Markets: Yes. Okay, great. Thanks a lot.

Robert, Conference Call Coordinator: Our next question comes from Tim Moore with ClearStreet. Please proceed with your question.

Larry Stavitsky, Analyst, ClearStreet: Hi, good afternoon guys. This is Larry Stavitsky on for Tim. He had to drop off to attend another call, but I just wanted to pinch hit for him. Do you guys have any large pilots or studies that you did in the last twelve to twenty four 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?

Robert Berman, Interim President and CEO, Recor Systems: Think can talk about that because those are procurement right now. So, it’s just nature of business, yes, we’re piloting and post using POCs have done RFPs, RFOs, you know, once it enters the RFP stage, just you know.

Michael Latimore, Analyst, Northland Capital Markets: Hello? Hello? Dilution? Yeah.

Larry Stavitsky, Analyst, ClearStreet: I think I lost you guys for a sec. I’m back on. I don’t know if you guys can hear me. I I I kinda missed you there.

Robert Berman, Interim President and CEO, Recor Systems: Yes. What I was saying was that a number of customers who did POC’s pilot have come back and they’ve decided to and once you enter your stage was opened and that’s just the rules. But the good news is that

Robert, Conference Call Coordinator: I think the answer to

Robert Berman, Interim President and CEO, Recor Systems: your question is the good news is a lot of the pipeline that we have is from doing the pilot and POCs that did that resulted in these coming back saying, okay, we’ll finish And

Larry Stavitsky, Analyst, ClearStreet: that’s what you guys are kind of talking about in the back half of the year coming to fruition in terms of sequential growth. I guess if you could put a little bit more color on the organic growth in the back half of the year for your expectations Well, in terms of

Robert Berman, Interim President and CEO, Recor Systems: yes. I mean, look, to be frank, I think we’ve learned that this is a business that has a long sales cycle because of the procurement process and we’ve learned how to manage that better and make more educated guesstimates as to when these things turn into revenue. And we feel very good about the back half of the year, about Q3 and Q4. And we’re confident that the company is turning the corner now.

Larry Stavitsky, Analyst, ClearStreet: Great. Thanks a lot for your help guys. I appreciate it.

Robert Berman, Interim President and CEO, Recor Systems: Sure. Thank Our

Robert, Conference Call Coordinator: next question is from Noah Levitz with William Blair. Please proceed with your question.

Noah Levitz, Analyst, William Blair: Thanks. Robert and Nehal, good afternoon. To start off, can you provide any color on the progress with PlateRanger and your partnership with Sound Thinking?

Eyal Henn, CFO, Recor Systems: Currently, to be honest, not much. We are working with them. But currently, there is not much progress right now. Yes.

Robert, Conference Call Coordinator: Sure. We

Robert Berman, Interim President and CEO, Recor Systems: really don’t have much involvement with that product. It’s all sound thinking and they market it, they sell it, they implement it and we provide the technology. So, we’re hoping that they get some traction, we’ll see. We’re hopeful.

Noah Levitz, Analyst, William Blair: Got you. Thank you. And then secondly, the IIJA bill continues to deploy funds. And I mean, a lot of companies we follow have noted that there’s a bipartisan group in Congress currently working on the subsequent bill, and it seems to be gaining a lot of steam. And Secretary Duffy has promoted the America is Building Again program.

So it seems like besides an uncertain procurement environment, there’s a lot of positivity in investing in transportation infrastructure. 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? Thanks.

Robert Berman, Interim President and CEO, Recor Systems: Well, it’s interesting that because Al and I are sitting right now at IT and Orlando once before and then we have ITS coming up, America, 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 $100,000,000,000 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.

Noah Levitz, Analyst, William Blair: Great. Thank you very much.

Robert Berman, Interim President and CEO, Recor Systems: Sure. Thank you.

Robert, Conference Call Coordinator: Our next question comes from Robert Ellinger, a Private Investor. Please proceed with your question.

Robert Ellinger, Private Investor: Hi, thank you for taking the time today. 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?

Robert Berman, Interim President and CEO, Recor Systems: 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 of systems. And also I think that’s the implementation of Command versus Discover.

Command is a SaaS product that’s installed inside buildings on computers and ATMs platforms, where Discover is being installed roadside. So I think a lot of that has to do with the company size, right? When you’re a little when you’re smaller, little impact and have a big change in your numbers. I hope that hopefully that’s helpful. But it’s not a seasonal business if that’s kind of where you’re going.

Robert Ellinger, Private Investor: Yes. That was mainly my question.

Robert Berman, Interim President and CEO, Recor Systems: It’s not a seasonal business. You.

Robert, Conference Call Coordinator: We have reached the end of the question and answer session. I’d now like to turn the call back to management for closing comments.

Robert Berman, Interim President and CEO, Recor Systems: Well, everybody, thank you. Appreciate it. I wish you could all be here with Eyal and I and the rest of the team that we have here to see what we see. It’s exciting. And again, we’re confident about the back half of the year and that finally we’re getting the attention that we believe the company’s technology deserves from the powers that be.

So we’ll look forward to seeing you on the next call in the fall. Thanks, everyone.

Robert, Conference Call Coordinator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.

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