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Rekor Systems, Inc. (REKR)·Q1 2025 Earnings Summary

Executive Summary

  • Revenue of $9.20M declined 6% YoY and missed S&P Global consensus ($10.92M); GAAP EPS was $(0.10) vs consensus $(0.075). Adjusted EBITDA loss was $(7.36)M; EBITDA $(8.73)M, both below expectations. Bold miss drivers: adverse weather, delayed contract signings, and DOT/public safety budget constraints tied to new administration uncertainty .*
  • Adjusted gross margin expanded 220 bps YoY to 48.2% on more margin-accretive mix; operating loss improved to $(10.14)M from $(12.92)M YoY on cost actions started in Nov-2024; management expects sequential EBITDA improvements in 2025 .
  • Strategic transformation to GM-led business units with P&L accountability to sharpen customer focus and accelerate adoption; CFO targets breakeven adjusted EBITDA “in the foreseeable future,” and interim CEO “personally believes” profitability could come before year-end (qualitative, not formal guidance) .
  • Recurring revenue held at $5.1M (+3% YoY), supporting predictability despite sales headwinds; cash and equivalents were $3.85M at 3/31/25, down from $5.01M at YE 2024; company added a $25M ATM in Feb-2025 to bolster flexibility .
  • Additional catalysts: new AI features (Command Incident Priority Ranking), EV movement study (Phoenix), expanded NMDOT pay-for-data deployments, and SoundThinking partnership with guaranteed revenue for 2025–2027, supporting product momentum and channel leverage .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA improved by ~$2.0M YoY to $(7.36)M; operating loss narrowed by ~$2.8M YoY, reflecting cost optimization and workforce realignment begun in Nov-2024 .
  • Adjusted gross margin rose to 48.2% (+220 bps YoY) on higher-margin SaaS/data mix; CFO expects continued margin expansion in 2025 .
  • Management implemented GM structure to tighten accountability and accelerate product adoption. “Each business unit now has dedicated leadership with full profit-and-loss responsibility… allowing us to operate with greater agility” — Interim CEO Robert Berman .

What Went Wrong

  • Top-line miss vs consensus due to “adverse weather conditions in the Southeast, delays in contract signings and budget constraints from DOTs and public safety agencies… due to the uncertainty surrounding the new administration,” pressuring near-term sales execution .
  • Sequential revenue decline vs record Q4 2024 ($13.28M → $9.20M) and sequential dip in adjusted gross margin (51.9% → 48.2%) indicate mix and seasonality headwinds .
  • Liquidity tightened: cash and equivalents fell to $3.85M by 3/31/25 from $5.01M at YE 2024, increasing reliance on ATM capacity and non-dilutive revenue-sharing notes for larger deployments .

Financial Results

Headline metrics vs prior periods

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$9.78 $13.28 $9.20
GAAP EPS ($)$(0.24) N/A$(0.10)
Adjusted Gross Margin (%)46.0% 51.9% 48.2%
Adjusted Gross Profit ($USD Millions)$4.49 $6.90 $4.44
Operating Loss ($USD Millions)$(12.92) N/A$(10.14)
EBITDA ($USD Millions)$(15.23) N/A$(8.73)
Adjusted EBITDA ($USD Millions)$(9.37) $(4.73) $(7.36)
Cash & Equivalents ($USD Millions)N/A$5.01 $3.85

Q1 2025 actuals vs S&P Global consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$10.92*$9.20 Bold miss ($1.72M)
GAAP EPS ($)$(0.075)*$(0.10) Bold miss $(0.025)
EBITDA ($USD Millions)$(3.92)*$(8.73) Bold miss $(4.81)

*Values retrieved from S&P Global.

KPIs (where disclosed)

KPIQ1 2024Q1 2025
Recurring Revenue ($USD Millions)N/A$5.10 (↑3% YoY)
Weighted Avg Shares (Basic & Diluted)78.89M 106.82M
Total Operating Expenses ($USD Millions)$17.41 $14.58

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA trajectoryFY 2025None formalManagement expects sequential improvement in adjusted EBITDA through 2025 and aims for breakeven “in the foreseeable future” Qualitative improvement
Profitability commentFY 2025None formalInterim CEO “personally believes” profitability could arrive before year-end (non-binding) Qualitative constructive
Gross margin trendFY 2025None formalExpected steady improvement on higher SaaS/data mix and delivery efficiencies Qualitative constructive

No numerical revenue/EPS/OpEx/tax guidance was issued in Q1 2025 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Cost optimizationAnnounced up to $15M annual cost realignment; Q4 adjusted EBITDA cut ~49% vs Q3 Adjusted EBITDA narrowed YoY; $15M savings to be realized over the year Improving
Productization & pricing (Discover)Florida APL certification; deployments commenced; pipeline building GM structure; revised pricing and go-to-market to match DOT procurement; near-term growth expected Improving
Margin trajectoryQ4 adjusted GM rebounded to 51.9% on higher-margin mix Q1 adjusted GM 48.2%; CFO expects steady expansion via SaaS/data Mixed, improving outlook
Government procurement uncertaintyNoted variability in servicing government customers Weather, contract delays, budget constraints under new administration hurt Q1 sales Persistent headwind
International expansionBuilding channel presence; partnerships (e.g., Goldwings Hawaii) GM hire (Mark Phillips); active Europe pilot; international demand for Discover Improving
Public safety channelSoundThinking partnership highlighted in 2024 Contract provides guaranteed revenue in 2025–2027; focus Scout on commercial side Improving
Capital structure/liquidityYorkville option eliminated; Q4 balance satisfied; $25M ATM established Liquidity tighter at Q1; ongoing use of ATM/revenue-sharing notes as needed Neutral

Management Commentary

  • “Each business unit now has dedicated leadership with full profit-and-loss responsibility, allowing us to operate with greater agility, accelerate innovation… and scale more efficiently across domestic and international markets.” — Interim CEO Robert Berman .
  • “Adjusted gross margin… 48.2%, up from 46%… primarily driven by a higher mix of margin accretive offerings… we anticipate continued gross margin expansion, supported by growing share of SaaS-based revenue and increased contributions from our pay for data contracts.” — CFO Eyal Hen .
  • “We are working towards achieving breakeven adjusted EBITDA in the foreseeable future… sequentially better EBITDA results as the year unfolds.” — CFO Eyal Hen .
  • “I personally believe that we are on track for profitability before the end of the year. I don’t want to commit to it, but I think we’re going to get there.” — Interim CEO Robert Berman .

Q&A Highlights

  • Discover rollouts: Management is “fully productizing” Discover; revised pricing and channel strategy to align with DOT buying; expect more task-order growth vs waiting for lumpy statewide wins .
  • Cost savings: $15M annualized savings are being implemented over the year; focus shifting from long-horizon R&D to near-term revenue delivery .
  • Data monetization: Company will “sell what we have” across Discover/Command/Scout, with potential to layer more data/services later; prioritizes revenue today over complex future builds .
  • International demand: Active European pilot; GM hire supports global go-to-market .
  • SoundThinking partnership: Guaranteed revenue for 2025–2027; Rekor focusing Scout more on commercial customers while SoundThinking drives law enforcement sales .

Estimates Context

  • Q1 2025 revenue and EPS missed S&P Global consensus; EBITDA miss was significant given lower-than-modeled sales and mix. Expect near-term estimate resets lower on revenue/EBITDA, with partial offset from margin discipline and recurring revenue stability .*
  • Structural actions (GM model, pricing changes, cost optimization) support a path to sequential EBITDA improvement; however, procurement/seasonality remain risks to timing, suggesting cautious consensus adjustments rather than aggressive upgrades .*

*Values retrieved from S&P Global for consensus figures.

Key Takeaways for Investors

  • Near-term miss on revenue/EPS/EBITDA reflects exogenous weather and procurement delays; margin discipline and recurring revenue provide ballast while GM structure reorients execution toward sell-through velocity .
  • Watch for evidence of Discover task-order cadence and international pilots converting to revenue; this would validate the productized, channel-led strategy and reduce dependence on large RFP cycles .
  • Margin trajectory should improve with SaaS/data mix and delivery efficiencies; sequential adjusted EBITDA improvement is a key KPI to track across Q2–Q4 .
  • Liquidity is tighter; monitor ATM usage and revenue-sharing notes deployment tied to pay-for-data contracts; cash discipline remains central to thesis .
  • Public safety channel leverage via SoundThinking (guaranteed revenue) and commercial Scout focus can diversify growth and support ARR stabilization/expansion .
  • Tactical trading: Stock may react to proof points on GM structure (new bookings, margin expansion) and contracted deployments (Texas/Florida follow-through), while procurement headlines and macro budget constraints are the primary risk overhangs .
  • Medium-term: If GM model accelerates product adoption and margins expand as planned, the path to breakeven adjusted EBITDA could support re-rating; execution vs contracting variability is the swing factor .

Additional Notes from Q1 2025 documents

  • Balance sheet snapshot shows total assets $79.80M; total equity $33.36M at 3/31/25 .
  • Operating expenses declined to $14.58M (from $17.41M) YoY, reflecting cost measures .
  • Company maintained narrative discipline on non-GAAP definitions and reconciliations (Adjusted EBITDA components provided) .
  • Other press releases this quarter reinforce product innovation (Command Incident Priority Ranking), EV analytics adoption (Phoenix), and third-party deployment scalability (NMDOT) .