Executive Summary

Q2 revenue rebounded sequentially to $12.36M, essentially flat year over year (-1%), while Adjusted Gross Margin compressed to 49.5% on mix; GAAP loss from operations improved both YoY and QoQ as cost actions flowed through .
Versus S&P Global consensus, revenue was in line ($12.36M actual vs $12.36M estimate*) and EPS modestly missed (-$0.068 actual vs -$0.06 estimate*); two estimates contributed to each consensus figure (low coverage) [Values retrieved from S&P Global].
Management highlighted strong H2 pipeline (TxDOT statewide BPO, CTRMA expansion, 150 Discover systems DaaS deployment) and reiterated expectations for sequential growth and continued adjusted EBITDA improvement in 2H25 .
Expense discipline remains a key driver: total operating expenses fell 17% YoY in Q2; YTD OpEx also down 17% YoY; ATM program was terminated as part of capital strategy .
Narrative shift: increasing adoption of AI-driven roadway intelligence with agencies focusing on data-centric decisioning (IIJA tailwinds), supporting medium-term multiple expansion if execution converts pilots/POCs into scaled contracts .

What Went Well and What Went Wrong

What Went Well
- Pipeline-to-revenue catalysts: TxDOT granted a statewide blanket purchase order for Rekor Command, enabling district-by-district rollouts; CTRMA executed a $1.4M five-year extension; and a major Sun Belt state is deploying 150 Discover systems under a $1.2M DaaS contract .
- Expense control: total operating expenses declined to $13.85M from $16.73M YoY (−17%), with CFO emphasizing broad-based savings across G&A, S&M, and R&D; Adjusted EBITDA loss improved YTD by $2M .
- Management conviction on H2: “We anticipate continued improvement in adjusted EBITDA for the remainder of 2025… our pipeline remains strong” and “we feel very good about the back half of the year” .
What Went Wrong
- Margin mix: Adjusted Gross Margin fell to 49.5% from 53.5% YoY on greater hardware/service mix vs higher-margin software, pressuring profitability despite revenue stabilization .
- EPS miss vs consensus: EPS of -$0.07 underperformed the -$0.06 consensus*, reflecting margin headwinds and financing costs; interest expense was $0.59M [Values retrieved from S&P Global].
- Revenue still flat YoY and below record Q4 pace; management cited weather and government-sector uncertainty earlier in the year affecting activity levels and mix .

Financial Results

Quarterly trend (oldest → newest):

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD)	$12.43M	$9.20M	$12.36M
Adjusted Gross Margin (%)	53.5%	48.2%	49.5%
Loss from Operations ($USD)	$(10.08)M	$(10.14)M	$(7.74)M
Net Loss ($USD)	$(9.80)M	$(10.87)M	$(8.66)M
Diluted EPS ($)	$(0.12)	$(0.10)	$(0.07)
Total Operating Expenses ($USD)	$16.73M	$14.58M	$13.85M
Adjusted EBITDA ($USD)	$(5.79)M	$(7.36)M	$(5.79)M

Q2 2025 vs S&P Global consensus:

Metric	Q2 2025 Actual	Q2 2025 Consensus*	Surprise
Revenue ($USD)	$12.36M	$12.36M (2 est.)*	In line [Values retrieved from S&P Global]
Primary EPS ($)	$(0.068) (GAAP loss per share $(0.07))	$(0.06) (2 est.)*	Miss ~$0.01 [Values retrieved from S&P Global]

YoY context from press release tables: revenue -1%, Adjusted Gross Margin -400 bps .

KPIs and mix:

KPI	Q2 2024	Q1 2025	Q2 2025
Recurring Revenue ($, % of total)	N/A; 50.6% of revenue	N/A	$5.9M; 48% of revenue
Note on Mix	—	—	Margin impacted by higher hardware/service mix vs software

Segment breakdown: Not disclosed; management referenced business lines (Command, Discover, Scout) but did not provide revenue by line .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	2H 2025	None	Management expects sequential growth in Q3–Q4 2025	Qualitative positive
Adjusted EBITDA	2H 2025 / FY 2025	None	“Anticipate continued improvement in adjusted EBITDA for the remainder of 2025”	Qualitative positive
Operating Expenses	Ongoing	None	Continued cost discipline; OpEx reduced 17% YoY in Q2; YTD -17%	Qualitative positive
Capital Actions	N/A	ATM in place	ATM offering terminated	Terminated

Note: No formal quantitative guidance (ranges) was issued in Q2 materials; management commentary was directional .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/technology initiatives	Q4: Priority Ranking and Related Events AI features for Command; SoundHound partnership; record 2024 revenue	Continued expansion of Command and RoadView; focus on AI-driven data fusion and decision support	Expanding feature set and platform adoption
Organizational execution	Q1: Implemented GM structure with P&L accountability to sharpen execution	Management reiterates GM structure benefits for speed and scale	Operating model maturing
Product performance (Command/Discover/Scout)	Q4: Strong positioning; Q1: foundation for scalable growth	TxDOT statewide BPO for Command; 150 Discover DaaS units in Sun Belt; Scout focus on commercial use cases	Broadening deployments
Regional trends	Q4: Domestic momentum (NJ, Phoenix EV study)	Texas and broader Sun Belt traction; pipeline across state DOTs/public safety	Strengthening in large states
Regulatory/macro	—	IIJA attention shifting to data-driven spending; procurement cycles remain lengthy	Tailwinds in policy focus; cycle management needed
R&D/OpEx discipline	Q1: Cost reductions underway; Adj. EBITDA improvement	Q2 OpEx -17% YoY; YTD -17% YoY; continued EBITDA improvement expected	Sustained cost control
Partnerships	Q4: SoundHound AI partnership; Scout certified in NJ	SoundThinking PlateRanger progress “not much” currently	Mixed; limited impact near-term

Management Commentary

CEO on market traction: “Our expanding work with agencies like TxDOT… reflects growing trust in our technology and a broader industry shift toward AI-powered data fusion.”
CFO on outlook: “With our commitment to continued cost discipline…and higher revenue in the current quarter, we anticipate continued improvement in adjusted EBITDA for the remainder of 2025.”
CEO on procurement cycles and 2H setup: “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.”
Strategy and org: “Each business unit now operates under dedicated leadership with full P&L responsibility—allowing us to drive innovation more quickly, scale operations more effectively…”

Q&A Highlights

Sequential growth drivers: Management emphasized broad-based contribution from Discover, Command, and Scout in H2 2025; Q1 was depressed by weather, with recovery in Q2 and momentum expected to continue .
Business mix: Scout currently focused more on commercial use cases (parking, fleets, car washes, rentals), while Command and Discover anchor public sector deployments .
DaaS model importance: Data-as-a-Service is “very important” to Discover pipeline, improving recurring revenue quality though government adoption can be slow .
Pipeline conversion: Many pilots/POCs have progressed into RFP/RFO stages; management more confident in timing and conversion in back half .
Partnerships: Limited near-term traction from SoundThinking’s PlateRanger; Rekor provides tech but commercialization is led by partner .

Estimates Context

Q2 2025 revenue: $12.36M actual vs $12.36M consensus (2 est.)* → in line [Values retrieved from S&P Global].
Q2 2025 EPS: -$0.068 actual vs -$0.06 consensus (2 est.)* → modest miss [Values retrieved from S&P Global].
Low estimate coverage (two estimates) suggests potential for wider-than-usual surprise dispersion in coming quarters [Values retrieved from S&P Global].

Key Takeaways for Investors

Execution runway for H2: TxDOT statewide BPO, CTRMA extension, and Sun Belt Discover DaaS should support sequential growth in Q3–Q4 if deployments stay on schedule .
Improving operating leverage: YoY OpEx down 17% with continued focus on efficiency; management targets ongoing Adjusted EBITDA improvement in 2H25 .
Mix remains the swing factor: Hardware/service-heavy quarters compress margin; sustained SaaS/DaaS growth is key to re-expanding gross margin toward prior levels (53.5% in Q2 2024 vs 49.5% now) .
Near-term print risk appears modest with revenue tracking in line to consensus and EPS sensitive to mix/interest; low estimate coverage adds uncertainty around future quarters [Values retrieved from S&P Global].
Strategic narrative strengthening around AI/data and IIJA-driven data-centric spending; successful pilot-to-scale conversions at large agencies could be a re-rating catalyst .
Capital discipline continues (ATM terminated); watch cash and working capital as deployments ramp given sequential growth expectations .

Footnotes:

S&P Global consensus and actuals (EPS and revenue) are values retrieved from S&P Global.

Supporting citations:

Q2 2025 press release and 8-K (financials, OpEx, margins, ATM termination):
Q2 2025 earnings call transcript (pipeline, recurring revenue mix, outlook, DaaS, partnerships, IIJA):
Q1 2025 8-K (sequential comparison, GM structure):
Q4 2024 8-K (record 2024, AI feature releases, partnerships):
Operational press releases in Q2 window (TxDOT BPO, CTRMA extension, Sun Belt Discover DaaS):

Rekor Systems, Inc. (REKR)·Q2 2025 Earnings Summary