Executive Summary

Rekor delivered record Q3 revenue of $14.19M, up 35% YoY and 15% QoQ, with adjusted gross margin expanding to 63.4%—the strongest quarter in company history .
Results beat S&P Global consensus: revenue $14.19M vs $12.85M*, EPS $(0.03) vs $(0.05); EBITDA also outperformed estimates (company EBITDA $(2.04)M vs $(2.70)M) .
Mix shift to higher-margin software/DaaS and disciplined cost control drove operating leverage; operating expenses fell 26% sequentially (total) and 24% ex-D&A, reducing loss from operations to $(4.0)M .
Strategically, Rekor secured its largest statewide GDOT contract (min $50M; co-op purchasing could take total value >$100M), initiated deployments with Caltrans and continued Texas, and announced a deepfake detection initiative (Rekor Labs) targeting a 2026 launch .

What Went Well and What Went Wrong

What Went Well
- Record financial performance: revenue $14.19M (+35% YoY), adjusted gross margin 63.4% (+1,940 bps YoY), and adjusted EBITDA loss narrowed to $(1.46)M—the best in company history .
- State-level momentum: largest statewide GDOT contract (min $50M, with co-op purchasing possibly taking value >$100M); deployments with Caltrans and continued traction in Texas .
- Structural shift to DaaS/software: management emphasized agencies increasingly want data without hardware burden; Rekor “pioneered” this model, enabling higher margins and longer-term contracts (“that means higher margins, longer-term contracts”) .
What Went Wrong
- Profitability still negative: Q3 loss from operations $(3.97)M and GAAP EPS $(0.03) despite improvements .
- Seasonality and deployment cadence remain constraints; DOT work can slow around holidays, requiring resource shifts across states .
- Liquidity needs persist; management is working on a second series of revenue sharing notes to improve liquidity (banker engaged) .

Financial Results

Quarterly trend (oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$9.20	$12.36	$14.19
Adjusted Gross Margin %	48.2%	49.5%	63.4%
Loss from Operations ($USD Millions)	$(10.14)	$(7.74)	$(3.97)
GAAP EPS ($)	$(0.10)	$(0.07)	$(0.03)
EBITDA ($USD Millions)	$(8.73)	$(6.51)	$(2.04)
Adjusted EBITDA ($USD Millions)	$(7.36)	$(5.79)	$(1.46)

Q3 vs S&P Global consensus

Metric	Actual (Q3 2025)	Consensus (Q3 2025)	Delta
Revenue ($USD Millions)	$14.19	$12.85*	+$1.34
EPS ($)	$(0.03)	$(0.05)*	+$0.02
EBITDA ($USD Millions)	$(2.04)	$(2.70)*	+$0.66

Q2 context vs S&P Global consensus

Metric	Actual (Q2 2025)	Consensus (Q2 2025)	Delta
Revenue ($USD Millions)	$12.36	$12.36*	~$0.00
EPS ($)	$(0.0676)	$(0.06)*	$(0.008)

KPIs and operating metrics

KPI	Q3 2025	YoY	QoQ
Recurring Revenue ($USD Millions)	$6.5	+18%	N/A
YTD Recurring Revenue ($USD Millions)	$17.5	+5%	N/A
Adjusted Gross Margin %	63.4%	+1,940 bps	+1,390 bps vs Q2
Operating Expenses (total)	Down 26% QoQ	Down 20% YoY	Down 26% QoQ
OpEx ex-D&A	Down 24% QoQ; −$3.7M QoQ	N/A	−24%

Notes: Segment revenue/KPIs not disclosed in press materials .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q4 2025	None	No formal quantitative guidance; management expects Georgia contract billing in Q4 and continued DaaS/software mix benefits	N/A
Gross/Adj. Gross Margin	FY/Q4 2025	None	Expect margins to “stabilize higher than we reported this quarter” over time, driven by DaaS mix	N/A
Operating Expenses	FY/Q4 2025	None	Continued discipline; sequential reductions achieved in Q3	N/A
Liquidity/Financing	FY/Q4 2025	None	Working toward second series of revenue sharing notes with banker	N/A

No formal numerical ranges provided in Q3 materials.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Data-as-a-Service (DaaS) adoption and software mix	Emphasis on structural changes to drive near-term revenue, GM structure, margin focus ; Q2 highlighted Discover DaaS installations and expanding agency adoption	Management: agencies want “data without hardware burden”; DaaS “pioneered” by Rekor; higher margins, longer-term contracts ; 63.4% adjusted GM	Positive acceleration
State contracts (Georgia, Texas, Caltrans)	Q2: TxDOT statewide blanket PO (Command); CTRMA extension; Sun Belt Discover rollout	Largest GDOT contract (min $50M; co-op use may lift >$100M) ; initial Caltrans deployments ; Austin PO and broader Texas rollout in process	Pipeline broadening
Margin trajectory	Q1/Q2: margin improvement focus, mixed; adjusted GM ~49%	Adjusted GM 63.4%; management expects margins to stabilize higher over time	Improving
Liquidity/financing	Not prominent in Q1 materials; operational discipline noted	Working on second series of revenue sharing notes to improve liquidity	Active
International expansion	Not emphasized earlier	Engaging European customers; target initial business in 2026	Early-stage
New initiatives (Deepfake detection)	Not mentioned in Q1/Q2 earnings releases	Rekor Labs launched; product targeting 1H 2026; exploring corporate structure with Moelis	New optionality
Scout product focus	Not highlighted	Scout remains a cornerstone; new GM hire to drive growth	Refocus and invest

Management Commentary

“We’re seeing transportation authorities issue new RFPs that combine [Discover and Command]. This confirms a clear industry shift toward integrated data and intelligence solutions—a direction Rekor helped define years ago.” — Robert A. Berman, President & CEO .
“Our Data-as-a-Service model has become a powerful growth engine… agencies increasingly want fast, reliable access to actionable roadway data without the cost and complexity of owning and maintaining hardware.” — Robert A. Berman .
“Total operating expenses, excluding depreciation and amortization, declined 24% quarter over quarter… Year to date, we’ve reduced operating expenses by $7.8 million.” — Joe Nalepa, CFO .
“We expect [margins] will stabilize higher than we reported this quarter” as DaaS scales .
On GDOT ramp: “Georgia contracts are in effect since October, and we anticipate to bill them under the new contract” in Q4 .

Q&A Highlights

Deepfake detection (Rekor Labs): Built on AI/machine vision; product targeted for 2026; operating independently with limited detail due to competition/IP considerations .
Margins/EBITDA trajectory: Management reiterated expectation for margins to rise and stabilize at higher levels as DaaS scales .
State pipeline: Unprompted RFPs increasingly request Rekor’s DaaS model and combined Discover/Command capabilities; Rekor sees copycat adoption across states .
Texas rollout: Austin issued a PO under the RFP; broader TxDOT district rollout expected with procurement coordination .
Liquidity: Company working with banker on second series of revenue sharing notes to improve liquidity .
Georgia timing: Billing under new contract in Q4; new Discover deployments active in GA, FL, and other states .
International: Early engagements in Europe with potential activity in 2026 .
Seasonality: Some DOT seasonal slowdown around holidays; Rekor reallocates resources to maintain deployment momentum .

Estimates Context

Q3 performance vs S&P Global consensus: Revenue $14.19M vs $12.85M*, EPS $(0.03) vs $(0.05); EBITDA $(2.04)M vs $(2.70)M—broad beats driven by higher-margin software/DaaS mix and cost discipline .
Q2 context: Revenue in-line at $12.36M vs $12.36M*, EPS modest miss $(0.0676) vs $(0.06)* .
Forward look: Q4 2025 consensus revenue $14.56M* and EPS $(0.04)*; GDOT billing in Q4 and continued DaaS mix could support estimate revisions upward if deployments sustain .
Estimate coverage is thin (2 estimates for revenue/EPS in Q3/Q4; 1 for Q4 EPS), which can amplify volatility in estimate moves and stock reaction.

Values retrieved from S&P Global.*

Key Takeaways for Investors

Q3 was a clean beat on revenue and EPS with a step-function improvement in adjusted gross margin to 63.4%, validating the DaaS/software mix thesis .
State-level momentum (GDOT, Caltrans, Texas) and co-op purchasing mechanics in Georgia present a credible multi-year ARR ramp and visibility, with potential to exceed the $50M minimum .
Operating discipline is translating to improved operating leverage; watch for continued OpEx containment and scaling deployments to narrow losses further .
Near-term catalysts: GDOT Q4 billing, additional state RFP wins that specify DaaS, and updates on revenue-sharing note financing to bolster liquidity .
Medium-term optionality: Rekor Labs deepfake detection (2026 launch) could open large adjacencies; management evaluating structure with Moelis .
Risks: Execution on large deployments, government budget timing/seasonality, liquidity needs (pending financing), and low Street coverage which can heighten volatility .
Stock narrative: Mix-driven margin expansion + marquee state wins are likely to be the primary catalysts; consistent ARR growth and proof-points on profitability path would further de-risk the story .

Additional Press Releases (Q3-related relevance)

Georgia DOT: largest statewide multi-year contract (min $50M, potential >$100M; co-op purchasing across GA) .
Caltrans/TxDOT: initial Discover deployments at two of the largest DOTs; validates path to statewide programs .
South Carolina “virtual weigh stations”: program recognized with State Technology Innovation Award; ~$1M initial order and statewide expansion potential .
Rekor Labs (Deepfake detection): subsidiary established; product launch targeted 1H 2026; Moelis engaged to advise on structure .

Citations:

Q3 earnings call transcript
Q3 8-K/press release
Q2 press release
Q1 8-K/press release
GDOT, Caltrans/TxDOT, South Carolina, Rekor Labs press releases

S&P Global estimates noted with an asterisk.*

Rekor Systems, Inc. (REKR)·Q3 2025 Earnings Summary