Rekor Systems, Inc. (REKR)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $13.277M, up 20.0% year over year and up 25.9% sequentially; results modestly beat Wall Street consensus by ~2.8% on revenue and by ~$0.001 on EPS, while EBITDA missed consensus; adjusted EBITDA loss improved sharply to $4.728M from $9.215M in Q3 . Revenue Consensus Mean: $12.913M*; EPS Consensus Mean: -$0.085*; EBITDA Consensus Mean: -$3.704M*; Q4 actual EPS: -$0.0837*; Q4 actual EBITDA (S&P): -$5.298M*.
• Management pivoted away from relying on uncertain government procurement timelines, realigned costs, and emphasized operating to breakeven on current recurring revenue base; they fully repaid the Yorkville $15M prepaid advance on 12/31 and set up a $25M ATM for flexibility .
• Product momentum: Florida DOT APL certification and deployments, New York progressed to procurement, and AI enhancements (Rekor Command Priority Ranking and Related Events) demonstrated meaningful traction; Texas reported 29% reduction in secondary crashes and 44 minutes faster incident resolution using Command .
• Preliminary guidance issued on 3/17 was exceeded by actuals (Q4 revenue “above $12.5M” prelim vs $13.277M actual; FY 2024 “above $45.5M” prelim vs $46.028M actual); management provided no 2025 numerical guidance on the Q4 call .

What Went Well and What Went Wrong

What Went Well

• Q4 revenue hit a quarterly record at $13.277M (+20% YoY), with adjusted gross margin rebounding to 51.9% from 44.0% in Q3; adjusted EBITDA loss narrowed to $4.728M (vs $9.215M in Q3), reflecting cost optimization and higher-margin mix .
• Strategic wins and certifications: Florida DOT APL inclusion and deployments underway; New York moved to procurement; Texas showcased measurable safety outcomes (29% fewer secondary crashes, 44-minute faster restoration) with Command .
• Clear strategic realignment: Board formed Executive Committee, reduced workforce, refocused on Scout and Discover, shifted away from waiting on large, lumpy contracts to operating at a breakeven path on core revenue; CFO emphasized financial discipline and early repayment of Yorkville facility .
  Quote: “We’re aligning the company’s cost structure and strategic direction with what we can control rather than waiting on what we can’t” .

What Went Wrong

• EBITDA (S&P definition) missed consensus even as company-reported adjusted EBITDA improved; quarterly EBITDA was pressured by impairment and financing-related charges, highlighting non-GAAP vs GAAP divergence *.
• Recurring revenue declined ~2% YoY to $5.8M in Q4, largely due to timing differences and prior hurricane impacts that also lowered Q3 recurring revenue, underscoring volatility from weather and government cycles .
• Operating losses remain significant and GAAP EBITDA was heavily impacted by impairment of intangible assets recorded in Q4, keeping net loss elevated; management reiterated no numeric 2025 guidance and dependence on procurement pacing, which may frustrate estimate visibility .

Financial Results

YoY and Sequential Performance

EPS and Estimate Comparison

Q4 Actual vs Consensus

Values marked with * were retrieved from S&P Global. Company-reported EBITDA and adjusted EBITDA differ from S&P’s standardized definition; see non-GAAP reconciliation in filings .

Segment/KPI Details

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We’re aligning the company’s cost structure and strategic direction with what we can control rather than waiting on what we can’t.” — Robert Berman, Interim CEO .
• “We are pleased with our financial and operational achievements in 2024…record revenue growth, alongside consistent improvement in operational efficiency…” — CFO Eyal Hen .
• “We fully satisfied the outstanding balance of $15,000,000 on 12/31/2024, ahead of schedule…underscores our commitment to prudent financial management.” — CFO Eyal Hen .
• “Adjusted EBITDA loss…reduction to approximately $4.7M significantly improved from $9.2M in Q3 2024.” — CFO Eyal Hen .
• “Early results…showed reductions of up to 60% in the time from incident detection to resource allocation.” — Robert Berman on Command Priority Ranking .

Q&A Highlights

• Public safety positioning vs Flock: REKR focuses on commercial channels/OEM licensing, claims leading vehicle recognition accuracy; avoids direct law enforcement market comparison .
• Free cash flow breakeven: Management reiterated expectation toward year end, consistent with prior commentary; remains committed to cost discipline and capital-light growth .
• SoundThinking partnership: Pilots underway; channel partner selling expected to contribute in 2025 .
• Florida deployments and disclosure: Active rollouts but unable to disclose camera counts due to Q1 reporting constraints; procurement rules restrict discussion during open RFPs .
• Capital structure/liquidity: Early repayment of Yorkville, establishment of $25M ATM; revenue-sharing notes remain a preferred funding mechanism for pay-for-data contracts .

Estimates Context

• Revenue beat: Q4 actual $13.277M vs consensus $12.913M — beat of ~$0.364M (~2.8%); CFO cited ~3% beat *.
• EPS beat: Q4 actual -$0.0837 vs consensus -$0.085 — beat of ~$0.0013*.
• EBITDA miss: Q4 actual (S&P definition) -$5.298M vs consensus -$3.704M — miss of ~$1.594M*.
  Values marked with * were retrieved from S&P Global.

Implication: Street should raise revenue/EPS modestly given beat and improving margin mix; however, differences between GAAP EBITDA and company-reported adjusted EBITDA (which improved materially) require analysts to adjust models for non-GAAP reconciliation (notably intangible impairment and financing-related items) .

Key Takeaways for Investors

• Sequential improvement in margin and adjusted EBITDA signals cost actions are taking hold; continued mix shift toward SaaS/pay-for-data should support margin trajectory into 2025 .
• Florida APL-driven deployments, New York procurement progress, and Texas Command outcomes provide tangible proof points; these are likely catalysts as awards/expansion materialize .
• Management’s strategic pivot to operate to breakeven on the current revenue base reduces financing and dilution risk; early retirement of Yorkville and ATM flexibility add balance sheet optionality .
• Watch for non-GAAP vs GAAP differences: sizable Q4 impairment drove GAAP EBITDA weakness; adjusted EBITDA trends are more indicative of operating trajectory .
• Estimate revisions: modest upward adjustments to revenue/EPS likely; caution warranted on EBITDA definitions across sources (S&P vs company-adjusted)* .
• Near-term trading: stock sensitive to concrete contract awards (Florida district rollouts, NY installations, Texas scaling) and further evidence of recurring revenue growth; management’s “no guidance” stance may keep volatility elevated until award visibility improves .
• Medium-term thesis: expanding AI feature set and ecosystem partnerships (AWS/NVIDIA/SoundThinking) strengthen competitive moat and multi-platform land-and-expand strategy across Discover, Command, and Scout .