Rekor Systems, Inc. Class B Stock

Thank you. Good afternoon, ladies and gentlemen, and welcome to today's Recourse Systems, Inc. conference call. My name is Melissa, and I will 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded for replay purposes. Before we start, I must remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, and other financial positions economic conditions, products and product releases, partnerships, and any other statement that is made to 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 that the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. I now would like to turn the presentation over to ReCore CEO, Mr. Robert Berman.

Thank you, and good afternoon, everyone. I'll keep this brief. Q2 shows the impact of the actions we said we were taking in the second half of 26. Revenue grew, gross margins expanded, and our adjusted EBITDA loss narrowed sharply year over year to approximately $1.2 million. Joe will walk you through the details. The key point is that this is not a one-quarter effect. We're nearing the end of a judicious cost-reduction program and have absorbed many of the one-time costs associated with that. So the savings are showing up in the run rate now. and we continue to expect additional cost efficiencies and further expansion of our recurring revenue base in the second half of 26. focus now is on continued execution, recurring growth, and reaching profitability.

On growth, I would like to start with Go Secure. We launched Go Secure video in June to cryptographically sign video at capture and prove frame by frame whether it has been altered. This is not a probability score. It's a determination. We've now extended the same approach to recorded audio, addressing splicing, deletion, and synthetic replacement under one authenticity framework. In a world of inexpensive voice cloning, altered clips, and disputed evidence, we believe the need to prove that both video and audio are real will only grow. We're now in active discussions with prospective launch partners, and we're being deliberate about commercial terms because we believe GoSecure can extend beyond the initial launch markets and has the potential to become an important media authenticity standard. Thank you. Based on where those discussions stand today, our objective is to finalize initial launch partner commercial terms during the third quarter with definitive agreements to follow as appropriate.

While we see great potential in GoSecure, demand remains meaningful in our core transportation business. As reflected in recent procurement trends, agencies are moving away from in-road sensors towards non-intrusive AI-driven systems. and our data as a service model have positioned us well for that shift, and our recurring revenue continues to grow in that area. I also want to address ALPR. This environment is more challenging with increased public scrutiny, new rules around retention sharing and access, and a more active litigation environment around data practices. That has affected sales cycles across the industry. But over time, we believe this scrutiny favors companies like ours that have taken privacy, responsible use, customer control, autoimmune, seriously and reCORE has been deliberate across these issues for years. When they Agencies and oversight bodies demand demonstrable compliance rather than after the assurance that the problems will be addressed in the future.

We believe vendors whose offerings have been designed to address these issues from the start will be better positioned. To summarize, the efficiency work is showing through the numbers. We remain confident. in achieving our goals in the back half of 26, and see meaningful opportunities in Go Secure, recurring roadway data revenue, and responsible vehicle recognition.

And with that, I'll now turn it over to Joe. Thanks, Robert, and good afternoon, everyone. I'm going to walk you through the second quarter and first half of 2026, then close with cash and our outlook. Second quarter revenue was $12.7 million, up 2% from $12.4 million in the second quarter of 2025. For the first six months, revenue was $22.9 million, up 6% year-over-year. An important indicator for us is recurring revenue. Compared with the respective prior year periods, recurring revenue grew 14 percent in the quarter to 6.7 million and increased 21 percent for the first six months of the year to 13.3 million.

That growth rate is running ahead of total revenue. Indicating the mix of business is shifting towards the type of revenue we've been focused on growing. Contracted, repeatable, and higher margin. The improvement in revenue this quarter did not depend on a large non-recurring software transaction. reflects the ongoing economics of the business as it is structured today. Turning now to adjusted gross profit. Adjusted gross profit increased for both the three- and six-month periods. Adjusted gross margin expanded to 56% in the second quarter from 50% in the second quarter of 2025. For the first half of 2026, adjusted gross margin rose to 55% from 49%.

Two things primarily drove that improvement. First, revenue growth allowed us to operate more efficiently across deployments. And second, the improvement in our product mix. Adjusted gross margin in our business is largely a function of how much higher margin, software, and recurring revenue we carry relative to service-related work. And that mix has been moving in our Shifting to operating expenses, this is where the work from the first half of the year becomes visible. Across all major areas, general and administrative, selling and marketing, and research and development, expenses decreased by $4 million in the quarter and $4.3 million for the first six months ended June 30, 2026, compared to the prior year periods. That reduction comes from the actions we've discussed over the past few quarters.

We reduced headcount during the first half of the year and worked towards optimizing our engineering operations. But we've also identified further efficiencies unrelated to workforce that we expect to produce several million dollars worth of additional annualized savings. We expect to execute on these in the third quarter with a noticeable impact in the fourth quarter of 2026 and into 2027. The quarter also included a one-time gain of $2.8 million associated with the re-measurement of one of our lease liabilities. This was an expected non-cash item that was tied to our continued operational realignment. As a result, the company recorded income from operations in the second quarter. This was driven by the one-time gain related to the remeasurement, along with revenue growth, higher adjusted gross profit, and the organizational efficiency measures we took at the beginning of the year now flowing through the numbers.

Adjusted EBITDA loss for the quarter was $1.2 million, up a 79% improvement from the second quarter of 2025. Lower payroll and payroll-related costs drove most of that improvement, with revenue growth and margin expansion contributing as well. Turning to cash, we ended Q2 2026 with a healthy amount of cash slightly exceeding $10 million while our operating cash burn for the quarter was reduced to $2.4 million. For the six months ended June 30, 2026 compared to 2025, our cash used from operations improved by $9.6 million or 61%. This highlights the improvement in our cash consumption and reinforces our belief that the underlying business is moving in the right direction. We are actively evaluating options to refinance our existing prime revenue sharing nodes. Our growing contract portfolio and the impact of our recent win in South Carolina should help support the refinancing. provide additional information when there's something definitive to report.

Looking to the back half of the year, three things give us confidence. First, the full period benefit of the majority of the cost reductions. Many of these actions were taken during the first half, so the third and fourth quarter should reflect a cleaner expense base than the first half of the year did. Second, continued revenue growth in our recurring revenue. Third, continued discipline around capital management. Taken together, we expect to reach profitability on an adjusted EBITDA basis during the second half of 2026, assuming continued execution and cost discipline. Thank you for your time and your continued support.

With that, I will turn it back to the operator for questions.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. If you're choosing speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Mike Lattimore with Northland Capital Markets.

with your question. Hey, hi, this is Vijay Devar for Mike Lattimore. A couple of questions. One, so how does the new South Carolina contract expand your opportunity versus the prior contract.

Joe, you want to have one? Yes. Thanks for the question. The South Carolina contract will expand our current footprint in South Carolina. It will also give us the ability, similar to Georgia, to go out and get additional work in South Carolina and really expand our footprint in that market.

Understood. How is the pipeline for command? Do you expect new wins this calendar year?.

Joe, you want to handle that? Yes. The pipeline for command, we continue to monitor it. I do believe that there is the potential for new wins. You know, I think one of the things I continually mention is working with government, it's sometimes difficult to predict when they'll put pen to paper. But we do have a pipeline, and we're in communication with multiple different DOTs and different jurisdictions. Thank you very much. You're welcome. Thank you.

Thank you. Once again, if you'd like to join the question, please press star 1 on your telephone keypad. Our next question comes from the line of Matt Sokol, private investor.

Yes, hi everyone. Thank you for the time. I was just trying to get a little bit more understanding regarding like the privacy issues that your competitors are facing and what your sales team is doing to hopefully alleviate some of those concerns and possibly get more wins in the future. Thank you.

Mike, this is Robert. Are you referring to the privacy issues around ALPR? Yes, ALPR. Look, sure, as we said, the industry is in quite a flux. There's been a massive amount of press over the last even several months, six months, a year, but it's becoming more every day. And I think we're headed in a world where people are trying to figure out how you deploy technology, especially when you have AI and you do this to help public safety at the same time not create a surveillance state. And ReCore has always been about privacy. If you look at some of the patents we filed, you know, half a decade ago, they were always around how the state is used. So I think, as I said, you know, in the call that the industry is the law enforcement agencies. government, city councils and all are kind of pausing things, you know.

Some of our competitors are losing contracts. That doesn't mean they're turning around and hiring another vendor to replace them. They're trying to sort this all. And we think that the way we've positioned ourselves and we've stood fast for the last, you know, number of years on how we'll allow our data to be used and how our systems work to protect privacy. And I think that'll work in our favor, you know, in the months to come as, as you know, the government sorted out.

Once again, as a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. We'll pause a moment to allow for any other questions. Mr. Berman, it seems there are no other questions at this time. I'll turn the floor back to you for final comments.

Okay, well, listen, thanks, everyone, and stay tuned because I think the back half of the year we're going to deliver the same way we did in the first six months of the year. So appreciate all your support and look forward to talking to you again soon. Be well.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. conference call. My name is Joe, and I will be your coordinator for today. At this time, all participants are in a listen only mode. [Operator Instructions]

Before we start, I must 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 today. 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 Report's CEO, Mr. Robert Berman.

Good afternoon, everyone, and thank you for joining us. I want to be direct about where we are and where we are headed, because I think the story is clear now than it has been in some time.

Toward the end of 2025 and into Q1 2026, we decided to take a hard look at every part of this organization. every headcount, every contract, every expense. Nothing was exempt from that review. The question we asked was simply, does this make the company better? If the answer was no, or even maybe we adjusted to improve our core business. That process produced real structural change. We reduced head count by approximately 45 positions, roughly 16% of our workforce between year-end 2025 and the end of Q1 2026. We found efficiencies and optimized engineering activities that were core to our path forward. We rightsized the cost and organizational structure to match where the business actually is today. The financial impact of those decisions were not fully visible in Q1.

Some of those actions were taken mid-quarter. Some carried onetime costs that hit Q1, but will not repeat. And Joe will walk you through all of that in detail. What I want the investors to understand is that this work is done. The organization we are running today is leaner, faster and more focused than the 1 we had a year ago. And Q2 will be where you start to see what that means in the numbers. Our target is to reach EBITDA positive by the end of the year, and we expect to be very close to EBITDA neutral by the end of Q2 or in early Q3. That is not a wish. It is where the math takes us when you run the full impact of the cost reductions we've already executed against our current revenue trajectory.

Now let me turn to the revenue side. Because the business itself is performing well, Revenue grew 12% year-over-year and every product line, Scout, Discover and Command grew. Gross margins reached 53%, up from 48% a year ago. These are not small moves. They reflect a business that is executing. Finally, we previously announced the creation of ReCor Labs. And before I close, I want to spend a moment on ReCor Labs. -- because I think it deserves attention. ReCor Labs was established to develop technology that extends into public safety and the commercial markets. Its first product, go secure is on track for commercial release in Q3 2026. SoSecure answers a question a law enforcement customer puts us way back in 2024. That question was can video evidence captured by your platform be fake.

Prosecutors and defense attorneys were using that footage in court, and they needed a definitive answer. We built 1 Go Secure certifies with mathematical certainty, whether video or photo content has been altered down to a single frame. It verifies the camera of origin, the timestamp the GPS location and the integrity of the file from the moment of capture in a world where deface technology is becoming widely accessible. The credibility of surveillance video is increasingly under threat. The ability to authenticate video evidence is, therefore, becoming essential for law enforcement, insurers and the courts. ReCor Labs is chaired by Professor Sanjay Sarma MIT Professor of Mechanical Engineering and former Vice President for Open Learning at MIT. Professor Sarma also previously served as a Director of Recourse Systems, his involvement underscores both the technical rigor behind the platform and the seriousness with which we are bringing this technology to market. We look forward to sharing more about Go Secure as we move towards its planned Q3 launch. I'll now turn the call over to Joe Lelepa to review the Q1 financial results. Joe?

Thank you, Robert. Q1 came in largely as we planned. We expected the quarter to include normal seasonality as well as certain onetime charges tied to the cost reduction actions we executed during the period. We also expected that the full benefit of those actions would not be meaningfully reflected until Q2. What is important to highlight is that when comparing Q1 2026 to Q1 2020 and the underlying trajectory of the business is positive.

Revenue increased adjusted gross margin improved, and we continue to identify and execute on meaningful cost efficiencies the majority of which are expected to show in Q2 2026. Revenue increased 12% year-over-year, approximately $1.1 million in growth realized across each of our product lines. Scalp contributed $281,000 to that increase, while Discover contributed $682,000 and Command contributed approximately $102,000. Adjusted gross margins rose to 53% in Q1 2026 compared to 48% in Q1 2025. This 5 percentage point improvement reflects revenue growth which allows us to be more efficient when we offer deployments, a favorable product mix with higher-margin software sales and recurring revenue, representing a larger portion of our total revenue. EBITDA loss came in at approximately $6.5 million, an improvement from $7.4 million loss in Q1 2025. Importantly, the Q1 2026 results do not fully reflect the benefit of the cost optimization measures implemented during the quarter and also includes certain onetime costs related to those actions.

Despite those items, we still delivered year-over-year improvement, and we believe that improvement will continue through 2026. The improvement in EBITDA was driven by revenue growth, and a disciplined focus on cost containment. Payroll and payroll-related costs declined as a result of the head count reductions Robert referenced. A significant portion of which were implemented during Q1 and and will begin to have their full impact in Q2. Q1 also reflected normal seasonality, which typically results in lower activity relative to later quarters. Beyond those specific actions, we have evaluated every line item and policy across our cost structure. Where spending was not critical. It was eliminated and where spending was deemed necessary. We evaluated how to improve efficiency, optimize processes and reduce costs.

This detailed review of our current operating model has already produced meaningful improvements and we expect it to help lower overall operating costs going forward. We ended Q1 2026 with $12.2 million in cash compared to $16.6 million at the end of -- the sequential decline was expected and reflects a seasonal Q1 pattern as well as the onetime restructuring costs. On a year-over-year basis, our operating cash consumption improved which reinforces our view that the underlying business is moving in the right direction. We are actively evaluating options to refinance our existing prime revenue sharing notes with a goal of reducing our cost of capital. Our growing contract portfolio supports the refinancing, and we expect to have more to report on this as we get further into 2026.

Looking ahead, the cost reductions executed during Q1 were not fully reflected in our quarter end results because many were implemented in mid-quarter. In Q2 and the remainder of the year, those savings are expected to be reflected and combined with our revenue growth trajectory, we believe the business is positioned for continued EBITDA improvement as we move through 2026. We remain focused on disciplined execution, cost efficiency and driving sustainable growth across the business.

Thank you again for your time and continued support. And with that, I'll turn it back to our operator for Q&A.

[Operator Instructions] And the first question comes from the line of Alex Latimore with Northland Capital Markets.

My first question, I was just wondering about the status of the Georgia DOT deployment? And then how should we think about that building throughout the year?

Mike, it's Robert. Thanks for asking. So George, it took a little longer to finalize, but we got it done last fall. -- and we're seeing substantial growth already because it's a contract vehicle, meaning that it's not just with the central office of Chida gives the ability to all other entities in the state of Georgia to buy through that contract vehicle. So without getting into specific details, which I can't -- we're already working with several other counties, a couple of large cities and so forth. So as I think we said when we announced the contract, we think the value will be substantially higher than the base value, which was roughly $60 million. And I think we're doing well with it. Plus, we got a price bump as we already have, which is what meant that's in the ground. So that means higher margins. So overall heading in the right direction.

Great. Good to hear. And then thinking about expenses throughout the year, do you expect the 1Q expense level to be about right for the rest of the year? Or do you expect to change

I think that's a question for Joe.

Yes. So we -- thank you for the question. We expect Q1 to be on the higher end of expenses Yes, a lot of the cost-cutting measures that we ended up taking in Q1 didn't get their full impact as they were made towards the end of the quarter and it bore some onetime costs with them. I think as we get into Q2, you'll see a stark drop in expenses, especially within our operating expenses that will continue throughout the rest of the year.

Mike, just to add to what Joe said. But as you said, the severance related to all those employees, office shutdowns, which required negotiating out of leases and so forth. -- really all took place by the time it was finalized, it was towards the end of Q1. So I think -- Joe, correct me, but I think we're going to see all of that in Q2, right? So it's behind us as of Q1. Maybe a few days real pick up, but it's mostly Q2 that you'll see the results of that. .

Cool. Great. And then around the Oklahoma vet program here. I was wondering if there's any additional prospects that might enter into uninsured vehicle program that you expect to get approved this year or maybe sitting in the pipeline currently?

We are talking to several other states I scratch my head thinking given the benefits that the states get from this type of program and the insurance industry. The natural question is, why the hell aren't all the stage doing this, right? But government takes time. But I think we're proud of the fact that they renewed for quite a long period with us. And hopefully, we'll see others realizing we need to be doing this. It's just -- there's no reason not to, right? So it's a good thing, right? Things just take time. .

And then just 1 quick final one. What percent of revenue was recurring in the quarter? -- this quarter .

Sorry. This quarter, we had about 64% of our revenue was recurring. .

There are no further questions at this time. And I would like to turn the call back to Robert Berman for closing remarks. .

Yes. Operator, I just want to make sure that there's nobody in the queue and there are no further questions. Just please double check.

[Operator Instructions]

No, there goes to be no further questions. .

Okay. So look, just in closing, again, thank everybody for joining the call, your attendance or patients -- what we did in late Q4 25 and all through Q1 26 was long overdue, and we needed to do it and we focused on it and we got it done. And I think we'll see the results of that now going into Q2. and beyond, and we just, again, thank everyone for their support and patience.

Thank you. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. conference call. My name is Kevin, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

Before we start, I must remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, product 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 will now turn the presentation over to Rekor's CFO, Mr. Joseph Nalepa.

Good afternoon, everyone. I'd like to start by thanking all of our investors and stakeholders who have joined us on today's call. Today, I'll walk through our financial results for the year ended December 31, 2025. We've been focusing on execution and operational efficiency and are encouraged by the progress we continue to make. During 2025, we continued to deliver top line revenue growth while also finding efficiencies within our operations.

For the year ended December 31, 2025, we recognized revenue of $48.5 million, an increase of 5% compared to revenue of $46 million in 2024. This increase represents continued growth across our public safety and urban mobility businesses. Throughout 2025, we continue to see growth in our sales pipeline and active deployments. As of December 31, 2025, our remaining performance obligations increased to $25.9 million, a nearly 80% increase from December 31, 2024, which highlights strong momentum, giving us confidence in our ability to drive growth into 2026.

For the year ended December 31, 2025, recurring revenue was $23.9 million, up 6% year-over-year. This reflects our long-term strategy of expanding our recurring revenue base through software and Data-as-a-Service subscription contracts. Adjusted margin for 2025 was 56% versus 49% in 2024. This improvement was largely driven by a greater portion of high-margin software sales relative to our service and hardware-based contracts as well as operational efficiencies within our deployments. As we continue to grow, we expect margins to fluctuate over time, but to gradually stabilize as our Software and Data-as-a-Service businesses become a larger share of total revenue.

As mentioned in our recent press release, we made the decision to onshore our engineering efforts to optimize our engineering operations and cost containment efforts. As a result of this decision, we recognized a noncash asset impairment charge of $3.8 million in 2025. A key highlight this year was our continued focus on optimizing our operations. Total operating expenses, excluding depreciation, amortization and asset impairment charges, declined 20% year-over-year, representing an $11.4 million reduction.

These reductions were achieved across all major areas of the business and reflect continuing disciplined cost containment and a deliberate realignment of resources to support our strategy. The combination of revenue growth and improved operational efficiency resulted in significant profitability improvements. Adjusted EBITDA loss for 2025 was $18.1 million, an improvement of $11 million or 38% compared to 2024.

A meaningful indicator of our progress in 2025 is the trajectory of our adjusted EBITDA loss throughout the year. Our adjusted EBITDA loss in the first half of 2025 was $13.1 million compared to a loss of $5 million in the second half of 2025, demonstrating that the operational improvements and cost discipline we've implemented throughout the year are taking hold and moving us in the right direction. We are encouraged by this trend and believe it reflects the early results of our strategic realignment. As we continue to evaluate our operations and identify further efficiencies heading into 2026, we do anticipate incurring onetime charges in the first and second quarters, primarily related to the cancellation and restructuring of existing agreements.

While these charges are near term in nature, we view them as necessary steps in building a leaner, more scalable operating structure that positions the company for improved performance and long-term value creation. We entered 2026 with strong momentum and remain committed to driving sustainable growth and long-term shareholder value. I'm grateful for your continued support and partnership.

Thank you for your attention. Robert, over to you.

Thank you, Joe, and good afternoon, everyone. 2025 was a defining year for the company. We made a deliberate shift away from building the company of the future and refocused the organization on executing a pragmatic, profitable business model. That shift is now clearly reflected in our results. We are a more disciplined, efficient and resilient company, having transitioned from a development-heavy R&D-driven organization to a customer-focused business with fully productized solutions.

As our rightsizing actions conclude towards the end of Q2 and the bulk of our efficiency work moves behind us, we are entering a new phase of the company, one focused on scaling. In the back half of 2026, we expect to aggressively ramp sales execution and drive accelerated growth, supported by strong and expanding demand environment and a platform now built for scale. From a financial standpoint, we delivered solid progress. Revenue grew year-over-year despite a significant focus on efficiency. More importantly, our mix towards higher-value recurring revenue and tighter cost controls drove gross margins to 56%.

We reduced net loss by 49% and importantly, achieved operating cash flow positivity in the fourth quarter of 2025. Combined with meaningful improvement in adjusted EBITDA, this makes a critical inflection point and demonstrates that our model is both viable and scalable. We have already captured substantial efficiencies through our rightsizing efforts and expect additional gains as we continue to align the cost structure with the current scale of the business. That said, we want to be clear, there may be some quarter-to-quarter variability as we complete this process.

The long-term trajectory, however, remains firmly intact. We are also taking a disciplined approach to innovation spend. We are reducing and normalizing R&D to a run rate of 7% to 10% of gross revenue by the back half of 2026, aligning investment levels with a company of our size. At the same time, we are improving development efficiency through the use of modern tooling and focusing resources on near-term customer-driven priorities. Operationally, the decision to onshore our engineering team is already delivering results. We are seeing faster development cycles, improved responsiveness and stronger customer engagement.

This is not only a cost and efficiency improvement, it enhances our competitive positioning. Between late '21 and late 2023, we completed 3 acquisitions, each with distinct technologies, teams and operating models, making integration a complex undertaking, after which we navigated a period of leadership transition across both the Board and executive teams, which added another layer of complexity. That work is now largely behind us. Integration is substantially complete, and we are operating on a unified platform and the organization is now aligned, stable and focused.

Importantly, we continue to execute and make meaningful progress throughout this period, positioning us to fully leverage these assets as we enter a growth phase in 2026. We also launched Rekor Labs in 2025, focused on identifying synthetically created and modified media known as deep fakes. This initiative builds on technology we have been developing internally for years. Professor Sanjay Sarma has agreed to chair Rekor Labs and stepped down from the parent company Board to do so.

In closing, we have materially strengthened the foundation of the business. We now have a more efficient cost structure, higher quality revenue base and a clear path to sustained profitability. With the heavy lifting behind us and a platform built to scale, we are entering our next phase focused on execution, growth and value creation. We believe we are well positioned to drive meaningful, scalable long-term value for our shareholders. Thank you for your continued support.

And operator, we can now turn the call and open it up for questions.

[Operator Instructions] Our first question is coming from Michael Latimore from Northland Capital Markets.

Congrats on getting cash flow positive here in the fourth quarter. I guess as you look to '26 here, do you think -- do you expect the year to be cash flow positive, maybe excluding maybe onetime items?

Joe?

Yes. So without -- I don't want to provide specific profitability guidance, but we are encouraged by the progress we made at the end of 2025, and we hope to continue to build on that momentum as we enter 2026. I think you'll see some additional cost savings related to the onshoring of engineering efforts as well as some other things that we're working on to kind of help reduce our expense base while also maintaining top line revenue growth.

I do want to be conscious that there are going to be those onetime charges that come in as we look to restructure the business. But I think it all gets back to ensuring that we're running a lean operation and working towards that goal of becoming profitable.

Yes. Great. Okay. Sounds good. And then maybe an update on the Georgia deployment. That was a big contract you guys won last year. Maybe talk a little bit about any deployments in the fourth quarter? How does that kind of play out through '26?

Yes. So Mike, typically, the state agencies or DOTs usually shut down between Thanksgiving and New Year's. It will let you do a lot of work. And then obviously, around the country, depending on the weather, it may be impossible. So we just started to crank things up there, probably towards the second half of the first quarter. And we're working down there right now at a pace that's more than we've ever done in Georgia before, and hopefully, it will continue.

Right. Great. And you highlighted -- for '25, you highlighted the public safety sector growing. Can you just describe a few of the more important customers you had in '25 for public safety? [indiscernible] said in the press release.

Yes. We have a couple of large OEM customers. Unfortunately, that -- where we cannot use their name, but they've been using our engine and software for years. And the LPR business is growing. It's picking up, and we're seeing that. We still have probably one of the best engines there is given that it operates not only in the U.S. but in 90 other countries. So we're seeing more licensing of our software, which is where our focus is. And we're going to continue those efforts going into '26 because it's just a better business model, right? Less overhead, boots on the ground, sales churn and so forth. So we're focused more on the software side of it now, which is good.

Great. And last one for me. There's been some talk about just political and, I guess, regulatory resistance to ALPR technologies. How do you view that? I mean is that elongating sales cycles? Is that creating obstacles? Or is it accelerating opportunities since you have some solutions there?

We -- the majority of our software license sales are not in the law enforcement arena. They are theme parks, parking companies and others. So we don't have that issue there. In law enforcement, it's always been an issue, Mike. It's not going away. But we don't operate like others. We don't have data lakes. We don't sell the data to third parties. That's where you see a lot of issues. So we kind of stay in the background and let others battle that out.

I guess I'll sneak one more in, if that's all right. In Texas, there's a good kind of, I guess, master contract there and you have Austin and you're trying to sell other big cities. Maybe update on kind of the receptivity of other big cities to Command in Texas?

Only that it's moving forward. It's a very slow grind. These agencies do not move quickly, although we would like them to, and sometimes we're naive to think that, that was a much faster process. I do think the good news is that we're in front of them. I know we have a couple of meetings coming up later in April with a number of the districts. So there is interest. And we are in the process of working on a couple of new contracts and a couple of renewals of existing contracts. So I think onshoring command was a good thing for us to do because it brought us closer to the customer. And frankly, it fixed a lot of bugs that the system had that where attention wasn't being paid to it. So we'll be able to get that to scale a lot faster now and tweak it.

Our next question is coming from Louie DiPalma from William Blair.

For Robert and Joe, for both of you, you referenced the Georgia DOT $50 million contract. In another geography during the summer of 2024, you won the 1,000-plus camera contract with the Florida DOT. What has been the progress of the Florida rollout? And do you expect that program to generate further growth in 2026? And what are the other prospects in Florida besides that particular contract?

Yes. So Florida, it wasn't 1,000. It was 150 systems and District 7. And it was a pilot as a state is looking to move to a Data-as-a-Service model for the entire state, and it's gone well, and we're in discussions with them now and the program is expanding. It's not public. I can't talk about it yet, but we're making good progress down there. The growth of the model and Data-as-a-Service is clearly starting to scale. So that's a good thing. And we're seeing that across a number of states, right?

Maybe the opportunity was 1,000 and your deployment was in the 100. Thank you for that clarification.

Yes. Yes, we deployed 150 systems in District 7. We have more cameras in Florida than 150. We deployed at least, I think, another 50, maybe a little bit more, and we're deploying now. But if you look at what the apparatus that we deploy does, okay, and you look at what it can replace, yes, there's thousands of systems that this technology can replace just in Florida alone, right?

And for the year that just concluded 2025, did you disclose what percentage of the $49 million in revenue came from recurring revenue versus equipment revenue? And what was the growth of your recurring revenue?

Yes, Joe, you want to take that?

Yes. So it was about a 50-50 split, and we had about a 6% growth in our recurring revenue year-over-year.

Great. And should we think of that trend continuing in 2026?

I think so. I think it is part of our strategy, we're working to push customers more to a recurring revenue model, and then that aligns well with Data-as-a-Service, Software-as-a-Service it's a little dependent on the buying power of the certain DOTs, but we do expect as part of our strategy to continue to push that into a recurring model.

One way to think about it is that the -- look, when we first went to the LPR business way back when law enforcement agencies, PDs, large and small, were not doing subscription-based procurement. They were buying hardware and software with maintenance packages. And that's traditionally how DOTs have operated. And we were the pioneers, the company we acquired SCS was the pioneer of the concept of Data-as-a-Service. So the idea that you get what you need to be able to have the data to manage your roadways, both for planning and public safety, but you don't have to buy anything.

You just pay a company for the data, and they're responsible for the hardware, the software and the maintenance is a very appealing model. It's just that it takes government a little bit of time to catch on to that, but it is catching on. And we've got multiple states doing that now. So that's going to continue to expand because they get -- they can stretch the dollars that they spend much further, right?

[Operator Instructions] And we reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Look, everybody, thanks for your support. If you recall, back during the call, -- it was just a few years ago that we completed the acquisitions of these 3 disparate companies. And we've gone through a lot, and Rome isn't built in a night, right, or a day. And I think we've got the company stable. We're focused on profitability. I would encourage you to look at the back half of 2025 with regard to the EBITDA loss compared to the first half of 2025. And I would remind you that a lot of the rightsizing and cost savings and efficiencies that we're doing have taken place here in the first quarter of this year, which will probably be equal to, if not greater, than what we did last year.

So you can look at the balance sheet and you can do the math, and you can see that the company is headed in the right direction. And the back half of '26, we're going to focus on scale, and then you'll see the company grow but grow profitably and smartly. So it's growing anyway, but growing a lot faster. So anyway, thanks, everyone. Appreciate it.

Take care. Thank you. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems Conference Call. My name is Alicia, and I'll be your coordinator for today. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes.

Before we start, I want to review 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 disclaimer 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 now would like to turn the presentation over to Mr. Robert Berman, Interim President and CEO of Rekor Systems.

Good afternoon, everyone. I'm incredibly proud of what the Rekor team has accomplished this quarter, the best performing quarter in our company's history. So I'm pleased to lead off today's call. But we are going to switch things up a bit today. Before diving into the business and technology updates, I'll first turn the call over to our CFO, Eyal Hen for some important financial and organizational updates. Eyal, the floor is yours. .

Thank you, Robert, and good afternoon to everyone joining us. After nearly 7 years with Rekor, I've made the decision to step down from my role as Chief Financial Officer. It's been tremendous privilege to help lead the company through its transformation and growth journey and I'm deeply proud to conclude this chapter with the strongest quarterly and year-to-date results in Rekor history.

It's truly a testament to the dedication and talent of our entire team. I'm also very pleased to introduce my successor, Joel, who will take over as Chief Financial Officer. Joel has served as Rekor Corporate Controller for the past 6.5 years, and has been deeply involved in every aspect of the CFO role over the past year. Joel brings both internal institutional knowledge and with experience as a manager at KPMG, is long-term tenor at Rekor and commitment to excellence, make him the ideal person to step into this role. There will be no learning curve, is appointed by our Board ensures a seamless transition, maintaining continuity and stability.

I remain overwhelmingly optimistic about Rekor future and live with complete confidence in the company's strategy. Our team and the tremendous momentum the company has built. It's been an all working alongside such a talented and mission-driven team. Rekor future is bright, and I look forward to working with continued success. With that, it's my pleasure to turn the call over to our incoming CFO, to discuss the financial performance for the quarter. .

Thank you, and best of luck to you and your family. I'd also like to thank all our investors who have joined us on today's call. Today, I'll walk you through our financial results for the 3 and 9 months ended September 30, 2025. We've been focusing on execution and operational efficiency and are encouraged by the progress we continue to make. .

During the third quarter of 2025, Rekor delivered its best financial performance in its history, marking our third consecutive quarter of positive results. We delivered record revenue of $14.2 million, an increase of 35% compared to Q3 2024 and 15% compared to Q2 2025. On a year-to-date basis, we recorded revenue of $35.8 million, up 9% from the first 9 months of 2024.

This increase represents continued growth across our public safety and urban mobility businesses. We continue to see strong momentum in our sales pipeline and active deployments, giving us confidence in our ability to continue to drive growth going forward. Recurring revenue for the third quarter 2025 totaled $6.5 million, representing an 18% increase compared to the recurring revenue in Q3 2024.

For the 9 months ended September 30, 2025, recurring revenue was $17.5 million, up 5% year-over-year. This reflects our long-term strategy of expanding our recurring revenue base, through long-term software and data as a service subscription contracts.

Our adjusted gross margin for the quarter was 63% compared to 44% in Q3 2024. For the first 9 months of 2025, adjusted gross margin was 55% versus 48% in the prior year period. This improvement was largely driven by a greater portion of high-margin software sales compared to our service and hardware-based contracts. As noted previously, we expect margins to continue to fluctuate over time but to gradually stabilize as our Software and Data as a Service businesses become a larger share of total revenue.

A key highlight this quarter was our continued focus on operating efficiency. Total operating expenses, excluding depreciation and amortization, declined 24% quarter-over-quarter, representing a $3.7 million reduction. Year-to-date, we've reduced operating expenses by $7.8 million, an 18% improvement compared to the same period last year.

These reductions were achieved across all major areas of the business and reflect disciplined cost containment and a deliberate realignment of resources to support our strategy. The combination of record revenue and operational efficiencies resulted in significant improvements in our profitability.

Adjusted EBITDA loss for Q3 2025 was $1.5 million, an improvement of $7.9 million or 84% from Q3 2024. On a year-to-date basis, adjusted EBITDA loss improved by $10.8 million to $14.5 million compared to $25.3 million in the prior year period. These results reflect record performances across the company as we continue to manage our operating expenses to align with our growth as our revenue base continues to expand.

Before I turn it back to Robert, I want to say how truly honored and excited that I am to serve as CFO and move forward with our efforts to focus on transparency, financial discipline and execution that supports our long-term strategy.

We have a clear strategy, a strong foundation and a dedicated team driving results to create value for our shareholders. I look forward to building on the progress we have made in helping lead the next phase of growth. Thank you for your attention. Robert, back to you.

Thanks, Joe, and welcome officially to your new role. We've had a long-standing relationship, and I am pleased to see you take on this leadership position. With your prior experience at KPMG and long tenure at Rekor, we are fortunate to have you here and to take the range. As outlined, this quarter represents the third straight quarter of positive results for both investors and the company. We are seeing clear signs that Rekor is reaching a point where the growth of recurring revenue and expanding market demand are aligning with operational discipline to drive sustainable growth. .

These results reflect the momentum outlined in our prior announcement, where we stated that Rekor expected record quarterly revenue, along with a significantly improved in adjustment in EBITDA and gross margin. We continue to work towards these objectives.

In early October, we achieved a major milestone by securing our largest statewide multiyear contract with the Georgia Department of Transportation valued at a minimum of $50 million over the contracts full term. This contract further validates our leadership in roadway intelligence and data infrastructure providing a long-term growth foundation and 1 of the most strategically important transportation markets in the country.

We also received recognition for our work in South Carolina where Rekor technology powers the state's virtual way station network. The program was recently awarded a State Technology Innovation Award we're establishing a nearly 100% accuracy rate and overweight truck targeting, a model that other states can follow. This project showcases Rekor's ability to effectively use AI and connected infrastructure to deliver measurable value and efficiency to state agencies.

Furthermore, 3 new and very large states have begun using Rekor Discover. Beyond our core operations, I'd like to briefly mention a new initiative Rekor plans to enter the global detection market. While we can't speak in detail yet, this opportunity builds on Rekor's years of experience in the video analytics for government agencies and particularly law enforcement.

For some time, even before deep fakes were in motion and the Publics mind, we've considered the evidential implications of synthetic media and deep fake technologies and position ourselves to protect our customers and the public at large in this critical area. These efforts have now been concentrated in Rekor Labs, which is operating as an independent entity, and there's more to come on this 1 time is right.

We continue to see strong performance across our core portfolio. Rekor Discover and Command have generated considerable attention and adoption in the market. More importantly, we are now seeing an organic convergence of these 2 technologies and new RFPs issued by transportation authorities. This reflects a growing industry movement towards integrated data and intelligent solutions, an approach that Rekor has been pioneering for years. Importantly, two, our data-as-a-service business model is proven to be a major differentiator.

Agencies increasingly want data without the hardware burden, deployment headaches and maintenance issues. Rekor is perfectly positioned to meet that demand with AI-driven solutions that are scalable, cloud-based and high margin.

I also want to take a moment to recognize the continued strength of Rekor Scout. While Discover and Command received much of the public attention, a significant portion of our revenue continues to come from Scout, which remains a cornerstone of our technology portfolio, and a recognized leader in vehicle and license plate recognition.

As part of our ongoing effort to strengthen and expand this business, I am pleased to announce that Jennifer, Jen, Candelaria will join Rekor as General Manager of Scout, will be based in our Columbia, Maryland office and report directly to me, brings more than a decade of global leadership experience across North America, Europe, Asia and Latin America and the Caribbean, she has a strong track record in technical sales, product management and business development with prior leadership roles at Motor Oil Solutions and Milestone Systems AI business unit, BriefCam. Her experience building high-performance teams and driving strategic growth aligns perfectly with our goals for Scout, will oversee the full P&L for Scout business, lead sales strategy, market share expansion and partner channel engagement to accelerate both revenue and margin.

Her appointment significantly strengthens our overall leadership team and reinforces our commitment to operational excellence across all business lines. As we enter the first quarter of the year and look ahead to 2026, Rekor continues to be positioned for substantial growth. The momentum we've built across our technology platforms, customer base and financial performance underscores that Rekor transformation is delivering lasting value.

And we would like to thank our shareholders, employees and partners for their continued trust and support. And lastly, I'd like to publicly thank once again for his dedicated service to Rekor and with that, operator, we'll now turn the call over for questions.

[Operator Instructions]

Our first question comes from the line of Louie Dipalma with William Blair.

Good afternoon. Robert and Jona and it was a pleasure working with you, and congrats Jonah on your appointment as CFO. My first question for Robert, what type of product does the Rekor team envision developing with the deep fake detection division? And would the product be software as a service? Or do you imagine it would be more of a solution in which it requires your personnel combined with your software?

So this is Robert. And thanks for the question. And by the way, it's who is assuming the role of CFO. But let me answer you by saying that the product that we had previously announced is being developed by a subsidiary, which is operating independently as Rekor Labs under the management of a Director. And given what's going on in that space and the competition and competition for IP and other things, there's not much more we can say about what we're doing than what we've said.

I know that's probably not satisfying, but we expect to get a product in the market in '26. And we just want to be careful. Look, Rekor has a long history of working with AI machine vision, which is video and audio, and this came to our attention back in '23. So it's not something that just kind of popped up 1 day and we decided only got deep fakes right?

So we have been looking at it. We actually started developing some technology around it for our customers that we're requesting, okay, this technology. So that's really all we can say about it at this point in time, which is the same or we can

Definitely, definitely exciting. And how should we think about the EBITDA trajectory and margins over the next several quarters, I think you've been able to take OpEx out of the model, and you're also in the process of scaling the Georgia contract, so how should we think of margins and EBITDA?

I think the way you should think about it is exactly what we've been saying. We've always said that we expect as things progress that our margins will increase. We expect that they will stabilize higher than we reported this quarter. And that's just part of the development process of the technology that we're putting in the field.

I think the most important thing is what was said earlier about our clients are looking for the Data as a Service business model. They're not interested in technology and hardware and maintenance contracts and so forth. They need the data that they need to operate the roadways.

Look, everyone here understands what's happening. You hear all these things about robo taxis and companies doing this and the other thing. Well, the DOTs have to keep pace. They've got to keep the roadway safe. And they have to do that through managing data and the idea of delivering the data as a service as opposed to delivering technology and supplying it, maintaining it as a contractor, is where it's headed, and that means higher margins, longer-term contracts and a better business model for a company like Rekor.

So I think it's consistent with where we projected that we were going and we're seeing that, and we're seeing that in the results today. right?

Great. And do you see many other contracts similar to the Georgia contract in your pipeline such that other states will look at Georgia as the model or the paradigm. And they perhaps won't need to do a rigorous RFP process. They can trust that Georgia did the proper due diligence and they can expedite the process and go straight with you.

Yes. Well, look, I think obviously, states procure the way they procure, but I think the good news is that they do follow each other. And at the end of the day, I believe that we're seeing, okay, which we pioneered was the concept of Data as a Service and delivering the solutions that these agencies are looking for, and that's where it's headed, and what we're seeing now, which I think we said during the call, is that this is unprompted, we're seeing RFPs come out that we're responding to that are asking for this business model with the solutions that we have.

And what's really interesting about it is we're seeing a convergence of both the Discover and the Command platform. And what I mean by that is when people think about DOTs, they have 2 sides, they have operations which is maintaining roadways, operating the roadway public safety and all the things that go along with that.

And then you have more longer-term things like planning for how you maintain your roadways over the next 10, 15, 20 years. And what we're seeing is now that the DOTs are looking to combine that into a sale pane of glass, where they can get the data that they need through 1 supplier, okay, not by buying hardware not by having a contractor install equipment, and you have to worry about is it working? Is it not working? but by a company that says we'll give you all of this data that you need to do both planning and operations with and pay us for the data.

And it's not giving you what you need to operate your roadway system that don't pay us, right? And if people think about today's world, everyone's used to getting things as a service. And that's something that I'm proud to say we pioneered, okay? And we fought long and hard to make that business model work, and when we first started years ago, people said, "Oh, I'm not sure that, that's going to work, but that's exactly what we're starting to see.

So we're seeing RFPs come from states that again, are unprompted. They're just showing up and they're looking for exactly what Rekor does. And the way we do business, more importantly, they're asking for that from the companies that are going to bid that. And I think Rekor is uniquely positioned to offer those services and solutions because, frankly, we probably heard a lot of it.

[Operator Instructions] Our next question comes from the line of Tim Moore with Clear Street.

All the best for your next phase outside of Rekor . I remember meeting at your headquarters a year ago and speaking many times since then. So good luck with everything. And my first question is about your Command win that you were piloting a few years back in Austin, Texas and the contract clearly came through well in June or so. .

So just wondering, is Austin starting to ramp up? Is the plan there to kind of tackle Austin because that's where the pilot was and then really go out to Dallas, Fort Worth and then Houston. Is there any kind of just color you can add on that in the ramp-up? .

That's a great question. Austin has issued a PO, okay, under the RFP quarter 1, so we have an expanded contract with them. I think it's Joe, it's about 3 years. I'm not sure what it is. But it took the full benefit of the pricing that was in and we've been working closely with TxDOT's procurement group, they wanted to kind of roll this out to the other districts in a certain way.

And when you work with states, you follow their lead and you do the best you can to support what they're asking you to do. So I think we'll see a successful rollout in Texas beyond Austin, right? And we're just in that process right now with the TxDOT procurement team, right?

But look, I just -- one additional thing about our business is it's B2G. We saw Well, the good news is that when you win, you're in and you're there for a long time. And that's the nice thing about this business, right? So it's a double and short, a little painful on the front end. But on the back end, it's very rewarding. And I think that's we're on the back end especially given Georgia and other states like Texas and others as well.

Great. Just to play on that thread of when you're in, which is great. How does the value Discover contracts stack up? Do you think that's like 1/3 the value of what you'll be doing either in Georgia or Texas, just kind of curious?

Look, California is large, but to talk about the size of that potential opportunity, but I'd hate to get ahead of ourselves and the have the folks at Caltrans get all, wait a second, we're just doing this at the other thing, look, it's a massive opportunity and we were pleased to be asked by then to come out and showcase the fact for Caltrans and all their districts and that's exactly what we're doing.

But look, we're going to slow things down a bit and being methodical about what we're telling the market. But the good news is tech is being adopted. The business model is being adopted. The states have to do this stuff and Rekor is in a premium position to be able to deliver these services because, again, we pioneered a lot of this. So I think it just is very unique, right?

I just have 1 last question for Al, Joe, Robert, whoever wants to answer it. Now that you nailed down the Texas contract, the extended higher-value Georgia contract, Caltrans, do you expect to do a revenue sharing note again? Because I mean that would definitely help improve liquidity. I'm just kind of curious what the thoughts are around that.

Eyal, you can certainly handle that, transferring it over to Joe .

We are working as part of improving our liquidity. We are working with the banker, as we announced before, to have another series of this note now with Georgia and Texas is coming in to add to the pool that gives us the opportunity to raise money through this revenue sharing tool that we have last 1.5 years.

So definitely, yes, we are working towards it. And you will know when it's been exited, but we are working with the banker as we announced before through this second series of notes.

[Operator Instructions]

Our next question comes from the line of Mike Latimore with Mawson Capital Markets.

This is Vijay Devar. Should you get a full rate of portion of the new Georgia contract in the fourth quarter.

I'm not sure we caught that.

Can you repeat the question, please? .

Do you expect a full pro rata portion of the new Georgia contract in the fourth quarter? .

Yes, we do. Georgia contract is in effect since October, and we anticipate to bill them under the new conference team. .

Okay. And tell status of the Discovery deployment in Georgia.

Can you repeat the question again?

The status of discovered deployments in Georgia? .

I think we can't get into the details, but we have new Discover deployments going in, in Georgia and Florida in a couple of other states as well. So I'm not sure that we have those exact numbers. And just so you know kind of towards the end of the year, we shift our resources around because some states slow down work over the Thanksgiving to New Year's holiday and other states allow to work.

So -- but trust that we're taking full advantage of working everywhere we can, getting as many systems as possible. I think we put a record number of systems in, in Florida in a very short period of time. And Joe, I'm not sure you guys have those numbers handy, but -- they're going in.

And finally, are cities joining the Georgia procurement contract yet.

The Georgia contract is in full effect. We have a PO from them for the next year. So it went through the whole processes, within the state and in effect as we speak. .

[Operator Instructions]

Our next question comes from the line of Ray Yakel, Private Investor. .

Yes. The international market, I believe reported the ITS ERP back on May 19, and Mark was over there earlier in the year. Can you give us any feedback on that? .

Sure. I mean this is new for us, right, because we haven't looked to do business tie the U.S. borders other than with the Scout platform. But we are actively engaged with a number of customers in Europe. And look, the technology looks here looks there. So we hope to be doing business in Europe and outside of the U.S. in 2026. .

And the QSR sector, is that any push for that? Or are you just no revenue there.

Again, it's more scout and it's not something that we're prepared to talk to today about. But look, we are with its vehicle recognition software has some unique tools, which allows for property owners to extract anonymized information from vehicles that are on their property. So that's something that has a lot of commercial application and I think that's an area that we're going to be focused on in 2016. And hopefully, with Jan joining us, we'll be able to produce some real results with that.

But I think that's something that we think has some strong opportunities. Look, companies want to know who's on the property, where they're coming from? And if you can do that in an anonymized way, which we can do, and we have some IP, and we have some patents on how we do that, then we expect to take advantage of that in the commercial sector. So it's an area we're certainly focused on. So that's a good question. So thank you

And do you see the technology being used anywhere else, for example, maybe shipping containers, for example, or .

Well, that's a really good question. And without getting into too much detail, I could just tell you that state DOTs on the federal government have a strong interest in tracking what comes in through port on to attract a traveler to a highway and so forth. And that's what makes, again, Rekor unique because not only do we have the ability to do what we do on the roadways with respect to discover, but given the ability to recognized vehicles, also the ability to recognize DOT numbers and other things related to what might be on the side of the shipping container.

So yes, that's very much something that we're looking at and working on. And I think it's a really good question. And I think that's, at the end of the day, how all of this kind of gets stitched together and why it has value.

And my last question as a long-term shareholder, do you believe the profitability is what's holding the elevation in the share price and maintaining it there in your opinion? .

Well, this small public company in this world, right? It's just tough, right? But I think -- the good news is that I think we've proven that we can advance the company, we can increase our revenue. We can control our costs. We can do so without impairing revenue, and we can drive the company to profitability. And at the end of the day, it's really the value of the technology. And there's a lot of value to what we've developed, it took years to do. and it's not easily replicated. So I personally expect that, that value is going to monetize in the share price at some point, people are going to realize it. .

You don't expect to slow down in this quarter with the holidays, Thanksgiving, Christmas, New Year's. .

Well, there is some seasonality in our business, certain DOTs do limit the amount of work that you do roadside from Thanksgiving to New Year's, but we're shifting around for those states where we can work and we think there is a good chance that the growth can overcome a little bit of seasonality that you have.

But at the end of the day, this stuff really doesn't matter because once the company gets its sea legs, and it grows, it's just going to grow because it's still very early, right? And the more important thing is just the pipeline is there, the adoption is there, the expansion is there, and as I said earlier, the RFPs that we're seeing unprompted from our customers, it just tells you that Rekor is headed in the right direction and we're providing what they want, right? So it's a really big market, and we haven't even touched the tip of the iceberg.

There are no further questions at this time. I'd like to pass the call back over to Robert for any closing remarks. .

Yes, operator, I just want to make sure that there's no further questions from any shareholders. Some times we hear that there were and people they get a chance to ask. But there are no further questions. The queue is clear. .

Yes, that's correct. .

Okay. Well, look, everyone, thank you so much for the support. Thank you for joining the call. And it's early. It's early in the game for Rekor, but I think we've proven that we're headed in the right direction. You just don't land contracts with states the likes that Rekor has and not have something that's really there, okay? So it's a good sign. And again, I think we're headed in the right direction, both with the company's technology as well as the business model. And we're looking forward to a great year in 2026 and seeing you all on the next call. So thank you all. Appreciate it. .

This concludes today's teleconference, you may disconnect your lines at this time. Thank you for your participation.