🔥 What This Document Is

This is an 8-K filing, which is a report of unscheduled major events that a public company must share with investors. Attached to it is Exhibit 99.1, which is Rekor Systems' full-year 2025 earnings press release. Think of it as the company's official scorecard and story for the entire year, released on March 31, 2026. It explains their financial results, what they accomplished, and what their plan is moving forward.

🏢 What The Company Does

👉 In simple terms, Rekor Systems builds "smart" technology for roads. They use artificial intelligence (AI) and computer vision to analyze video and data from traffic cameras, license plates (ALPR), and other sensors. This helps government agencies and businesses manage traffic, improve public safety, and understand roadway usage. They sell software and services on a subscription basis, aiming for recurring revenue.

💰 Financial Highlights: A Year of Efficiency

The big story in 2025 was not explosive growth, but getting leaner and more profitable on each sale.

• Revenue: $48.5 million, up 5% from $46.0 million in 2024. Growth was driven by their Public Safety product line.
• Profitability Leap: This is the most important part.
  • Gross Margin jumped to 56% from 49% last year. Why? They sold more high-margin software licenses and less lower-margin hardware.
  • Loss from Operations shrank dramatically by 47% to a loss of $28.9 million, compared to a $54.3 million loss in 2024. This was due to both revenue growth and serious cost-cutting.
  • Adjusted EBITDA Loss (a measure of core operational loss) improved by 38% to a loss of $18.1 million.
• A Key Milestone: The company achieved positive operating cash flow in Q4 2025. This is a major turning point, meaning the core business operations finally generated more cash than they spent in a quarter.

🚀 Key Moves: The "Transformation" Strategy

CEO Joseph Nalepa called 2025 "transformative." Here’s what that means in action:

• From R&D Lab to Product Company: They shifted from heavy, expensive research and development (R&D) to selling and improving their now-commercialized products like Rekor Scout® and Rekor Command®. This allowed them to plan a "significant reduction" in R&D spending.
• Operational Triage: They cut costs aggressively, especially in payroll. They also merged their subsidiaries (STS and ATD) to eliminate duplicate roles and processes.
• Bringing It Home: They moved the engineering for their main product, Rekor Command®, back to the United States. This improved communication with customers like transportation agencies.
• New Tech & Ventures: They secured a patent for privacy-friendly data storage and announced Rekor Labs, a new subsidiary focused on detecting fake or altered digital media (deepfakes).

📦 Financial Position: A Stronger Balance Sheet

The company's financial health improved significantly from the end of 2024 to the end of 2025.

• Cash on Hand: Cash and equivalents tripled to $16.6 million from $5.0 million, thanks to better operations and likely new financing.
• Debt Shuffle: They restructured their debt. They paid off old "Notes Payable" and now have new "Series A Prime Revenue Sharing Notes" totaling about $14.8 million. This is a different type of financing.
• Stockholder Equity: Thanks to the improved results and new shares issued (likely for compensation or fundraising), total equity grew to $42.9 million from $34.1 million.

📈 What This Signals

👉 The signal is clear: Rekor is trying to prove to the market that it can transition from a cash-burning growth story to a disciplined, sustainable software business. The dramatic margin expansion and the cash flow milestone are concrete evidence they want investors to focus on. They are betting that operational efficiency and a proven product portfolio will pave a "clear path to sustainable profitability."

🔮 What's Next: The Path Forward

• Profitability Focus: The entire message is about reaching profitability. They plan to further reduce R&D and other costs while growing higher-margin software sales.
• Leveraging Patents: They will likely try to commercialize their new "Incident-Based" data retention patent and their Rekor Labs deepfake detection technology.
• Following the Money: Investors will watch closely to see if Q4 2025's positive cash flow can be sustained into 2026 and beyond.

⚖️ Big Picture

• 👍 Strengths: Proven ability to cut costs and improve margins dramatically. A clear strategic pivot that is showing early financial results. A growing base of contracted, multi-year revenue (like with the Georgia DOT).
• ⚠️ Risks: The company is still deeply unprofitable, losing $31.5 million in 2025. The new "Revenue Sharing Notes" add a unique debt obligation. The broader economy could impact government spending on their products. Success hinges entirely on continuing to grow software sales while keeping costs tightly controlled.

🧠 The Analogy

Rekor Systems is like a startup restaurant that finally stopped spending wildly on experimental dishes (R&D) and perfecting the kitchen layout (operations). Instead, it’s now focusing on selling its proven, best-selling menu items (Scout, Command, Discover) more efficiently, using better ingredients that cost the same but sell for more (high-margin software). The goal is to finally get more money coming in the door each night than going out.

📇 Key Contacts & People

Joseph Nalepa Chief Financial Officer Phone: +1 (410) 762-0800 Email: [email protected]

Charles Degliomini Media & Investor Relations Email: [email protected]

🧩 Final Takeaway

Rekor Systems executed a painful but necessary financial turnaround in 2025, slashing its losses by focusing on efficiency and higher-margin software sales. The key milestone was achieving quarterly positive cash flow, proving its new, leaner business model can work. The company's future now depends on repeating this performance across all of 2026 and beyond.