Rekor Systems (NASDAQ:REKR) reported lower third-quarter revenue as sales of high-margin perpetual automatic license plate recognition software licenses fell away, while growth in recurring revenue and cost reductions helped narrow its net loss.
Revenue fell to $10.9 million from $14.2 million a year earlier, Chief Financial Officer Joseph Nalepa said on the company’s third-quarter 2026 earnings call. Recurring revenue rose 16% to $7.5 million, accounting for 69% of the total, up from 46% a year earlier.
Nalepa attributed the revenue decline primarily to perpetual automatic license plate recognition, or ALPR, software licenses sold in the prior-year quarter that did not recur. He said customers were taking longer to make purchases as they assess privacy expectations and await clearer industry standards.
Adjusted gross profit fell to $5.3 million from $9 million, and adjusted gross margin declined to 48.2% from 63.4%. Nalepa said the main factor was the absence of the prior-year license sales rather than a broad decline across recurring revenue.
Cost cuts narrow net loss
Rekor’s quarterly net loss narrowed to $2.9 million, or $0.02 per share, from $4.1 million, or $0.03 per share. Its adjusted EBITDA loss widened to $2.6 million from $1.5 million, reflecting the absence of the earlier license sales and higher urban mobility delivery costs.
For the first nine months of 2026, revenue fell to $33.8 million from $35.8 million, while recurring revenue grew 19% to $20.8 million. The nine-month net loss narrowed to $12.8 million from $23.7 million, and the adjusted EBITDA loss improved to $10.3 million from $14.5 million. Net cash used in operating activities declined 49% to $10.6 million.
Nalepa said the company’s operational restructuring was substantially complete. Actions taken during 2026, including headcount reductions and facility exits, represent estimated annualized savings of more than $10 million, he said.
Third-quarter GAAP operating expenses fell 41% to $7.6 million, including a net benefit of about $1.75 million from lease exits in Columbia and Tel Aviv. Rekor made approximately $2.6 million in one-time termination payments during the quarter and eliminated roughly $9.7 million in lease liabilities. Nalepa said the exits are expected to save more than $2 million annually.
Debt maturity and 2027 plans
Rekor ended the quarter with $5.1 million in cash and cash equivalents and $0.3 million in restricted cash. Nalepa said addressing $15 million of Prime Revenue Sharing Notes maturing Dec. 15 is a near-term priority.
The company is in discussions with multiple lenders and expects term sheets shortly, he said. Rekor is seeking a larger credit facility, but Nalepa cautioned that no definitive agreement has been reached and that financing before maturity or on acceptable terms is not assured.
CEO Robert Berman said Rekor has been working toward a cost structure that would allow it to operate profitably at approximately $50 million in annual revenue. He stressed that this was an operating model, not a claim that the company had achieved profitability or a forecast of when it would do so. The outcome depends on revenue mix, margins and financing costs, he said.
The company plans targeted sales and marketing initiatives in the first quarter of 2027 and is working to improve delivery margins through measures including bringing portable traffic data processing in-house and tightening pricing discipline.
Contracts and product launches
Berman highlighted several contract developments, while cautioning that potential contract value is not guaranteed revenue. South Carolina selected Rekor for a seven-year statewide contract with potential value above $22 million, subject to final negotiations. Oregon issued an intent to award a five-year driver alert program with an anticipated value of $1.4 million, subject to final terms and annual renewals after year two.
Since quarter-end, Florida increased Rekor’s contract ceiling by 94% to $9.5 million, although actual revenue depends on funding and work orders. A new Southern Nevada RTC contract has a potential value of $1.54 million if both extension options are exercised, Berman said.
On products, Berman said Born Authentic now supports video and audio authentication, with a planned launch and retail e-commerce introduction in the first quarter of 2027. He said the commercial contribution of that product and the Scout Axis Agent, which brings recognition and video integrity verification to compatible existing cameras, will depend on successful launches and customer adoption.
Rekor has until April 26, 2027, to regain Nasdaq minimum bid price compliance. Asked whether a reverse stock split was an option, Berman said the company had no plans for one and believed it could meet the requirement through execution of its business plan.
About Rekor Systems (NASDAQ:REKR)
Rekor Systems, Inc. (NASDAQ: REKR) is a technology company that develops artificial intelligence and machine-learning solutions for roadway intelligence, public safety, and transportation management. Its software analyzes data from cameras and other sources to help government agencies, law enforcement organizations, transportation departments, and commercial customers understand and manage vehicle movement. The company’s Rekor One platform is designed to combine roadway data from multiple sources and provide tools for vehicle identification, traffic analytics, incident detection, and operational decision-making.
