REKR · Rekor Systems, Inc.

Management Discussion and Analysis

Rekor Systems, Inc. delivered $10.3 million in revenue for Q1 FY2026, an 11.6% increase from $9.2 million in Q1 FY2025. This growth reflects continued demand for the company’s integrated offerings — which include data collection, implementation, engineering, customer support and maintenance services, as well as software and hardware — across its product lines. The company’s strategic emphasis on long-term contracts with recurring revenue remains central to its business model, with management stating this focus is intended to drive recurring revenue growth in future periods.

Operating income improved to -$8.8 million, a 13.0% narrowing versus -$10.1 million in the prior-year quarter. This improvement was primarily due to a reduction in payroll and related expenses resulting from cost-containment initiatives implemented to better align operations with strategic priorities. While the company does not disclose the specific dollar amount of this reduction in the authoritative financial packet, the business context packet confirms such initiatives were executed and contributed meaningfully to the operating result.

Net income improved to -$9.4 million, a 13.9% improvement from -$10.9 million in Q1 FY2025. Diluted EPS improved from -$0.10 to -$0.07 — a 30.0% reduction in the magnitude of per-share loss — consistent with the underlying improvement in net income and share count dynamics.

Net cash used in operating activities totaled -$3.7 million, a significant improvement from -$8.1 million in Q1 FY2025. This improvement reflects both the lower net loss and favorable shifts in working capital. As noted in the business context, general and administrative expenses continue to reflect actions taken to align the cost structure with current revenue levels, while still incorporating public-company compliance costs including accounting, legal, insurance, and investor relations.

Looking ahead, management expects Adjusted Gross Margin to improve over time as the company gains operational efficiencies through broader technology adoption and expands revenue via cross-selling and upselling of its current and future offerings. These expectations are grounded in the company’s stated strategy and are not tied to unsupported quantitative projections. The company also reaffirmed its commitment to long-term contracts as a vehicle for enhancing revenue visibility and margin potential — though no specific metrics around recurring revenue composition or performance obligations are supported by the authoritative financial packet and therefore omitted from this analysis.