Rekor Systems, Inc. Announces Strong Second Quarter 2024 Financial Results, Secures Facility for Up to $35 Million in Financing, Accelerates Customer Adoption Across All Business Segments

About this update from Rekor Systems, Inc.

Highlights: Received $15 million prepaid advance under facility to provide up to $35 million in financing, strengthening the Company's financial position and supporting future growth initiatives Q2 2024 gross revenue increased 45% to $12.4 million compared to $8.6 million in Q2 2023 Q2 year-to-date 2024 gross revenue increased 51% to $22.2 million compared to $14.7 million in 2023 Improved Adjusted EBITDA from a loss of $7.2 million for Q2 2023 to a loss of $5.8 million for Q2 2024 Secured $1.5 million contract with Maryland DOT for the Strategic Corridor Monitoring project Expanded adoption of the Rekor CommandTM platform by transportation agencies in Oklahoma , Kansas , and Umatilla County, Oregon Awarded multi-year contracts with TxDOT, Ohio DOT, and Pitkin County, Colorado , valued at up to $15 million Appointed specialty investment bank B.C. Ziegler & Company as the placement agent for future revenue-sharing notes COLUMBIA, MD / ACCESSWIRE / August 14, 2024 / Rekor Systems, Inc. (NASDAQ:REKR) ("Rekor" or the "Company"), a leader in developing and implementing advanced roadway intelligence technology, today announced its financial results for the quarter ending June 30, 2024 . The successful arrangement of a facility to provide up to $35 million in financing stands out as a key achievement, strengthening the Company's financial foundation and providing the necessary resources to fuel continued growth. The Company has drawn down $15 million from this facility to provide capital for current projects and to ensure continued growth. The Investor has agreed that, while the Pre-Paid Advance is outstanding, neither the Investor nor any of its affiliates will engage in any short sales or hedging transactions with respect to the Company's common stock. The Investor has also agreed to limit conversions to $2,625,000 per calendar month. Alongside strong financial performance, Rekor has also made significant progress in several critical areas of its business. Adoption of Rekor Command™ Platform: The Departments of Transportation in Oklahoma , Kansas , and Umatilla County, Oregon , have implemented the Rekor Command™ platform to modernize traffic management with AI-driven event detection, response, and analytics. These agencies can now monitor traffic in real-time, reducing response times by up to 23 minutes for potentially dangerous incidents across urban and rural areas. This expansion introduces advanced roadway intelligence and situational awareness capabilities to these regions, typically available only in urban centers. Strategic Corridor Monitoring in Maryland : Rekor has secured a $1.5 million engagement to support the Strategic Corridor Monitoring project along Maryland's I-495 , I-95 , and I-695 highways. This initiative will leverage the Rekor Discover™ platform to provide real-time traffic insights, focusing on electric vehicle usage patterns, air quality, road safety, and sustainable transportation. The Maryland Department of Transportation (MDOT) will benefit from AI-driven traffic analysis and enhanced infrastructure planning. Major Contracts with TxDOT, OhioDOT, and Pitkin County, CO : Rekor has expanded its reach with multi-year contracts valued at up to $15 million . These agreements with the Texas and Ohio Departments of Transportation involve managing, installing, and transitioning existing traffic data collection sites to AI-based systems using the Rekor Discover™ platform. In Pitkin County, Colorado , Rekor's non-intrusive Edge Series systems and traffic analytics platform will provide essential data to improve roadway planning, maintenance, and sustainability, further enhancing transportation infrastructure in the region. "We are very pleased with our Q2 2024 financial results, which reflect a 45% increase in gross revenue compared to Q2 2023. The arrangement of the $35 million financing facility has significantly strengthened our financial position, providing us with the necessary resources to continue our growth trajectory and execute our strategic initiatives," said Eyal Hen , CFO of Rekor . "Our improved Adjusted EBITDA and strong revenue growth are a testament to our team's hard work and dedication. We look forward to building on this momentum in the coming quarters." Second Quarter Ended June 30, 2024 Financial Results This section highlights the changes for the three and six months ended June 30, 2024 , compared to the three and six months ended June 30, 2023 . Revenues Three Months Ended June 30 , Change Six Months Ended June 30 , Change (Dollars in thousands) 2024 2023 $ % 2024 2023 $ % Revenue $ 12,427 $ 8,563 $ 3,864 45 % $ 22,205 $ 14,748 $ 7,457 51 % The increase in revenue for the three and six months ended June 30, 2024 , compared to the three and six months ended June 30, 2023 , was primarily attributable to our acquisition of ATD in January 2024 . During the three and six months ended June 30, 2024 , revenue attributable to ATD was $3,341,000 and $5,705,000 , respectively. The remainder of the increase in revenue for the six months ended June 30, 2024 was principally related to portable and short-term traffic services. Cost of Revenue, excluding Depreciation and Amortization Three Months Ended June 30 , Change Six Months Ended June 30 , Change (Dollars in thousands) 2024 2023 $ % 2024 2023 $ % Cost of revenue, excluding depreciation and amortization $ 5,776 $ 4,131 $ 1,645 40 % $ 11,061 $ 6,999 $ 4,062 58 % For the three and six months that ended June 30, 2024 , the cost of revenue, excluding depreciation and amortization, increased compared to the corresponding prior periods primarily due to an increase in personnel and other direct costs, such as hardware, that were incurred to support our increase in revenue. Additionally, during the three and six months ended June 30, 2024 , $970,000 and $1,799,000 of the increase was related to our acquisition of ATD. Loss from Operations Three Months Ended June 30 , Change Six Months Ended June 30 , Change (Dollars in thousands) 2024 2023 $ % 2024 2023 $ % Loss from operations $ (10,075 ) $ (10,280 ) $ 205 2 % $ (22,991 ) $ (22,966 ) $ (25 ) 0 % Loss from operations for the three and six months ended June 30, 2024 , compared to the three and six months ended June 30, 2023 , remained fairly consistent period to period. The Company has been able to leverage increases in its Adjusted Gross Profit to manage some of the additional costs associated with the ATD Acquisition. Additional Key Performance Indicators and Non-GAAP Measures Performance Obligations As of June 30, 2024 , the Company had approximately $21,023,000 in remaining performance obligations not yet satisfied or partially satisfied. This is a decrease of approximately 20%, down from $26,390,000 of remaining performance obligations as of December 31, 2023 . Total performance obligations have decreased over time as the contract term of certain of the Company's large long-term contracts begin to near. Adjusted Gross Profit and Adjusted Gross Margin Three Months Ended June 30 , Six Months Ended June 30 , 2024 2023 2024 2023 (Dollars in thousands, except percentages) (Dollars in thousands, except percentages) Revenue $ 12,427 $ 8,563 $ 22,205 $ 14,748 Cost of revenue, excluding depreciation and amortization 5,776 4,131 11,061 6,999 Adjusted Gross Profit $ 6,651 $ 4,432 $ 11,144 $ 7,749 Adjusted Gross Margin 53.5 % 51.8 % 50.2 % 52.5 % Adjusted Gross Margin for the three months ended June 30, 2024 , increased compared to the three months ended June 30, 2023 , while the Adjusted Gross Margin for the six months ended June 30, 2024 , decreased compared to the six months ended June 30, 2023 . The fluctuation in Adjusted Gross Margin is typically correlated to the mix of hardware and software sales as well as service-type work. Typically, our software sales carry a higher Adjusted Gross Margin. EBITDA and Adjusted EBITDA The Company calculates EBITDA as net loss before interest, taxes, depreciation, and amortization. The Company calculates Adjusted EBITDA as net loss before interest, taxes, depreciation, and amortization, adjusted for (i) impairment of intangible assets, (ii) loss on extinguishment of debt, (iii) stock-based compensation, (iv) losses or gains on sales of subsidiaries, and (v) other unusual or non-recurring items. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the U.S. (" U.S. GAAP") and should not be considered as an alternative to net earnings or cash flow from operating activities as indicators of our operating performance or as a measure of liquidity or any other measures of performance derived in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of a company's ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do. The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands): Three Months Ended June 30 , Six Months Ended June 30 , 2024 2023 2024 2023 Net loss $ (9,795 ) $ (11,113 ) $ (28,409 ) $ (23,795 ) Interest 544 908 1,598 1,668 Depreciation and amortization 2,344 2,003 4,676 3,954 EBITDA $ (6,907 ) $ (8,202 ) $ (22,135 ) $ (18,173 ) Share-based compensation $ 1,115 $ 1,044 $ 2,282 $ 2,156 Loss (gain) on extinguishment of debt - - 4,693 (527 ) Adjusted EBITDA $ (5,792 ) $ (7,158 ) $ (15,160 ) $ (16,544 ) Rekor has scheduled a conference call to discuss the second quarter 2024 results on Wednesday, August 14, 2024 , at 4:30 P.M. (Eastern). Any person interested in participating in the call should please dial in approximately 10 minutes prior to the start of the call using the following information: North America : 877-407-8037/ 201-689-8037 International: Click here for participant International Toll-Free access numbers Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=XdXiCAVS REPLAY INFORMATION A replay will be made available online approximately two hours following the live call for a period of two weeks. To access the replay, use the following numbers: Replay Dial-In : 877-660-6853 / 201-612-7415 Access ID : 13748129 An archived webcast will also be available to replay this conference call directly from the Company's website under Investors, Events & Presentations. About Rekor Systems, Inc. Rekor Systems, Inc. (NASDAQ:REKR) is a leader in developing and implementing state-of-the-art roadway intelligence systems using AI-enabled computer vision and machine learning. As a pioneer in the implementation of digital infrastructure, Rekor is collecting, connecting, and organizing the world's mobility data - laying the foundation for a digitally-enabled operating system for the roadway. With our Rekor One® Roadway Intelligence Engine at the core of our technology, we aggregate and transform trillions of data points into intelligence through proprietary computer vision, machine learning, and big data analytics that power our platforms and applications. Our solutions provide actionable insights that give governments and businesses a comprehensive picture of roadways while providing a collaborative environment that drives the world to be safer, greener, and more efficient. To learn more, please visit our website: https://rekor.ai , and follow Rekor on social media on LinkedIn , X (formerly Twitter ), Threads , and Facebook . Forward-Looking Statements This press release and its links and attachments contain statements concerning Rekor Systems, Inc. and its future expectations, plans, and prospects that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the impact of Rekor's core suite of AI-powered technology and the size and shape of the global market for ALPR systems. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," by the negative of these terms or by other similar expressions. You are cautioned that such statements are subject to many risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual circumstances, events or results may differ materially from those projected in the forward-looking statements, particularly as a result of various risks and other factors identified in our filings with the Securities and Exchange Commission . All forward-looking statements contained in this press release speak only as of the date on which they were made and are based on management's assumptions and estimates as of such date. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise. Company Contact: Rekor Systems, Inc. Eyal Hen Chief Financial OfficerPhone: +1 (443) 545-7260 [email protected] Media & Investor Relations Contact: Rekor Systems, Inc. Charles Degliomini [email protected] REKOR SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in thousands, except share data)(Unaudited) June 30, 2024 December 31, 2023 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 3,089 $ 15,385 Restricted cash 328 328 Accounts receivable, net 9,015 4,955 Inventory 3,627 3,058 Note receivable, current portion 340 340 Other current assets 1,382 1,270 Total current assets 17,781 25,336 Long-term assets Property and equipment, net 13,212 13,188 Right-of-use operating lease assets, net 9,527 9,584 Right-of-use financing lease assets, net 2,252 1,989 Goodwill 24,313 20,593 Intangible assets, net 26,996 17,239 Note receivable, long-term 312 482 Deposits 3,485 3,740 Total long-term assets 80,097 66,815 Total assets $ 97,878 $ 92,151 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses 6,272 5,139 Notes payable, current portion 2,000 1,000 Loan payable, current portion 77 75 Lease liability operating, short-term 1,741 1,261 Lease liability financing, short-term 720 547 Contract liabilities 3,617 3,604 Liability for ATD Holdback Shares 890 - Other current liabilities 5,839 5,610 Total current liabilities 21,156 17,236 Long-term Liabilities Notes payable, long-term - 1,000 2023 Promissory Notes, net of debt discount of $0 and $1,012 , respectively - 2,988 2023 Promissory Notes - related party, net of debt discount of $0 and $2,149 , respectively - 6,351 Series A Prime Revenue Sharing Notes, net of debt discount of $372 and $447 , respectively 9,628 9,553 Series A Prime Revenue Sharing Notes - related party, net of debt discount of $186 and $223 , respectively 4,814 4,777 Loan payable, long-term 234 273 Lease liability operating, long-term 12,823 13,445 Lease liability financing, long-term 1,090 1,057 Contract liabilities, long-term 1,325 1,449 Deferred tax liability 65 65 Other non-current liabilities 587 587 Total long-term liabilities 30,566 41,545 Total liabilities 51,722 58,781 Commitments and contingencies (Note 7) Stockholders' equity Preferred stock, $0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of June 30, 2024 and December 31, 2023 , respectively. No preferred stock was issued or outstanding as of June 30, 2024 or December 31, 2023 , respectively. - - Common stock, $0.0001 par value; authorized; 300,000,000 shares; issued: 86,371,359 shares as of June 30, 2024 and 69,273,334 as of December 31, 2023 ; outstanding: 86,216,706 shares as of June 30, 2024 and 69,176,826 as of December 31, 2023 . 9 7 Treasury stock, 154,653 and 96,508 shares as of June 30, 2024 and December 31, 2023 , respectively. (702 ) (522 ) Additional paid-in capital 273,941 232,568 Accumulated deficit (227,092 ) (198,683 ) Total stockholders' equity 46,156 33,370 Total liabilities and stockholders' equity $ 97,878 $ 92,151 REKOR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except share data) Three Months Ended June 30 , Six Months Ended June 30 , 2024 2023 2024 2023 Revenue $ 12,427 $ 8,563 $ 22,205 $ 14,748 Cost of revenue, excluding depreciation and amortization 5,776 4,131 11,061 6,999 Operating expenses: General and administrative expenses 7,370 5,873 15,032 13,078 Selling and marketing expenses 2,021 2,053 4,435 3,943 Research and development expenses 4,991 4,783 9,992 9,740 Depreciation and amortization 2,344 2,003 4,676 3,954 Total operating expenses 16,726 14,712 34,135 30,715 Loss from operations (10,075 ) (10,280 ) (22,991 ) (22,966 ) Other income (expense): (Loss) gain on extinguishment of debt - - (4,693 ) 527 Interest expense, net (544 ) (908 ) (1,598 ) (1,668 ) Gain on remeasurement of ATD Holdback Shares 745 - 745 - Other income 79 75 128 312 Total other income (expense) 280 (833 ) (5,418 ) (829 ) Net loss $ (9,795 ) $ (11,113 ) $ (28,409 ) $ (23,795 ) Loss per common share $ (0.12 ) $ (0.18 ) $ (0.35 ) $ (0.41 ) Weighted average shares outstanding Basic and diluted 84,932,611 61,816,279 81,929,347 58,353,534 SOURCE: Rekor Systems, Inc. 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