Rekor Systems NASDAQ: REKR reported higher second-quarter revenue, expanding gross margins and a substantially narrower adjusted EBITDA loss as cost-cutting measures and growth in recurring revenue began to affect results.
Chief Executive Officer Robert Berman said the company is nearing the end of a cost-reduction program and expects additional efficiencies and recurring-revenue growth during the second half of 2026. He said Rekor’s focus is on execution, recurring revenue growth and reaching profitability.
Second-Quarter Results
Revenue for the second quarter was $12.7 million, up 2% from $12.4 million in the year-earlier quarter, Chief Financial Officer Joe Nalepa said. Revenue for the first six months of 2026 rose 6% year over year to $22.9 million.
Recurring revenue increased faster than overall sales. Quarterly recurring revenue rose 14% from the prior-year period to $6.7 million, while first-half recurring revenue increased 21% to $13.3 million. Nalepa said the trend reflects a shift toward contracted, repeatable and higher-margin revenue.
Adjusted gross margin expanded to 56% in the second quarter from 50% a year earlier. For the first half, adjusted gross margin rose to 55% from 49%. Nalepa attributed the improvement to more efficient deployment operations as revenue grew and a more favorable mix of software and recurring revenue relative to service-related work.
Operating expenses across general and administrative, selling and marketing, and research and development declined by $4 million in the quarter and $4.3 million in the first half compared with the respective 2025 periods. The reductions followed headcount cuts during the first half and efforts to optimize engineering operations.
The company also recorded a one-time, non-cash gain of $2.8 million from the remeasurement of a lease liability tied to its operational realignment. Rekor reported income from operations for the quarter, which Nalepa said reflected the lease-related gain along with revenue growth, higher adjusted gross profit and organizational efficiency measures.
Adjusted EBITDA loss narrowed 79% year over year to approximately $1.2 million. Lower payroll and payroll-related costs accounted for much of the improvement, with revenue growth and margin expansion also contributing, Nalepa said.
Cash, Cost Savings and Outlook
Rekor ended the second quarter with slightly more than $10 million in cash. Operating cash burn was reduced to $2.4 million during the quarter. Cash used in operations for the first six months improved by $9.6 million, or 61%, from the same period in 2025.
Nalepa said the company has identified additional non-workforce efficiencies expected to generate several million dollars in annualized savings. Rekor expects to execute those measures in the third quarter, with a more noticeable impact anticipated in the fourth quarter and into 2027.
The company is evaluating options to refinance its existing Prime Revenue Sharing Notes. Nalepa said Rekor’s growing contract portfolio and a recent South Carolina win could help support a refinancing, though he said the company would provide more information only when something definitive is available.
Management said it expects to reach adjusted EBITDA profitability in the second half of 2026, assuming continued execution and cost discipline. Nalepa cited the full-period impact of first-half cost reductions, continued recurring-revenue growth and capital-management discipline as reasons for that outlook.
Product and Market Developments
Berman highlighted the June launch of Go-Secure.Video, which cryptographically signs video at capture and is designed to determine frame by frame whether footage has been altered. Rekor has extended the approach to recorded audio to address splicing, deletion and synthetic replacement under the same authenticity framework.
He said the company is in active discussions with potential GoSecure launch partners and is seeking to finalize initial commercial terms in the third quarter, with definitive agreements to follow where appropriate. Berman said Rekor believes the offering could extend beyond its initial launch markets and potentially become a media-authenticity standard.
In transportation, Berman said agencies are moving away from in-road sensors and toward non-intrusive, AI-driven systems. He said Rekor Discover and the company’s Data-as-a-Service model are positioned for that shift, while recurring roadway-data revenue continues to grow.
Management also addressed a more challenging environment for automatic license plate recognition, or ALPR, citing increased public scrutiny, rules covering data retention, sharing and access, and more active litigation regarding data practices. Berman said those developments have affected sales cycles across the industry.
He said Rekor believes its emphasis on privacy, responsible use, customer control and auditability could position it favorably as government agencies and oversight bodies seek demonstrable compliance. In response to an investor question, Berman said agencies and governments are pausing to assess how to deploy technology for public safety without creating what he called a surveillance state.
South Carolina and Rekor Command Pipeline
Nalepa said Rekor’s new South Carolina contract will expand the company’s existing footprint in the state and create an opportunity to pursue additional work there, similar to its operations in Georgia.
On the Rekor Command pipeline, Nalepa said the company is communicating with multiple departments of transportation across jurisdictions and sees potential for new wins. However, he noted that it can be difficult to predict when government customers will finalize contracts.
About Rekor Systems (NASDAQ:REKR)
Rekor Systems, Inc is a U.S.-based technology company specializing in real-time vehicle recognition solutions powered by artificial intelligence and machine learning. The company develops software and hardware systems that capture, analyze and store vehicle data—such as license plate images, make and model, color and vehicle characteristics—by leveraging advanced computer vision algorithms. Rekor's platforms enable public safety agencies, transportation departments and private enterprises to automate vehicle identification, enhance situational awareness and improve operational efficiency.
The company's flagship offering is a suite of intelligent camera and analytics products that include built-in license plate recognition (LPR) and vehicle attribute classification.
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