Rekor Systems Inc. reported a strong second quarter in 2026, demonstrating notable financial improvements and a clear trajectory towards profitability. The company achieved sequential revenue growth, substantially narrowed its adjusted EBITDA losses, and expanded its adjusted gross margins. These positive results stem from a focused strategy on increasing recurring software revenue, implementing significant cost-cutting measures, including a 20% reduction in its workforce, and enhancing overall operational efficiency. Management is optimistic about reaching adjusted EBITDA profitability in the second half of 2026, buoyed by a more streamlined expense base and continued expansion in its recurring roadway data revenue.
During the earnings call on August 13, 2026, CEO Robert Alan Berman and CFO Joseph Nalepa detailed the company's performance. Rekor's second-quarter revenue reached $12.7 million, marking a 2% year-over-year increase and a 23% sequential rise from the first quarter. Recurring revenue stood out, growing 14% year-over-year to $6.7 million, reflecting the company's successful pivot towards more consistent and higher-margin business models. For the first half of 2026, recurring revenue climbed 21% to $13.3 million. Adjusted gross margin improved to 56.2% in Q2 2026, up from 49.5% in the same period of 2025, primarily due to more efficient deployment strategies and a favorable shift in product mix, with a higher proportion of software sales compared to service work.
Operating expenses saw a significant reduction of $4 million in the second quarter across general and administrative, selling and marketing, and research and development categories. This reduction contributed to a 79% improvement in the adjusted EBITDA loss, which narrowed to $1.2 million from $5.8 million in Q2 2025. The company also reported a net loss of $551,000, a substantial improvement from the $8.7 million net loss in the prior year, partly aided by a one-time non-cash gain of $2.8 million from a lease liability remeasurement. Rekor ended the quarter with $10 million in cash and cash equivalents, showcasing improved working capital management and a reduced quarterly cash burn of $2.4 million.
Strategic initiatives highlighted during the call included the launch of GoSecureVideo in June, a platform designed to cryptographically verify the authenticity of video and audio content, crucial in an era of easy digital manipulation. Berman emphasized Rekor's long-standing commitment to privacy in its Automatic License Plate Recognition (ALPR) technology, positioning the company favorably amidst increasing public scrutiny and evolving data practice regulations. Furthermore, the company secured a new contract in South Carolina, expanding its market footprint and opening avenues for additional work in the region. Rekor also continues to evaluate options for refinancing its existing prime revenue sharing notes, supported by its expanding contract portfolio.
The company's focus on non-intrusive AI-driven systems, particularly with its Discover product, aligns with industry trends away from traditional in-road sensors, positioning Rekor for growth in the data-as-a-service sector. Management expects to realize several million dollars in additional annualized savings from further efficiency measures, with impacts anticipated from the fourth quarter of 2026 into 2027. These concerted efforts in cost management, strategic product development, and market expansion underscore Rekor's confidence in achieving sustained growth and reaching its profitability goals in the near future.
