Rekor Systems, Inc.

Good afternoon ladies and gentlemen and welcome to today's Recore Systems Incorporated conference call. My name is Robert and I'll be your coordinator for today. At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your telephone keypad. As a reminder this conference call is being recorded for replay purposes. Before we start, I want to read you the company's abbreviated Safe Harbor Statement. I want to remind you that statements made in this conference call concerning future, revenues, results of operations, financial position, markets, economic conditions, products and product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements. Such statements can involve known and unknown risk uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimers in our earnings release. You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. I would now like to turn the presentation over to Mr. Robert Berman, Interim President and CEO of Recore Systems.

Thank you, Operator, and good afternoon, everyone. We appreciate your joining us to review Recore Systems' second quarter 2025 results. We typically begin these calls with our CFO walking through the financials. But as we did last quarter, I'd like to first provide some broader context to help frame the numbers you'll hear shortly. With that, I'm pleased to kick off the conversation this afternoon. Earlier this year, we announced a major statewide blanket purchase order with the Texas Department of Transportation, one of the most influential and sophisticated departments of transportation in the country. This marks a transformative moment, not just for RECOR, but for the broader transportation industry. TxDOT's adoption of the RECOR command platform sets a new standard for how large agencies can leverage AI and data fusion to improve roadway decision-making safety and operational efficiency. That said, it is important to recognize that the expanded adoption across the rest of TxDOT's 25 districts is not a switch flip overnight. We expect the process of bringing additional districts on board to unfold over the coming quarters as stakeholders gain confidence in the results and operational benefits demonstrated in Austin and other future early deployments. In that regard, we also secured and began executing two additional deployments that validate our broader market traction. The Central Texas Regional Mobile Authority has entered into a $1.4 million contract expansion for over five years, demonstrating the Authority's continued trust and investment in its RECOR command technology. The implementation of RECOR command for this agency has led to significant measurable results, including a 324% increase in incident detection and an 11-minute faster average response time, highlighting the effectiveness of the technology in improving roadway safety. The new contract expansion enhances their use of the platform by adding advanced features such as bidirectional driver communication and AI-powered predictive insights to the capabilities they now use and will enhance its contribution to the roadway management. This partnership aligns with broader regional growth supporting over 35 major infrastructure projects in Central Texas through enhanced technology, which can lead to increased demand for recourse services. Another notable development for RECOR in the second quarter has been a major deployment of RECOR Discover in a Sunbelt State. As part of new statewide initiative to modernize traffic operations, the agency is installing 150 Discover systems under a one-year $1.2 million data as a service contract. Our installations are expected to be completed shortly. This deployment reflects growing momentum for ReCore Discover as transportation agencies seek safer, non-intrusive FHWA-compliant solutions to replace older in-road technologies. In addition to this project, Discover is now active in multiple states, including Arizona, Colorado, Florida, Georgia, New Mexico, New York, South Carolina, further strengthening our national footprint and supporting future international expansions. On a local level, we've continued rolling out ReCore RoadView, our situational awareness platform built specifically for cities and counties that don't operate 24-7 traffic management centers. RoadView provides real-time alerts for incidents, congestion, and work zones, allowing smaller agencies to take timely action and improve operational response without having infrastructure investments. Feedback from the early adopters has been very encouraging. We also expanded our data as a service model for Record Discover, giving users access to accurate FHWA-compliant traffic data, being subscription. No hardware, no installation, and no maintenance, just the data they need when they need it. It's a win-win that will reduce agencies' costs and complexity and allow us to increase recurring revenue while delivering high-value insights at scale. The transportation landscape is evolving quickly, and RECOR is playing a leading role in increasing transportation data is being viewed not just as a planning tool, but as a national asset with implications for safety, resilience, and economic development. That recognition is shaping our conversations with agency partners and opening doors to new opportunities. RECOR is well positioned to meet this moment with the technology, credibility, and policy alignment required to help agencies modernize responsible and securely. As we look to the second half of 2025, we'll continue executing against current deployments while deepening those relationships. We'll work to bring new TxDOT districts online over time. We'll build on our momentum to secure additional Discover contracts at the state and regional levels. And we'll continue participating in the national dialogue around AI transportation, and infrastructure modernization and developing new products and services to address these important needs. Two major milestones ahead, first the ITE 2025 in Florida this week and the ITS World Congress in Atlanta later this month. We'll be demonstrating our full connected intelligence suite and engaging with global transportation leaders to reinforce RECOR's leadership position. In closing, RECOR is continuing to advance as a connected intelligence partner for the public sector. We're solving real problems, delivering value, and helping agencies rethink how they manage and secure the most vital public assets, our roads. Thank you again for your continued support, and with that, I'll turn it over to our CFO, Eyal Henn, for a review of the financials. Eyal?

Thank you, Oleg. And good afternoon to everyone joining us. Today, I'll walk you through our financial results for the three and six months ended June 30, 2025. While the macro environment remains somewhat challenging, particularly due to continued uncertainty in the government sector, we remain focused on execution and operational efficiency, and we are encouraged by the progress we continue to make in this challenging environment. Total revenue for Q2 2025 was $12.4 million, consistent with the same quota of last year. On a year-to-date basis, we recorded $21.6 million, down 3% from the first half of 2024. This modest decline was primarily driven by slower project activity and weather conditions at the beginning of the year. We continue to see strength in our sales pipeline and current deployment, and are confident in our ability to drive sequential growth in the second half of the year. Recurring revenue for Q2 totaled $5.9 million, representing 48% of total revenue, compared to 50.6% in Q2 2024. For the six months ended June 30, 2025, recurring revenue was $11 million, a slight decline of 2% from the prior year. This fluctuation reflects some recent increases in point-in-time sales. However, our long-term strategy remains focused on growing our recurring revenue base through SaaS and data subscription models. Adjusted gross margin for the quarter was 49.5% compared to 53.5% in Q2 2024. For the first six months of 2025, adjusted gross margin was 48.9% versus 50.2% in the prior year period. The decline in margin is largely attributable to the revenue mix. with a greater proportion of hardware-based contracts compared to high-margin software sales. We continue to expect margin increases over time as our SaaS and data businesses grow and account for a larger share of revenue. A key highlight this quarter is our continued focus on operating efficiency. Total operating expenses for Q2 declined 17% year-over-year, representing a $2.9 million reduction. Year-to-date, we have reduced operating expenses by $5.7 million, also a 17% improvement. These savings were achieved across all major areas of the business. G&A expenses decreased 6% in Q2 and 5% year-to-date. Sales and marketing expenses were down 16% for the quarter and 22% year-to-date. and R&D expenses decreased 27% in Q2 and 24% for the first six months. These results reflect disciplined cost containment and deliberate realignment of resources to match our operating model and growth strategy. Adjusted EBITDA loss for Q2 2025 was $5.8 million, in line with the prior year. On a year-to-date basis, adjusted EBITDA improved by $2 million, narrowing to $13.1 million, compared to $15.2 million in the same period last year. With our commitment to continued cost discipline and sights on higher revenue in the current quarter, we anticipate continued improvements in adjusted EBITDA for the remainder of 2025. Looking ahead, we are very optimistic. Our pipeline remains strong, particularly with our State Department of Transportation and public safety verticals. We expect these relationships to continue to expand and contribute more meaningfully to revenue in the second half of the year. We also continue to identify opportunities for additional operational efficiency to help improve our bottom line. With our focus on revenue growth, extended SaaS offerings, and disciplined execution, we remain confident in our goal of exiting 2025 on a stronger financial footing and moving closer to break-even adjusted EBITDA. Before I turn it back to Robert, I want to thank our shareholders for their continued support. We recognize the challenges of the past year, but we are proud of the operational and financial progress made in the first half of 2025. We have a clear strategy, and we are executing on that plan. Your trust and patience are invaluable, and we remain committed to delivering long-term share of their value. Thank you for your attention. Over back to you.