Rekor Systems, Inc. — Call Transcript 2026

As a reminder, this conference call is being recorded for replay purposes. Before we start, I must 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 risks, 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 today. 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 Rekor CEO, Mr. Robert Berman. Good afternoon, everyone, and thank you for joining us. I want to be direct about where we are and where we are headed because I think the story is clearer now than it has been in some time. Toward the end of 2025 and into Q1 2026, we decided to take a hard look at every part of this organization, every headcount, every contract, every expense. Nothing was exempt from that review. The question we asked was simply, does this make the company better? If the answer was no or even maybe, we adjusted to improve our core business. That process produced real structural change. We reduced headcount by approximately 45 positions, roughly 16% of our workforce between year-end 2025 and the end of Q1 2026. We found efficiencies and optimized engineering activities that were core to our path forward. We right-sized the cost and organizational structure to match where the business actually is today. The financial impact of those decisions were not fully visible in Q1. Some of those actions were taken mid-quarter. Some carried one-time costs that hit Q1 but will not repeat. Joe will walk you through all that in detail. What I want the investors to understand is that this work is done. The organization we are running today is leaner, faster, and more focused than the one we had a year ago. Q2 will be where you start to see what that means in the numbers. Our target is to reach EBITDA positive by the end of the year, and we expect to be very close to EBITDA neutral by the end of Q2 or in early Q3. That is not a wish. It is where the math takes us when you run the full impact of the cost reductions we've already executed against our current revenue trajectory. Now let me turn to the revenue side. Because the business itself is performing well, revenue grew 12% year-over-year, and every product line Scout, Discover, and Command grew. Gross margins reached 53%, up from 48% a year ago. These are not small moves. They reflect the business that is executing. Finally, we previously announced the creation of Rekor Labs. Before I close, I want to spend a moment on Rekor Labs because I think it deserves attention. Rekor Labs was established to develop technology that extends into public safety and the commercial markets. Its first product, GoSecure, is on track for commercial release in Q3 2026. GoSecure answers a question a law enforcement customer put to us way back in 2024. That question was, "Can video evidence captured by your platform be faked?" Prosecutors and defense attorneys were using that footage in court, and they needed a definitive answer. We built one. GoSecure certifies with mathematical certainty whether video or photo content has been altered down to a single frame. It verifies the camera of origin, the timestamp, the GPS location, and the integrity of the file from the moment of capture. In a world where deepfake technology is becoming widely accessible, the credibility of surveillance video is increasingly under threat. The ability to authenticate video evidence is therefore becoming essential for law enforcement, insurers, and the courts. Rekor Labs is chaired by Professor Sanjay Sarma, MIT Professor of Mechanical Engineering and former Vice President for Open Learning at MIT. Professor Sarma also previously served as a director of Rekor Systems. His involvement underscores both the technical rigor behind the platform and the seriousness with which we are bringing this technology to market. We look forward to sharing more about GoSecure as we move towards its planned Q3 launch. I'll now turn the call over to Joe Nalepa to review the Q1 financial results. Joe? Thank you, Robert. Q1 came in largely as we planned. We expected the quarter to include normal seasonality as well as certain one-time charges tied to the cost reduction actions we executed during the period. We also expected that the full benefit of those actions would not be meaningfully reflected until Q2. What is important to highlight is that when comparing Q1 2026 to Q1 2025, the underlying trajectory of the business is positive. Revenue increased, adjusted gross margin improved, and we continued to identify and execute on meaningful cost efficiencies, the majority of which are expected to show in Q2 2026. Revenue increased 12% year-over-year, approximately $1.1 million in growth realized across each of our product lines. Scout contributed $281,000 to that increase, while Discover contributed $682,000, and Command contributed approximately $102,000. Adjusted gross margins rose to 53% in Q1 2026 compared to 48% in Q1 2025. This 5 percentage point improvement reflects revenue growth, which allows us to be more efficient when we operate deployments, a favorable product mix with higher margin software sales and recurring revenue representing a larger portion of our total revenue. EBITDA loss came in at approximately $6.5 million, an improvement from $7.4 million loss in Q1 2025. Importantly, the Q1 2026 results do not fully reflect the benefit of the cost optimization measures implemented during the quarter, and also include certain one-time costs related to those actions. Despite those items, we still delivered year-over-year improvement, and we believe that improvement will continue through 2026. The improvement in EBITDA was driven by revenue growth and a discipline focused on cost containment. Payroll and payroll-related costs declined as a result of the headcount reductions Robert referenced, a significant portion of which were implemented during Q1 and will begin to have their full impact in Q2. Q1 also reflected normal seasonality, which typically results in lower activity relative to later quarters. Beyond those specific actions, we have evaluated every line item and policy across our cost structure. Where spending was not critical, it was eliminated, and where spending was deemed necessary, we evaluated how to improve efficiency, optimize processes, and reduce costs. This detailed review of our current operating model has already produced meaningful improvements, and we expect it to help lower overall operating costs going forward. We ended Q1 2026 with $12.2 million in cash, compared to $16.6 million at the end of 2025. The sequential decline was expected and reflects the seasonal Q1 pattern, as well as the one-time restructuring costs. On a year-over-year basis, our operating cash consumption improved, which reinforces our view that the underlying business is moving in the right direction. We are actively evaluating options to refinance our existing Series A Prime Revenue Sharing Notes with a goal of reducing our cost of capital. Our growing contract portfolio supports the refinancing, and we expect to have more to report on this as we get further into 2026. Looking ahead, the cost reductions executed during Q1 were not fully reflected in our quarter end results because many were implemented mid-quarter. In Q2 and the remainder of the year, those savings are expected to be reflected and combined with our revenue growth trajectory. We believe the business is positioned for continued EBITDA improvement as we move through 2026. We remain focused on disciplined execution, cost efficiency, and driving sustainable growth across the business. Thank you again for your time and continued support. With that, I'll turn it back to our operator for Q&A. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. The first question comes from the line of [Mike] Latimore with Northland Capital Markets. Please proceed. Hey, guys. Thanks for taking my question. My first question, I was just wondering about the status of the Georgia DOT deployment. How should we think about that building throughout the year? Thank you. Hey, Mike, it's Robert. How are you? Thanks for asking. You know, Georgia took a little longer to finalize, but we got it done, you know, last fall. We're seeing substantial growth already because it's a contract vehicle, meaning that it's not just with the central office of GDOT, but gives the ability to all other entities in the state of Georgia to buy through that contract vehicle. Without getting into specific details, which I can't, we're already working with several other counties, a couple of large cities and so forth. As I think we said when we announced the contract, we think the value will be substantially higher than the base value, which was, you know, roughly $60 million. I think we're doing well with it. We got a price bump on stuff we already have, which is equipment that's in the ground. That means higher margins. Overall, headed in the right direction. Great. Good to hear. Thinking about expenses throughout the year, do you expect the 1 Q expense level to be, you know, about right for the rest of the year, or do you expect a change? The I think that's a question for Joe. Joe? Yeah. Thank you for the question. We expect Q1 to be on the higher end of expenses. You know, a lot of the cost-cutting measures that we ended up taking in Q1 didn't get their full impact, as they were made towards the end of the quarter, and they bore some one-time cost with them. I think as we get into Q2, you'll see a stark drop in expenses, especially within our operating expenses that'll continue throughout the rest of the year. Yeah. Mike, just to add, just to add to what Joe said, as you said, the severance related to all those employees, office shutdowns, which required, you know, negotiating out of leases and so forth, really all took place. By the time it was finalized, it was towards the end of, you know, Q1. I think, Joe, correct me, but I think we're gonna see, you know, all of that in Q2, right? It's behind us as of Q1. Maybe a few days it would pick up, but it's mostly Q2 that you'll see the results of that. Cool. Great. Around the Oklahoma UVED Program here, I was wondering if there's any additional prospects that might, you know, enter into a uninsured vehicle program that you expect to get approved this year or maybe sitting in the pipeline currently. We are talking to several other states. I scratch my head, you know, thinking, given the benefits that the states get from this type of program and the insurance industry, you know, the natural question is, why the hell aren't all the states doing this, right? You know, government takes time. I think, you know, we're proud of the fact that they renewed for quite a long period with us, and hopefully we'll see, you know, others realizing, you know, we need to be doing this. It's just there's no reason not to, right? It's a good thing, right? Things just, you know, take time. Just one quick final one, what percent of revenue was recurring in the quarter? Uh- Sorry. This quarter, we had about 64% of our revenue was recurring. Awesome. Thank you. I appreciate it, guys. All right. Mike, thank you. Thank you. There are no further questions at this time, and I would like to turn the call back to Robert Berman for closing remarks. Yeah. Operator, I just wanna make sure that there's nobody in the queue and there are no further questions. Just please double-check. Yes, sure. Ladies and gentlemen, as a reminder, please press star one on your telephone keypad to ask a question. If not, operator, you seeing anything or? No, there should be no further questions. Okay. Look, just in closing, you know, again, thank everybody for, you know, joining the call, your attendance, your patience. What we did in late Q4 2025 and all through Q1 2026 was long overdue, and we needed to do it. We focused on it and we got it done. I think we'll see the results of that now going into, you know, Q2 and beyond. We just, again, thank everyone for their support and patience. Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker 3: As a reminder, this conference call is being recorded for replay purposes. Before we start, I must 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 risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. As a reminder, this conference call is being recorded for replay purposes. as a reminder this conference call is being recorded for replay purposes Before we start, I must 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. before we start i must 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 risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. such statements can involve known and unknown risks 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 today. 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 Rekor CEO, Mr. Robert Berman. We ask that you refer to the full disclaimers in our earnings release. 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. 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 today. non-gaap results will also be discussed on the call today 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. 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 Rekor CEO, Mr. Robert Berman. i would now like to turn the presentation over to rekor ceo mr robert berman

Speaker 4: Good afternoon, everyone, and thank you for joining us. I want to be direct about where we are and where we are headed because I think the story is clearer now than it has been in some time. Toward the end of 2025 and into Q1 2026, we decided to take a hard look at every part of this organization, every headcount, every contract, every expense. Nothing was exempt from that review. The question we asked was simply, does this make the company better? If the answer was no or even maybe, we adjusted to improve our core business. That process produced real structural change. We reduced headcount by approximately 45 positions, roughly 16% of our workforce between year-end 2025 and the end of Q1 2026. We found efficiencies and optimized engineering activities that were core to our path forward. Good afternoon, everyone, and thank you for joining us. good afternoon everyone and thank you for joining us I want to be direct about where we are and where we are headed because I think the story is clearer now than it has been in some time. i want to be direct about where we are and where we are headed because i think the story is clearer now than it has been in some time Toward the end of 2025 and into Q1 2026, we decided to take a hard look at every part of this organization, every headcount, every contract, every expense. toward the end of 2025 and into q1 2026 we decided to take a hard look at every part of this organization every headcount every contract every expense Nothing was exempt from that review. nothing was exempt from that review The question we asked was simply, does this make the company better? the question we asked was simply does this make the company better If the answer was no or even maybe, we adjusted to improve our core business. if the answer was no or even maybe we adjusted to improve our core business That process produced real structural change. that process produced real structural change We reduced headcount by approximately 45 positions, roughly 16% of our workforce between year-end 2025 and the end of Q1 2026. we reduced headcount by approximately 45 positions roughly 16% of our workforce between year-end 2025 and the end of q1 2026 We found efficiencies and optimized engineering activities that were core to our path forward. we found efficiencies and optimized engineering activities that were core to our path forward We right-sized the cost and organizational structure to match where the business actually is today. The financial impact of those decisions were not fully visible in Q1. Some of those actions were taken mid-quarter. Some carried one-time costs that hit Q1 but will not repeat. Joe will walk you through all that in detail. What I want the investors to understand is that this work is done. The organization we are running today is leaner, faster, and more focused than the one we had a year ago. Q2 will be where you start to see what that means in the numbers. Our target is to reach EBITDA positive by the end of the year, and we expect to be very close to EBITDA neutral by the end of Q2 or in early Q3. That is not a wish. We right-sized the cost and organizational structure to match where the business actually is today. we right-sized the cost and organizational structure to match where the business actually is today The financial impact of those decisions were not fully visible in Q1. the financial impact of those decisions were not fully visible in q1 Some of those actions were taken mid-quarter. some of those actions were taken mid-quarter Some carried one-time costs that hit Q1 but will not repeat. some carried one-time costs that hit q1 but will not repeat Joe will walk you through all that in detail. joe will walk you through all that in detail What I want the investors to understand is that this work is done. what i want the investors to understand is that this work is done The organization we are running today is leaner, faster, and more focused than the one we had a year ago. the organization we are running today is leaner faster and more focused than the one we had a year ago Q2 will be where you start to see what that means in the numbers. q2 will be where you start to see what that means in the numbers Our target is to reach EBITDA positive by the end of the year, and we expect to be very close to EBITDA neutral by the end of Q2 or in early Q3. our target is to reach ebitda positive by the end of the year and we expect to be very close to ebitda neutral by the end of q2 or in early q3 That is not a wish. that is not a wish It is where the math takes us when you run the full impact of the cost reductions we've already executed against our current revenue trajectory. Now let me turn to the revenue side. Because the business itself is performing well, revenue grew 12% year-over-year, and every product line Scout, Discover, and Command grew. Gross margins reached 53%, up from 48% a year ago. These are not small moves. They reflect the business that is executing. Finally, we previously announced the creation of Rekor Labs. Before I close, I want to spend a moment on Rekor Labs because I think it deserves attention. Rekor Labs was established to develop technology that extends into public safety and the commercial markets. Its first product, GoSecure, is on track for commercial release in Q3 2026. It is where the math takes us when you run the full impact of the cost reductions we've already executed against our current revenue trajectory. it is where the math takes us when you run the full impact of the cost reductions we've already executed against our current revenue trajectory Now let me turn to the revenue side. now let me turn to the revenue side Because the business itself is performing well, revenue grew 12% year- over -year, and every product line Scout, Discover, and Command grew. because the business itself is performing well revenue grew 12% year- over -year and every product line scout discover and command grew Gross margins reached 53%, up from 48% a year ago. gross margins reached 53% up from 48% a year ago These are not small moves. these are not small moves They reflect the business that is executing. they reflect the business that is executing Finally, we previously announced the creation of Rekor Labs. finally we previously announced the creation of rekor labs Before I close, I want to spend a moment on Rekor Labs because I think it deserves attention. before i close i want to spend a moment on rekor labs because i think it deserves attention Rekor Labs was established to develop technology that extends into public safety and the commercial markets. rekor labs was established to develop technology that extends into public safety and the commercial markets Its first product, GoSecure, is on track for commercial release in Q3 2026. its first product gosecure is on track for commercial release in q3 2026 GoSecure answers a question a law enforcement customer put to us way back in 2024. That question was, "Can video evidence captured by your platform be faked?" Prosecutors and defense attorneys were using that footage in court, and they needed a definitive answer. We built one. GoSecure certifies with mathematical certainty whether video or photo content has been altered down to a single frame. It verifies the camera of origin, the timestamp, the GPS location, and the integrity of the file from the moment of capture. In a world where deepfake technology is becoming widely accessible, the credibility of surveillance video is increasingly under threat. GoSecure answers a question a law enforcement customer put to us way back in 2024. gosecure answers a question a law enforcement customer put to us way back in 2024 That question was, "Can video evidence captured by your platform be faked?" Prosecutors and defense attorneys were using that footage in court, and they needed a definitive answer. that question was "can video evidence captured by your platform be faked?" prosecutors and defense attorneys were using that footage in court and they needed a definitive answer We built one. we built one GoSecure certifies with mathematical certainty whether video or photo content has been altered down to a single frame. gosecure certifies with mathematical certainty whether video or photo content has been altered down to a single frame It verifies the camera of origin, the timestamp, the GPS location, and the integrity of the file from the moment of capture. it verifies the camera of origin the timestamp the gps location and the integrity of the file from the moment of capture In a world where deepfake technology is becoming widely accessible, the credibility of surveillance video is increasingly under threat. in a world where deepfake technology is becoming widely accessible the credibility of surveillance video is increasingly under threat The ability to authenticate video evidence is therefore becoming essential for law enforcement, insurers, and the courts. Rekor Labs is chaired by Professor Sanjay Sarma, MIT Professor of Mechanical Engineering and former Vice President for Open Learning at MIT. Professor Sarma also previously served as a director of Rekor Systems. His involvement underscores both the technical rigor behind the platform and the seriousness with which we are bringing this technology to market. We look forward to sharing more about GoSecure as we move towards its planned Q3 launch. I'll now turn the call over to Joe Nalepa to review the Q1 financial results. Joe? The ability to authenticate video evidence is therefore becoming essential for law enforcement, insurers, and the courts. the ability to authenticate video evidence is therefore becoming essential for law enforcement insurers and the courts Rekor Labs is chaired by Professor Sanjay Sarma, MIT Professor of Mechanical Engineering and former Vice President for Open Learning at MIT. rekor labs is chaired by professor sanjay sarma mit professor of mechanical engineering and former vice president for open learning at mit Professor Sarma also previously served as a director of Rekor Systems. professor sarma also previously served as a director of rekor systems His involvement underscores both the technical rigor behind the platform and the seriousness with which we are bringing this technology to market. his involvement underscores both the technical rigor behind the platform and the seriousness with which we are bringing this technology to market We look forward to sharing more about GoSecure as we move towards its planned Q3 launch. we look forward to sharing more about gosecure as we move towards its planned q3 launch I'll now turn the call over to Joe Nalepa to review the Q1 financial results. i'll now turn the call over to joe nalepa to review the q1 financial results Joe? joe

Speaker 1: Thank you, Robert. Q1 came in largely as we planned. We expected the quarter to include normal seasonality as well as certain one-time charges tied to the cost reduction actions we executed during the period. We also expected that the full benefit of those actions would not be meaningfully reflected until Q2. What is important to highlight is that when comparing Q1 2026 to Q1 2025, the underlying trajectory of the business is positive. Revenue increased, adjusted gross margin improved, and we continued to identify and execute on meaningful cost efficiencies, the majority of which are expected to show in Q2 2026. Revenue increased 12% year-over-year, approximately $1.1 million in growth realized across each of our product lines. Scout contributed $281,000 to that increase, while Discover contributed $682,000, and Command contributed approximately $102,000. Thank you, Robert. thank you robert Q1 came in largely as we planned. q1 came in largely as we planned We expected the quarter to include normal seasonality as well as certain one-time charges tied to the cost reduction actions we executed during the period. We also expected that the full benefit of those actions would not be meaningfully reflected until Q2. we expected the quarter to include normal seasonality as well as certain one-time charges tied to the cost reduction actions we executed during the period. we also expected that the full benefit of those actions would not be meaningfully reflected until q2 What is important to highlight is that when comparing Q1 2026 to Q1 2025, the underlying trajectory of the business is positive. what is important to highlight is that when comparing q1 2026 to q1 2025 the underlying trajectory of the business is positive Revenue increased, adjusted gross margin improved, and we continued to identify and execute on meaningful cost efficiencies, the majority of which are expected to show in Q2 2026. revenue increased adjusted gross margin improved and we continued to identify and execute on meaningful cost efficiencies the majority of which are expected to show in q2 2026 Revenue increased 12% year-over-year, approximately $1.1 million in growth realized across each of our product lines. revenue increased 12% year-over-year approximately $1.1 million in growth realized across each of our product lines Scout contributed $281,000 to that increase, while Discover contributed $682,000, and Command contributed approximately $102,000. scout contributed $281,000 to that increase while discover contributed $682,000 and command contributed approximately $102,000 Adjusted gross margins rose to 53% in Q1 2026 compared to 48% in Q1 2025. This 5 percentage point improvement reflects revenue growth, which allows us to be more efficient when we operate deployments, a favorable product mix with higher margin software sales and recurring revenue representing a larger portion of our total revenue. EBITDA loss came in at approximately $6.5 million, an improvement from $7.4 million loss in Q1 2025. Importantly, the Q1 2026 results do not fully reflect the benefit of the cost optimization measures implemented during the quarter, and also include certain one-time costs related to those actions. Despite those items, we still delivered year-over-year improvement, and we believe that improvement will continue through 2026. The improvement in EBITDA was driven by revenue growth and a discipline focused on cost containment. Adjusted gross margins rose to 53% in Q1 2026 compared to 48% in Q1 2025. adjusted gross margins rose to 53% in q1 2026 compared to 48% in q1 2025 This 5 percentage point improvement reflects revenue growth, which allows us to be more efficient when we operate deployments, a favorable product mix with higher margin software sales and recurring revenue representing a larger portion of our total revenue. this 5 percentage point improvement reflects revenue growth which allows us to be more efficient when we operate deployments a favorable product mix with higher margin software sales and recurring revenue representing a larger portion of our total revenue EBITDA loss came in at approximately $6.5 million, an improvement from $7.4 million loss in Q1 2025. ebitda loss came in at approximately $6.5 million an improvement from $7.4 million loss in q1 2025 Importantly, the Q1 2026 results do not fully reflect the benefit of the cost optimization measures implemented during the quarter, and also include certain one-time costs related to those actions. importantly the q1 2026 results do not fully reflect the benefit of the cost optimization measures implemented during the quarter and also include certain one-time costs related to those actions Despite those items, we still delivered year-over-year improvement, and we believe that improvement will continue through 2026. despite those items we still delivered year-over-year improvement and we believe that improvement will continue through 2026 The improvement in EBITDA was driven by revenue growth and a discipline focused on cost containment. the improvement in ebitda was driven by revenue growth and a discipline focused on cost containment Payroll and payroll-related costs declined as a result of the headcount reductions Robert referenced, a significant portion of which were implemented during Q1 and will begin to have their full impact in Q2. Q1 also reflected normal seasonality, which typically results in lower activity relative to later quarters. Beyond those specific actions, we have evaluated every line item and policy across our cost structure. Where spending was not critical, it was eliminated, and where spending was deemed necessary, we evaluated how to improve efficiency, optimize processes, and reduce costs. This detailed review of our current operating model has already produced meaningful improvements, and we expect it to help lower overall operating costs going forward. We ended Q1 2026 with $12.2 million in cash, compared to $16.6 million at the end of 2025. Payroll and payroll-related costs declined as a result of the headcount reductions Robert referenced, a significant portion of which were implemented during Q1 and will begin to have their full impact in Q2. payroll and payroll-related costs declined as a result of the headcount reductions robert referenced a significant portion of which were implemented during q1 and will begin to have their full impact in q2 Q1 also reflected normal seasonality, which typically results in lower activity relative to later quarters. q1 also reflected normal seasonality which typically results in lower activity relative to later quarters Beyond those specific actions, we have evaluated every line item and policy across our cost structure. beyond those specific actions we have evaluated every line item and policy across our cost structure Where spending was not critical, it was eliminated, and where spending was deemed necessary, we evaluated how to improve efficiency, optimize processes, and reduce costs. where spending was not critical it was eliminated and where spending was deemed necessary we evaluated how to improve efficiency optimize processes and reduce costs This detailed review of our current operating model has already produced meaningful improvements, and we expect it to help lower overall operating costs going forward. this detailed review of our current operating model has already produced meaningful improvements and we expect it to help lower overall operating costs going forward We ended Q1 2026 with $12.2 million in cash, compared to $16.6 million at the end of 2025. we ended q1 2026 with $12.2 million in cash compared to $16.6 million at the end of 2025 The sequential decline was expected and reflects the seasonal Q1 pattern, as well as the one-time restructuring costs. On a year-over-year basis, our operating cash consumption improved, which reinforces our view that the underlying business is moving in the right direction. We are actively evaluating options to refinance our existing Series A Prime Revenue Sharing Notes with a goal of reducing our cost of capital. Our growing contract portfolio supports the refinancing, and we expect to have more to report on this as we get further into 2026. Looking ahead, the cost reductions executed during Q1 were not fully reflected in our quarter end results because many were implemented mid-quarter. The sequential decline was expected and reflects the seasonal Q1 pattern, as well as the one-time restructuring costs. the sequential decline was expected and reflects the seasonal q1 pattern as well as the one-time restructuring costs On a year-over-year basis, our operating cash consumption improved, which reinforces our view that the underlying business is moving in the right direction. on a year-over-year basis our operating cash consumption improved which reinforces our view that the underlying business is moving in the right direction We are actively evaluating options to refinance our existing Series A Prime Revenue Sharing Notes with a goal of reducing our cost of capital. we are actively evaluating options to refinance our existing series a prime revenue sharing notes with a goal of reducing our cost of capital Our growing contract portfolio supports the refinancing, and we expect to have more to report on this as we get further into 2026. our growing contract portfolio supports the refinancing and we expect to have more to report on this as we get further into 2026 Looking ahead, the cost reductions executed during Q1 were not fully reflected in our quarter end results because many were implemented mid-quarter. looking ahead the cost reductions executed during q1 were not fully reflected in our quarter end results because many were implemented mid-quarter In Q2 and the remainder of the year, those savings are expected to be reflected and combined with our revenue growth trajectory. We believe the business is positioned for continued EBITDA improvement as we move through 2026. We remain focused on disciplined execution, cost efficiency, and driving sustainable growth across the business. Thank you again for your time and continued support. With that, I'll turn it back to our operator for Q&A. In Q2 and the remainder of the year, those savings are expected to be reflected and combined with our revenue growth trajectory. in q2 and the remainder of the year those savings are expected to be reflected and combined with our revenue growth trajectory We believe the business is positioned for continued EBITDA improvement as we move through 2026. we believe the business is positioned for continued ebitda improvement as we move through 2026 We remain focused on disciplined execution, cost efficiency, and driving sustainable growth across the business. we remain focused on disciplined execution cost efficiency and driving sustainable growth across the business Thank you again for your time and continued support. thank you again for your time and continued support With that, I'll turn it back to our operator for Q&A. with that i'll turn it back to our operator for q&a

Speaker 3: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. The first question comes from the line of [Mike] Latimore with Northland Capital Markets. Please proceed. Thank you. thank you Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. ladies and gentlemen if you would like to ask a question please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue You may press star two if you would like to remove your question from the queue. you may press star two if you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys One moment please while we pull for questions. one moment please while we pull for questions The first question comes from the line of [Mike] Latimore with Northland Capital Markets. the first question comes from the line of [mike] latimore with northland capital markets Please proceed. please proceed

Speaker 2: Hey, guys. Thanks for taking my question. My first question, I was just wondering about the status of the Georgia DOT deployment. How should we think about that building throughout the year? Thank you. Hey, guys. hey guys Thanks for taking my question. thanks for taking my question My first question, I was just wondering about the status of the Georgia DOT deployment. my first question i was just wondering about the status of the georgia dot deployment How should we think about that building throughout the year? how should we think about that building throughout the year Thank you. thank you

Speaker 4: Hey, Mike, it's Robert. How are you? Thanks for asking. You know, Georgia took a little longer to finalize, but we got it done, you know, last fall. We're seeing substantial growth already because it's a contract vehicle, meaning that it's not just with the central office of GDOT, but gives the ability to all other entities in the state of Georgia to buy through that contract vehicle. Without getting into specific details, which I can't, we're already working with several other counties, a couple of large cities and so forth. Hey, Mike, it's Robert. hey mike it's robert How are you? how are you Thanks for asking. thanks for asking You know, Georgia took a little longer to finalize, but we got it done, you know, last fall. you know georgia took a little longer to finalize but we got it done you know last fall We're seeing substantial growth already because it's a contract vehicle, meaning that it's not just with the central office of GDOT, but gives the ability to all other entities in the state of Georgia to buy through that contract vehicle. we're seeing substantial growth already because it's a contract vehicle meaning that it's not just with the central office of gdot but gives the ability to all other entities in the state of georgia to buy through that contract vehicle Without getting into specific details, which I can't, we're already working with several other counties, a couple of large cities and so forth. without getting into specific details which i can't we're already working with several other counties a couple of large cities and so forth As I think we said when we announced the contract, we think the value will be substantially higher than the base value, which was, you know, roughly $60 million. I think we're doing well with it. We got a price bump on stuff we already have, which is equipment that's in the ground. That means higher margins. Overall, headed in the right direction. As I think we said when we announced the contract, we think the value will be substantially higher than the base value, which was, you know, roughly $60 million. as i think we said when we announced the contract we think the value will be substantially higher than the base value which was you know roughly $60 million I think we're doing well with it. i think we're doing well with it We got a price bump on stuff we already have, which is equipment that's in the ground. we got a price bump on stuff we already have which is equipment that's in the ground That means higher margins. that means higher margins Overall, headed in the right direction. overall headed in the right direction

Speaker 2: Great. Good to hear. Thinking about expenses throughout the year, do you expect the 1 Q expense level to be, you know, about right for the rest of the year, or do you expect a change? Great. great Good to hear. good to hear Thinking about expenses throughout the year, do you expect the 1 Q expense level to be, you know, about right for the rest of the year, or do you expect a change? thinking about expenses throughout the year do you expect the 1 q expense level to be you know about right for the rest of the year or do you expect a change

Speaker 4: The I think that's a question for Joe. Joe? The I think that's a question for Joe. Joe? the i think that's a question for joe. joe

Speaker 1: Yeah. Thank you for the question. We expect Q1 to be on the higher end of expenses. You know, a lot of the cost-cutting measures that we ended up taking in Q1 didn't get their full impact, as they were made towards the end of the quarter, and they bore some one-time cost with them. I think as we get into Q2, you'll see a stark drop in expenses, especially within our operating expenses that'll continue throughout the rest of the year. Yeah. yeah Thank you for the question. thank you for the question We expect Q1 to be on the higher end of expenses. we expect q1 to be on the higher end of expenses You know, a lot of the cost-cutting measures that we ended up taking in Q1 didn't get their full impact, as they were made towards the end of the quarter, and they bore some one-time cost with them. you know a lot of the cost-cutting measures that we ended up taking in q1 didn't get their full impact as they were made towards the end of the quarter and they bore some one-time cost with them I think as we get into Q2, you'll see a stark drop in expenses, especially within our operating expenses that'll continue throughout the rest of the year. i think as we get into q2 you'll see a stark drop in expenses especially within our operating expenses that'll continue throughout the rest of the year

Speaker 4: Yeah. Mike, just to add, just to add to what Joe said, as you said, the severance related to all those employees, office shutdowns, which required, you know, negotiating out of leases and so forth, really all took place. By the time it was finalized, it was towards the end of, you know, Q1. I think, Joe, correct me, but I think we're gonna see, you know, all of that in Q2, right? It's behind us as of Q1. Maybe a few days it would pick up, but it's mostly Q2 that you'll see the results of that. Yeah. yeah Mike, just to add, just to add to what Joe said, as you said, the severance related to all those employees, office shutdowns, which required, you know, negotiating out of leases and so forth, really all took place. mike just to add just to add to what joe said as you said the severance related to all those employees office shutdowns which required you know negotiating out of leases and so forth really all took place By the time it was finalized, it was towards the end of, you know, Q1. by the time it was finalized it was towards the end of you know q1 I think, Joe, correct me, but I think we're gonna see, you know, all of that in Q2, right? i think joe correct me but i think we're gonna see you know all of that in q2 right It's behind us as of Q1. it's behind us as of q1 Maybe a few days it would pick up, but it's mostly Q2 that you'll see the results of that. maybe a few days it would pick up but it's mostly q2 that you'll see the results of that

Speaker 2: Cool. Great. Around the Oklahoma UVED Program here, I was wondering if there's any additional prospects that might, you know, enter into a uninsured vehicle program that you expect to get approved this year or maybe sitting in the pipeline currently. Cool. cool Great. great Around the Oklahoma UVED Program here, I was wondering if there's any additional prospects that might, you know, enter into a uninsured vehicle program that you expect to get approved this year or maybe sitting in the pipeline currently. around the oklahoma uved program here i was wondering if there's any additional prospects that might you know enter into a uninsured vehicle program that you expect to get approved this year or maybe sitting in the pipeline currently

Speaker 4: We are talking to several other states. I scratch my head, you know, thinking, given the benefits that the states get from this type of program and the insurance industry, you know, the natural question is, why the hell aren't all the states doing this, right? You know, government takes time. I think, you know, we're proud of the fact that they renewed for quite a long period with us, and hopefully we'll see, you know, others realizing, you know, we need to be doing this. It's just there's no reason not to, right? It's a good thing, right? Things just, you know, take time. We are talking to several other states. we are talking to several other states I scratch my head, you know, thinking, given the benefits that the states get from this type of program and the insurance industry, you know, the natural question is, why the hell aren't all the states doing this, right? i scratch my head you know thinking given the benefits that the states get from this type of program and the insurance industry you know the natural question is why the hell aren't all the states doing this right You know, government takes time. you know government takes time I think, you know, we're proud of the fact that they renewed for quite a long period with us, and hopefully we'll see, you know, others realizing, you know, we need to be doing this. i think you know we're proud of the fact that they renewed for quite a long period with us and hopefully we'll see you know others realizing you know we need to be doing this It's just there's no reason not to, right? it's just there's no reason not to right It's a good thing, right? it's a good thing right Things just, you know, take time. things just you know take time

Speaker 2: Just one quick final one, what percent of revenue was recurring in the quarter? Just one quick final one, what percent of revenue was recurring in the quarter? just one quick final one what percent of revenue was recurring in the quarter

Speaker 4: Uh- Uh- uh-

Speaker 1: Sorry. This quarter, we had about 64% of our revenue was recurring. Sorry. sorry This quarter, we had about 64% of our revenue was recurring. this quarter we had about 64% of our revenue was recurring

Speaker 2: Awesome. Thank you. I appreciate it, guys. Awesome. awesome Thank you. thank you I appreciate it, guys. i appreciate it guys

Speaker 4: All right. Mike, thank you. All right. all right Mike, thank you. mike thank you

Speaker 3: Thank you. There are no further questions at this time, and I would like to turn the call back to Robert Berman for closing remarks. Thank you. thank you There are no further questions at this time, and I would like to turn the call back to Robert Berman for closing remarks. there are no further questions at this time and i would like to turn the call back to robert berman for closing remarks

Speaker 4: Yeah. Operator, I just wanna make sure that there's nobody in the queue and there are no further questions. Just please double-check. Yeah. yeah Operator, I just wanna make sure that there's nobody in the queue and there are no further questions. operator i just wanna make sure that there's nobody in the queue and there are no further questions Just please double-check. just please double-check

Speaker 3: Yes, sure. Ladies and gentlemen, as a reminder, please press star one on your telephone keypad to ask a question. Yes, sure. yes sure Ladies and gentlemen, as a reminder, please press star one on your telephone keypad to ask a question. ladies and gentlemen as a reminder please press star one on your telephone keypad to ask a question

Speaker 4: If not, operator, you seeing anything or? If not, operator, you seeing anything or? if not operator you seeing anything or

Speaker 3: No, there should be no further questions. No, there should be no further questions. no there should be no further questions

Speaker 4: Okay. Look, just in closing, you know, again, thank everybody for, you know, joining the call, your attendance, your patience. What we did in late Q4 2025 and all through Q1 2026 was long overdue, and we needed to do it. We focused on it and we got it done. I think we'll see the results of that now going into, you know, Q2 and beyond. We just, again, thank everyone for their support and patience. Okay. okay Look, just in closing, you know, again, thank everybody for, you know, joining the call, your attendance, your patience. look just in closing you know again thank everybody for you know joining the call your attendance your patience What we did in late Q4 2025 and all through Q1 2026 was long overdue, and we needed to do it. what we did in late q4 2025 and all through q1 2026 was long overdue and we needed to do it We focused on it and we got it done. we focused on it and we got it done I think we'll see the results of that now going into, you know, Q2 and beyond. i think we'll see the results of that now going into you know q2 and beyond We just, again, thank everyone for their support and patience. we just again thank everyone for their support and patience

Speaker 3: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Thank you. thank you This concludes today's conference. this concludes today's conference You may disconnect your lines at this time, and we thank you for your participation. you may disconnect your lines at this time and we thank you for your participation