Rekor Systems (NASDAQ:REKR) Is Making Moderate Use Of Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Rekor Systems, Inc. (NASDAQ:REKR) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Rekor Systems Carry?

The image below, which you can click on for greater detail, shows that Rekor Systems had debt of US$15.0m at the end of September 2025, a reduction from US$15.8m over a year. However, because it has a cash reserve of US$3.16m, its net debt is less, at about US$11.8m.

A Look At Rekor Systems' Liabilities

According to the last reported balance sheet, Rekor Systems had liabilities of US$15.5m due within 12 months, and liabilities of US$29.0m due beyond 12 months. Offsetting these obligations, it had cash of US$3.16m as well as receivables valued at US$12.6m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$28.8m.

Given Rekor Systems has a market capitalization of US$219.2m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Rekor Systems can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Rekor Systems

In the last year Rekor Systems wasn't profitable at an EBIT level, but managed to grow its revenue by 12%, to US$49m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Rekor Systems had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$30m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$28m in negative free cash flow over the last twelve months. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Rekor Systems (of which 2 shouldn't be ignored!) you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.