Duos Technologies Group Reports Improved Third Quarter 2024 Results

Revenue increased 112% to $3.24 million in the quarter of which almost 50% was related to recurring revenue services and consulting with increased gross margin and decreased operating expenses.

JACKSONVILLE, Fla., Nov. 19, 2024 (GLOBE NEWSWIRE) -- Duos Technologies Group, Inc. ("Duos" or the "Company") (Nasdaq: DUOT), reported financial results for the third quarter ("Q3 2024") ended September 30, 2024.

Third Quarter 2024 and Recent Operational Highlights

   -- Delivered and installed Edge Data Center for Amtrak at the Secaucus 
      location. Construction work continues at the site. Received more than 
      $1.4 million in contract modifications at Amtrak including renewal of the 
      subscription utilizing three portals for long-distance passenger trains. 
      Initial discussions for future sites in progress. 
 
   -- Expanded investment in new subsidiary, "Duos Edge AI" with the addition 
      of three new EDCs for a total of six units.   Expecting continuous 
      delivery to field in Q4 and Q1 and with initial customer indications of 
      approximately $3.3 million in annual recurring revenue for 2025. 
 
   -- New subsidiary, "Duos Energy Corporation", secured initial revenues 
      during the quarter of approximately $500,000 for consulting services to a 
      large private equity group related to the evaluation of power generation 
      assets with additional services expected in Q4. Using our existing 
      in-house expertise to support the massive demand for AI, Edge computing, 
      and 5G rollout this new subsidiary is aligned with our strategy to be an 
      important part of the growth in data centers. 
 
   -- Over 2.3 million comprehensive railcar scans were performed in the third 
      quarter across 13 portals, with more than 379,000 unique railcars 
      scanned. This metric encompasses all railcars scanned at locations across 
      the U.S., Canada, and Mexico, representing approximately 24% of the total 
      freight car population in North America. 
 
   -- As of the end of the third quarter, the Company now has $18.8 million of 
      revenue in backlog including near-term extensions. In addition, the 
      Company received a cash exercise of approximately $900,000 for all 
      remaining warrants and the Company now has no warrants outstanding. 

Third Quarter 2024 Financial Results

It should be noted that the following Financial Results represent the consolidation of the Company with its subsidiaries Duos Technologies, Inc., Duos Edge AI, Inc., and Duos Energy Corporation.

Total revenues for Q3 2024 increased 112% to $3.24 million compared to $1.53 million in the third quarter of 2023 ("Q3 2023"). Total revenue for Q3 2024 represents an aggregate of approximately $1,685,000 of technology systems revenue and approximately $1,550,000 in recurring services and consulting revenue. The increase in overall revenues is primarily attributed to a $1.4 million contract modification associated with our two high-speed Railcar Inspection Portals project, which was awarded and largely recognized as revenue during Q3 2024. There was an 88% increase in recurring services and consulting revenue for the same comparison period as a result of new AI and subscription customers that were not present in the same quarter last year as well as increases in service contract revenue due to higher service contract prices. The Company also generated $505,982 in services and consulting revenue from power consulting work, which was new to this quarter.

Cost of revenues for Q3 2024 increased 78% to $2.32 million compared to $1.30 million for Q3 2023. The increase in cost of revenues was driven by $473,069 in amortization expenses recorded in 2024 to offset site revenue related to a nonmonetary transaction for the new services and data agreement signed during the second quarter of 2024. The Company also generated $505,982 in services and consulting revenue from power consulting work, which was provided at cost, further increasing the cost of revenue for services and consulting, which was also not present in the corresponding period of 2023.

Gross margin for Q3 2024 increased 306% to $919,000 compared to $226,000 for Q3 2023. The increase in margin was primarily due to the awarded change order, associated with our two high-speed, transit-focused Railcar Inspection Portals, that was awarded and substantially recognized in Q3 2024. This was offset by $505,982 in services and consulting revenue from power consulting work, which was largely provided at cost, which had a onetime dilutive effect on gross margin. These same project revenues and subsequent margin impacts were absent during the third quarter of 2023.

Operating expenses for Q3 2024 decreased 11% to $2.84 million compared to $3.20 million for Q3 2023. The decrease in expenses is attributed to reductions in development and administrative costs due to the completion of certain activities and the impact of previously implemented cost reductions. Stable operating expenses are expected for the remainder of 2024 while we continue to focus on further efficiencies to support anticipated revenue growth. The decrease in operating expenses is slightly offset by additional investments in sales resources for expansion of the commercial team that was made in the latter half of 2023. The Company implemented a 5% reduction in staff in early Q3 2024. Beginning in late Q3 2024, the Company allocated personnel costs, typically recorded under operating expenses, to costs of revenue associated with power consulting efforts, allowing the Company to recover costs that it would not have otherwise.

Net operating loss for Q3 2024 totaled $1.92 million compared to net operating loss of $2.97 million for Q3 2023. Operating losses were lower than the comparative quarter of a year ago. The decrease in loss from operations was primarily the result of higher revenues recorded in the quarter related to the two high-speed RIPs for a passenger transit client accompanied by a planned reduction in expenses which resulted in an overall decrease in operating loss compared to the same quarter in 2023.

Net loss for Q3 2024 totaled $1.40 million compared to net loss of $2.95 million for Q3 2023. The 53% decrease in net loss was mostly attributed to the increase in revenues as described above as well remaining successful in driving down operating costs, a trend which is expected to continue.

Cash and cash equivalents at September 30, 2024 totaled $0.65 million compared to $2.44 million at December 31, 2023. In addition, the Company had over $2.21 million in receivables and contract assets for a total of approximately $2.86 million in cash and expected short-term liquidity.

Nine Month 2024 Financial Results

Total revenue decreased 2% to $5.82 million from $5.95 million in the same period last year. Total revenue for the first nine months of 2024 represents an aggregate of approximately $2.22 million of technology systems revenue and approximately $3.60 million in recurring services and consulting revenue. An increase in recurring revenues by 42% was offset by the decrease in technology systems revenue. The decrease in technology systems revenue is primarily attributed to delays outside of the Company's control with deployment of our two high-speed Railcar Inspection Portals. The Company was able to contract a change order related to our two high-speed Railcar Inspection Portals project in the third quarter of 2024. This adjustment added more than $1.4 million to the contract's total value, with a substantial portion recognized in Q3 of 2024. The increase in the services portion of our revenues stems from the addition of new AI and subscription customers that were not present in the same quarter. Last year as well as increases in service contract revenue due to higher service contract prices. We also generated $505,982 in services and consulting revenue from power consulting work, which was new to this quarter.

Cost of revenues increased 2% to $5.02 million from $4.94 million in the same period last year. The increase in cost of revenues was driven by $1,021,190 in amortization expenses recorded in 2024 to offset site revenue related to a nonmonetary transaction for the new services and data agreement signed during the second quarter of 2024. The Company also generated $505,982 in services and consulting revenue from power consulting work, which was provided at cost, further increasing the cost of revenue for services and consulting, which was also not present in the corresponding period of 2023.

Gross margin decreased 21% to $799,000 from $1,005,000 in the same period last year. The decrease in gross margin was a direct result of the timing of business activity related to the manufacturing of two high-speed, transit-focused Railcar Inspection Portals. The revenues from the aforementioned project and subsequent margin impacts were not present during the first and second quarters of 2024. The Company also generated $505,982 in services and consulting revenue from power consulting work, which was provided largely at cost, having a dilutive effect on the overall gross margin. These same project revenues and subsequent margin contributions were absent during the third quarter of 2023.

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November 19, 2024 19:00 ET (00:00 GMT)