Q1 2025 Duos Technologies Group Inc Earnings Call
[music].
Unknown Executive: Inaudible Good afternoon.
Good afternoon, welcome to Joel's technologies first quarter 2025 earnings conference call joining.
Unknown Executive: Welcome to Duos Technologies first quarter 2025 earnings conference call.
Unknown Executive: Joining us for today's call are Duos' CEO, Chuck Ferry, and CFO, Adrian Goldfarb.
Chuck Berry: Joining us today to this call or do I was the CEO Chuck Berry.
Adrian Goldcorp: CFO Adrian Goldcorp.
Unknown Executive: Following the remarks, we will open the call for your Then, before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call.
Speaker Change: Following their remarks, we will open the call for your questions.
Before we conclude today's call I'll provide the necessary cautions regarding the forward looking statements made by management during this call.
Charles Ferry: Now, I'd like to turn the call over to Duos' CEO, Chuck Ferry. Please go ahead. Welcome, everyone, and thank you for joining us.
Chuck: Now I'd like to turn the call over to do I was the CEO Chuck sorry. Please go ahead Sir.
Chuck: Welcome everyone and thank you for joining us.
Charles Ferry: Earlier today, we issued our earnings press release in our 10-Q for the first quarter of 2025. Copies are available in the Investor Relations section of our website. I encourage all listeners to view the press releases and our 10-Q filing to better understand some of the details we'll be discussing during today's call.
Chuck: Earlier today, we issued our earnings press release, and our 10-Q for the first quarter of 2025.
Chuck: Copies are available on the Investor Relations section of our website they.
Chuck: I encourage all listeners to review the press releases and our 10-Q filing to better understand some of the details will be discussing during today's call.
Charles Ferry: Since our last earnings call in March, only six weeks ago, we've made significant progress, particularly in our power and edge data center lines of business. Let's first talk about our power line of business. Through our asset management agreement with APR Energy, we have now successfully contracted 570 megawatts. with the APR Energy's Gap Turbine Fleet, which is an increase of 180 megawatts since our last report six weeks ago. I expect to contractually close on an additional 160 megawatts in the coming two weeks. Altogether, this means we will have approximately 730 megawatts of gas turbines contracted in just five months for entering into our asset management agreement with APR Energy and Fortress Investment Group.
Chuck: Since our last earnings call in March only six weeks ago.
Chuck: We've made significant progress, particularly in our power and edge data center lines of business.
Chuck: Let's first talk about our power line of business.
Chuck: Through our asset management agreement with APR energy, we have now successfully contracted 570 megawatts with the APR Energy's gas turbine fleet, which is an increase of.
Chuck: 180 megawatts since our last report six weeks ago.
Chuck: I expect to contractual close on an additional 160 megawatts in the coming two weeks.
Chuck: Altogether. This means we will have approximately 730 megawatts of gas turbines contracted in just five months for entering into our asset management agreement with APR energy and fortress investment group.
Charles Ferry: These assets will be deployed across multiple projects in the United States and Mexico in the coming three months.
Chuck: These assets will be deployed across multiple projects in the United States and Mexico in the coming three months.
Charles Ferry: With our Edge Data Center business, called Duos Edge AI, we have previously reported contracting our first Edge Data Center in Amarillo, Texas, in support of School District 16. We now have customer commitment for an additional eight EDGE data centers and expect to complete these installations in the coming six months. We remain confident in our plan to place 15 edge data centers by the end of this year. Overall, we're on track to execute our strategy and meet the guidance that we have previously issued.
Chuck: With our edge data center business called USA J I.
Chuck: We have previously reported contracting our first edge data center in Amarillo, Texas in support of School District 16.
Chuck: We now have customer commitments for an additional eight edge data centers and expect to complete these installations in the coming six months.
Chuck: We remain confident in our plans in place 15 edge data centers by the end of this year.
Chuck: Overall, we are on track to execute our strategy and meet the guidance that we've previously issued.
Adrian Goldfarb: With that, I'll turn it over to Adrian Goldfarb to our CFO to get further into the financial review. Thank you, Chuck. Before covering the specific results for the first quarter, I will make some brief introductory remarks discussing the progress that has been made during this quarter. I will also discuss some of the additional disclosure we are making in our 10Q related to recording our financials, given that we are now operating in three distinct sectors.
Chuck: With that I'll turn it over to Adrian Goldfarb, two our CFO to get further into the financial review.
Adrian Goldfarb: Thank you Chuck before covering the specific results for the first quarter I will make some brief introductory remarks discussing the progress has been made during this quarter.
Chuck: I'll also discuss some of the additional disclosure we are making in our 10-Q related to recording our financials given that we are now operating in three distinct segments.
Adrian Goldfarb: It is important to understand that while the results being presented are significantly improved compared to a year ago, this is just the beginning of a wholesale transformation for Duo.
Chuck: It is important to understand that while the results being presented all significantly improved compared to a year ago. This is just the beginning of a wholesale transformation for us.
Adrian Goldfarb: As a reminder, we now record financials for three separate divisions. Duos Technologies, which in the last few years has focused on the rail industry. Duos Edge AI, a Holyoan subsidiary which was started last summer with the objective of moving into the Edge data center market with a product that is a spinoff from our Railcar Inspection Portal. and Duos Energy, also created last summer as a vehicle for us to supply services to the behind-the-meter power business. Duos Energy now serves as a vehicle for supporting our Asset Management Agreement, or AMA, with new APR. Each division has a distinct role and objectives with the goal of growing Duos to becoming a much larger company.
Chuck: As a reminder, we now report financials for three separate divisions.
Chuck: Those technologies, which in the last few years is focused on the rail industry.
Chuck: Do as edge AI, a wholly owned subsidiary, which was started last summer with the objective of moving into the edge data center market with a product that is a spin off from a railcar inspection portal.
Chuck: And do a synergy also created last summer as a vehicle for us to supply services to the behind the meter power business.
Chuck: It was energy now serves as a vehicle for supporting our asset management agreement or a M E with new I P O.
Chuck: Each division has a distinct role and objectives with the goal of growing to us becoming a much larger entity.
Adrian Goldfarb: While we have not had the success we hoped for in the rail industry, We have been successful in building some world-class technology. and the reaction is universally positive to what can be accomplished. Despite the slow adoption of the rail industry, a lot of work continues with our key customers.
Chuck: While we have not had the success we hope for in the rail industry. We have been successful in building some world class technologies.
Chuck: And the reaction is universally positive to what can be accomplished.
Chuck: Spot the slow adoption of the rail industry a lot of work continues with our key customers.
Adrian Goldfarb: And we also plan to roll out some new products later this year, both in software and hardware. Our Edge AI division has been extremely active in marketing the concept of a remote but highly capable data center to serve local communities and businesses. As a reminder, the offering behind this business was an outgrowth of development work done at Duos Technologies. and our pilot rollout in Amarillo earlier this year was attended by over 150 staff and executives representing industry, government and media. This event generated significant interest such that, as discussed in our press release This morning, we have solidified our financial arrangements with Acutech for the supply of edge data centers built to our specifications.
Chuck: And we also plan to rollout some new products later this year, both in software and hardware.
Chuck: Our edge AI Division has been extremely active in marketing the concept of a remote but highly capable data center to serve local communities and businesses.
Chuck: As a reminder, you offering behind this business was an outgrowth of development work done it does technologies and a pilot rollout in Amarillo earlier. This year was attended by over 150 staff and executives representing industry government and media.
Chuck: This event generated significant interest such that as discussed in our press release.
Chuck: This morning, we have solidified our financial arrangements with architects to supply of edge data centers built to our specification.
Adrian Goldfarb: As Chuck mentioned, we have identified locations for at least nine EDCs, with excellent prospects for an additional six units, and we expect to achieve our 15 units deployed target by year end. We will begin recording revenues from these units starting in Q2 and building throughout 2022. We expect to enter 2026 with more than $3 million in annual recurring revenue on multi-year Our asset management agreement with UAPR Energy is off to a fast start. We recorded almost $4 million in revenues in the quarter, and I expect that number to grow steadily over the next three quarters, meeting the guidance previously.
Chuck: As Chuck mentioned, we have identified locations for at least 90 D. C's with excellent prospects for an additional six units and we expect to achieve about 15 units deployed target by year end.
Chuck: We will begin recording revenues from these units starting in Q2 and building throughout 2025.
Chuck: We expect to enter 2026 with more than $3 million in annual recurring revenue on multiyear contracts.
Chuck: Our asset management agreements with new APR energy is off to a fast start.
Chuck: We recorded almost $4 million in revenues in the quarter and I expect that number to grow steadily over the next three quarters, beating the guidance previously issued.
Adrian Goldfarb: Finally, as I initially discussed in this report and going forward, we will provide additional information pertaining to the performance of the individual business. For example, we now report the results from the AMA as separate line items on the P&L for both revenue and cost of goods sold. In the future, we will also report on the impact of certain material items such as our equity ownership in new APR.
Chuck: Finally, as I initially discussed in this report and going forward, we will provide additional information pertaining to the performance of the individual businesses.
Chuck: For example, we now report the results from the a M. A as a separate line items on the P&L for both revenue and cost of goods sold.
Chuck: In future. We will also report on the impact of certain material items, such as our equity ownership in new I P O.
Adrian Goldfarb: And now, let me give a summary of our results for the first. Total revenues for Q1 2025 increased 363% to $4.95 million compared to $1.07 million in the first quarter of 2024. The substantial majority of our revenue for Q1 2025 was approximately $4.9 million in recurring services and consulting revenue, of which $3.9 million was primarily driven by Duos Energy, beginning to execute against the asset management.
Chuck: And now let me give a summary of our results for the first quarter.
Chuck: Total revenues for Q1, 2025 increased 363% to 495 million compared to 1.17 million in the first quarter of 2024.
Chuck: The substantial majority of our revenue for Q1, 2025 was approximately $4 $9 million in recurring services and consulting revenue of which $3 9 million was primarily driven baidu is energy beginning to execute against the asset management agreement with new APR.
Adrian Goldfarb: with new APR. as a reminder, under the AMA. Duos Energy oversees the deployment and operations of a fleet of mobile gas turbines and related balance plan inventory, providing management, sales, and operational support services to new APR. As new APR continues to grow its business, and as Chuck has discussed, Duos revenues from this segment are expected to have a positive impact on gross margin that I will discuss momentarily. Cost of revenues for Q1 2025 increased 273% to $3.64 million, compared to $0.98 million for Q1 2024. The significant increase in cost of revenues was primarily due to supporting the AMA with new APR, which is now listed as a separate item in the amount of $2.66 million.
Chuck: As a reminder, under the a M a.
Chuck: This energy oversees the deployment and operation of our fleet of mobile gas turbines and related balanced plan inventory, providing management sales and operational support services to new APR.
Chuck: As new API continues to grow its business and as Chuck has discussed do US revenues from this segment are expected to have a positive impact on gross margin that I will discuss momentarily.
Chuck: Cost of revenues for Q1, 2025 increased 273% to $3 six 4 million compared to 1.98 million for Q1 2024.
Chuck: The significant increase in cost of revenues was primarily due to supporting the MAA with new a P. R. Which is now listed as a separate item in the amount of $2 six 6 million.
Chuck: An additional contributing factor to the increase in cost of revenues on services and consulting is.
Adrian Goldfarb: and Additional Contributing Factors to the Increase in Cost of Revenues on Services and Consultants. is approximately 548,000 in amortization expenses. of the intangible asset accounted for as a non-monetary transaction related to our RIP subscription business. which was not present in the corresponding period of 2024. Overall, the cost of revenues on technology systems decreased compared to the equivalent period in 2020. This reduction is primarily driven by our ability in Q1 2025 to reallocate certain fixed operating and servicing costs for technology. to support the AMA. and others. It also reflects the wrap-down of manufacturing ahead of field installation.
Chuck: It's approximately 548000 in amortization expense of the intangible asset accounted for as a nonmonetary transaction related to our rips subscription business, which was not present in the corresponding period of 2024.
Chuck: Overall, the cost of revenues on technology systems decreased compared to the equivalent period in 2024.
Chuck: This reduction is primarily driven by our ability in Q1 2025 to reallocate certain fixed operating and servicing costs for technology system to support the Ami.
Chuck: And allocation, we could not making the comparative period, because the agreement was not yet in effect.
Chuck: It also reflects the ramp down of manufacturing ahead of field installation all.
Adrian Goldfarb: of our two high-speed railcar inspection portals. which has been delayed due to circumstances out of our control. Temporarily slowing project activity and further reducing cost of revenues while we await customer readiness for site. Gross margin for Q1 2025 increased 1,288% to $1.31 million compared to $90,000 for Q1 2024. Gross margin improved primarily due to Duos Energy beginning performance of the AMA with new APR. This includes over $900,000 in revenue, recognized during the three months ended March 31, 2025, related to the company's 5% non-voting equity interest in the ultimate parent of new APR, which carried no associated costs and therefore contributed at a 100%...
Chuck: All of that to high speed rail car inspection portals, which has been delayed due to stuck circumstances out of our control.
Chuck: Temporarily slowing project activity and further reducing cost of revenues, while we await customer readiness for site deployment.
Chuck: Yeah.
Chuck: Gross margin for Q1, 2025 increased 1288% to $131 million compared to 90000 for Q1 2024.
Chuck: Gross margin improved primarily due to Jewish energy beginning performance at the a M a with new APR.
Chuck: This includes over $900000 in revenue recognized during the three months ended March 31, 2025 related to the company's 5% nonvoting equity interests in the ultimate parent of new a P. R, which carried no associated costs and therefore contributed at a 100% margin.
Chuck: These revenues and the associated margin contribution we're not present in the prior year period.
Adrian Goldfarb: These revenues and the associated margin contribution were not present in the prior year period. As I mentioned earlier, the increase in business from the AMA is expected to improve gross margins on this segment due to the greater profitability for Duos on certain aspects of the work it will perform on behalf of new agencies. Operating expenses for Q1 2025 increased 9% to $3.1 million compared to $2.86 million for Q1 2024. The increase in expenses is largely attributed to non-cash, stock-based compensation charged for restricted stock granted to the executive team on January 1, 2025, under new employment agreements with a three-year cliff-vesting schedule.
Chuck: As I mentioned earlier the increase in Ami in business from the Ami is expected to improve gross margins on this segment due to the greater profitability to do us on certain aspects of the work will perform on behalf of new APR.
Chuck: Operating expenses for Q1, 2025 increased 9% to $3 $1 million.
Chuck: <unk> 2.86 million for Q1 2024.
Chuck: The increase in expenses is largely attributed to noncash stock based compensation charged for restricted stock granted to the executive team on January one 2025 under new employment agreements with a three year cliff vesting schedule.
Adrian Goldfarb: Sales and marketing costs declined as resources were allocated to the cost of service and consulting revenues in support of the AMA with new APR. Conversely, research and development expenses rose 11%, reflecting new engineering effort to develop new and enhanced product offerings that I previously mentioned. Company continues to focus on stabilizing operating expenses while meeting the increased needs of our customers. Net operating loss for Q1 2025 totaled $1.79 million compared to a net operating loss of $2.76 million. for Q1 2020. The decrease in loss from operations was primarily the result of increased revenues during the quarter driven by revenue generated by Duos Energy through the AMA with new APIs.
Chuck: Sales and marketing cost declined as resources were allocated to cost of service and consulting revenues and supported the Ami with new APR.
Chuck: Conversely research and.
Chuck: <unk> expenses rose, 11%, reflecting new engineering effort to develop new and enhanced product offerings that I previously mentioned.
Chuck: The company continues to focus on stabilizing operating expenses, while meeting the increased needs of our customers.
Chuck: Net operating loss for Q1, 2025 totaled $1 $79 million compared to a net operating loss of $2 $76 million.
Chuck: For Q1 2024.
Chuck: Decrease in loss from operations was primarily the result of increased revenues during the quarter driven by revenue generated by <unk> energy through the Ami with you a P O.
Adrian Goldfarb: Net loss for Q1 2025 totaled $2.08 million compared to a net loss of $2.75 million for Q1 2025. 24% decrease in net loss was mostly attributed to the increase in revenues generated by Duos Energy through the AMA, with new APRs described above. There was also approximately $322,000 of interest paid during the quarter which was not present in the equivalent quarter one year ago.
Chuck: Net loss for Q1, 2025 totaled 2.08 million compared to a net loss of $2 75 million for Q1 2024.
Chuck: 24% decrease in net loss was mostly attributed to the increase in revenues generated by <unk> energy through the Ami with new API as described above.
Chuck: It was also approximately 322000 of interest paid during the quarter, which was not present in the equivalent quarter at one year ago.
Adrian Goldfarb: In our last call, I highlighted the substantial improvement in the company's balance sheet as of 12-31-2024. In the first quarter, we have largely maintained that strength and also improved in some areas, notably shareholders' equity, which now stands at over $5.1 million. We ended the quarter with $6.48 million in cash and expected short-term liquidity. Previously discussed, a significant asset for Duos is the equity investment in Sovrass APR holdings, the ultimate parent of new APR. A 5% equity holding in this business is currently valued at over $7.2 million and is expected to generate profits in future years as a profit interest structure.
Chuck: In our last call I highlighted the substantial improvement in the company's balance sheet as of 12 31 2024.
Chuck: In the first quarter, we have largely maintained that strength and also improved in some areas, notably shareholders' equity, which now stands at over $5 $1 million.
Chuck: We ended the quarter with $6.48 million in cash and expected short term liquidity.
Chuck: As previously discussed a significant asset for do it is the equity investment in Sawgrass APR holdings, the ultimate parent new APR energy.
Chuck: A 5% equity holding in this business is currently valued at over $7 $2 million.
Chuck: And is expected to generate profits in future years as a profit interest structure.
Speaker Change: As Chuck will discuss the tremendous progress that you apr's, making will be additive in the short term through the a M. A and in the longer term to the expected increase in valuation of our equity holdings.
Adrian Goldfarb: As Chuck will discuss, the tremendous progress that UAPR is making will be additive in the short term through the AMA and in the longer term through the expected increase in valuation of our equity.
Adrian Goldfarb: All of this is positive for Duos' future potential, and I look forward to updating you further in our earnings calls later this year. On the liability side, the company has traditionally operated with little to no debt, other than some minor financing contracts related to insurance or IT. As a reminder, in 2024, we received $2.2 million in debt funding for our initial three EDCs, and we're able to secure that for around 10% cost of capital, which is an attractive rate for a company of our size. We also secured additional financing for a further three EDCs in the form of a master capital lease with a similar cost of capital and flexible payments.
All of this is positive for <unk> future potential and I look forward to updating you further in our earnings calls later this year.
Chuck: On the liability side. The company has traditionally operated with little to no debt other than some minor financing contracts related to insurance so equipment is.
Chuck: As a reminder, in 2024, we received $2 $2 million in debt funding for our initial III E D. CS and were able to secure that for around 10% cost of capital, which is an attractive rate for a company of our size.
Chuck: We also secured additional financing for a further three E D. CS in the form of a mass a capital lease with a similar cost of capital and flexible payment terms.
Adrian Goldfarb: as we deploy these assets in preparation for the associated cash. Pleased to announce that during the quarter we have retired $1 million of this debt and expect to retire a further $1.2 million by the end of this year, keeping our leverage ratios within reasonable limits.
Chuck: As we deploy these assets in preparation for the associated cash flows.
Chuck: I'm pleased to announce that during the quarter. We have retired $1 million of this debt and expect to retire a further $1 $2 million by the end of this year, keeping our leverage ratios within reasonable limits.
Adrian Goldfarb: Next, I would like to update you on our backlog in pipe. With expected revenues for the management and operations of new APR energy, expected deployments over our edge data centers, and current and anticipated contracts in our rail business, our current contracts and backlog represent more than $45 million in revenue, with approximately $17.4 million or more of that projected to be recognized in 2025, plus a further $7 to $8 million in expected near-term awards and revenues.
Chuck: Next I would like to update you on our backlog and pipeline.
With expected revenues for the management and operations of New APR energy expected deployments of our edge data centers and current and anticipated contracts in our rail business.
Chuck: Contracts and backlog represent more than $45 million in revenue with approximately $17 4 million or more of that project to be recognized 2025, plus a further $7 million to $8 million and expected near term awards and renewables.
Adrian Goldfarb: During the last call, we reinstituted guidance and we are maintaining that guidance where we expect to record between $28 and $30 million in consolidated revenue from our three Although we do not normally give quarterly guidance, our performance in Q1 was at the upper end of the projected range of $4-5 million, and I expect a similar performance in Q2.
Chuck: During the last call, we reinstituted guidance and we are maintaining that guidance, where we expect to record between 28 and $30 million in consolidated revenue from our three subsidiaries.
Chuck: Although we do not normally give quarterly guidance our performance in Q1 was that the upper end of the projected range of $4 million to $5 million.
Chuck: And I expect a similar performance in Q2.
Adrian Goldfarb: With respect to our previously stated expectations to lose some money in the first half as we transition and build the new businesses, we are reiterating this projection, but plan to minimize this as much as possible by some expense reductions, which will be somewhat offset by an anticipated increase in one-time expenses related to deferred compensation. However, as previously stated, we continue to expect a breakeven and they make money in the third and fourth quarters and end the full year with positive, adjusted EBITDA, the major adjustment being for non-cash stock companies.
Chuck: With respect to our previously stated expectations to lose some money in that first half as we transitioned and built the new businesses. We are reiterating this projection, but plan to minimize this as much as possible by some expense reductions, which will be somewhat offset by an anticipated increase in onetime expenses related to deferred compensation.
Chuck: However, as previously stated we continue to expect to breakeven and they make money in the third and fourth quarters and then the full year with positive adjusted EBITDA, the major adjustment being for noncash stock compensation.
Charles Ferry: This concludes my formal remarks and at this point I will turn the call back to Chuck for his closing. Thank you, Adrian. As you can see from Adrian's commentary, the business has made good progress since the beginning of the year.
Chuck Berry: This concludes my formal remarks and at this point I will turn the call back to Chuck for his commentary Chuck.
Chuck Berry: Thank you Peter.
As you can see if a major in his commentary the businesses made good progress since the beginning of the year.
Charles Ferry: Let me add some additional details to my opening remarks. With our asset management agreement supporting APR Energy, closing commercial contracts in both the data center space and traditional fast power jobs has gone at a lightning pace. As I said earlier, we have 570 megawatts in contract now, and I expect that to increase to 730 megawatts in the next two weeks. As a reminder, through the Asset Management Agreement, we operate approximately 850 megawatts of power generation along with Bounce, a plant where we provide turnkey power plants normally installed within 30 to 90 days. depending on the situation.
Chuck Berry: Let me add some additional details to my opening remarks, with our asset management agreement supporting APR energy closing commercial contracts in both the data center space and traditional fast power jobs has gone out of lightning pace.
As I said earlier, we have 570 megawatts in contract now and I expect that to increase to 730 megawatts in the next two weeks.
Chuck Berry: As a reminder, through the asset management agreement, we operate approximately 850 megawatts of power generation, along with balance of plant, where we provide turnkey power plants normally installed within 30 to 90 days.
Chuck Berry: Depending on the situation.
Charles Ferry: Currently, we have two projects here in the United States fully installed and operating. One of them is with a large data center operating as part of a behind-the-meter solution. In progress currently are two more installations. The first is with another U.S. data center operating a behind-the-meter solution. And the second is a traditional fast power project in Mexico. We are expecting a third project that will provide a fast power solution for another U.S. customer who has an immediate need. I expect all projects to be online producing electricity in the next 90 days or so. Simultaneously, we are in discussions with multiple U.S.
Chuck Berry: Currently we have two projects here in the United States fully installed and operating one of them is with a large data center operating as part of a behind the meter solution.
Chuck Berry: In progress currently are two more installations. The first is with another U S data center operating a behind the meter solution and the second is a traditional fast power project in Mexico.
Chuck Berry: We are expecting a third project that will provide a fast power solution for another U S customer who has an immediate need.
Chuck Berry: I expect all projects to be online producing electricity in the next 90 days or so.
Chuck Berry: Simultaneously, we are in discussions with multiple U S data center developers for longer term behind the meter power solutions.
Charles Ferry: data center developers for longer term behind-the-meter power solutions. Our staff is also assisting APR Energy in evaluating follow on asset acquisitions to expand the fleet. The positive for Duos is a solid source of revenue through the asset management agreement and growing the value of our 5% equity stake in APR Energy's parent.
Chuck Berry: Our staff is also assisting APR energy and evaluating follow on asset acquisitions to expand the fleet.
Chuck Berry: The positive for duals as a solid source of revenues through the asset management agreement and growing the value of our 5% equity stake in APR Energy's parent.
Charles Ferry: With the Rich Data Center business, Doug Rucker and his team have also made fast progress since our last earnings call. As I said earlier, we now have customer commitments for an additional eight Edge data centers. and are working to complete contracts and coordinate installations that are planned over the next six months. These include two edge data centers in Pampa, Texas, one edge data center in Dumas, Texas. One Edge Data Center in Victoria, Texas. two edge data centers in Lubbock, Texas, and finally a second edge data center in Amarillo, Texas for a new customer not related to Region 16.
Chuck Berry: With their edge data center business, Doug Wrecker and his team have also made fast progress since our last earnings call.
Chuck Berry: As I said earlier, we now have customer commitments for an additional eight edge data centers.
Chuck Berry: And are working to complete contracts and coordinate installations that are planned over the next six months.
Chuck Berry: These include two edge data centers in Pampa, Texas, one edge data center in <unk>, Texas.
Chuck Berry: One edge data center in Victoria, Texas.
Chuck Berry: Two inch Datacenters in Lubbock, Texas, and finally, our second edge datacenter in Amarillo, Texas for a new customer not related to <unk> 16.
Charles Ferry: We have also recently placed a procurement order for four additional new wedge data centers. necessary to support our pipeline. This would put the total number of Edge data centers owned at 10. Adrian, Doug, and I remain confident in our plan to place 15 edge data centers by the end of this year.
Chuck Berry: We have also recently placed to procure them in order for four additional new edge data centers.
Chuck Berry: Necessary to support our pipeline this would put the total number of edge data centers owned at 10 eight.
Adrian Doug and I remain confident in our plan to place 15 edge data centers by the end of this year.
Charles Ferry: A special thanks to our partner, Accutech, who has been super supportive of our deployment strategy. I also want to give my highest compliments and regards to the Duos leaders and staff. As you can tell, we are executing a number of simultaneous projects. We currently have our teams deployed in multiple locations, and they are working very hard to execute installations that include railcar inspection portals for Amtrak, edge data centers for our Texas-based customers, and fast power plants for our data center and traditional power customers. As always, I want to thank our business partners, Board of Directors, and our shareholders for their continued support.
Chuck Berry: Special Thanks to our partner Accu, Chek, who has been super supportive of our deployment strategy.
Chuck Berry: I also want to give my highest complements in regards to the duals leaders and staff.
Chuck Berry: As you can tell we are executing a number of simultaneous projects. We currently have our teams deployed in multiple locations and they are working very hard to execute installations that include railcar inspection portals for Amtrak edge data centers for our Texas based customers and best power plants for our data center and traditional power customers.
Chuck Berry: As always I want to thank our business partners board of directors and our shareholders for their continued support.
Charles Ferry: The outlook for Duos looks very promising right now, and I'm excited to be able to lead.
Chuck Berry: The outlook for <unk> also looks very promising right now and I am excited to be able to lead it.
Unknown Executive: Thank you for listening, and now we'll open the call for your questions.
Chuck Berry: You for listening and now we'll open the call for your questions. Operator, please provide the appropriate instructions.
Unknown Executive: Operator, please provide the appropriate instructions. Thank you.
Chuck Berry: Thank you.
Unknown Executive: Ladies and gentlemen, if you'd 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 For participants using speaker equipment, it may be necessary to pick up your handset before pressing start.
Chuck Berry: 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 no question Q.
Chuck Berry: You May press star two if he would like to remove your question from the queue.
Chuck Berry: For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Michael Latimore: And our first question comes from the line of Michael Latimore with Northland Capital Markets. All right, great. Thank you. Yeah, looks like an awesome start of the year here. In terms of the power business, it looks like gross margin was around 32%. Is that kind of a good range to think about throughout this year? Yeah, Adrian's shaking his head yes. Yeah. So on the on the power business. We feel very confident in the forecast. that we put together for the year on that, and yeah, so that's a good number to think about for our gross margin.
And our first question comes from the line of Michael Latimore with Northland Capital markets. Please proceed.
Michael Latimore: Alright, great. Thank you.
Chuck Berry: Yes, let's looks like.
Michael Latimore: Start to the year here.
Michael Latimore: In terms of the power business it looks like gross margin was around 32%.
Michael Latimore: <unk>.
Kind of a good range to think about throughout this year.
Michael Latimore: Yes, <unk> shaking.
Michael Latimore: And you said, yes, yes, so on the power business.
Michael Latimore: We feel very confident in the forecast.
Michael Latimore: We put together for the year on that and yes. So that's a good number to think about for our gross margin.
Charles Ferry: Obviously, as we go through the year, we're going to try to improve that, and there'll be some opportunities, I think, to try to do that. And it looks like you've got really good visibility on the data center business. In the past, you've sort of talked a little bit about maybe some hyperscaler opportunities. Can you give any update on that? Yeah.
Michael Latimore: We as we go through the year, we're going to try to improve that.
Michael Latimore: And there'll be some opportunities I think to try to do that.
Michael Latimore: Got it.
Michael Latimore: And.
Speaker Change: It looks like your you've got really good visibility on the data center business.
Michael Latimore: Yes in the past.
Talk a little bit about maybe some hyper scaler opportunities can you give any update on that.
Michael Latimore: Yes.
Charles Ferry: So, you know, one of the things that really kind of flipped the switch on that was we, you know, it was in the press, of course, was the first edge data center. We put into Amarillo and supported region 16, and that really attracted a lot of attention from a lot of these other customers down, down in the state of Texas and also outside of Texas. So that really kind of spurred that on. It also attracted the attention of a couple of different hyperscalers. I would prefer not to disclose their names at this time, but we are in active discussions with probably about three or four hyperscalers that are interested in putting their product, if you will, or their computing power into these edge data centers in support of these smaller markets.
Michael Latimore: So one of the things that really.
Michael Latimore: Kind of flipped the switch on that was we.
Michael Latimore: It was in the press of course was the.
Michael Latimore: First edge data center, we've put into ambarella in support of <unk> 16, and that really attracted a lot of attention.
From a lot of these other customers down down in the state of Texas and also outside of Texas, but.
Michael Latimore: So that really kind of spurred that on.
Michael Latimore: It also attracted the attention of a couple of different hyperscale or is that all I would prefer not to.
Michael Latimore: Disclose their names at this time, but we are.
Michael Latimore: In active discussions with probably about three or four hyperscale.
Michael Latimore: That are interested in.
Michael Latimore: Putting their product if you will or the computing power into these edge data centers.
Michael Latimore: In support of these smaller markets.
Adrian Goldfarb: And then also interested in behind-the-meter power as they're developing the larger data center part. So it's kind of a win-win for both those lines of business. Thanks a lot. Excellent. I guess just two clarification questions. Adrian, did you say you expect 2Q to be similar to 1Q in terms of revenue? Yes, yes. You know, we, as I said, we don't normally give quarterly guidance, but I am expecting that Q2 will be similar to Q1. And then what just last one for me what What should we have stock comp and depreciation be for the second quarter and year?
Michael Latimore: And then also interested in behind the meter power.
Michael Latimore: As they're developing a larger data center park, so it's kind of a.
Michael Latimore: Kind of a win win for both of those lines of business.
Michael Latimore: Excellent excellent and I guess just two.
Michael Latimore: Clarification question.
Chuck Berry: Adrian did you say you expect to Q could be similar to <unk> in terms of revenue.
Michael Latimore: Yes, yes.
We as I said, we don't normally give quarterly guidance.
Michael Latimore: But I am expecting that Q2 will be similar to Q1.
Michael Latimore: Okay.
Michael Latimore: And then just last one for me.
Michael Latimore: What should we have stock comp and depreciation be for.
Michael Latimore: The second quarter and year I'm, just trying to back into an EBIT number here.
Adrian Goldfarb: Just trying to back up a bit of a number here. Yes, so the, so the stock comp is running at about, it's about five or six hundred thousand a quarter. And then, sorry, what was the other, what was the other number you asked for? Depreciation.
Speaker Change: Yes, so the so the stock comp is running at about <unk>.
Michael Latimore: About five or 600000 a quarter.
Michael Latimore: And then sorry, what was the other what was the other number yeah.
Michael Latimore: Depreciation.
Michael Latimore: Yeah, the depreciation will start to increase as the EDGE data census come online, but I don't expect much impact for that for Q2. Chris, thanks, congrats on a great start here. Thanks, Mike.
Michael Latimore: Yes, the depreciation depreciation will we will start to increase as the edge data centers come online, but I don't expect much impact for that for Q2.
Speaker Change: Okay, great. Thanks, Congrats on a great start here.
Mike: Thanks, Mike.
Edward Woo: The next question comes from the line of Ed Woo with Ascending Capital Markets. Please proceed. Yeah, congratulations also on the progress. My question is, you know, there's been a little bit of volatility, obviously, with the tariffs. Have you noticed any change in the sales cycle of trying to, you know, sign contracts, either in the edge data center business, or with your power business? Have you had any, you know, change in macro outlets with any of your potential customers? No, no, we haven't. And we're actually in pretty good shape compared to some some other companies in that regard.
Speaker Change: The next question comes from the line of Ed Woo with <unk> capital markets. Please proceed.
Yes. Congratulations also on the progress my question is do we spend a little bit of volatility I'll see what the tariffs have you noticed any change in the sales cycle of China.
Speaker Change: In contrast, either in the edge data center business or with your power business have you had any change in macro outlooks with any of your potential customers.
Speaker Change: No no we have and we're actually in pretty good shape compared to some some other companies in that regard on the power side.
Charles Ferry: On the power side, you know, APR Energy owns all of the assets, and all of the assets right this moment are in the United States. And so those are literally shielded from tariffs. If APR, you know, with our assistance, thinks about buying more assets, and we are, I stated that in my comments, those could potentially be subject to tariffs. But right now, it's of no impact to us. On the EDGE data center side, there are some raw materials that are used in the construction of the EDGE data centers that could be subject to the tariffs.
Speaker Change: Our energy owns all of the assets and all of the assets right this moment or in the United States.
Speaker Change: And so those are literally shielded from from tariffs.
Speaker Change: If if APR.
Speaker Change: Our assistance thinks about buying more assets and we are I stated that in my comments.
Speaker Change: Those could potentially be subject to tariffs, but right now it's a no impact to us on the edge data center side. There are some raw materials that are used in the construction of the edge data centers.
Speaker Change: That could be subject to the tariffs but.
Charles Ferry: But right now, we're kind of shielded by that based on the agreement that we have with Accutech. But it is something for us to watch. But again, for right now, there's no impacts to us on those two lines of business. And you don't really see people kind of holding off on signing deals or entering into, you know, agreements with you guys. No, not at all. In these two lines of business, commercially, they're both on fire right this moment, which is a great thing for us. So there is no slowdown right now. And where it has put us into an enviable position, where we're able to kind of evaluate, you know, which customers we actually want to prioritize.
Speaker Change: But right now, we're we're kind of shielded by that based.
Speaker Change: Based on the agreement that we have with accu chek, but it is something for us to watch.
Speaker Change: But again right now there is no impact to us on those two lines of business.
Speaker Change: And you don't really see people kind of holding off on signing deals are entering into.
Speaker Change: Agreements with you guys.
Speaker Change: No not at all.
Speaker Change: In these two lines of business.
Speaker Change: No.
Speaker Change: Commercially there both on fire right. This moment, which is a great thing for us.
Speaker Change: So there is no slowdown.
Speaker Change: Right now and where it has put us into an enviable position.
Speaker Change: <unk>, where we're able to kind of evaluate which customers we actually want to prioritize.
Charles Ferry: So right now, we're in good shape.
Speaker Change: So right now were.
Speaker Change: We're in good shape.
Speaker Change: Okay.
Edward Woo: Great, great to hear and I wish you guys good luck. Thank you.
Speaker Change: Great Great to hear and I wish you guys. Good luck. Thank you.
Unknown Executive: Okay, thank you, Ed.
Ed Woo: Okay. Thank you Ed.
Dan Weston: And the next question comes from the line of Dan Weston with West Capital Management. Please proceed. Yeah, hi, thanks very much. Congrats, guys, on all the progress, the transformation has been pretty astonishing. A couple of questions. The on the Edge Data Center on your guidance of 150 to 200 by end of year 27, given 15 by the end of this year, that assumes a pretty massive ramp going into the next two years. How do you see that playing out? In other words, Would you expect all of those to be for the typical school districts that you've been targeting or do you have some contribution coming in from the potential hyperscaler customers you're speaking of?
Speaker Change: And the next question comes from the line of Dan Weston with West Capital Management. Please proceed.
Dan Weston: Yes, hi, thanks, very much congrats guys on all the progress that the transformation has been pretty astonishing.
Speaker Change: A couple of questions.
Speaker Change: On the edge data center on your guidance of 150 to 200 by end of year 2007.
Speaker Change: <unk> 15 by the end of this year that assumes a pretty massive ramp going into the next two years.
Speaker Change: How do you see that.
Speaker Change: Saying out in other words would.
Speaker Change: Would you expect.
Speaker Change: All of those to be for the typical school districts that you've been targeting or do you have some contribution coming in from the potential hyperscale customers you're speaking with.
Dan Weston: Yes, no Dan Thanks for the question.
Charles Ferry: Thanks for the question. I would see it as a combination of both. So, you know, right now we're focused because we're just getting a lot of activity on these school districts down in Texas, which are in a good position where they have federal and state funds. to kind of pull these things in. It allows us to go and install on their property and not have to pay a whole lot from a real estate perspective. And then it attracts a lot of customers from that local market now to fill out that Edge Data Center. So it's a win-win scenario there.
Speaker Change: I would see it as a combination of both so you know.
Dan Weston: Right now we're focused.
Dan Weston: Just getting a lot of a lot of activity on the school districts down in Texas, which are in the <unk>.
Dan Weston: In a good position, where they have a federal and state funds.
Dan Weston: Two.
Dan Weston: Pull these things and it allows us to go in.
Dan Weston: Install on their property and not.
Dan Weston: I have to pay a whole lot from a real estate perspective, and then it attracts.
Dan Weston: A lot of customers from that local market now to fill out that edge data centers. So it's a win win scenario there as I said before we are in discussion with a couple of different hyperscale or <unk>.
Charles Ferry: As I said before, we are in discussion with a couple of different hyperscalers. What we're seeing in this data center space. is that because there's not enough power for many of the larger data center parts. to be had right this moment. Money at the Data Center. are taking a real hard look at using edge data centers which don't require as much power in one location. In other words, they're kind of distributed out amongst the... you know, a particular area, it's easier to get power for them. And so they're looking at not only individual edge data centers at a particular location, but potentially small, what we would call pod farms, you know, where you'd have, you know, 5, 10, you know, maybe up to 20 of these things in a single location that they don't draw nearly as much power, and they get, you know, they get the computing put out closer to where the customers need it.
Dan Weston: What we're seeing in this in this data center space.
Speaker Change: Is that because there's not enough power.
Dan Weston: For many of the larger datacenter parks.
Speaker Change: To be had right this moment.
Speaker Change: Many of the data center.
Speaker Change: Hyperscale or <unk> or <unk>.
Speaker Change: Taken a real hard look at.
Speaker Change: Using edge data centers, which don't.
Speaker Change: Require as much power in one location in other words, there are kind of distributed.
Speaker Change: Out amongst.
Speaker Change: A particular area.
Speaker Change: It's easier to get power for them and so they're looking at not only individual edge data centers at a particular location, but potentially small what we would call a pod farms.
Speaker Change: We have $5 10.
Speaker Change: Or maybe up to 20 of these things in a single location.
Speaker Change: They don't draw nearly as much power and they get they get the computing put out closer to where the customers need it so.
Charles Ferry: So I, we're going to see more of that. And I anticipate we'll probably be able to commercially talk about that in more detail. I'm going to, I'm going to bet here in the next quarter to for sure, based on those discussions.
We're gonna see more of that.
Speaker Change: And I anticipate we'll probably.
Speaker Change: Be able to commercially talk about that in more detail I'm going to I'm going to bed here in the next quarter or two for sure based on those discussions.
Charles Ferry: No, I appreciate that, Chuck. You mentioned the scarcity of power for the large data center part. Can you provide any updates relating to your project out in Pampa, the large park there? Any additional commentary or timing you're expecting to have that operation? Yeah. You know, we've publicly talked, you know, we're absolutely committed to developing APR Energy is with Fortress Investment Group as their sponsor and of course we're a part of that. The plans right now are to develop that data center park. We have progressed. to the point where we will close on actually owning the property there probably in the next two months.
Chuck Berry: No I appreciate that Chuck.
Speaker Change: You mentioned the scare.
Chuck Berry: Scarcity of power for the large data center Parcs.
Chuck Berry: Can you provide any updates relating to your project out in Pampa large park there.
Chuck Berry: Any any additional commentary or timing you are expecting to have that operational.
Chuck Berry: Yes.
Chuck Berry: <unk>.
Chuck Berry: We've publicly talked.
Chuck Berry: We're.
Chuck Berry: Absolutely.
Chuck Berry: Committed to developing <unk>.
Chuck Berry: <unk> energy is with fortress investment group as a sponsor and of course, we're a part of that.
Chuck Berry:
Chuck Berry: The plans right now are to develop that datacenter park.
Chuck Berry: We have progressed.
Chuck Berry: To the point, where we.
Chuck Berry: We will close on actually owning the property there.
Chuck Berry: Probably the next two months.
Charles Ferry: And then all of the studies and all the prep work that goes in is ongoing right now. So, you know, APR will make their final decision to progress that here in the next month or so. And when they do, they'll announce that. But I will tell you that there are other similar opportunities. that look a lot like PAMPA as well, so kind of watch this space because this is an opportunity where we'll be assisting APR in providing obviously the temporary bridging behind the meter power, very likely a permanent power solution, and then the actual build out of the data center park itself for one or two of the key hyperscalers that we're in discussions with right now.
Chuck Berry: And then all of the studies and all of the prep work that goes in is ongoing right now so.
Chuck Berry: Yes.
Chuck Berry: APR and there will make their final decision.
Chuck Berry: To progress that here in the next month or so and when they do they'll announce that but I will tell you that there are other similar opportunities.
Chuck Berry: Look a lot like Panther as well.
Chuck Berry: So kind of kind of watch this space because this is.
Chuck Berry: An opportunity where.
Chuck Berry: We will be assisting APR and providing obviously the <unk>.
Chuck Berry: Temporary bridging behind the meter power.
Chuck Berry: Very likely a permanent power solution.
Chuck Berry: And then the actual build out of the datacenter park itself.
Chuck Berry: For one or two of the key hyperscale or as it were in discussions with right now.
Charles Ferry: Yeah, I really appreciate that color, Chuck. Forgive the maybe the remedial question, but Considering the current portfolio of power is sold out, if you will. How do you see that? playing out in terms of allocating for new projects, whether it be Pampa or others that come on stream, anything that you can talk to would be appreciated. Yeah, so the so our fleet of power turbines, obviously it's finite. And again, you'll It will be obvious to those who are familiar with that business, I've been careful not to tell folks, at least in this call, the length of term of contracts and things like that.
Speaker Change: Yes, I really appreciate that color Chuck.
Chuck Berry: Forget the maybe the remedial question, but.
Chuck Berry: During the current portfolio of power is assumed to be.
Chuck Berry: Sold out if you will.
Chuck Berry: How do you see that playing.
Chuck Berry: Playing out in terms of allocating for new projects, whether it be pampa or others that come on stream.
Chuck Berry: Anything that you can talk to you would be appreciated.
Chuck Berry: Yes so.
Chuck Berry: So our fleet of power turbines, obviously, it's finite.
Chuck Berry:
Chuck Berry: And again you will.
Chuck Berry: It will be obvious to those who are familiar with that business.
Chuck Berry: I've been careful not to tell folks at least in this call.
Chuck Berry: The length of term of contracts and things like that so.
Charles Ferry: So, you know, very broadly, a lot of the work that we've contracted is for work to be performed this year, and it'll allow us to, it'll allow APR Energy, and we'll benefit through the asset management agreement to monetize those assets very, very quickly, shortly after this meeting. shortly after the acquisition of these things. And then we have probably three or four very large behind the meter data center projects that are already lined up to take these assets. So effectively what you're trying to do is you're trying to maintain a very high utilization rate of those assets.
Chuck Berry: Very broadly a lot of the work that we've contracted.
Chuck Berry: As for work can be performed this year and it will allow us to it will allow APR energy and will benefit through the asset management agreement.
To monetize those assets very very quickly shortly after this.
Chuck Berry: Shortly after the acquisition of these things.
Chuck Berry: And then we have probably three or four very large.
Chuck Berry: Behind the meter data center projects that are already lined up.
To take these assets so effectively with trend as you're trying to maintain a very high utilization rate of those assets. That's the name of the game.
Dan Weston: That's the name of the game in that business is high utilization rate. I will say that the demand for this is so high. We are assisting APR Energy in evaluating opportunities to acquire additional assets so we can actually grow the overall value of the APR business. And of course for us, we benefit from that 5% ownership stake in that business. So it's a win-win for both companies. I appreciate that, Chuck, answering the questions, and congrats again.
Chuck Berry: That business is high utilization rate.
Chuck Berry: I will say that the.
Chuck Berry: Demand for this is so high.
We are assisting APR energy in evaluating opportunities to acquire additional assets.
So we can actually grow the overall value of of the APR business and of course for US we benefit from that 5% ownership stake in that business. So it's a win win for both companies.
Chuck Berry: I appreciate that Chuck.
Chuck Berry: Answering the questions and congrats again on the progress has been really amazing so good luck. Thanks.
Unknown Executive: The progress has been really amazing, so good luck. Thanks very much. All right, thanks. Thanks, Dan. Appreciate it. Thank you.
Chuck Berry: Thanks very much.
Dan Weston: Alright, thanks, Thanks, Dan appreciate it.
Speaker Change: Thank you ladies and gentlemen. This concludes the question and answer session I will hand, the call back to Mr. Ferron for closing remarks.
Charles Ferry: Ladies and gentlemen, this concludes the question and answer session. I'll have a call back to Mr. Ferry for questions. Yeah, thanks very much, operator. Again, thanks to everybody that's on the call today.
Speaker Change: Yes, thanks, very much operator again, thanks to everybody that's on the call today, and then again just want to reiterate my thanks to all of our partners our shareholders. Our board members and then.
Unknown Executive: And then and again, just want to reiterate my thanks to, you know, all of our partners, our shareholders, our board members, and then, you know, a special thank you to the to the Duos leadership and employee team that's making all this good stuff happen. Thank you very much.
Speaker Change: A special thank you to the to the duals leadership.
Speaker Change: An employee team that's making all this good stuff happen. Thank you very much.
Unknown Executive: Before we conclude today's call, I would like to provide Rose's safe harbor statement that includes important cautions regarding forward-looking statements made during this call. This earnings call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology, such as believes, expects, may, will, should, anticipates, plans, and or opposites, or similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond our control, which may influence the accuracy of the statement.
Speaker Change: Before we conclude today's call I would like to provide the safe Harbor statement that includes important cautions regarding forward looking statements made during this call.
Speaker Change: This earnings call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 95.
Speaker Change: Forward looking terminology such as believes expects may will should or anticipates plans and their opposites or similar expressions are intended to identify forward looking statements.
Speaker Change: We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties risks and other influences many of which are beyond our control, which may influence the accuracy of these statements and the projections upon which the statements are made.
Unknown Executive: and the projections upon which the statements are based and could cause Duos Technologies Group actual results to differ materially from those anticipated by the forum. These risks and uncertainties include but are not limited to those described in Item 1A in Duos' annual report on Form 10-K, which is expressly incorporated herein by reference, and other factors, as may periodically be described in Duos' filings with the SEC.
Speaker Change: <unk> and could cause two duos technologies group Inc's.
Speaker Change: <unk> results to differ materially from those anticipated by the forward looking statements.
Speaker Change: These risks and uncertainties include but are not limited to those described in item <unk> and duals as annual report on Form 10-K, which is expressly incorporated herein by reference and other factors.
Speaker Change: <unk> periodically be described on doors as filings with the SEC.
Unknown Executive: Thank you for joining us today for Duos Technologies Group's first quarter 2025 earnings call.
Speaker Change: You for joining us today for duals technology groups first quarter 2025 earnings call you may now disconnect.
Unknown Executive: You may now Ukulele music
Speaker Change: Okay.
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