Fourth Quarter 2023 and Recent Operational Highlights
- Secured contract for expansion of recurring revenues including
$2.4 million , multiyear AI subscription and services agreement with Class 1 railroad for advanced AI-Based Defect Detection models. - Closed
$360,000 in annual recurring revenue with Mexican rail operator encompassing expanded support through Duos’ Preventative Maintenance Checks and Services (PMCS) Program and Field Services Support. - Scanned more than 8.5 million railcars on over 665,000 unique railcars for the full year. This metric encompasses all railcars scanned at locations across the
U.S. ,Canada , andMexico , representing approximately 40% of the total freight car population inNorth America . - Granted wide ranging Patent "Use of Artificial Intelligence to Detect Defects in Trains and Method to Use". This innovative AI patent reinforces Duos’ strong commitment to improving rail safety through technology.
- Appointed power and logistics industry veteran
Christopher King as Chief Commercial Officer. King joins Duos with over 20 years of operational and commercial leadership experience within the energy and supply chain sectors. - At the end of the year, the Company had
$6.6 million of revenue in backlog and more than$100 million in identified opportunities. - Strengthened industry collaborations with Dell Technologies and NVIDIA to support AI development and achieve significant increases in performance at near “real-time” reporting. Duos featured in
Dell promotional video released in Q1 2024.
Fourth Quarter 2023 Financial Results
It should be noted that the following Financial Results represent the consolidation of the Company with its subsidiaries
Total revenue for Q4 2023 decreased 74% to
Cost of revenues for Q4 2023 decreased 68% to
Gross margin for Q4 2023 decreased 86% to
Operating expenses for Q4 2023 increased 12% to
Net operating loss for Q4 2023 totaled
Net loss for Q4 2023 totaled
Cash and cash equivalents at
In
Full Year 2023 Financial Results
Total revenue for the full year 2023, decreased 50% compared to 2022. Much of the decrease was due to customer-driven delays beyond the Company’s control related to the ongoing production of the two high-speed transit-focused RIPs. The resultant timing delays of the overall project delivery timeline shifts anticipated revenues into the second half of 2024. The Company also began its transition into a greater focus on AI software and support services, much of which are recurring revenues and there was a small increase in services and consulting revenues. Underlying recurring revenues climbed by approximately 23% on a year-over-year basis. This growth is fueled by the expansion of service contracts following the completion of new portals in early 2023, coupled with the deployment of AI services with several customers and data subscription services for a large passenger transit customer. The Company anticipates these revenue sources will continue growing throughout 2024 and beyond.
Cost of revenues decreased 40% overall for the year due to the overall decrease in revenues. Cost of revenues on services and consulting decreased by 4% year-over-year despite a small increase in revenues for this category, which is a positive trend. The Company continues to put into service additional artificial intelligence algorithms and maintenance and support services which are high margin and represent only marginal increases in the requisite costs to deliver these services.
Gross margin decreased 72% for the year ended
Operating expenses were higher by 10% in 2023 as compared to the full-year 2022. There was a 12% increase in sales and marketing related to increased investment into the capability of the commercial team, including the addition of professionals with extensive experience and leadership in the rail industry. Additionally, a small increase in general and administration costs was influenced by several factors, including non-cash amortization charges associated with roughly 400,000 share options that were issued during 2023. In late 2023, the Company took steps to rationalize some non-essential staff positions given the lower performance in 2023 with an anticipated impact of around
Net operating loss The losses from operations for the years ended,
Net loss The net loss for the years ended
Financial Outlook
At the end of 2023, the Company’s contracts in backlog represented approximately
In the fourth quarter of 2023 the Company withdrew its previously issued guidance due to unforeseen delays from three major projects which delayed recognition of a substantial portion of expected revenues into 2024. Duos expects an improvement in operating results to be reflected over the course of the full year 2024 from the realization of these projects and other anticipated new projects. As a result of typical business seasonality as well as timing and other factors, the Company expects revenues in the first quarter of 2024 to be similar to the fourth quarter of 2023 before sequentially increasing throughout the remainder of the year.
Management Commentary
“2023 was a challenging year for our Company with strong progress in many areas of operations offset by project delays from three major clients which were out of our control,” said Duos Chief Executive Officer
“We continue to engage with the Class 1s, Passenger Railroads, labor unions, and
Conference Call
The Company’s management will host a conference call today,
Date: Time: International dial-in: Confirmation: | 877-407-3088 201-389-0927 13744636 |
Please call the conference telephone number 5-10 minutes prior to the start time of the conference call. An operator will register your name and organization.
If you have any difficulty connecting with the conference call, please contact DUOT@duostech.com.
The conference call will be broadcast live via telephone and available for online replay via the investor section of the Company's website here.
About
Forward-Looking Statements
This news release includes forward-looking statements regarding the Company's financial results and estimates and business prospects that involve substantial risks and uncertainties that could cause actual results to differ materially. Forward-looking statements relate to future events and typically address the Company's expected future business and financial performance. The forward-looking statements in this news release relate to, among other things, information regarding anticipated timing for the installation, development and delivery dates of our systems; anticipated entry into additional contracts; anticipated effects of macro-economic factors (including effects relating to supply chain disruptions and inflation); timing with respect to revenue recognition; trends in the rate at which our costs increase relative to increases in our revenue; anticipated reductions in costs due to changes in the Company's organizational structure; potential increases in revenue, including increases in recurring revenue; potential changes in gross margin (including the timing thereof); statements regarding our backlog and potential revenues deriving therefrom; and statements about future profitability and potential growth of the Company. Words such as "believe," "expect," "anticipate," "should," "plan," "aim," "will," "may," "should," "could," "intend," "estimate," "project," "forecast," "target," "potential" and other words and terms of similar meaning, typically identify such forward-looking statements. Forward-looking statements involve risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the Company's ability to continue as a going concern, the Company's ability to generate sufficient cash to continue and expand operations, the competitive environment generally and in the Company's specific market areas, changes in technology, the availability of and the terms of financing, changes in costs and availability of goods and services, economic conditions in general and in the Company's specific market areas, changes in federal, state and/or local government laws and regulations potentially affecting the use of the Company's technology, changes in operating strategy or development plans and the ability to attract and retain qualified personnel. The Company cautions that the foregoing list of risks, uncertainties and factors is not exclusive. Additional information concerning these and other risk factors is contained in the Company's most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other filings filed by the Company with the
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
For the Years Ended | |||||||
2023 | 2022 | ||||||
REVENUES: | |||||||
Technology systems | $ | 3,618,022 | $ | 11,190,292 | |||
Services and consulting | 3,853,176 | 3,822,074 | |||||
Total Revenues | 7,471,198 | 15,012,366 | |||||
COST OF REVENUES: | |||||||
Technology systems | 4,352,247 | 8,376,649 | |||||
Services and consulting | 1,810,070 | 1,887,614 | |||||
Total Cost of Revenues | 6,162,317 | 10,264,263 | |||||
GROSS MARGIN | 1,308,881 | 4,748,103 | |||||
OPERATING EXPENSES: | |||||||
Sales and marketing | 1,493,309 | 1,337,186 | |||||
Research and development | 1,812,951 | 1,651,064 | |||||
General and Administration | 9,449,187 | 8,625,002 | |||||
Total Operating Expenses | 12,755,447 | 11,613,252 | |||||
LOSS FROM OPERATIONS | (11,446,566 | ) | (6,865,149 | ) | |||
OTHER INCOME (EXPENSES): | |||||||
Interest expense | (7,159 | ) | (9,191 | ) | |||
Other income, net | 212,007 | 9,557 | |||||
Total Other Income (Expenses) | 204,848 | 366 | |||||
NET LOSS | $ | (11,241,718 | ) | $ | (6,864,783 | ) | |
Basic and Diluted Net Loss Per Share | $ | (1.56 | ) | $ | (1.11 | ) | |
Weighted Average Shares-Basic and Diluted | 7,204,177 | 6,175,193 | |||||
CONSOLIDATED BALANCE SHEETS | |||||||
2023 | 2022 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash | $ | 2,441,842 | $ | 1,121,092 | |||
Accounts receivable, net | 1,462,463 | 3,418,263 | |||||
Contract assets | 641,947 | 425,722 | |||||
Inventory | 1,526,165 | 1,428,360 | |||||
Prepaid expenses and other current assets | 184,478 | 441,320 | |||||
Total Current Assets | 6,256,895 | 6,834,757 | |||||
Property and equipment, net | 726,507 | 629,490 | |||||
Operating lease right of use asset | 4,373,155 | 4,689,931 | |||||
Security deposit | 550,000 | 600,000 | |||||
OTHER ASSETS: | |||||||
Note Receivable, net | 153,750 | - | |||||
Patents and trademarks, net | 129,140 | 69,733 | |||||
Software development costs, net | 652,838 | 265,208 | |||||
Total Other Assets | 935,728 | 334,941 | |||||
TOTAL ASSETS | $ | 12,842,285 | $ | 13,089,119 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 595,634 | $ | 2,290,390 | |||
Notes payable - financing agreements | 41,976 | 74,575 | |||||
Accrued expenses | 164,113 | 453,023 | |||||
Equipment financing payable-current portion | - | 22,851 | |||||
Operating lease obligations-current portion | 779,087 | 696,869 | |||||
Contract liabilities | 1,666,243 | 957,997 | |||||
Total Current Liabilities | 3,247,053 | 4,495,705 | |||||
Operating lease obligations, less current portion | 4,228,718 | 4,542,943 | |||||
Total Liabilities | 7,475,771 | 9,038,648 | |||||
Commitments and Contingencies (Note 10) | |||||||
STOCKHOLDERS' EQUITY: | |||||||
Preferred stock: | |||||||
Series A redeemable convertible preferred stock, | |||||||
Series B convertible preferred stock, | |||||||
Series C convertible preferred stock, | |||||||
Series D convertible preferred stock, | 1 | 1 | |||||
Series E convertible preferred stock, | 12 | - | |||||
Series F convertible preferred stock, | - | - | |||||
Common stock: | 7,306 | 7,156 | |||||
Additional paid-in-capital | 69,120,199 | 56,562,600 | |||||
Accumulated deficit | (63,603,552 | ) | (52,361,834 | ) | |||
Sub-total | 5,523,966 | 4,207,923 | |||||
Less: | (157,452 | ) | (157,452 | ) | |||
Total Stockholders' Equity | 5,366,514 | 4,050,471 | |||||
Total Liabilities and Stockholders' Equity | $ | 12,842,285 | $ | 13,089,119 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
For the Years Ended | |||||||
2023 | 2022 | ||||||
Cash from operating activities: | |||||||
Net loss | $ | (11,241,718 | ) | $ | (6,864,783 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 550,201 | 350,192 | |||||
Stock based compensation | 710,047 | 819,191 | |||||
Stock issued for services | 143,065 | 157,500 | |||||
Amortization of operating lease right of use asset | 316,776 | 235,834 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 1,955,800 | (1,679,720 | ) | ||||
Note receivable | (153,750 | ) | - | ||||
Contract assets | (216,225 | ) | (422,273 | ) | |||
Inventory | (97,804 | ) | (1,130,022 | ) | |||
Security deposit | 50,000 | - | |||||
Prepaid expenses and other current assets | 744,771 | 266,539 | |||||
Accounts payable | (1,694,756 | ) | 1,245,890 | ||||
Accrued expenses | (289,209 | ) | (165,069 | ) | |||
Operating lease obligation | (232,007 | ) | 184,728 | ||||
Contract liabilities | 708,245 | (871,314 | ) | ||||
Net cash used in operating activities | (8,746,564 | ) | (7,873,307 | ) | |||
Cash flows from investing activities: | |||||||
Purchase of patents/trademarks | (69,327 | ) | (18,190 | ) | |||
Purchase of software development | (527,896 | ) | (281,783 | ) | |||
Purchase of fixed assets | (496,686 | ) | (344,915 | ) | |||
Net cash used in investing activities | (1,093,909 | ) | (644,888 | ) | |||
Cash flows from financing activities: | |||||||
Repayments of insurance and equipment financing | (520,529 | ) | (331,175 | ) | |||
Repayment of finance lease | (22,851 | ) | (80,335 | ) | |||
Proceeds from common stock issued | - | 8,801,003 | |||||
Issuance cost | (25,797 | ) | (942,926 | ) | |||
Proceeds from shares issued under Employee Stock Purchase Plan | 230,400 | - | |||||
Proceeds from preferred stock issued | 11,500,000 | 1,299,000 | |||||
Net cash provided by financing activities | 11,161,223 | 8,745,567 | |||||
Net increase in cash | 1,320,750 | 227,372 | |||||
Cash, beginning of year | 1,121,092 | 893,720 | |||||
Cash, end of year | $ | 2,441,842 | $ | 1,121,092 | |||
Supplemental Disclosure of Cash Flow Information: | |||||||
Interest paid | $ | 7,159 | $ | 9,292 | |||
Taxes paid | $ | 29,085 | $ | 1,264 | |||
Supplemental Non-Cash Investing and Financing Activities: | |||||||
Notes issued for financing of insurance premiums | $ | 487,929 | $ | 353,244 | |||
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/35922dd8-a8e3-4ee0-9c75-4394c2a2e280
Contacts CorporateFei Kwong , Director, Corporate CommunicationsDuos Technologies Group, Inc. (Nasdaq: DUOT) 904-652-1625 fk@duostech.com
Duos Technologies Group Reports Fourth Quarter and Full Year 2023 Results
Short term revenue decline during transition to subscription revenue model combined with significant operational progress and growing pipeline of opportunities
2024 GlobeNewswire, Inc., source