Duos Technologies (DUOT) - 2024 Q2 - Quarterly Results

markdown [Second Quarter 2024 and Recent Operational Highlights](index=1&type=section&id=Second%20Quarter%202024%20and%20Recent%20Operational%20Highlights) Duos secured a major contract, expanded operations, diversified into new markets, and strengthened its IP, boosting its backlog - Closed a 5-year support services and data sharing agreement with a Class 1 railroad valued at **$10.9 million**, leveraging it for a subscription marketing model starting in Q3[2](index=2&type=chunk) - Formed new subsidiaries, **Duos Edge AI** and **Duos Energy Corporation**, to expand into the Edge Data Center (EDC) and power sectors[2](index=2&type=chunk)[3](index=3&type=chunk) - Received its **10th patent** for automated visual inspection of railcars, with **6 additional patents pending**[2](index=2&type=chunk) - Performed over **2.3 million** comprehensive railcar scans in Q2, covering approximately **24%** of North American freight cars[2](index=2&type=chunk) - Total revenue backlog, including near-term renewals, reached **$19.6 million**, with **$6.9 million** expected to be recognized in the remainder of 2024[3](index=3&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) Total revenue declined and net losses widened, despite strong growth in recurring services and consulting revenue [Second Quarter 2024 Financial Results](index=2&type=section&id=Second%20Quarter%202024%20Financial%20Results) Q2 2024 saw a 15% revenue decrease and negative gross margin, despite 38% growth in recurring services revenue Q2 2024 vs. Q2 2023 Financial Highlights (in millions USD) | Financial Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1.51M** | **$1.77M** | **-15%** | | Technology Systems Revenue | $0.27M | $0.87M | -69% | | Services & Consulting Revenue | $1.25M | $0.90M | +38% | | **Gross Margin** | **($0.22M)** | **$0.24M** | **-189%** | | **Operating Expenses** | **$3.00M** | **$3.39M** | **-11%** | | **Net Loss** | **($3.20M)** | **($2.99M)** | **+7%** | - The increase in cost of revenues was driven by **$473,069** in amortization expenses from a nonmonetary transaction for a new services and data agreement[5](index=5&type=chunk) [Six Month 2024 Financial Results](index=3&type=section&id=Six%20Month%202024%20Financial%20Results) H1 2024 saw a 42% decline in total revenue and a negative gross margin, despite a 19% increase in recurring revenues Six Months 2024 vs. 2023 Financial Highlights (in millions USD) | Financial Metric | H1 2024 | H1 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$2.58M** | **$4.41M** | **-42%** | | Technology Systems Revenue | $0.53M | $2.70M | -80% | | Services & Consulting Revenue | $2.05M | $1.72M | +19% | | **Gross Margin** | **($0.12M)** | **$0.78M** | **-115%** | | **Operating Expenses** | **$5.86M** | **$6.07M** | **-4%** | | **Net Loss** | **($5.96M)** | **($5.13M)** | **+16%** | - The decrease in total revenue was primarily impacted by delays in delivering two high-speed RIPs for a passenger transit client[8](index=8&type=chunk) [Financial Outlook](index=4&type=section&id=Financial%20Outlook) Improved operating results are expected, driven by a strong $19.6 million backlog and a new subscription data model - The company's contract backlog and near-term renewals total over **$19.6 million**[11](index=11&type=chunk) - Approximately **$6.9 million** of the backlog is expected to be recognized as revenue during the remainder of 2024[11](index=11&type=chunk) - A **$10.7 million** portion of the backlog is for data access under a non-monetary exchange agreement, enabling a high-margin subscription revenue stream[11](index=11&type=chunk)[12](index=12&type=chunk) [Management Commentary](index=4&type=section&id=Management%20Commentary) Management is dissatisfied with short-term performance but focuses on long-term growth through recurring revenue and new initiatives - CEO Chuck Ferry expressed dissatisfaction with short-term financial performance but was encouraged by recurring revenue growth and the fast start of the EDC business[13](index=13&type=chunk) - Management's focus is on establishing a foundation for long-term growth through new business development, market expansion, and the subscription data offering[13](index=13&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) The unaudited consolidated financial statements detail the company's financial position, performance, and cash flows [Consolidated Statements of Operations](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The statement details net losses of $3.20M for Q2 and $5.96M for H1 2024, reflecting revenue shifts Consolidated Statements of Operations Summary (Unaudited, in millions USD, except per share data) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Total Revenues** | $1.51M | $2.58M | | **Gross Margin** | ($0.21M) | ($0.12M) | | **Loss from Operations** | ($3.22M) | ($5.98M) | | **Net Loss** | **($3.20M)** | **($5.96M)** | | **Net Loss Per Share** | **($0.43)** | **($0.81)** | [Consolidated Balance Sheets](index=7&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2024, cash decreased, total assets rose due to an intangible asset, liabilities increased, and equity declined Consolidated Balance Sheet Highlights (Unaudited, in millions USD) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Cash** | **$0.51M** | **$2.44M** | | **Total Current Assets** | $3.43M | $6.26M | | **Total Assets** | **$21.21M** | **$12.84M** | | **Total Current Liabilities** | $5.81M | $3.25M | | **Total Liabilities** | **$18.36M** | **$7.48M** | | **Total Stockholders' Equity** | **$2.85M** | **$5.37M** | [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash flow statements show increased cash used in operations, continued investing, and financing inflows, resulting in $0.51 million cash at period-end Consolidated Cash Flow Summary (Unaudited, For the Six Months Ended June 30, in millions USD) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | **Net cash used in operating activities** | **($3.94M)** | **($1.92M)** | | **Net cash used in investing activities** | ($0.89M) | ($0.55M) | | **Net cash provided by financing activities** | $2.89M | $3.80M | | **Net (decrease) in cash** | ($1.94M) | $1.33M | | **Cash, end of period** | **$0.51M** | **$2.45M** |