Duos Technologies (US:DUOT)2023-08-15 01:56Financial Data and Key Metrics Changes - Total revenue for Q2 2023 decreased 51% to $1.77 million compared to $3.62 million in Q2 2022 [1] - For the first six months of 2023, total revenue decreased 13% to $4.41 million from $5.06 million in the same period last year [14] - Net operating loss for Q2 2023 totaled $3.2 million compared to a net operating loss of $1.39 million for Q2 2022 [20] - Net loss for Q2 2023 totaled $3.04 million compared to a net loss of $1.34 million for Q2 2022 [21] - Cash position improved to approximately $6 million in cash and cash equivalents as of the end of the quarter, up from $1.1 million at December 31, 2022 [41][42] Business Line Data and Key Metrics Changes - Technology systems revenue for Q2 2023 was approximately $870,000, while recurring services and consulting revenue was approximately $900,000 [1] - Cost of revenues for Q2 2023 decreased 33% to $1.56 million compared to $2.33 million for Q2 2022 [15] - Gross margin for Q2 2023 decreased 83% to $212,000 compared to $1.28 million for Q2 2022 [17] Market Data and Key Metrics Changes - The company is experiencing increased commercial inquiries following the derailment in East Palestine, Ohio, which has heightened focus on safety across the industry [11] - The Railway Safety Act is progressing through Congress, which could lead to increased demand for the company's technology [10][88] Company Strategy and Development Direction - The company is transitioning from a CapEx-focused business model to a subscription-based model, aiming for recurring revenues to grow to over 50% of total revenue [83] - The company has initiated its first subscription services agreement valued at $300,000 per year with a passenger rail operator [22] - The company plans to expand its subscription portal network to 40 to 50 locations within the next 18 to 36 months [29] Management's Comments on Operating Environment and Future Outlook - Management believes the company is in its strongest position ever and is optimistic about achieving financial profitability within the next 12 to 24 months [9] - The company expects revenues in Q3 2023 to moderately increase compared to Q2 2023, with significant ramp-up anticipated in Q4 2023 and into 2024 [33] - Management acknowledges risks associated with project delays but remains focused on long-term growth through subscription offerings [36] Other Important Information - The company has strengthened strategic partnerships with Dell and NVIDIA to enhance its technology offerings [2] - The company has a backlog of contracts representing approximately $7.8 million in revenue, with $3 million to $5 million expected to be recognized during the remainder of 2023 [64][65] Q&A Session Summary Question: What will be the revenue mix between services and systems revenue for this year? - The company anticipates an 80% CapEx and 20% recurring revenue split in 2022, expecting this to grow in the latter half of 2023 [76] Question: How is the company advancing its AI technology? - The company controls all aspects of its AI development in-house, which allows for better performance and integration compared to competitors relying on third-party AI [80] Question: Will recent derailments drive more sales in the next 12 months? - Management believes that increased familiarity with their technology among regulators and labor unions will lead to a higher pace of adoption, regardless of the occurrence of derailments [82] Question: What is the likelihood of the FRA mandating automated inspections? - The company is optimistic about the potential passage of the Railway Safety Act, which would require the FRA to establish regulations for wayside detection devices [84][61]