Duos Technologies Group, Inc.

Good afternoon. Welcome to Duos Technologies' fourth quarter and full year 2025 earnings conference call. Joining us for today's call are Duos President Doug Recker and CFO Leah Brown. Following the remarks, we will open the call to your questions. Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. Now I'd like to turn the call over to Mr. Doug Becker. Sir, please proceed.

Welcome, everyone. Thank you for joining us. Earlier today, we issued our earnings press release and our 10-K for 2025. Copies are available in the investor relations section of our website. I encourage all listeners to view press releases and our 10-K following to better understand some of the details we'll be discussing during this afternoon's call. Before I begin, I would like to take a minute to personally thank Chuck Ferry for his leadership and guidance. Chuck has served the DUOS organization and provided personal mentorship to me. I value Chuck and the opportunity he has provided me at DUOS. It is not every day that you get to be mentored by a war hero and a corporate champion. And for that, I will be forever grateful. I look forward to your continued mentorship and guidance as you continue to serve on our board of directors. Thank you, Chuck, for all you have done and continue to do for the DUOS organization. As your newly appointed CEO, I am honored and excited to discuss the focus of DUOS Technologies Group. We are now fully dedicated to the data center market through our DUOS Edge and Tech Solutions Division, driven by accelerating customer demand. I will get into more of that in a minute, but want to give you an update on the rail technology and DUOS energy subsidiaries. First, let me talk to you about our legacy business, which is a rail car inspection portal. In the previous calls, we had discussed that this line of business has become less important to our future at DUOS. We also talked about diversifying our business strategy to edge computing. Thus, we have made the decision to completely divest the rail division. This divestiture is expected to take place over the next 60 days. This decision did not come lightly. and I know the rail technology has a rich history with Duo shareholders. In fact, my involvement goes back many years before joining Duos, and I was intimately involved in the design and building of the edge data centers that the portal uses today. However, the lack of growth and regulatory hurdles for that business has proved to be extremely challenging to manage. The decision to invest frees up company resources and cuts significant SG&A expenses. More details will be made available on the few divestitures in the near future. Second, I would like to talk about Dewis Energy Corporation. As many of you may remember from last year, Dewis entered into an asset management agreement with New APR Energy to help find new contracts to engineer, procure, construct, and operate fast power plants. Dewis also was giving a 5% equity stake in the parent of APR Energy. The AMA provided the interim financial ability to execute and pivot to our data center strategy. We announced on the Q3 earnings call that the AMA would conclude in 2026, but DUOS will retain the 5% equity stake. Now I would like to discuss our data center strategy and our new line of businesses at DUOS Technology Solutions. Part of our strategy in building and deploying data centers at a rapid pace has always been focused on cost savings, lowering our capital expenditures. Building data center infrastructure is very capital intensive. As Duos is a relatively small buyer compared to the larger hyperscalers and co-location companies, we needed a way to buy products cheaper. So we created Duos Technology Solutions. This brand new division allows us to do just that, as well as provide a new stream of revenue for us. We started by hiring an industry veteran with a proven track record who understands our business as well as the data center market overall. Kristen Sanderson joined Duos and will serve as the Senior Vice President of Duos Technology Solutions. Kristen has over 18 years of data center product experience, vast market distribution knowledge, relationships with all the key supplier partners that Duos needs to work with, and a wealth of relationships in the data center industry. This new division allows DUOS to procure materials for its own builds at a much lower rate than the legacy way of purchasing through traditional distribution. DUOS Technology Solutions offers the same strategic sourcing and product distribution to new customers, including large-scale enterprise organizations, hyperscalers, large co-location companies, low-voltage contractors, and general contractors across the United States. I'm very pleased to report that through the first quarter, Duo's Tech Solutions has already sold 10 million in new business, which currently sits as backlog, all of which I expect to be recorded as revenue this year. This new line of business has low overhead and is simple to execute while having strong commitments by the end client. The revenue generated from Tech Solutions is expected not only to replace the revenue from the new APR AMA, but also provide better margins, thus further contributing to the overall future profitability and growth of Duos Technologies Group. Kristen has built a seasoned team with the talent and short three-month build, tremendous sales pipeline, and we expect amazing things from this new venture. Now I want to shift our discussion to the core of our new data center-focused organization, Duos Edge AI. The demand for edge computing continues to grow at a rapid pace, and I'm pleased to share that Duos Edge AI is in a great place to meet this demand. The second half of 2025 proved to be extremely busy for Duos Edge. In July 2025, we successfully completed a capital raise of $45 million with Titan Partners to fund the construction and deployment of 15 EDCs to further broaden the connectivity and compute needs of underserved Tier 3 and Tier 4 markets. Lewis Edge AI was also awarded a patent for clean room technology for modular data center deployments, which gives us a strategic competitive advantage in the space. Our goal in 2025 was to procure, manufacture, deploy 15 edge data centers. This goal was extremely aggressive and unheard of in our industry. We are proud to report today that we have accomplished that goal. Our focus for the first half of 2026 is to continue executing our sales strategy to acquire new customers in our markets to fully utilize the capacity of each EDC. In March 2026, we completed a 65 million capital raise to deploy approximately 2,300 GPUs as a service. a 4.8 megawatt high-density EDC deployment for a leading hyperscaler and to expand our high-density EDC footprint to support growing demand for power and compute across AI inference, training, enterprise, and hyperscale AI workloads. We also have five new EDCs in production with plans for an additional 20 megawatts of deployed capacity by year-end. Having inventory for our EDCs to deploy is crucial for our continued growth and success in this market. The Duos Edge AI story and its initial success is garnering tremendous excitement and demand, so inventory will allow us to react quickly to new market requests. Part of this new demand we now see is for higher density power, which serves AI and high-powered compute needs. While Duos Edge AI is committed to sustainability, Taking to our original model of deploying in the Tier 3 and Tier 4 markets, we are seeing unprecedented demand for power in megawatts compared to kilowatts. The data center market is experiencing a boom like we've never seen before, and building at scale is costly, and it takes years to complete. During the course of this deployment, our 15 EDCs, we saw an influx of calls requesting more power in the markets where we reformed organizations all across the country. There is such a shortage of data center space and power that companies are turning to Duo's Edge AI. So we are going to start to build our new EDCs with greater power capacity to meet this demand. We have shown the market we can deploy at lower costs with an incredibly faster speed to market. Duo's Edge AI will now be able to cater to customers that have the high density needs like the NeoCloud providers and hyperscalers for their remote edge sites. These higher power capacity EDCs should provide much higher monthly recurring revenue for DUOS, which we will explain in our financial update coming up shortly. Before I transition to the financials, I would like to touch on our start of the year and our first partnership in deploying high-density power EDCs. This month, DUOS executed its first contract across two newly launched business lines, GPU as a Service and high-power co-location service for AI infrastructure. Under our GPU as a service agreement, NUOS will deploy 2,304 NVIDIA GPUs across our Edge data center platform, generating reoccurring revenue through a GPU rental model purpose-built for enterprise and AI workloads. This contract is expected to generate approximately $176 million in revenue over a 36-month term. with margins exceeding 80%, an expected annual EBITDA of approximately 40 million. Separately, DUOS was awarded a high-power co-location contract to deliver 4.8 megawatts of critical compute power to support a leading hyperscaler's high-density NVIDIA GPU cluster, housed within DUOS Edge data centers. This contract represents DUOS' entry into the market of high-power co-location where demand for AI-grade infrastructure continues significantly outpacing supply. Together, these contracts mark a significant commercial inflection for DUOS, establishing two distinct and complementary revenue streams within our data center platform and validating edge data center infrastructure at the highest level of the AI compute market. Since announcing these contracts, we have received strong incremental inbound interest from hyperscalers, Neocloud providers, and other large-scale compute customers seeking high-density EDC solutions, we see a significant opportunity to scale the high-power EDC model through 2026 and beyond. Now I would like to turn it over to our CFO, Leah Brown, who will go over our financials for 2025. Leah?

Thank you, Doug. This has been an exciting year for Duo. 2025 is a year marked by significant revenue growth, strategic investment, and meaningful progress toward building a stronger, more scalable company. I am truly excited to walk through our full year financial performance and highlight key operational drivers that shaped our results. For 2025, total consolidated revenue was approximately $27 million. The company previously projected revenue in 2025 of $28 million. Although that target was not met, we recorded a little over $1 million in deferred revenue for technology solutions, which is contracted, cash was received, and we will record as revenue in 2026. In 2025, the $27 million in revenue was a significant increase compared to 7.3 million in 2024, which is over a 270% increase year over year. This growth was primarily driven by services and consulting revenue from the asset management agreement with new APR energy, totaling 22.4 million in 2025 versus 900,000 in 2024. The company delivered materially stronger growth margin in 2025, generating 7.9 million in gross profit, achieving approximately 29%, a significant year-over-year improvement. This was driven by improved cost absorption, and continued operating efficiency. The company reported net loss of approximately 9.8 million in 2025, an improvement from the 10.8 million net loss in 2024. The year-over-year improvement was driven primarily by higher revenue and significantly stronger gross margin. As we discussed on our Q3 earnings call, achieving positive adjusted EBITDA was an important milestone for the company, reflecting the early benefits of revenue scale and margin improvement. I'm pleased to report that we built on that progress in Q4. Delivering positive adjusted EBITDA for the second consecutive quarter, This consistency is meaningful and demonstrates that the Q3 result was not a one-time event, but rather the continuation of improving operating performance as the business scales. The consecutive improvement from Q3 to Q4 reinforces our confidence in the direction of the business, driving higher revenue volume improved growth margin, and more efficient cost structure. Let's shift to the balance sheet. The company ended 2025 with approximately $63 million in total assets, reflecting meaningful growth year over year. Cash increased significantly compared to the prior year, driven by capital raise during the year, which strengthened liquidity and enhanced our ability to support operations and planned investments. Another strong position on the balance sheet is property and equipment, each with significantly increase year over year, reflecting continued investment in infrastructure and assets required to support the program execution and long-term growth initiatives. The current contract liabilities, over $5 million, supports the company's future revenue recognition. On the equity side, capital raised during the year strengthen our balance sheet and liquidity, while ongoing investment in the business aligns our strategy to scale operations and drive longer-term value creation. 2025 was a transformative year for Duo Technologies Group. We significantly scaled revenue, strengthened our liquidity position, and made strategic investments that positioned the company for increased operating leverage and margin expansion going forward. As previously reported, the rail segment remains relatively flat. In response, we are divesting the rail business and reallocating resources to support the continued expansion of our EDGE data center segment. Turning to our 2026 outlook, the company is providing revenue guidance of 50 to 55 million in total revenue across all business lines. This forecast reflects growth from both our core operations and newer initiatives, which Dove will cover, and we believe positions us for a strong year. Due to the timing of revenue recognition, a significant portion of revenue is expected to be recognized in the second half of the year, coinciding with the periods in which we expect to achieve positive EBITDA. Our investment and expanded revenue opportunities give us confidence in our ability to execute and continue building a stronger, more profitable company. Doug, I'll turn it back to you for additional comments.