Duos Technologies Group Inc (DUOT) 2024 Q2 法說會逐字稿

Good afternoon. Welcome to Duos Technologies' second quarter 2024 earnings conference call. Joining us for today's call are Duos' CEO, Chuck Ferry; and CFO, Adrian Goldfarb.

午安.歡迎參加 Duos Technologies 2024 年第二季財報電話會議。參加今天電話會議的有 Duos 執行長 Chuck Ferry；和財務長阿德里安·戈德法布。

(Operator Instructions) Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call.

（操作員說明）然後，在我們結束今天的電話會議之前，我將就管理層在本次電話會議期間所做的前瞻性陳述提供必要的警告。

Now I would like to turn the call over to Duos' CEO, Chuck Ferry. Sir, please go ahead.

現在我想將電話轉給 Duos 的執行長 Chuck Ferry。先生，請繼續。

Welcome, everyone, and thank you for joining us. We've just released our press release as well as our 10-Q announcing our financial results for the second quarter of 2024 and other operational highlights. Copies of both are available in the Investor Relations' section of our website. I encourage all listeners to review that release and 10-Q filing with the SEC to better understand some of the details we'll be discussing during today's call.

歡迎大家，感謝您加入我們。我們剛剛發布了新聞稿以及 10-Q 報告，宣布了 2024 年第二季的財務業績和其他營運亮點。兩者的副本均可在我們網站的投資者關係部分找到。我鼓勵所有聽眾查看該新聞稿和向 SEC 提交的 10-Q 文件，以更好地了解我們將在今天的電話會議中討論的一些細節。

In the last few earnings calls, I have articulated our strategy to diversify our growing technology business into areas where we have expertise and synergies with the intent to more rapidly increase our value and return on investment to our shareholders. On our call today, I'm going to report on those diversification efforts and what they will mean for us going forward. We are making steady progress with our Railcar Inspection Portal business to include ongoing installation projects with Amtrak and the planning for a new RIP installation at a large chemical manufacturer.

在過去的幾次財報電話會議中，我闡述了我們的策略，將不斷增長的技術業務多元化到我們擁有專業知識和協同效應的領域，旨在更快地提高我們的價值和股東的投資回報。在今天的電話會議上，我將報告這些多元化努力以及它們對我們未來的意義。我們的軌道車檢查入口網站業務正在穩步取得進展，其中包括與 Amtrak 正在進行的安裝項目以及在大型化學品製造商規劃新的 RIP 安裝。

As I reported earlier, we now have an important agreement and partnership in place with one of our long-term class 1 railroad customers, currently the largest user of our wayside technology. The new agreement allows us to add subscribers to 7 of our 13 portals, along with an eighth portal owned by a different customer. We'll talk more about the subscription offering later in the call.

正如我之前所報道的，我們現在與我們的長期 1 級鐵路客戶之一達成了重要的協議和合作夥伴關係，該客戶目前是我們路邊技術的最大用戶。新協議允許我們向 13 個入口網站中的 7 個新增訂閱者，以及另一個客戶擁有的第八個入口網站。我們將在稍後的電話會議中詳細討論訂閱服務。

Our edge data center business called Duos Edge AI has made fast progress commercially given the high demand for edge computing infrastructure. Our plans to have four Edge Data Centers installed in various locations in Texas this year are on schedule, and we expect recurring revenue from those data centers to begin in Q4.

鑑於對邊緣運算基礎設施的高需求，我們的邊緣資料中心業務 Duos Edge AI 在商業上取得了快速進展。我們計劃今年在德克薩斯州的不同地點安裝四個邊緣資料中心，這些資料中心的經常性收入預計將在第四季度開始。

I just returned from a TD Cowen data center investor conference being held in Boulder, Colorado, and I can tell you that there is excitement in this industry about our business when I'm discussing it with potential customers, investors, and analysts. Our pipeline of new orders is growing and I expect to install at least 15 more Edge Data Centers in FY 2025.

我剛從科羅拉多州博爾德舉行的TD Cowen 資料中心投資者會議回來，我可以告訴您，當我與潛在客戶、投資者和分析師討論我們的業務時，整個行業都對我們的業務感到興奮。我們的新訂單不斷增加，我預計在 2025 財年將安裝至少 15 個邊緣資料中心。

I have previously spoken about the power industry experience that the Duos team and I have from our time at APR Energy. With our entry into the data center space, we are now getting requests to participate and, in some cases, lead opportunities to install power in support of data centers here in the United States. Based on this rapidly growing demand, we have incorporated Duos Energy Corporation as a third subsidiary to Duos Technologies Group and already have a small pipeline of projects that could further accelerate our growth -- our goal for more recurring revenue and profitability. We'll discuss each line of business in more detail after the financial review, so at this time, I'll turn it over to Adrian to cover our financial results.

我之前曾談過我和 Duos 團隊在 APR Energy 工作期間所獲得的電力產業經驗。隨著我們進入資料中心領域，我們現在收到了參與的請求，在某些情況下，我們還獲得了安裝電力以支援美國資料中心的機會。基於這種快速增長的需求，我們將Duos Energy Corporation 合併為Duos Technologies Group 的第三家子公司，並且已經擁有一系列小型項目，可以進一步加速我們的成長——我們的目標是獲得更多的經常性收入和獲利能力。我們將在財務審查之後更詳細地討論每條業務線，所以此時，我將把它交給 Adrian 來報道我們的財務表現。

Thanks, Chuck.

謝謝，查克。

Following on from Chuck's introductory remarks, I would like to give a brief commentary on the recent operational highlights and my expectations as to how and when these will translate into revenue growth and most importantly, profitability. As Chuck mentioned, the company is in the process of expanding into three distinct lines of business: complex visualization with AI, as manifested in our legacy Duos Tech business; the recently announced business of providing Edge Data Centers and related operational services; and the brand-new subsidiary, which will focus on power provision for data centers, both Edge and traditional.

繼查克的介紹性發言之後，我想對最近的營運亮點進行簡要評論，以及我對這些將如何以及何時轉化為收入增長以及最重要的是盈利能力的期望。正如 Chuck 所提到的，該公司正在擴展到三個不同的業務領域：人工智慧的複雜視覺化，如我們傳統的 Duos Tech 業務所體現的那樣；最近宣布的提供邊緣資料中心及相關營運服務的業務；以及全新的子公司，該子公司將專注於為邊緣和傳統資料中心提供電力。

While these three divisions may on the face of it look as if they are not related, in fact, Duos and its management team, and staff, have extensive experience in all three domains. Chuck will address the three-year strategic plan for the company in his commentary following my discussion of the financials. But from my perspective, the transition plan is expected to be complete by the end of 2024 with an expected markedly improved financial position and guidance at the conclusion of the transition period.

雖然這三個部門表面上看起來似乎沒有關聯，但事實上，Duos 及其管理團隊和員工在這三個領域都擁有豐富的經驗。在我討論財務狀況後，查克將在評論中討論公司的三年策略計畫。但在我看來，過渡計畫預計將於 2024 年底完成，預計過渡期結束時財務狀況和指導將顯著改善。

During the last call, I stated that I believe that we are on the threshold of steadily improving results, and I believe we are seeing the first signs of this in our most recent quarterly results. As such, we will detail out our plans for the remainder of 2024, and indications are that a $70 million-plus investment in building a talented organization, intellectual property with highly defendable patents, and now access to new markets with key assets that the company owns or plans to own will provide a solid foundation for the expected increase in recurring revenues. With that in mind, let us now look at the results for the second quarter and first half of 2024.

在上次電話會議中，我表示，我相信我們正處於穩步改善業績的門檻上，我相信我們在最近的季度業績中看到了這一點的第一個跡象。因此，我們將詳細制定 2024 年剩餘時間的計劃，有跡象表明，將投資 7,000 萬美元以上來建立人才組織、擁有高度可防禦專利的智慧財產權，以及現在利用公司的關鍵資產進入新市場。計劃擁有將為經常性收入的預期增長提供堅實的基礎。考慮到這一點，現在讓我們來看看 2024 年第二季和上半年的業績。

During the second quarter, total revenue for the quarter decreased 15% to $1.51 million, compared to $1.77 million in the second quarter of 2023. Total revenue for Q2 2024 represents an aggregate of approximately $265,000 of technology systems revenue, but more than $1.25 million in recurring services and consulting revenue, representing a 38% increase in this important metric.

第二季總營收下降 15%，至 151 萬美元，而 2023 年第二季為 177 萬美元。2024 年第二季的總收入總計約為 26.5 萬美元的技術系統收入，但經常性服務和諮詢收入超過 125 萬美元，這一重要指標增加了 38%。

For the six months ended 2024, total revenue decreased 42% to $2.58 million from $4.41 million in the same period last year. Total revenue for the six months of 2024 represents an aggregate of approximately $0.5 million of technology systems revenue and approximately $2.05 million in recurring services and consulting revenue, which is also an increase in recurring revenues of 19%.

截至 2024 年的六個月，總營收下降 42%，從去年同期的 441 萬美元降至 258 萬美元。2024 年 6 個月的總收入包括總計約 50 萬美元的技術系統收入和約 205 萬美元的經常性服務和諮詢收入，這也意味著經常性收入增加了 19%。

Growth of the services portion of revenues was driven by the successful completion and implementation of artificial intelligence detections, which represents services and support for those detections as well as increases in service contract revenue due to higher service contract prices. For both periods, the small revenues in the technology systems area reflects the ongoing delays in revenue recognition for the Amtrak installation, who, as discussed previously, postponed delivery last year into Q4 of this year.

收入中服務部分的成長是由人工智慧檢測的成功完成和實施推動的，這代表了對這些檢測的服務和支持，以及由於服務合約價格上漲而導致的服務合約收入的增加。在這兩個時期，技術系統領域的小額收入反映出美國鐵路公司（Amtrak）裝置的收入確認持續延遲，如前所述，該系統將去年的交付推遲到今年第四季。

I'm pleased to report that although revenue was expected to be booked in Q4, the company has accelerated delivery of part of the system and we expect to report an increase in these revenues in Q3. I should caution, however, that due to the complex nature of this project at the site, further delays may be encountered such that the project might not be complete until mid-2025.

我很高興地報告，儘管預計收入將在第四季度入帳，但該公司已加快部分系統的交付，我們預計將在第三季報告這些收入的成長。不過，我應該提醒大家，由於該專案現場的複雜性，可能會遇到進一步的延誤，導致該專案可能要到 2025 年中期才能完成。

Cost of revenues for the second quarter increased 13% to $1.73 million compared to $1.53 million for Q2 2023. And for the six months ended 2024, cost of revenue decreased 26% to $2.7 million from $3.64 million in the second period last year. Both periods reflect certain cost increases related to project delivery where we expect to record higher revenues in Q3 and to the effect of the new class 1 subscription business startup costs.

第二季的營收成本成長 13%，達到 173 萬美元，而 2023 年第二季的營收成本為 153 萬美元。截至 2024 年的六個月，收入成本從去年第二期的 364 萬美元下降 26% 至 270 萬美元。這兩個時期都反映了與專案交付相關的某些成本增加，我們預計第三季的收入將增加，並且受到新的 1 類訂閱業務啟動成本的影響。

Gross margin for Q2 2024 decreased 189% to negative $215,000, compared to $241,000 for the Q2 2023. And for the six months ended 2024, gross margin decreased 115% to negative $120,000 from $779,000 in the same period last year.

2024 年第二季的毛利率下降 189%，至負 215,000 美元，而 2023 年第二季的毛利率為 241,000 美元。截至 2024 年的六個月，毛利率下降 115%，從去年同期的 779,000 美元降至負 120,000 美元。

Per my previous comment, when comparing the results between the two periods, the stage of completion for production and installation should be factored into these comparisons and taken into account when analyzing the two periods. Specifically, the decrease in gross margin was driven by the timing of business activity in Q2 2024 related to the manufacturing of two high-speed transit-focused RIPs for Amtrak.

根據我先前的評論，在比較兩個時期之間的結果時，生產和安裝的完成階段應考慮到這些比較中，並在分析兩個時期時考慮在內。具體而言，毛利率下降是由於 2024 年第二季與 Amtrak 製造兩個以高速交通為重點的 RIP 相關的業務活動時間造成的。

As previously mentioned, the temporary decline in technology revenues was not completely offset by related ongoing costs to support that revenue segment. Operating expenses for Q2 2024 decreased by 11% to $3 million compared to $3.39 million for Q2 2023. And for the six months ended 2024, operating expenses decreased 4% to $5.86 million from $6.07 million in the same period last year.

如前所述，技術收入的暫時下降並沒有完全被支持該收入部門的相關持續成本所抵消。2024 年第二季的營運費用下降 11%，至 300 萬美元，而 2023 年第二季的營運費用為 339 萬美元。截至 2024 年的六個月，營運費用從去年同期的 607 萬美元下降 4% 至 586 萬美元。

The company implemented a number of expense reduction measures in late 2023, and the results of these measures are now being seen in the overall financial results. The decreases being recorded are related to targeted costs in some development and, more specifically, administrative costs, that are offset with continued investment in sales resources as the company continues to build the commercial resources necessary to address the expansion into new markets.

該公司在2023年底實施了多項費用削減措施，這些措施的效果現已反映在整體財務表現上。所記錄的下降與某些開發的目標成本有關，更具體地說，是與管理成本有關，隨著公司繼續建立解決新市場擴張所需的商業資源，這些成本可以透過對銷售資源的持續投資來抵消。

The expense cuts have been precise to reduce investments in certain areas where certain activities are now complete, but we continue to invest in the technology that has delivered the wide-ranging patent for the RIP and associated AI. We continue to anticipate that operating expenses will remain stable throughout the remainder of 2024, but we have taken additional actions in Q3 to further improve efficiency and align our staffing to address both the new and existing business areas so as not to impact the expected growth in revenue.

費用削減是為了減少對某些活動現已完成的某些領域的投資，但我們繼續投資於為 RIP 和相關人工智慧提供廣泛專利的技術。我們仍預期營運支出將在2024 年剩餘時間內保持穩定，但我們在第三季採取了額外行動，以進一步提高效率並調整我們的人員配置，以解決新的和現有的業務領域，以免影響預期的成長收入。

Net operating loss for Q2 2024 totaled $3.22 million compared to a net operating loss of $3.15 million for Q2 2023. And for the six months ended 2024, net operating loss totaled $5.98 million compared to a net operating loss of $5.30 million in the same period last year. Although operating losses were higher than the comparative quarter a year ago, the increase was proportionally less than the relative decrease in revenues and gross margin. The increase in loss from operations was primarily the result of lower revenues recorded in the first and second quarters as a consequence of the delays previously noted, offset by continued increases in services and consulting revenue.

2024 年第二季的淨營運虧損總計 322 萬美元，而 2023 年第二季的淨營運虧損為 315 萬美元。截至 2024 年的六個月，淨營運虧損總計 598 萬美元，而去年同期的淨營運虧損為 530 萬美元。儘管營業虧損高於去年同期，但增幅小於收入和毛利率的相對下降。營運虧損的增加主要是由於先前提到的延誤導致第一季和第二季收入下降，但被服務和諮詢收入的持續成長所抵消。

Net loss for the second quarter was $3.2 million or negative $0.43 a share, compared to net loss of $2.9 million or negative $0.42 a share for Q2 2023 with the 7% increase being lower proportionately than might have been expected with the decrease in overall revenue.

第二季淨虧損為 320 萬美元，即每股負 0.43 美元，而 2023 年第二季淨虧損為 290 萬美元，即每股負 0.42 美元，7% 的增幅低於總體收入下降的預期。

For the six months ended 2024, net loss totaled $5.96 million or negative $0.81 per share, compared to a net loss of $5.13 million or negative $0.72 per share in the same period last year. The increase in net loss was attributable to the decrease in revenues as previously noted above partially offset by the increase in services and consulting revenue and a decrease in operating expenses.

截至 2024 年的六個月，淨虧損總計 596 萬美元，即每股負 0.81 美元，而去年同期淨虧損為 513 萬美元，即每股負 0.72 美元。淨虧損的增加是由於上述收入的減少被服務和諮詢收入的增加以及營運費用的減少部分抵消。

With regard to the balance sheet. At June 30, 2024, cash and cash equivalents was approximately $0.5 million compared to $2.44 million at December 31, 2023. In addition, the company had over $1.27 million in receivables and contract assets for a total of approximately $1.77 million in cash and expected short-term liquidity. Duos also has more than $1 million in inventory as of June 30, 2024, consisting primarily of long-lead items for future RIP installation that are expected to be deployed this year and 2025. There has been a large increase in other assets, notably the recording of a $10.7 million intangible asset, which represents the estimated fair value for five years of data to support the recently signed long-term services and data sharing agreement executed with the previously mentioned class 1 customer for the provision of subscription services.

關於資產負債表。截至2024年6月30日，現金及現金等價物約為50萬美元，而2023年12月31日為244萬美元。此外，該公司還有超過127萬美元的應收帳款和合約資產，現金和預期短期流動資金總計約177萬美元。截至 2024 年 6 月 30 日，Duos 的庫存也超過 100 萬美元，主要包括用於未來 RIP 安裝的長週期項目，預計將在今年和 2025 年部署。其他資產也大幅增加，特別是記錄了 1,070 萬美元的無形資產，它代表了五年數據的估計公允價值，以支持最近與上述類別簽署的長期服務和數據共享協議1.為客戶提供訂閱服務。

Total current liabilities are $5.81 million versus $3.25 million as of December 31, 2023. $2.2 million of this increase is noncash and related to the data services agreement. Long-term contract liabilities have increased by $8.5 million, reflecting the noncurrent portion of this agreement. My overall comment on the balance sheet is that it remains stable in anticipation of the expected growth in the business in the second half of the year.

截至 2023 年 12 月 31 日，流動負債總額為 581 萬美元，而截至 2023 年 12 月 31 日為 325 萬美元。長期合約負債增加了 850 萬美元，反映了該協議的非流動部分。我對資產負債表的整體評價是，預計下半年業務將達到預期成長，資產負債表保持穩定。

Turning to backlog. At the end of the second quarter, the company's contracts and backlog and near-term renewals and extensions are now more than $19.6 million, of which approximately $6.9 million is expected to be recognized as revenue during the remainder of 2024. The balance of contract backlog comprises multiyear service and software agreements as well as project revenues. It should be noted that $10.7 million of the revenue backlog is for data access to support the new subscription business and is accounted for as a nonmonetary exchange that resulted from an amendment to a massive material and service purchase agreement with a class 1 railroad.

轉向積壓。截至第二季末，該公司的合約、積壓訂單以及近期續約和延期現已超過 1,960 萬美元，其中約 690 萬美元預計將在 2024 年剩餘時間內確認為收入。合約積壓餘額包括多年服務和軟體協議以及專案收入。應該指出的是，積壓收入中的1070 萬美元用於支持新訂閱業務的數據訪問，並被視為非貨幣交換，這是由於對與1 級鐵路的大規模材料和服務購買協議進行修訂而產生的。

Before turning the call back to Chuck, I would like to address the subject of guidance. As we have discussed previously, we have experienced some difficulty in giving accurate guidance within the time frame of a fiscal year due to the delays and uncertainties in our current market space. However, we believe the current analyst expectations for annual revenue this year represent a reasonable estimate at this time. Chuck will be addressing the transition into new markets, including our growing recurring revenue initiatives such as AI and subscriptions, for which we have already announced some success this year. As we transition another few months, my expectation is that we will be able to formally reintroduce guidance.

在把電話轉回給查克之前，我想談談指導的問題。正如我們之前所討論的，由於當前市場空間的延遲和不確定性，我們在一個財年的時間範圍內提供準確的指導時遇到了一些困難。然而，我們認為目前分析師對今年年收入的預期是合理的估計。Chuck 將負責向新市場的轉型，包括我們不斷增長的經常性收入計劃，例如人工智慧和訂閱，我們今年已經宣佈在這方面取得了一些成功。當我們再過渡幾個月時，我的期望是我們將能夠正式重新引入指導。

This concludes my financial commentary, and I will now pass the call back to Chuck.

我的財務評論到此結束，現在我將把電話轉回給查克。

Thank you, Adrian.

謝謝你，阿德里安。

I'll start first about our Railcar Inspection Portal business, and more specifically about the subscription offering. On May 17, 2024, Duos and our largest class 1 customer executed a five-year machine vision AI subscription partnership agreement. Much of the expansion on our balance sheet that Adrian discussed is a result of this agreement. This is the first machine vision and AI rail safety partnership agreement in North America. The agreement authorizes Duos to offer shippers and railcar owners transiting their class 1 network the opportunity to subscribe to wayside machine vision AI safety technology.

我將首先介紹我們的軌道車檢查門戶業務，更具體地說是訂閱服務。2024 年 5 月 17 日，Duos 與我們最大的 1 類客戶簽署了為期五年的機器視覺 AI 訂閱合作夥伴協議。阿德里安討論的資產負債表擴張大部分都是協議的結果。這是北美第一份機器視覺和人工智慧鐵路安全合作協議。該協議授權 Duos 為運輸其 1 類網路的托運人和軌道車車主提供訂閱路邊機器視覺 AI 安全技術的機會。

While Duos is the inventor of the Railcar Inspection Portal and holder of 10 active US patents for this innovative wayside defect detection solution, our class 1 customer is leading the rail industry in the deployment of machine vision AI wayside detection technology with seven portals in the United States and Canada. More importantly, our class 1 customer has fully integrated the portals into their mechanical inspection operations. Mechanical Carmen from the class 1s that I have talked to say that they are getting great results using the tool and have provided good feedback that we've used to improve the system over time.

雖然Duos 是軌道車檢查入口網站的發明者，並擁有該創新路邊缺陷檢測解決方案的10 項有效美國專利，但我們的1 類客戶在部署機器視覺AI 路邊檢測技術方面處於領先地位，在美國擁有七個門戶美國和加拿大。更重要的是，我們的 1 類客戶已將入口網站完全整合到他們的機械檢查操作中。我採訪過的 1 級機械卡門表示，他們使用該工具取得了很好的成果，並提供了良好的回饋，我們用這些回饋來隨著時間的推移改進系統。

Going forward, Duos and our class 1 customer will emphasize standardizing machine vision AI safety technology so the data can be easily exchanged through a subscription service with other class 1s, regional carriers, passenger railroads, and first responders. Our Railcar Inspection Portal technology can be integrated into railroad, public safety, and asset management data systems with the ability to identify FRA and critical safety appliance defects and communicate alerts to train crews, train dispatchers, railroad operation centers, and first responders in real time. Visual documentation of the train, railcar location within the train, car initial and number, placard and defects are all presented within 60 seconds of image capture.

展望未來，Duos 和我們的 1 類客戶將強調標準化機器視覺 AI 安全技術，以便可以透過訂閱服務與其他 1 類、區域航空公司、客運鐵路和急救人員輕鬆交換資料。我們的軌道車檢查入口網站技術可以整合到鐵路、公共安全和資產管理資料系統中，能夠識別 FRA 和關鍵安全設備缺陷，並向列車工作人員、列車調度員、鐵路營運中心和急救人員即時傳達警報。火車的視覺記錄、火車內的軌道車位置、車廂首字母和編號、標誌和缺陷均在影像擷取後 60 秒內呈現。

Currently, we have two subscribers that have been using the system effectively for many months now, Amtrak and another large railcar fleet operator. We are in discussions with another 20 potential subscribers, which includes car owners, shippers, short lines, passenger rail, and other class 1s. We'll continue our efforts to expand and prove out the subscription offering and keep you updated. Our edge data center business, led by data center industry veteran, Doug Recker, is completing contract discussions that have effectively sold out our first three Edge Data Centers destined for Texas.

目前，我們有兩個用戶，Amtrak 和另一家大型鐵路車隊營運商，已經有效使用該系統好幾個月了。我們正在與另外 20 個潛在訂戶進行討論，其中包括車主、托運人、短線、客運鐵路和其他 1 類訂戶。我們將繼續努力擴展和驗證訂閱服務，並及時向您通報最新情況。我們的邊緣資料中心業務由資料中心行業資深人士 Doug Recker 領導，正在完成合約談判，該合約談判實際上已售罄我們運往德克薩斯州的前三個邊緣資料中心。

A fourth edge data center is close to being sold out as well. Land leases are in the process of being secured and our in-house project management team has begun the site survey work, permit requests, and logistical planning to execute installations beginning this September with the expectation of revenue starting this October. These Edge Data Centers will allow for high-speed connectivity, low data latency, and high reliability that has not ordinarily been available in smaller and rural markets.

第四個邊緣資料中心也即將售罄。土地租賃正在進行中，我們的內部專案管理團隊已開始現場調查工作、許可證申請和後勤規劃，以從今年 9 月開始執行安裝，預計從今年 10 月開始收入。這些邊緣資料中心將實現高速連接、低資料延遲和高可靠性，而這些在較小的農村市場通常是不具備的。

Those who will greatly benefit are schools, hospitals, first responders along with large farms and oil and gas operators in that region. Local leaders we are planning with for the installations are very excited and removing all obstacles to gain access to better connectivity for their communities.

受益最大的是該地區的學校、醫院、急救人員以及大型農場以及石油和天然氣營運商。與我們一起規劃安裝的當地領導人非常興奮，他們消除了所有障礙，為他們的社區提供更好的連接。

Our pipeline of new orders is growing, and I expect to install at least 15 more Edge Data Centers in FY 2025 and accelerate that, if possible, to meet the demand. We have launched a new website specific to this business where you can learn more about how this all works at duosedge.ai.

我們的新訂單不斷增加，我預計在 2025 財年將安裝至少 15 個邊緣資料中心，並在可能的情況下加快安裝速度以滿足需求。我們推出了一個專門針對該業務的新網站，您可以在 duosedge.ai 上了解有關這一切如何運作的更多資訊。

Let's talk about our new power business and what is driving it. The demand for more computing with 5G and AI has created a data center boom, and that has also created a power shortage to meet that demand. Accelerating data center load growth is driving long lead times of three to seven years to procure sufficient utility power for new hyperscale data centers across the US according to analysts from TD Cowen.

讓我們來談談我們的新電力業務以及推動它的因素。5G 和人工智慧對更多運算的需求創造了資料中心的繁榮，同時也造成了滿足該需求的電力短缺。TD Cowen 的分析師表示，資料中心負載的加速成長導致需要三到七年的較長交付時間，才能為美國各地新建的超大規模資料中心獲取足夠的公用電力。

I have previously spoken about the power industry experience that the Duos team and I have from our time at APR Energy. From 2016 to 2020, about 15 members of my current Duos team and I installed more than 1 gigawatt of power. During one period of intense demand in the fall of 2017, our team installed two power plants in South Australia, two power plants in Puerto Rico following Hurricane Maria, and one more power plant in Mexico following an earthquake. All five plants were installed near simultaneous in less than 120 days. With our entry into the data center space, we are now receiving requests to participate and, in some cases, lead opportunities to install power in support of data centers here in the United States.

我之前曾談過我和 Duos 團隊在 APR Energy 工作期間所獲得的電力產業經驗。從 2016 年到 2020 年，我和我目前的 Duos 團隊中大約 15 名成員安裝了超過 1 吉瓦的電力。在 2017 年秋季的需求旺盛期間，我們的團隊在南澳大利亞安裝了兩座發電廠，在颶風瑪麗亞後在波多黎各安裝了兩座發電廠，在墨西哥地震後又安裝了一座發電廠。所有五座工廠在不到 120 天內幾乎同時安裝。隨著我們進入資料中心領域，我們現在收到了參與的請求，並在某些情況下，引導安裝電力以支援美國資料中心的機會。

Based on this growing demand, we have incorporated Duos Energy Corporation as a third subsidiary to our Duos Technologies family and already have a small pipeline of projects in support of data centers that could further accelerate our plan for more recurring revenue and profitability. With all the excitement around our new divisions, I want to reiterate our commitment to progressing our Railcar Inspection Portal subscription business. Our company has invested nearly $70 million over the past seven years to perfect this technology and patent. There is strong evidence from across the rail industry that this technology will eventually be deployed in high numbers, benefiting everyone.

基於這種不斷增長的需求，我們將Duos Energy Corporation 合併為Duos Technologies 系列的第三家子公司，並且已經擁有一小批支援資料中心的項目，這可以進一步加快我們獲得更多經常性收入和盈利能力的計劃。帶著對我們新部門的興奮之情，我想重申我們對發展軌道車檢查門戶訂閱業務的承諾。我們公司在過去七年裡投資了近7,000萬美元來完善這項技術和專利。整個鐵路行業的有力證據表明，這項技術最終將得到大量部署，使所有人受益。

However, to ensure we can deliver the value and return our shareholders and what they expect, I am strongly committed to diversifying our business into other synergistic areas where we have expertise and market conditions expect fast growth. Our team is exceptionally talented and very capable in advancing this strategy. In closing, I want to thank my Board of Directors and long-term shareholders for their advice, counsel, and support as we advance this strategy.

然而，為了確保我們能夠實現價值並回報股東以及他們的期望，我堅定地致力於將我們的業務多元化到我們擁有專業知識且市場條件期望快速增長的其他協同領域。我們的團隊才華洋溢，非常有能力推進這項策略。最後，我要感謝我的董事會和長期股東在我們推動這項策略的過程中提供的建議、建議和支持。

Thank you for listening, and we'll now open the call for your questions. Operator, would you please provide the appropriate instructions?

感謝您的收聽，我們現在將開始電話詢問您的問題。接線生，請您提供適當的指示嗎？

(Operator Instructions)

（操作員說明）

Michael Latimore, Northland Capital Markets.

麥可‧拉蒂摩爾 (Michael Latimore)，北國資本市場。

So I guess as you think about the second half of this year, I know you're not giving specific guidance, but maybe can you highlight the top two or three driver -- incremental revenue drivers second half versus first half?

因此，我想，當您考慮今年下半年時，我知道您沒有提供具體指導，但也許您可以強調一下前兩個或三個驅動因素——下半年與上半年相比的增量收入驅動因素？

Yeah, I'll start, and I'll let -- this is Chuck. I'll start and I'll let Adrian clean up behind me here.

是的，我會開始，我會讓──這是查克。我先開始，讓阿德里安在我身後清理這裡。

At a high level, key revenues that we're expecting to come in, first of all, will come in from Amtrak, which is an ongoing installation project. Adrian mentioned we've already accelerated some of that revenue, and that was because we've installed now the very large edge data center which is a part of that installation, and that occurred here about a month or so ago. We've got another large contract that we're expecting to close with a large chemical producer. And then we do expect to start seeing revenues coming in with our new Edge Data Centers that will be deployed out into the field.

從高水準來看，我們預計的主要收入首先將來自美鐵，這是一個正在進行的安裝項目。阿德里安提到我們已經加速了部分收入的成長，這是因為我們現在已經安裝了非常大的邊緣資料中心，這是該安裝的一部分，大約一個月前發生在這裡。我們還有另一份大型合同，預計將與一家大型化學品生產商簽訂。然後，我們確實希望開始看到我們將部署到現場的新邊緣資料中心帶來收入。

And Adrian, if you want to add to that, please?

Adrian，如果想補充一下，可以嗎？

No. That pretty much describes it, Mike. I think what you'll see is you'll see a marked improvement, obviously, over the past two quarters for Q3 related to the fact that we are now starting to push forward with the Amtrak installation. There are still some challenges around that, which I've mentioned and then just waiting to start the other RIP installation at the chemical manufacturer.

不。這幾乎描述了它，麥克。我認為您會看到，顯然，在過去兩個季度的第三季度中，您會看到明顯的改善，這與我們現在開始推進 Amtrak 安裝有關。仍然存在一些挑戰，我已經提到過，然後就等待在化學品製造商開始另一個 RIP 安裝。

Outside of that, we are currently in discussions with about 20 different potential clients on the subscription side, and with the Edge Data Centers, all of that will start probably -- will start to kick off probably in about Q4. I think what will happen is that we will in the next call, the Q3 call, we'll have a much better visibility on that. But I'm expecting much better results going forward.

除此之外，我們目前正在與大約 20 個不同的潛在客戶進行訂閱方面的討論，而對於邊緣資料中心，所有這些都可能會在第四季度左右開始。我認為將會發生的事情是，我們將在下一次電話會議（第三季電話會議）中對此有更好的了解。但我期待未來能有更好的結果。

Okay, great.

好的，太好了。

And then I think in the press release you talked about winning customers already for Edge Data Center and that amounts to, I think, $1 million of ARR starting in the fourth quarter. Does that assume full capacity of those three Edge Data Centers, that $1 million of ARR?

然後，我認為您在新聞稿中談到了已經為邊緣資料中心贏​​得客戶，我認為從第四季度開始，這相當於 100 萬美元的 ARR。這是否假設這三個邊緣資料中心的全部容量，即 100 萬美元的 ARR？

Yeah. So it does. So we expect those to be filled to capacity. Again, these Edge Data Centers are effectively small-scale co-location data centers, which is why they're pretty in high demand. And we expect them to have filled out. So the way that the operational cadence works, you get it installed, you bring the power and fiber up in the Edge Data Center. And in general, we expect about a 30-day period where customers start to come in, fill out that data center. So about 30 days after we commercially turn it on, it's effectively filled with those long-term and recurring customers inside those data centers.

是的。確實如此。因此，我們預計這些將被填滿。同樣，這些邊緣資料中心實際上是小型託管資料中心，這就是它們需求量很大的原因。我們希望他們已經填寫完畢。因此，按照操作節奏的工作方式，您可以安裝它，並在邊緣資料中心引入電源和光纖。一般來說，我們預計客戶會在大約 30 天的時間內開始進入並填寫該資料中心。因此，在我們將其投入商業運行大約 30 天后，這些資料中心內實際上就擠滿了長期和經常性的客戶。

No, perfect. And then, Chuck, did you say you had 15 people on staff that are experienced in the energy world?

不，完美。然後，Chuck，您是否說過您有 15 位在能源領域經驗豐富的員工？

Yeah, we do. So we have a staff of about 70 folks total. Of that, at least 15 are prior APR Energy employees. I'm very fortunate that employees that used to work for me will come back and work for me a second time, which is very helpful. In those 15, they go across all of the skill sets that you need to commercially develop, financially plan for, engineer, procure, install, and then operate and maintain power plants. In this case, again, it's a convergence of what we're doing inside the Edge Data Center space and the data center industry at large.

是的，我們願意。所以我們總共有大約 70 名員工。其中，至少 15 人是 APR Energy 的前員工。我很幸運，以前為我工作的員工會再次回來為我工作，這非常有幫助。在這 15 種技能中，它們涵蓋了商業開發、財務規劃、設計、採購、安裝以及營運和維護發電廠所需的所有技能。在這種情況下，這又是我們在邊緣資料中心領域和整個資料中心產業所做的事情的融合。

When some of the customers and some of the data center analysts found out that we have all this power experience, all of a sudden, a lot of these power opportunities against data centers have become -- have been presented to us. And so I think we're going to take advantage of the talent we have on staff and our know-how in that space and participate in that.

當一些客戶和一些資料中心分析師發現我們擁有所有這些電力經驗時，突然間，許多針對資料中心的電力機會已經呈現在我們面前。因此，我認為我們將利用我們在該領域的員工才能和專業知識並參與其中。

Richard Jackson, True North Financial.

理查德·傑克遜，True North Financial。

Yeah. Congratulations on moving most of the business to a subscription model. I always thought that was the place to be long term.

是的。恭喜您將大部分業務轉向訂閱模式。我一直認為這是一個可以長期發展的地方。

Can you give us a range of what gross margins and operating margins you're targeting for that subscription business? Is it vastly different between the power and the data and your railcar monitoring?

您能否告訴我們您對該訂閱業務的毛利率和營業利潤目標範圍是多少？電力、數據和軌道車監控之間有很大不同嗎？

Yeah. I'll let Adrian cover the subscription part and I can talk to the data center and the power plant.

是的。我會讓阿德里安負責訂閱部分，我可以與資料中心和發電廠交談。

Yeah. So from a subscription standpoint, the margins are very high. And that's because the marginal cost of putting in a subscription is not that much. So typically, you're looking for margin -- gross margins at minimum range of 70%. And then typically, we expect that to increase over time and get up into closer to the 90% range as is typical with that type of business. And that's been our aim with all of the businesses now that we're currently looking at.

是的。因此，從訂閱的角度來看，利潤率非常高。這是因為訂閱的邊際成本並不高。因此，通常情況下，您會尋找利潤率——毛利率至少在 70% 範圍內。通常情況下，我們預計這一比例會隨著時間的推移而增加，並接近 90% 的範圍，就像此類業務的典型情況一樣。這就是我們目前正在考慮的所有業務的目標。

So on the Edge Data Centers again, there's -- obviously, there's a cost, again, because we own and operate these Edge Data Centers, so obviously there's costs going in. But those costs are effectively capitalized over the life of a five-year recurring contracts. And so once that thing is up and operational, we expect gross margins to be at least in the 60% to 70% or higher area. On a power plant project, ones that are against these data centers right now, we would expect, again, there's going-in costs.

因此，在邊緣資料中心，顯然，再次存在成本，因為我們擁有並經營這些邊緣資料中心，所以顯然存在成本。但這些成本在五年定期合約的有效期限內有效資本化。因此，一旦該項目啟動並投入運營，我們預計毛利率將至少達到 60% 至 70% 或更高。在目前針對這些資料中心的發電廠專案中，我們預期會再次產生投入成本。

The good news in this sector is that the data center operators and developers have shown a high willingness to pay up milestone payments to offset the costs of going into a power project. Once you're in there, again, good recurring revenue, typically five years or more. And we would expect our gross margin to be probably in the 50- to 60-percentile range with that particular business. Again, we're pushing a lot of the costs from an overhead perspective above the line, and then try to really bifurcate that G&A cost below to show a true -- what we're truly running at.

該領域的好消息是，資料中心營運商和開發商表現出了支付里程碑付款的高度意願，以抵消電力專案的成本。一旦你進入那裡，再次獲得良好的經常性收入，通常是五年或更長時間。我們預計該特定業務的毛利率可能在 50% 到 60% 的範圍內。同樣，我們從管理費用的角度將大量成本推到了上限之上，然後嘗試將 G&A 成本真正分為以下幾類，以顯示真實的——我們真正的運行情況。

Yeah. One other comment on that, Richard, is that as compared to some subscription businesses, although the level -- the number of customers is typically on the lower end just because of the industries they're in, the churn rate is extremely low. All of the contracts we look at are typically minimum multiyear contracts and can go on for a long time. So that's one of the beauties, it's not only a high margin but it's also a low churn business.

是的。理查德對此的另一個評論是，與某些訂閱業務相比，儘管客戶數量通常由於其所在行業而處於較低水平，但客戶流失率極低。我們關注的所有合約通常都是最低限度的多年期合約，並且可以持續很長時間。這就是它的優點之一，它不僅利潤率高，而且流失率低。

So will you need capital? You got an idea of how much yet?

那你需要資金嗎？你知道多少錢了嗎？

Yeah. Right now, we're not sizing out any capital right now. The Edge Data Center business, like we said, we've effectively funded the first four. The intention is to get those first four up and prove out the economics of that. And then we'll see what that looks like from there. That business could readily be funded from asset-backed debt financing. I'm not saying it's how we'll do that, but it can be. So there are ways to do that without diluting current shareholders.

是的。目前，我們還沒有確定任何資本。正如我們所說，邊緣資料中心業務我們已經有效地資助了前四個業務。目的是讓前四個成功並證明其經濟性。然後我們會看到從那裡看起來是什麼樣子。該業務很容易透過資產支持債務融資獲得資金。我並不是說我們會這樣做，但確實可以這樣做。因此，有一些方法可以在不稀釋現有股東的情況下做到這一點。

On the power side, there's a lot of different options there with the, I'll call it, the data center nuclear arms race. There are data center developers and operators that are willing to fund a lot of that as part of a power deal. So we'll see what that looks like and keep everybody updated.

在電力方面，有很多不同的選擇，我稱之為資料中心核武軍備競賽。作為電力交易的一部分，一些資料中心開發商和營運商願意提供大量資金。因此，我們將看看情況如何，並及時向大家通報最新情況。

Ed Woo, Ascendiant Capital Markets.

Ed Woo，上升資本市場。

I just had a question about your pipeline. Has there been any change in the sales cycles as you try to get these new contracts? Is there different sales cycles with your railroad business and with the data center business?

我只是對你們的管道有疑問。當您嘗試獲得這些新合約時，銷售週期是否有任何變化？您的鐵路業務和資料中心業務的銷售週期是否不同？

Ed, that's a great question.

艾德，這是一個很好的問題。

And yes, there is a big difference in the sales cycle timeline between the rail and the Edge Data Center, and I'll talk to the power side of this in a moment. So again, the rail -- the cycle for closing rail CapEx deals is typically, as we've seen, taken sometimes 12 to 24 months. It can be a bit painstaking, but that really hasn't changed that much. On the subscription side, we're seeing -- it's probably taking about four to six, maybe even eight months to close a large subscriber -- subscription customer.

是的，鐵路和邊緣資料中心之間的銷售週期時間表存在很大差異，我稍後將討論這方面的電力方面。如我們所見，鐵路資本支出交易的週期通常需要 12 至 24 個月。這可能有點辛苦，但實際上並沒有太大改變。在訂閱方面，我們看到 - 可能需要大約四到六個月，甚至可能需要八個月才能關閉一個大型訂閱者 - 訂閱客戶。

Again, we're on the very front end of this. We've only been able to really truly offer a subscription of these portals for about the last 60 days. So we got a lot of interested customers. And so I think we'll have to come back to you in a couple of months to really give you an accurate metric for how long it's taking to close those customers.

再說一次，我們正處於這方面的最前端。大約在過去 60 天裡，我們才真正提供了這些入口網站的訂閱服務。所以我們得到了很多有興趣的客戶。因此，我認為我們必須在幾個月後回覆您，以便真正為您提供關閉這些客戶所需時間的準確指標。

On the Edge Data Center side, what we're seeing is that once we find a customer who, in our case, has actually been funded by federal and state infrastructure dollars and being granted that money, we get into a conversation with them, the closure rate with them is about 60 to 90 days, and sometimes it's even faster.

在邊緣資料中心方面，我們看到的是，一旦我們找到一個客戶，在我們的例子中，該客戶實際上是由聯邦和州基礎設施資金資助並獲得這筆資金的，我們就會與他們進行對話，他們的成交速度約為 60 至 90 天，有時甚至更快。

Now once we actually get interest from them and we start discussing the -- getting into contracts, now there's a pipeline of about, let's call it, about 90 days to actually manufacture the Edge Data Center. Month number four, you're actually installing the data center; by month number five, you're filling it up. So we're probably talking about, from interest to Edge Data Center in the ground, and producing recurring revenue, let's call it about six months for that.

現在，一旦我們真正引起了他們的興趣，並開始討論簽訂合同，現在就有一個大約（我們稱之為）大約 90 天的管道來實際製造邊緣數據中心。第四個月，您實際上正在安裝資料中心；到第五個月，你就填滿了。因此，我們可能正在談論，從對地面邊緣資料中心的興趣，到產生經常性收入，我們稱之為大約六個月。

On the power side, I don't have any specific data points right now for putting power up against data centers. But right now, it appears that -- both Adrian and I were out on a TD Cowen investor conference where the best and brightest of that industry were there to include data center builders and hyperscalers. There are data center locations that need power now. So now it's a matter of how fast we can bring it to them. Again, I think on our next call, we'll be able to tell you with a little bit more clarity about what the interest to closure cycle looks like on that.

在電力方面，我現在沒有任何具體的數據點來為資料中心提供電力。但現在看來，Adrian 和我都參加了 TD Cowen 投資者會議，該行業最優秀、最聰明的人都出席了會議，其中包括資料中心建立者和超大規模企業。現在有一些資料中心位置需要電力。所以現在的問題是我們能以多快的速度把它帶給他們。再說一次，我認為在我們的下一次電話會議中，我們將能夠更清楚地告訴您對關閉週期的興趣是什麼樣的。

Great. Well, thanks for giving me -- answering my questions, and I wish you guys good luck.

偉大的。好吧，感謝您回答我的問題，祝你們好運。

Thank you.

謝謝。

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Ferry for his closing.

至此，我們的問答環節就結束了。現在我想將電話轉回給費裡先生以結束演講。

Again, I'd like to thank the audience for joining us today. And as always, I want to double-thank all my Board members and most especially our shareholders and our -- especially, our long-term shareholders, for your support. I think our strategy is one that is going to be very lucrative for us going forward, like Adrian said. And we look forward to keeping you updated.

我要再次感謝觀眾今天加入我們。像往常一樣，我要再次感謝所有董事會成員，尤其是我們的股東以及我們的長期股東的支持。正如阿德里安所說，我認為我們的策略對我們的未來非常有利可圖。我們期待為您提供最新資訊。

I'll turn the call back over to our operator. Thank you.

我會將電話轉回給我們的接線生。謝謝。

Before we conclude today's call, I would like to provide Duos' 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 terminologies such as believes, expects, may, will, should, anticipates, plans, and their opposites or similar expressions are intended to identify forward-looking statements.

在我們結束今天的電話會議之前，我想提供 Duos 的安全港聲明，其中包括有關本次電話會議期間所做前瞻性陳述的重要警告。本次財報電話會議包含 1995 年《私人證券訴訟改革法案》意義內的前瞻性陳述。諸如相信、期望、可能、將、應該、預期、計劃等前瞻性術語及其反義詞或類似表達旨在識別前瞻性陳述。

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 statements and the projections upon which the statements are based and could cause Duos Technologies Group, Inc.'s actual results to differ materially from those anticipated by the forward-looking statements.

我們提醒您，這些陳述並不是對未來業績或事件的保證，並且受到許多不確定性、風險和其他影響，其中許多因素超出了我們的控制範圍，這可能會影響陳述和預測的準確性。性陳述是有依據的，可能導致Duos Technologies Group, Inc. 的實際結果與前瞻性陳述的預期有重大差異。

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.

這些風險和不確定性包括但不限於 Duos 表格 10-K 年度報告第 1A 項中所述的風險和不確定性（透過引用明確納入本文）以及 Duos 向 SEC 提交的文件中可能定期描述的其他因素。

Thank you for joining us today for Duos Technologies Group's second quarter 2024 earnings call. You may now disconnect.

感謝您今天參加 Duos Technologies Group 的 2024 年第二季財報電話會議。您現在可以斷開連線。