Duos Technologies Group Reports Fourth Quarter and Full Year 2022 Results

Jacksonville, Florida, UNITED STATES

Record Year Performance Driven by 82% Revenue Increase to $15.01 Million

Reaffirmed 2023 Revenue Outlook of Between $20.0 Million and $21.0 Million, Representing an Increase of 33% to 40% Over 2022

Subscription Business Expansion Remains On Track, Initial Site Installations Scheduled for Later This Year

JACKSONVILLE, Fla., March 30, 2023 (GLOBE NEWSWIRE) -- Duos Technologies Group, Inc. (“Duos” or the “Company”) (Nasdaq: DUOT), a provider of machine vision and artificial intelligence that analyzes fast moving vehicles, reported financial results for the fourth quarter (“Q4 2022”) and full year ended December 31, 2022.


Fourth Quarter 2022 and Recent Operational Highlights

  • Performed over seven million comprehensive railcar scans in 2022 across 11 portals, of which more than 573,000 were unique railcars. This metric encompasses all railcars scanned at locations across the U.S., Canada, and Mexico, representing approximately 35% of the total freight car population in North America.
  • Released 13 new AI detection models for use within the Company’s Railcar Inspection Portal (“rip®” or “RIP®”) solution since the end of the third quarter. The Company currently has 35 models deployed and operational for freight and transit customers with plans to reach up to 50 different models by the end of 2023.
  • Achieved a 100% renewal rate on recurring revenue contracts throughout 2022 with $2 million cash inflow from those contracts received during the first quarter of 2023. Underlying recurring revenues for support and artificial intelligence grew 32% in 2022.
  • Entered 2023 with estimated total backlog of more than $10.7 million of which the Company expects to recognize $8.4 million during 2023.
  • Secured contract modifications worth an additional $1.1 million in upgrades to a new system for an existing customer in the passenger transportation sector. The add-ons are part of a long-term installation of the Company’s high-end RIP, which is designed to capture images at up to 125 miles per hour.
  • Appointed industry veteran Thomas Hughes to the newly created role of Vice President of Sales, where he is responsible for supporting the Company's commercial and go-to-market strategies for its new subscription offerings.
  • Continued to invest in and expand intellectual property by submitting additional AI and engineering patent applications.

Fourth Quarter 2022 Financial Results
It should be noted that the following Financial Results represent the consolidation of the Company with its subsidiaries Duos Technologies, Inc. and truevue360™.

Total revenue for Q4 2022 increased 71% to $5.93 million compared to $3.72 million in the fourth quarter of 2021 (“Q4 2021”). Total revenue for Q4 2022 represents an aggregate of approximately $4.92 million of technology systems revenue and approximately $1.07 million in recurring services and consulting revenue. The increase in revenues was driven by new revenues being recorded after lengthy delays in receiving “notices to proceed” for anticipated new contracts earlier in the year that pushed delivery dates into the second half of 2022 and into 2023. The increase also resulted from the delivery of two RIP projects during 2022 in addition to the onset of a new high-speed RIP project, for which the Company will continue to recognize revenue well into 2023.

Cost of revenues for Q4 2022 increased 91% to $3.80 million compared to $1.98 million for Q4 2021. The increase in costs year-over-year stems from additional project work related to the delivery of two RIPs as previously noted. Additionally, the Company made significant progress on the manufacturing of a special-purpose, high-value RIP, which it anticipates completing during 2023.

Gross margin for Q4 2022 increased 24% to $2.14 million compared to $1.73 million for Q4 2021. The improvement in margin was a direct result of increased business activity the Company recognized in the latter half of 2022 that was related to the manufacturing and near completion of installation of two RIPs, a number of one-time service events, and significant progress made on a special-purpose, high-value RIP.

Operating expenses for Q4 2022 increased 57% to $3.10 million compared to $1.97 million for Q4 2021. There was an increase in sales and marketing related to increased investment in the overall capability of the commercial team. Research and development costs declined significantly during the quarter, which was the result of some of the technical resources from the IT and Engineering teams being temporarily consumed as part of the significant increase in project and service revenues and led to the Company performing additional project and one-time services work year-over-year. Additionally, general and administration costs increased primarily due to a focus on employee retention to support the growth in the Company’s operating plan.

Net operating loss for Q4 2022 totaled $960,000 compared to net operating loss of $240,000 for Q4 2021. The increase in net operating loss was driven by increases in costs of revenues as well as operating expenses.

Net loss for Q4 2022 totaled $952,000 compared to net loss of $200,000 for Q4 2021. The increase in net loss is primarily attributable to the flow through of increased cost of revenues and operating expenses.

Cash and cash equivalents at December 31, 2022 totaled $1.12 million compared to $894,000 at December 31, 2021. As of year end, the Company had an additional $3.42 million in receivables, bolstering its liquidity position to approximately $4.53 million. Duos also had an additional $1.43 million of inventory as of December 31, 2022, consisting primarily of long-lead items for two ongoing RIP installations.

In March 2023, the Company entered into a securities purchase agreement with certain existing investors resulting in the issuance of an aggregate of 4,000 shares of a newly-authorized Series E Convertible Preferred Stock. Duos received aggregate proceeds of $4.00 million through the transaction.

Full Year 2022 Financial Results
Total revenue increased 82% to $15.01 million compared to $8.26 million for 2021. Total revenue for 2022 represents an aggregate of approximately $11.19 million of technology systems revenue and approximately $3.82 million in recurring services and consulting revenue. The increase in revenues was driven by new revenues being recorded after delays in receiving “notices to proceed” for anticipated new contracts earlier in the year that pushed delivery dates into the second half of 2022 and into 2023. Additionally, the growth in services and consulting revenue stems from the Company’s success in deploying artificial intelligence as well as change orders to existing services agreements during the year.

Cost of revenues increased 65% to $10.26 million compared to $6.22 million for 2021. The cost of revenues on technology systems grew at a slower pace than revenues primarily because the Company neared completion of two of its RIPs and thus recognized additional profits on these projects as it satisfied its project-related obligations. Cost of revenues on services and consulting increased as a result of one-time services completed on existing RIP sites during which the Company incurred some additional material costs as well as project management and engineering team labor to complete the project.

Gross margin increased 133% to $4.75 million compared to $2.04 million for 2021. As previously discussed, the improvement in margin was a direct result of increased business activity the Company recognized in the latter half of 2022.

Operating expenses increased 22% to $11.61 million compared to $9.50 million for 2021. In 2022 the Company had additional expenses related to staff retention via non-cash charges of an employee stock option plan as well as a discretionary performance program, which was a new initiative for the entire organization designed to drive higher performance and attract and retain better quality resources in a tight labor market. As a result, employee retention in the fourth quarter was 100%.

Net operating loss totaled $6.87 million compared to net operating loss of $7.46 million for 2021. The Company continued to face inflationary and supply chain pressures throughout 2022 and has worked to balance these impacts through management of customer contracts and other cost control efforts. The decrease in loss from operations was the result of mostly improved revenues stemming from the deployment of new portals and receipt of materials and manufacturing related to a high value set of portals to be completed during 2023.

Net loss totaled $6.86 million compared to a net loss of $6.01 million for 2021. The increase in net loss is primarily attributable to the one-time effect of the PPP loan forgiveness gain in the first half of 2021. Despite the increased net loss year-over-year, the Company showed an improvement at the operating loss level.

Financial Outlook
At the end of 2022, the Company’s contracts in backlog represented approximately $10.7 million in revenue, of which approximately $8.4 million is expected to be recognized in calendar 2023. The balance of contract backlog is comprised of multi-year service and software agreements as well as project revenues spanning into fiscal 2024.

Based on these committed contracts and near-term pending orders that are already performing or scheduled to be executed throughout the course of 2023 as well as the planned expansion of the Company’s subscription business model and other contributing factors, Duos is reiterating its previously stated revenue expectations for the fiscal year ending December 31, 2023. The Company expects total revenue for 2023 to range between $20.0 million and $21.0 million, representing an increase of 33% to 40% compared to 2022.

Duos expects its improvement in operating results to be reflected over the course of the full year in 2023. As a result of typical business seasonality as well as timing and other factors, the Company expects revenues in the first quarter of 2023 to decline compared to the fourth quarter of 2022 before sequentially increasing throughout the remainder of the year.

Management Commentary
“The fourth quarter capped a strong finish to a record year for our Company,” said Duos Chief Executive Officer Chuck Ferry. “During the period we successfully deployed two additional RIPs for Class 1 customers, significantly increased the breadth of our AI applications to also include passenger rail use cases, and continued to grow our recurring revenue base through strong renewals and add-on work. Heading into 2023, our current backlog sits above our entire topline output in 2021, giving us clear visibility to continue executing against the outsized demand we’re seeing. We are also moving full speed ahead with our subscription offering, having identified the first sites for Duos-owned portals; initial installations will be primarily in the southern U.S., where we plan to begin building later this year.

“Due to several highly publicized train derailments, the last several weeks have also been a tumultuous period for the broader rail industry. In response, we have been working simultaneously with our current Class 1 partners and numerous other stakeholders to answer questions and support their respective action plans. Additionally, we have been equally engaged with the Federal Railroad Administration, labor union leadership, and several members of Congress to provide our input on pending legislative actions. Our company is fully prepared to scale up our technology deployments in support of these action plans and/or legislation.”

Conference Call
The Company’s management will host a conference call today, March 30, 2023, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results, followed by a question-and-answer period.

Date: Thursday, March 30, 2023
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
U.S. dial-in: 877-407-3088
International dial-in: 201-389-0927
Confirmation: 13737078

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 Gateway Investor Relations at 949-574-3860.

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 Duos Technologies Group, Inc.
Duos Technologies Group, Inc. (Nasdaq: DUOT), based in Jacksonville, Florida, through its wholly owned subsidiary, Duos Technologies, Inc., designs, develops, deploys and operates intelligent vision based technology solutions supporting rail, logistics, intermodal and government customers that streamline operations, improve safety and reduce costs. The Company provides cutting edge solutions that automate the mechanical and security inspection of fast-moving trains, trucks and automobiles through a broad range of proprietary hardware, software, information technology and artificial intelligence. For more information, visit www.duostech.com   

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 Reports 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 U.S. Securities and Exchange Commission (the "SEC"), which are available at the SEC's website, http://www.sec.gov. The Company believes its plans, intentions and expectations reflected in or suggested by these forward-looking statements are based on reasonable assumptions. No assurance, however, can be given that the Company will achieve or realize these plans, intentions or expectations. Indeed, it is likely that some of the Company's assumptions may prove to be incorrect. The Company's actual results and financial position may vary from those projected or implied in the forward-looking statements and the variances may be material. Each forward-looking statement speaks only as of the date of the particular statement. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any forward-looking statement is based, except as required by law. All subsequent written and oral forward-looking statements concerning the Company or other matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.


  For the Years Ended  
  December 31,  
 2022  2021 
Technology systems$           11,190,292  $              5,871,666 
Services and consulting3,822,074  2,388,251 
Total Revenues15,012,366  8,259,917 
Technology systems8,376,649  4,728,197 
Services and consulting1,887,614  1,492,176 
Total Cost of Revenues10,264,263  6,220,373 
GROSS MARGIN4,748,103  2,039,544 
Sales and marketing1,337,186  1,233,851 
Research and development1,651,064  2,515,630 
General and Administration8,625,002  5,747,014 
Total Operating Expenses11,613,251  9,496,495 
LOSS FROM OPERATIONS(6,865,148) (7,456,951)
Interest expense(9,191)  (20,268)
Other income, net9,557  1,468,319 
Total Other Income (Expenses)366  1,448,050 
NET LOSS$            (6,864,783)  $            (6,008,901)
Basic and Diluted Net Loss Per Share$                      (1.11)  $                      (1.63)
Weighted Average Shares-Basic and Diluted6,175,193  3,694,293 


  December 31,    December 31,  
  2022    2021  
Cash$                        1,121,092  $                           893,720 
Accounts receivable, net3,418,263  1,738,543 
Contract assets425,722  3,449 
Inventory1,428,360  298,338 
Prepaid expenses and other current assets441,320  354,613 
Total Current Assets6,834,757  3,288,663 
Property and equipment, net629,490  603,253 
Operating lease right of use asset4,689,931  4,925,765 
Security deposit600,000  600,000 
Patents and trademarks, net69,733  66,482 
Software development costs, net265,208  - 
Total Other Assets334,941  66,482 
TOTAL ASSETS$                     13,089,119  $                        9,484,163 
Accounts payable$                        2,290,390  $                        1,044,500 
Notes payable - financing agreements22,851  52,503 
Accrued expenses453,023  618,093 
Equipment financing payable-current portion74,575  80,335 
Operating lease obligations-current portion696,869  315,302 
Contract liabilities957,997  1,829,311 
Total Current Liabilities4,495,705  3,940,044 
Equipment financing payable, less current portion-  22,851 
Operating lease obligations, less current portion4,542,943  4,739,783 
Total Liabilities9,038,648  8,702,678 
Commitments and Contingencies (Note 4)     
Preferred stock:  $0.001 par value, 10,000,000 authorized, 9,476,000 shares available to be designated     
Series A redeemable convertible preferred stock, $10 stated value per share,     
500,000 shares designated; 0 issued and outstanding at December 31, 2022 and December 31, 2021    
convertible into common stock at $6.30 per share-  - 
Series B convertible preferred stock, $0.001 par value per share,     
15,000 shares designated; 0 and 851 issued and outstanding at December 31, 2022     
and December 31, 2021, convertible into common stock at $7 per share-  1 
Series C convertible preferred stock, $0.001 par value per share,     
5,000 shares designated; 0 issued and outstanding at December 31, 2022 and 2,500 issued     
and outstanding at December 31, 2021, convertible into common stock at $5.50 per share-  2 
Series D convertible preferred stock, $0.001 par value per share,1  - 
4,000 shares designated; 999 issued and outstanding at December 31, 2022 and 0 issued     
and outstanding at December 31, 2021, convertible into common stock at $3 per share     
Common stock:  $0.001 par value; 500,000,000 shares authorized,     
7,058,198 and 4,111,047 shares issued, 7,056,874 and 4,109,7237,156  4,111 
shares outstanding at September 30, 2022 and December 31, 2021, respectively     
Additional paid-in-capital56,562,600  46,431,874 
Total stock & paid-in-capital56,569,757  46,435,988 
Accumulated deficit(52,361,834) (45,497,051)
Sub-total4,207,923  938,937 
Less:  Treasury stock (1,324 shares of common stock     
at September 30, 2022 and December 31, 2021)(157,452)  (157,452)
Total Stockholders' Equity4,050,471  781,485 
Total Liabilities and Stockholders' Equity$                     13,089,119  $                        9,484,163 



 For the Years Ended
 December 31,
 2022  2021 
Cash from operating activities:     
Net loss$                   (6,864,783) $  (6,008,901)
Adjustments to reconcile net loss to net cash used in operating activities:     
Bad debt expense (recovery)-  76,046 
Depreciation and amortization350,192  275,346 
Loss on disposal of assets-  14,454 
Stock based compensation819,191  262,411 
Stock issued for services157,500  144,167 
PPP loan forgiveness including accrued interest-  (1,421,577)
Capital of operating lease right of use asset235,834  250,482 
Changes in assets and liabilities:     
Accounts receivable(1,679,720)  (611,023)
Contract assets(422,273)  99,009 
Inventory(1,130,022)  (185,915)
Security deposit-  (600,000)
Prepaid expenses and other current assets266,539  423,905 
Accounts payable1,245,890  445,184 
Accounts payable-related party-  (7,700)
Payroll taxes payable-  (3,146)
Accrued expenses(165,069)  (408,692)
Operating lease obligation184,728  (127,816)
Contract liabilities(871,314)  804,388 
Net cash used in operating activities(7,873,307)  (6,579,378)
Cash flows from investing activities:     
Purchase of patents/trademarks(18,190)  (7,435)
Purchase of software development(281,783)  - 
Purchase of fixed assets(344,915)  (545,505)
Net cash used in investing activities(644,888)  (552,940)
Cash flows from financing activities:     
Repayments of insurance and equipment financing(331,173)  (353,444)
Repayment of finance lease(80,335)  (89,618)
Proceeds from common stock issued8,801,003  - 
Issuance cost(942,926)  - 
Proceeds from preferred stock issued1,299,000  4,500,000 
Net cash provided by financing activities8,745,569  4,056,938 
Net increase (decrease) in cash227,373  (3,075,380)
Cash, beginning of period893,720  3,969,100 
Cash, end of period$                    1,121,093  $       893,720 
Supplemental Disclosure of Cash Flow Information:     
Interest paid$                            9,292  $         30,817 
Taxes paid$                            1,264  $- 
Supplemental Non-Cash Investing and Financing Activities:     
Notes issued for financing of insurance premiums$                        353,244  $       363,005 

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