Good afternoon. Welcome to Duos Technologies' Third Quarter 2024 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry, and CFO, Adrian Goldfarb. Following their remarks, we will open the call for 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 Duo's CEO, Chuck Ferry. Thank you. You may begin.

Welcome, everyone, and thank you for joining us. Yesterday, we issued our earnings press release and our 10-Q for the third quarter. This morning, we released news concerning the signing of an agreement for our newly formed Duos Energy Corporation. And just prior to this call, we have filed an 8-K covering this matter. This recent material event and the expected material impact on our financial performance in the coming years are a milestone achievement for Duos. Copies are available on the Investor Relations section of our website. I encourage all listeners to view the press releases, 10-Q and 8-K filings with the SEC to better understand some of the details we'll be discussing during today's call. We have previously discussed our strategy to diversify our business and accelerate the timeline of profitability. Today, I am pleased to discuss several recent developments that will enable the company to achieve this objective in 2025. As you know, we incorporated Duos Energy some weeks ago, given the increasing demand for power, driven by the data center industry. As a reminder, many members of the Duos management team and I have experienced -- have significant experience in the power sector. With this, I am pleased to announce that we have signed a two-year asset management agreement worth an estimated $42 million over the next two years to manage 850 megawatts of power generation assets. You may have already seen the press release, and we'll talk more about this opportunity after the financial presentation. We have expanded our investment into our Duos Edge AI subsidiary with the addition of three new Edge Data Centers for a total of six now ready for immediate deployment. Operationally, the first Edge Data Center is being installed in support of our Texas Region 16 School District customer located in Amarillo, Texas. We have already identified the locations and customers for the remaining five Edge Data Centers that are scheduled for deployment through Q4 and into Q1 of next year. The commercial demand for these Edge Data Centers, which provide colocation services to underserved areas is considerable. We are making steady progress with our Railcar Inspection Portal business to include ongoing installation projects with Amtrak and the planning for a new Railcar Inspection Portal installation at a large chemical manufacturer. As I've reported earlier, we now have an important agreement and partnership in place with one of our long-term Class I railroad customers, currently the largest user of our Wayside technology. The new agreement allows us to add subscribers to seven of our 13 portals, along with an eight portal owned by a different customer. We'll discuss each line of business in more detail after the financial review. So, at this time, I will turn it over to Adrian to cover our financial results.

Thanks, Chuck. With today's announcement of the asset management agreement, my introductory remarks will focus on the expected impact of the recent expansions of the Duos business. From an historical perspective, the company has excelled in producing leading-edge technology, and we will continue to invest in research and development for technologies that can enhance the analysis of moving vehicles, including trains as well as trucks and buses and ultimately aviation assets. In the past four years, we have made investments in our delivery and operations capabilities to match the advanced nature of our technologies. We have built a team of professionals that have taken our core competencies and paved the way for the expansion of the markets we serve, ultimately leading to the growth in revenues and soon profitability to reward our loyal shareholders. Our three divisions, while seemingly serving disparate markets, are in fact quite closely related. For example, the Duos Edge AI business with its Edge Data Center concept serving rural communities is an outgrowth of the EDCs we supply with our Railcar Inspection Portals where they operate in remote and often challenging environments. And the EDC business often works in areas where power can be a challenge. Hence, all three business units are expected to provide complementary benefits and further enhance the business. Before I get to the results, I would like to note that although we will not provide formal guidance today, our expectation is to issue such guidance near the end of the year. I can say that Q4 will be a transition period as the various businesses prepare for material operations in 2025 and that while some variability can be expected, we believe that our quarterly financial results will become much more predictable going forward. And with that, let me discuss Q3 and the…

Thank you, Adrian. Let's talk first about our Duos Energy Asset Management Agreement. I have previously spoken about the power industry experience that the Duos team and I have from our time with APR Energy. From 2016 to 2020, about 15 members of my current Duos team and I installed and operated more than 1 gigawatts of power. With our entry into the data center space earlier this year, the management team and I quickly determined that power and the increasing demand for data center computing, both cloud and edge, are linked. About three months ago, we became aware that APR Energy's parent company Atlas Corporation, wanted to exit the power business. With this opportunity in mind, we formed a partnership with Fortress Investment Group, who will acquire the assets that will then be managed by Duos. I don't want to get too far into the details of the deal given that the transaction will close upon the completion of customary closing conditions and regulatory approval, which we should expect in the coming 30 to 60 days. I will say that I've thoroughly enjoyed working with the Fortress team and our collective financial and legal advisors, as well as the APR and Atlas team in putting the deal together. So, what does this mean for Duos? First, it entails managing all aspects of 850 megawatts of power, consisting of 30 gas mobile turbines, which includes 20 General Electric TM2500s and 10 Pratt & Whitney FT8 MOBILEPACs. These generators can run on either diesel fuel or natural gas, producing anywhere from 20 megawatts to 35 megawatts each depending on the model. We will also manage an extensive inventory of balance of plant, which is the connective tissue needed to build a power plant. This includes transformers, fuel and water forwarding and…

Great. Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question here is from Mike Latimore from Northland Capital Markets. Please go ahead.

Yeah. Great. Thanks. Yeah, congrats on all the recent developments here. It looks great. So, just starting with the energy business. I guess, Chuck, did you say that the assets that you will be deploying and managing are the same ones you used to work with at APR?

Yeah, that's exactly correct. Yeah. So, I was the CEO for APR Energy, also based here out of Jacksonville, by the way, between 2016 to 2020. And a lot of the folks that served with me at that company have joined me over the last few years here at Duos. Yeah, so these are the exact same assets. We're very, very familiar with them. And I think we'll be off to a fast start in terms of managing them.

Great. And then, on the $42 million, I guess that's revenue over two years. And just to be clear, is that guaranteed revenue? And also, does that build over time as you deploy these turbines, or is there some kind of sort of normalized quarterly run rate?

Yeah, I would probably characterize that as it's the estimated revenues that we have developed from our financial models in coordination with Fortress Investment Group. Again, those revenues aren't guaranteed. They're estimated based on the business plan that we've developed jointly with Fortress Investment Group.

Okay. So, it would build over time as you deploy these systems, basically?

Yeah. I think after the closing, it'll probably build up over the first part of 2025, and then it will probably level out a little bit as we go through. That being said, depending on the pace of deploying the assets, if it goes very, very fast, and it might, those revenues could potentially go higher. But again, what we've done is we've taken and built a conservative business plan and model that we work together with Fortress Investment Group jointly. And so, that's where those numbers are derived from.

Yeah. And it's a two-year deal, but I'm guessing that customers will need power beyond two years.

That's absolutely correct. Again, we have a very robust pipeline. We've been -- during the last 90 days or so, we've been very active commercially developing deals as part of putting this together. There are a lot of customers, particularly in the data center space that want power at least three years. Some of them are calling for five years. So, this is a new kind of thing for the data center space, this behind the meter concept, but obviously, all the analysts like yourself have seen a lot of discussion about it and understand that it's going to be in high demand for the next several years at the moment.

Great. And then just last one on the data center business. I think you said that there's $3.3 million of recurring revenue in '25 tied to the six you currently have, is that right?

Well, it starts with the six. So, what it really means is that we have a business plan similar to the energy business to deploy 15 Edge Data Centers that will be put in incrementally, starting now all the way through the end of 2025. So that $3.3 million really represents kind of an incremental build up to that 15 by the end of the year. And Adrian is going to keep me straight. Did I get that correct?

That's absolutely correct.

Okay. Thank you, sir.

Got it. That makes sense. Great. All right, awesome. Well, best of luck. Looks great.

All right. Thanks so much, Mike.

Our next question is from Ed Woo from Ascendiant Capital Markets. Please go ahead.

Yeah, congratulations on all the progress. My question is, as you guys move into the power business and the data center business, who are your competitors? And have you seen a big change in the landscape recently?

Yeah. Well, let's talk about the Edge Data Center business first. Look, there are certainly competitors out there. One potential competitor, but also potential partner for us is Ubiquiti Edge business. That's the business that Doug Recker sold his EdgePresence business to. But to be honest, right now, we've actually been working in partnership with Ubiquiti. At this point, right now, the demand for the Edge Data Centers is so high that there's enough work share for everybody. And we just really haven't seen any direct head-to-head competition as of yet. I think we should expect that we will see some, but at this moment, there's not too many folks out there doing this in a similar way that we're doing it where we're basically owning, installing and operating those Edge Data Centers at this moment. On the power side, that's a much more competitive space. Typically, we think of competitors in that space as the larger OEMs, such as like General Electric, Siemens, Caterpillar, Cummins and others. These obviously are the manufacturers of the generation equipment itself. And then, there's smaller companies that also kind of participate in the temporary power or power rental business. I won't go into those detail right now, but we're very, very familiar with all of them. The challenge for everybody in that space right now is the availability of equipment. So, if you want to put a behind the meter solution in to -- let's say, to a new data center project, you're probably going to get into a waiting line that's going to be at least 24 months long, potentially longer. If you're going to try to have a utility cover down on let's say 200 megawatts to 300 megawatts, some of the utilities have a similar challenge where they can't -- they're not going to be able to put in new equipment for 24 or 36 months and/or the transmission and distribution infrastructure to be able to deliver that power to the site itself. So, the challenge the data center space has at this moment is a shortage of equipment. We're fortunate right now we have an opportunity to take down 850 megawatts. That equipment is immediately available right now as we speak and we're talking to a lot of folks that are interested in putting their names on that equipment right now.

Great. Well, thank you for answering my questions for all the information. I wish you guys good luck. Thank you.

Okay. Appreciate it. Thank you.

Next question here is from [indiscernible]. Please go ahead.

Hello, can you hear me?

Yeah, Nikolai, it's good to meet you. I don't think we've spoken to you before. So, go ahead.

No. I actually -- first of all, let me start by saying, Chuck, you did an excellent presentation of the numbers and the guy before you also did an excellent presentation. I think you guys both did an excellent presentation. I like your company. I was interested in two things. First of all, the Amtrak situation, right, so are we hoping to expand this in a more, how shall we say, quicker way? There's already Amtrak contracts, right? There's contracts with the United States government, kind of quasi government. Are we hoping to expand that quickly?

Yeah, So, this -- the contract that we've had with Amtrak, for everybody that's on the line, basically, Amtrak has unfortunately had delays with this particular project, but they've had delays with a lot of their projects. The challenge for Amtrak as a government organization has been that they are very well funded right this moment, and they're undertaking a lot of projects. Many of them are in very close proximity in the Northeast Corridor. And that, unfortunately, has had kind of some impacts to our particular installation at Secaucus, New Jersey. That being said, we do expect...

Is it just a problem of, like -- okay, so let's say not the Northeast Corridor, let's say, well, there are other corridors, obviously. Do they not want to give you guys the Edge network reciprocity, I suppose, is the right word, like, to allow you to utilize your Edge network to -- it's not a big deal. I mean, but it's like -- it's kind of a big deal. I mean, why not? Why not all of Amtrak runs on Duos?

Yeah. I think what -- we kind of -- what's going on right now is, like I said, over the last year, because we see Amtrak trains in some of our other portals here in the United States. So, really Amtrak has been kind of using our tool at those three other portals for the last year. This is very, very new technology to the railroads, quite frankly. And Amtrak has been very successful in kind of their initial test run. And so, we are actually in discussions to build additional portals on the larger Amtrak network right now.

That's great. That's fantastic. Also, you guys are based in Florida.

Yeah. That's correct. We're here in Jacksonville, Florida, yes.

Excellent. Well, I was going to visit a part of Florida, but I don't know if it's near Jacksonville. So, those were all my questions. I think it's a great technology. I think you guys are building out a great network. You worked for a company that was the company and now is the company, and you're building out a technology, and I thought it was cool that you were building it out for Amtrak trains and certainly that you got the Northwest Corridor down. And I just -- I hope that you get all the other corridors down.

Well, I appreciate your questions, Nikolai.

Next question here is from Dan Weston from [West Capital] (ph) Management. Please go ahead.

Yeah, hi. Good afternoon, guys, and congrats again on your agreement with Fortress. Some of the questions have been answered. If I could follow-up, and I know you're limited in what you can say, but Chuck, you mentioned that on the estimated $42 million over two years, I guess, I just wanted to understand, is that dependent on how many megawatts are deployed, is how you'll get calculated your revenue stream?

Yeah, that's part of it. At a broad level, again, we put together this business plan, and so we do that, where we generate a set of operational assumptions, and then we match, obviously, financial assumptions to that to build out the model. So, the key activities that we'll conduct in that, one, we'll provide some, I'll call it, back-office services, but more importantly, we'll provide the supervision of maintenance of the assets and preparation of those assets for the deployment. We'll supervise the installations and manage the installations of those assets on certain projects. And then, once the power is installed, we'll actually supervise and manage the operations and maintenance of those assets when they're actually producing power. So, depending on when some of those key activities happen, in particular the installations, that can kind of cause the needle to kind of go up or down in that. And we know that based on our experience from running the assets before with APR.

Okay. Fair. I think I get the gist of it. I'll wait till the deal closes and we can get more detail. You mentioned that you have a pipeline that's building in that business already. I think you said you have 35 potential opportunities. Is there a way that you can translate that into potential megawatts for those potential 35 opportunities?

Yeah, I mean, if we were to address -- well, first off, we would be sold out. If we were able to, let's just say, pull down, let's just say five on the high side, maybe 10 of those opportunities, we would be sold out. So, I think the way we want to think about this is, look, we're starting off with this first tranche of 850 megawatts, but I think Duos with Fortress Investment Group will look for other opportunities to expand that business, expand the amount of those assets in the overall value of the deal.

Okay. Yeah, that's exactly where I was going. It seemed like you don't have enough megawatts, if you were going to calculate. Is there anything that you can share with us relating to what kind of margins you expect to generate from this particular agreement?

I'd rather not talk about that right now. That's something that we've been kind of advised by counsel just to hold off until we get to the deal closing. And that'll be in the next 30 days, and we'll talk more about it in more detail about this whole thing here when we do that.

Okay. Great stuff. A couple more, if I may.

Sure.

On the data center business, I wrote down, I thought you said something to the effect you expect to have 15 EDCs fully deployed by year-end next year and that you thought, you and Doug were coming up with ways that you may be able to accelerate that. Could you expound on that a little bit and what you have planned to accelerate that potential program?

Yeah. So again, everybody, if you read a bit about our business and Doug Recker in particular, Doug has a long history and experience in the data center sector. Doug and I are in discussions with a couple of hyperscalers that are interested -- very, very interested in using the experience that Doug has and the capabilities that we have to maybe accelerate the deployment of those Edge Data Centers. So, it would be probably in some sort of a partnership with some of the big hyperscalers out there. Again, those are, I would say, in discussions and really not able to kind of talk to them publicly at least right now, not right now.

Okay. We'll follow up with you on that one. Also relating to one of the previous questions, the company that Doug sold EdgePresence to Ubiquiti, I previously thought them to be a potential competitor to you. Now, you mentioned that they could be a potential partner for you. Can you expand a little on that potential partnership and why somebody like Ubiquiti would need a partner like Duos Edge AI?

Yeah, we talked about the three. So, recently, we -- so, we acquired three additional Edge Data Centers that had already been manufactured, and that was actually a deal that we did with Ubiquiti. So Ubiquiti's Edge Data Center business had some additional undeployed Edge Data Centers. We got into a commercial discussion and so, we kind of cut a deal where we took those three Edge Data Centers, and we'll deploy them in return for some longer-term consideration on those Edge Data Centers with Ubiquiti. So, it was kind of a win-win in this situation. Again, we view them as a partner. At the same time, they could be a competitor. They're no different than in the power industry. You could potentially consider General Electric or Siemens or Pratt & Whitney as a partner. And then other days, depending on the opportunity, they're competing against you. So, it's not really a whole lot different.

Fair enough. I appreciate that. And then lastly, from my standpoint, could you give us any sense of what you're expecting, generally speaking, for subscription revenue generated from your Rail business in 2025?

Yeah, so my CFO is telling me probably about $2 million to $3 million is what we currently have forecast right now for that.

Just subscription.

Yeah, just for the railcar subscription business, about $2 million to $3 million.

Got it. Okay. I'll follow up with you in a little while. Thanks, and congrats again. Looks like a wonderful deal.

Okay. We appreciate it, and thanks for the questions.

This concludes the question-and-answer session. I'd like to turn the floor back to Mr. Ferry for any closing comments.

Okay. Well, again, we really appreciate everybody joining and again always appreciate the support from our Board of Directors and shareholders and everybody else that partners with us. So thank you again for joining us on today's call.

Before we conclude today's call, I'd 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. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties and 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 actual results to differ materially from those anticipated by future forward-looking statements. 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. Thank you for joining us today for Duo's Technologies second quarter 2024 -- I'm sorry, third quarter 2024 earnings conference call. You may disconnect your lines at this time. Thank you again and have a great day.