Company Achieves Sequential Quarterly Growth; Expanded Implementation Capacity and Fourth Quarter Visibility Both Support Updated Full-Year Guidance and Initial 2020 Growth Projections
JACKSONVILLE, FL / ACCESSWIRE / November 13, 2019 / Duos Technologies Group, Inc. ('Duos' or the 'Company') (OTCQX:DUOT), a provider of intelligent security analytical technology solutions, reported financial results for the third quarter and nine months ended September 30, 2019.
Third Quarter 2019 and Recent Operational Highlights
Awarded $1.8 million contract with a Class 1 freight railroad for the implementation of a turn-key Rail Inspection Portal (rip®), installation of which is expected to be completed prior to the end of 2019.
Awarded an expanded, five-year, $1.0 million, recurring revenue-based contract with another Class 1 freight railroad to provide an initial library of Artificial Intelligence ('AI') based algorithms, which will analyze images from the Company's rail inspection portal (rip®) for maintenance inspection of the customer's railcars.
Awarded $2.3 million contract with an additional Class 1 freight railroad for the turn-key delivery of the Company's latest version of its Rail Inspection Portal (rip®).
Received a purchase order from Chicago Metra to install an automated pantograph inspection system (apis®) spanning four tracks that will capture high-resolution digital video imagery of critical pantographs.
Company's new AI and deep learning-focused subsidiary TrueVue360™ has fully staffed and onboarded its development team and has met its goal of completing the development of a state-of-the-art AI platform. The Company has already recognized initial revenue from this business in the second half of 2019 and expects significant growth in 2020.
Expected strong fourth quarter revenue with full-year guidance of between $13.5 and $14M
Third Quarter 2019 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 decreased 57% to $2.20 million compared to $5.10 million in the same quarterly period last year due to several shifts in timing of projects dictated by customer construction delays. While these delays impacted the projects revenue portion for the quarter, they are not expected to have a material impact for the full year 2019.
Gross profit decreased 56% to $1.03 million (47% of total revenue) compared to $2.33 million (46% of total revenue) in the same quarterly period last year. The decrease in gross profit was mainly the result of the lower revenues previously described. The increase in gross profit as a percentage of revenue was driven by more efficient product delivery and enhanced operational capacity.
Operating expenses increased 27% to $2.15 million from $1.69 million in the same quarterly period last year. Selling and marketing expenses increased in line with the Company's investment in resources to support growth. The measurable increase in salaries, wages and contract labor during the period was the result of additional research and development staff related to TrueVue360, as well as implementation resources needed to service an anticipated larger order book. Other general and administrative costs were higher as the result of additional business and non-project related travel.
Net loss totaled $1.13 million, a decrease from net income of $633,000 in the same quarter a year-ago. The net loss was primarily attributable to a decrease in project revenues previously mentioned and an increase in staffing.
Nine Month 2019 Financial Results
Total revenue decreased 17% to $7.90 million compared to $9.49 million in the same period last year. The decrease in total revenue reflected delays in contract executions for two large new projects and the effects of such delays. Since the Company expects these contracts to be implemented in 2019, it began acquiring certain components ahead of the contracts in order to ensure no material impacts to expected revenues for the year. The company is currently executing these projects in the fourth quarter.
Gross profit decreased 18% to $3.33 million (42.2% of total revenue) compared to $4.06 million (42.8% of total revenue) in the same period last year. The decrease in gross profit was the result of lower revenues recorded during the period. Gross profit as a percentage of revenue remained stable for the period and broadly comparable with the same period in the prior year.
Operating expenses increased 33% to $6.36 million compared to $4.80 million in the same period last year. Selling and marketing expenses increased in-line with the Company's plans growth plan. The increase in salaries, wages and contract labor was higher during the period due to an increased number of employees and additional contract expenses, related to an overall expected increase in revenues. These increases are also a result of an increasing investment in the Company's TrueVue360 subsidiary. Research and development expenses, excluding personnel, decreased for the period. Other G&A costs were in-line with the additional staff expenses and the growth of the Company.
Net loss totaled $3.04 million, an increase from net loss of $745,000 in the same period a year-ago. The increase in net loss was primarily attributable to the significant investment in the Company's new subsidiary TrueVue360 and the decrease in project revenues previously mentioned.
For the fiscal year ending December 31, 2019, the Company now expects total revenue to be between $13.5 million and $14.0 million, which would represent an approximate 13% to 17% increase over the $12.0 million recorded in 2018. The Company's guidance is based on contracts in backlog and near-term pending orders that are already performing or scheduled to be executed during the fourth quarter of 2019. Management is also issuing preliminary revenue guidance for 2020 of $20.0 million.
'In the third quarter we made continued progress in our product development roadmap and generated sequentially improved financial results as well,' said Duos Chairman and CEO Gianni Arcaini. 'While we experienced some delays in contract awards and implementations due to customer scheduling, we generated a solid book of new business in the quarter, highlighted by two multi-million-dollar projects, as well as, our first deal for TrueVue360, our wholly owned subsidiary for developing artificial intelligence technology. With our comprehensive AI platform now completed, we will be able to expand our market reach well beyond the rail space and target several verticals that are heavily incorporating artificial intelligence applications into their operations. Effective January 2020, our plan includes expansion of our business development team dedicated to our AI program. Additionally, our rail-centric AI applications are rapidly growing and are generating increased interest from many of our current rail customers.
'At the same time, while continuing to focus on generating sales within our project-based core operations, we are working to build steadier revenue streams in adjacent areas, which should begin to translate into a meaningful financial contribution to the Company beginning in the new year. With the increased staffing and operating capacity we now have in place, Duos is fully capable, and ready, to convert our existing backlog and near-term contracts to recognize significant additional revenue this calendar year. Looking ahead, we are increasingly confident in our ability to meet our updated financial targets and initial projections for 2020.'
The Company's management will host a conference call today, Wednesday, August 14, 2019 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: Wednesday, November 13, 2019
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
U.S. dial-in: (888) 339-2688
International dial-in: (617) 847-3007
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 broadcasted 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. (OTCQX:DUOT), based in Jacksonville, Florida, through its wholly owned subsidiary, Duos Technologies, Inc., provides advanced, analytical technology solutions with a strong portfolio of intellectual property. The Company's core competencies include intelligent technologies that combine machine learning, artificial intelligence and advanced video analytics that are delivered through its proprietary integrated enterprise command and control centraco® platform. The Company provides its broad range of technology solutions with an emphasis on mission critical security, inspection and operations within the rail transportation, retail, petrochemical, government, and banking sectors. Duos Technologies also offers professional and consulting services for large data centers. For more information, visit www.duostech.com.
Forward Looking Statements
This press release contains 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as 'believes,' 'expects,' 'may,' 'will,' 'should,' 'anticipates,' 'plans,' or similar expressions or the negative of these terms and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Duos Technologies Group, Inc.'s actual results to differ materially from those anticipated by the 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.
Duos Technologies Group, Inc.
Matt Glover or Tom Colton
Gateway Investor Relations