DUOT

Good morning. Welcome to Duos Technologies Group's first quarter 2026 earnings conference call. Joining us for today's call are Duos' CEO, Doug Recker, and CFO, Leah Brown. Following the remarks, we'll open the call for your questions. Before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I'll turn the call over to Mr. Doug Recker. Sir, please proceed.

Welcome, everyone, and thank you for joining us today. Earlier today, we issued our earnings press release, and at the end of last week, we filed our 10-Q for Q1 2026. Copies are available in the investor relations section of our website. I encourage all listeners to view press releases and our 10-Q filing to better understand some of the details we'll be discussing during this morning's call. At a high level, our first quarter results reflect the continued execution of our strategic transformation towards a data center-focused platform with our Duos Edge AI Technology Solutions division emerging as our primary growth drivers. As expected, results from the quarter reflected our in-progress transition away from the legacy rail operation and the planned wind down of the New APR Energy Asset Management Agreement, which was the primary driver for the revenue in the period.

At the end of the same time, we remain on track to exceed our $50 million revenue target for this year, supported by our strategic partnership with Hydra Host and our growing pipeline of AI infrastructure deployments. Before I get into the exciting updates on our Duos Edge AI and Technology Solutions divisions, I'd like to first update you on our rail technology and Duos Energy subsidiaries. Since our last call, we've continued to make progress on the rail division divestiture. The company is currently going through a fairness opinion on the value of the rail division, and this process is expected to extend into the second quarter. As previously discussed, this was a thoughtful decision that will enable us to redeploy capital, reduce SG&A, and focus on higher growth opportunities. We will provide additional details as the progress moves forward. Turning to the Duos Energy Corporation, we saw a ramp down with reduced reliance on Duos services this quarter. As a reminder, in December 2024, Duos entered into an Asset Management Agreement with New APR Energy to help find new contracts to engineer, procure, construct, and operate fast power plants. This was pivotal for us to make our data center business transition that is currently underway. As we previously discussed, the AMA will conclude later this year, but we will retain 5% equity stake in the parent of APR Energy. In Q1, the company reported $1.55 million in revenue with a cost of goods sold of approximately $544,000. This was a step down from the previous period, we expect it to continue to wind down in the coming quarters.

Now I'd like to discuss our data center strategy and our newer line of business, Duos Technology Solutions. As we build and deploy data centers at scale, controlling costs and optimizing procurement is critical given the capital-intense nature of this market. As a smaller buyer relative to hyperscalers and large colocation companies, we needed a more efficient way to procure equipment, which led to the creation of the Duos Technology Solutions. This division enables us to reduce procurement costs for our own deployments while creating a new asset-light revenue stream serving enterprise, hyperscalers, and contractor customers. I am pleased to report that Duos Technology Solutions experienced traction throughout the first quarter. We successfully signed eight new large data center operators and increased our backlog to approximately $14 million, all of which is expected to ship and be invoiced in 2026.

Our pipeline for the Technology Solutions is several orders of magnitude greater than the backlog as of today, giving us an additional confidence in our outlook, specifically in the revenue ramp for the second half of the year. This new line of business help low overhead is high scalable while also being supported by strong customer commitments. We expect the revenue generated by the Technology Solutions to not only replace the revenue from the new APR AMA, but also provide better margins. Now I want to shift our discussion to the core of our new data center-focused organization, Duos Edge AI. The demand for edge computing and AI infrastructure continues to grow rapidly, and we believe Duos is well-positioned to address this demand through our modular data center platform. Following our recent capital raises, including the $65 million in financing completed in March, we have significantly strengthened our balance sheet and are well-capitalized to support near-term deployments and future growth. Our focus for the first half of 2026 is to continue executing our sales strategy to acquire new customers in our markets to fully utilize capacity of each EDC. During the quarter, we made significant progress across two key revenue streams, the GPU-as-a-Service and high-power colocation. Under our GPU-as-a-Service agreement with Hydra Host, we expect to deploy 2,304 NVIDIA GPUs across our edge data center platform. This contract represents approximately $176 million in total revenue over a 36-month term, with total anticipated revenue of roughly $50 million, projected margins exceeding 80% and approximately $40 million in expected EBITDA.

Importantly, in addition to the GPU-as-a-Service revenue, this partnership is expected to generate incremental colocation revenue of approximately $25 million over the term, further enhancing the overall economics of the relationship. We have already received $15 million down payment with an additional $3 million deposit pending currently. We are actively executing on initial deployments. We continue to expect revenue from this agreement to begin ramping in the second half of the year. Separately, we were awarded a high-power colocation contract to deliver 4.8 MW of critical compute capacity to support a leading hyperscaler high-density GPU cluster. Together, these agreements represent a significant commercial inflection point, establishing two complementary high-margin revenue streams and validating our edge data center platform at scale.

At the same time, we are also seeing increasing demand for high-density data center capacity driven by AI and advanced compute workloads, with demand now measured in megawatts rather than kilowatts. These higher power capacity EDCs should provide much higher monthly recurring revenue for Duos. Duos currently has 10 MW contracted and an additional 15 MW planned for deployment in 2026, and we continue to expand our pipeline of edge data center opportunities to support growing demand for our AI training, inference, and high-performance computing workloads. Geographically, we're expanding into multiple regions across the country, including Maryland, Iowa, Georgia, and Texas, as we position the platform to serve both enterprise and hyperscale customers.

Within our existing EDCs, we've also begun hosting open houses for the surrounding communities as well as prospective customers to provide an opportunity to explore how edge data centers enable faster connectivity, localized computing power, and AI readiness. We've recently announced a few of these communities initiatives and expect to host several more over the coming months. Since announcing our recent contracts, we have seen strong inbound interest from hyperscalers, neocloud providers, and other large-scale compute customers. Supporting a growing backlog and pipeline, we are currently evaluating new power partnerships that will enable green solutions and faster deployments for our megawatt sites and expect to provide exciting updates in this area in the near future. In closing, we believe Duos is at a pivotal inflection point. We are transitioning to a higher growth, higher margin business model, building strong visibility through contracted opportunities and pipeline, and positioning the company to deliver meaningful revenue and EBITDA growth as we move through 2026. I would like to turn it over to our CFO, Leah Brown, who will go over our financials for the first quarter of 2026. Leah?

Thank you, Doug. This has been an encouraging and productive start to 2026 for Duos. The first quarter included several landmark announcements, strategic financing, strong backlog growth, strategic investment, and meaningful progress toward building a stronger, more scalable company. I will now walk through our first quarter 2026 financial performance and highlight key operational drivers that shaped our results. For Q1 2026, total consolidated revenue was approximately $2.7 million compared to $4.9 million in the first quarter of 2025.

Total revenue for Q1 2026 represents an aggregate of approximately $44,000 of technology systems revenue, $562,000 of technology solutions revenue, approximately $532,000 in services and consulting revenue, $1.5 million from related party services and consulting agreements, and approximately $30,000 of hosting revenue. The decrease in total revenues was primarily driven by the planned down draw from the Duos Energy and New APR asset management agreement, the AMA, that Doug mentioned previously. The company delivered materially stronger gross margin in Q1 2026, generating $1.6 million in gross profit, achieving approximately 59% margin, a significant year-over-year improvement. This was driven by reduction of cost of goods sold, largely reflecting the impact of the transition of the AMA, the associated decline in related costs. The company also recognized approximately $900,000 of revenue during the first quarter of 2026 and 2025 related to its 5% non-voting equity interest in the ultimate parent of New APR. As this revenue has no associated cost of revenue, it contributed at a 100% gross margin. The company reported net loss of approximately $3.5 million for Q1 2026 compared to a net loss of $2.1 million for Q1 2025. The year-over-year increase was primarily driven by lower revenues resulting from reduced scope of services Duos Energy provided under the AMA with New APR, as well as higher operating expenses. As we discussed on previous earnings calls, achieving positive adjusted EBITDA in Q3 and Q4 last year were important milestones for the company, reflecting the early benefits of revenue scale and margin improvement.

In Q1 2026, adjusted EBITDA was -$1.5 million. We did not report adjusted EBITDA in the prior year period. On a comparable basis, this reflects the impact of the items discussed earlier. While we did not achieve positive adjusted EBITDA in the quarter, we expect improved profitability as revenue ramps in the coming quarters. Let's shift to the balance sheet. The company ended Q1 2026 with $33 million in cash and cash equivalents. Our cash increased significantly compared to December 31st, 2025 as a result of our $65 million capital raise in March, which strengthened liquidity and enhanced our ability to support operations and fully fund our planned investments as part of our agreement with Hydra Host. As of March 31st, 2026, Hydra Host has secured a customer for the company, and this customer provided a deposit of $15 million to the company in May 2026, with an additional $3 million currently pending. Now I'd like to turn to our 2026 outlook. At the end of the first quarter, the company's bookings represented approximately $43.5 million in revenue, of which all is expected to be recognized during the year, included contracted backlog and near-term anticipated awards. In addition, approximately $1.1 million of the contracted technology solutions deferred revenue recorded in 2025 will be recorded as revenue in 2026, further supporting the company's performance. Based on these committed contracts and near-term pending orders that are already performing and scheduled to be executed throughout the course of 2026.

The company is reconfirming its expectation for the total revenue in 2026 to exceed $50 million. Let me briefly walk through how we bridge from approximately $2.7 million of Q1 revenue to our $50 million full year target, which we know is a key focus for our investors. The primary driver is our GPU-as-a-Service business, which we expect to contribute approximately $26 million, largely recognized in the second half of the year as the project comes online and utilization ramps up. In addition, we expect to generate approximately $26 million from our technology solutions backlog, which provides a solid base of committed revenue. This includes $2.9 million currently recorded as deferred revenue that will be recognized in the second half of the year.

We also remain on track to recognize $15 million of bookings as revenue in 2026, supported by an additional $25 million in backlog. We also anticipate the balance of guidance to be recognized due to incremental contributions from colocation and infrastructure services driven by customer expansions, new hosting deployments, and continued capacity build-out, along with new customer wins we are actively pursuing. Together, these visible drivers give us confidence in reaching our full-year target. To reiterate, due to the timing of revenue recognition, a significant portion of revenue is expected to be recognized in the second half of the year, during which time we also expect to return to positive adjusted EBITDA. Doug, I'll now turn it back to you for final comments.

Thank you, Leah. Our first quarter of 2026 reflects continued momentum as we execute on our AI infrastructure strategy and expand our edge data center footprint. The industry recognition we've received this year underscores the strength of our positioning and validates the path we're on. We believe our strategy is aligned with several powerful industry trends, including the rapid growth of AI-driven workloads, increasing demand for high density and energy-efficient infrastructure, the shift towards secondary markets with available power and a broader move toward modular, faster deployed data center solutions. At the same time, evolving power, cooling, sustainability requirements are all reshaping the competitive landscape, further reinforcing the importance of the scalable, cost-efficient, and speed-to-market solution. We are entering the remainder of 2026 with a focus, discipline, and a growing pipeline of opportunities, and we believe we are well-positioned to deliver capture the market opportunity. With that, I will open up to questions, everyone. Thank you. Operator?

Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. Once again, that's star one to be placed in the question queue. Our first question today is coming from Rafay Khalid from Ascendiant Capital Markets. Your line is now live.

Hi, this is Rafay for Edward Woo. With your progress in the U.S. data center market, do you have any plans to expand internationally?

Right now, good question, 'cause we are getting a lot of inquiries internationally, especially South America. I was actually in London last week. A lot of interest. Right now, our primary focus is to keep proving the model out here in the U.S. and probably stick with doing our 25 MW this year and our 50 next year in the U.S.

Great. One more question. With such strong demand in the U.S., have you seen new competitors enter the market or any change in the competitive landscape?

Actually the There has been some movement. Obviously Armada is in the business, but it's a different approach. They're more privatized with Microsoft, but you're starting to see the need for inference. You're starting to see the need to compute more locally, and the power obviously is an issue. You're starting to see a lot of movement going the modular way and going after that 5 MW-10 MW range so you can deploy quicker.

Great. Thank you.

Thank you. Next question is coming from Scott Buck from Titan Partners. Your line is now live.

Hi. Good morning, guys. I appreciate the time. Doug, on the Hydra Host GPU-as-a-Service agreement, can you provide the status of what hardware deployment and site readiness look like? Trying to understand whether we start to see some revenue in the third quarter versus, you know, even later in the year.

Yes, absolutely. As of Thursday of last week, NVIDIA and Supermicro have received everything. They're doing the rack and stack at Supermicro, so the cabinets will be fully utilized and shipped on site. Actually, that brings us about a three-week, takes about three weeks off of our lead time. Fingers crossed, we're looking at that for it to start building instead of August, July 1st. Everything is pointing that direction, so we should be a month ahead of schedule.

That's great. I'm curious.

That would be a $4.4 million in revenue starting. Sorry, go ahead.

Great. Great. Do we potentially see this partnership expand to other locations?

The Hydra Host partnership?

Ye-yes.

Yes. What we see with the Hydra Host partnership going forward is, obviously on this first model, we deployed GPU-as-a-Service, right? We actually bought the GPU. That's not our model going forward, but they do have tons of customers, actually, over 12 customers that are interested in 5 MW or 10 MW that other folks have bought the GPU that they need to deploy. Our partnership with Hydra Host will keep growing, and it will grow on the co-location side.

Great. I appreciate that. Last one for me. You scaled up some costs during the quarter. Do we expect that to continue through the remainder of 2026, or does the current, you know, kind of underlying cost infrastructure support the anticipated growth through the end of the year?

The cost of our infrastructure, are you referring to, like, our $6.5 million per megawatt?

No, I mean, you took up some Sorry, Doug. You took up some sales and marketing costs, I think, in the quarter, and I think maybe a little bit of D&A. I'm just, you know, curious whether you need to continue to add to OpEx to support the top line.

Let me talk about that real quick. Obviously, all the investors on the call today realize that we are moving the rail business out. The challenge has been separating the two. A lot of folks look at us as a rail business, and then they dig in, and they see what we're doing, and then they're extremely excited and happy. What we're doing is we put a lot of capital in the very beginning of the year, and we will do that going into the second quarter to really distance and separate the two businesses. There's been a lot of marketing expense for that.

Obviously, Gateway we've hired, who's doing an excellent job for us, and we can already see, the calls coming in correctly and the investors having the right pitch and having the right expectation of what we're doing. It'll fall off around July, August timeframe because we're making great progress. I think we'll slim that down. That definitely was a need that we had to do.

Great. Well, I appreciate the added color. This is very helpful.

Thank you.

Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Allen Klee from Maxim Group. Your line is now live.

Yes. Hi. How do you think about your CapEx spend over the next 12 months?

The CapEx spend over the next 12 months, we're looking at deploying another 5 MW site, and roughly we're at $6 million-$6.5 million. $30 million is what we're anticipating in the next two quarters to deploy to meet our goal. We'll probably deploy another $30 million towards the end of the year to stay on track. We will obviously procure more product for next year to make sure we hit our number for next year. We are on track. We're well-funded to hit our number of the 25 MW this year, and we can do that with the funding that we have.

Yeah. That's clearly a competitive advantage. Strategically, it looks like your contract that comes on later this year, it's a three-year contract. How do you think about what you do with the GPUs after that contract is over? Do you think there's an option that they could get renewed?

Yes. There's two options there that we're actually looking at. One, the market is saying, right, and it can change, but the market is saying that those GPUs are going to be worth $50 million-$58 million, in that range, after the contract is finished. We have two options. One, we can turn around and sell those GPUs and go back to a straight colo play, and then we're out of the GPU business. We can actually go back to that customer, which is common from what we understand. We go back to that customer, and we're not getting 100% of the revenue that we did on the first term, but probably anywhere from 40%-60% of that normal revenue. We'll look at both applications. It just depends.

If we want the capital to expand, we'll probably sell those GPUs. You know, we can use that capital to put back into infrastructure.

That's helpful. You did mention you also have colo opportunities with the Hydra partnership. It started out with you buying the GPUs, but going forward, you could be getting customers that already have GPUs to deploy. In those type of situations, what would your responsibilities be?

Sure. Actually, when we build a 5 MW site, a modular 5 MW site, say in Iowa, our responsibility is to bring power, cooling, and connectivity. We are basically a colo, just like a QTS or an Equinix. Anybody, the big brick-and-mortars, we are just very small, and we provide all the services. They bring their own gear. They bring rack and stack. They bring the infrastructure as far as the compute. We provide the infrastructure as far as the power, cooling, and the reliability of the five nines, the backup power, the generators. That is our core business.

Okay. For those opportunities, I guess you would signed on to longer-term leases with potential customers. Is that the way to think of it?

Correct. Those are typically five to 10 year terms. Obviously, we like those terms a lot better.

Okay, great. No, this is impressive what you're doing. maybe one other question, just since I'm a little newer to the story. For Could you go through a little bit of what Hydra Host is bringing to the table?

Sure.

What their expertise is? Thank you.

Yes, absolutely. Hydra Host is basically a GPU-as-a-Service company. They do not own the GPU. Their specialty is selling and supporting the GPU. Basically, they have let's say that the hyperscalers as a customer, they basically go to companies like myself or investors or data center operators that want that GPU revenue. They'll go and buy the GPU. The customer owns the GPU. Hydra Host just manages the GPU. They do the install, they manage the sales. Basically, they bring you revenue, and they support the GPU. You own the, you take the hit on buying all the GPU, but in return, you get the revenue, and it's a revenue share. They get a small portion of the revenue.

Okay.

It's for people that aren't in the GPU business that wanna be in the GPU revenue business, basically.

Makes sense. In terms of what you said your responsibilities are with colo, with power and interconnect and all that, who Explain also, like, who you partnered with to do those things and what their background is?

Sure. Our equipment is backed. Obviously, it's Schneider Electric. We use a lot of Schneider Electric equipment. We use Vertiv. In-house, our team in-house, we have roughly 22 folks that what we do is we monitor with our NOCs. We have two NOCs. We have one in Jacksonville and one in Amarillo, Texas. Those NOCs monitor the pods 24 hours a day. That's break fix. That's, AC unit goes down. We dispatch within two hours. Everything that's built with our pods is just like a Tier 3 data center. It's what's called N+1. Everything has a redundancy factor to it, so you have time to fix it. If something does go down, it's not hurting the business. You're still delivering the five nines. You have time to fix it. That's why we have dual generators.

Everything you see is what we call an A and a B feed, and we maintain all that. We do sub it out, obviously, to contractors that are in those markets, but we control the dispatch, we control the contracts, we control all the servicing.

Right. As you go forward and are looking at total opportunities, or building out, This is my list. How are you strategically thinking about, like, finding power opportunities?

When we look for power, we're a different breed, right? We're not going into a community looking at a 100 MW. We're going to where power is, what we call stranded. When they build a substation in, say, a city in Iowa, right? That they build a substation, they build it to 20 MW because they know that community's gonna grow. There is actually extra power there. Our team goes out and finds where there's 5 MW-10 MW stranded power, and then we go contract it and move quickly. A lot of times on our two sites that we have, basically they were old bit mining sites, so the power is actually there. They thought they would use a lot of power, they never did. There's 10 MW available at the site.

What we do is we do a lease with the actual landowner, and we'll take that over for 20 years. The landowner makes money on the power as well. It's to their benefit to bring somebody like us, who actually is going to use the 5 MW-10 MW than a bit miner who goes up and down. One month it's 1 MW, two months You know, it's not consistent load. They wanna make money off of power, they like our model.

Thank you so much.

Yes, sir.

Really appreciate it.

Thank you. Next question today is coming from Justin Taffer from Shay Capital. Your line is now live.

Hi, Doug. Question really the 10 MW and the colocation business. The 10 MW you've signed, you've guided to 25 this year, so you'll do another 15. Next year, I think you said 40. Maybe can you just talk about the demand out there? What type of customers want this? Do the same customers that would want, like you mentioned before, the 100 MW sites, why would they want something like a 5 MW or 10 MW from you? Maybe you could just help us to bridge the gap of demand there.

Absolutely. Great question. Thanks, Justin. Let's back up. When we deployed the first one with Hydra Host, we started to get tons of calls for 5 MW-10 MW. I've been in this business 30 years, and I'm thinking, "Why, why all of a sudden does somebody want five or ten meg when everybody else is looking at gigawatt and 100 MW?" You know, it's just, it's crazy the power they need. What's going on is the 5 MW-10 MW to even 20 MW sector is going to be the hot new sector. That is for training or for inference models. What's happening is they need to deploy their GPU, they need to deploy it quickly. Everybody knows that people are sitting on GPU. They've bought them, they've invested.

They need to burn them. To actually get 5 MW-10 MW up quickly, we can do that under six months. You can't do that in the other models that people are deploying. The Microsofts, the Googles of the world, all them, they're all getting into inference, and they know they need to capture these pockets to do their inferencing. The 5 MW-10 MW range, I can tell you right now, I look on my wall right here, I have 21 neocloud. If I had 5 MW or 10 MW, they would take it. The need is there. They're trying to build their networks out now for inferencing. It's finally there. People have talked about it for a while. They're doing it. You can see press releases from Google, how they're looking at doing 20 sites right now, the same thing. It's time, and they can deploy quicker. Obviously, speed is of the essence right now.

Got it. Great. Just a follow-up from me just on the balance sheet. The $33 million in cash, I think Leah mentioned the $15 million received prepayment with another $3 million on the way. That was in May, that's additional cash to the $33 million you filed as of March 31st?

Correct.

Correct. just one also too. A question. On the FTC website over the weekend, there's a filing that Elon Musk purchased APR Energy. One, just can you confirm, is that the APR Energy you have the 5% stake in? If there's any details you can provide us there would be great. Thanks.

Yes. I'm not at liberty to say that today, but it is the same, obviously the same company. I can't discuss that today. Hopefully, we'll have some news from them shortly.

Got it. Thanks.

Thank you. Next question is coming from Nico Sacchetti from RBC. Your line is now live.

Hey, Doug. Can you hear me this time?

Yes, sir. How are you?

I'm doing well. Yeah, that last question was my first question I read about. There's no, there's no details released.

Yeah.

It looks like that will capitalize for you. Whatever the details are, if this goes through, your 5% of whatever the number is is going to come into Duos, correct?

Yes, sir.

If the sale takes place. Is that going to be taxed? Is the number that we just do 5% of whatever the number is the number that's gonna show up on your balance sheet? Do you have any idea? Do you have any carry forward? What will that look like?

Just looking at the funds that we would receive, the agreement has a waterfall effect. It's not a straight calculation just doing the 5%

Okay

on the transaction.

Yeah.

Sure.

Oh

From a tax standpoint, not what is the number, but let's just say..

Right

he buys it for $100 million.

Right.

I understand we don't know exactly what the 5% is. The 5%, is it going to be taxed as like a long-term capital gain where you're going to net out an amount of it? That's my question is just to speculate on the number. Obviously, we don't know.

Yeah.

I'm saying if it goes through, what would the tax look like? Would it be a gross-

Yeah

or a net number? That's what I'm asking.

I would say at a high level, we do understand that that is a capital gain. You know, we don't want to divulge any.

Yeah

you know

Yeah

calculation around that transaction at this time.

I think I can answer your question a little bit better, Nico. We, you know.

Yeah

with this movement of the rail business that we're doing, I think..

Yeah

have a substantial amount of NOLs. I think we'll be in good shape, but we'll report to you as soon as we know.

Sorry, a substantial amount of what? I just didn't catch that.

With the movement of the rail.

Yeah.

Yeah, yeah.

I just didn't hear what you said. A substantial amount of what?

Well, NOLs. I mean, we.

Oh, NOL, okay. Got it.

We've lost a lot of money in that division.

Great

we'll, uh-

No, I know. That's gotta be it.

we should be able to back that. Yeah.

I mean, behind the scenes, I'm sure you're excited, right? 'Cause this is getting the company into the actual company that you want moving forward, correct? Like, focused on what you wanna be doing on the data center.

That's exactly correct. If you look at our business, obviously, I came into this role, and I brought this product to this business for our shareholders. It's the best thing going in the market right now. We just need to separate and focus. Like, prime example, we, you know, Everybody knows this on the call. It's been a challenge, right? We burned through $900,000 on that division. We need to exercise that, and we're doing that here. I would like to commit to you I'll have that done as soon as possible. We're almost at the finish line with that, so we're excited about that. We're excited about a bunch of stuff this week. We're extremely excited about where the company is going.

This just, you know, things like this just, you know, another quiver, another arrow in our quiver. This is good stuff.

That rolls into my next question. You know, you're usually, you're really fired up on these calls, and it seems like it's a little more dampened this call, and that's with the $2.7 million of revenue for the quarter. Obviously, that's not what I think anybody is looking to own the company for is a number like that. I'm curious. Do you think that this is Like, understanding this pivot is happening, the work that you're doing is maybe you're booking it now, but the revenue isn't recognized yet. Is this like the pivot quarter or quarters? Like, is this something that we should expect or should have expected?

Yeah

You were expecting?

Yeah

you know, you've booked all of this. You've got this, the tech solutions backlogged.

Yeah

recognizing it in this quarter, we shouldn't look at $2 million as like, wow, what a flop of a quarter. You are doing work that's going to get paid.

Yeah

in the next couple of quarters and moving forward, where if anything, this number is it immaterial, or should is it worth, like, questioning this quarter is my question?

Yeah, that prime example, if I could have shipped all that stuff, because that business you have to ship it, right, to recognize the revenue.

Yeah.

I could have booked $14 million this quarter, right?

Okay.

I, I made it clear on the last earnings call that we're going to see this revenue start kicking end of second, third, and fourth. That's always been our model. Our model right now obviously is keep going, keep doing what we're doing, get these other sites up. You know, once I like that Iowa site, that's another 5 MW at $2 million a megawatt, right?

Yeah.

You really start seeing this kick. What we're doing is exactly what I wanted the team to do, is build these, deploy them, keep focused, keep your head down. The infrastructure division, keep running. I'm telling you, I apologize if I'm not excited, we are working 24/7, and it is good stuff. I'm sorry I did that.

No, no.

We are extremely pumped. Yeah.

With that, with the $2 million, I just wanna ask the question?

Oh, yeah. No.

You mentioned Iowa. Where in Iowa is that work happening?

It's called Muscatine. I always say it wrong. Muscatine, Iowa. I'll put it out there. We have a press release coming here in the next day or two. It's right outside of Illinois, so I still get that low latency down to Kemah, which is important. Our hyperscale customer wants that location, and they want the one in Texas as well. The one in Texas is right outside of Amarillo.

Okay.

We're partnering now with somebody that is gonna be a great partner of ours moving forward. They're already a partner.

It's not a major metro area in Iowa, I take it.

No, no. Yeah. You're only, you know, 20 miles out of a major market area. Yeah.

Sure. Sure.

That's where the power was stranded. That's where the power is there. I literally, if I had 10 MW worth of infrastructure, like, coming off the line, I could light 10 MW there today. It's there.

Okay.

It's transmission down. It's beautiful.

Okay. Okay. I think I have two more questions.

Sure.

Around this whole backlog, like revenue, the fact that you do the work now, but it's not showing up. Then, you know, I saw some backlog things. Even earlier in the Q&A, you were talking about deploying 30 MW. You know, there's a lot of, like, language barrier for, like, are we deploying something? What does that translate into revenue? Just to try to, for the sake of getting things, like, understandable.

Yeah

Even, like, in the, in the release, it said after the quarter, you received a $15 million prepayment from a customer.

Yeah.

like,

Yeah

It's just trying to make sense of the different, word-wording and what numbers are what.

Yeah.

I am hopeful, like, the backlog numbers looked like they were broken down into booked backlog. Data center was $43.5 million. Tech solutions looked like it was $14 million. Are those numbers right? That sounds right?

Yes, absolutely.

That just means that the $43.5 million and the $14 million are booked business for what type of timeframe, or is there a timeframe?

This year. Yeah.

Or-

This year.

That's this year.

This year. Yeah. Yeah.

Okay.

This year. Yeah.

Is that something that you will start to report moving forward as, like, a broken down, like, backlog from those two views?

Yeah. Yeah.

Yeah. It'd be very helpful if you did. If you would, this really helps clear up the story.

Sure. Yeah.

So then-

Yeah

The $43.5 million in backlog, is that inclusive of the $15 million prepayment?

The $15 million prepayment, which there's going to be an additional $3 million that is pending right now, we will recognize that over the life of the contract, so the three-year customer contract. You won't see $18 million being booked immediately. That will be over the life of the customer contract.

My question is, the $15 million prepayment that you highlighted in that release, is that like cash flow coming in, and is that?

Yes

included in Is that different than your reported booked backlog?

That isn't included in our reported backlog.

Okay.

That will not be recognized until for the life of the contract, which is three years.

Yes. You get what I'm saying, right? Is just to try to make sense and get the clearest picture and you highlighted the $15 million prepayment in the call, and then I'm just not sure where that fit in with some of the other numbers.

Sure.

Then, you know.

Right

The guide is, like Doug, is on the megawatts. There's a megawatt guide, and then there's also a revenue guide. I just want to make sure that we're always talking about the same things, and it's not.

we're not talking about megawatts booked and built versus revenue because that, I feel like that pendulum kind of swings back and forth with the conversation.

Right

for the sake of getting everyone on the same page to get your stock to be valued with all of these good things that you're doing. To try to just get the picture as clear as possible. It sounds like we're on the cusp of maybe this rail car and this gas-powered turbine business being removed, and I think that will only help, you know, clean up the situation, so.

Absolutely. Absolutely.

Okay. Last one is just around, like, the actual unit. You mentioned competition, more competition. You mentioned Armada on this call.

You mentioned there's a lot of interest in this 5 MW-10 MW range.

That to me is semi-new information just from the standpoint of, you know, you guys are the only ones really doing it. The clean room is this huge competitive advantage. I just wanna clear up, like, what I you know, I watch a video of them with a, with a semi-mobile data center, you know, and someone is lowering one onto a Navy ship. Like, is that a PR thing?

Yes. Yeah.

Is it real?

It's-

So, so-

No, it. Yeah.

Who?

Nico, it's real.

Who's real? Like, who is real?

It's a totally different application. Yeah.

Sure. Sure.

It's a totally different application that we're doing. Yeah. When I say there's people going in the market, I was just talking more you know, modular, right?

Sure.

They're not gonna deploy 3 MW, 4 MW, 5 MW. They're not doing that, and they're not for multi-customer, right?

Okay.

They're just for one privatized customer. Do a lot for the government. I was just using that as an example, but you see a lot now, if you go out in the industry and you're in it like us.

Right.

You'll see a lot of 3D renderings. You'll see a lot of people saying, "Look, we're doing inference. We're doing this." That's why the 2 main hyperscalers that came to our facility, they toured last week, Corpus Christi, and they went down there to physically see it. Now, that pod is not the high-density pod.

Sure.

They wanted to see physical work done. They wanted to see how we build the quality of work. They both signed off on it.

Okay

That's how we're winning the market, is we've done this. I've done this nine years, 10 years now. I've put over 30 of them on the ground in my career. You can go look at the first one. You can look at the one we just put down three weeks ago. We do know what we're doing, and it's not rocket science, but we've got it down, right? We've got it down.

Your comment was more of a positive that there's a lot more interest in this modular type of idea rather than.

Yeah

there's a lot more, like, competition coming.

Yeah.

Okay.

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

Now, I'd like to turn the call over to Mr. Doug Recker. Sir, please proceed.

Welcome, everyone. Thank you for joining us. Earlier today, we issued our earnings press release and our 10-K for 2025. Copies are available in the investor relations section of our website. I encourage all listeners to view press releases and our 10-K filing to better understand some of the details we'll be discussing during this afternoon's call.

Before I begin, I would like to take a minute to personally thank Chuck Ferry for his leadership and guidance. Chuck has served the Duos organization and provided personal mentorship to me. I value Chuck and the opportunity he has provided me at Duos. It is not every day that you get to be mentored by a war hero and a corporate champion, and for that, I will be ever forever grateful. I look forward to your continued mentorship and guidance as you continue to serve on our board of directors. Thank you, Chuck, for all you have done and continue to do for the Duos organization.

As your newly appointed CEO, I am honored and excited to discuss the focus of Duos Technologies Group. We are now fully dedicated to the data center market through our Duos Edge and Technologies Solutions division, driven by accelerating customer demand. I will get into more of that in a minute, but want to give you an update on the rail technology in Duos Energy subsidiaries.

First, let me talk to you about our legacy business, which is a Railcar Inspection Portal. In the previous calls, we have discussed that this line of business has become less important to our future at Duos. We also talked about diversifying our business strategy to edge computing. Thus, we have made the decision to completely divest the Rail division. This divestiture is expected to take place over the next 60 days.

This decision did not come lightly, and I know the Rail technology has a rich history with Duos shareholders. In fact, my involvement goes back many years before joining Duos, and I was intimately involved in the design and building of the edge data centers that the portal uses today. However, the lack of growth and regulatory hurdles for that business has proved to be extremely challenging to manage. The decision to divest frees up company resources and cuts significant SG&A expenses, for more details will be made available on the few divestitures in the near future.

Second, I would like to talk about Duos Energy Corporation. As many of you may remember from last year, Duos entered into an asset management agreement with New APR Energy to help find new contracts to engineer, procure, construct, and operate fast power plants. Duos also was given a 5% equity stake in the parent of APR Energy. The AMA provided the interim financial ability to execute and pivot to our data center strategy. We announced on the Q3 earnings call that the AMA would conclude in 2026, but Duos will remain or will retain the 5% equity stake.

Now, I would like to discuss our data center strategy and our new line of businesses at Duos Technologies Solutions. Part of our strategy in building and deploying data centers at a rapid pace has always been focused on cost savings, lowering our capital expenditures. Building data center infrastructure is very capital intensive. As Duos is a relatively small buyer compared to the larger hyperscalers and colocation companies, we needed a way to buy products cheaper, so we created Duos Technologies Solutions. This brand new division allows us to do just that, as well as provide a new stream of revenue for us.

We started by hiring an industry veteran with a proven track record who understands our business as well as the data center market overall. Kristen Sanderson joined Duos and will serve as the Senior Vice President of Duos Technologies Solutions. Kristen has over 18 years of data center product experience, vast market distribution knowledge, relationships with all the key supplier partners that Duos needs to work with, and a wealth of relationships in the data center industry.

This new division allows Duos to procure materials for its own builds at a much lower rate than the legacy way of purchasing through traditional distribution. Duos Technologies Solutions offers the same strategic sourcing and product distribution to new customers, including large scale enterprise organizations, hyperscalers, large colocation companies, low voltage contractors, and general contractors across the United States.

I'm very pleased to report that through the first quarter, Duos Technologies Solutions has already sold $10 million in new business, which currently sits as backlog, all of which I expect to be recorded as revenue this year. This new line of business has low overhead and is simple to execute while having strong commitments by the end client.

The revenue generator from Tech Solutions is expected not only to replace the revenue from the new APR AMA, but also provide better margins, thus further contributing to the overall future profitability and growth of Duos Technologies Group. Kristen has built a seasoned team with the talent in short three-month build, tremendous sales pipeline, and we expect amazing things from this new venture.

Now, I want to shift our discussion to the core of our new data center-focused organization, Duos Edge AI. The demand for edge computing continues to grow at a rapid pace, and I'm pleased to share that Duos Edge AI is in a great place to meet this demand. The second half of 2025 proved to be extremely busy for Duos Edge. In July 2025, we successfully completed a capital raise of $45 million with Titan Partners to fund the construction and deployment of 15 EDCs to further broaden the connectivity and compute needs of underserved Tier 3 and Tier 4 markets. Duos Edge AI was also awarded a patent for Clean Room technology for modular data center deployments, which gives us a strategic competitive advantage in the space.

Our goal in 2025 was to procure, manufacture, deploy 15 edge data centers. This goal was extremely aggressive and unheard of in our industry. We are proud to report today that we have accomplished that goal. Our focus for the first half of 2026 is to continue executing our sales strategy to acquire new customers in our markets to fully utilize the capacity of each EDC.

In March 2026, we completed a $65 million capital raise to deploy approximately 2,300 GPUs as a service, a 4.8 MW high-density EDC deployment for a leading hyperscaler, and to expand our high-density EDC footprint to support growing demand for power and compute across AI inference, training, enterprise, and hyperscale AI workloads. We also have five new EDCs in production, with plans for an additional 20 MW of deployed capacity by year-end. Having inventory for our EDCs to deploy is crucial for our continued growth and success in this market. The Duos Edge AI story and its initial success is garnering tremendous excitement and demand, so inventory will allow us to react quickly to new market requests. Part of this new demand we now see is for higher density power, which serves AI and high-powered compute needs.

While Duos Edge AI is committed to sticking to our original model of deploying in the Tier 3 and Tier 4 markets, we are seeing unprecedented demand for power in megawatts compared to kilowatts. The data center market is experiencing a boom like we've never seen before, and building at scale is costly, and it takes years to complete. During the course of this deployment, our 15 EDCs, we saw an influx of calls requesting more power in the markets where we have our operations all across the country. There is such a shortage of data center space and power that companies are turning to Duos Edge AI. We are going to start to build our new EDCs with greater power capacity to meet this demand.

We have shown the market we can deploy at lower costs with an incredibly faster speed to market. Duos Edge AI will now be able to cater to customers that have the high-density needs, like the neoclouds providers and hyperscalers, for their remote edge sites. These higher power capacity EDCs should provide much higher monthly recurring revenue for Duos, which we will explain in our financial update coming up shortly.

Before I transition to the financials, I would like to touch on our start of the year and our first partnership in deploying high-density power EDCs. This month, Duos executed its first contract across two newly launched business lines, GPU-as-a-Service and high-power colocation service for AI infrastructure.

Under our GPU-as-a-Service agreement, Duos will deploy 2,304 NVIDIA GPUs across our edge data center platform, generating recurring revenue through a GPU rental model, purpose-built for enterprise and AI workloads. This contract is expected to generate approximately $176 million in revenue over a 36-month term, with margins exceeding 80% and expected annual EBITDA of approximately $40 million.

Separately, Duos was awarded a high-powered colocation contract to deliver 4.8 MW of critical compute power to support a leading hyperscaler's high-density NVIDIA GPU cluster housed within Duos Edge AI data centers. This contract represents Duos' entry into the market of high-power colocation, where demand for AI-grade infrastructure continues significantly outpacing supply.

Together, these contracts mark a significant commercial inflection for Duos, establishing two distinct and complementary revenue streams within our data center platform and validating edge data center infrastructure at the highest level of the AI compute market. Since announcing these contracts, we have received strong incremental inbound interest from hyperscalers, neocloud providers, and other large-scale compute customers. Seeking high-density EDC solutions, we see a significant opportunity to scale the high-power EDC model through 2026 and beyond.

Now, I would like to turn it over to our CFO, Leah Brown, who will go over our financials for 2025. Leah?

Thank you, Doug. This has been an exciting year for Duos. 2025 is a year marked by significant revenue growth, strategic investment, and meaningful progress toward building a stronger, more scalable company. I am truly excited to walk through our full year financial performance and highlight key operational drivers that shaped our results.

For 2025, total consolidated revenue was approximately $27 million. The company previously projected revenue in 2025 of $28 million. Although that target was not met, we recorded a little over $1 million in deferred revenue for technology solutions, which is contracted, cash was received, and we will record as revenue in 2026.

In 2025, the $27 million in revenue was a significant increase compared to $7.3 million in 2024, which is over a 270% increase year-over-year. This growth was primarily driven by services and consulting revenue from the asset management agreement with New APR Energy, totaling $22.4 million in 2025 versus $900,000 in 2024.

The company delivered materially stronger gross margin in 2025, generating $7.9 million in gross profit, achieving approximately 29%, a significant year-over-year improvement. This was driven by improved cost absorption and continued operating efficiency. The company reported net loss of approximately $9.8 million in 2025, an improvement from the $10.8 million net loss in 2024. The year-over-year improvement was driven primarily by higher revenue and significantly stronger gross margin.

As we discussed on our Q3 earnings call, achieving positive Adjusted EBITDA was an important milestone for the company, reflecting the early benefits of revenue scale and margin improvement. I'm pleased to report that we built on that progress in Q4, delivering positive Adjusted EBITDA for the second consecutive quarter. This consistency is meaningful and demonstrates that the Q3 result was not a one-time event, but rather the continuation of improving operating performance as the business scales. The consecutive improvement from Q3 to Q4 reinforces our confidence in the direction of the business, driving higher revenue volume, improved gross margin, and more efficient cost structure.

Let's shift to the balance sheet. The company ended 2025 with approximately $63 million in total assets, reflecting meaningful growth year-over-year. Cash increased significantly compared to the prior year, driven by capital raised during the year, which strengthened liquidity and enhanced our ability to support operations and planned investments.

Another strong position on the balance sheet is property and equipment, each with a significant increase year-over-year, reflecting continued investment in infrastructure and assets required to support the program's execution and long-term growth initiatives. The current contract liabilities over $5 million support the company's future revenue recognition. On the equity side, capital raised during the year strengthened our balance sheet and liquidity, while ongoing investment in the business aligns our strategy to scale operations and drive longer-term value creation.

2025 was a transformative year for Duos Technologies Group. We significantly scaled revenue, strengthened our liquidity position, and made strategic investments that position the company for increased operating leverage and margin expansion going forward. As previously reported, the Rail segment remains relatively flat. In response, we are divesting the Rail business and reallocating resources to support the continued expansion of our edge data center segment.

Turning to our 2026 outlook, the company is providing revenue guidance of $50 million-$55 million in total revenue across all business lines. This forecast reflects growth from both our core operations and newer initiatives, which Doug will cover, and we believe positions us for a strong year. Due to the timing of revenue recognition, a significant portion of revenue is expected to be recognized in the second half of the year, coinciding with the periods in which we expect to achieve positive EBITDA. Our investment and expanded revenue opportunities give us confidence in our ability to execute and continue building a stronger, more profitable company.

Doug, I'll turn it back to you for additional comments.

Leah, thank you. Before we open this up for questions, I wanted to say again how honored I am to serve as your new CEO. The new data center-focused strategy is the new Duos Group, Duos Technologies Group, and we are poised for great success. We have been awarded global recognition with the Innovation of the Year award at the largest data center and telecom conference at Pacific Telecommunications Council 2026 in January. We have also been nominated for breakout success in North America Digital Infrastructure Leader of the Year from the Tech Capital Global Awards coming up in May. The global recognitions only solidifies we are on the right path at Duos with a prosperous future ahead.

We understand we have a new focus, and this is a departure from our legacy business past. We are taking steps to ensure the new messaging is relayed to the market and that we will be given the appropriate market coverage moving forward. We will be retaining an IR firm to assist, and expect several analysts to report on our new focus and business activities in the near future.

With that, I will open it up to questions. Operator?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you.

Our first question comes from the line of Ed Woo with Ascendiant Capital Markets. Please proceed.

Yeah. I'd just like to give my congratulations to you, Doug, and to the entire Duos team. The growth that you guys had has just been amazing. My question is, as you know, you mentioned that demand remains very, very strong. Are there any worries of competitors entering this market? What can Duos do to be able to, you know, have the advantages to be able to compete if new entrants come in?

That's a great question, and that's why we manage the business appropriately. You're going to see some people come into the market, like you just probably saw the press release from Crusoe. They're entering the market as far as building 5 MW to 10 MW to 20 MW modular data centers. They're one of the largest in the business. They build Stargate. They're huge. That in itself tells us we're in the right market.

What we've done, and this is an incredible piece--I just got back from GTC, and everybody was talking about how they're concerned about deploying with modular because GPUs are extremely sensitive to particles, to dust. Ironically, the best part about our business, we obtained a patent in September called the Clean Room. We actually have a patent that goes on top of our--it connects to our modular data center that cleans the air before you come in. All the particles on your body, on your equipment, are blown off, filtered off, then you walk actually into the data center.

That is huge when it comes to deploying, because what's gonna happen is the GPU providers, like NVIDIA and, you know, everybody that makes chips, everybody that makes servers, they won't honor their warranties if the fans get dirty and dust in them. That is a huge win for us, and it's gonna help us, you know, differentiate us from the competitors coming in the market.

You will see them, but we are the only ones that have deployed, prime example, 15 pods. I challenge everybody that comes into this business that doesn't have a 3D rendering to go look at, physically look at their pods. We had a customer fly in from China last week, and they flew into Corpus Christi and toured our pods just to see our manufacturing capabilities. It looks like there'll be a new customer of ours on the hyperscale side, possibly.

We have the experience. We've done it. We can actually show people our markets. They can physically go there to see our customers, see gear burning, and see how the facility works. We welcome the competition, but we're strong where we sit.

That sounds good. My last question is, you know, kind of like a longer term plan. I know you guys kind of been focused on the rural underserved markets. Is there plans to go into the bigger markets? Also you mentioned, China customers or China partners. Do you anticipate possibly going international? Thank you.

Yeah, great question. Right now our focus is Tier 3, Tier 4 markets, and let me tell you why. The demands to deploy in a Tier 3 market, I can deploy my pods and get access to power in 90-120 days. If I go into a Tier 1 market, I'm competing against the larger data centers and the infrastructure that's already in place. We're going to build infrastructure fast.

So where do you do that? You go into markets that have accessible power. They've built substations that have 5 MW-10 MW available on them, and permitting is a lot quicker. So our focus is gonna continue to Tier 3 and Tier 4 markets, and that business sector is huge, and it's gonna be huge for the next 10 years. International-

Great. Well, thanks for answering my question.

International. Yeah. As to answer your international question, once we start deploying at scale here and move on, we'll be open to international. But right now, our number one focus is in the U.S. into the Tier 3 and Tier 4 markets.

Great. Well, thank you, and I wish you guys good luck.

Thank you, sir. Thank you so much.

Thank you. Our next question comes from the line of Dan Weston with West Capital Management. Please proceed.

Yeah. Hi. Good afternoon, everyone. Thanks for taking the questions and congrats on the quarter. Doug, a couple of quick points of clarification. I think you mentioned you were expecting to have, or you do have 5 new EDCs in production to be deployed by year end, if I heard that right?

Yes, sir.

Are those 5 EDCs specific to the GPU-as-a-Service contract you just signed?

No, those 5 EDCs are committed to markets that have been contracted. There are markets in Georgia, and we're working with a utility to deploy on their network as well. Those are our normal pods that we deploy and that we've deployed. Like, the 15 we've deployed, they're identical.

I see. Okay.

Yeah. Let me give some clarification because this might help answer a lot of questions for other folks, too. We're still building our same model. Our core is, you go after the education, healthcare, and local government in these markets. What we're doing at the factory is we're building the pod with more power. We're deploying these units, the same concept, the same places, but we're building them at more scale so we can bring in higher density users. Yeah. That's the model.

Got it. Thank you for that clarification. Back to the first GPU-as-a-Service customer that you just recently signed. When do you expect to have those larger pods, if you will, in the ground and expected to generate revenue?

We're on track for July, August. You know, with permitting and things like that, I wanna say August to you, but we're looking good. More August timeframe.

That's amazing. As it just kinda ties into the guidance that Leah provided, if Leah, if you're there, I think I wrote down $50 million-$55 million of revenue expected for this year. Could you give us a sense of how that revenue breaks down, please?

Yeah. Thank you for that question. The revenue lines that we anticipate for this year, we're expecting definitely on a holistic view to achieve that aggregate. As a company, we don't go into specifics for each business line, but overall, we do anticipate to meet that guidance.

Okay. I understand. While you're there, you mentioned the PP&E up to $27 million and change. That's obviously a massive increase from last year, but also up $12 million from your Q3. Can you give us a breakdown of what that PP&E is, please?

Absolutely. The majority of our PP&E is our edge data centers. We have 15 edge data centers, and we've also started pre-buying for the next lot that is coming online in 2026. You-

Got it.

The majority of that. Yes.

Great stuff. Last one from me, I'll jump back in. Doug, I think you mentioned that you'd secured the 4.8 MW of power for, I assume you're talking about the GPU-as-a-Service contract. The initial LOI, I think you mentioned 10 MW dedicated to that project. Could you explain a little bit, what the delta is there between the 4.8 MW and the 10 MW?

Sure. The site is built to 10 MW, so there's 10 MW available. They're taking down 4.8 MW for critical load. That means I can add to that site quickly up to 10 MW. Now, that site can go to 20 MW, but it might take another year to get access to another 10 MW. That is the winner here, is that site has the capability that's already been transformed down at 10 MW. There's 10 MW physically available today if I wanted to sell it. I would just build the pods. I'd build another section of pods to get to the 10 MW, so another 5 MW cluster of pods.

In terms of, you know, real estate, if you will, there's plenty of space there to just drop another 2, 3, or 5 pods down if needed?

Yes. There's 3 acres there, and what we've noticed is 3 acres is plenty. Basically, if you look at our model, you know, if we're deploying 5 MW, it's really like looking at 5 school buses.

Understood completely. Do you anticipate that your first technology, global technology customer for the GPU-as-a-Service, will end up taking the whole 10 MW?

Yes. Absolutely. There are 2 customers that are looking at 5 more sites at 5 MW with us right now. Obviously, we've researched. We found 5 sites with the power there, but we're gonna get this one installed and the one in Iowa installed first. You know, we'll report on how quickly we did it and how the revenue looks. The demand, I mean, I came back from GTC, and we had 21 inquiries on 5 MW-10 MW sites.

That's amazing.

The demand, yeah, the demand in this niche is unbelievable. Like I said, I'm not real worried about other people coming in. Our secret sauce is how we deploy quickly, how we find the power, we have a secret to that, and the other piece is the Clean Room. I don't see you--Prime example, in one of these pods, you're talking $10 million-$12 million just in GPU in a pod. A Clean Room, I don't understand why you wouldn't go to somebody that has a Clean Room. It doesn't cost them more.

Understood.

I keep-

Yeah.

Yeah.

By the way, do you anticipate that you'll be able to disclose who that first technology customer is in the near future?

I'm not sure. It's a very strict NDA right now, so I think maybe once we prove ourselves to them, it might be an option. Put it this way, they're Tier 1, so we're good.

I appreciate that. You know, let me get, squeeze one last one and I'll hop back. As-

Sure.

You mentioned that there was a $10 million backlog in the tech solutions business that you expect to record as revenue for this year. Is-

Yeah.

Is that typical for this business where the booking of the contract could take several quarters to actually run through the revenue line?

Yes, exactly. Let me give you an example. We sell a lot of, and we have a lot of, you know, our funnel is huge. We have a lot of, like, cabinets, PDUs, fiber connectors. Those are 60 days, 90 days max, right? Well, we book that, we ship it out quickly. UPSes and other switchgear are six to eight, some of them nine months out.

That's, you know, we had a big booking towards the end of the year, but it took three months for us to bill it, right? A lot of the bigger products take longer. Everything that we're booking, that's in the funnel and that you see us report in this quarter, next quarter, will all bill this year. Because a majority of it is, I wouldn't say off the shelf, but it's more UPS, PDUs, cabinets, cold aisle containment, that kind of stuff. There's a lot of it.

That's incredible. I really appreciate you taking the time to answer the questions. Congrats to everybody.

Thank you. That's why I'm here. I love the questions. Thank you, sir.

Thank you. Our next question comes to the line of Nico Sacchetti with RBC. Please proceed.

Hey, Doug.

Nico, sir, how are you? Good to hear your voice.

Yeah, I'm good. Maybe I'll piggyback on Dan's last question here.

Okay.

Not only is that $10 million of the distribution business, you know, going to-

Four one through one.

Yeah. Actually, recognizing the revenue.

Okay.

Is $10 million, like, a quarter, a typical run rate for that business?

Absolutely.

Is that a huge quarter? Is that low? You know, obviously not looking for a definitive guidance, just trying to get an idea of what you're, like, expecting or what that, the capability of that business could be in just like a normalized, situation.

Yeah. We're new to the business, but what we're seeing is, you know, when we can recognize it and how stable it is. You know, let's say the funnel's over $150 million, if we, you know, depending on what the product is.

No, like $2 million, but like, like-

I'm sorry. Just to clarify, you said the funnel, like, annual, like, capacity. Is that?

Okay. Is that like a high-end number that you could do in a year?

The $10 million was over two months, and that was when they first started. Obviously we're looking at a lot greater than that.

Yeah.

Yeah.

I'm looking at going back in and out. Hold on a little bit. I thought you said-

Yeah.

I thought you said the funnel is $150 million. Is that like an annual, like, TAM or capacity that you could do? Did I hear that number right?

Yeah. That number is from two sales reps that she's hired. That's in their funnel.

Okay. I gotcha.

For this year. That's only for three months of doing business. You know, this, we just started that group. I mean, look, one data center buys $1.6 billion worth of product, right? That's normal, believe it or not, in this industry.

It would be fair to say, you know, if there was any kind of negative perception around the loss of that $20 million two years ago, and the opportunity here.

Listen to me as well.

You mentioned that replacing that side of the deal, but it sounds like this could be a multiple of that in a normalized situation.

That's exactly right.

Okay.

That's why we brought it on.

For the past two years.

Nico, just real quick about that division. Remember, the main reason we brought that division on is in the marketplace right now, everybody knows to build a megawatt, it's anywhere from $10 million-$13 million, right? To build a megawatt. Why they're looking at us is I can build a megawatt for $6.5 million. Why, how do we do that? It's because that infrastructure group has direct to the manufacturer now. I'm not buying through a Wesco or a Graybar. 20%-30% comes off the line because I buy direct.

Can you explain the 20%? You are offering, something that can be set up substantially quicker than like a traditional, you know, football field-sized data center and at a lower cost, is what it sounds like.

That's right.

Yep.

Go with the shorter timeline and go for a better margin profile.

Right. Well, we could deploy quicker. Remember that. The CapEx isn't as intensive. You're deploying 5 MW at $25 million. It's a big difference.

A lot of what I have are just clarification questions. Obviously, there's a lot of moving parts with this second-

Yep.

To the extent of, you know, what was the company. You had the AMA, the equity-

Oh, thank you.

The you know, data software. Then, you know, it's going towards this modular data center, you know, school, hospital, anchor tenants. You know, the metrics around that were very black and white, like cost, what the revenue opportunity is. Then, you know, it seems like we're kind of pivoting again.

I just wanna make sense of all of these moving parts and maybe the. It would be helpful if we could clarify the deck that you have available on your website from February, I think it is. Is this, like, good information? There's just some differences in metrics from what's on this slide versus, like, what was reported and, like, just have some clarification questions. I'm just curious, like, how set in stone the numbers were off of that specific presentation.

Yeah. We're actually after obviously after the call, we're gonna update because now we've recognized and told some information. We're gonna update that. But just remember there's two. And I don't wanna make it confusing. That's why I'm trying to change the model here a little bit. There's two pieces to our business.

One is the edge data center business, and the one is the infrastructure. The edge data center business, the GPU business falls under the edge data center business. Remember, it's the same pod, it's the same concept. It's just on building them bigger. Just look at the GPU as a different type of customer. I'm just bringing in different types of customers. It's the same model, and the revenue is a lot higher, obviously, because they're taking power.

We make money off of power, space, and cross-connect, right? The more power we sell, the more money we make. Obviously the CapEx goes up and the pod cost. The model, you know, and we, I'm pretty sure we shared that. The model on the GPU-

Mm-hmm.

... is a big difference. Prime example, remember our pod model at 15 cabinets is $350,000-$400,000 a year. That's the goal, right? Out of that if you compare it to the GPU model, you know, 1 MW, you're at $1 million a year. So at 4.8 MW, you're now at almost $1 million a month. So why not build the pod bigger and take the customers that need that power? When all it is for us is at the factory, we just put bigger panels in. We-

When you say the same model-

Mm-hmm.

You know, you've talked about, you know, the original, the founded version of this model going on kind of like two to three markets with little areas with it and like 500 mi of the data center.

Hey, Nico, you're cutting out. It's hard to hear you.

Yeah.

You there?

I think I'm having a service here. I just wanna get like, do you have? It sounds like it totally depends on which unit to what the metrics are, or it looks much more standardized with the other version, original model.

Thank you.

Um, and then-

I hear you.

When you say the same model, are they going in the same locations where instead of it being a colocation where you still have the hospital and the school board?

Yeah.

It's in a little area, and you're just having it left available to be leased out eventually by maybe other businesses in that town. Now is it now that it-

Yeah. Yep. You're exactly right, Nico. That's exactly right. Our core customers are our anchor customers, which are education, healthcare, and then enterprise in that market, right? The carriers coming in to take space so they can peer and cross-connect to each other. You there?

Yeah.

Someone's cross-talking. I'm sorry about that. Yeah, Nico, if you can hear me, that's the original model, and that's why we're sticking with that model. We're just adding more capacity to bring those customers in that need higher density. We're always servicing that market, and that's what helps us get into those Tier 3 and Tier 4 markets, especially with permitting and everything, because we're low on the radar.

We're not 10 MW, 20 MW, 30 MW, 40 MW that they have to build out that's draining the community. We're going after power that's already there, that's in excess that the utility wants to make money on. In return, it helps the local community as well in tax dollars. They're actually welcoming us.

Thank you. Our next question comes from the line of Carl Weiss with ForeFront. Please proceed.

Hey, Doug. How you doing?

Good, sir. How are you? Long time no see.

Yeah. I was wondering if, you know, you can kinda talk to, you know, at scale, you know, as you go into the second half. You know, what does the, you know, the model look like from a gross margin perspective? Then with all of the, you know, winding or selling the rail business and winding down the management contract, what kind of OpEx should we expect, you know, on a go-forward basis?

We'll talk real quick. Let me take over the rail. The rail business we're hoping to offload or, you know, decommission that biz, offload it in the next 60 days. That's the goal on that. There's no burn on that business for us right now, so hopefully we'll exit that. It frees up a lot of SG&A, so we'll obviously not carry that load of employees and all the other expense. That's a good thing. That should happen in the next 60 days. But that-

And-

I'll turn it over to Leah on your numbers there.

Sure. Carl, good afternoon. We should expect to see our gross margin improve the second half of the year. Just a reminder with the revenue recognition for some of our business lines, you are going to see that revenue recognized in the second half of the year. We're looking at gross margin, you know, around 7%-6%.

Growth margin, shouldn't it? Well, you know, the data centers themselves are what 70%-80% type growth margins?

Yeah.

Yes, exactly. We should see around, for gross margin, you're about $7 million, $6 million.

Oh, got it. Okay.

Towards the end of the year. Yeah, exactly. Just, you know, when we report here in May, you'll see our Q1. But you'll be able to see that revenue picking up in Q3 and Q4.

OpEx should actually be coming down at the same time.

The OpEx? Yes.

Yes.

Yeah. Okay. Just, Doug, as you sit here today, you know, how long do you think this demand environment, you know, will last?

I think the high demand, like what we're seeing now, like when I go to GTC and there's 21 people trying to talk to me to sign contracts, I think that is gonna be strong for the next three to four years. What's critical about our business is the main data centers that are out there, and I think we might have talked about this before, the main data centers that are out there are gonna look to us as a hub and spoke because they're gonna wanna capture those markets that we're in, like Dumas, like Corpus Christi, Lubbock. These Tier 3 markets that we're going in, they need to have compute out there. So does the mobile operators. When we go to, you know, 6G, we're at 5G, we're going to 6G now.

They need to compute out at the, what we call the eyeballs. All that data is gonna take a lot of fiber to get back, a lot of network, right? They want to be able to own that network and they wanna own that customer. The best way to do that is obviously buy these mini data centers everywhere, bring them back to the core, because to be honest with you, they're all going back to a core anyway. It makes complete sense. I think, you know, the growth is gonna be very strong and extremely strong in the 3 MW-10 MW range, because right now, and I just did this exercise for another potential client, he needed 2 MW worth of power. 2 MW, which doesn't sound like a lot nowadays, but it's a lot.

I couldn't find it throughout the country in one data center. I'm talking about a legacy data center. The market is looking past the need of the 10 MW-15 MW data centers. Prime example, like Johnson & Johnson, they keep their stuff at a local data center. They go to like a QTS. They go to a Flexential. That's where they house. They don't go to a hyperscaler. They don't go to these big ones they're building. We're losing sight that the demand is there and they're still growing. I think you're gonna see the market for the next five to 10 years focusing on that 10 MW-15 MW range. We have a long haul, but we do have to build quickly.

Thank you.

Yes, sir. Okay. Tell the operator one more question and that's it. Thanks.

Our next question comes from the line of Tom Leonard with River Bay Investments. Please proceed.

Hey, Doug. Tom calling.

Sir, how are you?

Doing great. You provided a lot of color on the GPU as a service, the economics, the revenues of that. I'm trying to think about the revenue exit run rate this year. Could you put more color on the high density EDC, how total megawatts and what's the revenue value per megawatt for that high density colocation customer versus the, you know, mission end GPUs that you purchased?

Sure. On the GPU model, let me back up. The goal for this year is to deploy 25 MW. Now that can be through, you know, 300 kW pod that we deployed. Right now we have 15 of them on the ground at 300 kW. But the total megawatts, 'cause that's what we're being judged by right now. Everybody's being judged by megawatts, not by kilowatts or cabinets. The plan is 25 MW. When we look at the GPU model, for every megawatt, we're looking at $2 million a year in revenue. That's right on the head. That's what they're billing, that's what the industry shows, and that's what we're building to. It obviously is a very strong model to house GPU for customers.

Thank you. With that concludes today's question and answer session. I'd like to pass the call back over to Doug for any closing remarks.

Well, I'd like to thank everybody for joining today and we look forward to speaking with you in Q1 earnings. Thank you so much for your time.

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. The earnings call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as believe, 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, 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'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 the 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 Duos Technologies Group fourth quarter and full year 2025 earnings call. You may now disconnect.