Duos Technologies Group's Q3 2025: Contradictions Emerge on Revenue Sustainability, SG&A Expenses, and Edge Data Center Deployment Timelines

Date of Call: November 12, 2025

Financials Results

• Revenue: $6.88M in Q3 2025, up 112% YOY (Q3 2024: $3.24M); 9M 2025: $17.57M, up 202% YOY (9M 2024: $5.82M)
• EPS: Net loss per share -$0.49 for the 9 months ended 2025 (vs -$0.98 prior year); Q3 net loss $1.04M
• Gross Margin: Gross margin $2.52M in Q3 2025, up 174% YOY (Q3 2024: $0.919M)
• Operating Margin: Net operating loss $1.12M in Q3 2025 (improved from $1.92M in Q3 2024)

Guidance:

• Consolidated revenue for 2025 expected to be $28M–$30M.
• Maintain adjusted EBITDA profitability going forward (Q3 adjusted EBITDA positive ~$491k; adjusted EBITDA margin ~7%).
• Backlog ~ $26M with ~ $9.5M expected to be recognized in Q4 2025 and $4M–$5M in near-term awards/renewals.
• Management expects further growth and full-year adjusted EBITDA profitability in 2026 as Edge deployments and new infrastructure offerings scale.

Business Commentary:

* Revenue and Profitability Growth: - Duos Technologies Group reported a 112% increase in revenue for Q3 2025, reaching $6.88 million compared to $3.24 million in Q3 2024. - The company also achieved positive adjusted EBITDA profitability for Q3 2025, a quarter ahead of projections. - The growth was driven by the execution of the Asset Management Agreement with APR Energy.

• Edge Data Center Deployment:
• Duos aims to have 15 data centers installed by the end of 2025, with 6 already in place and plans to install the remaining by the end of the year.
• The company is expanding its presence outside of Texas, with its first Edge Data Center in Illinois.
• This expansion is driven by the growing demand for Edge Computing, particularly in underserved rural markets.

• New Modular Data Center Patent:
• Duos was granted a new patent for a 'Modular Data Center Entryway,' enhancing its competitive advantage in clean environment and security standards.
• This patent introduces a clean room-level environment protection, ensuring the security and reliability of data center operations.

• The patent is expected to open up new opportunities in healthcare, finance, and other sectors requiring strict compliance standards.

• Strategic Focus on Data Center and Edge Computing:

• Duos is prioritizing its resources in the Edge Computing space and adding new data center service offerings to diversify its revenue streams.
• The company plans to launch Duos Technology Solutions, which will serve as a strategic sourcing partner for data center infrastructure equipment.
• This strategic shift is in response to the growing demand for AI computing power and the limitations of traditional data center power supply.

Sentiment Analysis:

Overall Tone: Positive

• Q3 revenues rose 112% to $6.88M; adjusted EBITDA profitability achieved in Q3 at ~$491k (7% margin); cash and short-term receivables >$35M (up ~422% YOY); shareholders' equity ~ $50M. Management: 'we remain on plan' and reaffirmed 2025 revenue guidance of $28M–$30M and expects full-year adjusted EBITDA profitability in 2026.

Q&A:

• Question from Unknown Analyst (Investor): How is the growing demand from AI and cloud customers affecting your business? Are you noticing any changes in what customers need or the size of the deals?
  Response: Demand is strong; power constraints at hyperscalers are driving customers to Edge solutions—Duos is deploying modular 300 kW pods and building local carrier peering in Tier 3/4 markets to capture those opportunities.

• Question from Unknown Analyst (Investor): You reported a 112% year-over-year revenue increase and positive adjusted EBITDA this quarter. Can you elaborate on what drove this performance and how sustainable this trajectory looks heading into 2026?
  Response: Q3 growth was driven primarily by Duos Energy executing the Asset Management Agreement with APR (including $5.15M AMA revenue and ~$904k equity-related revenue); management expects to sustain growth by scaling Edge deployments and new infrastructure/technology solutions to replace AMA revenue and drive more profitable 2026 results.

• Question from Unknown Analyst (Investor): You've highlighted progress toward 15 Edge Data Center deployments this year. Can you update us on the current progress and timing for the remaining installations? And are there any constraints on the supply chain?
  Response: On track: 6 installed, 4 leaving the factory this month, and 5 more at month-end/early December; supply chain is manageable since pods are 300 kW and use largely off-the-shelf components with shorter lead times.

• Question from Unknown Analyst (Investor): With your new modular data center patent now granted, how does this technology enhance your competitive advantage, and how do you intend to monetize it?
  Response: The patent's clean-room/mantrap entry supports SOC2-level access and reduces dust/contamination risk, making pods suitable for regulated customers (finance, healthcare); Duos will monetize via differentiated sales, higher-value contracts, SOC2 compliance and premium services.

• Question from Unknown Analyst (Investor): (Follow-up) Are you seeing changes in deal sizes and deployment timelines as customers shift to Edge?
  Response: Yes—customers are opting for smaller, faster-deployable capacity (e.g., 5MW via two pods deployable in ~120 days) rather than large megasites, and Duos can deliver that modular capacity quickly.

• Question from Unknown Analyst (Investor): Where are you prioritizing your target markets for Edge deployments? What factors guide your regional expansion strategy?
  Response: Priority is underserved Tier 3/4 markets—proof points in education (Amarillo/Region 16) and expansion beyond Texas (first out-of-state contract in Illinois); strategy driven by education/healthcare demand, carrier peering opportunities and rural connectivity needs.

Contradiction Point 1

Revenue Increase and Sustainability

It involves the explanation of the revenue increase and the sustainability of the revenue trajectory, which is crucial for investor expectations and strategic planning.

What drove the 112% year-over-year revenue increase, and how sustainable is this trajectory through 2026? - Adrian Goldfarb(CFO, Duos Technologies Group)

2025Q3: The revenue increase was driven by the Asset Management Agreement with APR Energy, which Duos staff executed successfully. - Charles Ferry(CEO)

If Duos installs 65 data centers by 2026, how much annual recurring revenue would this generate? - Richard Jackson (True North Financial)

2025Q2: Installing 65 data centers by the end of 2026 is expected to generate more than $20 million in recurring annual revenue. - Adrian G. Goldfarb(CFO)

Contradiction Point 2

SG&A Expenses

It concerns the projection of SG&A expenses, which impacts operational efficiency and cost management.

How much will SG&A increase to achieve revenue goals, particularly in 2026? - Adrian Goldfarb(CFO, Duos Technologies Group)

2025Q3: SG&A is expected to remain flat, with staffing levels adequate for current operations and no significant increase anticipated. - Adrian G. Goldfarb(CFO)

How much will SG&A increase to meet revenue targets in 2026? - Richard Jackson (True North Financial)

2025Q2: We expect our operating expenses to increase in the second half of this year as we ramp our sales and marketing efforts. - Adrian G. Goldfarb(CFO)

Contradiction Point 3

Revenue Growth Drivers

It involves changes in the explanations for revenue growth drivers, which are crucial for understanding the company's financial performance and strategic focus.

What drove the 112% YoY revenue growth and is this trajectory sustainable through 2026? - Adrian Goldfarb (CFO, Duos Technologies Group)

2025Q3: The revenue increase was driven by the Asset Management Agreement with APR Energy, which Duos staff executed successfully. - Charles Ferry(CEO)

Will Q2 revenue be similar to Q1? - Michael Latimore (Northland Capital Markets)

2025Q1: When we look at the top line guidance for 2025, we are 85% certain we can deliver between $120 million and $140 million in revenue, assuming no major disruptions. - Adrian Goldfarb(CFO)

Contradiction Point 4

Edge Data Center Deployment Progress

It involves changes in the timeline and progress of Edge Data Center deployments, which are critical for understanding the company's growth strategy and operational capabilities.

Can you update us on progress and timing for the remaining 15 Edge Data Center deployments this year? Are there any supply chain constraints? - Adrian Goldfarb (CFO, Duos Technologies Group)

2025Q3: Duos Technologies Group is on track to complete 15 Edge Data Center deployments by year-end, with several installations already in progress. - Doug Recker(President)

Will the 150-200 Edge Data Center guidance by 2027 apply to school districts or hyperscaler customers? - Dan Weston (West Capital Management)

2025Q1: We expect to complete 150 to 200 Edge deployments by the end of 2027. - Chuck Ferry(CEO)

Contradiction Point 5

Edge Data Center Deployments and Timing

It directly impacts expectations regarding the deployment timeline and completion of Edge Data Centers, which are critical for the company's growth and revenue projections.

Can you provide an update on the current progress and expected timeline for the remaining 15 Edge Data Center deployments this year? Are there any supply chain constraints affecting the deployment? - Adrian Goldfarb (CFO, Duos Technologies Group)

2025Q3: Duos Technologies Group is on track to complete 15 Edge Data Center deployments by year-end, with several installations already in progress. - Doug Recker(President)

How many data centers are currently operational? Are there plans to reach 15 by year-end? - Vijay Devar (Northland Capital Markets)

2024Q4: Expecting 15 by year's end. - Charles Ferry(CEO)