Duos Technologies Group Inc

NASDAQ:DUOT

Earnings Call Analysis

Duos Technologies Reports Growth and New Agreements, Eyes Profitability in 2025

In Q3 2024, Duos Technologies achieved a remarkable 112% revenue increase to $3.24 million, driven by a $1.4 million contract for Railcar Inspection Portals. They've signed a significant $42 million asset management deal to oversee 850 megawatts of power generation, expected to boost future revenues and lead to profitability in 2025. Although overall revenue for the nine months declined to $5.82 million from $5.95 million, recurring services rose 42%. With a robust backlog exceeding $18.8 million, the company is well-positioned to capitalize on its expanding Edge Data Center and subscription services.

Strong Revenue Growth in Q3 2024

In the third quarter of 2024, Duos Technologies experienced a remarkable 112% increase in total revenue, reaching $3.24 million compared to $1.53 million in Q3 2023. This surge was fueled primarily by a $1.4 million contract modification linked to the successful implementation of two high-speed Railcar Inspection Portals. Additionally, recurring services and consulting revenue showed impressive growth, up 88% quarter-over-quarter, reflecting newfound customers in AI and subscriptions, alongside increased service contract prices. For the first nine months of 2024, total revenue slightly decreased to $5.82 million from $5.95 million the prior year, yet recurring revenues rose by 42%.

Cost Challenges and Margin Improvement

Cost of revenues for Q3 2024 rose by 78% to $2.32 million, attributed to significant amortization expenses and the new power consulting revenue, which was recognized at cost. However, gross margin improved dramatically by 306%, amounting to $919,000 due to the recognition of substantial project revenues tied to the Railcar Inspection Portals. The better margin reflects successful project completions that had been absent in the previous year, even though power consulting work incurred a one-time adverse effect.

Reduction in Operating Losses

Duos Technologies reported a net operating loss of $1.92 million in Q3 2024, a significant improvement from a loss of $2.97 million in Q3 2023. This $1 million reduction was achieved through higher revenues from projects and planned cuts in operating expenses, which fell by 11% to $2.84 million. The company anticipates stable operating expenses moving forward while continuing to seek efficiencies, which should further aid profitability. Additionally, the net loss improved significantly to $1.4 million compared to $2.95 million in the previous year, marking a 53% decrease.

Strategic Shift into Power Management

A major development for Duos is its new asset management agreement, estimated at $42 million over two years to manage 850 megawatts of power generation assets. This strategic move aligns with the increasing demand for data center operations and positions the company favorably as it leverages existing abilities in the power sector, reaffirmed by a management team experienced in handling similar projects at APR Energy. This agreement is expected to bolster revenues gradually, reflecting a promise of operational start in 2025.

Expansion of Edge Data Center Operations

Duos is actively developing its Edge Data Center business, with plans for 15 centers to be deployed by the end of 2025. Currently, six data centers are operational, supporting underserved areas by providing crucial colocation services. The company identified numerous opportunities for expanding its footprint in the Texas region, responding to a strong commercial demand for these services. The Edge AI division is poised for significant growth and complements the Railcar Inspection Portal business effectively.

Guidance on Future Revenue Streams

While formal revenue guidance is reserved for future updates, Duos projects promising revenue streams from its various initiatives. Upcoming subscription revenue from the railcar business is anticipated to reach between $2 million to $3 million in 2025, showcasing the potential for consistent income from innovative services. Furthermore, with a backlog exceeding $18.8 million, including substantial multiyear agreements, Duos is well-positioned for stable growth as operational improvements take effect.

Solid Financial Position Amidst Challenges

As of September 30, 2024, Duos maintained cash and equivalents of approximately $646,000, alongside over $2.21 million in receivables, contributing to a stable financial foundation. Inventory valued at more than $1 million consists largely of components for future projects, enhancing the company’s operational readiness. Despite fluctuations in cash flow due to recent activities, the management views the overall financial health as supportive of anticipated growth.

Management Insights and Outlook

Management remains optimistic about the direction of the company, highlighting the synchronization between distinct business units: Edge AI, Railcar Inspection, and Power Management. They expressed confidence in achieving profitability by 2025, supported by ongoing strategic partnerships and operational efficiencies. As the company transitions through Q4 2024, stakeholders are encouraged to look for improved predictability in financial results ahead.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon. Welcome to the Duos Technologies Third Quarter 2024 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry; and CFO, Adrian Goldfarb. Following the remarks, we will open the call for questions. Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call.

Now I'd like to turn the call over to Duos' CEO, Chuck Ferry. Thank you. You may begin.

[Charles Ferry, executive]

Welcome, everyone, and thank you for joining us. Yesterday, we issued our earnings press release and our 10-Q for the third quarter. This morning, we released news concerning the signing of an agreement for our newly formed Duos Energy Corporation. And just prior to this call, we have filed an 8-K covering this matter. This recent material event and the expected material impact on our financial performance in the coming years are a milestone achievement for Duos. Copies are available on the Investor Relations section of our website. I encourage all listeners to view the press releases, 10-Q and 8-K filings with the SEC to better understand some of the details we'll be discussing during today's call.

We have previously discussed our strategy to diversify our business and accelerate the time line to profitability. Today, I am pleased to discuss several recent developments that will enable the company to achieve this objective in 2025. As you know, we incorporated Duos Energy some weeks ago, given the increasing demand for power driven by the data center industry. As a reminder, many members of the Duos management team and I have significant experience in the power sector. With this, I am pleased to announce that we have signed a 2-year asset management agreement worth an estimated $42 million over the next 2 years to manage 850 megawatts of power generation assets. You may have already seen the press release, and we'll talk more about this opportunity after the financial presentation.

We have expanded our investment into our Duos Edge AI subsidiary with the addition of 3 new Edge Data Centers for a total of 6 now ready for immediate deployment. Operationally, the first edge data center is being installed in support of our Texas Region 16 school district customer located in Amarillo, Texas. We have already identified the locations and customers for the remaining 5 Edge Data Centers that are scheduled for deployment through Q4 and into Q1 of next year. The commercial demand for these Edge Data Centers, which provide colocation services to underserved areas is considerable.

We are making steady progress with our Railcar Inspection Portal business to include ongoing installation projects with Amtrak and the planning for a new Railcar Inspection Portal installation at a large chemical manufacturer. As I've reported earlier, we now have an important agreement and partnership in place with one of our long-term Class 1 railroad customers, currently the largest user of our wayside technology. The new agreement allows us to add subscribers to 7 of our 13 portals, along with an eighth portal owned by a different customer. We'll discuss each line of business in more detail after the financial review.

So at this time, I will turn it over to Adrian to cover our financial results.

[Adrian Goldfarb, executive]

Thanks, Chuck.

With today's announcement of the asset management agreement, my introductory remarks will focus on the expected impact of the recent expansions of the Duos business. From an historical perspective, the company has excelled in producing leading-edge technology, and we will continue to invest in research and development for technologies that can enhance the analysis of moving vehicles, including trains as well as trucks and buses and ultimately, aviation assets.

In the past 4 years, we have made investments in our delivery and operations capabilities to match the advanced nature of our technologies. We have built a team of professionals that have taken our core competencies and paved the way for the expansion of the markets we serve, ultimately leading to the growth in revenues and soon profitability to reward our loyal shareholders.

Our 3 divisions, while seemingly serving disparate markets are, in fact, quite closely related. For example, the Duos Edge AI business with its edge data center concept serving rural communities is an outgrowth of the EDCs we supply with our Railcar Inspection Portals, where they operate in remote and often challenging environments. And the EDC business often works in areas where power can be a challenge. Hence, all 3 business units are expected to provide complementary benefits and further enhance the business.

Before I get to the results, I would like to note that although we will not provide formal guidance today, our expectation is to issue such guidance near the end of the year. I can say that Q4 will be a transition period as the various businesses prepare for material operations in 2025 and that while some variability can be expected, we believe that our quarterly financial results will become much more predictable going forward.

And with that, let me discuss Q3 and the first 9 months. During the third quarter, total revenue for the quarter increased 112% to $3.24 million compared to $1.53 million in the third quarter of 2023. Total revenue for Q3 2024 represents an aggregate of approximately $1.69 million of technology systems revenue and more than $1.55 million in recurring services and consulting revenue, representing an 88% increase quarter-over-quarter in this important metric, which continues to grow.

The increase in overall revenues is primarily attributed to a $1.4 million contract modification associated with our 2 high-speed Railcar Inspection Portals project, which was awarded and largely recognized as revenue during Q3 2024. The increase in recurring services and consulting revenue is the result of new AI and subscription customers that were not present in the same quarter last year as well as increases in service contract revenue due to higher service contract prices. The company also generated $505,982 in services and consulting revenue from power consulting work, which was new to this quarter.

For the 9 months ended 2024, total revenue decreased slightly to $5.82 million from $5.95 million in the same period last year. Total revenue for the 9 months of 2024 represents an aggregate of approximately $2.22 million of technology systems revenue and approximately $3.6 million in recurring services and consulting revenue, which is also an increase in recurring revenues of 42% comparing to the equivalent periods.

Cost of revenues for Q3 2024 increased 78% to $2.32 million compared to $1.3 million for Q3 2023. The increase in cost of revenues was driven by $548,000 of amortization expenses recorded in 2024 to offset site revenue related to a nonmonetary transaction for the new services and data agreement signed during the second quarter of 2024. The $505,982 in services and consulting revenue from power consulting work, which was provided at cost, further increased the cost of revenue for services and consulting, which was also not present in the corresponding period of 2023.

Gross margin for Q3 2024 increased 306% to $919,000 compared to $226,000 for Q3 2023. The increase in margin was primarily due to the award of a change order associated with our 2 high-speed, transit-focused Railcar Inspection Portals that were substantially recognized in Q3 2024. This was offset by a $505,982 in services and consulting revenue from power consulting work, which had a onetime dilutive effect on gross margin. These same project revenues and subsequent margin impacts were absent during the third quarter of 2023.

Operating expenses for Q3 2024 decreased 11% to $2.84 million compared to $3.2 million for Q3 2023. The decrease in expenses is attributed to reductions in development and administrative costs due to the completion of certain activities and the impact of previously implemented cost reductions. Stable operating expenses are expected for the remainder of 2024, while we continue to focus on further efficiencies to support anticipated revenue growth.

The decrease in operating expenses is slightly offset by additional investments in sales resources for expansion of the commercial team that was made in the latter half of 2023 and in the first half of 2024. The company implemented a 5% reduction in staff in early Q3 2024. Beginning in late Q3 2024, the company allocated personnel costs, typically recorded under operating expenses, to costs of revenue associated with power consulting efforts, allowing the company to recover costs that would not have otherwise and effectively providing contribution margin on part of the initial power consulting revenues.

Net operating loss for Q3 2024 totaled $1.92 million compared to a net operating loss of $2.97 million for Q3 2023. Operating losses were thus more than $1 million lower than the comparative quarter of a year ago. The decrease in loss from operations was primarily the result of higher revenues recorded in the quarter related to the 2 high-speed RIPs for a passenger transit client, accompanied by a planned reduction in expenses, which resulted in an overall decrease in operating loss compared to the same quarter in 2023.

Net loss for Q3 2024 totaled $1.4 million compared to a net loss of $2.95 million for Q3 2023. The $1.5 million decrease in net loss represents a 53% reduction, which was mostly attributed to the increase in revenues as described above, a onetime gain from a fair value adjustment and the extinguishment of warrant liabilities as well as remaining successful in driving down operating costs.

For the 9 months ended 2024, net loss totaled $7.36 million or a loss of $0.98 per share compared to a net loss of $8.08 million or a loss of $1.12 per share in the same period last year. The decrease in net loss was primarily the result of planned decreases in operating expenses, as previously noted above, which offset the impact of slightly lower revenues in the equivalent period.

With regard to the balance sheet, at September 30, 2024, cash and cash equivalents was approximately $646,000 compared to $2.44 million at December 31, 2023. In addition, the company had over $2.21 million in receivables and contract assets for a total of approximately $2.86 million in cash and expected short-term liquidity. Duos also has more than $1 million in inventory as of September 30, 2024, consisting primarily of long lead items for future RIP installations that are expected to be deployed this year and 2025. My overall comment on the balance sheet is that it remains stable in anticipation of the expected growth in the business next year.

Turning to the backlog. At the end of the third quarter, the company's contracts in backlog and near-term renewals and extensions are now more than $18.8 million in revenue, of which approximately at least $1.6 million is expected to be recognized during the remainder of 2024. The balance of contract backlog is comprised of multiyear service and software agreements as well as project and consulting revenues. It should be noted that $10 million of the revenue backlog is for data access to support the new subscription business and is accounted for as a non-monetary exchange that resulted from an amendment to a Master Material and Service Purchase Agreement with a Class 1 railroad.

The agreement gives Duos the rights to use and resell all data required by 7 portals owned by the Class 1 railroad. The initial decrease in cash receivables is expected to be offset from revenues for data subscriptions to owners and lessors of railcar assets for the provision of mechanical and safety data and longer term provide an expected growing high-margin revenue stream from subscribers.

Duos anticipates an improvement in operating results to be reflected over the next 12 months as a result of the new initiatives described in this release, and the company will provide further updates as they become available.

This concludes my financial commentary, and I will now pass the call back to Chuck.

[Charles Ferry, executive]

Thank you, Adrian.

Let's talk first about our Duos Energy asset management agreement. I have previously spoken about the power industry experience that the Duos team and I have from our time with APR Energy. From 2016 to 2020, about 15 members of my current Duos team and I installed and operated more than 1 gigawatts of power. With our entry into the data center space earlier this year, the management team and I quickly determined that power and the increasing demand for data center computing, both cloud and edge, are linked.

About 3 months ago, we became aware that APR Energy's parent company, Atlas Corporation, wanted to exit the power business. With this opportunity in mind, we formed a partnership with Fortress Investment Group who will acquire the assets that will then be managed by Duos. I don't want to get too far into the details of the deal, given that the transaction will close upon the completion of customary closing conditions and regulatory approval, which we should expect in the coming 30 to 60 days. I will say that I've thoroughly enjoyed working with the Fortress team and our collective financial and legal advisers as well as the APR and Atlas team in putting the deal together.

So what does this mean for Duos? First, it entails managing all aspects of 850 megawatts of power consisting of 30 gas mobile turbines, which includes 20 General Electric TM2500s and 10 Pratt & Whitney FT8 mobile packs. These generators can run on either diesel fuel or natural gas, producing anywhere from 20 to 35 megawatts each depending on the model. We will also manage an extensive inventory of balance-of-plant, which is the connective tissue needed to build a power plant. This includes transformers, fuel and water forwarding and filtration equipment, switchgear, auxiliary black start generators and other key power plant equipment.

Since this is the same equipment that was managed by my team and I a few years ago, we have significant experience in all aspects of commercial deal development, engineering design, installation, operation and maintenance. Right now, if you want this kind of power, you will likely wait 24 months or more for the local utility or new equipment from an OEM to be ready to provide it. Our equipment and our team are ready immediately after closing, and we have experience building fast power plants in 30 days or less when required.

The second positive impact for Duos is our commercial pipeline. Currently, we have over 35 power opportunities, of which 30 are data center developers and 5 are international opportunities. I've never seen so much demand for these assets. What we didn't expect that during our pre-deal commercial work was to find power opportunities. It has also opened more opportunities for Edge Data Center line of business, and our pipeline for that line of business has grown dramatically in just the last 3 months.

The third positive impact for Duos is financial. Again, we reported earlier today that the estimated value of the management contract is $42 million of revenue over 2 years. These revenues, along with the backlog we already have and expected growth of our Edge Data Center business and Railcar Inspection Portal business in the coming year allow me to confidently say we will become profitable in 2025. I know there will be lots of questions around this opportunity, but we want to be cautious in how much information we released during the closing period and regulatory review.

Let's talk about our Edge Data Center business. Duos Edge AI was incorporated this last summer, and already, we have 6 Edge Data Centers ready for immediate deployment where we will own, install, operate and maintain these colocation Edge Data Centers. As I mentioned earlier, we have a team on the ground right now installing the first Edge Data Center in support of our Texas Region 16 school district customer located in Amarillo, Texas. The next 2 Edge Data Centers will be deployed by year-end into the city of Pampa, Texas. We have already identified the locations and customers for the remaining Edge Data Centers, also primarily in Texas, with scheduled deployments through Q1 of next year. The commercial demand for these Edge Data Centers, which provides colocation services to underserved areas is overwhelming.

Our pipeline has grown significantly in the last few months and in some cases, includes a requirement for behind-the-meter power solutions similar to the larger cloud data centers. Our plan is to have at least 15 Edge Data Centers deployed by the end of 2025, but Doug Recker and I are exploring options to accelerate that. I also wanted to mention our strategic partnership with Accu-Tech, who is one of the largest distributors of infrastructure to the data center market. This partnership has been key to accessing the Edge Data Center manufacturing capability and supporting the equipment necessary to operate and maintain them. We have also continued our strategic partnership with FiberLight and other carriers to bring lower data latency and more robust networks into these underserved markets.

Now let's talk about our Railcar Inspection Portal business. We are making steady progress on our project with Amtrak. As I have previously reported, we have incurred delays out of our control with this installation, which have impacted us financially in previous quarters. However, we do continue to add financial value to this contract, and we are in discussions for additional portals in the future. We did recently install a large Edge Data Center into the Secaucus construction site, which you will see if you were traveling on the Northeast corridor passenger rail line. We are also planning for the deployment of a new portal at a large chemical manufacturing plant also located in Texas.

Here's an update on our subscription offering. Late last year, Duos and Amtrak began a pilot program to test the subscription concept. At 3 of our portal locations, Amtrak's long-distance passenger trains are scanned and the machine vision images are sent in real time to Amtrak mechanical inspectors who have used the data with excellent results during the testing period. In partnership with Canadian National, Duos now offers shippers and car owners that transit the CN network the opportunity to subscribe to our cutting-edge machine vision data safety. This safety information can be used in various ways to include predictive maintenance, train analytics and overall fleet health and maintenance. The intent is to have better maintain railcars that make the network safer and more productive for everyone. We are getting significant interest now with this offering, especially with several large chemical producers and shippers.

With the diversification and expected expansion of the business, I have taken several steps over the last few months to adjust the organization of the company to accommodate and properly manage these 3 lines of business. First, we have appointed Chris King, previously the Chief Commercial Officer, to be our Chief Operating Officer at the group level. And let me just make that correction. First, we have nominated Chris King, previously the Chief Commercial Officer, to be our Chief Operating Officer at the group level, and we expect him to take that position here very shortly. Jeff Necciai, our CTO, has assumed a broader leadership role to lead our Railcar Inspection Portal line of business. Doug Recker continues to be the President and lead for our Edge Data Center business. But in the last few months, we have expanded his role to be the Chief Commercial Officer at the group level.

We have reorganized the staff where some of the employees are assigned into the business units permanently but others fall into a shared services organization supervised by Chris King, Chief Operating Officer; and Adrian Goldfarb, Chief Financial Officer. This allows us to support the 3 different lines of business in a cross-functional manner. Again, the strength of Duos is our management team and our employees. As we grow, it allows me to offer more responsibility and professional opportunities to high potential leaders and employees. Building and growing highly effective teams is what I've always loved to do when serving in the Army and now in my civilian business career.

As always, I want to thank our business partners, our Board of Directors and our shareholders for their continued support. The outlook for Duos looks very promising right now, and I'm excited to be able to lead it. Thank you for listening, and we'll now open the call for your questions. Operator, please provide the appropriate instructions.

[Operator]

[Operator Instructions] Our first question here is from Mike Latimore from Northland Capital Markets.

[Mike Latimore, analyst]

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

[Charles Ferry, executive]

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

[Mike Latimore, analyst]

Great. Great. And then on the $42 million, I guess that's revenue over 2 years. And just to be clear, is that guaranteed revenue? And also, does that build over time as you deploy these turbines? Or is there some kind of sort of normalized quarterly run rate?

[Charles Ferry, executive]

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

[Mike Latimore, analyst]

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

[Charles Ferry, executive]

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

[Mike Latimore, analyst]

Yes. Yes. And it's a 2-year deal, but I'm guessing that customers will need power beyond 2 years.

[Charles Ferry, executive]

That's absolutely correct. Yes. We're -- again, we have a very robust pipeline. We've been -- during the last 90 days or so, we've been very active commercially developing deals as part of putting this together. There are a lot of customers, particularly in the data center space that want power at least 3 years. Some of them are calling for 5 years. So this is a new kind of thing for the data center space, this behind-the-meter concept. But it's -- obviously, all the analysts like yourself have seen a lot of discussion about it and understand that it's going to be in high demand for the next several years at the moment.

[Mike Latimore, analyst]

Great. And then just last one on the data center business. I think you said that there's $3.3 million of recurring revenue in '25 tied to the 6 you currently have. Is that right?

[Charles Ferry, executive]

That's -- well, it starts with the 6. So what it really means is that we have a business plan similar to the energy business to deploy 15 Edge Data Centers that will be put in incrementally starting now all the way through the end of 2025. So that $3.3 million really represents kind of an incremental buildup to that 15 by the end of the year. And Adrian is going to keep me straight. Did I get that correct?

[Adrian Goldfarb, executive]

That is absolutely correct.

[Charles Ferry, executive]

Okay. Thank you, sir.

[Operator]

Our next question is from Ed Woo from Ascendiant Capital Markets.

[Edward Woo, analyst]

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

[Charles Ferry, executive]

Yes. Well, let's talk about the Edge Data Center business first. Look, there are certainly competitors out there. One potential competitor, but also a potential partner for us is Ubiquity Edge business. That's the business that Doug Recker sold his EdgePresence business to. But to be honest right now, we've actually been working in partnership with Ubiquity. At this point right now, the demand for the Edge Data Center is so high that there's enough work share for everybody. And we just really haven't seen any direct head-to-head competition as of yet. I think we should expect that we will see some. But at this moment, there's not too many folks out there doing this in a similar way that we're doing it, where we're basically owning, installing and operating those Edge Data Centers at this moment.

On the power side, that's a much more competitive space. Typically, we think of competitors in that space as the larger OEMs, such as like General Electric, Siemens, Caterpillar, Cummins and others. These obviously are the manufacturers of the generation equipment itself. And then there's smaller companies that also kind of participate in the temporary power or power rental business. I won't go into those details right now, but we're very, very familiar with all of them. The challenge for everybody in that space right now is the availability of equipment. So if you want to get -- if you want to put a behind-the-meter solution in to, let's say, to a new data center project, you're probably going to get into a waiting line that's going to be at least 24 months long, potentially longer.

If you're going to try to have a utility cover down on, let's say, 200 to 300 megawatts, some of the utilities have a similar challenge where they can't -- they're not going to be able to put in new equipment for 24 to 36 months and/or the transmission and distribution infrastructure to be able to deliver that power to the site itself. So the challenge the data center space has at this moment is a shortage of equipment. We're fortunate right now. We had an opportunity to take down 850 megawatts. That equipment is immediately available right now as we speak. And we're talking to a lot of folks that are interested in putting their names on that equipment right now.

[Operator]

Next question here is from [ Nikolai Sokov from La Chupacabra ].

[Unknown Analyst]

Can you hear me?

[Charles Ferry, executive]

Yes. Yes, we hear you. [ Nicolai ], it's good to meet you. I don't think we've spoken to you before. So go ahead.

[Unknown Analyst]

No, no, no, no. Well, I actually -- first of all, let me start by saying, Chuck, you did an excellent presentation of the numbers. And the guy before you also did an excellent presentation. I think you guys both did an excellent presentation. I like your company. I was interested in 2 things. First of all, the Amtrak situation, right? So are we hoping to expand this in a more, how shall we say, quicker way? There's already Amtrak contracts, right? There's contracts with the United States government, kind of quasi-government. Are we hoping to expand that quickly?

[Charles Ferry, executive]

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

That being said, we do expect...

[Unknown Analyst]

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

[Charles Ferry, executive]

Yes. I think what kind of -- what's going on right now is, like I said, over the last year, because we see Amtrak trains in some of our other portals here in the United States. So really, Amtrak has been kind of using our tool at those 3 other portals for the last year. This is very, very new technology to the railroads, quite frankly. And Amtrak has been very successful in kind of their initial test run. And so we are actually in discussions to build additional portals on the larger Amtrak network right now.

[Unknown Analyst]

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

[Charles Ferry, executive]

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

[Unknown Analyst]

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

[Charles Ferry, executive]

Well, I appreciate your questions, [ Nicolai ].

[Operator]

Next question here is from Dan Weston from West Capital Management (sic) [ WestCap Mgmt. ].

[Dan Weston, analyst]

Congrats again on your agreement with Fortress. Some of the questions have been answered. If I could follow up, and I know you're limited in what you can say. But Chuck, you mentioned that on the estimated $42 million over 2 years. I guess I just wanted to understand, is that dependent on how many megawatts are deployed is how you'll get calculated your revenue stream?

[Charles Ferry, executive]

Yes, that's part of it. At a broad level, again, we put together this business plan with -- and so we do that where we generate a set of operational assumptions -- and then we match obviously, financial assumptions to that to build out the model. So -- and there's -- so the key activities that we'll conduct in that. One, we'll provide some, I'll call it, back-office services. But more importantly, we'll provide the supervision of maintenance of the assets and preparation of those assets for the deployment. We'll supervise the installations and manage the installations of those assets on certain projects. And then once the power is installed, we'll actually supervise and manage the operations and maintenance of those assets when they're actually producing power.

So depending on when some of those key activities happen, in particular, the installations, that can kind of cause the needle to kind of go up or down in that. And we know that based on our experience from running the assets before with APR.

[Dan Weston, analyst]

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

[Charles Ferry, executive]

Yes. I mean if we were to address -- well, first off, we would be sold out. Just if we were able to, let's just say, pull down, let's just say, 5 on the high side, maybe 10 of those opportunities, we would be sold out. So I think the way we want to think about this is, look, we're starting off with this first tranche of 850 megawatts. But I think Duos with Fortress Investment Group will look for other opportunities to expand that business, expand the amount of those assets and the overall value of the deal.

[Dan Weston, analyst]

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

[Charles Ferry, executive]

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

[Dan Weston, analyst]

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

[Charles Ferry, executive]

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

[Dan Weston, analyst]

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

[Charles Ferry, executive]

Yes. We talked about the 3. Yes. So yes, recently, we -- so we acquired 3 additional Edge Data Centers that had already been manufactured. And that was actually a deal that we did with Ubiquity. So Ubiquity's Edge Data Center business had some additional undeployed Edge Data Centers. We got into a commercial discussion. And so they -- we kind of cut a deal where we took those 3 Edge Data Centers, and we'll deploy them in return for some longer-term consideration on those Edge Data Centers with Ubiquity. So it was kind of a win-win in this situation. Again, we view them as a partner. At the same time, they could be a competitor. That's no different than in the power industry. You could potentially consider General Electric or Siemens or Pratt & Whitney as a partner. And then in other days, depending on the opportunity, they're competing against you. So it's not really a whole lot different.

[Dan Weston, analyst]

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

[Charles Ferry, executive]

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

[Adrian Goldfarb, executive]

Just subscription.

[Charles Ferry, executive]

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

[Dan Weston, analyst]

Got it. Okay. I'll follow up with you in a little while. Congrats again. It looks like a wonderful deal.

[Charles Ferry, executive]

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

[Operator]

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

[Charles Ferry, executive]

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

[Operator]

Before we conclude today's call, I'd like to provide Duos' safe harbor statement that includes important cautions regarding forward-looking statements made during this call. This earnings call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as beliefs, expects, may, will, should, anticipates, plans and their opposite or similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties and risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based and could cause Duos Technologies Group actual results to differ materially from those anticipated by future forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A in Duos' annual report on Form 10-K, which is expressed 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 Second Quarter 2024 -- sorry, Third Quarter 2024 Earnings Conference Call. You may disconnect your lines at this time. Thank you again, and have a great day.