Good afternoon. Welcome to Duos Technologies' Third Quarter 2021 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry and CFO, Adrian Goldfarb. Following their remarks, we will open the call for your questions. Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. Now, I'd like to turn the call over to Duos' CEO, Chuck Ferry. Sir, please proceed.

Welcome everyone, and thanks for joining us. Earlier today, we issued a press release announcing our financial results for the third quarter of 2021 as well as other operational highlights. A copy of the press release is available in the Investor Relations section of our website. I encourage all listeners to view that release as well as our forthcoming 10-Q filing with the SEC to better understand some of the details we'll be discussing during our call. Now let's get started. From a high level, in the third quarter, we delivered improved results compared to recent quarters and the prior year. As a headline, revenue increased 36% year-over-year, which was larger the result of winning anticipated business that has been previously delayed. More specifically, we received long-awaited official notice to proceed on making upgrades to two current rail inspection portals already deployed with an existing Class I rail customer. This quarter's modest return to growth was an encouraging step in the right direction, while we positioned ourselves to meet an increasing pipeline of large contract opportunities in the coming months. While the macroeconomic climate continues to present challenges, including increasing pricing pressure and extended lead times for certain parts, we are taking steps to mitigate some of these issues such as obtaining long lead items in advance of formal notices to proceed in order to reduce the overall deployment time for technology systems. Internally, we have made improvements to processes across all work functions, further strengthened our current solutions and invested in our technology capabilities, all of which have our company's strongest position ever operationally. As of today, we remain confident in our ability to meet our near-term financial targets. I can firmly state that I've never been more optimistic about this company, our team and our future. Longer term, we believe the initial progress we are seeing today supports the work we've done thus far and underlies a greater opportunity ahead. Now, before I provide further updates, I'd like to turn the call over to our CFO, Adrian Goldfarb, who will walk us through the financial results for the quarter and the first nine months of the year. Adrian?

Thank you, Chuck. My comments today will be broadly focused on our results for the third quarter and nine months ended September 30, 2021. I want to remind everyone of our income statement presentation changes that we implemented at the beginning of the year. As we did in the prior quarter, we will be presenting two components to revenue; technology systems, which records revenue from turnkey engineered systems, such as our railcar inspection portal, as well as AI software revenue and services and consulting, which primarily records recurring revenues from maintenance and support business, plus any consulting services that are undertaken. Further, we now record all costs of delivering those revenues, including all the staffing related to those operations in production mode, plus associated overhead. As previously discussed, we have been upgrading and expanding our overall technology capabilities with a particular focus on AI as a key component of our overall product portfolio. Our average revenue per installation is now higher as a result of meeting the demand from our customers or increased functioning capabilities. In addition, our revenue mix will feature growth in our recurring revenue services and software going forward. Now turning to the numbers. Total revenue for the third quarter increased 36% to $1.74 million compared to $1.28 million in the equivalent quarter in 2020. This was the aggregate of about $1.15 million for technology systems and $587,000 in recurring services and consulting revenue. The increase in total revenue was the result of progress in new installations in the technology systems portion of the business, following the receipt of an anticipated "notice to proceed" on a significant upgrade to two key installations. Some of that revenue was recognized during the quarter resulting in a 58% increase in technology systems revenue in comparison to the equivalent quarter a…

Thanks, Adrian. For the remainder of my remarks today, I'd like to provide an update on our strategy and the progress we are making within our 2021 operating plan. I will then provide a brief update on our outlook before turning it over to questions. As a reminder, our plan encompasses operational, commercial, financial and personnel specific areas. Beginning with operations. As I've stated many times before, at Duos, we are committed to achieving operational and technical excellence. We believe this approach leads to higher customer satisfaction and improved deal closure rates. I'll now provide a few updates from the quarter on how these efforts are progressing. Over the last few months, we've made meaningful improvements to how we execute our manufacturing, including instituting more rigorous quality controls and in-house testing prior to equipment being shipped. This is expected to reduce costs during the field installation and reduce after installation service issue, which will have a net positive effect on operating costs and subsequent cash usage in the year. We've also recently introduced a new upgraded generation two version of our obliquevue with better and improved environmental hardening to make this piece of equipment more able to withstand the rigors of the Canadian winters, where some of our portals have been deployed. Within our artificial intelligence division, we are devoting additional resources to meet demand for more comprehensive algorithm development, including the hiring of additional internal staff and subject matter experts. More specifically, we brought on a highly experienced mechanical car inspector to help improve and verify the inspection process. We've also onboarded our own AI image analysis and labeling team. In the recent months, we’ve also – while we've dealt with changeover, we had contracted with an outside party to ensure our work did not fall behind to the…

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. Our first question comes from the line of Gary DiStefano with ThinkEquity. Please proceed with your question.

Thanks, operator. Congratulations, Chuck and Adrian on the quarter. Just want to get your thoughts around two things. One, what's your expectation for the revenue split going forward between tech systems and the recurring services revenue? And also, which solution or tech system do you expect to drive sales moving forward? Thanks.

Yes. Thanks, Gary. I'll start on question number one, which is the expected revenue split, and Adrian can clean up for me, if I mess it up. So right now, we're about an 80-20 split right now. So we've got about 80% of our revenue is related to CapEx or one-time sales, about 20% is for recurring revenue. On a go-forward basis and what we're projecting right now is that we should improve that this coming year to about a 70-30 split and potentially even better. So it'd be 70% kind of CapEx one-time and 30% recurring revenue. Adrian, anything…

That is correct. We've had the objective for a fair while to increase the percentage of our revenue from recurring revenue sources. And this quarter, in fact, the first nine months, you're starting to see the of that. And that's because the number of installations we have is obviously expanding. And then when we do add-ons, which were involved in the moment, that drives the recurring revenue portion of the systems for support and maintenance up from that. The other thing that's one of the great benefits of this business is that the revenue sources for these types of contracts, although it's not that many contracts tends to be very, very long-term, so people sign long-term service agreements, they tend to stick with us. So you'll see that recurring revenue climbing consistently. And I think as we also reported, the profitability on those tends to be increasing as well.

Yes. On your second question, Gary, is what's going to really drive, what are we expecting to drive most of our revenue for next year? Right now, our number one horse right now remains the rail inspection portal with our Class I customers. But now also, we're seeing more activity inside the transit space. I will tell you that we will pick up the pace I think with our secondary offering, that's our automated logistics information system or truck inspection portal. We're seeing more demand for that, particularly with the backups that a lot of the seaports and the intermodal yards that we're seeing right now. We're also working with one of our Class I customers actually add UAV or drone as a solution, and use that in combination with our rail inspection portal. That's a concept that we're developing right now, and we'll talk about more in future calls.

That makes sense. Thanks. Keep up the good work.

Thanks, Gary.

Our next question comes from the line of Richard Jackson with TrueNorth Financial. Please proceed with your question.

So I'm afraid Gary stole it, but I'm curious, I see you're going to need to raise more capital. It's really more of a comment than a question, although I'd appreciate some feedback. You did say – that you'd need any capital six months ago. I would encourage you to get more capital than you need because that would not only make sure that you have all the working capital necessary, but it also give stock buyers greater confidence, there won't be dilution in the future. And I'm curious if you guys are looking at anything besides issuing additional stock.

Yes. Thanks. Appreciate the question. And it's a good one. We discussed this topic extensively in the prepared remarks, but just to reiterate with the current business we have right now. The current business we have right now, we won't need to go out and raise funds. But that being said, sharing these larger contracts, we're working with right now come to fruition. In the next couple of months, it certainly would be prudent for us considering the current climate to increase inventory and working capital ahead of time to ensure we can deliver on those projects in a timely manner and raising capital would need to be for a specific purpose, most likely the support business in hand are very close to it.

So does that mean it would be a debt instrument associated with the order? Or is it pretty much equity you're looking at to raise your money?

Yes. I think right now, we've made preparations that if we need to do a raise, that we’re prepared to do that. Right now, we don't need to. Like I said previously, most likely in the form of equity at this point right now, we would not, I think, be looking particularly at debt right now.

Yes. We've made no decisions in that area. We're really monitoring. And it's really based on as Chuck mentioned, on a need. So we'll continue to evaluate that as we go forward. The expectation obviously is that we are expecting major contracts as we've said throughout the remarks, and so that will be in concert with that.

Well, glad, that's exciting. I encourage you to get more than you need. Thank you.

Appreciate the question. Thanks.

There are no further questions at this time. I'd like to hand the call back to management for closing remarks.

Yes. Thank you very much, operator. And again, appreciate everybody coming on to the call today. And it's always a pleasure to update everyone. Thank you.

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. This earnings call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking terminology such as believes, expects, may, will, should, anticipates, plans, 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 Inc.'s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to those described in Item 1A in Duos Annual Report on Form 10-K, which is expressly incorporated, herein, by reference and other factors as may periodically be described in Duos filings with the SEC. Thank you for joining us today for Duos Technologies Group’s 2021 third quarter conference call. You may now disconnect.