0:05 Good afternoon. Welcome to Duos Technologies Fourth Quarter and Full Year 2021 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 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. 0:31 Now, I'd like to turn the call over to Duos CEO, Chuck Ferry. Sir, please proceed.

0:38 Welcome everyone, and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the fourth quarter and full year 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-K filing with the SEC to better understand some of the details we'll be discussing during our call. 1:03 Now let's get started. The fourth quarter marked a strong finish to an eventful year. Looking at our financial results, Q4’s revenue accounted for 45% of our total output for the year. This metric underlies what was a tale of two halves for the business filled with both challenges and opportunities in a year where we were turning the business around. Based on my previous experience turning around both military and civilian organizations, it can sometimes feel like it's going to slow. But if you stick to it, you will make progress. Here at Duos, we are starting to make meaningful progress. 1:37 But first, let me discuss the challenges that we pushed through in 2021. Let’s start off with the task of turning the business around, while simultaneously dealing with the effects of COVID-19 rising inflation and a problematic supply chain, which in turn caused delays in orders in the first half of 2021. But dual stuck to it and continue to execute on our turnaround plan. We have made significant technical and operational improvements. We have upgraded our staff and are now benefiting from the new team's talent, determination and teamwork. We have deployed improved technical modifications into the field. and delivered improved artificial intelligence, which is directly responsible for several new orders as we ended 2021 and started 2022, which includes orders with our existing Class I customers along with Toronto Transit Authority and Amtrak. This, along with a successful capital raise this past February puts us in a much improved position with strong order book and with the capital that we need. 2:36 As we look to the year ahead, I'm more confident than ever that the markets we address want our solution. We have a team that can deliver on it, and we're in a good financial position. I'm not saying everything to turn this business around is done. There's still a ton of work to be done, and there are risks, but it is great to be able to discuss the good progress that we have made thus far. We will discuss more details about the business. So before I go any further, I'd like to turn the call over to Marin Goldfarb, who will walk us through the financial results for the quarter and the full year. Adrian?

3:08 Thank you, Chuck, and good afternoon, everyone. My comments today will be broadly focused on our results for the fourth quarter and full year ended December 31, 2021. I want to remind everyone of our income statement presentation changes that we implemented at the beginning of 2021. The -- as we've done for the past few quarters, 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. 3:51 Further, we also 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 for increased function and capabilities. In addition, our revenue mix will feature growth in our recurring revenue services and software going forward. 4:28 Now let's turn to the numbers. Total revenue for the fourth quarter was essentially unchanged at $3.72 million compared to $3.78 million in the same period of 2020. This amount represents an aggregate of approximately $3.12 million of Technology Systems revenue and $592,000 of recurring services and consulting revenue. The company's recurring services and consulting revenue is expected to increase our strategic investments in AI systems and infrastructure expand. 5:02 Total revenue for the year increased 3% to $8.26 million compared to $8.4 million in the same period in 2020. This amount represents the aggregate of approximately $5.87 million…

17:03 Thanks, Adrian. For the remainder of my remarks today, I'd like to provide an update on our strategy and the progress we're making within our 2022 operating plan. I will then provide a brief update on our outlook before turning it over for questions. When I joined Duos roughly 18 months ago, one of the first tasks we performed was to assess the company's position in terms of commercial, operations, finance and personnel. From there, we spent the better part of 1.5 years implementing a plan designed to turn the business around and make sure it is positioned to grow and scale. We have made good progress, and we'll continue to improve on two key goals: First, deliver operational and technical excellence to our customers; and second, prioritize our product offerings and focus on a more profitable and sustainable go-to-market strategy. That with a view toward improving margins and increasing recurring revenue. 17:54 As we plan ahead and with our internal -- and with our initial turnaround efforts implemented, I believe it's appropriate to provide an updated road map, which reflects the significant progress we've made to date and also considers the current market environment. Our strategy going forward is focused on five key areas: one, we will continue efforts to improve our technical and operational delivery, which will make cap customers that order more equipment and services. We will continue to add more recurring revenue through our services, maintenance and artificial intelligence offerings. We will continue to keep our primary commercial focus in the rail sector, where we expect to add more work with existing customers add new Class I and transit customers and then selectively bid on international opportunities and consider complementary accretive M&A opportunities in an effort to improve our technical offerings and market reach. We…

30:11 Thank you. Our first question is from Mike Latimore with Northland Capital Markets. Please proceed.

30:43 Great. Thank you and congratulations on the strong finish to the year on the Amtrak 8-K today. That was nice to.

30:53 Thanks, Mike. I appreciate it.

30:55 With regard to your guidance for the year, it sounds like the revenue guidance is basically tied to deploying customers you already have. It's not -- you don't need to win new business to hit your guidance, is that right?

31:12 That -- that's correct. Just to reiterate, we've got -- we're giving guidance and we previously released that guidance. $16.5 million to $18 million, and that is based on what is in contract right now and what we expect to deliver this year based on those contracts.

31:31 And the sort of the diversity of the backlog seems like it's improved. I mean can you maybe characterize that a little bit as how that's played out over the last few quarters?

31:42 Yes. No, that's a great point. Last year, I believe in our filings, one of the risk areas we had identified was concentration. Obviously, we want to improve that. Last year, we were concentrated around 80% into one of our Class I customers. That has been dramatically reduced we're not concentrated into anyone particular customer, any more than 20% or 30% with one of our largest customers and the others have all been, if you will, kind of diluted. Obviously, our goal is to continue to expand that customer base and reduce that risk.

32:19 Got it. And in terms of the guidance, any color on the mix that you're expecting here? Obviously, the services business is -- most of that's recurring in builds, but any sort of general guidance on mix systems versus service here?

32:36 Yes. Generally, we've been kind of landing between previously our mix, if you will, kind of 15% to 20% recurring whereas 80% or so has been kind of onetime revenue. As we get into the latter part of Q2, we should improve that percentage and it should get well above that 20% mark as we -- particularly as we get into the latter part of the year and finish the installations, a lot of our services and maintenance contracts as well as the recurring services now for the artificial intelligence algorithms that we're deploying, we'll definitely pump that number up even further.

33:24 Got it. And then you've highlighted the supply chain and inflation topic a few times. I guess just to be clear, in terms of your ability to manage that, that comes with ordering key components earlier than you might have prior to this and that so far, that management of that has been relatively positive and gives you confidence in being able to install as expected this year?

33:54 Yes. Yes. For this year, we're in very good shape. Again, we're also identifying the supply chain as a risk. But as it stands right now, we're in good shape and I'm confident about being able to meet all of the procurement and manufacturing demands for those contracts for that work that's in contract. A lot of the long lead items that we've already put on order A lot of our vendors are also being conservative, so that will give us a promised delivery date. We are beginning to see some of our long lead items come in earlier than those promised delivery dates. That doesn't mean that will hold. But we are confident that we can from a supply chain management standpoint, take care of every -- all doors we have now. 34:42 Again, we've moved just about, I did a little bit stick check today, about 90% or more of our suppliers right now are from the United States, and we've got a little bit coming out of Canada and Europe. So just about everything we're getting right now is coming out of the U.S., which is very, very helpful for us in managing that aspect. -- inflation during the first half of 2021 was sort of hitting us, but not so bad. During the second half of 2021 and now it's coming out a bit stronger. So that's something that we'll be addressing with our customers, of course, on a go-forward basis.

35:27 Yes. And then just last one. Do you have like a year-end employee headcount? And then how might that expand this year?

35:39 Yes, we are -- because I also did a dipstick check on that. I think it was yesterday. We're at 68 employees, right, full-time employees right now that are in the business -- our plan and forecast for this year is we make it as high as 74, 75-ish. But right now, we're pretty much at the head count threshold that can address that -- the current contracted work that we have right now.

36:12 Okay. Thank you. Good luck this year.

36:16 Thanks very much Mike.

36:22 And our next question will come again from Mike Latimore with Northland Capital Markets. Please proceed.

36:49 Thanks, Mike. Go ahead.

36:50 Yes. I appreciate it. So the Amtrak 8K, the -- it looks like the revenue per portal is a fair amount higher than average. I guess can you just kind of go into that a little bit? And then what's the prospect for an either?

37:11 So I want to be careful and respectful to Amtrak, they've given us some pretty clear guidance on what we can discuss, and that is, obviously, in my remarks and the 8-K that we released I think it is fair to say that 8-K discusses that the portals that are being deployed are very specific and meet some very specific requirements from Amtrak and those requirements are a bit different because it applies to their passenger railcars, along with the location and the complexity of the system. So outside of that, I don't want to go too much further into Antara got in respect for the guidance that they've given us.

37:56 Sure. That makes sense. And then in terms of the cost, obviously, you have a strong backlog from current customers. What's the pipeline look like for new business throughout the year? Is it potentially additional portals with current customers? Or are there a few, I don't know, new Class I rails in the mixer as potential new logos.

38:22 Yes, I'm pretty excited. I think we're going to have a pretty good mix this year. So we've got a pipeline right now that's probably got about $40 million to $50 million overall in it. Of course, all businesses maintain a pipeline that they hope they will hit. Ours is about $40 million to $50 million of potential opportunities of that, about third of those opportunities are with current Class I customers that we currently have as customers. There's about another third with either new Class I customers or new transit railroad customers. We've actually got our team up at a conference today actually up in Philadelphia, where both domestic and international transit railroads are actually presenting to a large conference. 39:13 Obviously, one of the things for everyone realizes that quite a bit of money has been earmarked. -- infrastructure money has been earmarked towards the Department of Transportation and further earmark down into transit railroads and we expect to be able to benefit from that -- some of that, and that is in our pipeline. And then we have a very good pipeline of potential customers inside their inserted in our automated logistics information system. Surprisingly, obviously, we've got some large retailers that are in that pipeline. Some of them were, we were in discussions with last year. Again, I kind of pumped the brakes because I wanted to get ourselves sorted out for that, but they've come back to us. But we're also seeing interest from current either Class I or, I'll say, short line operators for an automated logistics information system to handle intermodal traffic that they have. So that's exciting for us. There is definitely a demand out there for this technology across the board, the way I see it.

40:23 Great. And then just last on the algorithms. You talked about getting -- having confidence that you get 15 up and running, and I think you said 15 days. by year-end, how many sort of algorithms that can be used across a wide range of customers might you have? Or what would be the plan for number of algorithms what you're in.

40:49 Yes. We currently got a menu of about 18 to 25 algorithms that have been developed specifically for Class I freight railcar inspection. The key thing to highlight there is that we've had some of these deployed or developed for a while as have other AI developers, but it's not really until the last, I would say, eight months that we applied some new talented folks at it as well as some new techniques, which has now taken those algorithms and made them significantly more reliable, 95% or higher -- and that has now garnered the interest of the Class I railroads where they are actively asking for waivers with Transport Canada and the federal rail administration. Those are the regulators for this industry. And part of getting those waivers is the accuracy and maintenance of those algorithms. So that's an important thing that we're doing in support of our Class I partners, and we'll continue to support that.

42:17 Okay. Thank you.

42:20 Thanks, Mike. So with that, I don't see any more questions on the Board. So we'd like to turn it back to the operator. We appreciate. We thank everybody for joining us in particular. I know we had some of our shareholders on board, and we just want to thank you for attending today. Thank you.

42:44 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 terminologies such as believes, expects, may, will, should, anticipates, plans and their opposites or similar expressions are intended to identify forward-looking statements. 43:12 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 made -- 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. 43:56 Thank you for joining us today for Duos Technologies Group’s 2021 Fourth Quarter and Full Year Conference Call. You may now disconnect.