Good afternoon. Welcome to Duos Technologies First Quarter 2022 Earnings Conference Call. Joining us 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.

Thank you, Maria. Welcome, everyone, and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the first quarter 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 10-Q filing with the SEC to better understand some of the details we'll be discussing during our call. So now, let's get started. The first quarter was in line with our stated plan and has us well positioned to execute on our exiting backlog through the remainder of this year and in 2023. As we discussed in our March update, the last 18 months has been about laying a foundation for the business we plan to build upon going forward. 2022 will be a year of execution. We plan to meet performance obligations for existing contracts, sign new business with current and prospective Class I rail and transit operators, continue to develop and deploy artificial intelligence and software capabilities to meet the growing demands and needs of these customers, further our expansion efforts into adjacent market opportunities, and invest in internal operations to better capitalize on all these opportunities. Through this process, we will continue to focus on achieving operational and technical excellence to provide better products, improve customer service and attract top talent. As of today, our business is performing at highest level in nearly two years, the results of which will begin to show in the latter half of 2022 and into 2023. We will discuss more details about the business later on the call. So before I go any further, I'd like to turn the call over to our CFO, Adrian Goldfarb, who will walk us through the financial results for the quarter. Adrian?

Thank you, Chuck. My comments today will be focused on our results for the first quarter ended March 31, 2022. I want to remind everyone of our two components to revenue that we report, technology systems, which records revenues from turnkey engineered systems such as our Railcar Inspection Portal, including AI software technology licensing, and services and consulting, which primarily records recurring revenues from maintenance and support contracts about technology systems and AI models, plus any consulting services that are undertaken. As previously discussed, we've been upgrading and expanding our overall technology capabilities with a particular focus on AI as a key component of our overall product portfolio. I'm pleased to report that our average revenue per installation continues to move higher as a result of meeting the demand from our customers for increased function and capabilities. Due to the ongoing issues with supply chain, the time between contract award and for revenue recognition has been lengthening. But we expect to see higher revenues later this fiscal year and into 2023. In addition, we continue to focus on our revenue mix to support growth in our recurring revenue services and software going forward. Now, let's look at the numbers. Total revenue for the first quarter decreased 33% to $1.44 million compared to $2.15 million in the first quarter of 2021. Total revenue for Q1 2022 represents an aggregate of approximately $783,000 of technology systems revenue and approximately $656,000 in recurring services and consulting revenue. The decrease from Q1 2022 compared to Q1 2021 was a result of a previously discussed delays in receiving anticipated notices to proceed for new contracts, as well as supply chain issues, which are extending deadlines for shipment of key components used in our technology systems. Because of delays in anticipated start dates, certain installations may…

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 to questions. As a reminder, our 2022 operating strategy is focused on five key areas as follows: One, improve our technical and operational delivery, which will make satisfied customers who are more equipment and services; two, add more recurring revenue through our services, maintenance and artificial intelligence offerings; three, continue our primary commercial focus in the real sector; fourth, add a second commercial focus by reinitiating our efforts in the logistics and intermodal industry with our existing automated logistics information system, also known as ALIS; and fifth, focus on recruiting and retaining top talent in a very competitive market space. I'll now add further comments to these five major components of our strategy, beginning with improving our technical and operational delivery. Since my arrival in 2021 of the core components of our updated company values and commitment to achieving operational technical excellence, we believe this approach leads to higher customer satisfaction and improve new deal closure rates. Improving technical and operational delivery is something we are never completely satisfied with and constantly seeking to improve. From a high level, we are on plan with all current deployments. Additionally, our improved operational and technical delivery is now driving steady contract modifications with current customers. I'll take a minute to provide updates within our currently in progress or in process deployments. In March, we confirmed a $9 million master services agreement for thermal and vision scanner solutions from a major national passenger carrier. With the agreement fully executed, a milestone payment of approximately $4.2 million is inbound. As part of…

Thank you. [Operator Instructions] We'll take our first question from Mike Latimore with Northland Capital. Please go ahead.

Thanks. Yes. Hi, guys. Congrats on the strong start to the year there.

Thank you.

Interesting to hear about the sizable cash payments coming in shortly. I guess, is there any rev rec associated with those, are those more kind of balance sheet items?

Mike, thanks for joining us today. I'll start and then Adrian -- will play catch-up or cleanup for me on the financial side of things. Yes. We’re expecting -- these are contracts that we won late part of last year and then these are now pretty sizable milestone payments. Typically we'll get anywhere from 30% to 50% of the contract value in upfront payments. That obviously helps us manage our cash on a go-forward basis. These are quite helpful and the fact that we've already ordered most of our long lead items prior to receiving these large cash rewards, these large cash payments. So obviously, that's very helpful for us. Adrian, do you want to add any color?

Yes. There is not much cleanup required. So, as far as the rev rec concern was, I guess, that's the second part of the question. Yes, there will be a little bit -- obviously, it lags the actual cash received, because the cash payments come in, they use to pre-fund certain components in some cases. And this is part of the reason for the raise early in the year. We have been pre-purchasing components. We've mentioned that in a lot of our filings. And as those things come in, we recognize some of the revenue as the manufacturing happens according to the ASC 606 standard, we will recognize more. So, yes, the cash coming in won’t be immediately recognize but will put us on this study path, which we expect to be increasing somewhat sequentially in Q2, and then will accelerate as we go into Q4.

And then, I think you mentioned the pipeline number, I believe you said $100 million. Can you remind me what it was last time you gave that figure and then what's changed?

Yes. I think we probably gave a similar number to that last time -- transfers and catch a little bit -- last time, it has gone up here recently. I will tell you, again, that pipeline -- those are, that's a pipeline of opportunities, portion of which -- let's call it about one-third of that is with either our current Class I customers that are basically expanding the work that we're doing for them right now. Probably another third of that is with either, we hope will be new Class I customers. But also now, we're getting a lot of inquiries. And we're responding to requests and providing proposals to a number of transit railroads, who are now the beneficiaries of the federal funding, which is now becoming available, specifically to a lot of those organizations. Another third of it is mostly due to our automated logistics information system queries coming in from that, but also international customers in the rail space. So, we've got -- again, we're getting quite a bit of inquiries from both potential ALIS customers, mostly here in North America but then in the rail space, a lot of international customers, we've been responding to inquiries from those. So, that's kind of the makeup of that of that pipeline.

And then, the services line, it looks like it's grown sequentially for four quarters in a row now. I guess, should we think about this as sort of a new baseline and you can build from here or..?

Yes, absolutely. So, we're showing now, certainly, once we get customers using our equipment, they stay with us really long-term and are renewing their services and maintenance. But we're also now starting to see the recurring revenue being pumped up further by the successful deployment of artificial intelligence. And that's a trend that you're going to see continue to improve on a go forward basis.

[Operator Instructions] There appear to be no further questions at this time. This concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Ferry for his closing remarks. End of Q&A:

Yes. Thank you, operator. Again, I wanted to thank everybody for joining us on today's call. It looks like we got a good mix. A number of you are currently shareholders. So, thank you very much for joining us and for your support. And those that are new to us, thanks for joining us and having a look at us. And so, I'll go ahead and turn it back over to you, operator, to finish things up.

Thank you, Mr. Ferry. 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. 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 these statements are based and could cause Duo's 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 Duo's 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 for Duos Technologies Group’s 2022 first quarter conference call. You may now disconnect, and have a great day.