Good afternoon. Welcome to Duos Technologies Third Quarter 2022 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry, Adrian Goldfarb, CFO; and Andrew Murphy, VP, FP&A. Following their remarks, we will open up the line 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's CFO, Chuck Ferry. Thank you, sir. Please go ahead.

Welcome, everyone, and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the third quarter 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 that we'll be discussing during our earnings call. Now let's get started. In the third quarter, we delivered another double digit improvement in revenue performance, which adds some target to meet our financial and operating goals for the year. Revenues increased more than 130% year over year and are also up north of 10% on a sequential quarterly basis, reflecting the substantial completion of several railcar inspection portals and portal installations in Q3. We currently have two additional reps that are nearing completion with another two expected to come online early next year. Put together, we expect to have 15 rips installed by the end of the first half of 2023. Through this year's growth, we have continued to improve our installation procedures, in field performance and maintenance capabilities, all of which have improved customer satisfaction, leading to renewals, increased recurring revenue and add on sales opportunities. Additionally, we are well underway with our plans to build, own and operate RIPs at strategic locations within the North American rail network. This new offering and pricing model will dramatically increase our potential customer base, while also improving margins and predictability of our revenues over the long term. As we continue to grow our solutions, we are aligning our organization's goals with the necessary experiences and resources to execute our mission. Our recent executive appointments, as well as the additions from our new industry advisory…

Thanks, Chuck. As just mentioned, I've been with Duos for over 10 years. Having seen us develop from a technology startup with a handful of patents to a leading AI inspection company in the rail industry with numerous Class 1 operators amongst its customers. In that time, I've witnessed a complete overhaul in leadership, operations and execution that has Duos in its strongest position to date. After many years, I've come to the decision that it's now time for someone else to come in and continue the next phase of our mission. Earlier this year, we began the process of building out our CFO succession plan with today's news being the outcome. As part of my role in our newly formed industry advisory group, I will continue to work closely with the finance and investor relations teams to ensure a smooth transition. As an advisor, I plan to continue supporting the company and providing guidance from my years in the industry. As Chuck also noted, I'm being succeeded by Andrew Murphy who has been with us since 2020. I've had the benefit of working closely with Andrew through the entirety of his time here and I'm highly confident in his ability to assume the role and provide leadership as the company grows in the company in coming years. I would also like to thank the many shareholders and investors that have worked with me to assist the company in getting to this point. And I look forward to continuing my work within the company through my new role. I'm confident we will be in capable hands with Andrew as our new CFO. Since today is my last day as CFO, and consequently my last earnings conference call. And as there is no time like the present for Andrew to get started, I will now hand the call over to Andrew to walk us through the financial results for the quarter.

Thank you, Adrian. It's been a pleasure working with you and learning from you these past two years. And I congratulate you on the very successful career you've led and thank you for all you've contributed to Duos. I'd like to add that I'm excited you'll be staying on with us via the industry advisory group and continue to drive Duos forward. Before I begin, I'd like to thank Chuck, Adrian and our Board of Directors for this opportunity. I'm very excited to take on my expanded role and look forward to working with the rest of the team at Duos to further our financial and operational goals. Before turning to the results for the third quarter ended September 30, 2022, I want to first discuss the two components to revenue that we report. Technology Systems, which records revenues from turnkey engineered systems, such as our rail inspection portal and the increased impact of recurring revenue from services and consulting. These -- this records recurring revenues from maintenance and support contracts for both technology systems and AI models plus any consulting services that are undertaken. As previously discussed, we've been upgrading and expanding our technology capabilities with particular focus on AI as a key component to our product portfolio. I am pleased to report that the average revenue per installation continues to move higher as a result of meeting the demand from our customers for an increased function and capabilities. We have started to see higher revenues and expect those numbers to continue to rise later this fiscal year and into 2023. In addition, we continue to focus on our revenue mix to support accelerating growth in our recurring revenue services and software going forward. On that point, during the quarter we formally introduced our subscription offering in which Duos…

Thanks, Andrew. For the remainder of today's call I'll now provide updates within our key areas of focus. As a reminder, our 2022 operating strategy is focused on the following: one, improve our technical and operational delivery; two, add more recurring revenue through our services, maintenance and artificial intelligence offerings through continued expansion of our artificial intelligence catalog; continue our -- three, continue our primary commercial focus in the rail sector by adding more value to existing customers, adding new customers in the Class 1s, passenger rail and we'll discuss the car owners themselves later in the brief. And lastly, focus on retaining top talent in a very competitive market space. One of the core components of our updated company values has been a commitment to achieving operational and technical excellence. We believe this approach leads to higher customer satisfaction, and improved new deal closure rates. On a high level, customer service continues to improve and we are successfully meeting our service level agreements maintaining a 95% or higher availability rate on all systems. Reliability is essential in our business and we're pleased to be realizing the benefits from our investments over the last 12 months. Our hardware engineering team has continued to make significant improvements on not only reliability, but also the ability to rapidly and easily repair and remotely monitor our equipment, helping to drive [Technical Difficulty] down as well. Over the past several months, we have continued to regularly release new detection models or algorithms for use with our reps. We have recently released five new AI models covering brake beam bent, ladder stile condition, retainer valve handle position, side handhold condition, and ladder tread condition. We also plan to release six additional new AI detection models before the end of 2022 calendar year, addressing brake systems…

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question today is coming from Mike Latimore of Northland Capital Markets. Please go ahead.

Great. Thank you. And congrats on everything. Adrian enjoyed working with you and congrats Andrew for the new role.

Thank you, Mike. So obviously, current business looks very strong. You talked about a new pipeline number here. I'm curious how much of that pipeline is -- are you including much subscription business in that pipeline yet or is that under the traditional model?

No, that still points back towards our traditional model. And to that end, it is important to note, we didn’t touched on it in our discussion. But going forward, we think we will have a mix of both the subscription and continue to add the CapEx concept as well.

Got it. So your new head of sales, how much of his time is going to be looking at kind of traditional RIP opportunities versus really promoting the subscription offering here?

Mike, yes, this is Chuck, very good question. Right now, Matthew's focus that I've set form is primarily focused on the subscription model business. We certainly are still taking inquiries and have good opportunities in our pipeline for the traditional, I'll call it, CapEx model which is good for us, but his priority is largely on that subscription model. And he's already generated just a short, I would say, six to eight weeks, a pretty good list of potential customers in that -- that are interested in that subscription model.

Got it, got it. And then I guess on the subscription model, I'm sure it's still evolving, but is that going to be -- when you went to customer, is that going to be 100% recurring or is there going to be a mix of hardware and recurring there? And then also would they pay kind of per location or would they just pay you kind of a blanket fee and kind of use whatever data you can give them?

No, it’s good question as well. Look, we're still formulating the exact methodology that we'll charge for this. But in concept, what we want to do is, we want to offer our subscription customer a very predictable and manageable fee. We think that that will largely be, I'll say, an entry fee or a sign-up fee that will probably be fixed and based on a number of sites. And then in addition to that, there's probably going to be a variable fee based on the number of cards that are actually expected or the number of detections. That portion is still to be worked out. And I think as we get into our first several sort of subscribing companies or customers, I think we'll learn a bit more on what and how they view paying on these things. But railcar owners are typically accustomed to paying a little bit of a fixed, but also on a per car fee. And so that's kind of the direction we're headed, but still more work that we've done.

Sure. Thanks, Chuck. Is there a certain number of RIPs you need out in the field before you get kind of a critical mass of these subscription customers? I mean, is one enough or you need five? And then I assume once things get rolling, the sales cycle on this would be a lot shorter than under the traditional model?

Yes. So the number that we've really were putting our plan together for 2023 is to have a total of 20 railcar inspection portals out on the network. In an ideal position we would have -- at least five of them would be subscription and potentially upwards of 10 of them would be in subscription. So by the end of 2023, what we're working towards is where -- out of our 20 portals, about half of them are in a subscription model. And that will put us in a position where by the end of next year, we're getting a lot more predictable and beginning to get to a breakeven point on a go forward basis. And then I forget -- you asked me a second portion of that question, if you could hit me with that again.

Sure. I would imagine that the sales cycle for subscription business would be shorter than the traditional model over time?

Yes, we think it will be largely because the hurdle rate to basically sign up for a subscription is a lot lower than our traditional CapEx model. So inside some of the large customers that we have that charge for a subscription probably falls much lower down in their delegation of authorities if you know what I mean by that. And so it should be a lot [indiscernible] and therefore, we should be able to reduce the time from interest to the time to getting into a contract for sure.

All right. Okay. Got it. Good. And then last, can you just remind me on the revenue recognition milestones. I think you obviously get someone final deployment, but there's more along the way. Can you just remind me like what are the main ones that are going to -- like, I think you have a material order as a procurement, these sort of things can be rev rec factors as well. But what are the key ones for the fourth quarter here in terms of those that generates rev rec on your deals?

Sure. It's a great question. And looking at Q4, a key for us will be first and foremost received materials and beginning to phase those materials into our manufacturing process under our revenue recognition policy [indiscernible] in that subsequent manufacturing initiation are critical to our profit and revenue wreck. So that will have to -- that will contribute quite a bit. So obviously, we're doing everything we can to continue to push our numbers forward and as we talked about in our speech, stave off any sort of potential risk of supply chain impacts. But really the receipt of materials and the completion of manufacturing and subsequent shipment to project site and then the installation itself are really our key milestones.

Great. Thanks a lot. Best of luck.

Thank you.

[Operator Instructions] I'm showing no additional questions in queue at this time. I'd like to turn the floor back over to Mr. Ferry for his closing comments.

Thanks, operator. Again, thank you everyone for joining us on today's call and in particular thanks to -- I see a number of our shareholders on the call today. And again, on behalf of the entire company, we appreciate your support for what we're doing. Thanks and have a great day. Over to you, operator.

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 meanings of the Private Securities Litigation Reform Act of 1995. Forward looking terminology such as believes, expects, may, will, should, anticipates, plans or 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's Inc. actual results to differ materially from those anticipated by the forward looking statements. These risks and uncertainties [Technical Difficulty] The actual results may 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 described in Duos' filings with the SEC. Thank you for joining us today on Duos Technologies Group's 2022 third quarter earnings conference. You may now disconnect.