Good afternoon. Welcome to Duos Technologies Third Quarter 2023 Earnings Conference Call. Joining us for today's call are Duos' CEO, Chuck Ferry; and CFO, Andrew Murphy. Following their remarks, we will open 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' CEO, Chuck Ferry. Sir, please proceed.

Welcome, everyone, and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the third 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. Today, I'm going to discuss my assessment that the company has in the best position it has ever been to achieve our strategy and long-term value despite some short-term financial headwinds, which Andrew will walk us through in a moment. I want to remind everyone that we believe Duos is currently the North American rail industry leader in machine vision and artificial intelligence wayside detection technology. Three of the six Class 1 railroads, plus Fair Max and Amtrak use our railcar inspection solution with strong results. During the third quarter we scan 2.3 million rail cars. And subsequent to the end of the quarter, I'm happy to report our detections are now deployed with all of our railroad customers. While full adoption of machine vision wayside technology paired with AI is going more slowly than we would like. There is strong consensus among industry leaders that this technology will be fully adopted in the coming years as the rail industry makes continued safety improvements. We believe that Duos is in a strong position, with the support of our current rail customers to be in the leading edge of this adoption. What is critical for us in the next 12 to, coming 12 to 18 months is the transition from a volatile CapEx only business to a machine vision artificial intelligence subscription business with steady recurring revenue. We'll discuss our plan and the critical milestones to lead this after we review the financial results. Andrew?

Thank you, Chuck. As we have discussed in previous calls, Duos has historically operated with periods of intermittent growth, interspersed with temporary lolls as large new contracts begin the execution cycle and progress through various stages of development. More recently, we discussed the strategic shift at the business toward recurring revenue model given the volatility and previously noted forecast challenges of our legacy CapEx focused structure. Our results for Q3 exemplify this volatility and revenue underscoring the challenges in a CapEx model and support our ongoing efforts to focus on primarily subscription based model in the future. To be clear, the business is in a strong position both fundamentally and financially. However, contract timing represents Duos biggest threat to predictability. This makes quarter-over-quarter comparisons not necessarily meaningful to the current position of the company. As a result, the focus of today's calls and assessment of where we currently stand in our long-term vision and strategy to transform our business into a sustainable, predictable leading technology company. For that reason, I will be brief in my commentary to allow for analysis on the strategic vision. Now, let's get into our results for the third quarter. Total revenue for the third quarter of 2023 was $1.53 million and $5.95 million for the first nine months of 2023. This was a decrease in total revenue on a year-over-year basis for both periods, driven by a combination of factors including customer driven delays on key projects, originally slated to be completed late in the third quarter, 2023 and timing of new CapEx projects. Gross margin was $227,000 for the third quarter of 2023 and $1.01 million for the first nine months of 2023. This represents a decrease in revenue on a year-over-year basis, largely driven by the same period to period drivers noted in…

Thank you, Andrew. Let's briefly discuss where we are as a company right now. Our current customers and many potential new customers have told us that technically our railcar inspection portal is the best-in-class in terms of performance, reliability and standardization of the hardware software, IT infrastructure, and artificial intelligence. Major advancements have been made in AI development. And I'm pleased to say that all of Duos’ customers are using our AI detections catalog of 40 plus use cases with excellent results. In some applications, our customers are using the portals and detections catalog to obtain regulatory waivers. We have continued to invest in research and development to stay at the forefront of the industry. This coming year we will deploy a new thermal undercarriage examiner, a new 360 degree wheel and brake inspection system and a new hot bearing detector system, all of which can be integrated into the existing railcar inspection portal. Another key technical breakthrough deployed to the track edge is a system update whereby the portals can acquire, compute and present inspection results in as little as 60 seconds after the railcar passes through the portal, which allows for instant notification to train crews, dispatchers and railroad mechanical teams. This achievement has been publicly recognized by two of our technical partners, Dell Computers and Nvidia. Another compelling feature is that our machine vision AI safety data is exchangeable and can be uniformly distributed amongst the stakeholders of the larger rail network in near real time. Commercially, we have a lot of high level interest, we have a high level of interest for all the Class 1s, several short lines and passenger railroads. Our backlog is at the end of the quarter of approximately $6.4 million, within a $5 million to $7 million of near term contract…

[Operator Instructions] Our first question comes from Mike Latimore from Northland Securities.

Hey, guys. This Owen Rickert on for Mike tonight. First question is the postponement of deployments with the large transiting customer, a cancellation? And if not, a cancellation will deployments occur in ‘24?

Yes, so thanks for the question. To be to be really clear, it is not by saying it not a cancellation, it is a delay for that customer right there that it's up along the northeast corridor, what's going on is you've got two large tunnel projects and a bridge project that are north of our portal locations. And project delays out of our control that those three sites have caused delays around the civil works, and some of the other preparatory works to insert those portals. So we're definitely expecting to complete those portals in the coming year. But again, I think that customer is managing themselves through some project delays. And unfortunately, we are being impacted from that. That being said, I want to add that customer has worked very closely with us, and has actually added a number of additional contract modifications, and other modifications to add additional work in the form of subscriptions, that is actually added to the overall value of that customer. So while we're -- while the delays are frustrating for us, it has actually added to the overall value to the overall backlog for the company.

Got it, thanks. And then what are you guys assuming for sales cycles on subscription deals? And how many subscription customers are expecting to land in fiscal year ‘24?

Yes, as we talked before, the sales cycle for a normal CapEx sale is oftentimes, it'll run 12 to 18 months, which is a long cycle. In the subscription cycle, we've already been through this, that sales cycle is shorter, I would probably place at about anywhere from three to nine months, depending on the customer. We already have two solid subscription customers now. And we're already talking to a dozen or so others. Each of them has their own separate set of situations. So I would expect we would probably add at least 6 to 12 additional subscriptions customers over the course of 2024 at a minimum as we progress.

Okay, and then last one. Many customers want to see a few more subscription examples up and running before deciding to go the subscription route.

Look, I try to categories like this always tried to be very transparent, the type of data, the type of safety data, which is machine vision, and artificial intelligence driven is pretty new to this industry. A lot of the car owners and shippers have not previously had access to this data. Now, the Class 1 carriers have had access to this data now for a couple of years, certainly our three main customers. And I believe as we go forward, our current Class 1 customers will actually help and assist in kind of talking about the use of that data and help us actually drive bringing on those subscription customers. I will say that the current shippers and car owners are kind of looking at as to how the Class 1 customers use that data. And in the discussions that we're having, which are very detailed and very technical, there's a lot of excitement for how they can use it, and how they can use that to make sure as an enabler to keep their core utilization rates higher at this point.

Our next question comes from Rafiq Khalid from a Ascendiant Capital.

Hi, it’s Rafiq for Edward Will. Two questions. First one, can you talk a little bit about our expand on your international marketing efforts? And then the second one, do you see any change in demand when there's a government shutdown or upcoming elections?

Yes, so on the first question, particularly over the last year, we've taken a lot of inquiries internationally. These increases have come in from Europe, they've come in from Australia, they've come in from the Middle East. And we've also seen inquiries come in, obviously, from Canada and Mexico, but also down in Latin America. In terms of marketing, we've approached it one of two ways. Number one, we're very fortunate that we haven't done a lot of international marking directly, but we've still taken an increase. So I think that comes from having a good website. And I think having an overall good reputation within the Class 1, the American, North American Class 1 network, a lot of times the calls come in, after the inquiry, some of our customers so that's really helpful. We have taken in some of our leads, if you will, internationally from our technology partners, both Dell Computers and Nvidia, which we're very thankful for. And then the third pathway internationally has been working with partners. There are some larger wayside detection and real vendor partners. I don't want to name them publicly right now. But we are partnered with one or two of the larger rail vendors in the international market that have a good international footprint, where we've partnered with them on some of these international opportunities. So we're excited to do that. And it certainly in that partnership, allows us to be a little bit more aggressive in some of the requests for proposals that are currently under evaluation. On the second question, the government shutdown as you know, I spent a number of years in the army so we still always be very careful, a bunch government shutdown. They can be very disruptive to not only employees but also their families. In our case, a government shutdown. I do not see that impacting our business at this time. Again, most of our business is with commercial entities that are not at least directly impacted by that. Our one true government customer right now, as it stands, last time, we were threatened with the shutdown or gone through shutdowns, it did not impact us. If we had an extended shutdown, or one passenger rail customer, it could impact them. But right now, I don't really -- I'm not particularly concerned about it. Andrew, unless you see it differently. That's kind of my take on it.

No, I think that's a very consistent approach with what we've seen so far with that customer.

Thank you for taking my question.

Okay, any other questions I appreciate, we'll answer for you.

At this time this concludes our question and answer session. I would now like to turn the floor back over to Mr. Ferry for his closing remarks.

Yes. Before we can conclude today's call, I'd like to provide Duos, excuse me, stand corrected. Thanks, operator. Appreciate your support today and thank you for everyone joining us. And thank you, especially for our shareholders that are on the call today.

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. The 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 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 Incorporated 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 the 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 filing with the SEC. Thank you for joining us today for Duos Technologies Group third quarter 2023 conference call. You may now disconnect. And have a nice day.