Q1 2024 Duos Technologies Group Inc Earnings Call
Operator: Good afternoon. Welcome to Duos Technologies' first quarter 2024 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 to 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 would like to turn the call over to Duo's CEO, Chuck Perry. Sir, please go ahead.
Good afternoon, and welcome to devote technologies first quarter 2024 earnings conference call joining.
Joining us for today's call are divorced CEO Chuck sorry.
F O 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.
Chuck: Now I would like to turn the call over to do a CEO Chuck ferry Sir.
Chuck Ferry: Please go ahead.
Chuck Ferry: Yeah.
Charles Parker Ferry: Welcome everyone and thank you for joining us. We've just issued a press release, as well as our 10-Q, announcing our financial results for the first quarter of 2024 and other operational highlights. Copies of both are available in the Investor Relations section of our website. I encourage all listeners to view that release and attend Q-filing with the SEC to better understand some of the details we'll be discussing during today's call. Some of the highlights that I'll discuss in more detail after the financial report include an award for a new rail car inspection portal valued at $2.7 million, an improved backlog of $10 million, and a new, very comprehensive patent on our rail car inspection portal.
Chuck Ferry: Welcome everyone and thank you for joining us.
Chuck Ferry: <unk> issued a press release as well as our 10-Q announcing our financial results for the first quarter of 'twenty 'twenty four and other operational highlights copies of both are available on the Investor Relations section of our website.
Chuck Ferry: Encourage all listeners to view that release and 10-Q filing with the FCC to better understand some of the details will be discussing during today's call.
Chuck Ferry: Some of the highlights I will discuss in more detail. After the financial report include an award for new railcar inspection pool valued at $2 $7 million and improved backlog of $10 million.
Chuck Ferry: And a new very comprehensive patent on a railcar inspection pool.
Charles Parker Ferry: We have also formed a second operating entity called Duos Edge AI and are in contract negotiations to install and operate our first four Edge data centers this year. Before we get into the financials, I want to remind everyone that we anticipated short-term financial headwinds as we transition from a pure play CapEx business focused on the rail sector to a recurring and more diversified business within the broader AI value chain that I believe will result in significant shareholder value over the next few years.
Chuck Ferry: We have also formed a second operator, you're going to be called duals edge AI.
Chuck Ferry: We're in contract negotiations to install and operate our first for edge data centers this year.
Chuck Ferry: Before we get into the financials I want to remind everyone that we anticipated short term financial headwinds as we transition from a pure play Capex business focused on the rail sector dual recurring and more diversified business within the broader AI value chain that I believe will result in significant shareholder value over the next few year.
Charles Parker Ferry: As we discussed in a recent press release, Adrian Goldfarb will reassume the CFO position following the departure of Andrew Murphy. Andrew did an outstanding job for us and was a significant contributor to the turnaround that we have executed in the last few years. Andrew worked for me for eight years at both APR Energy and here at Duos.
Chuck Ferry: As we discussed in our recent press release, Adrian Goldfarb Reassume, the CFO position.
Chuck Ferry: Following the departure of Dania Murphy.
Chuck Ferry: Andrew did an outstanding job for us and was a significant contributor to the turnaround that we've executed in the last few years Andrew.
Chuck Ferry: Andrew worked for me for rate years at both APR energy and here would do us he's an exceptional financial professional and business leader and we wish him the very best.
Charles Parker Ferry: He's an exceptional financial professional and business leader, and we wish him the very best. Given the critical stage of the company's operations, the board and I asked Adrian to reassume the role, given his close working relationship with Andrew and myself, in laying the groundwork for the strategy that will make our company valuable, his long-term knowledge of the company, and his experienced leadership will ensure no gaps between incoming and outgoing CFOs. I'm personally very happy he's agreed to return to this important role and very much enjoy working with him. With that, I would like to invite Adrienne to review our most recent financial results.
Speaker Change: Given the critical stage of the companies at the board and I ask Adrian to reassume the wall.
Speaker Change: Given its close working relationship with Andrew and myself.
Speaker Change: And laying the groundwork for the strategy that will make our company values.
As long term knowledge of the company and his experienced leadership will ensure no gaps between incoming and outgoing CFO.
Speaker Change: I am personally very happy he has hurt very Joe returned his important role and very much enjoy working with him.
Speaker Change: With that I would like to invite Adrian to review our most recent financial results.
Adrian G. Goldfarb: Thank you, Chuck. Before discussing the results for Q1, I would like to give a brief commentary on the company and its progress thus far. As you may or may not be aware, I've been working with Chuck on the strategy for Duos and assisting him with implementing the plans and programs that are now underway. In particular, I've maintained a close relationship with the capital market in terms of communicating the vision as it continues to develop.
Adrian Goldfarb: Thank you Chuck before discussing the results for Q1, I would like to give a brief commentary on the company and its progress thus far.
As you may or may not be aware I've been working with.
Adrian Goldfarb: Chuck on the strategy, you could do us and assisting him with implementing the plans and programs that are now underway.
In particular, it maintained a close relationship with the capital markets.
Adrian Goldfarb: In terms of communicating the vision as it continues to develop.
Adrian G. Goldfarb: It was not a hard decision for me to return as CFO, but I truly believe that the company is in a very good position to profitably grow into a much larger entity, and I look forward to being a part of that.
CFO: It was not a hard decisions made to return as CFO.
CFO: Truly believe the company is Mike very good position probably to profitably grow into a much larger entity and I look forward to being a part of that success.
Adrian G. Goldfarb: My general commentary before getting into the specific financial results is that traditionally, Duos growth has not been linear. Since 2022, we have taken concrete steps to structure the business in such a way that we can produce more consistent and predictable growth. That transition has been in effect for much of the past 18 months, and while we are not giving updated guidance today, I believe that we are on the threshold of steadily improving results. The evidence to support that belief will be discussed by Chuck following my comments.
My general commentary before getting into specific financial result.
CFO: Is that traditionally the lowest growth has not been linear.
CFO: Since 2022, we have taken concrete steps to structure the business in such a way that we can produce more consistent and predictable growth.
CFO: That transition has been in effect for much of the past 18 months.
CFO: And while we are not giving updated guidance today I believe that we're on the threshold of steadily improving results.
CFO: The evidence to support that belief will be discussed by Chuck following my comments.
Adrian G. Goldfarb: Lastly, I would like to thank all of the shareholders who have offered their congratulations and support since returning as a CFO, and I hope to return that by being able to report increasingly stronger results in successive quarters. Now, let's look at some of the highlights from the first. Total revenue for the quarter decreased 60% to $1.07 million compared to $2.64 million in the first quarter of 2023. Total revenue for Q1 2024 represents an aggregate of approximately $270,000 of technology systems revenue and approximately $800,000 in recurring services and consulting revenue. The revenue decrease in the first quarter compared to the equivalent quarter a year ago is primarily related to timing and revenue recognition for a major cut who postponed delivery last year into Q4 this year.
Speaker Change: Lastly, I would like to thank all those shareholders, who are also there congratulations to support since returning as the CFO.
Hope to return that by being able to report increasingly stronger results in successive quarters.
Now, let's look at some of the highlights from the first quarter.
Speaker Change: Total revenue for the quarter decreased 60% to 1.07 billion compared to 2.64 million in the first quarter of 2023.
Speaker Change: Total revenue for Q1, 2024 represents an aggregate of approximately $270000 of technology systems revenue.
Speaker Change: And approximately 800000 in recurring services and consulting revenue.
Speaker Change: The revenue decrease in the first quarter compared to the equivalent quarter a year ago is primarily related to timing and revenue recognition, where a major customer to postpone delivery last year into Q4 this year.
Adrian G. Goldfarb: That revenue is expected to be booked in Q3. It is also important to note that the 2% decline in recurring services and consulting revenue for the same comparison period marks the transition from certain services revenue to subscription. We expect a similar effect in Q2, and then incremental growth in the second half of 2024, as increases in subscription and other revenues are expected. Cost of revenues for the quarter decreased 54%, 0.98 million compared to 2.11 million for Q1 2023, reflecting the decline in revenues and the associated lower costs that were largely in line with the revenues.
Speaker Change: That revenue is expected to be booked in Q4.
Speaker Change: It is also important to note that the 2% decline in recurring services and consulting revenue for the same comparison period.
Speaker Change: The transition from certain services revenue to subscription.
Speaker Change: We expect a similar effect in Q2, and then incremental growth in the second half 2024 and increases in subscription and other revenues are recorded.
Speaker Change: Cost of revenues for the quarter decreased 54%.
Speaker Change: $98 million compared to 2.11 billion for Q1 2023, reflecting the decline in revenues and the associated lower costs that were largely in line with the revenue decrease.
Adrian G. Goldfarb: It should be noted that the company does record certain ongoing costs in the cost of revenue, related to ongoing expenses related to both system production and service delivery, and those costs will typically be a larger percentage during periods of lower overall revenue, leading to temporarily reduced markets. Gross margin for Q1 2024 decreased 82% to $94,000, compared to $537,000 for Q1 2000.
Speaker Change: It should be noted that the company does record certain ongoing cost in cost of revenues.
Speaker Change: The ongoing expenses related to the system production and service delivery and those costs will typically be a larger percentage during periods of lower lower overall revenues.
Speaker Change: Leading to temporarily reduce margin.
Speaker Change: Gross margin for Q1, 2024 decreased 82% to $94000 compared to 537000 for Q1 2023.
Adrian G. Goldfarb: For my previous comment, when comparing the results between the two periods, the stage of completion for manufacturing and installation should be factored into those comparisons and should be taken into account when analyzing the two periods. Operating expenses for Q1 2024 increased 6% to $2.86 million compared to $2.68 million for Q1 2023. The entire amount of this increase is due to additional investment in sales resources as the company builds a commercial team in anticipation of a much higher level of activity in the subscription and recurring revenue areas.
Speaker Change: But my previous comments when comparing the results between the two periods the stage of completion for manufacturing and installation can be factored into those can pat and should be taken into account when analyzing the two periods.
Speaker Change: Operating expenses for Q1, 2024 increased 6% to eight 6 million compared to 2.68 million for Q1 2023.
Speaker Change: The entire amount with this increase is due to additional investment in sales resources as the company built the commercial team in anticipation of a much higher level of activity in the subscription and recurring revenue areas.
Speaker Change: The full increase was offset by modest reductions in R&D and some of our activities are now complete notably the technology behind the wide ranging patents for the rip and associated AI.
Adrian G. Goldfarb: The full increase was offset by modest reductions in R&D as some of our activities are now complete, notably the technology behind the wide-ranging patents for the RIP and associated AI. In addition, the reduction in administrative costs is the result of cost reductions that have been implemented. We anticipate that operating expenses will remain stable throughout the remainder of 2024 with further efficiencies being implemented in areas that do not impact the expected growth. The net operating loss for Q1 2024 totaled $2.76 million compared to a net operating loss of $2.15 million for Q1 2023.
Speaker Change: In addition, the reduction in administrative cost as a result, the cost reductions that have been implemented.
Speaker Change: We anticipate that operating expenses will remain stable throughout the remainder of 2024 with further efficiencies being implemented in areas that do not impact we expect to close right.
Speaker Change: Net operating loss for Q1, 2024 totaled 2.7 hundred $6 million compared to net operating loss of $2. One 5 million for Q1 2023.
Adrian G. Goldfarb: Although operating losses were higher than the compared quarter a year ago, the increase was proportionally less than the relative decrease in revenue growth. The net loss for the first quarter was $2.75 million, or negative 38 cents per share.
Speaker Change: Operating losses were higher than the comparator quarter, a year ago. The increase was proportionately less than the relative decrease in revenue and gross margin.
Speaker Change: Net loss for the first quarter was $2 75 million or negative <unk> 38 cents per share compared to a net loss of $2 1 million or negative 30 cents a share for Q1 2023, with a 28% increase being low proportionately it might've been expected with decrease in alcohol right.
Adrian G. Goldfarb: Q1 2023. A 28% increase, being lower proportionally than might have been expected with a decrease in overall revenue. With regard to the balance sheet, at March 31, 2024, cash and cash equivalents totaled $2.98 million compared to $2.44 million at December 31, 2000. In addition, the company had over 1.5 million receivables and contract assets, for a total of approximately $4.5 million in cash and expected short-term, a similar position to the comparable quarter a year ago.
Speaker Change: We've just gone through the balance sheet at March 31, 2024, cash and cash equivalents totaled $2 98 billion compared to 2.44 million at December 31 2023.
Speaker Change: In addition, the company had over $1 5 million receivables and contract that's it.
Speaker Change: A total of approximately $4 5 million in cash and expected short term liquidity, a similar position to the comparable quarter a year ago.
Adrian G. Goldfarb: The U.S. also has $1.5 million in inventory as of March 31, 2024, consisting primarily of long-lead items for future RIP installations that are expected to be deployed this year. Total current liabilities are $3.08 million versus $3.25 million a year ago.
Speaker Change: He was also has $1 $5 million in inventory as of March 31, 2024, consisting primarily of long lead items for future Rip installations that are expected to be deployed this year.
Speaker Change: Total current liabilities, a 3.08 billion versus $3, two 5 million a year ago.
Adrian G. Goldfarb: My overall comment on the balance sheet is that it remains stable in anticipation of expected growth in the business in the second half. At the end of the first quarter, the company's Contracts & Backlog and Near-Term Renewals and Extensions were now more than $10 million, of which approximately $7 million is expected to be recognized as revenue during the remainder of 2020. Balance of Contract Backlog Comprised of Multi-Year Service and Software Grants, as well as projects
Speaker Change: My overall comment on the balance sheet that remains stable in anticipation of expected growth in the business in the second half of this year.
Speaker Change: At the end of the first quarter.
Speaker Change: Contracts and backlog and near term renewals and extensions are now more than $10 million of which approximately $7 million is expected to be recognized as revenue during the remainder of 2024.
Speaker Change: Bouts of contract backlog comprised multi year service.
Speaker Change: Software agreements.
Speaker Change: Well the project revenues.
Speaker Change: Before turning the call back to Chuck I would like to address the subject of God.
Adrian G. Goldfarb: Before turning the call back to Chuck, I would like to address the subject of guidance. As we have discussed previously, we have experienced some difficulty in giving accurate guidance within the timeframe of a fiscal year due to the delays and uncertainties in our current market.
As we have discussed previously we have experienced some difficulty in giving accurate guidance within the timeframe of the physical yet.
Speaker Change: Due to the delays and uncertainty in our current market space.
Adrian G. Goldfarb: However, we believe that the current analyst expectations for annual revenues this year represent a reasonable estimate at this time. Chuck will be addressing the transition into new markets, including our growing recurring revenue initiatives such as AI and subscriptions, for which we have already announced some success. As we transition another few months, my expectation is that we will be able to formally reintroduce guidelines. This concludes my financial commentary, and I will now pass the call back. Thank you, Adrian.
Speaker Change: However, we believe that the current analyst expectations for annual revenues. This year represent a reasonable estimate at this time.
Speaker Change: Chuck will be addressing that transitioned into new markets, including our growing recurring revenue initiatives, such as AI and subscriptions, which we have already announced some success this year.
Speaker Change: As we transition to another few months my expectation is that we will be able to formally reintroduce guidance.
This concludes my financial commentary and I will now pass the call back to Chuck.
Chuck Ferry: Thank you Adrian.
Charles Parker Ferry: As a reminder to our shareholders and the market in general, I want to provide a reminder of what this company has accomplished to date. Duos is the inventor of the Railcar Inspection Portal and is the only turnkey provider of this cutting-edge machine vision artificial intelligence wayside detection. Duos designs, manufactures, installs, and operates every aspect of the solution, including hardware, software, IT infrastructure, and artificial intelligence development. We currently operate 13 freight railcars. Thank you.
Chuck Ferry: As a reminder to our shareholders in the market in general I want to provide a reminder of what this company has accomplished to date.
Chuck Ferry: Duo is the inventor of the railcar inspection portal and it's the only turnkey provider of this cutting edge machine vision artificial intelligence wayside detection system.
Chuck Ferry: Most designs manufacturers installs and operates every aspect of the solution.
Chuck Ferry: Adding hardware software infrastructure and artificial intelligence development.
Chuck Ferry: We currently operate 13 rail freight railcar inspection portals that provides services to Amtrak.
Charles Parker Ferry: Canadian National, CSX, CPKC, and Ferromex, and we have three more portals in our backlog. Our system has been favorably reviewed by the Federal Rail Administration and currently supports waivers and or waiver applications with both the FRA and Transport Canada. The system has been demonstrated to the Labor Union of Mechanical Carmen, National Leadership, who have given it very high marks and would like to see their membership use the oil car inspection portal in greater numbers. It has also been demonstrated to more than 30 U.S. senators and congressmen who would also like to see the system used more broadly. In fiscal year 2023, Duo scanned 8.5 million railcars, producing more than 1 billion component images, which is the largest image database of rail car components in the world.
Chuck Ferry: Canadian National see effects, she PKC and fair mix.
Chuck Ferry: And have three more portals in our backlog.
Chuck Ferry: Our system has been favorably reviewed by this.
Chuck Ferry: Federal Railroad administration, and currently supports waivers waiver applications with both the F R E and transport Canada.
Chuck Ferry: The system has been demonstrated to the labor Union mechanical Carmen National leadership, who are giving us very high marks and we'd like to see your membership and use the rail car inspection portal in greater numbers.
Chuck Ferry: Portal has been demonstrated to more than 30 U S Senators and congressmen, who would also like to see the system used more broadly.
Chuck Ferry: In fiscal year, 2023, dual screen and $8 5 million railcars, producing more than 1 billion component images, which is the largest image database of railcar components in the world.
Charles Parker Ferry: Duo sold 10 active patents on the rail car inspection portal and has another 6 patents pending. I'm pleased to announce that we received notice of award for an additional rail car inspection portal by a large industrial shipper here in the United States with a contract value of $2.7 million, which is expected to be fully installed later this year. This new order expands the potential addressable market outside of the traditional passenger and freight rail operator.
Chuck Ferry: Duo sold 10 active patents on the railcar inspection portal and has another six patents pending.
Speaker Change: I am pleased to announce that we received notice of award.
For an additional railcar inspection portal by a large industrial shippers here in the United States with a contract value of $2 $7 million.
Speaker Change: As expected to be fully installed later this year.
Speaker Change: This new order expands the potential addressable market outside of the traditional passenger and freight rail operators.
Charles Parker Ferry: With this new order, our operations teams will be busy this summer and fall installing three new portals, two for Amtrak in Secaucus, New Jersey, and one for this new customer in Texas. We have recently been awarded another comprehensive patent on the four-wheel car inspection portal. This new patent, when combined with our other nine active patents, further recognizes our position as the inventor of this technology. We have an additional six patents pending, primarily related to new technology we intend to deploy later this year.
Speaker Change: With this new where our operations teams will be busy this summer and fall and installing three new portals Chu for Amtrak and Chicago, New Jersey, and one for this new customer in Texas.
Speaker Change: We have recently been awarded another comprehensive patent on the full railcar inspection portal this new patent and when combined with other with our other nine active patents.
Speaker Change: Other recognizes our position as the inventor of this technology.
Speaker Change: We have an additional six patents pending primarily related to new technology, we intend to deploy later this year.
Speaker Change: Despite our financial results this quarter, which were anticipated.
Charles Parker Ferry: Despite our financial results this quarter, which were anticipated, we have increased our backlog to $10 million and have a good line of sight to at least another $5 million of contract modifications with current customers. Our overall pipeline value has increased to over $100 million, given the significant uptick of interest with the pending Railway Safety Act and challenges at the Mexican-United States border, where our system is used to detect illegal riders.
Speaker Change: We have increased our backlog of $10 million and have a good line of sight to another at least another $5 billion of contract modifications with current customers. Our overall pipeline value has increased increased to over $100 billion given a significant uptick of interest with the pending railway safety Act and challenges with the Mexican United States border.
Speaker Change: Our system is used to detect illegal writers.
Charles Parker Ferry: I would like to thank one of our long-term strategic partners, Dell Technologies, who recently published a comprehensive article in Forbes magazine discussing AI at the Edge, the new vanguard of railway innovation. This article highlights how our company is an important part of artificial intelligence computing at the edge and our role in the AI value chain for the rail industry. We have previously spoken about our keen interest in expanding and diversifying Duos into the broader AI value chain, where analysts predict significant and rapid growth in edge computing and the IT infrastructure to support it.
Speaker Change: I would like to thank one of our long term strategic partners Dell technologies, who recently published a comprehensive article in Forbes magazine discussing AI at the edge, the new Vanguard of railway and innovation.
This article highlights how our company is an important part of artificial intelligence computing at the edge and our role in the AI value chain for the rail industry.
Speaker Change: We have previously spoken about our keen interest in expanding and diversifying <unk> into the broader AI value chain, where analysts predict significant and rapid growth in edge computing and the it infrastructure to support it.
Charles Parker Ferry: Accordingly, I am pleased to announce that we have formed a new operating entity called Duos Edge AI that will install, own, and operate edge data centers, much like the ones we already operate in railcar inspection. We are currently in final negotiations to install our first four Edge data centers later this year that will produce solid and long-term recurring revenue, and we have a pipeline of more than 200 more Edge data centers to be installed.
Speaker Change: Accordingly, I am pleased to announce that we have formed a new operating entity called duals edge AI, they will install own and operate edge data centers much like the ones, we already operate in the railcar inspection portals.
Speaker Change: We are currently in final negotiations to install our first for edge data centers. Later this year that will produce solid and long term recurring revenue and we have a pipeline of more than 200 more edge data centers.
To be installed we will conduct a press conference in the next month or so providing details of this new line of business you can find out more details in the meantime, our normal website as well as our new website duals edge AI.
Charles Parker Ferry: We will conduct a press conference in the next month or so providing details of this new line of business. You can find out more details in the meantime on our normal website, as well as on our new website at duosedge.ai. I want to ensure the market understands what we're doing. Our position in the AI value chain within the rail sector is solid, and it is described quite nicely in the Forbes article previously mentioned.
I want to ensure the market understands what we're doing here our position in the AI value chain within the rail sector is solid and it has described quite nicely in the Forbes article previously mentioned I expect to grow our rail sector wine business significantly in the coming years, particularly with our subscription offering which is gaining momentum.
Charles Parker Ferry: I expect to grow our rail sector line of business significantly in the coming years, particularly with our subscription offering, which is gaining momentum. Duos Edge AI is using the technical skills Duos already has and deploying those skills to take advantage of a significant opportunity to build out the broader Edge AI IT infrastructure that supports other sectors such as schools, oil and gas companies, utility companies, telecommunications, fiber providers, manufacturing companies, and government agencies.
Speaker Change: <unk> edge AI is using the technical skills duals already has and deploying those skills to take advantage of a significant opportunity to build out the broader edge AI infrastructure that supports other sectors, such as schools oil and gas companies utility companies telecommunications fiber providers.
Speaker Change: <unk> companies and government agencies for those that know me personally you understand my experience, leading multiple lines of business both in the civilian sector as well as leading complex and simultaneous submissions as an infantry and special operations officer. The team. We have assembled here duals is quite capable and we are prepared to do this and.
Charles Parker Ferry: For those that know me personally, you'll understand my experience leading multiple lines of business, both in the civilian sector, as well as leading complex and simultaneous missions as an infantry and special operations officer. The team we have assembled here at Duos is quite capable, and we are prepared to do this. In closing, I believe that Duos is a strong leadership position in the rail sector with machine vision and AI wayside detection systems, and we'll continue to push this line of business with focus on expanding the technical capabilities of the rail car inspection portal and the subscription recurring revenue aspect of it. Simultaneously, we will prove our value in the Edge Data Center line of business, which will diversify the company and add to our recurring revenue and overall valuation
Speaker Change: In closing I believe that do also has a strong leadership position in the rail sector with machine vision and AI Wayside detection systems, and we'll continue to push this line of business with focus on expanding the technical capabilities of the railcar inspection portal and the subscription recurring revenue aspect of it.
Speaker Change: Simultaneously, we will prove our value in the edge data center line of business that will diversify the company and add to our recurring revenue and overall valuation.
Operator: As always, I'd like to thank my Board of Directors and shareholders for their support. Thank you for your time, and we'll now open the call to your questions. Operator, would you please provide the appropriate instructions? Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: As always I'd like to thank my board of directors and shareholders for their support.
Speaker Change: Thank you for your time and we'll now open the call for your questions. Operator would you. Please provide the appropriate instructions.
Speaker Change: Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: Press Star two if you'd like to remove your question from the queue for participants using speaker equipment and they'd be necessary to pick up your handset before pressing the star one.
Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Mike Lattimore with Northline Capital Markets. Please proceed with your question.
Speaker Change: One moment, please while we poll for questions.
Okay.
Speaker Change: Thank you. Our first question is from Mike Latimore with Northland Capital markets. Please proceed with your question.
Speaker Change: Hi, This is Bob on behalf of Mike Latimore could.
Charles Parker Ferry: Hi, this is Aditya on behalf of Mike Latimore. Could you give some color on what the status of your next software upgrade is and what the main advancements would be?
Bob: Could you give some color on what is the status of your next so glad upgrade and what would be the may not mudslides.
Yeah.
Bob: Oh.
Charles Parker Ferry: Yeah, I think the question relates to what are some of the next things that we'll see with the Railcar Inspection Corp in terms of technology. So, the real emphasis right now for R&D teams has been largely around wheels and brakes. As everyone watches the rail sector, wheels and brakes are two really of the top reasons for mechanical derailments, and that's where our emphasis has been. So as a part of our Amtrak contract, we've been steadily developing some really cutting-edge equipment.
Speaker Change: Yeah, I think the.
Speaker Change: I think the question relates around what some of the next things that we'll see what the railcar inspection portal in terms of technology.
Speaker Change: So the real emphasis right now where our R&D teams.
Has been largely around our wheels and brakes.
Speaker Change: Everyone watches the rail.
Speaker Change: The rail sector, our wheels, and brakes or two really are the top reasons for mechanical derailments, and that's where our emphasis has been so as a part of our Amtrak contract.
Speaker Change: We've been steadily developing some real cutting edge.
Charles Parker Ferry: So we're going to continue to work on that, developing wheel detection systems that use a combination of machine vision and laser technology that will produce what I would argue is probably the most advanced wheel inspection system, where we'll actually basically inspect the entire 360 degrees of the wheel. And then there are some other technologies that will do the same thing for the rotor disks that are on the Amtrak trains, on the long-haul distance trains, as well as the new Accela 21.
Speaker Change: Wheel detection.
Speaker Change: Systems that use a combination of machine vision and laser technology.
Speaker Change: That will produce a what I would argue is probably the.
Speaker Change: Most advanced a wheel inspection system will actually basically.
Speaker Change: Inspected the a 360 degrees of the wheel.
Speaker Change: And then there are some other technologies they'll do the same thing for the rotor discs that are on the the Amtrak train so in the long haul distance trains as well as the new excel at 'twenty. One so we're excited to be able to roll some of that out.
Charles Parker Ferry: So, we're excited to be able to roll some of that out. We've also got some advances and some big upgrades in our software. As you know, our Centrico system is our user interface, and in preparation to take on multiple subscribers onto some of our systems. That software, we call it an R4 update, will be rolled out here in the next month or so.
Speaker Change: We've also got some advances and some big upgrades in our software.
Speaker Change: As you know our centric ecosystem as our user interface.
Speaker Change: And in preparation to take on multiple subscribers.
Speaker Change: On to some of our systems that software we call. It our whole our four update will be rolled out here in the next month or so.
Speaker Change: Alright, and could you also give some color on how much annual recurring revenue or do you expect exiting to see it.
Charles Parker Ferry: Alright, and could you also give some color on how much annual recurring revenue do you expect to exit this year? Yeah, I'll turn it over to Adrian.
Adrian G. Goldfarb: Yeah, I'll turn it over to Adrian for his comment on that one. Yes, so currently, we have recurring revenue that's running, as I said in the other one, about $800,000 per quarter. And I do expect that to increase probably by about at least 50% to 75% as we get into Q4 and exit the year. Let me give a little bit more color on that comment.
Speaker Change: Yeah, I'll turn it over to Adrian for his comment on that one yes.
Adrian Goldfarb: Yes. So currently we have recurring revenue that's running as I said and the other one about 800000 per quarter.
Adrian Goldfarb: And I do expect that to increase.
Adrian Goldfarb: Probably by about at least 50%.
Adrian Goldfarb: To 75% as we get into Q4 and exiting the year, what let me give a little bit more color on that comment.
Adrian G. Goldfarb: We have some initiatives that are in progress right now that will probably get announced. As Chuck mentioned, there will probably be a special press release and press conference in about a month or so, and I think we'll be more prepared to talk about that right now. But we do expect a steady and growing increase in the amount of recurring revenue if that's where I'm interested and others. Thank you. Thank you very much.
Adrian Goldfarb: Have some initiatives that are in progress right now.
That will probably get announced as Chuck mentioned, our there'll probably be a special press release, a press conference.
Adrian Goldfarb: About a month or so and I think we'll be more prepared to talk about that right now, but we do expect a steady and growing increase in the amount of recurring revenue, that's where our major focuses.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Thank you very much.
Speaker Change: Our next question is from Ed Woo with <unk> capital markets. Please proceed with your phosphate.
Edward Moon Woo: Our next question is from Ed Woo with Ascending Capital Markets. Please proceed with your question. Yeah, thank you for taking my question, and congratulations on getting the additional rail card, you know, the RIPA award that's for a new industrial application. You said it's valued at $2.7 million.
Ed Woo: Yeah. Thank you for taking my question and congratulations about getting additional railcar.
Ed Woo: The rest are all walked out spark new industrial application you said, it's valued at $2 7 million well lets be all recognized this year and my next question is on the new industrial application shall we expect more sales.
Charles Parker Ferry: Will it be all recognized this year? And my next question is about the new industrial application; should we expect more, you know, sales to different types of applications other than traditional rail card inspections? Yeah, so the first part of the question is, yeah, this is a job to basically build a full-on rail car inspection portal inside a very large, industrial shipper of, I'll say, hazardous materials down in Texas. We're in a contract negotiation still, so I want to be confidential about their name, but that job is expected to be completed this year.
Ed Woo: Sales to different types of applications other than traditional railcar inspections.
Speaker Change: Yeah. So the first part of the question is yeah. This is oh.
Speaker Change: Job to basically build a.
Speaker Change: Our full long railcar inspection portal.
Speaker Change: Inside a are very large.
Speaker Change: Industrial.
Speaker Change: Shipper of.
Speaker Change: Well I'll say hazardous material.
Speaker Change: Down in Texas.
Speaker Change: We're in contract negotiations still so I wanted to.
Speaker Change: Coffee that ship out their name but.
Speaker Change: That job is expected to be completed this year.
Charles Parker Ferry: It's approximately $2.7 million in one-time spend, and then we expect that all of that will be recognized this year, and then we'll expect to probably have at least $200,000, $300,000, maybe $400,000 of annual revenue from that on a go-forward basis. And then that particular customer is also interested in potentially some subscriptions after that on some of our other pull-ups. What's interesting about this customer is that this is the first, what I'll call, shipper or rail shipper of hazardous materials, in this case.
Speaker Change: It's approximately $2 $7 million of a one time spend.
Speaker Change: And then we will expect that all of that to be recognized this year and then we'll expect to probably have at least two 300, maybe 400 K.
Speaker Change: The annual revenue from that on a go forward basis, and then that particular customer is also interested in.
Speaker Change: And potentially some subscriptions after that on some of our other pools.
Speaker Change: What's interesting about this customer is that.
Speaker Change: This is the first of all I'll call it a ship or a rail shipper of.
Speaker Change: This materials in this case it's.
Charles Parker Ferry: It's one of a number of shippers that we've been talking with, not only to build portals on their property but also to add them to our subscription services. Effectively, what they're doing is it's a very large production facility. They bring in large shipments of rail cars into the facility, where they first have to inspect them. They make repairs there to their own cars, and then they load them with their products and then put them back on the main line.
Speaker Change: One of a number of shippers that we've been talking with.
Speaker Change: Not only to build portals on their on their property.
Speaker Change: Also too too to add them in our subscription services. So effectively what theyre doing is a very it's a very large production facility. They bring in large consist of our railcars into the facility.
Speaker Change: They first have to inspect them.
Speaker Change: They make with payers there of their own cars and then they load them with their products and then put them back out of the mainline. So again this opens up.
Charles Parker Ferry: Again, this opens up a nice avenue for us outside of the normal freight and passenger rail. Great. Well, congratulations.
Speaker Change: A nice avenue for us outside of the normal freight.
Speaker Change: Freight and passenger rail.
Speaker Change: Great well, congratulations it's a great opportunity and I wish you guys. Good luck. Thank you.
Edward Moon Woo: That's a great opportunity, and I wish you guys good luck. Thank you. I appreciate it. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you.
Speaker Change: I appreciate it.
Speaker Change: Yeah.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: I will now.
Speaker Change: Like what.
Speaker Change: I'm sorry go ahead Margaret.
Charles Parker Ferry: Management will now take select listener-submitted questions. Yes, we had a couple come in here, and what I'll do is... One of the questions asks the question, "How does the new company Duos Edge AI fit in with the overall market space of railroads?" Kind of akin to the comments that I made, you know. Basically, we think of ourselves as a technology company that's really operating inside the overall AI value chain. Right now, it's focused on the railroads in terms of that machine vision and artificial intelligence and the AI value chain.
Speaker Change: Management will now take select listener submitted questions.
Speaker Change: Yeah.
Margaret: Yeah. So we had a couple come in here and what I'll do is.
Margaret: One of the questions asked the question how does this new company do us edge AI fit in with your overall market space of our railroads.
Margaret: Kind of akin to the comments that I made.
Margaret: No.
Margaret: Basically we think of ourselves as a technology company, that's really operating inside the overall AI value chain.
Margaret: Right now it's focused inside the railroads in terms of that machine vision and artificial intelligence AI value chain.
Charles Parker Ferry: But when you kind of read that article that comes from Dell Technologies, you'll kind of understand where we kind of see ourselves a bit better in that space. And what we're really doing here with this Duos Edge AI is really just kind of laterally moving using the skill sets that we already have, using technologies that we have because we already operate edge data centers for the specific purpose of computing AI at the edge.
Margaret: But when you kind of read that article that comes from.
Margaret: From Dell technologies, you'll you'll kind of understand where are we kind of see ourselves a bit better in that space and what we're really doing here with this new OS edge AI is really just kind of laterally moving using the skill sets that we already have.
Margaret: Using technologies that we have because we already operate edge data centers for.
Margaret: Specific purpose computing AI at the edge and we're simply kind of putting that into another portion of the AI value chain.
Charles Parker Ferry: And we're simply kind of putting that into another portion of the AI value chain. And in particular, it's still within our business model where we're providing a service that will produce solid recurring revenue that is right now in super high demand inside that space. So we are just kind of at the leading edge of developing that right now. We are currently in discussions to put the first four of these into the field. We expect to do that this year, too.
And in particular, it's still within our business model, where we're providing a service that will produce solid recurring revenue there.
Margaret: But right now as in Super high demand.
Margaret: And in that inside that space. So.
Margaret: We are just kind of at the leading edge of developing that right now.
Speaker Change: We are.
Speaker Change: Currently in discussions to put the first.
Speaker Change: For these into the field, we expect to do that this year.
Charles Parker Ferry: We know there's going to be a lot of questions about it, so we'll look forward to answering those as things firm up. And we'll do that in a special press conference here in the next month or so. Okay, and with that, that'll conclude our question and answer session, and I'd like to turn the call back over to the Operator, please. At this time, I'd like to turn the call back over to Mr. Ferry for his closing remarks.
Speaker Change: We know there's going to be a lot of questions about it. So we'll look forward to answering those.
Speaker Change: As things firm up and we will do that in a special.
Speaker Change: This conference here in the next months or so.
Speaker Change: Okay and with that there that'll conclude our question and answer session and I'd like to turn the call back.
Speaker Change: Back over to the operator please.
Speaker Change: Okay.
Operator: At this time I'd like to turn the call back over to Mr. Terry for his closing remarks.
Terry: Yeah, again, I just want to reiterate my.
Charles Parker Ferry: Yeah, again, I just want to reiterate my special thanks, one, for my CFO, Adrian Goldfarb, joining me again. Thank you, as well as all of our shareholders and board members for their support. Thank you all for joining us on today's call.
Terry: My special Thanks, one for my CFO Adrian Goldfarb, joining me again, thank you and as well as all of our shareholders.
Terry: <unk> members and their support and thank you all for joining us on today's call.
Terry: Yeah.
Speaker Change: Before we conclude today's call I would like to provide <unk> safe Harbor statement that includes important cautions regarding forward looking statements made during this call.
Operator: Before we conclude today's call, I would like to provide Duos Safe Harbor Statements that include 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 opposite or similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guaranteed for future performance or events and are subject to a number of uncertainties, risks, and other factors, many of which are beyond our control, which may influence the accuracy of statements and the projections upon which statements are based and could cause Duos Technologies Group's actual results to differ materially from those anticipated in forward-looking statements.
Operator: 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 facts as may periodically be described in DUO's filings with the SEC. Thank you for joining us today for Duos Technologies Group's first quarter 2024 earnings call. You may now disconnect.
Speaker Change: This earnings call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.
Speaker Change: Forward looking terminology such as believes expects may will should anticipates plans and their opposite or similar expressions.
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.
Speaker Change: Many of which are beyond our control.
Speaker Change: Which may influence the accuracy of these statements and the projections upon which statements are based on good clubs dues technology.
Speaker Change: Technology group actual results could differ materially from those anticipated in forward looking statements.
Speaker Change: These risks and uncertainties include but are not limited to those described in item one a and do its annual report on Form 10-K, which is expressly incorporated herein by reference and other factors as may periodically be described in <unk> filings with the SEC.
Speaker Change: For joining us today for <unk> technologies Group first quarter 2024 earnings call you may now disconnect.