Good afternoon. Welcome to Duos Technologies Third Quarter 2019 Earnings Conference Call. Joining us for today's call are Duos' Chairman and CEO, Gianni Arcaini; and CFO, Adrian Goldfarb. Following their remarks, we will open the call for your questions. Then before we conclude today's call, I will 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 Duos Chairman and CEO, Gianni Arcaini. Sir, please proceed.

Thank you, Rebecca. Welcome, everybody, and thank you for joining us. Earlier today, we issued a press release announcing our financial results for the third quarter of 2019 as well as other operational highlights. A copy of the release, by the way, is available in the Investor Relations section of our website. I plan to provide additional commentary on our results shortly. But before we begin with the discussion of our results, I'd like to take a few minutes, as I always do, to provide a brief overview of who we are and what we do, particularly for those who you may -- who have not been familiar with our company in the past. At Duos, we provide advanced analytical technology solutions with a strong portfolio of intellectual property. In simple terms, we create highly sophisticated technology solutions for our wide range of customers. We focus on improving their business processes to ultimately provide a measurable return on investment. To that end, we have and continue to develop a broad range of proprietary technologies, which we typically deploy as turnkey systems. These advanced tools include machine learning and other forms of artificial intelligence as well as advanced video analytics that we deliver through a combination of our image and data capture technology suite, which includes back-end processing and middleware branded as praesidium and our customer-facing software platform branded as centraco. Our chief focus is our mission-critical security, inspections and operational applications. Our target markets predominantly include the rail transportation, retail distribution, critical infrastructure security and the law enforcement sectors. We estimate that the total addressable market opportunity in our combined core target markets exceeds $100 billion. In addition to our strength in technology development, one major differentiator is that our technologies do not require any change in our customers' business…

Thank you, Gianni. On previous calls, I had discussed how the majority of our revenue is recognized and our adoption of ASC 606 at the beginning of last year. Comparisons of each quarter are now on the same accounting basis. It should also be noted that the financial results I will be discussing represent the consolidation of the company with its subsidiaries, Duos Technologies Inc. and TrueVue360. All of our investments in the new AI subsidiary are incorporated in the company's operating expenses. As I've also discussed in previous calls, our revenue recognition policy is based on the principles of ASC 606 using the input method. Although ASC 606 was not a factor during this quarter, our results can vary substantially between measurement periods and are highly dependent on the stages of completion of our project business. This will become less pronounced as the business grows, our revenues are spread between a greater number of projects and the recurring revenue portion of our business becomes more meaningful. Now turning to our financial results for the third quarter and first 9 months of 2019. Total revenue for the third quarter decreased 57% to $2.2 million compared to $5.1 million in the equivalent quarter in 2018 due to slower-than-anticipated contract awards from 2 customers pending resolution of certain terms and conditions. These orders have now been received. However, additional execution delays from one customer in the project portion of our business continued to have an impact, albeit to a lesser degree than previously envisioned. Although these delays may impact the project revenue portion of our business, the net effect is that they are not expected to have any material impact for the full year. We are continuing to make improvements in our project build and delivery process largely as a result of…

Thank you, Adrian. And now I get to talk about the good stuff. So I'd like to provide some key updates for the quarter as well as expand upon our outlook for the remainder of the year. In the first part of this year, we formed a dedicated team of development engineers to focus specifically on expanding our existing technology road map. Since that time, I am pleased to report we have already seen excellent initial traction with a handful of new technologies to be announced soon. Our product development team is currently working on a number of technology upgrades and new technologies, which we plan to discuss at a later date. While we are, of course, focused on generating and accelerating new business, we remain dedicated to providing technology innovations and superior quality in our current products. Operationally, we are also still winning new business as well as expanding our relationships with our existing blue-chip customers. First, as you may have seen from our press releases issued just a week ago, we were recently awarded a $1.8 million contract with a Class 1 freight railroad customer to implement a turnkey rail inspection portal, or as we call it, a rip. As mentioned in the press release, we expect the installation of the system to be fully completed prior to the end of this year, allowing us to recognize substantially all of the revenue from this current -- from this contract during this calendar year. The award includes a contract for tech support as well as the development and maintenance of a significant library of AI algorithms. Also within our rip business, back in August, we were awarded a $2.3 million contract with an existing Class 1 freight railroad customer to replace an earlier-generation system with our latest generation of…

[Operator Instructions] And now our first question will come from Ashok Kumar from ThinkEquity.

To follow up to your earlier comment in terms of project-related revenues, they tend to be nonlinear over the course of the year. So as you look into 2020, could you give some color in terms of the contribution from the asset management and AI and potentially acquisitions that could give a more linear profile to the top line? A related question also is given your OpEx forecast for '20, what do you think is going to be your break-even profitability levels? Will it be in high teens? And what will be the time line to get there?

Thank you, Ashok. This is Adrian. So there are multiple parts and I'll see if I can address each of the parts of the question. With respect to the business going forward in 2020, as we have described in quite some detail, the recurring revenue part of that business is going to be growing primarily through the AI piece of the business or TrueVue360. As I mentioned, I think, during my dialogue, that part is expected to grow over time to become about 20% of our total revenue in the next 24 months. So you'll see some impact of that in 2020. There is nothing right now in that initial guidance, and please understand that as initial guidance for 2020, at the moment, we've not really put anything specifically in there in terms of the break down between our project business and also our AI businesses. That will come, as Gianni mentioned, in future announcements going forward. With respect to the second part of your question, we are currently working on our forecast going forward. We're giving -- we have given obviously the initial guidance that's based on some metrics that we provide each quarter in terms of our backlog and our pending contracts in our pipeline. And so that's based on -- that we're anticipating plus more [indiscernible] that are already being worked on. We have not yet looked at in terms of what the contribution will be to that. However, we are going to be moving forward towards breakeven on profitability, obviously, as that revenue line grows.

Got it. And you stated aggregate margins of 50% and I assume you'll be able to sustain at those levels in calendar '20.

You're speaking about gross margins, correct, Ashok?

Yes. Yes.

Yes. So traditionally, we have a long history to bear this out. Our business typically has produced around about a 50% or better gross margin. As I mentioned, always in the beginning of my section, since the move to ASC 606, sometimes the way that revenues are measured from quarter to quarter don't always provide for that and you could end up in a situation like we had last quarter where the expenses are much higher against the revenue that you can actually record. But over the year, this tends to smooth out, and in fact, you can see that the overall gross margin reported in Q3 was around 47% and has been pretty stable. We expect that gross margin to continue to improve over time. And in fact, it wouldn't be unusual to expect that to continue to increase as the recurring revenue portion of our business, it becomes a greater component of the overall revenue.

[Operator Instructions] At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Arcaini for his closing remarks.

Well, again, thank you for joining us today. I especially want to thank our employees, our partners, investors and our customers for their continued support. We're looking forward to an exciting 2020, and we will update you on our next call accordingly. Operator?

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 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, Inc.'s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include but are not limited to those described in Item 1A in Duos' annual report on Form 10-K, which is expressly incorporated herein by reference and other factors as may previously be described in Duos' filings with the SEC. Thank you for joining us today for Duos Technology Group's 2019 Third Quarter Earnings Conference Call. You may now disconnect.