OMNIQ Corp. (NASDAQ:OMQS) Q4 2023 Earnings Call Transcript

OMNIQ Corp. (NASDAQ:OMQS) Q4 2023 Earnings Call Transcript April 2, 2024

OMNIQ Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello and welcome to the OMNIQ Corp's Fourth Quarter 2023 Earnings Conference Call. My name is Ali and I will be your coordinator for today's call. With us on the call are Mr. Shai Lustgarten, Chief Executive Officer and Principal Accounting Officer. Today's call is being recorded and you should have access to the company's fourth quarter 2023 earnings press release issued after the market closed yesterday. This information is available on the Investor Relations section of OMNIQ's website at www.omniq.com. During the course of this conference, we will make certain forward-looking statements. All statements that address expectations, opinions or predictions about the future are forward-looking statements. Although they reflect our current expectations and are based on our best view of the industry and our current expectations and our business as we see them today, they are not guarantees of future performance.

A close up view of a person's hands typing on a computer keyboard, emphasizing internet-based information technology services.

These statements involve a number of risks and uncertainties, and since these elements can change, and in certain cases are not within our control, we would ask that you consider that and interpret them in that light. We urge you to review the company's Forms 10-K, 10-Q and other SEC filings for a discussion of the principal risks and uncertainties that affect the company's business and performance and the factors that could cause actual results to differ materially. OMNIQ undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Following the prepared remarks, the company will be taking questions as time permits. Now I will turn the call over to Shai Lustgarten, CEO.

Mr. Lustgarten, please go ahead.

Shai Lustgarten: Thank you, operator. Welcome, everyone. I'm Shai Lustgarten, CEO of OMNIQ, and it's my pleasure to welcome you to our earnings call today. Today, I'll be sharing our financial results and key developments for the fourth quarter and full year of 2023, followed by insights into our strategic direction and operational achievements. We have navigated the challenging landscape, yet our focus remains steadfast on innovation, operational efficiency and strategic growth, combined with our achieving -- with the achieving of profitability. First, let's talk about some of the significant milestones we achieved recently, which truly reflect our dedication to execute a balanced plan of cost cuts, resulting into significant savings of over $5 million for the 2023 annual results.

This effort continues as we speak and will be reflected in the near future. On the business side, we continue to leverage on technology leadership to tackle complex challenges across a variety of sectors. We've signed a multiyear contract with Israel's largest logistics center, a clear demonstration of our dedication and ability to improve operational efficiency. Additionally, our AI machine vision technology has been chosen again and again by some of the most demanding security authorities around the world and by airports like JFK, Laguardia, New York Stewart and Newark in the US and we had first orders coming from Latin American airport as well. This represents a major advance in our quest to boost safety and streamline operations at key locations and transportation centers.

Furthermore, we've made notable strides in AI and fintech with several key developments. The introduction of AI-based in-car face detection technology is set to revolutionize law enforcement and terror prevention by ensuring drivers and passengers and make sure they are correctly identified, enhancing both security and personalization. Our strategic acquisition of CodeBlocks, a leading fintech software company lets us add special one-of-the-kind features to our financial tech solutions. This move not only expands what we offer, but also strengthens our role in the fintech world. We do see fintech as one of our growth engines in the near future. Additionally, we've rolled out customized fintech solutions for Israel's biggest fast food chain and the restaurant chain owned by a US company.

These actions highlight our skill in adopting and scaling our solutions for various industry demands. We've won a contract in collaboration with Gett taxi, that you can consider like in Israeli Uber, to install self-service taxi kiosks of Ben Gurion Airport. This effort is set to greatly enhance the travel experience by shortening lines and guaranteeing high service quality, safety and fair pricing for travelers. In the mobile computing area of our business, we've secured a contract to update the tech setup for 450 sporting goods stores across the US. This shows how versatile and innovative we are in retail. It's key because it boosts our enhanced to extend our profitable managed services to a big retail chain. Lastly, OMNIQ solution was ordered by Nestle for its advanced logistics center in Israel.

Together, these achievements highlight our unwavering commitment to innovation and our ability to deliver cutting-edge solutions that meets the evolving needs of our demanding clients across various sectors. Next, let's discuss our financial performance in the fourth quarter of 2023. We reported revenue of approximately $15.5 million for the quarter ended December 31, 2023, with gross margin of 30.5%. As a result of management's efforts to reduce cost, the total operating expenses for the quarter before the noncash impairment expenses were $6.5 million compared with $7.6 million in the fourth quarter of 2022. That resulted in savings of $1.2 million for the quarter. As we experienced a $14.7 million goodwill impairment, our total expenses amounted to $19.1 million.

Net loss for the quarter was $17.8 million compared with the loss of $4 million or a loss of $0.53 per basic share for the fourth quarter of last year. The loss was largely impacted by the $14.7 million noncash impairment expense. Adjusted earnings before interest, taxes, depreciation and amortization for the fourth quarter of 2023 amounted to a loss of $3.6 million compared with an adjusted EBITDA loss of $1.4 million for the fourth quarter of 2022. Our cash balance on December 31, 2023, was approximately $1.7 million compared with $1.1 million on December 31, 2022. That is an increase in our cash assets of $600,000 in the fourth quarter. Now let's look at the whole year 2023 financial results. We reported revenue of $18.1 million for the year that ended December 31, 2023, a decrease of $19.6 million from $100.8 million in the same period of 2022.

Our gross profit decreased to $15.7 million in the year that ended December 31, 2023, compared to $22.1 million in 2022. Total operating expenses, excluding the impairment cost, for the year ended December 31, 2023, were $27.2 million, a decrease of $4.5 million compared with the same period of 2022. Including the noncash impairment, the expenses were $41.9 million for the year ended December 31, 2023. We experienced a reduction in general administrative expenses by $4.7 million or 17% in 2023. Net loss for the year ended December 31, 2022 was $29.4 million or a loss of $3.45 per basic share compared with a loss of $13.6 million or a loss of $1.82 per basic share for the same period of last year. Our adjusted EBITDA for the year ended December 31, 2023, amounted to a loss of $7.4 million compared with an adjusted EBITDA loss of $2.9 million in 2022.

Next, we'll discuss the steps we've taken and are taking to correct some of these trends. The company dealt with the challenge of the need to conduct costs and mainly additional costs because of the temporary weakness in the market conditions combined with the need to maintain and improve its position in the huge market it is involved with to support future growth and profitability. So far management has taken aggressive measures to reduce annual SG&A costs by $4.7 million and is working on further measures to achieve profitability as soon as practically possible. Ultimately, we plan to prioritize timely and cost-effective development. We have placed a strategic focus on increasing sales with prime customers. Additionally, our sales efforts are focused on the most profitable product lines.

To ensure we have sufficient working capital, in October 2023, management finalized an equity raise which resulted in $2.5 million in net cash received from investors. Management also finalized a new line of credit with a new financial institution. We also reduced our overall employee count by 34 compared to December 31, 2022 to continue to reduce administrative costs. In conclusion, as we reflect on the past year and look ahead, our journey is one of transformation and growth. The challenges we faced have not only tested us, but also highlighted our resilience and capacity for innovation. Our strategic focus remains on developing and deploying leading-edge technologies to drive value for our customers and stakeholders. We believe integrating our patented and proprietary AI technology into our existing supply chain offerings will allow our automated logistics monitoring and optimization, creating operational efficiencies and higher margins for us and our customers.

I'm confident in the path we've charted and I believe our best days are ahead of us. Thank you for your continued support and trust in OMNIQ Corp. Now operator, we can go into Q&A.

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