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spk02: 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. 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.
spk01: Thank you, Operator. Welcome, everyone. I'm Shai Luzgurten, 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 a challenging landscape, yet our focus remains steadfast on innovation operational efficiency, and strategic growth combined 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 multi-year 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, and Newark in the US. And we had first orders coming from the 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-a-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 U.S. company. These actions highlight our skill, in adopting and scaling our solutions for various industry demands. We've won a contract in collaboration with GetTaxi that you can consider like an Israeli Uber to install self-service taxi kiosks at 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 meet 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% $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 costs, the total operating expenses for the quarter before the non-cash 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 mounted 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 non-cash impairment expenses. 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 EBIT 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 non-cash 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 $29.2 million. or loss of $3.45 per basic share compared with the loss of $13.6 million or 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.
spk00: Next, we'll discuss the steps we've taken and are taking to correct some of these trends.
spk01: 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 a 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,
spk00: of 31-2022 to continue to reduce administrative costs.
spk01: 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 at 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 Omnicube 4. Now, operator, we can go into Q&A.
spk02: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Hila Pinjewski, who is an investor. Your line is live.
spk04: Thank you. Good morning, Shai. Good morning, Lori. I'm fine. Thank you. So I have a few questions. The first, what caused the drop in revenue in 2023? And when do you think the company will continue to grow?
spk01: So we've seen in our sectors a reduction that was common to many of the leading companies that lead the industries, for example, like Zebra and additional search organizations that are the main ones in our industry. And, for example, they suffered a reduction of about 30%, so we haven't suffered that. in sales, and we've seen that in several of the organizations that lead our industry. But the main point here is that we haven't had even one PO canceled. It all, of course, started from all the recession and additional macroeconomic reasons, but the good thing for OmniQ is that none of the orders that we have received and that, you know, continue to firm are very strong backlog. These orders were not canceled. They were postponed for delivery, and we started seeing the ramp up for the first quarter of 2024, and, of course, continuing in Q2, mainly Q2 2024. Okay, great.
spk04: Can you explain, please, your involvement with FinTech and what are your plans going forward?
spk01: Yes, FinTech is one of the automated solutions that we deploy in our total system that we deliver to retail, to restaurants, and some additional relevant markets. We decided to invest in fintech in providing software credit card processing or payment solution, total payment solution, not only the hardware, but we've decided to invest in the software as well. The purchasing or procurement acquisition of CodeBlocks, which is a very significant and leading software company in the fintech space. they've developed a very flexible and innovative and groundbreaking through technology that now allows us to provide the complete solution, enlarge our margins by adding additional software component to our solution. And also even more than that is very lucrative due to the fact that it allows us to touch the final consumer and be able to provide additional details for customization and provide additional added value in the inputs that we need to get to be able to discover AI trends in the consumer behavior, for example. So it was a strategic on our end. It is something that also already generates significant revenue. And of course, one that is making us and differentiates us from our competition. In addition, of course, Nautilus and the other reasons, it is enlarging our margins and allowing us to provide a much better stickiness to the consumer level.
spk04: Sounds good. So I have a last question. Are the cost cuts negatively affecting the sales?
spk01: No, no, we focused on cuts that we've declared before that we are going to take. It is according to the plan that we've shared with you, the investors. We've shared with you that we're going to get into now the phase of cost cuts in 2023 and make sure that we reach profitability very soon These cuts, according to the plan that we presented, are cuts that are involving more, I would say, temporary expenses that were significant expenses that were aimed and targeted into stabilized.
spk00: More than 10,000 deployments in the U.S. alone. Hello?
spk02: Sorry, we seem to have temporarily lost audio from Mr. Lustgarten. One moment, please.
spk00: Hello?
spk02: You're back, sir.
spk01: Can you hear me now? Yeah. I'm sorry. Some network issues. So I'll just sum up the response that I was speaking to myself. I'm sorry about that. But basically, the cuts that we've made were more focused and done with temporary expenses, significant expenses that were aimed on product stabilization. Now that we have more than 10,000 deployments of AI products in the U.S., we no longer need to expense these expenses and spend the money on stabilizing products because we have very stable products today. These were mainly the cuts.
spk04: Okay. Okay. Thank you, Shai, and wishing a successful 2024.
spk00: Thank you very much for your support.
spk02: Thank you. Our next question is coming from, and I apologize if I mispronounce this, Havilina Sailikiotou, who is an investor. Your line is live.
spk03: Hello, Shai. I'm Havilina, and I have two questions for you. The first one is, do you think market conditions are recovering so that we can start enjoying growth again? And the second question is, are you expecting any big order in the near future?
spk00: Can you repeat the second question, please?
spk03: The second question is, are you expecting any big order in the near future?
spk01: Oh, yeah. Okay. Thank you. Regarding the orders and the pickup going forward, yes, we've seen that already starting this quarter. We see that the trends that the whole market faced and we part of the market in 2023 of postponing deliveries and spending less, we see that these trends are now turning around to what we were used to before. So we expect growth, of course. We expect for 2024 to be a great year, a profitable year. And we've taken the measures to get there, to get to that point now. and ramp up again and get to the revenues we're used to, plus being profitable. So that's the big news. The big orders specifically, yes, absolutely. We were able to get awarded, and we announced several of these awards to the market, awards by very large enterprises, leading enterprises, Fortune 500 enterprises, even Fortune 100 enterprises. So we started seeing that. these are new customers we haven't had these customers before so this is new business and that certainly evidence for uh you know for going forward success that's good thank you shai and uh good luck with the new orders and all the best for 2024. thank you thank you for your support appreciate your support
spk00: Thank you. If there will be any final questions or comments, please indicate so now by pressing star 1 on your telephone keypad.
spk02: Okay, as we have no further questions in queue at this time, I will hand it back to Mr. Lustgarten for any closing comments he may have.
spk01: Thank you, Operator. As we wrap up today's earnings call and the Q&A session, I want to sincerely thank all our devoted employees and you, our loyal investors, for your unwavering support of Omnicube. Your dedication is vital as we look back on our performance and plan for a profitable future. In navigating through the complex landscape shaped by global and market events, it has provided us with a valuable opportunity to reflect deeply on our core operations and values. It's like looking in the mirror, not to contradict what we see with harshness, but to understand where our strengths lie and where we need to evolve. These insights are now guiding us toward making significant forward-thinking changes. We're not just addressing the immediate issues at hand. We're laying down the foundation for a healthier, more robust future for our companies. This period of transformation, though demanding, is an investment in our collective future, ensuring we emerge not just intact, but stronger and more aligned with our mission than ever before. We're ramping up our development, making technological strides, and acquiring strategic assets to ensure Omnicare remains the top choice for the major companies looking ahead. Your trust in our direction motivates us to keep innovating and leading. Thank you for playing such a key role in our journey to lasting success. Thank you all.
spk02: Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.
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