Q4 2023 Omniq Corp Earnings Call

Participants

Shai Lustgarten; Chairman of the Board, CEO, & Interim CFO; OMNIQ Corp

Gila Penetsky

Presentation

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 on 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 in our control, we would ask that you considered 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. Franchises go to NCO. one Q. And it's my pleasure to welcome you to our and 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 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 and machine vision technology has been chosen again, again by some of the most demanding security authorities around the world and by airports like JFK with Wachovia, New York, Stewart and nor in the U.S., and we had first orders coming from Latin American airports 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 reboot revolutionized law enforcement and terror prevention by ensuring drivers and passengers and make sure they're correctly identified enhancing both security and personalization, our strategic acquisition of code blocks and leading fintech software company.
Let us add special one-at-a-time features to our financial tech solutions. This move not only expand 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 scale in adopting and scaling our solutions for various industry demands. We've won a contract in collaboration with get taxi that you can consider like in the Israeli Uber to install self-service taxi kiosks have been growing in the airport. This effort is set to greatly enhance the travel experience by shorten lines and guaranteeing high service quality safety and fair pricing for travelers in the mobile computing area of our business, we've secured the contract to update the tech setup of 450 sporting goods stores across the US. This shows how versatile and innovative we are in retail. It's key because it boosts our enhance to extend our profitable managed services to a big retail chain.
Lastly, OMNIQ solution was ordered by Nestlé 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 make the evolving needs are 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 31st, 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 experience a $14.7 million goodwill impairment, our total expenses amounted to $19.1 million. Loss for the quarter was $17.8 million compared with a loss of $4 million for 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 expense.
Adjusted earnings before tax before interest, taxes, depreciation and amortization for the 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 31st, 2023, was approximately $1.7 million compared with $1.1 million on December 31st, 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 31st, 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 31st, 2023, compared to $22.1 million in 2022.
Total operating expenses, excluding the impairment costs for the year ended December 31st, 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 ending December 31st, 2023.
We experienced a reduction in general administrative expenses by $4.7 million or 17% in 2023.Loss for the year ended December 31st, 2022, was $29.4 million or 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 last year. Our adjusted EBITDA for the year ended December 31st, 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 occur to correct some of these trends, the Company dealt with the challenge of the need to conduct costs in May 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, our 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 line 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 31st of 31 2022 to continue to reduce administrative costs.
In conclusion, as we reflect on the past year and look ahead our journey, our journey is one of transformation and growth. The challenges we face. Tough 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 in integrating our our patented and proprietary AI technology into our existing supply chain offerings will allow or automate our automated logistics monitoring and optimization, creating operational efficiencies and higher margins for us for us and our customers. I'm confident that we've charted and I believe our best days are ahead of us. Thank you for your continued support and trust in OMNIQ plus now, operator, we can go into Q&A.

Question and Answer Session

Operator

(Operator Instructions) Gila Penetsky, an investor.

Gila Penetsky

Thank you. Good morning, Shai. Thank you and I have a few questions and the first and what caused the drop in revenue in 2023? When do you think the Company will continue to grow?

Shai Lustgarten

So some we've seen in our sectors, a reduction that is commonly that was common to many of the leading companies that we are in that lead the industries, for example, like Zebra and additional of additional such organizations that are the main ones in our industry. And for example, they suffered a reduction of about 30%. So we haven't so suffered that. But the whole market was downsizing in cell, and we've seen that in several of the organizations that lead our industry. But the main point here is that we haven't added even one PO canceled it all, of course, started from all the recession and additional macroeconomic of reasons. But the good thing that for Omnicare's and none of the orders that we have received and that continued to firm our very strong backlog. These orders were not canceled. They were postponed for delivery, and we started seeing the ramp-up in the for the first quarter of 2024 and of course, continuing in Q2, mainly in Q2 2020, sorry.

Gila Penetsky

Okay, great. And can you explain, please, your involvement in with fintech and what are your plans going forward?

Shai Lustgarten

Just in terms of what would be your automated solutions that we deploy in our total system that we deliver to retail to restaurants and on some additional room on the relevant markets. These we decided to invest in fintech in providing software, credit card processing, bill payment solution, total payments solution, not only the hardware, but we've decided to invest in the software as well on the purchasing or procurement, our acquisition of coal block, which was a which is a very leading a very significant and leading software company in the fintech space. They've developed a very flexible and innovative and breaking ground breaking through technology that now allows us to provide the complete solution and larger 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 and provide additional added value in the inputs that we need to get to to be able to discover a I trends in of the consumer behavior, for example.
So it was strategic on our end. It is something that also already generates significant revenue. And of course, one studies May-Kin us and differentiates us from our competition. In addition, of course, not less than the other reasons. It is enlarging our margins and allowing us to provide a much better stickiness too, to the consumer level.

Gila Penetsky

Sounds sounds good. And so I have one last question. Are the cost cuts negatively affecting the sales?

Shai Lustgarten

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 getting to now the phase of cost cuts in 2023 and make sure that we reach profitability very soon of these cuts according to the plan that we presented is our cuts that are involving more, I would say, temporary expenses that were significant expenses that were filed and then targeted into stabilized of 10,000 more than 10,000 deployments in the U.S.

Gila Penetsky

Hello?

Operator

Sorry. We seem to have temporary lost audio from Mr. Lustgarten One moment please, for a follow-up.

Shai Lustgarten

Yes, there are some network issues, so I'll just sum up there response that I was speaking to myself. I'm sorry about that. But basically because the cuts that we've made were more are focused and done with temporary expenses, significant expenses that were aimed on product stabilization. Now that we have more than 10,000 deployments of that product in the U.S., we no longer need two expense on these expenses and spend the money on stabilizing products because we have very stable product today. These were mainly the cuts.

Gila Penetsky

Okay. Thank you, Shai, and wish you a successful 2025.

Shai Lustgarten

Thank you very much for your support.

Operator

Javelina (inaudible), an investor.

Hello, Shai. 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 orders in the near future of.

Shai Lustgarten

Can you repeat the second question, please?

Second question is are you expecting any big orders in the near future?

Shai Lustgarten

Oh, yes. Okay. Thank you. On regarding the orders and the pickup and going forward? Yes, we've well, we've seen that already starting this quarter. We see that what we see that the trends that we the whole market faced and we are part of the market in 2023, postponing deliveries and expense, not spending less. We see that these trends are now turning around to what we were used to before. So we expect a growth. Of course, we expect to us 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 by 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 dividends for us. Of course, we've got going forward success that's good.

Thank you, Shai, and good luck with the new orders and all the best for 2024. Thank you.

Shai Lustgarten

Thank you for your support. Appreciate your support.

Operator

(Operator Instructions) As we have no further questions in queue at this time. I will hand it back to Mr. Lustgarten for any closing comments you may have.

Shai Lustgarten

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 OMNIQ through dedication.
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 not to contest what we see with harshest, but to understand where our strengths lie and where we need to evolve. These insights are now guiding us towards making significant forward-thinking changes were not just addressing the immediate issues at hand. We are laying down the foundation for a healthier, more more robust future for our company. 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 are wrapping up our development, making technological strides in acquiring strategy, strategic assets to ensure OMNIQ remains the top choice for four major companies.
Looking ahead for 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.

Operator

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.