Omniq - Q2 2024

Transcript

Operator (participant)

Hello, and welcome to the OmniQ Corp.'s second quarter 2024 earnings conference call. My name is Holly, and I will be coordinating your call today. With us on the call is Mr. Shai Lustgarten, Chief Executive Officer and Acting Chief Financial Officer. Today's call is being recorded, and you should have access to the company's second quarter 2024 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 call, 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 OmniQ's current expectations and are based on the best view of the industry, current expectations in their 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 8-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. 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 (Chairman and CEO)

Thank you, Holly, and welcome, everyone. I appreciate you joining us today to discuss OmniQ's second quarter results. I'm excited to share the progress we've made, the strategic initiatives we're implementing, and how we are positioning OmniQ for continued growth and success. Your support and interest are extremely important to us, and I'm looking forward to discussing the details with you. Let's get started. At OmniQ, our strategic vision includes leveraging advanced technology to deliver exceptional value to our customers, while also offering value to our shareholders by focusing on the most profitable business lines and continuous financial improvement. In this competitive environment, we remain focused on expanding our market presence through technological advancements and strategic partnerships while upholding the core values of integrity and innovation. Q2 brings our recent efforts to achieve profitability while keeping strong revenue and our competitive advantages in the markets we serve.

In alignment with this vision, I'm pleased to share several key achievements from the second quarter that highlight our progress and strategic direction. First, advancement in technology development. We have significantly reinvested in our technology, enhancing our AI engine to serve new use cases, which expands our market share and creates ongoing revenue streams. One of the most notable advancements is our ability to manage restricted area access within large facilities. This development allows us to offer more precise control, such as differentiating between student and staff parking or enforcing handicap space restrictions. These enhancements not only increase customer satisfaction, but also open new revenue opportunities for OmniQ. Next, strategic expansion in security operations. We successfully deployed our upgraded technology in two major medical centers last quarter in Ohio and Texas.

These deployments are prime examples of how we are integrating our enhanced AI solutions into critical security operations, reinforcing our position as a leader in intelligent security and access management. Also, leveraging strong IoT capabilities. Our IoT business is important to many of our long-term customer relationships. By integrating our SaaS product line with existing IoT solutions, we're able to offer even more value to our customers, particularly those in Fortune 100 companies. This approach not only strengthens our existing relationships, but also attracts new business, contributing to our overall strategy for sustained success. On another note, I'm also happy to highlight our recent uplisting to the OTCQB market, which became effective on August 1. This transition reflects our sustained financial stability and adherence to high corporate governance standards. The uplisting is expected to provide our investors with improved trading conditions, demonstrating our commitment to transparency and shareholder value.

Our uplisting to the OTCQB market marks the initial phase in our strategy to rejoin a national exchange. We're committed to meeting the necessary criteria, and we'll apply for listing as soon as we qualify. Additionally, one of our expected growth and profit engines is our Fintech division. Our decision to focus on this business sector is exceeding our expectations, as we announced in February 5, in February 5, 2024, we acquired a leading Fintech software company in order to develop our proprietary software with unique features and save the licensing we pay today. Yesterday, we announced the additional necessary feature to be the best of breed, joining forces with Ingenico, the leading worldwide supplier of handheld terminals, which combined with our own software, and in this way, we offer a winning solution for businesses of all verticals.

We intend to double our sales in Israel from approximately 30,000 units to 60,000 units within the next 12 months, while gearing up to expand to Europe and the U.S., following other companies like Verifone and IEX. As we continue to work towards our objectives, we remain focused on enhancing financial strength. We've taken decisive steps to reduce expenses without compromising our operational effectiveness. By concentrating on our most profitable product lines and offering SaaS and revenue share models to our existing customers, we are optimizing our revenue streams while maintaining cost efficiency. Our recently launched product, See, is a testament to our R&D team's dedication to innovation. This product exemplifies our strategy of enhancing our offerings to meet the evolving needs of our customers, while strengthening our financial position. Our ongoing commitment to our shareholders is very important to us.

Every decision we make is aimed at creating long-term value and sustained trust that you have placed in OmniQ. Your support is the foundation of our success, and we're deeply committed to achieving our shared goals. Now, I'm pleased to present our financial results for the second quarter of 2024, which showcase significant progress and improved financial performance compared to the same period last year. Let's begin with our gross margins. For the three months ended June 30, 2024, our gross margin increased to 26%, up from 19% in the second quarter of 2023. Looking at the first half of the year, our gross margin also saw a notable increase, rising to 27% compared to 20% in the same period last year. Next, the gross profit.

For the quarter ended on June 30, 2024, our gross profit increased by 26% or $1 million compared to the second quarter of 2023. Over the six-month period, our gross profit rose by 4% or $332,000. A key component of our enhanced financial health is our strategic approach to our operational expenses. Our selling, general, and administrative, SG&A, expenses have significantly decreased, dropping by approximately $290,000 in the second quarter and by $1.5 million over the first half of the year. Overall, our total operating expenses for the six months ended June 30, 2024, were reduced by over $2 million, a 14% decrease compared to the same period in 2023. Next, we'll look at our sequential quarterly performance from Q1 to Q2 of 2024.

Our revenue increased to $19.1 million, up $740,000 or approximately 4% from the last quarter. We saw a 10% reduction in total operating expenses, decreasing from $5.6 million in the first quarter to $5 million in the second quarter. Additionally, our cash position strengthened significantly, with cash and cash equivalents rising by 56% to $1.4 million at the end of the second quarter. These financial highlights reflect our strong commitment to operational excellence and cost management, which have enabled us to improve our profitability and enhance shareholder value. The results are a testament to our team's hard work and the strategic initiatives we have implemented. As we move forward, our expansion strategy remains focused on deepening our relationships with our existing customers while simultaneously broadening our market reach.

We're doing this through several key initiatives that leverage our strengths in SaaS, Fintech, and AI-driven solutions. Now, let's discuss our forward-looking strategy. One of our core strategies is to continue expanding the adoption of our new SaaS and Fintech products among our current customers. By offering these innovative solutions to our existing customers, we're not only adding new layers of functionality, we're transforming the way they interact with our technology. For example, our SaaS offerings provide scalable, subscription-based services that integrate easily with our customers' operations, delivering continuous value without the need for significant upfront investment. Our recent partnership with Ingenico is a prime example of this initiative. By integrating our AI-driven Fintech software with Ingenico's state-of-the-art payment solution, we're providing our customers with a more comprehensive and streamlined payment processing experience.

This partnership allows us to introduce our advanced Fintech capabilities into industries where payment efficiency is crucial, thereby expanding our footprint in those sectors. We're also making significant strides in expanding our AI vision solutions across existing customer locations. Our advanced AI capabilities are increasingly being recognized for their ability to enhance security, manage access control, and improve overall operational efficiency. By deepening our integration with current customers, we're expanding the deployment of these solutions to more of their facilities, ensuring that they can benefit from the latest advancements in AI technology. For instance, our new use case for restricted area access, which we discussed earlier, is now being implemented in additional locations for existing clients. This not only enhances security at these sites, but also opens up new revenue streams for OmniQ by providing ongoing value-added services.

This approach strengthens our relationships with key customers by continuously evolving our offerings to meet their growing needs. Also, is the focus on providing comprehensive product lines. As part of our expansion strategy, we're shifting towards offering more comprehensive product lines that integrate hardware, software, and services into a unified package. This approach allows us to deliver greater value to our customers by addressing multiple aspects of their operational needs with a single integrated solution. By bundling cutting-edge hardware with our advanced SaaS and AI software solutions and application, we provide more complete end-to-end experience to our customers. This not only simplifies their buying processes, but also ensures they have access to the latest technological innovation.

For example, our QP2 product, with its single camera solution and seamless integration with OmniQ, OmniQ's SeeNN software, exemplifies how we are combining our hardware expertise with our software innovation to create robust, user-friendly systems. This shift towards comprehensive solutions is appealing to our Fortune 100 customers, who are looking for partners that can offer, that can offer reliable, scalable, and future-proofed technology. By positioning OmniQ as a provider, as a provider of complete solutions rather than just hardware, we're opening new doors for growth and expanding our influence across multiple industries. These achievements reflect the core of OmniQ's strategic vision: continuously innovating, innovating to deliver more value to our customers, expanding our market presence, and enhancing financial strength, all while maintaining the highest standards of operational excellence.

I'm confident that as we move forward, we will continue to build on this momentum and achieve even greater success. As we move forward, we remain focused on sustaining our positive momentum by expanding our SaaS and Fintech products to existing customers, expanding our AI vision solutions into more locations, and offering comprehensive integrated product lines, all while delivering substantial value to our shareholders, to our customers, and solidifying OmniQ's position as a leader in the technology industry. Thank you for your continued support and trust in our leadership. Let's go back to the moderator now for questions. Operator?

Operator (participant)

Certainly. At this time, we will be conducting a question-and-answer session. If you would 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. You may press star two if you would 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. Once again, that is star one to ask a question. One moment please, while we poll for questions.... Your first question for today is from Mario Cohen, a private investor.

Mario Cohen (Analyst)

Hey, hello. Can you please tell us more about the fintech business, please?

Shai Lustgarten (Chairman and CEO)

Yes, absolutely. Thank you. Our Fintech business is, I'll start from the end. We already are creating very large, we penetrated quickly in creating significantly revenue from this business. And basically what we do is we are delivering payment processing solutions to retail, to different industries that that we're today already implementing solutions to. So that that was expanding our solution, existing solutions to the Fintech environment that we saw as a strategic growth engine. What we do there is, for example, the significant partnership that we have signed with Ingenico, which they are, as we discussed, providing the state-of-the-art or best of breed handheld for payment processing.

We're taking their solution, their devices, and we load on it, we integrate into it our software, credit card, payment processing, or other payment methods of payments. So that software, our software, can communicate now with the financial institutions such as credit card companies, banks, et cetera, and that's how transactions are getting authorized. And then it goes back to our software, which then the consumer gets the authorization for the transaction. So basically, when we go to a store, we have a complete point-of-sale, if you will, solution where it has a screen that can integrate between the seller to the consumer, and all the software on it that has to do with the payment is OmniQ's software and OmniQ's hardware. And that complete solution is offered by us to these different industries.

And we're expanding forward into different additional currencies and in Europe, as we discussed, that's our next step together with the U.S., and also crypto and additional functionalities in the wallet that we are creating. So another example, quick one, is the kiosk, the smart kiosk that we offer to QSR, quick service restaurants, for example, for self-ordering, et cetera. We've done that now for some time, and that business is a growing business with OmniQ. And what we did is we just offered now expanding on that same kiosk, the ability to offer the complete payment payment solution as well. So everything that we do with the Fintech is actually complementary to our existing offering and also opens us up to additional sectors and businesses that we are seeing now.

Operator (participant)

Once again, if there are any questions or comments, please press star one on your telephone keypad. We have reached the end of the question and answer session, and I will now turn the call over to Shai for closing remarks.

Shai Lustgarten (Chairman and CEO)

Thank you, operator. Thank you all for your questions and for taking time to join us today. I hope that you're able to see the solid foundation we've built here at Omniq and the exciting opportunities ahead. As we move forward, we're staying focused on innovation, building stronger relationships with our customers, and executing our expansion plans with care. We're confident that the actions we're taking now will lead to continued growth and success in the coming quarters. To our shareholders, customers, and partners, thank you for your support and trust. We're committed to delivering exceptional value and upholding the high standards you expect from us. I also want to take a moment to thank all the employees at Omniq for their hard work and dedication. Your efforts are what make all this possible, and I'm truly grateful for everything you do. Thank you once again, and we look forward to sharing more of our progress with you in the future. Have a great day.

Operator (participant)

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.