Executive Summary

Q1 2016 revenue rose 72% year over year to $18.4M, while gross margin improved sequentially to 20.8% from 18.5% in Q4; GAAP net loss widened to $(1.50)M on higher amortization and interest tied to the ViascanQData acquisition .
Sequential trends: revenue fell from seasonally stronger Q4 ($22.9M) to $18.4M, but gross margin rebounded 230 bps on a higher consumables mix; Adjusted EBITDA turned to $(0.16)M from $0.13M in Q4 as integration and expense levels weighed .
Management reiterated a 2016 plan “on track” for ~$90M revenue and positive EBITDA; announced balance sheet actions (convert ~$4.3M debt to equity; repurchase up to 4.5M shares for ESPP) and reported $5.6M backlog expected to deliver in Q2—key near‑term catalysts .
Street consensus (S&P Global) for Q1 2016 EPS and revenue was unavailable during this session; we cannot assess beat/miss vs estimates. S&P Global consensus data was not retrievable due to request limits.

What Went Well and What Went Wrong

What Went Well

Strong top-line expansion and sequential margin improvement: revenue +72% YoY to $18.4M; gross margin improved to 20.8% from 18.5% in Q4 on a higher consumables mix .
Operating cash flow strength: cash from operations of $1.5M vs $0.13M in Q1 2015, aiding liquidity while integration progresses .
Strategic balance sheet moves and integration progress: Board approved Series C preferred for debt conversion (~~$4M+ targeted by June); synergies and cost initiatives identified (~~$1M in 2016); CEO: “we remain on track to achieve [~$90M revenue and positive EBITDA]” .

What Went Wrong

GAAP profitability pressure: net loss widened to $(1.50)M vs $(0.42)M YoY driven by amortization of acquired intangibles, higher interest expense, and acquisition-related costs .
Adjusted EBITDA dipped negative to $(0.16)M vs $0.04M in Q1 2015 and $0.13M in Q4 2015, reflecting integration costs and opex levels early in the year .
Gross margin down YoY (20.8% vs 22.4%) on account/customer mix, despite the sequential improvement; Q1 is seasonally the lowest revenue quarter, impacting operating leverage .

Financial Results

Quarterly results (sequential trend: Q3 2015 → Q4 2015 → Q1 2016)

Metric	Q3 2015	Q4 2015	Q1 2016
Revenue ($)	$16,711,339	$22,909,208	$18,394,562
Gross Profit ($)	$3,187,795	$4,244,151	$3,818,014
Gross Margin (%)	19.08%	18.5%	20.8%
Net Income (Loss) ($)	$697,356	$(1,725,195)	$(1,502,729)
GAAP EPS (basic) ($)	$0.02	n/a	n/a (press shows adjusted EPS only)
Adjusted EPS (basic) ($)	n/a	$0.00	$(0.04)
Adjusted EBITDA ($)	$1,127,697	$134,363	$(160,427)
Cash from Operations ($)	n/a	n/a	$1,500,000

YoY context for Q1: Revenue $18.4M vs $10.7M (+72%); Gross margin 20.8% vs 22.4%; Net loss $(1.50)M vs $(0.42)M; Adjusted EBITDA $(0.16)M vs $0.04M .

KPIs and balance sheet indicators

KPI	Q3 2015	Q4 2015	Q1 2016
Backlog ($)	~$3.2M	$4.1M	$5.6M
Net Deferred Revenue ($)	~$1.0M	$1.27M	$1.4M
Cash ($)	$264,943	$842,715	$1,136,578
Restricted Cash ($)	n/a	$690,850	$553,439
Top 10 acct concentration	n/a	n/a	“Top ten accounts made up 56% of US hardware sales; top ten in consumables 43% of Canadian sales”

Notes and non‑GAAP reconciliation points

Adjusted EBITDA reconciliation (Q1): EBITDA $(327,683) plus non‑cash stock comp $149,011 and one‑time costs $18,245 → Adjusted EBITDA $(160,427) .
Q1 cash disclosure: CFO cited ~$1.7M total cash including ~$0.55M restricted; balance sheet shows $1.14M cash and $0.55M restricted—difference reflects classification/rounding .

Segment/Revenue mix

Revenue derived from hardware, software, consumables (labels, tags, ribbons) and related services; no discrete segment reporting provided in the release .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Disclosure	Change
Revenue	FY 2016	n/a	Sales plan supports ~$90M; “on track” as of 3/31/16	Introduced
Adjusted EBITDA	FY 2016	n/a	Positive for full year targeted	Introduced
Gross Margin	FY 2016	n/a	Expect blended margin to improve with higher consumables mix	Qualitative up
OpEx/Cost Reduction	FY 2016	n/a	~$1M operating efficiencies identified for 2016	Introduced
Debt Conversion	By Jun-2016	n/a	Intend to convert at least ~$4M of debt to Series C Preferred ($1/share)	Introduced
Share Repurchase/ESPP	Through 2016	n/a	Plan to repurchase up to 4.5M shares (incl. 0.9M already redeemed) to fund ESPP and reduce shares outstanding	Introduced
Backlog Delivery	Q2 2016	n/a	$5.6M backlog expected to deliver in Q2	New timing color

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2015, Q4 2015)	Current Period (Q1 2016)	Trend
Integration & Synergies	ViascanQData acquisition effective Oct 1; synergy/cost reductions; debt restructuring contemplated	~$1M operating efficiencies targeted in 2016; 20% executive pay cut implemented	Integration progressing; cost actions accelerating
Gross Margin Mix	Q3 margin impacted by large hardware deals; expected improvement in Q4 with higher labels mix	GM up to 20.8% from 18.5% in Q4 on higher consumables mix; YoY down on customer mix	Sequential improvement; mix shift supportive
Capital Structure	~$20M debt; convertible elements; capital clean‑up underway	Convert ~$4.3M debt to equity via Series C; share repurchase/ESPP plan	De‑risking path clarified
Recurring/Deferred Revenue	Net deferred revenue ~$1.0M at 9/30/15; multi‑year contracts	Net deferred revenue $1.4M; 1–5 year contracts, ~3‑year avg	Growing base; visibility improving
Sales/Marketing Expansion	Expanded sales coverage (NY/Chicago) in 2015	Investment in marketing (materials, webinars) to support demand	Building GTM engine
Cloud/Software Initiatives	QTSaaS program; NCR smart targeted advertising license	New cloud initiatives (Apex smart lockers; retail shelf management; yard management) to be announced	Expanding SaaS partnerships
Seasonality & Demand	Q4 and Q1 slower; demand supported by refresh cycles	Q1 is seasonally lowest; strong demand from retail/transport/logistics upgrades	Seasonality acknowledged; pipeline supportive

Management Commentary

“We delivered net revenue of $18.4 million, a 72% increase… Q1 is seasonally our lowest revenue quarter… We expect… trend to continue in the upcoming quarters thus supporting our revenue growth.” — CEO Gilles Gaudreault .
“We began 2016 with a sales plan that supports… ~$90 million in revenue with positive EBITDA for the full year. As of March 31, 2016 we remain on track to achieve these targets.” — CEO .
“The increase is attributable to the organic growth of 39.5% from the US-based companies and the acquisition of the ViascanQData in October 2015.” — CFO Joey Trombino on Q1 YoY growth drivers .
“Adjusted EBITDA for the first quarter of 2016 was negative $160,000… We use adjusted EBITDA as a key non‑GAAP earnings measure of the underlying operations.” — CFO .
“We have agreements to convert $4.3 million of outstanding debts… to equity with our new Series C Preferred Stock.” — CEO .
“Backlog of signed, contracted orders at March 31, 2016 was $5.6 million… expected to be delivered during Q2‑2016.” — Press release .

Q&A Highlights

Cost control and opex trajectory: management targeted ~$1M 2016 operating cost reductions post‑merger; reiterated that some acquisition‑related costs will roll off .
News flow and pipeline catalysts: management flagged upcoming announcements on cloud partnerships (Apex smart lockers; retail shelf analytics; yard management), positioned as demand generators .
Capital return/ESPP logistics: repurchase shares sourced from prior settlement to fund ESPP; legal constraints limit insider market purchases; program rollout in U.S. and Canada .
Deleveraging path: combining prior note repurchases and planned $4.3M conversion supports a cumulative ~$9.2M debt reduction trajectory across periods .

Estimates Context

Wall Street (S&P Global) consensus for Q1 2016 EPS and revenue was unavailable during this session due to data access limits; therefore, we cannot assess beats/misses versus consensus. We recommend revisiting S&P Global for consensus and revising this section accordingly.
Modeling considerations: sequential gross margin improvement tied to consumables mix (positive), operating cost reductions (~$1M, positive), and lower interest expense if debt conversions execute as planned (positive); YoY margin compression from account mix and ongoing amortization expenses are headwinds to GAAP EPS .

Key Takeaways for Investors

Sequential quality improved despite seasonal revenue downtick: gross margin rose 230 bps QoQ to 20.8% on consumables mix; watch for sustained mix benefits into Q2 .
Balance sheet de‑risking is a near‑term catalyst: ~$4.3M debt‑to‑equity conversion and ESPP‑funded repurchases can lower interest burden and simplify capital structure .
Integration and cost synergy execution in focus: ~$1M operating efficiency target in 2016 and 20% executive pay cut support EBITDA recovery in coming quarters .
Backlog conversion should aid Q2: $5.6M backlog slated for Q2 delivery supports sequential revenue and operating leverage .
Recurring revenue base expanding: net deferred revenue increased to $1.4M with multi‑year terms, improving visibility and margin profile over time .
Watch non‑GAAP vs GAAP gap: amortization of acquired intangibles and interest expense continue to pressure GAAP EPS; Adjusted EBITDA is the cleaner operating indicator near term .
Strategic pipeline: cloud initiatives (smart lockers, shelf analytics, yard management) add higher‑margin SaaS/services optionality—announcements could be incremental stock catalysts .

OMNIQ Corp. (OMQS)·Q1 2016 Earnings Summary