OMNIQ Corp. (OMQS)·Q2 2016 Earnings Summary

Executive Summary

• Q2 delivered 39% YoY revenue growth to $18.90M, but GAAP net loss widened to $(4.32)M on non-cash goodwill impairment ($2.3M) and restructuring ($0.6M); gross margin contracted to 21.0% on product/customer mix .
• Adjusted EBITDA improved sequentially to $0.40M (2.1% margin) from $(0.16)M in Q1, reflecting cost actions, yet remained below Q2’15 ($0.60M, 4.4%) .
• Balance sheet actions reduced leverage: ~$4.5M of debt converted into new Series C Preferred and $0.5M of debt forgiven; management expects lower 2H interest expense; additional annualized cost savings of ~$0.9M targeted from facility consolidation and headcount reductions .
• No formal Q2 guidance issued; the last quantitative target (from Q1 call) was FY16 revenue of ~$90M with positive EBITDA; Q2 press release emphasized ongoing restructuring and balance-sheet improvement without updating targets .

What Went Well and What Went Wrong

• What Went Well

  • Strong top-line execution: “Revenues increased by 39%” to $18.90M on ViascanQdata contribution and enterprise wins .
  • Sequential profitability improvement: Adjusted EBITDA rose to $0.40M (2.1% of revenue) from $(0.16)M in Q1, aided by restructuring and cost controls .
  • Capital structure progress: ~$4.5M of debt converted to Series C Preferred; $0.5M debt forgiveness; management: “expect to report reductions in our interest expense in the second half of the year” .

• What Went Wrong

  • Margin pressure and mix: Gross margin fell to 21.0% vs 24.6% a year ago, driven by product/customer mix; YoY Adjusted EBITDA margin compressed (2.1% vs 4.4%) .
  • Non-cash and one-time charges drove losses: $2.3M goodwill impairment (ViascanQdata) and $0.6M restructuring charge expanded GAAP net loss to $(4.32)M despite revenue growth .
  • Elevated interest burden 1H: Interest expense rose to $1.13M in Q2 (incl. non-cash OID), though actions aim to reduce it in 2H .

Financial Results

• Summary (quarterly progression: oldest → newest)

• YoY comparison (Q2 2015 vs Q2 2016)

• Balance Sheet and Cash Flow Highlights (period ends; oldest → newest)

• KPIs / Other
  • Backlog: $4.1M at 12/31/15; $5.6M at 3/31/16 (orders expected to deliver near term) .
  • Deferred revenue recognized over 1–5 years (avg. ~3 years) underscores recurring service component .

Notes on estimates: We attempted to pull Wall Street consensus (S&P Global) for Q2 2016 revenue/EPS but no consensus data was available for OMQS in this period (micro-cap, limited coverage). As a result, no beat/miss analysis vs estimates is provided.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO on growth and efficiency: “We continue to grow our customer base and deepen our market penetration, as revenues increased by 39%… We remain focused on driving sales and realizing cost efficiencies across the enterprise” .
• CEO on capital structure: “The conversion of $4.5 million in debt into a new Series C Preferred Stock and the forbearance of $0.6 million… we expect to report reductions in our interest expense in the second half of the year” .
• Q2 actions and charges: Management recorded a $2.3M goodwill impairment (ViascanQdata), and $0.6M restructuring (facility move, severance) to streamline operations and support future profitability .

Q&A Highlights

• No Q2 2016 earnings call transcript was filed/found; therefore Q&A highlights for Q2 are not available from primary sources. For context, Q1 investor Q&A focused on OpEx control (targeting ~$1M reductions), equity/ESPP mechanics, and debt reduction; management reiterated cost-saving initiatives and debt-to-equity conversion plans .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2016 EPS and revenue was unavailable for OMQS; as a result, we cannot assess beat/miss vs estimates this quarter.

Key Takeaways for Investors

• Revenue growth remained robust (+39% YoY) but profitability was pressured by non-cash impairment and one-time restructuring; the underlying Adjusted EBITDA trend improved sequentially, signaling early benefits from cost actions .
• Balance sheet de-risking (debt-to-preferred conversion; debt forgiveness) should reduce 2H interest expense and support cash flow, a potential narrative positive if sustained .
• Gross margin sequential stability (21.0% vs 20.8% in Q1) is encouraging, but customer/product mix remains a watch item after YoY compression from 24.6% .
• Execution on facility consolidation and headcount reductions (aggregate ~$0.9M annualized savings) is a near-term catalyst for margin expansion and improved Adjusted EBITDA run-rate .
• Liquidity still tight (cash $0.49M; working capital deficit), but H1 cash from operations ($2.59M) and deferred revenue base ($1.4M net) offer partial support—continued working-capital discipline will be key .
• With no updated FY guidance in Q2 and limited external coverage, near-term trading likely hinges on delivery of 2H margin/interest-expense improvements and visibility on recurring consumables/services mix .

Citations: All figures and statements sourced from the company’s Q2 2016 8-K press release and financial tables , Q2 2016 10-Q MD&A , Q1 2016 8-K and earnings call transcript , Q4 2015 press release , and Series C capital actions .