Omniq Corp (OMQS) 2022 Q4 法說會逐字稿

Hello, and welcome to the OMNIQ Corporation's third-quarter and 2022 earnings conference call. My name is Holly, and I'll be coordinating your call today. With us on the call are Mr. Shai Lustgarten, Chief Executive Officer; and Neev Nissenson, Chief Financial Officer.

Today's call is being recorded, and you should have access to the company's fourth-quarter and year-end 2022 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 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 Form 10-K 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 Mr. Shai Lustgarten, CEO. Mr. Lustgarten, please go ahead.

Thank you, operator. And good morning, everybody. Thank you for joining us today to discuss our Q4 and year-end 2022 financial results. To start, I'd like to thank each one of our employees across the entire company for their continued hard work and dedication to our vision and strategic plan.

During today's call, I'm pleased to share with you our financials as well as give you an update on our recent achievements and a clear understanding of our future focus and potential opportunities. I'm proud to announce that we experienced record-breaking revenues of $102.5 million for 2022, growing from $78 million in 2021 and $55 million in 2020.

In addition, we recognized the record gross profit of $22.1 million, an increase of $5 million or 33% over last year and 100% over 2020. Also, we recorded positive cash flow from operations, totaling $1.2 million, another strong milestone. This growth came from a diverse group of customers in a wide variety of sectors, including safe city, supply chain, hospitals, restaurants, and retail. This diversity proves once again that our platform designs offering has demand and success from multiple large verticals, who depend on our technology and services to improve their operations and increase safety.

It is also important to note that our AI revenue increased over 100% from 2021 to 2022 as our higher margin product gained momentum. While we have incurred upfront expenses related to our AI product and sales, our revenue share model will allow for higher margins going forward. As we look to 2023 and beyond, we see ongoing strength across verticals and are excited about both the progress and opportunities ahead.

During the year, we made several significant announcements, including 14 contracted cities for Q Shield, our safe city product; completed the closing of 100% of Dangot Computers; formalized the banking relationship, increasing the strength of our balance sheet; named the total solution partner for one of the largest global leaders in enterprise asset intelligence for robotics, supply chain management; deployed our AI machine vision solution to our 50th airport; and many more achievements, which you can see from the numerous press releases throughout the year.

As we look into 2023, we have three company initiatives as well as three areas of growth that we believe will drive our company to continued success. I'll start with the company's initiatives; first, selling deeper and wider to our existing Fortune 100 and 500 customers in all three business lines; second, increased focus on generating cash and profitability by further efficiencies in operations and continued focus on sales growth; and third, focusing on the momentum in our deployments of our AI products to existing and newly penetrated markets.

Before I go further, let me turn the call over to Neev Nissenson, our Chief Financial Officer, who will go over our financial results in more detail. Neev?

Yes. Thank you, Shai. Hello, everybody. In the year ended December 31, 2022, OMNIQ reported record revenue of $102 million, which is an increase of 31% from $78 million for the year ended December 31, 2021. We also reported record gross profit of $22.1 million in 2022 compared to $16.7 million in 2021. Our gross margin for 2022 also slightly pulled to 22%.

Total operating expenses for the year were $31.7 million compared with $27 million for last year -- for, I mean, the year before last 2021. Net loss for 2022 was $13.6 million or a loss of $1.82 per share compared with a loss of $13.1 million or a loss of $2.20 per share in 2021. This loss includes one-time expenses incurred from the implementation of our [ALP] system company wide.

Adjusted EBITDA or adjusted earnings before interest, taxes, depreciation, amortization, and non-recurring loss events for the year ended 2022 amounted to an adjusted EBITDA loss of $2.9 million, compared with an adjusted EBITDA loss of $4.1 million in the year that ended December 31, 2021, an improvement of $1.2 million in our adjusted EBITDA profitability.

Let me turn the call back to Charles to talk more about our operational achievements and focus goals. Shai?

Thank you, Neev. Now that we have discussed what we have accomplished last year, let's now shift focus on our plan and what our shareholders can expect.

While we continue our efforts on all sectors, we are specifically enthusiastic and focused on three verticals, including safe city, supply chain, and traffic management. As we look at our entire businesses and with these three verticals in mind, we expect to see accelerated growth and strong results.

I would like to take a few minutes now to expand on each of these three key verticals so you have better understanding of the opportunity ahead. First, safe cities. Safe cities is driven by Q Shield, our proprietary AI offering that has been labeled by our first customer of the force multiplier. In addition, this solution removes the need for a physical officer by utilizing our proprietary vehicle recognition system and our cloud-based citation management technology.

The technology operates 24/7 while providing an unbiased approach, eliminating the potential for conflicts that has traditional accord. Our solution is unique in both the patented technology as well as the revenue share model that we created. And it has resulted in both the safety benefit as well as a revenue generator for the cities we serve.

The system identifies any vehicle driving through the city, which is on National Crime Information Center database, NCIC, or on the city's local Bureau of Investigation's database. Within 20 milliseconds, our system alerts the authorities of potential criminals. And if any vehicles are driven unregistered or uninsured as well as a full menu of other violations that the individual city can choose from.

Our strategy is to target small- and medium-sized cities who see immediate impact from Q Shield. With over 16,000 small and medium cities across the country, our potential is that while gaining rapid momentum in 2022, we continue to believe this represents a significant opportunity of growth and margin expansion for the company. Our current backlog of cities continues to grow as our exposure expands and have targeted an additional 35 to 40 cities to potentially be contracted this year.

Next, supply chain. OMNIQ continued to enjoy solid sales from our long-standing customers, many of whom have relied on the company for over 20 years to handle their logistics and supply chain challenges. This segment represents a foundational business for us, servicing some of the largest companies in the world, including many Fortune 100 and 500 companies.

We are proud of several awards we received, including a $4 million contract from a multinational transportation and logistics company and $29 million order from a large supermarket chain and a $4 million order for advanced supply chain equipment from a Fortune 50 company.

It is important to note that not only this is stable generator revenue. It also have a significant opportunity to sell our AI-related products into these cooperative customer base, which, over time, brings an opportunity to both increase our revenues as well as our margins significantly.

And finally, traffic management. This vertical includes our AI solution for airport, commercial, and public parking, and our newly introduced HOV solution. With over 50 airports deploying and using our solution, we have a solid presence across the nation and continue to add many new locations.

We're currently servicing thousands of parking lots and are introducing our latest technology that utilizes both ticketless and gateless parking solutions, which allow for both a better customer experience as well as increased efficiencies for the parking facilities.

Our HOV product now not only counts passengers driving down the highway. It also is currently being utilized by a large public company with a green initiative. Utilizing our passenger accounting technology, which is tied into their CRM and HR department, the company is able to collect rideshare habits by their thousands of employees.

This dynamic solution ensures they reach their green goals as they are now able to efficiently and accurately incentivize and reward their staff. As you can see, we have disciplined focus on three key areas of growth as well as three company initiatives.

Before I turn the call over for questions, I'd like also to quickly discuss one of our newest verticals, the restaurants and retail sectors, which we feel offer additional growth potential.

As you may have seen, we have already announced several contracts this year, including an initial order for our Q Post, Integrated AI Machine vision solution from a major retailer for up to 5,000 units. We also received both an initial order as well as a follow-on order from a US-based fast-food chain with over 800 locations. Both contracts represent growth, groundbreaking achievement as retailers and restaurants are looking for ways to stay ahead of their competitors as well as growth.

Utilizing OMNIQ technology will provide tools to better understand consumers' consumption habits, while improving each unique customer interaction. This technology will be part of the CRM system, allowing for dynamic decisions based on each unique customer visits.

Together with Q Shield security enforcement in each location, our total solution is unparalleled and a unique offering. This first-of-a-kind integration will also include vital data collection services, providing a more complete solution and offer additional revenue opportunities for both OMNIQ and our customers.

In conclusion, our business saw significant improvement in 2022 with record revenues and positive cash flow from operations. Additionally -- and we are starting up 2023 with continued momentum, a clear focus, and a disciplined approach on the initiatives and segments that I have shared with you.

As we turn over the call for questions, I would like to extend my sincere thanks to our loyal customers and suppliers, our professional team, and other strong supporters.

Last but not least, we would like to thank our shareholders for their trust in us as well as wish you all a continuous success. Operator, I'll now turn this call over for questions.

Certainly. (Operator Instructions) Jaeson Schmidt, Lake Street.

Hey, guys. Thanks for taking my questions. Shai, not looking for specific guidance, but just curious if you could comment what you've seen from an order pattern perspective year to date here.

Hi, Jaeson. Thanks for the question. Yeah, we still continue to see -- we discussed that in the previous quarters as well. The backlog stability growth and then continue to be firm at high levels. And we still actually continue to see that as we started 2023 as well -- is solid and at a much higher level than we've seen before and remains that way with the additional growth in sales.

Okay. And I'm sorry if I missed it, but did you say 35 to 40 cities to be contracted this year for the safe cities?

Yes, sir.

Okay. And how should we think about the number to actually be rolled out.

So the number to be rolled out varies from state to state, depending on the certifications required for the deployments of some states and cities of [BC] was very a quick, much quicker than others. But certainly, we should see at least half or -- I should say, between the third to half of that amount getting deployed.

Okay. That's helpful. And then just a last one from me, and I'll jump back into queue. Obviously, Q4 gross margin was pretty depressed, but how should we think about gross margin trending here this year?

Yeah, unfortunately, Q4 -- we did see lower margin there. But the good news is that it was due to one-time events that had to be reported in Q4. And that is -- to your question, that is not carried on to Q1 or into 2023. These were one-time events, accounting-wise, that had to be considered in Q4 and not repeated going forward.

Okay, perfect. Thanks a lot, guys.

Thank you.

[Hyla Pyminski], a private investor.

Hi, Shai. Congratulations. Hope to see doubling to $200 million again within three years.

Hi, [Joana]. Thank you very much.

Thank you. So I have a few questions, please. First, can you explain the deployment of the Q Shield in the cities? The revenue model -- what is the status now and if there are more cities in the pipeline?

Yeah. So first of all, absolutely, there are more cities as we discuss in this call today. We have a growing backlog, a very solid one, and we expect to more than double what we did in 2022.

Regarding the revenue model, that is one of our unique offerings that comes with Q Shield to the safe city to provide safety to the cities we serve. And that is a revenue share model, where out of the citations issued by Q Shield, through its cloud-based technology, we are able to send out the citation electronically and do a revenue share with the city. Basically, there is a split depending on the agreement with the city, the percentage from the citation that remains with the OMNIQ, and the percentage that goes further and gets paid to the city.

All the payments of the citations go through OMNIQ bank account. And we're the ones actually writing the checks to the cities. The cities, this way, get a revenue stream that they've never had before, never could have achieved before as well. And we're very proud of the different use cases used actually to be -- when they use these funds, for example, to schools, buying laptops to students, doing some community events, et cetera, et cetera.

Very exciting story is coming out of the cities using the capital, using the money that OMNIQ generates to them. At the same time, enforcing regulations -- and, like I said, the whole platform is game changer. It is something that we see spreading very nicely. Going now into different other states, we started from the first state and now it's going into three additional states. So we feel very solid. This is going to be a very good growth engine for the company.

Excellent. Thank you. Can you explain how the Dangot acquisition is performing?

Yeah. The acquisition is a very solid positive one. We're very happy of the performance. We've been able to very quickly achieve a lot of the goals that we had hoped for to achieve from this acquisition. For example, the cross sales, both ways into Dangot's, existing customers of OMNIQ's, AI products together with a cross selling the products of Dangot to OMNIQ's existing customers in the US. So that immediately took effect, and we're very happy about that. And it created the significant growth as well, which, overall, represents very solid organic growth as we saw going up from $78 million last year into the $102.5 million this year.

Of course, wonderful. And regarding the AI technology, is the Israeli Ministry of Defense buying from OMNIQ?

Yeah, the IMOD, the Israeli Ministry of Defense, is one the very good customers of OMNIQ today, using the AI border control product, which we have for governments and militaries. And yeah, we're very happy every year to extend the services and probably exclusively providing the border control security to the Israeli Minister of Defense, which is a very exciting and very -- we're very proud of that. Yes.

That's impressive. And then, can you explain the usage of the AI for the retail sector that you talked about before? What is the potential in it also?

Yeah. Well, absolutely. The QSR, the restaurant, and the fast-food chain market for OMNIQ, this new vertical, of course, is a huge one. We're talking about thousands of thousands of thousands of locations throughout the nation, not even mentioning worldwide.

And what is nice about, again, the solution that OMNIQ provides, it allows to learn customers' behavior through our AI machine learning capabilities, and this way automate actions. And we're all hearing about and reading about -- I'm receiving from many people on this call articles through text or they send me by e-mail of different AI solutions of voice recognition that automate or do better performance in drive-thrus, for example.

But OMNIQ, what we say here in OMNIQ is, why do you need even to speak to the screen, on the mic, focus on that. You can -- from starting, using OMNIQ solution, we immediately, from the second customer comes into a drive-thru, for example, that is when we start learning its habits -- the habits of that customer. And the next time that same customer comes, we are 95% accurate in the order that is going to be placed. And we can automate the action without even the consumer or the customer of needing to even interact with anyone.

So basically, we do that through different parameters, and it is all based on our mission-vision technology,

That's amazing. And I have to say -- to ask, how do you see Q1?

We start, as we mentioned as well, we don't give guidance, but we did mention that we started Q1 with a strong momentum. So I would -- we feel very comfortable. And we're now at the end of Q1, and we still feel very positive and comfortable with the results.

That's good to hear. And then, are you considering another acquisition?

Well, as we always said before, we looked at two strategies for growth. One is organic, of course, and the other one is M&A. And we're always examining, all the time, on the M&A opportunities we have that come to our table or that we search for. And yes, definitely. I mean, once we feel comfortable and this is going to be something that is beneficial to reach our objectives quicker, we'll jump on it and make it happen.

Okay, wonderful. Thank you very much, Shai. Thank you very much.

Thank you.

Blair Abernethy, Rosenblatt.

Hi. Good morning. Shai, I just wanted to just dig in a little more on this fast-food restaurant win the 800 stores. Can you just describe to us how this came about? Does this come directly or is this through certain channel partners? And what's the rollout here? Are they going to pilot a few stores? Or -- you just give us some sense, I guess, a sense of the pace of that rollout.

It came from a reseller. What we started focusing on in 2022 is to establish a reseller channel because there's no way we can reach all of the customers in that sector nationwide by ourselves. And there are many more. It's not only drive-thrus that are at restaurants. These are drive-thrus also at some other retail providers in different other markets.

So like we said before, there are so many of them, hundreds of tens of thousands, certainly. So there's no way OMNI can do that by itself. And in 2022, we started establishing our reseller channel and very proud that this opportunity came from one of them. And what we've done, we've already had concluded the pilot. And today, we have already deployed in more than 14 locations. And this is an ongoing process with our customer, the deployment of [PTC]. They're looking to deploy that over. So we are engaged with them on a deployment schedule.

I would mention also that we received another contract for another to automate another drive-thru, like I mentioned, from another retail sector, not the restaurants. But again, the drive-thru is a drive-thru. And there, we're talking about an opportunity, which is four times larger than the one we've just discussed of these restaurant chain. So -- and we, over there, this contract we already received. We had finished the pilot as well and now expecting the first order of deployment into -- we expect at least 20 locations.

It's a -- would that be something like a bank, potentially bank drive thru?

No, but that's a great idea.

So I think the banks might be interested in seeing this kind of --

Yeah, I agree. And that's exactly the points are. When you look at the -- that's, I would say, the best emphasis that I would put on this a remark you just had because when you have a technological platform like ours, the machine vision one, which senses and creates automatic actions, you could actually utilize that in every sector, right? It's a platform.

And now, it is our objective to try to capture as much as possible, as quick as possible. So we're trying. And yeah, bank like you just mentioned, is just one another example of where we could be very attractive to, in utilizing not only automatic actions but actually think about the data, which is even more interesting and the customizations and the characteristics now that you can provide through the data you gather and all the analytics that comes with it.

Excellent. And just on the fast food chain that you're working on now, what's the recurring revenue component look like in that deal?

So as this was our first customer, the recurring revenue, portion of it, I think, if we tried to put it in percentage out of each location would be something like 25%. Of course, going forward, we're looking at raising that to that data component, the recurring component in the business model to achieve to be at 60% minimum.

Okay. And just from the overall company perspective, Neev, on the Q4, do you provide or will you provide sense of what the recurring revenue component is?

Yes. I think that Shai mentioned that revenue coming from the AI machine vision has increased over 100% this year over last year. But revenue does have, of course, a portion of recurring revenue that is also increasing. And we expect it to increase such that we expect it as usual.

Okay. And presumably at some point, you'll start disclosing an ARR, an annualized recurring revenue amount. Is that in your plans if -- maybe this year or next year?

I think that the -- as we've been pretty consistent about this, we're trying to give general ideas of some -- these types of information. And we haven't made a decision yet on disclosing the specific amount of recurring revenue that we have, compared to non-recurring.

Okay. And then secondly, on the gross margins, so -- I know you're not giving guidance at all, but should we expect of -- given the pipeline you've got that you think you're going to execute on 2023? Should we be expecting incremental improvement in gross margin in '23 over '22?

I think that --

As we -- go ahead, Neev.

As I mentioned, in Q4, we had a non-recurring loss event that hit the cost of goods sold, which is not expected to recur, which I think had the effect of suppressing our gross margin. And it's not going to recur in 2023. I do expect the gross margin to two points in '22.

Okay, great. And just one other question for me. On the safe city area, Shai, obviously, it's been great traction and seen with a number of smaller municipalities and so forth. And I'm just wondering, either directly or through channel partners, are there other opportunities to go after some of the large cities or major metropolitan centers with something that might look like a much larger, longer-term contract? Is that -- are those out there? Or what's your approach to that end of the market?

Well, the answer is yes. But I would like also to mention that a contract is a contract. I mean, we found that small cities, large cities, medium cities, it would be rare to not continue using us for at least five years to the, again, game changing.

It's not only the revenue share. I mean when you look at the success stories that we have solving, missing person investigations, bringing back an elderly person on the silver alert, bringing back the person's home after a 1.5 hour been missing, doing that kind of stuff, which is very exciting, this has a lot of effect.

If we continue to perform this way and provide the game changers and affect our everyday life of the residents in these different cities, I don't see a reason for them to replace us. So we'll definitely continue working on that. So the contract I think for larger cities or small cities or medium cities, the term of these contracts will remain solid for several years -- the same.

And like I said, the answer is yes, to go after larger cities. The very good point there is that we already have references in these large cities. For example, let's say we -- Los Angeles now wants to get safe city product. They will go to these very big, large integrators that would not wake up in the morning if they were not going to receive $100 million contract to do this. And we will come with something that is very different, very unique, and I would say, much more innovative as well and provide them even better, I would say, ROI, immediate ROI.

And when they will talk to us about that, they will understand that we already do this in their airports because we're already in the Los Angeles airport and we're already doing across the city, many of their parking lots as well. So the OMNIQ is not a stranger to these very large cities once the opportunity will be there.

Great. Thanks very much for that, and nice job on the year, guys.

Thank you, sir. I appreciate your support.

[Richard Milenski], a private investor.

Shai, how are you doing, my friend?

Good, sir. How are you, Rich?

Good, good. Congratulations -- hitting that $100 million, cash flow positive. And I know this is not the bench I'm most concerned about. This one part is -- based on the current cash you have, the credit lines, the growth that you have, you feel pretty confident that you're able to meet these -- the backlog and without having to raise an equity at this point in time?

Yes, we feel comfortable about that. And we just had that discussion yesterday with one of our friends here internally. And we're -- I mean, this person like yourself, Rich, you've been with us for a long time now, and we've been at much, I would say, sensitive times before.

So today we're much stronger and definitely have more tools to cope with different events, not only internal, like the growth you mentioned, et cetera, but we just went through COVID and recessions now and stuff like that. And you're saying that we're still continuing our growth and continuing to support our growth and do a lot of very exciting things. So the answer is yes.

Yeah. And the other thing is that drives me crazy. I look at [recore] doing $20 million a year in revenues, losing a ton of money, trading in a market cap that's probably twice your market cap today. And based on where you currently are, you're in exciting areas, what is it going to take for a company in the industry to say, these guys just broke through the $100 million level. We got to work with them. We want to have an ownership in this company.

I think I would not mind if a major company said, we'd love to give you $25 million and really work with you in some areas. What point revenue-wise would you have to be at? What point technology-wise would you think that would be at?

I'll answer to you this way, Rich. We have our objectives and agenda. We wake up every morning to execute that. We measure ourselves every morning on last, on yesterday, measure the everything we did until that morning, and see if we're going the right way. We have our objective in our plan. We have an amazing team that executes that. We have a groundbreaking technology that gives something that doesn't exist in many areas we penetrate. And we're getting approached.

But again, this is a Board decision, always how to advance with the approaches that we're getting. We're just very excited here, getting, executing our plans, getting our objectives done. And trust me, Rich, as you know and seen what we've done until now, we only by the performance or by very -- measuring everything that we do to the details.

We learn internally that we could actually double our objectives every year. And that's what makes us excited. And whatever comes, whoever notices, whoever is going to be interested in, that's great. We're just going to continue our success.

Perfect. Shai, I greatly appreciate, as always. Keep up the great job.

Thank you, sir. I appreciate your support.

You bet, of course.

[Neil Feigans] , a private investor.

Hey, Shai.

Hello, sir.

Hey, I got a couple of quickies before I get to what I really wanted to ask you. I'm just trying to clarify a couple of things. What would the margins have been in Q4 if you didn't have those two non-recurring one-time items?

Margin -- yeah, go ahead, Neev.

Yeah, I think that the margin would have been closer to 20%.

Okay. So pretty consistent with the rest of the year. And then, bullet number 4, where you say your AI machine vision revenue more than doubled in 2022, is your classification of AI machine vision revenue -- is that software only or is it recurring revenue only or is it software, hardware, and recurring revenue --everything related to anything AI?

Everything and anything related to AI.

Okay. So it's the cameras. It's the software. It's the recurring revenue component. It's the installation. It's everything.

Yes,

That is correct.

Okay. And one last thing that I just want to clarify. Shai, when you were asked about the recurring revenue component of the 20 fast-food locations that could expand to hundreds, you said that the recurring revenue was 25% and that you wanted to, going forward, with new customers make it, get it up to 60%. But what are we talking about, 25% and 60% of what?

So again, it depends on the amount of -- it varies. Every location is not the same and depends on the camera, amount of sensors that we have to deploy, and the size of the location as well. So that varies. And you're looking at --

What is it? Is it 25% of the initial hardware cost? Or is it -- I don't understand. It's a percentage of what I number.

It's 25% of the total revenue per deployment.

Okay. Got it. Okay. So what I really would be interested to hear you talk a little bit more about, Shai, is you've got this enormous list of legacy customers, the Fortune 500 customers, Fortune 100 customers. They're in all these different verticals -- grocery, tire manufacturers, retail, paint companies, on and on and on.

Talk a little bit about what you're doing with these companies now that's generating the tens of millions of dollars of revenue every year. And talk about what it is that you want to move them to -- you talk about wanting for them to move from what they're doing now to the AI-related products for supply chain and inventory management. Can you talk a little bit about what exactly your vision is for them to move to? And what's the timeframe until we might see one or two of these customers actually do it?

Yes. So what we do for our customer, existing customers today is we create automation for them. And this automation of the supply chain levels within warehouses, within their distribution centers, within their stores, within the transportation, between each of these levels as well, the automation that we create is creating the efficiencies.

And it all is based on -- what we do for them today is all based on image processing. Now image processing that identifies objects, and mostly is done today by either scanning barcodes. And that's how you identify the object. And that's how now you know what's going on and what's, where, and the assets, when they reach a location, when -- if there is anything missing, and create all that.

And we aggregate all that data of the objects we identify within the warehouses, within the distribution centers, at each of the steps of the way of the workflow, for example. And we aggregate that data and integrate it into the different ERP systems. And that's how you start creating the automation and analytics, and that's how they run their operation.

And it's all based, like I mentioned, on image processing of barcodes and scanning the barcodes. And -- but it's still that image processing, where -- what we want to do is continue do the same thing but replace the image processing technology, which is today based on scanning of barcodes, to replace that with our machine vision technology that would not only identify the barcode but now look at the whole product and create a much higher confidence level in the identification, eliminate many, many millions of dollars of errors, tens of millions of dollars of errors for each of our customers by providing a better identification process.

And then aggregate that same data into the ERP systems, get the analytics. But it will be in real time. It will be -- allow also additional -- the machine learning allows analytics that basically will learn better what's going on in real time once you sense everything much more than when just pointing a scanner at a barcode.

Now you see many more things that happen in that image. And this is how you create many more efficiencies and become even proactive and actually expect and prevent problems from recurring in the future for that same customer.

So that's a long answer, but to make it very simple is we are going to take away the scanning from the world and replace it with machine vision. And that's why we always say that $1 billion valuation is just the first milestone for us.

Okay. Well, Shai, that's great. And I think the long answer was exactly what I was looking for so we can visualize where you are and where you want to go. Let me make my last question on the same topic. Do you have the capability today to do what you just described, the future of inventory and supply chain management is going to be? Can you do that today and do you think we'll see some of these large industry recognizable companies make the move to the next generation by the end of 2024? Or is this something down the road three, four years?

So we are -- I'll start from the last portion of the question. Our objective is to already make and do something this year, not wait for 2024 or down the road, a couple of years. We want to -- that's one of our objectives for this year. And some to answer the first portion of your question, we have, I would say, we have the solution. Yes, we do have the solution. But we are today -- not but -- and we are today using to complete it with additional third-party company, for example, for the hardware, same as we do today with -- in parking or Q Shield in cities.

We're not manufacturing the sensor. We are, in many situations, assemble the sensor. But we don't want to deal with that hardware. We want to focus on software. Here, the same thing, we have this software. We have the algorithms. We know how to train the engine already to identify, and we prove that we don't need the scanner to read. We already did that. We can read barcodes by smart glasses, with smart glasses rather than using anything else.

And then, what we are -- so we have the capability to train our engine, the algorithms to do that. And we are now expanding it to also identify the additional parameters of a product, of our customer. For example, if it's a tire, then we already trained our engine how to identify what is the tire and also all the markings on the tire, the date, the batch number, et cetera.

So now it's not only -- for example, I'll just talk about it in the ten seconds, and that's it. Today's problems with identifying tires is that it has -- the way to identify tires, it has barcode stickers on them. When you sent tens of thousands of tires in the container, it peels off. It tears off. It's torn from the tire.

And many, many, many times, it seems weird but even a huge dip the large -- I don't to mention name that we're talking to. But the largest companies in the world, the manufacturers of tires, don't know what's going into stores. They know the quantity, but they don't know all the other materials. We already had trained our engine to read all the marks, identify each tire, and do this on the fly. So to answer your question, yeah, and that's one example of something that we already did.

Okay. All right. And Shai, I'll hang up after this, but is anybody beta testing this? Is anyone now currently doing internal testing of what the solution would look like for them? Or is this all yet to come?

No, we started the beta testing with one customer. It did stop due to them coming after COVID and trying to rearrange things, et cetera, but we did start the process and looking forward to not only continue that with that customer but actually continue with two others.

Okay. So you've got two others that want to start testing this year?

Yes.

Okay, great. All right. Well, listen, thank you very much. I think all that's certainly helpful for me.

Thank you, sir. Appreciate your support.

Curt Stauffer, Seven Summits Capital.

Hi, Shai. This is Curt Stauffer. How are you?

Hello. How are you?

Good. Congratulations on your growth. And I just have a question related to your sales effort, in terms of sales reps that are currently employed and what growth you see in your sales rep numbers this year and then going into 2024.

Thank you. Yeah, we, like we discussed also before, our focus is to not -- I wouldn't say, enlarge ourselves for us, ourselves. For us, today really is sufficient to what we need. If we need to grow it or reduce it, nothing is significant there. It's not like we need to double or increase it by a third to reach our objectives now.

We're very comfortable with what -- with the sales force that we have today. The focus, though, is on growing the sales channel and making it more a larger one in each vector, in each in each market that we penetrated -- let's say cities, retail, restaurants, fast food, et cetera, et cetera.

So that is our focus -- schools, universities, all of that. That is our focus to really establish a good and firm and stable sales channel that is trained to resell our equipment, our product in each of the sectors that we've penetrated.

Okay. So you're saying you're going to -- you're relying on resellers as opposed to direct sales force.

We do rely on our, of course, existing sales force. But in order to achieve the scalability and potential in the market, there's no way we can reach 16,000, more than 16,000 small and medium cities by ourselves. So we are getting today the revenue and the amazing potential we have comes from our direct sales. And that's the opportunity here because we're doing it ourselves, and it's doing well. So imagine, when we have a firm sales channel, the growth of this company is yet to come.

Is your sales force that's in place now -- how is it structured? Is it regional? Is it regional by geography or is it by business line or is it by customer type?

First, it is by business line. Then within the business line, it tries to be geographically. But in some of the cases, in some of the business lines, it is account based. And the relationships we have for so long with different accounts, for example, in the supply chain market where we have a direct and we don't need to use resellers there.

We have direct and relationships with all of our customers there. All of the sales is done directly, and each of these customers Fortune 100, 500 customers we have there can double the company switching into the air products.

So these are direct sales. For example, if you go into safe cities, you're talking about today getting the sales. What happens is that we're making the sales directly, and only few cases came from reseller. But most of the sales will come from the reseller channel going forward because like I said, there is no way we can do this ourselves. And it is geographically divided between the salespeople. So it depends on the business line

All right. Thank you very much.

I appreciate it. Thank you.

We have reached the end of the question-and-answer session, and I will now turn the call over to Shai for closing remarks.

So again, it was a pleasure talking to you, all. And then, thank you for your continued support. And looking forward to talking to you soon on our next conference call. Thank you, everyone.

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