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Operator: 00:04 Good morning, and thank you for joining us for the OMNIQ Financial Results and Corporate Update Call for the Third Quarter ending September thirty, twenty twenty one. 00:11 Joining us today are Shai Lustgarten, CEO of OMNIQ, who will provide an operational overview; and Neev Nissenson, Chief Financial Officer, who will discuss financial results. [Operator Instructions]. 00:28 I will now take a brief moment to read the safe harbor statement. During the course of this conference 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. 01:21 I will now turn the call over to Shai Lustgarten. Please go ahead.

Shai Lustgarten: 01:26 Thank you, operator. And thanks to everyone joining us on the call today. During twenty twenty one in the third quarter, we achieved milestone highs for all of us. We listed on NASDAQ, our share liquidity substantially grew, we closed the raise of fifteen million dollars in equity strengthening our balance sheet. We have ten million dollars in cash we received thirteen million dollars worth of new orders in October, we were selected by a number of cities for long term installment of AI machine vision systems for public safety and law enforcement, and we closed the acquisition of fifty one percent of Dangot Computers creating many new opportunities that I'll discuss later. 2:13 With this acquisition, we're creating a ninety one million dollars revenue company based on the twenty twenty pro form basis. The acquisitions create power hearts of AI, object identification, and automation company that is well placed to drive growth and stronger financial results. Furthermore, during the quarter we executed on another major milestone with successful up list to NASDAQ. 02:40 Turning to the results, third quarter revenue reached twenty point five million dollars up thirty percent year over year. While we are not immune to supply chain disruption, demand remains high as evidenced by more than thirty million dollars of orders announced in October loans. Based on that and our firm customer base, we expect growth to continue. 03:04 Before I go further, let me now turn this over to Neev to take a deeper look at our financial results. Neev?

Neev Nissenson: 03:12 Yes. Hello everybody. As Shai highlighted, we reported revenue of twenty point five million dollars for the quarter ended September thirty twenty twenty one, which is an increase of thirty percent from fifty eight point eight million dollars in the third quarter of twenty twenty. Revenue increased reflects a combined strength of our consolidation with Dangot. As well as continued traction in our market. 03:37 Total operating expenses for the quarter were eight point eight million dollars compared to five point eight million dollars in the third quarter of twenty twenty. And the increase reflects the consolidation of Dangot as well as certain nonrecurring expenses related to the acquisition. Net loss for the quarter was five point one million dollars or loss of zero point seven three dollars per share compared to a loss of two point eight million dollars or a loss of zero point thirty three dollars per share for the first quarter of last year. 4:08 Adjusted EBITDA, meaning adjusted earnings before interest, taxes, depreciation and amortization for the first quarter of twenty twenty one amounted to a loss of one point nine million dollars compared to adjusted EBITDA a loss of nine hundred and five thousand dollars in the third quarter of twenty twenty. Cash balance were ten million dollars at period ended September thirty twenty twenty one. 04:33 Let me now turn the call over back Shai to talk more about operational achievements and outlook. Shai?

Shai Lustgarten: 04:40 Thank you, Neev. Q3 was not just another good quarter for us, it's a quarter of stronger and better position company for further growth and success. Our success is driven by our AI Solutions, supply chain automation solutions and our new Dangot offerings. I'll now provide an update starting with AI and will share few Q3 and both Q3 highlights.

. : 06:00 Also during the quarter, we received an order to deploy our AI based machine vision solution at the border checkpoint between Israel and Jordan. This order to deploy our AI technology in the sensitive spot between Israel and Jordan is an additional vote of confidence from one of the most demanding authorities in the world. This passage, which opened after signing the peace agreement between Israel and Jordan in ninety ninety four is the main passage point between Israel and Jordan. Additionally, we received a ten year contract from La Sierra University to deploy our PERCS software for campus management. 06:38 The contract includes an upgrade to OMNIQ’s new [indiscernible] system enabling vehicle identification with PERCS newest digital functionality for time based parking enforcement. Furthermore, we announced our AI based OMNIQ vision solution will be deployed at Miami International Airport. OMNIQ was selected by [indiscernible] Access Corporation to deploy the OMNIQ vision solutions, our advanced AI Vehicle Recognition technology. 07:10 OMNIQ vision is now deployed at more than forty airports including fifty percent of the top twenty hub airports in the U.S., including Atlanta, Dallas, Fort Worth, Los Angeles International Airport and John F. Kennedy Airport in New York. On top of that, after the third quarter ended we announced Q Shield was selected in Georgia to crack down on crime and enforce traffic violations. Additionally, we entered into a partnership with 911 inform to expand our offerings in sales channels for AI based object identification and location discovery solutions. 07:48 After the quarter ended we announced more than thirteen million dollars in purchased orders in October alone. The thirteen plus million dollars includes the purchase orders with a total value of approximately one point eight million dollars from a Fortune five hundred leading IT supply chain provider with more than one hundred thousand customers in over one hundred countries, generating more than twenty billion dollars in annual revenues. The seven figure order comes from a long term customer for the implementation of OMNIQ solutions, including deliver data collection hardware. Implementation of these devices will complete OMNIQ’s task in migrating the customer from Windows to an Android platform. We also received a seven point eight million dollars purchase agreement from one of the largest food distributors in the U.S. and in North America for the supply of mobile computerized IoT equipment designed to collect, identify, track and trace assets, as well as shares, connect as part of the supply chain system of the customer. 09:00 Since February twenty twenty one OMNIQ has now received over thirteen million dollars in orders from the same leading food distributor. The new projects will roll out across distribution centers in the U.S. and Canada starting in December and continuing into the first half of twenty twenty two. 09:20 Additionally, we received an approximately four million dollars purchase agreement from a top based [indiscernible] company logistics clients, OMNIQ will supply Android based data collections, computing and communication equipment to the [indiscernible] customer distribution centers across United States. The customer has annual revenue of over four hundred million dollars and more than three thousand employees. The multiyear deployment is valued approximately four million dollars which includes an immediate four hundred thousand opening delivery order and has announced only recently these customer plays with us additional three million dollars purchase agreement, which now totaled to seven million dollars. 10:09 Turning to Dangot. During the quarter, we announced that enrollment first of our largest coffee chain as Israel with two hundred branches in the U.S., Canada, and other countries have selected Dangot to provide its self-service kiosks. According to Forbes article titles self-order kiosks are finally having moment in the fast food space, it’s written by Alicia Kelso, it is predicted that the self-service kiosk market will reach thirty point eight billion dollars by twenty twenty four. 10:44 We will install one hundred and twenty self-ordering kiosks by the end of twenty twenty one at the Aroma Israeli branches with the expectation to install two fifty of the kiosks in total by the end of twenty twenty two. 10:58 Dangot self-order kiosks are integrated with advanced computing as well as EMV smart payment systems. EMV developed and managed by American Express, Discover, JCB, Mastercard, UnionPay and Visa is a global standard for credit cards that uses computer chips to authenticate chip card transactions. Our software house incorporates smart software at the kiosks that enhances the customer experience and enables fast ordering. Dangot's innovative product offerings continue to be adopted in its home market in Israel and are also a fit for OMNIQ's target markets. 11:40 Also, recently it was announced that a major healthcare organization, serving over four point seven million individuals have selected our intelligent Healthcare Carts to be used in the customers fourteen hospitals and in over two thousand clinics, Again, another great award for one of Dangot’s product. 12:01 Today, OMNIQ offered a total solution under one roof, combining all three of our offerings into a combination solution that includes our AI Solutions, supply chain automation solution and our new Dangot product. Not only this way customers find a huge strength in understanding the added value of OMNIQ’s total offering, but in supports our roadmap to become a metadata and a leading provider through object identification that creates unique automation and efficiencies. 12:33 In closing, during these transformative quarter, we strengthened our balance sheet, we closed on our acquisition of Dangot Computers, we successfully up list into NASDAQ and we grew with third quarter revenue reaching twenty point five million dollars, up thirty percent year over year and demand remains higher as illustrated by more than thirteen million dollars in orders announced in October alone. We thus expect growth to continue and lead the company to new series. 13:06 Operator, I'll now turn over the call for questions.

Operator: 13:10 Certainly. Ladies and gentlemen the is floor now open for questions. [Operator Instructions] Your first question is coming from [indiscernible]. Your line is live.

Unidentified Analyst: 13:35 Hello. Hi, Shai, great quarter and encouraging beginning with new acquired Dangot. Do you intend to buy a bigger ownership than fifty one percent?

Shai Lustgarten: 13:45 Yes, absolutely. And hello again. Yes, we announced that we are going to execute, of course, on the option we have for the forty nine percent acquisition. And we're looking to do that and we'll announce very soon how we are doing it sooner than what is also been publicly provided, the data. It's going to be shorter than the twelve months we said we're going to do. So it’s definitely a target for us and we're going to do it immediately.

Unidentified Analyst: 14:19 Great. And can you explain the – the recently announced Dangot related orders, like the self-order kiosks and Healthcare Carts. Any potential in the U.S?

Shai Lustgarten: 14:32 Of course, we're actually working on this as we speak. And in the next room right here are one of the largest customers in this field waiting for me to finish this calls, so I can join them for exactly that, the self-ordering kiosks. So this is something that differently, as we mentioned, it's very applicable to the targeted market here in North America. And now with these products that are well proven in Israel and two other countries as well, we can now go and explode and provide -- expand our product offering to North America to our existing customers as well.

Unidentified Analyst: 15:15 That's excellent. And we read about chief citizen [indiscernible] AI Solution, you mentioned it also in you talk. Can you explain the application and if we can expect more cities soon?

Shai Lustgarten: 15:30 You were saying cities?

Unidentified Analyst: 15:34 The AI solution and [Multiple Speakers].

Shai Lustgarten: 15:40 Yes, definitely, as we also discussed before this solution is putting our sensors in the field and detecting vehicles in real time, doing the identification in twenty milliseconds and cross checking the data with different databases and providing notifications and alerts to police to other agencies, authorities that are licensed to use our service. And we've been awarded with three cities already in Georgia. We aimed to do this at first three cities, we do have eight more cities waiting in line to sign the agreement with us. 16:23 Once we are finishing the deployment in this cities, we are then providing that service of alerts, notifications to the customers as well as doing the revenue share with them on the citations that we provide online in real time for uninsured and unregistered vehicles. So it's a win-win solution where we provide service to the – to law enforcement, to the users, to different agencies and authorities and at the same time enlarging every city, every municipalities budgets and creating more money for them, more resources. And actually, as we expand in these same cities more and more, we're putting more eyes on the street, put in and creating better service to the residents as well as we create safer tweets for our kids, for ourselves to walk on and to enjoy our life.

Unidentified Analyst: 17:24 That's very important and excellent. Sounds good. Thank you very much.

Shai Lustgarten: 17:30 Thank you for the support.

Operator: 17:32 Thank you. Your next question is coming from [indiscernible] Israel. Your line is live.

Unidentified Analyst: 17:42 Hello. I'm in the company. First, great results Shai. I know your AI technology in Israel is all over the parking lot here in [indiscernible], can you explain your AI technology deployed in the U. S. and outside Israel?

Shai Lustgarten: 18:07 Absolutely and welcome to the family. Our AI solution actually what it does is, were in parking where you see in many parking lots in Israel. What we do there is, we detect vehicles that are coming close to the gate to the entrance of the parking lot, we created ticket less real time scenario where real life situation where you didn’t need to take any ticket, we create a virtual ticket by identifying your vehicle and creating the virtual digital ticket. And then when you enter to the parking lot and once you're are done with your arrangement, whatever you do at the parking lot of the shopping mall anywhere and you are getting ready to exit, you either make your payment on an app or you make a payment on a payment machine out there in the parking lot, doesn’t matter how you do that. We immediately get that data and we cross check it with a digital ticket that we created, we match it and then we know that this vehicle had paid and when you come closer to the exit of the parking lot, the gate will lift in less than a second, because we already know you paid, we identify you are the exit, so we can raise the gate and you can exit. We can actually do that today without even gates. 19:34 So that’s our next product, and that's what we do a lot in Israel. In the U.S. we do this today in forty airports and we do this in many parking lots in many parts and of course, the market potentially is huge.

Unidentified Analyst: 19:53 Okay. I got one question. I know Dangot in Israel where they have a very strong customer base, what are the steps taken to sell Dangot system also in the U.S?

Shai Lustgarten: 20:07 Yes. Dangot solutions are very unique product, very unique in the sense that they provide great user experience. And again, sensor -- beautiful sensors for us to gather, collect data and provide analytics through this. The target market in the U.S., the first ones that we are looking at is the parking and also healthcare. We're going to use the healthcare Cards, doctor stations, doctors cards, nurses cards, etcetera. We're going to take that and we're in the process of exposing that to different distributors and resellers in the U.S and our existing customers. And sell these products here in the U.S and at the same time in parking the kiosk are going to be something in just another solution that our parking customers in the US are going to get from us and there's is a huge market for that. And these are the two cross sale targets that we're looking at. Later on, it's going to be going into the – with the self-ordering kiosks to fast food change that we started talking to and additional restaurants and with the additional products we will expand slowly into these targeted markets.

Unidentified Analyst: 21:38 Thank you, Shai, and good luck.

Shai Lustgarten: 21:40 Thank you. Appreciate it.

Operator: 21:43 Thank you. Your next question is coming from Howard Halpern from Taglich Brothers. Your line is live.

Howard Halpern: 21:49 Congratulations on all the good work that you've been doing guys.

Shai Lustgarten: 21:53 Thank you. Appreciate it, sir.

Howard Halpern: 21:55 In terms of Dangot, what was the revenue contribution during the quarter?

Shai Lustgarten: 22:05 Revenue was about nine million dollars.

Howard Halpern: 22:12 And were there any one time costs that were embedded in G&A for doing that transaction that will actually come out?

Shai Lustgarten: 22:21 Yes. Absolutely. There are significant onetime costs that are not going to recur in the next quarter. That all relate to the acquisition, of course.

Howard Halpern: 22:33 Okay. And in terms of have you begun a streamlining process already to improve operating leverage for the combined entity?

Shai Lustgarten: 22:47 Of course, we started that first on the low hanging fruits, but we are going to focus on it, continue focusing on it and you see the results I believe in about probably three to six months, that's when we'll see the more significant results as we are also deploying the Netsuite Oracle ERP system across Dangot as well in this month and allow better automation of operation.

Howard Halpern: 23:21 Okay. And could you discuss a little bit about the gross margin profile for -- like your smart city projects, the kiosks from Dangot and then some of the more meat and potatoes like from the food distributor. Can you just go over that margin profile again?

Shai Lustgarten: 23:46 The margin profile that we see, if I understand the question correctly, if I can take like an average for the product now -- in the technology now that we have in-house and the combined solution to safe cities and parking, etcetera like you mentioned. We should see the margins ranging -- it depends again on how expanding this solution to that same customer, but we should see expanding the or growing the margins from the twenty percent or above twenty percent that we see on average today, twenty four today, to actually thirty five percent to fifty five percent margins and more if it's more software oriented only.

Howard Halpern: 24:34 Okay. And can you just talk a little bit about -- I know you've just really deployed some of the smart city projects, especially in Georgia, but what kind of recurring revenue ramp are you beginning to see and what do you expect to generate hopefully over the next two to three years?

Shai Lustgarten : 24:55 Specifically from this safe city projects, we expect to see margins of -- coming from the solutions to be on the higher end of it, seventy percent margins and we're looking -- I don't know how to call it, it depends on how you would provide -- what term you would prefer, but it's more a revenue share. It's a revenue share with this cities because that's the unique actually business case that we presented. And if you define it under recurring, then we expect that to be about ten percent going forward.

Howard Halpern: 25:44 Okay. And in terms of, I guess, you talked a little bit about what happened in October with the pipeline, but -- I think you touched on a couple of other like there are eight safe cities sort of behind in the pipeline, but are there any other projects that you were maybe pilots in past years that are coming to fruition within the next six months or so?

Shai Lustgarten: 26:14 Yes, definitely the safety cities. Yes, we are moving fast with that. That's what we started from, we're moving fast. And also in supply chain, we'll see the pilots finishing with a new product offering we have and new ones coming in like we've discussed on the parking now having the kiosks and having the total solution in-house, that is something that we are moving from pilot stages to actually executing already this year. So on the parking certainly, supply chain will move faster, we'll probably see this -- like we discussed before in the next six months, but definitely on safe cities that's going to be starting from pilot to actual, I would say, revenue stream this year already.

Howard Halpern: 27:11 Okay. Keep up the good work, guys.

Shai Lustgarten: 27:14 Thank you, sir. I appreciate your support.

Operator: 27:17 Thank you. Your next question is coming from Calvin Hori form Hori Capital. Your line is live.

Calvin Hori: 27:25 Good morning, Shai.

Shai Lustgarten: 27:27 Good morning.

Calvin Hori: 27:28 In the last call, Q2 call you mentioned that your AI revenue grew one hundred percent sequentially, what did it grow this quarter versus the last quarter?

Shai Lustgarten: 27:40 We did grow this quarter as well. The percentage, I would say wasn’t one hundred percent, but it was close to that. And the backlog certainly grew more than one hundred percent of what we had last quarter So, I would say about eighty percent growth or -- yes, close to eighty percent growth in AI.

Calvin Hori: 28:10 And you said the backlog grew close to that as well?

Shai Lustgarten: 28:14 Even more. Yes, sir.

Calvin Hori: 28:16 Even more, okay. You see that trend continuing going forward?

Shai Lustgarten: 28:24 Absolutely. What we see not -- I mean, we see the growth, we see the backlog growth at the same time and thus we expect the growth to continue.

Calvin Hori: 28:35 Still off of a relatively small numbers already?

Shai Lustgarten: 28:40 Meaning –

Calvin Hori: 28:43 Percentage of revenues, which is –

Shai Lustgarten: 28:46 Are you talking about the AI only.

Calvin Hori: 28:50 AI, because you're running about eighty million dollars or ninety million dollars annual run rate count so?

Shai Lustgarten: 28:57 We -- Well, it depends, right? I mean, the total pie growth, the Ai grows as well, so maybe it always remains ten percent, but if it ten percent over a billion it is still growing a lot, right? So, basically our total pie growth, which is a good thing and we do grow with the AI. Yes, we wanted to grow faster and that's why we're invest in more technology and we invest in more product offering to be more attractive if you will. And it shows because we do grow their. I believe that you will see the pace of growth even stronger and higher as we advance forward, because we do see how the market react to certain places we do piloting and also other places that we are measured compared to competitors on performance and that's why we keep getting selected by airports, etcetera. So, I think that the base traction will be much higher and tighter.

Calvin Hori: 30:06 Is there any AI associated with these orders you announced a thirteen million dollars order so the other factory floor orders that's just based out –

Shai Lustgarten: 30:15 Absolutely. Yes, there's a nice very nice order there as well.

Calvin Hori: 30:22 Great. Thanks. I’ll get back.

Shai Lustgarten: 30:26 Thank you for your support.

Operator: 30:30 Thank you. Your next question is coming from Matt Williams from [indiscernible] Associates. Your line is live.

Q – Unidentified Analyst: 30:36 Hey, Shai. Matt Williams with [indiscernible] Associates. I appreciate the opportunity to ask a question. A couple of questions. Let me start with just the percentage or the -- can you quantify the recurring revenues perhaps in this quarter? And talk about what you think it might look like as we move out, maybe the next six or twelve months, the recurring revenue stream.

Shai Lustgarten: 31:01 Yeah. That's a good question, Matt. And thank you for jumping on the call and listen into us. As I mentioned couple of times, we are consolidating all the data and to create GAAP number precise GAAP number is something that I still don’t have in my hand, precise one, but we're looking at going forward. The target is still ten percent recurring and the exact numbers will be generated – consolidated ones with the Dangot acquisition as well that has recurring factor there as well. So once I have that, I'll be able to provide the precise number, but certainly, we see a higher number in recurring revenue today already. And again, our objective is to get it to be ten percent of the total revenue.

Q – Unidentified Analyst: 31:58 Okay, Thank you. And then when I just listening to some of these opportunities, right, you've got safe cities, you've got parking across many different sorts of end markets, airports, parks, etcetera. You've got these kiosks and I'm sort of thinking about your go to market strategy, How much of the sales effort is a direct sales or an internal effort versus using some channel partners?

Shai Lustgarten: Right. So yes, we do our strategy as you mentioned consist of direct sales or indirect. Direct sales work will more focus on safe city project, and government projects and supply chain customers because the supply chain customers that we have our Fortune five hundred enterprises. So we got account managers on them for years now. So these are more direct and the indirect would go in the parking space and where we use resellers. In some of the public safety projects as well to K-12 schools, universities, etcetera, we can't reach alone one hundred and forty two thousand K-12 schools in the U.S. only. So there we are we're using resellers as well, of course, parking lots all over the country. 33:30 There are hundreds of thousands if not more. So, that's a huge market and work with resellers. What we see you mentioned the kiosks, what we see. And again, some people think when they see -- when we say kiosk, they think about hardware, there is so much software and then the leading there. That's the point where you touch the customer. That's the point where we could actually even deploy more AI added value putting in our systems near to the customer and provide better on the leading and that's why we did that. And basically, it gives us the ability now actually to even move up the food chain sometimes above our resellers because the biggest companies in yes, like I mentioned, I've got in the next term right now when for to finish this call. The biggest parking in U.S. today, because of the kiosk that now we have in house and this allows us to work to your question. Not only with through resellers, but now we see the end users coming to us and creates huge significant opportunities for the for the company.

Q – Unidentified Analyst: 34:46 Excellent. Congratulations on the progress to date, and Appreciate the time.

Shai Lustgarten: 34:52 Thank you, sir. Appreciate your support.

Operator: 34:56 Thank you. There are no further questions in the queue. I will now hand the conference back to Shai Lustgarten for closing remarks. Please go ahead.

Shai Lustgarten: 35:03 Thank you, operator. I would like to thank again beyond OMNIQ the team for yet again delivering great performance. OMNIQ continues our advancement with our roadmap in being the leading image identification company creating automation and efficiencies in the markets we serve. I thank you all for your continuing support and I'm looking forward talking to you soon. Thank you.

Operator: 35:29 Thank you, Ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day.