Hello, and welcome to the OMNIQ Corporation's third quarter and 2022 earnings conference call. My name is Halley, and I will be coordinating your call today. With us on the call are Mr. Shai Lustgarten, Chief Executive Officer, and Niv 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. 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 a 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-designed 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 products, 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 will 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. 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 Niv Nissenson, our Chief Financial Officer, who will go over our financial results in more detail. Niv?
Yes. Thank you, Shai. Hello, everybody. In the year ended December 31st, 2022, OMNIQ reported record revenue of $102 million, which is an increase of 31% from $78 million in the year ended December 31st, 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 improved 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 ERP 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 31st, 2021, an improvement of $1.2 million in our adjusted EBITDA profitability. Let me turn the call back to Shai to talk more about our operational achievements and focus goals. Shai?
Thank you, Niv. 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 City is driven by Q Shield, our proprietary AI offering that has been labeled by our first customer as 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 has resulted in both a 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 Investigations 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 vast. 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 35-40 cities to potentially be contracted this year. Next supply chain. OMNIQ continues 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, a $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 this competitive customer base, which over time brings an opportunity to both increase our revenues as well as our margins significantly. Finally, traffic management. This vertical includes our AI solution for airports, 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 counting 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 sector, which we feel offers 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 U.S.-based fast food chain with over 800 locations. Both contracts represent groundbreaking achievements as retailers and restaurants are looking for ways to stay ahead of their competitors as well as grow. Utilizing OMNIQ's technology will provide tools to better understand consumers' consumption habits while improving each unique customer's interaction.
This technology will be part of the CRM system, allowing for dynamic decisions based on each unique customer visit. 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 a significant improvement in 2022, with record revenues and positive cash flow from operations. Additionally, we are starting off 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 continued success. Operator, I'll now turn this call over for questions.
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. One moment while we poll for questions. Your first question for today is coming from Jason Smith at 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, Jason. 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, to be firm at high levels. We still actually continue to see that, as we started 2023 as well. It is solid and at a much higher level than we've seen before and remains that way, with the additional, growth in sales.
Okay. I'm sorry if I missed it, but did you say, 35-40 cities to be contracted this year for the safe cities?
Yes, sir.
Okay. How should we think about the number to actually be rolled out?
The number to be rolled out varies from state to state, depending on the certifications required for the deployments. Some states and cities, it works very quick, much quicker than others. Certainly we should see at least half, or I should say between a third to half of that amount getting deployed.
Okay, that's helpful. Then just the last one from me, and I'll jump back into queue. Obviously, Q4 gross margin was pretty depressed, how should we think about gross margin trending here this year?
Unfortunately, Q4, we did see lower margin there, the good news is that it was due to one-time events that had to be recorded in Q4. That is to your question, that is not carried on to Q1 or to 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.
Your next question for today is coming from Hila Pyminsky, a private investor.
Hi, Shai. Congratulations. Hope to see doubling to $200 million again within two years.
Hi, Hila. Thank you very much.
Thank you. 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. First of all, absolutely, there are more cities, as we discussed 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 offering that comes with Q Shield to the safe city, to provide safety to the cities we serve. 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 citations 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 OMNIQ and the percentage that goes further and gets paid to the city. All the payments of the citations go through OMNIQ's 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. We're very proud of the different use cases used actually when they use these funds, for example, to schools buying laptops, to students, doing some community events, et cetera. Very exciting stories coming out of the cities using the capital, using the money that OMNIQ generates to them, at the same time enforcing regulations.
Like I said, the whole platform is a 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. 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 product, together with cross-selling the products of Dangot to OMNIQ's existing customers in the U.S. That immediately took effect, and we're very happy about that. It created the significant growth as well, which overall represent very solid organic growth as we saw going up from $78 million last year into $102.5 million this year.
Of course. Wonderful. Regarding the AI technology, is the Israeli Ministry of Defense buying from OMNIQ?
The IMOD, the Israeli Ministry of Defense, is one of the very good customers of OMNIQ today, using the AI border control product, which we have for governments and militaries. We're very happy every year to extend these services and probably exclusively providing the border control security to the Israeli Ministry of Defense, which is very exciting and we're very proud of that. Yes.
That's impressive. Can you explain the usage of AI for the retail sector that you talked about before?
Yeah.
What is the potential in it also?
Well, absolutely. The QSR, the restaurant, and fast food chain market for OMNIQ, the new vertical, 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. 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. We're all hearing about and reading about, I'm receiving from many people on this call articles to, you know, through text or they send me by email of different AI solutions of voice recognition that automate or do better performance in drive-throughs, for example.
OMNIQ, what we say here in OMNIQ is why do you need even to speak to scream on a mic or, you know, focus on that. Using OMNIQ solution, we immediately from the second a customer comes into a drive-through, for example, that is when we start learning its habits of that customer. The next time that same customer comes, we are 95% accurate in the order that is going to be placed. We can automate the action without even the consumer or the customer needing to even interact with anyone. Basically, we do that through different parameters, and it is all based on our machine vision technology.
That's amazing. I have to say, I have to ask, how do you see Q1?
As we mentioned as well, we don't give guidance, but we did mention that we started Q1 with a strong momentum. 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. Are you considering another acquisition in the next months?
Well, as we always said before, we look at two strategies for growth. One is organic of course, and the other one is M&A. We're always examining all the time, on the M&A opportunities we have that come to our table or that we search for. 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. Thank you.
Your next question is coming from Blair Abernethy at Rosenblatt.
Hi, good morning. Shai, just wanted to just dig in a little more on this fast food restaurant win, the sort of 800 stores. Can you just describe to us sort of how this came about? Did this come directly or is this through, you know, certain channel partners? You know, what's sort of the rollout here? Are they gonna pilot a few stores? Just give us some a sense of the pace of that kind of rollout.
It came from a reseller. What we focused on, 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-throughs that are at restaurants, these are drive-throughs also at some other retail providers in different other markets. Like we said before, there are so many of them, hundreds of tens of thousands, certainly. There's no way OMNIQ 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.
What we've done, we've already had concluded the pilot, and today, we have already deployed in more than 14 locations. This is an ongoing process with our customer, the deployment. They're looking to deploy that all over. We're engaged with them on a deployment schedule. I would mention also that we're receiving another contract for another automatic to automate another drive-through, like I mentioned, from another retail sector. Not the restaurants, but again, a drive-through is a drive-through. There, we're talking about an opportunity which is four times larger than the one we've just discussed in the of this restaurant chain.
We o ver 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, would that be something like a bank, potentially bank drive-through?
No, that's a great idea.
I would think that the banks might be interested in seeing this kind of.
Yeah, I agree. It. That's exactly the point there. When you look at the- that's the, I would say, the best emphasis that I would put on this 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. Now it is our objective to try to capture as much as possible, as quick as possible. We're trying.
Yeah, bank, like you just mentioned, is just one another example of where we could be very, you know, 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. Just on that, on the fast food chain that you're working on now, what's the recurring revenue component look like in that deal?
As this was our first customer, the recurring revenue portion of it, I think, if we try to put it in percentage out of each location would be something like 25%. Of course, going forward, we're looking at raising that component, the recurring component in this model to achieve to be at 60% minimum.
Okay. Okay. Just from the overall company perspective, Niv, on the Q4, do you provide or will you provide some sense of what the recurring revenue component is?
Yes. I think that Shai had mentioned that revenue coming from the AI machine vision has increased over 100% this year over last year. That revenue does have, of course, a portion of recurring revenue that is also increasing, and we expect it to increase significantly next year as well.
Okay. Presumably, at some point, you'll start disclosing, you know, an ARR, an annualized recurring revenue amount. Is that in your plans for maybe this year or next year?
I think that, you know, as we've been pretty consistent about this, you know, we kind of give general ideas of, you know, 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. Secondly, on the gross margins. I know you're not giving guidance at all, but, you know, should we expect, given the pipeline you've got that you think you're gonna execute on in 2023, you know, should we be expecting incremental improvement in gross margin in 2023 over 2022?
Uh, we-
I think that.
Oh, go ahead-
As Shai 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. It's, as it's not gonna recur in 2023, I do expect the gross margin to improve in 2023.
Okay. Okay, great. Just one other question from me, on the Safe City area, Shai. The, you know, you've obviously, it's been, you know, great traction in seeing with a number of smaller municipalities and so forth. I'm just wondering, you know, either directly or through channel partners, are there opportunities to go after some of the large cities or major metropolitan centers with something that might look like a much larger, you know, longer term contract? Are those out there, or what's your approach to that end of the market?
The answer is yes, 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, you know, five years, due to the, again, game changing. It's not only the revenue share. I mean, when you look at the, when you look at the success stories that we have, solving missing person investigations, bringing back an elderly person on a silver alert, bringing back the person home after an hour and a half 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, I don't see a reason for them to replace us. We'll definitely continue working on that. 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. 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 a Safe City product.
They will go to these very big, large integrators that would not wake up in the morning if they were not gonna receive a $100 million contract to do this. 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. 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. The opportunity will be there.
Great. Great. Thanks. Thanks very much for that and nice job on the year, guys.
Thank you, sir. Appreciate your support.
Your next question for today is coming from Richard Malinsky, a private investor.
Shai, how are you doing, my friend?
Good, sir. How are you, Rich?
I'm good. Good. Congratulations hitting that $100 million cash flow positive. I know this is, you know, I've mentioned this, I'm always 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, you know, that you're able to meet these the backlog without having to raise on equity at this point in time?
Yes. We feel comfortable about that. Like, you know, we just had that discussion yesterday, of, with one of our friends here internally, 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. Today, yeah, 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, you know, went through COVID and recessions now and stuff like that. You're seeing that we're still continuing our growth and continuing to support our growth and do a lot of very exciting things. The answer is yes.
Yeah. Yeah. The, the other thing is that drives me crazy, I look at Rekor doing $20 million a year in revenues, losing a ton of money, trading at a market cap that's probably twice your market cap today, you know. Based on where you currently are, you're in exciting areas. You know, what is it gonna take for a company in the industry to say, you know, "These guys just broke through the $100 million level. You know, we gotta work with them. We wanna have an ownership in this company." Like, I would not mind if, a major company said, "You know, we'd love to give you $25 million , you know, and really work with you know, in some areas." You know, what point revenue-wise would you have to be at?
What point technology-wise would you think that would be at, you know?
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 yesterday, measure everything we did until that morning and see if we're going the right way. We have our objectives and 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. We're getting approached, again, this is a board decision always how to advance with the approaches that we're getting. We're just very excited here getting, you know, executing our plans, getting our objectives done.
Trust me, Rich, as you know, and seeing what we've done till now, we only by the performance or by, you know, very, you know, measuring everything that we do to the details, we learn internally that we could actually double our objectives every year. That's what makes us excited. Whatever comes, whoever notices, whoever is gonna be interested, that's, you know, 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. Appreciate your support.
You bet. Of course.
Your next question is coming from Neil Fagins, 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?
Um, margin-
Well-
Yeah, go ahead, Niv.
Yeah. I think that the margin would have been. It would have been closer to 20%.
Okay. Pretty consistent with the rest of the year.
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. It's the cameras, it's the software, it's the recurring revenue component-
Yes.
It's the installation, it's everything.
Yes.
That is correct.
Okay. Okay. One last thing that I just wanna 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 get it up to 60%. What are we talking about? 25% and 60% of what?
Again, it depends on the amount of, it varies. Every location is not the same and depends on the camera, you know, amount of sensors that we have to deploy and the size of the location as well. That, that kind of varies. You're looking at.
Is it 25% of the initial hardware cost or is it... I don't understand. It's a percentage of what number?
It's 25% of the total revenue per deployment.
Okay. Okay, got it. Okay. 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. You know, 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. 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?
What's the timeframe until we might see one or two of these customers actually do it?
Yes. What we do for our customer, existing customers today is we create automation for them. 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. In, and it all is based on what we do for them today is all based on image processing. 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, when they reach a location, if there is anything missing and create all that.
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. It's all based, like I mentioned, on image processing of barcodes and scanning the barcodes.
It's still, that's image processing, where what we want to do is continue to 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 millions of dollars of errors, tens of millions of dollars of errors for each of our customers by providing a better identification process. Then aggregate that same data into the ERP systems, get the analytics. It will be in real time.
It will 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. This is how you create many more efficiencies and become even proactive and actually expect and prevent problems from reoccurring in the future for that same customer. That's a long answer. To make it very simple is we are going to take away the scanning from the world and replace it with machine vision. That's why we always say that, you know, $1 billion valuation is just the first milestone for us.
Okay. Well, Shai, that's great. I think the long answer was exactly what I was looking for, so we can visualize where you are and where you wanna go. Let me make my last question on this 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? 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? Is this something down the road three, four years?
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 couple of years. That's one of our objectives for this year. To answer the first portion of your question, I would say we have the solution, yes, we do have the solution, but 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 wanna deal with that hardware.
We wanna focus on the software. Here are the same thing. We have the software, we have the algorithms, we know how to train the engine already to identify, and we proved that we don't need a scanner to read. We already did that. We can read barcodes by our smart glasses, with smart glasses rather than using anything else. 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, if it's a tire, then we already trained our engine how to identify what is a tire and also all the markings on the tire, the date, the batch number, et cetera. Now it's not only... For example, I'll just talk about it in 10 seconds and that's it. Today's problems with identifying tires is that the way to identify tires is it has barcode stickers on them. When you send tens of thousands of tires in a container, it peels off, it tears off, it's torn from the tire. Many times it seems weird, but even huge, the large-- I don't wanna mention names that we're talking to, but the largest companies in the world that manufacture tires don't know what's going into the stores.
They know the quantity, but they don't know all the other material. We already have trained our engine to read all the marks, identify each tire, and do this on the fly. To answer your question, yeah, and that's one example.
Okay.
of something that we already did.
Okay. All right. 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 1 customer. It did stop, due to them coming after COVID, you know, and trying to rearrange things and et cetera. We did start the process and looking forward to not only continue that with that customer, but actually continue with two others.
Okay. you've got two others that wanna 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.
With the interest of time, our final question will be coming from Curt Stauffer, Seven Summits Capital.
Hi, Shai. This is Curt Stauffer. How are you?
Hello. How are you?
Good. Congratulations on your growth. 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 our sales force. Our sales force today really is sufficient to what we need. You know, 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. No, we're not. We're very comfortable with the sales force that we have today. The focus though is on growing the sales channel and making it a 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. 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 products in each of the sectors that we penetrated.
Okay. you're saying you're gonna you're relying on resellers as opposed to direct sales force, to...
We do.
How are you-
We do rely on our, of course, existing sales force. 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. 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. 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. 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 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 AI products. 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. Like I said, there is no way we can do this ourselves, and it is, geographically, divided, between the salespeople. 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.
Again, it was a pleasure talking to you all, and I thank you for your continued support and looking forward to talking to you soon on our next conference call. Thank you, everyone.