Senstar Technologies Q2 2023 Earnings Call Transcript

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September 6, 2023

There are 4 speakers on the call.

Operator

Hello, and welcome to the Senstar Technologies Second Quarter 2023 Financial Results Conference Call and Webcast. Session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kim Rogers of Hayden IR. Please go ahead, Kim.

Speaker 1

Thank you, Kevin. Welcome and thank you for joining us today. I would like to thank the management of Sunstar Technologies for hosting today's call. With us on the call today from the company are Mr. Fabian Hobert, Interim CEO Mr.

Speaker 1

Tomer Hey, CFO and Ms. Alicia Kelly, Vice President of Finance. Before we start, I'd like to point out that this conference call may contain projections or other forward looking statements regarding future events or the company's future performance. These statements are only predictions and Senstar cannot guarantee that they will, in fact, occur. Senstar does not assume any obligation to update that information.

Speaker 1

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand and the competitive nature of the security systems industry as well as other risks identified in the documents filed by the company with the In addition, during the course of the conference call, we will describe certain non GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, we have reconciled our non GAAP measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website atwww.senstarttechnologies.com for the most directly comparable financial measures and related reconciliations. And with that, I will now hand the call over to Senstar Technologies' CEO, Fabienne Hobert. Fabienne, please go ahead.

Speaker 2

Thank you, Tim. Good morning, everyone, and thank you for joining today's earnings call. I'm delighted to provide an update on the company's performance. Starting with the Q2 of 2023, Revenue was largely in line with our expectation, showing accelerated growth in 2 key geographies. Q2 2023 revenue was $8,400,000 a 7% decline from the same period last year.

Speaker 2

Year to date revenue for 2023 totaled $14,900,000 compared to $15,900,000 reflecting a decrease of 6%. Our gross margin for Q2 stood at 60% to 7%, up 70 basis points year over year and 500 basis points sequentially. The improvements resulted primarily from a shift in product mix. We achieved positive operating income and EBITDA in the 2nd quarter despite lower revenue helped by lower operating expenses. Notably, Robert's growth emerged from focus on the EMEA and U.

Speaker 2

S. Region in Q2, counterbalanced by the absence of the one time project in Asia that boosted last year's Q2 results. Although the challenging year over year comparison obscured our original progress, we're making headway in pivotal markets like Europe and the U. S. The Asia projects fill on orders have been slower than expected, causing some variability in APAC sales.

Speaker 2

Looking at our performance regionally, the U. S. And European regions were the best performing geographies, representing about 80% of our total revenue in Q2, twenty 63% from the same period last year. Diving into the numbers a little bit deeper, EMEA has shown an increase of 30% versus Q2 last year. Year to date, the region grew by 2% versus the first half twenty twenty two.

Speaker 2

The outstanding growth in the Q2 was primarily due to a few military projects across Europe and the direct result of our past year's investments in DACH, Iberia, Eastern Europe, France and the Netherlands. Danfel will keep investing in Europe to develop its market share, mainly in the targeted verticals, which have overcome the COVID challenges and show high potential to steady growth. The U. S. Displayed notable growth of 8% in Q2 at an impressive 22% year to date, driven by correction business expansion and large demand In the targeted verticals through the whole region, Senstar is taking steps to reinforce its presence in the correction industry and to strengthen the U.

Speaker 2

S. Sales team to further boost its presence in our largest territory and improve our market shares in utility, Energy, logistics and military projects in the region. The U. S. Remains a major market where Sensa expects long term growth as your high technology offering matches the demand in the whole region.

Speaker 2

The APAC The region helped us last year when we had a slowdown of correction orders in the U. S, which was impacted by low government funding for projects. Centaur is looking close in its current situation and is looking forward to reinforcing its efforts to a Part of Asia, where the demand is currently well sustained. Shifting to our performance into 4 key verticals. Collectively, our 4 key verticals delivered a 22% increase in billings year over year and represented about 60% of Total Billings.

Speaker 2

Sensa has aligned its results to focus on the energy, utilities, correction and logistics verticals, leveraging our advanced solution and brand recognition. These markets require technologically advanced solutions and as a result are a good fit for Cellstar Sensors and Information Management Software. Let me comment on Cellstar industry leading product portfolio. We manufacture, customize and service our offerings, delivering multilayered security solutions, Sensa products synergize for comprehensive facility level solutions, enhanced by AI and cutting edge data visualization and video analytics. To this extent, Sensa will communicate shortly on introducing to the market this new generation of sensors technology.

Speaker 2

This unique and extremely innovative solution is taking a step forward in solving challenges in intrusion detection. SunStar team remains committed to expanding operational capacity, growing market share in key verticals and reaching our product line and boosting sales to existing and future companies. In conclusion, we remain confident in our strategic directions and the steps we're taking to expand our market share and drive growth. By focusing on high value virtual markets, Offering comprehensive vertical solutions and investing in research and development, we're positioning ourselves for success. We appreciate your ongoing support.

Speaker 2

Now, I will pass the call to our CFO, Tomer Hai, to review the financial results. Tomer, please go ahead.

Speaker 3

Thank you, Fabienne. Our reported revenues for the Q2 of 2023 was $8,400,000 a decrease of 7 point 5% compared with reported revenues of $9,100,000 in the Q2 of 2022. As Fabian mentioned, the decline was mainly due to one time project in the APAC region in Q2 2022. The geographic breakdown as a percentage of revenues for the Q2 of 2023 compared to the year ago quarter is as follows: North America, including LatAm, 50% compared to 43% Europe, 40% compared to 28% In APAC, 10% compared to 29%. 2nd quarter reported gross margin was 60.7% of revenues Compared to 60% last year, our reported operating expenses were $5,000,000 a decrease of 6.1% from the prior year Q2 operating expenses of $5,400,000 The year over year decrease in operating expenses was due primarily to a decrease in general and administrative expenses, which was partially offset by an increase in selling and marketing expenses compared to the year ago quarter.

Speaker 3

Our reported operating income for the Q2 was $83,000 compared to $107,000 in the year ago period. Financial expenses was $74,000 in the 2nd quarter this year compared with $109,000 in the Q2 last year. Net loss attributed Stenstar Technologies' shareholders in the quarter was $211,000 or $0.01 per share compared to net income of $164,000 or $0.01 per share in the Q2 of last year. The company's reported EBITDA for the Q2 of 2023 was $290,000 compared to $460,000 in the Q2 of last year. Cash and cash equivalents in short term bank and restricted Excluding the Q2 2023 financial results conference call and webcast.

Speaker 3

Excluding the impact of the Q2, 2023, That concludes my remarks. Operator, we'd like to open the call to questions now.

Operator

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back

Speaker 2

So on behalf of the management of Senstar, I'd like to thank you for your continued interest and long term support of our business. I look forward to updating you next quarter. Have a good day.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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