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spk05: Greetings, and welcome to the CEMTREX Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risk and uncertainties that could cause actual results to differ materially. We are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of the presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results was issued today and is available on the Investor Relations section of our company's website, Soundtracks.com. Your hosts today are Sagar Govil, Chief Executive Officer, and Paul Wyckoff, Chief Financial Officer. We'll present results of operations for the third quarter and the June 30th, 2023. At this time, I will turn the call over to Centrix Chief Executive Officer Sagar Govil.
spk01: Thank you, Operator, and good afternoon, everyone.
spk02: I'm pleased to welcome you to today's third quarter 2023 financial results conference call. The third quarter of fiscal year 2023 was highlighted by a second consecutive quarter of operating profit driven by the company's realignment and operating performance power. Continued sales execution by Vicon with multiple large orders resulted in revenue growth of 36% year over year. In combination with operational improvements, The quarter led to a gross margin improvement of 200 basis points to 44%. We continue to expect increases in our gross margin over the next couple of quarters as we make further enhancements in Vicon's business. Overall, operating income was positive for the second quarter in a row at $0.1 million compared to an operating loss of $1.5 million a year ago. Our quarterly performance is now reflecting our shift in focus to the Vicon and Advanced Industrial Services or AIS businesses. With the actions we have taken to drive business improvement and the increasing demand for security solutions, we expect to achieve a full year operating profit for fiscal year 2024. We also believe that there's room within our inventory and asset base to draw extra liquidity in order to continue to maintain a healthy cash position. As a reminder, we have now modified our financial presentation into three segments, Security, consisting of Vicon, Industrial Services, consisting of Advanced Industrial Services, and Semtrex Corporate. Year-over-year, improving revenues in our security segment were led by Vicon, with a 36% increase to $9 million, driven by strong demand from customers for its award-winning Roughneck cameras and Valeris video management software solutions. Vicon orders included a follow-up $1.1 million order from a current large border protection customer in Texas to expand its security technology system with new security solutions, a follow-on to its $1.5 million order earlier in the year. Increasing modernization of the current security infrastructure is accelerating the growth of the border security market, driven by the rise of geopolitical instabilities and an increase in border threat assessments. Another $0.8 million order for a new prison being built in the UK includes a full end-to-end system of Vicon's surveillance products, including hardware and software, and equipped with the latest smart technologies to better protect prisoners, staff, and the public. We see demand in the US and internationally from corrections facilities as a growth driver for us, as they are increasingly focusing on deploying the latest and greatest technologies. With Vicon on track to launch more products this year, as well as continued improvements to our core software platform, Valeris, we expect to drive further growth. Through the first nine months of our fiscal year, Vicon has delivered $25.9 million in revenue, which is already more revenue than we achieved of $23.6 million for the full year fiscal year 2022. We believe revenues for Vicon, based on our current demand, will exceed our earlier expectations of $28 million for fiscal year 2023, given the growing demand for our products and services. Additionally, we see further opportunity to grow our gross margin percent in fiscal year 24. Shifting to our industrial segment, revenue for our industrial services segment, AIS, increased 5% during the quarter, mainly due to increased demand for our services. Recently, we closed on a highly synergistic acquisition of Heise Mechanical, based in Columbia, Pennsylvania, which is focused on steel fabrication and contracting, primarily to the commercial and industrial wastewater treatment market, as well as other service industries. Hy-Z provides the water treatment industry with a variety of fabricated vessels and equipment, including ASME pressure vessels, heat exchangers, mixed tanks, reactors, and other specialized fabricated equipment. The acquisition brings over $11.6 million in immediately accretive annual revenue and approximately $775,000 in adjusted EBITDA, when averaged over the last four years. with its client list of commercial and industrial facilities, a seasoned team, and extensive manufacturing equipment. We expect the transaction to be accretive in the fourth quarter of fiscal year 2023. Looking ahead, we believe AIAS will continue to expand revenues and clearly exceed our original 3% target of $21.8 million for fiscal year 2023, driven by continued strength in the industrial services market, as well as one quarter of revenue with the acquisition consolidated. The gross profit margin for AIS improved to 36% for the quarter compared to 30% for the prior year quarter, driven by increased prices and lower subcontractor costs. The gross margin percent is expected to maintain or exceed approximately 34% for the fiscal year 2023 for AIS. I will now turn the call over to Paul Wyckoff, CFO, to discuss the financials. Paul?
spk04: Thank you, Sagar. Revenue for the three months ended June 30, 2023 and 2022 was $14.7 million and $12.1 million, respectively, an increase of 22%. Revenue for the nine months ended June 30, 2023 and 2022 was $42.8 million and $33.3 million, respectively, an increase of 29%. This increase is mainly due to the increased demand for the company's products and services. The security segment revenues for the three months ended June 30th, 2023 increased by 36% to 9 million. The security segment increase was due to an increased demand for the security technology products under the Vicon brand. The industrial services segment revenues for the quarter increased by 5% to $5.7 million, mainly due to increased demand for the segment's services. Gross profit for the third quarter of 2023 was $6.5 million, or 44% of revenues, as compared to gross profit of $5 million, or 42% of revenues, for the same period a year ago, mainly attributable to the increased demand for our products and services, along with increased prices and lower subcontractor costs. Total operating expenses for the three months ended June 30th, 2023 were $6.4 million compared to $6.6 million for the prior year's quarter. The decrease was due to a reduction in research and development expenses for the period. Operating income for the third quarter of 2023 was 0.1 million as compared to an operating loss of 1.5 million for the third quarter of 2022. The increase was primarily due to an increase in gross profit for the period. Net loss for the quarter ended June 30th, 2023 was 1.1 million as compared to a net loss of 0.7 million in 2022, an increase of 68%. Net loss increased in the third quarter as compared to the same period last year, primarily due to a decrease in other income. Cash and cash equivalents and restricted cash totaled $6.4 million at June 30, 2023, as compared to $11.4 million at September 30, 2022. Inventories increased to $8.7 million at June 30, 2023, from $8.5 million at September 30, 2022. I will now turn the call back to Sagar for a review of our 2023 outlook. Thank you, Paul. In summary, with approximately $6.4 million in cash,
spk02: our restructuring complete, year-over-year revenue growth of almost 30%, increasing margins, and two sequential quarters of positive operating income, we believe we are well positioned to drive profitable growth. Looking ahead, we are highly focused on Vicon's ability to disrupt the status quo of how the security industry traditionally operates with its upcoming next-generation version of state-of-the-art surveillance cameras and VMS software. Additionally, We are looking to build on AIS's growth, leveraging the resurgence of manufacturing demand in the U.S., and seeking out further acquisition opportunities. After achieving operating profit for the second and third fiscal quarters, we are optimistic we can achieve a full-year positive operating income in fiscal year 2024 while driving attractive top-line and bottom-line growth. We look forward to providing additional updates in the months to come as we accelerate our efforts to build long-term value for our shareholders. I thank you all for attending, and now I would like to open it up for questions. Operator?
spk05: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then 2.
spk01: At this time, we will pause momentarily to assemble our roster. Again, if you have a question, please press star then one. We have no questions.
spk05: This concludes our question and answer session. I would like to turn the call, the conference back over to Sagar Gawal for any closing remarks.
spk02: Thank you, operator. I would like to thank you. each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any questions today, please feel free to reach out to our IR firm and Z Group, who would be more than happy to assist. You can also email us at investors at semtrex.com. Thank you all.
spk01: Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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