Senstar Technologies Corporation

Greetings and welcome to the CentStar Technologies fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Kim Rogers. With Hayden Iyer, you may begin.

Thank you, Stacey. Welcome to today's call. I'd like to welcome you all to the conference call and thank Sunstar Technologies Management for hosting today's call. With us on the call today are Mr. Dror Sharan, CEO of Sunstar Technologies, and Mr. Tomer Hay, CFO. Dror will summarize key financial and business highlights, followed by Tomer, who will review SendStar's financial results for the full year and the fourth quarter. We will then open the call for question and answer session. 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 SendStar cannot guarantee that they will, in fact, occur. Then Star does not assume any obligation to update that information. 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 our security systems industry, the unanticipated and unknown effect of the coronavirus, including on our operations and our clients, as well as other risks identified in the documents filed by the company with the Security and Exchange Commission. In addition, during the course of the 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 financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at www.sensestartechnologies.com for the most directly comparable financial measures and related reconciliations. And with that, I'll now hand the call over to Dror. Dror, please go ahead.

Thank you, Kim. Thank you for joining us today to review Senstar Technologies' fourth quarter and full year 2021 financial results. As a reminder, following the divestiture of Magad's security system in 2021, our year-to-date financial statements reflect the Magal contribution in 2021 as net income from this continual operation. Senstar sales to the former integrated solution division in the second half of 2021 are included in our revenue as a third-party customer. 2021 was an important year for our company. On June 30th, we have completed the divestiture of Magal integration solution, receiving $35 million in cash at the closing and rebranding the sensor technologies. In September, we returned $40 million in cash to our shareholders in cash distribution. With the transition behind us, we are now 100% focused on our product combined piece, VMS, asset control, and analytics, creating an unfilled, unified, and unique solution for our customers in our four key verticals. As a standalone firm, And as a standalone company, we are leveraging our reputation as a technology leader to capture a meaningful share of new market opportunities. For 2021, Senstar grew revenue by 5% to $34.9 million and delivered gross profit of $22 million for an annual gross margin of 63%. Our results in 2021 were impacted by They are a venture of Magal division, which consumed a significant portion of management time and by the COVID pandemic. We estimate that our revenue in 2021 was reduced by around 10% as a result of the impact of COVID globally, which affected the closing of deals, the effectiveness of workplace and limited client interactions. Although COVID impacted our top line, we managed to keep our operational expenses low and delivered an EBITDA of 20%, for sensor operational entities. We ended the year with $26.4 million in cash and cash equivalent after the $40 million cash distribution to shareholders that I mentioned earlier and $25 million in cash distribution the year before. In 2021, we launched several new products, including our sensor fusion engine and our OEM thermal cameras. These new solutions, together with the ongoing products offering, run on the latest version of our Symfony Common Operating Platform. In December, our Symfony platform, with our Sensor Fusion Engine, won the Platinum Award from Astos, Homeland Security and the Video Surveillance Solutions segment. The platform was also named the Top 30 Security Technology Innovation by Security Sales and Integration, a leading industry publication. All this to say that Sensor is well positioned for expanding market share and returning to growth. We have industry-leading products and solutions, and the global need for our products and solutions continue to grow. We have streamlined our business, focusing on key verticals with a sales pipeline increasing in all principal geographics. There are a few factors affecting our business in the current global environment. We have several projects that have been delayed due to COVID and the supply chain disruption of our customers. Supply chain remains stressed due to several factors, most recently related to the lockdown in China. Shortages of material and labor are increasing costs for companies in all sectors, including ours. We monitor all those elements as we plan the remainder of 2022. Luckily, through very tight control, we don't anticipate a major impact on our 2022 revenue due to lack of material. However, development in this field may change rapidly. In the fourth quarter, we felt the effect of a few of those business hurdles. Celsa revenue declined by 6% year-over-year for the fourth quarter. The decline in our fourth quarter revenue was primarily due to timing. Two large customers' projects were postponed into 2022. I'm happy to say that one of those projects closed in the first quarter of 2022, and we will provide you with more details shortly. The second project for a large energy company in North America is in the advanced stages of negotiation. It is likely to be closed in the first half of 2022. Importantly, looking into our growing pipeline, demand for our products remains robust and new businesses progressing. Like so many industries, businesses are taking slightly longer to close. We are navigating the mismatch between supply and demand. Census growth Profit in the fourth quarter was $5.2 million, and gross profit margin was 58%, down from last year of 69%. This quarter, several factors impacted our gross margin, including the mix of product sold, higher material costs, component availability, and labor costs. On our last earning call, I stated that we expected supply chain challenges to continue in the fourth quarter of 2021, and potentially into the first half of 2022. We have secured the necessary components to manufacture products for customers' orders, but things are subjected to change in short notice. We have successfully raised our prices with no negative backlash from our customers and are trying to mitigate further cost increases to keep gross margins above the 60% in 2022. In recent months, many business activities have returned to pre-COVID levels. We are encouraged by the interest level in our solutions at trade shows and customer meetings. The increase in our marketing activity has led to pipeline growth in our key verticals, and we have several large potential opportunities. In energy, we are engaging with global energy companies on several opportunities across multiple continents that will help to protect facilities, reserves, pipelines, and oil fields. I referenced one project earlier, and we have two other large projects that we are negotiating. One project is a blanket agreement with a large multinational energy company, and the other is for an African oil field facility to secure its oil pipelines and pumps. In logistics, we are in advanced discussion with the Global Logistics and Fulfillment Network to provide a solution that will secure communication fiber within its facilities, and enable the testing of fiber optics with our fiber patrol solution. Critical infrastructure and ports are another vertical with multiple opportunities in Europe, Africa, and APAC. We remain cautiously optimistic that COVID variants and geopolitical tensions will not escalate further to disrupt the ongoing recovery of global business. Our platform is now a full SMS. of security management system that offers AI analytics, access control, video integration, and inputs from our PIDs products. The enhanced data intelligence functionality of the Symfony platform combines video surveillance with analytics, security sensors, and data from customer security, manufacturers, or logistics systems. This superior functionality is achieved by linking inputs from our PIDs products and any other sensor into a solution that enrich the intelligence gathering for end users. The result is an improved surveillance system that provides valuable operational intelligence positioning SenStar as a solution provider that opens new customers' targets and can bring bigger contracts with recurring revenue streams. The SenStar team has continuously enhanced our offering to improve the value we bring to the thousands of SenStar customers worldwide. The new product and software launched in 2021 and increased awareness created by winning industry awards and prizes for our innovation in perimeter security technology are working together to improve our 2022 CELS pipeline in Europe, North America, and APAC. We anticipate releasing a new short-range fiber patrol solution later this year. Our current outlook for the year indicates revenue and pipeline growth compared to 2021. With new, highly innovative products, we are leveraging Senstar's strong industry standing to provide future growth. In addition, we are cross-selling and up-selling products and solutions to our existing customer base in our four key verticals. Another factor of supporting our pipeline growth is our restructured sales organization with six senior sales directors, SSDs, closer to the customers with clear performance targets in each of the three key regions. The result is a smaller team working more closely with clients, all under the direct supervision of a SSD, a senior sales director, in the region. Each one of those teams has its own quota and goals. This allows the streamlined customer's interaction, which should help us convert pipeline prospects into bookings. In summary, Senstar has earned an industry-leading reputation in PIDs and now as an established provider of broad solution with the ability to combine hardware and software into one platform and deliver innovative technology and software solutions that are gaining industry attention. Global trends are increasing the need for sophisticated security, large physical assets like oil fields, ports and manufacturing and distribution facilities. We continue to improve our offering and refine our business practice to build a better company worldwide. Senstar has a strong balance sheet with no debt and high cash balance. All those factors position the company for continuous success and growth. In closing, I want to thank all of our employees worldwide for their ongoing commitment to our strategy to deliver excellence in products and services, improve our profitability, and ultimately deliver shareholders' value. And now I will pass the call to our CFO, Tomer Hai. Tomer, please go ahead and review the financial results.