Senstar Technologies Corporation

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. I would now like to turn the conference over to your host, Kim Rogers of Hayden IR. Thank you. You may begin.

Thank you, Melissa. And welcome to our third quarter earnings conference call. With me today are Mr. Dror Sharon, CEO of Senstar Technologies, and Mr. Tomer Hay, CFO. 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. SendStar 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 the 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 document filed by the company with the Security and Exchange Commission. In addition, during the course of this 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 financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at www.senstarttechnologies.com for the most directly comparable financial measures and related reconciliations. And with that, I'd now like to hand the call over to Dror. Dror, please go ahead.

Thank you, Kim. Thank you for joining us today to review Sensta Technologies' third quarter financial results. Our third quarter revenue increased by 5% to $9.7 million compared to last year's third quarter. Our bookings were particularly strong in the quarter compared to last year. Despite longer sales cycles across the industry, Thank you. Now, Canadian and European businesses balancing contracts and war delays for government projects tied to federal funding from the US and the effect of prolonged lockdowns related to COVID, which presents similar challenges in the Asia-Pacific region. While it's frustrating to see projects postponed, I'm happy to say we are not seeing any orders canceled and we are optimistic about the opportunities that are in our pipeline. We have a strong backlog of revenue that we expect to deliver the majority of it over the next 12 months, and several larger projects that have advanced negotiations that we expect to close in the coming months. Let's dive into the regional performance details. The U.S. is down due to delays in federal budgets related to correctional facilities. Correction, the vertical it was delivering the most growth previously, has been the hardest hit by the federal government budget delays as the current administration redirects correction facilities standing away from infrastructure. These are contracts that have been awarded but not closed primarily due to an extended closing cycle that I referenced earlier, causing low revenue from those projects to shift into further quotas. The U.S. has been an active region for us in the energy sector. We recently closed on a new project to provide perimeter security for an important oil and gas reserve facility. We are in the final negotiations stage with a large U.S. oil and gas provider that anticipates closing shortly to become the main supplier of our goods to their facilities worldwide. In addition, we helped boost our U.S. sales. We are investing in marketing to other key verticals that we are focused on. APAC is another region that has been hurt by market conditions. The zero-COVID policy and related lockdowns in China have impacted the greater APAC region and been a headwind for since our year to date. On a positive note, we expand our business with a larger Asian airport that we announced in June 2021 with two large follow-on orders. The initial contract included an integrated perimeter security system and included a multi-layer intrusion detection system featuring fence-mounted and buried sensors and a software platform for security management integrated with the facility's existing cameras and security infrastructure. The APAC region is starting to open slowly and we are optimistic of a rebound in 2022. The EMEA region has positive news this quarter. starting with the closing of a large oil and gas project, which we are currently fulfilling. In addition, a large $6 million advance project for a customer in Europe that was awarded in 2019 is now moving forward, and fulfillment has begun after a long slowdown due to COVID. We expanded our European sales capabilities with the appointment of a new regional sales manager who is responsible for Spain, Portugal, and Italy. This executive has already established a great track record of developing market opportunities in North and South America, bringing strong field sales engineering and regional sales management experience to the position. Insta remains well positioned in Canada, our home market. This year, we have added a sales people to the Canadian region to maximize our home court advantage. The increased focus has delivered nice returns. Canada delivered solid performance again in Q3. We landed several large projects in critical infrastructure verticals, specifically for utility facilities. The correctional vertical has also contributed to our steady-fast growth in Canada year-to-date. On the marketing and brand development front, We participated in numerous trade shows and industry events in the third quarter in all of our regions. We reconnected with our existing customers at this event and focused on developing our pipeline. Higher and more engaged attendees compared to last year enabled us to identify new opportunities and meet with new prospective customers. The backlog remains solid at the end of Q3. While our backlog is not growing at this time, we are replenishing it at a steady rate with a booking that approximates the revenue recognized as working completed. Last year, we received subsidies from the Canadian Emergency Wage Subsidy Program of approximately $0.4 billion in the third quarter. This subsidy expired in the third quarter of 2021. This has impacted the year-over-year comparison in this quarter and the year-to-date result of the cost of goods sold and operating expenses. Regarding product introduction, Sensta continues its improvement to the Sensta Symfony Common Operation Platform with the release of version 8.4 and our new fiber solution is also entering into a test internally. We are getting positive feedback from customers on our fusion solution which links our PID devices with our software, and it's currently running at a few sites of their sites in beta versions. We plan to release two new products in the fourth quarter or the first quarter of next year. We ended the third quarter with cash and cash equivalent of 15.2 million. This compares to 26.4 million as of the end of 2021. The use of cash in the first nine months of 2022 was primarily for working capital purposes, specifically investment in inventories and increased accounts receivables, in addition to a significant reduction in other accounts payables. We also regularly invest in research and development, which has produced advanced solutions. As a result, As a result, we have developed a valuable competitive advantage with a comprehensive and innovative solution platform. Senstar solutions protect essential assets and facilities that are crucial to the global economy. There are macro trends that benefit Senstar in our key verticals, including energy and critical infrastructure, so there is an increased sensitivity to protecting facilities to keep them fully operational. Geographical unrest has increased the demand for border security solutions. Likewise, increasing volumes of global shipping and fulfillment mean that an essential objective for logistics facilities is consistent operational efficiency. Senstar delivers solutions for each of those critical objectives. As a result, our products are increasingly deployed in critical infrastructures, logistics, correctional, and energy sites worldwide. In summary, Senstar has a solid balance sheet with no debt. We prioritize our cash to create value with focus on growth. We remain committed to delivering product innovations, strengthening our brand, and expanding our global footprint to ultimately increase shareholders' value. Now I will pass the call to our CFO, Mr. Tomer Haim. Tomer, please go ahead and view the financial results.