Senstar Technologies Corporation

Hello, and welcome to the SendStar Technologies second quarter 2023 financial results conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed in the question queue. 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.

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. Tomer Hay, 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 CENSTAR cannot guarantee that they will in fact occur. CENSTAR 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, 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 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.sunstartechnologies.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, Fabien Hobert. Fabien, please go ahead.

Thank you, Kim. Good morning, everyone, and thank you for joining today's hearing call. I'm delighted to provide an update on the company's performance. Starting with the second quarter of 2023, Revenue was largely in line with our expectations, showing accelerated growth in two key geographies. Q2 2023 revenue was $8.4 million, a 7% decline from the same period last year. Year-to-date revenue for 2023 totaled $14.9 million, compared to $15.9 million, reflecting a decrease of 6%. Our gross margin for Q2 stood at 60.7%, of 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 second quarter despite lower revenue helped by lower operating expenses. Notably, robust growth emerged from focus on the MEA and U.S. region in Q2 counterbalanced by the absence of a 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' follow-on orders have been slower than expected, causing some variability in APAC sales. 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 2020, up from about 63% from the same period last year. Diving into the numbers a little bit deeper, EMEA showed an increase of 30% versus Q2 last year. Year-to-date, the region grew by 2% versus the first half of 2022. The outstanding growth in the second quarter was primarily due to a few military projects across Europe, and a direct result of our past year's investments in Daesh, Iberia, Eastern Europe, France, and the Netherlands. Danstar 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 for steady growth. The U.S. displayed notable growth of 8% in Q2 and an impressive 22% year-to-date, driven by correction business expansion and large demand in the targeted verticals through the whole region. Sunstar is taking steps to reinforce its presence in the correction industry and to strengthen the U.S. sales team to further boost its presence in our largest territories and improve our market shares in utilities, energy, logistics, and military projects in the region. The U.S. remains a major market where Centaur expects long-term growth as your high technology offering matches the demands in the whole region. The APAC 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 closely at the 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 in the four key verticals. Collectively, our four key verticals delivered a 22% increase in billings year over year, and represented about 60% of total billings. CENTA has aligned its resource to focus on the energy, utilities, correction, and logistics projects. leveraging our advanced solution and brand recognition. These markets require technologically advanced solutions and, as a result, are a good fit for Sensar sensors and information management software. Let me comment on Testar's industry-leading product portfolio. We manufacture, customize, and service our offering, delivering multi-layered security solutions. Sensar products synergized for comprehensive facility-level solutions, enhanced by AI and cutting-edge data visualization and video analytics. To this extent, Senstar will communicate shortly on introducing to the market this new generation of sensors technology. This unique and extremely innovative solution is taking a step forward in solving challenges in intrusion detection. Senstar team remains committed to expanding operational capacity growing market share in key verticals, enriching our product line, and boosting sales to existing and future customers. In conclusion, we remain confident in our strategy direction and the steps we're taking to expand our market share and drive growth. By focusing on high-value vertical markets, offering comprehensive vertical solutions, and investing in research and development, we're positioning ourselves for success. We appreciate your ongoing support. Now, I will pass the call to our CFO, Tomer Haim, to review the financial results. Tomer, please go ahead.

Thank you, Fabian. Our reported revenues for the second quarter of 2023 was $8.4 million, a decrease of 7.5% compared with reported revenues of $9.1 million in the second quarter of 2022. As Fabian mentioned, the decline was mainly due to a one-time project in the APAC region in Q2 2022. The geographic breakdown as a percentage of revenues for the second quarter of 2023 compared to the year-ago quarter is as follows. North America, including LATAM, 50% compared to 43% Europe 40% compared to 28%, and APAC 10% compared to 29%. Second quarter reported gross margin was 60.7% of revenues compared to 60% last year. Our reported operating expenses were $5 million, a decrease of 6.1% from the prior year second quarter operating expenses of $5.4 million, 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. Our reported operating income for the second quarter was $83,000 compared to $107,000 in the year-ago period. Financial expenses was $74,000 in the second quarter this year, compared with $109,000 in the second quarter last year. Net loss attributed to Senstar Technologies shareholders in the quarter was $211,000, or one cent per share, compared to net income of $164,000, or one cent per share, in the second quarter of last year. The company's reported EBITDA for the second quarter of 2023 was $290,000 compared to $460,000 in the second quarter of last year. Cash and cash equivalents and short-term banks and restricted deposits were $11.9 million or 51 cents per share as of June 30, 2023. That concludes my remarks. Operator We'd like to open the call to questions now.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. One moment, please, while we poll for questions.

We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.

So, on behalf of the management of SenseDollar, 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.

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.