Senstar Technologies Corporation

Ladies and gentlemen, thank you for standing by. Your conference will begin in approximately two to three minutes. Again, please continue to hold. Your conference will begin shortly. Thank you. Thank you. Thank you. © transcript Emily Beynon Greetings, and welcome to the CENSTAR Technologies third quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow a 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, Brett Moss of Hayden IR. Thank you, sir. You may begin.

Thank you. Welcome, and thank you for joining us today. I want to thank the management of Sunstar Technologies for hosting today's call. With us on the call today from the company are Fabian Halbert, Interim CEO, 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 and other forward-looking statements regarding future events or the company's future performance. These statements are only projections, and Senstar cannot guarantee that they will, in fact, occur. Senstar 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 Securities 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 sendstarttechnologies.com for the most directly comparable financial measures and related reconciliations. With that, I will now hand the call over to SendStart Technologies CEO, Fabian Haber. Fabian, please go ahead.

Thank you, Brad. Thank you for joining the call today to review our third quarter financial results. Starting with an overview of the result this quarter, we booked revenue of $9 million, underscoring our sustained strength in Europe and LATAM, which have been areas of investment over the past few years. This growth was tempered by the absence of one-off projects in Canada and the U.S., completed in the third quarter of last year but did not repeat this year. Additionally, our revenue declined in the APAC region, primarily due to challenging economic conditions in China. Our gross profit was affected by the delivery of a lower-margin legacy project. We're working to have our growth margin returning to more normalized levels in the coming quarters. Despite the deepened revenue and growth margin in the quarter, we maintain positive operating income and positive EBITDA. Switching to our performance per region, we continue to deliver strong growth in Europe, where revenue increased by over 20% year-over-year for the second quarter in a row. Thanks to our significant investments in countries like Germany, France, Spain, Eastern Europe, and the Netherlands, we're harvesting the fruits of that focus and taking market share. We believe we can continue to gain market share in Europe and anticipate that this large and productive region will be a steady growth engine for us over the next few years. As a person of the German revenue, the U.S. is our largest markets. This year, we have experienced a recovery in correction business, our largest vertical in the US market. Federal budget restriction and relocation impacted this segment in the prior year. Year to date, revenue in the US is at 8%. To further expand our market position, we have added a senior executive in the third quarter to continue rebuilding in this critical region and accelerate our market share gains in our verticals. The LATAM region was also a standout performer regionally, delivering 10% growth year-over-year. Year-to-date, this region has grown almost 20%. Looking at our home markets, Canada stands at Raymond Wells' position. Last year, we had a one-off project that closed in the third quarter, which did not reoccur this year with the same magnitude. Lastly, APAC has been a challenging market this year, primarily due to the weak Chinese economy. The decline in this market year-to-date has been a headwind for our top-line growth. Now, let me turn to something I'm very excited about. We recently introduced our latest breakthrough, the sensor-motor-sensor intrusion detection system, a disruptive AI-powered sensor unit that seamlessly integrates five intrusion detection capabilities into a single powerful device. The multi-sensor offers unparalleled situational awareness, effectively neutralizing false alarms, and, as a versatile standalone solution, expands its potential application beyond the conventional perimeter intrusion detection use cases. The remarkable feature of our innovation lies in its ability to streamline multiple technologies, into a single intelligent unit, simplifying intrusion detection installation and significantly enhancing overall performance. The device is worth the occurrence of false alarms next to zero. Additionally, this innovative solution reduces the need of numerous sensors and camera installations. While this provides substantial advantages for our customers in reducing system complexity, It also benefits sensors considerably. It will also decrease sensor field costs related to installation, management, and support. The motor sensor, by encapsulating all these capabilities within a single unit, will enable us to decrease our product portfolio range and realize improved operating scale. Furthermore, this product extends our strategy vision beyond our current pitch market focus. With Emotisensor, we aim to penetrate broad markets by offering the product as standalone units. These markets may possess critical security vulnerabilities, but do not constitute critical infrastructure. Our investment in this project is already paying off since Emotisensor received the Platinum Award for the Best Intrusion Detection and Prevention Solution from American Security Today's Annual Astor's Homeland Security 2023 Awards. I'm excited to officially announce that we will unveil the multisensory ISTS West in April 24, followed by a full scale of launch later in the year. In summary, our solutions protect essential assets and facilities crucial to the global economy. Each of our key verticals are benefiting from macro trends. As a result, our products are increasingly deployed in critical infrastructure, logistics, correction, and energy side worldwide. Sensar remains committed to delivering product innovation, improving regional performance, and driving growth in key verticals. Now, I will pass the call to our CFO, Tomer Haim.