Senstar Technologies Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the SEDNSTAR Technologies second quarter 2025 results conference call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. I would now like to hand the call over to Corbin Woodhull of Hayden IR. Corbin, would you like to begin?

Thank you, Paul, I would like to welcome everyone to the conference call and thanks 10 start technologies management for hosting today's call with us on the call today. Our Mr Fabian, who bear CEO of sensor technologies and miss Alicia Kelly, the CFO baby, and we'll summarize key financial and business highlights followed by Alicia, who will review sensors financial results for the 2nd quarter of 2025. we will then open the call for a question and answer session. I would like to remind participants that all financial figures discussed today are in U.S. dollars, and all comparisons are on a year-over-year basis, unless otherwise indicated. 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 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, 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 the company's website at www.senstar.com for the most directly comparable financial measures and related reconciliations. And with that, I would now hand the call over to Fabian. Fabian, please go ahead.

Thank you, Corbin. Thank you for joining us today to review Senstar Technologies' second quarter 2025 financial results. We delivered strong second quarter results marked by the successful execution of our growth strategy and targeted investments to drive sales across our key verticals and geographies. Revenue for our four core verticals increased by 27% in aggregate year over year, which led to total consolidated revenue growth of 16.2% and robust expansion in both gross and EBITDA margins. Now, moving on to a review of quarterly highlights. Revenue in the second quarter was driven by a well-balanced mix of products with notable vertical market strength from energy and corrections. These results reflect the sustained customer demand, and when combined with our cost optimizations and focus on selling high-value-added solutions, drove a material growth margin expansion to 66.1% in the second quarter, comfortably above our targets. We're continuing to invest in technological innovation to protect our competitive positioning and fuel growth, while diligently managing costs to deliver margin expansions and sustainable profitability. In the second quarter, operating expenses remain relatively stable as a percentage of revenue at 56% compared to 55% in the prior year quarter, despite an 18% increase in absolute terms. This operational leverage combined with strong double-digit growth in revenue and gross profit drove EBITDA to 1.1 million. EBITDA margin expanded by 161 basis points to 11.8%, Net income increased significantly compared to the same period last year. In terms of the core geographic market we served, sensor global diversification continues to strengthen, with EMEA, North America and LATAM delivering broad-based double-digit gains across our key verticals. In EMEA, the region is becoming a larger contributor to revenue and grew by 52% in the second quarter, while also gaining over 800 basis points in share of total sales. Our sustained investments in Europe over the previous years are coming to fruition, with the EMEA region now representing 35% of total revenue, up from 27% in the year-ago period. The main verticals driving this record in the region include energy, particularly oil and gas, along with solar farms and electrical generation. In addition, there has been solid customer adoption in higher set value airport and data center infrastructure. In North America, which remains our largest market as a percentage of sales, revenue increased by 29% in the second quarter, mainly due to continued momentum in the correction and utilities verticals. North America delivered solid growth in the quarter despite moderate sales performance in Canada declining slightly in the second quarter after a strong first quarter. In the second quarter of this year, the Asia-Pacific region faced a challenging year-over-year comparison against exceptionally strong growth of 135% in the prior year quarter, resulting in a 47 revenue decline versus the same quarter last year. The year-ago quarter included a large customer contract, which did not repeat this quarter. Historically, APAC has been among the fastest growing regions for CENSA and we're continuing to experience strength from data centers, utility and airport perimeter security solutions. In contrast, the LATAM region returned to growth in the second quarter with revenue increased by 26% compared to the year-ago period. We attribute this turnaround to the successful execution of our strategy aimed at delivering industry-leading solutions to international markets, where security modernization is becoming an increasing priority. Looking at revenue contribution per vertical, our four key verticals grew 27% in aggregate in the second quarter, driven primarily by strong performance, correction, and energy. We're continuing to identify material growth opportunities across renewable energy, data centers, and utilities, and Sensas is reinforcing its commitment to further penetrate those verticals and capture market share. In terms of product updates, technological innovation is the cornerstone of our strategy to strengthen our competitive positioning in the market. We're continuing to make meaningful progress with multi-sensor, an important validation by our customers. Senstar is focused on delivering advanced and disruptive security solutions tailored to our targeted vertical markets. We aim to enhance security and operational efficiency by combining cutting-edge sensors with intelligent information management software. This strategy enables Senstar to grow its market share within core sectors while expanding its scope by offering differentiated, high-value solutions that sustain our growth margins of 60% and above. In addition, Sensor is actively working to broaden its addressable market by targeting the protection of critical points within non-critical infrastructure, such as hospitals, educational institutions, and logistic facilities. Leveraging our unrivaled multi-sensor, we deliver unique performance by eliminating use and slum rate, optimizing total cost of ownerships, and significantly reducing installation and maintenance costs, unlocking opportunities in a much larger market segment. Turning to other strategic initiatives, as discussed on the prior Earnings Conference call, we're pleased with the execution of our business development team, following the addition of several key hires earlier in this year. The team is now fully ramped and gaining traction with their core focus on driving growth through new customer acquisition and broader penetration within our core verticals. Based on encouraging initial results, we plan to expand the team further to support the development of several large key accounts and accelerate market share gain across high potential sectors. In summary, our second quarter results demonstrate the resiliency of our business model, with continued momentum in both revenue growth and margin expansion. We remain focused on differentiating ourselves from the competition by investing in innovative security solutions for our international customer base. I want to express my gratitude to our employees for the strong execution of our strategy to grow our market share across key global verticals, to our valued customers for their continued partnerships, and to our shareholders