Q4 2021 Senstar Technologies Ltd Earnings Call
Greetings and welcome to the Sun Star 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 IR you may begin.
Thank you Stacy welcome to today's call.
I'd like to welcome you all to the conference call and Thanks, Joan Star Technologies management for hosting today's call with us on the call today are Mr. Dror, Sharon CEO of Sunstar technologies and Mr. Tomer Hay CFO Dror will summarize key financial and business highly.
I, followed by Tomer, who will review some stars 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 sunstar cannot guarantee that they will in fact occur.
<unk> 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 Corona virus.
Including on our operations and our clients 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 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 occur.
Just with the Reg G requirements. You can also referred to our web site at Www Sunstar technologies Dot com for the most directly comparable financial measures and related reconciliation.
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 sensor technologies.
<unk> 2021 financial results.
As a reminder, following the eventual mcgough secured assisting in 2021 Oh, we used to date financial statements reflect then my God contribution in 2020 , one as net income.
From discontinued operations.
Sales to the former integrated solutions Division second half of fiscal 'twenty one.
You know with the new third party customer.
2021 wasn't important view for our company one gig Celsius.
We have completed the eventual if my God integration citizen.
Assuming $35 million cash.
At closing and the new blending the sensor technologies.
In September well, it down $14 million in cash to shareholders in cash distributions.
The transition behind US we all know how does the same focus on our board. The combined these vms component analysis racing unseen unified and unique solution for cost for our customers you know full key verticals.
As a stand alone.
Okay.
Yeah.
And as a Standalone company really leveraging our reputation as a technology leader to capture meaningful share of new market opportunities.
For 2021 since Doug all revenue by 5% of 35, $34 $9 million and delivered gross profit of $22 million with an annual gross margin of 63%.
Our results in 2021 were impacted by the eventual mogul division, which consume 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. That's that's given us a little place and give me some clients into good interactions.
Although COVID-19 impacted our topline we managed to keep our personal expenses low and delivered <unk>, 20% for since the operational entities.
We ended the year with $26 $4 million in cash and cash equivalents. After the 40 million cash distribution to shareholders that I mentioned earlier and $25 million in cash distributions the year before.
In 2021, we launched several new products, including <unk> Central fusion engine and the OEM thermal cameras.
These new solutions together with the ongoing products hopefully one of the latest version of full Symphony contemplating platform.
In December Oh Symphony platform with our sensor fusion and Jim on the Platinum Award I suppose homeland.
Acuity in the video surveillance solution segment.
The platform was also named the top surface security technology innovation based security sales and integration a leading industry publication.
All this to say that since that is well positioned for expanding market share and they're turning to go.
We have an industry, leading products and solutions and the global need for products and solutions continue to grow.
We have streamlined our business focusing on key verticals with the sales pipeline increasing in all principal geographics.
There are a few factors.
Affecting all business in the current global environment, we have.
Several projects that have been delayed due to COVID-19 and the supply chain disruption of all customer.
Supply chain and men's dress useful several factors, mostly something related to the lockdown in China.
So folks are the shortages of material and labor, while increasing costs for companies in all sectors, including ours, we monitor all those elements as we plan to the remainder of 'twenty to 'twenty two Luckily two very tight control and we don't anticipate a major impact on our 2022 revenue due to local material.
Developments in this field to make change our business.
In the fourth quarter, we felt the effect of an awesome.
A few of those headwinds.
The revenue decline by 6% year over year for the fourth quarter.
Declining Oh food in our fourth quarter revenue was primarily due to timing tool allows customers projects are postponed into 2022.
I'm happy to say that one of those project closed in the first quarter of 2022 and then we provide you with more details shortly.
The second project for a large energy energy company in North America is in the advanced stages of negotiation that it is likely to be closed in the first half of fiscal 'twenty two.
Importantly, looking at ongoing pipeline demand for our products remains robust and your business is progressing well.
Like so many industries businesses, taking slightly longer to close.
Navigating the mismatch between supply and demand.
Since those growth gross profit in the first quarter was $5 $2 million in gross profit margin was 58% down from last year of 69%.
This quarter several factors impacted the gross margin, including like including the mix of products sold higher material cost component components availability and labor cost.
Last earnings call I stated I stated that we expected supply chain challenges to continue in the fourth quarter was going to be 21.
Potentially into the first half of 2022.
We have secured the necessary components to manufacture products for customers orders, but things are subject to subjected to changes change in shorter notice.
That's really raised our prices with no negative backlash from all customers and not trying to mitigate the cost increases to keep gross margins above 60% in 2022.
In recent months many business activities have returned to pre COVID-19 levels. We are encouraged by the interest in our solutions.
Jos and customers' meetings.
Interest in our marketing activity has led to pipeline growth in all key both because and we have several large potential opportunities.
In energy, we are engaging with global energy companies, a seven or eight.
It is across multiple continents. This will help to protect facilities.
Reserves pipelines in the oilfields.
That's what I, that's one projects earlier and earlier.
And we have two other large projects that we are negotiating one project is a blanket agreements with the large multinational energy company and the other is for an African oilfield facilities to secure its oil pipelines and the 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 in and enable the test single fiber optics with our fiber patrol solution.
Critical infrastructural pools or another vertical with multiple opportunities in Europe Africa in April .
We remain cautiously optimistic that the coffee Devonian until geopolitical tensions will not escalate.
That's great for us to disrupt the ongoing recovery of global business.
Our platform is now through SMS or security management system that offers AI analytics access control video integration of inputs from a peaceful.
The enhanced data intelligence functionality of the Symphony platform combines video surveillance with analytics and security sensors and data from customer security Monocultures or logistics.
This superior functionality that she was by linking inputs from our pizza product and any other sensor windows solution that then the reach the intelligence gathering for end users.
The result is an improved surveillance system that provides valuable policeman intelligence.
<unk> as a solution provider that opens new customer targets and can bring bigger contract with recurring revenue streams.
The central theme.
Contingency continuously enhance the offering is to improve the value we bring to the thousands since the customers worldwide.
The new product launch in 2021, an increase.
And the and increase the awareness created by our winning industry Awards and prizes for Oh innovation three met the security technology are working together to improve about 2022 since the pipeline in Europe North America in April we anticipate releasing a new short range fiber patrol solution later this year.
Our current outlook for the year indicates revenue is broken glass.
Compared to 'twenty to 'twenty one.
With new highly innovative products leveraging <unk>.
First our strong industry spendings to provide future growth ambition, we are cross selling and upselling products a solution to all existing customers base in all key verticals.
Another factor supporting our Butler and go see those restructured sales organization with 16 Youll sell direct those ssds.
Closer to the customers with clear performance targets in each of the two.
Three key regions the results.
The result, and this is a smaller team working more closely with clients all under the direct supervision of the SSD is email says the lakeville individually each one of those themes as its own quota and goals.
This allows the streamline customer's interaction with <unk>, which should help us for the pipeline.
Both sets into a into bookings.
Yes.
In summary center sensitized, and an industry, leading reputation peds and I wasn't as an established provider offload solution with the ability to combine hardware and software into one platform and deliver innovative technology and software solutions.
Bringing this all gaming industry attention.
Global trends and increasing the need for sophisticated security large physicals.
It's like all oilfield oil fields, both in manufacturing and distribution facilities will continue to improve our offering and refine our business, but it is to build a better company.
Worldwide system has a strong balance sheet with no debt.
And high cash bonds all of those factors. Please will position the company for continued success and growth.
Yeah.
In closing I want to thank all of our employees worldwide for the ongoing commitment to our strategy is to deliver excellent excellence in product and services improve our profitability and ultimately ultimately delivering shareholder value.
Now I will pass the call to our CFO Thomas Hi, Thomas. Please go ahead and review the financial results.
Thank you too.
Our reported revenues for the fourth quarter of 2021 was $9 million.
Chris was six 4% compared with reported revenues.
$9 6 million in the fourth quarter of 2020.
As mentioned Baidu the decline was primarily due to the timing of customer projects.
Delayed beyond year end, one of which closed in the first quarter of 2022.
As well as over the overall market conditions.
<unk> to be impacted by supply chain challenges.
The geography breakdown.
Central to have revenues for the fourth quarter of 2021 compared to the year ago quarter is as follows.
North America, 41% versus 52%, Europe , 25% versus 28% APAC, 24% versus 13% Latin America, 5% versus 6%.
Other was 5% versus 1%.
Fourth quarter reported gross margin was 58, 1% of revenues versus 68, 6% last year.
The decrease in gross margin was primarily due to a shift in the mix of products sold during the quarter and macro level business conditions related to higher material cost component availability and labor cost.
Our reported operating expenses were $6 five.
Million Daus, an increase of 21, 5% from the prior year fourth quarter operating expenses.
$5 3 million.
Year over year increase in ARPA.
Operating expenses did you is due primarily to live.
The vessel will government COVID-19 subsidies receiving in 2021.
Yep, Good tour actively as well as increased marketing and selling expenses related to travel trade shows and other customer engagements.
Our reported operating losses for the fourth quarter was $1 2 million.
Compared to operating income of $5 3 million.
In the year ago period.
Financial expenses were zero point $4 million.
Compared to $1 2 million in the fourth quarter of last year.
This is a non cash accounting effect regulatory reports.
Due to adjustments.
Sure.
The elevation of our monetary assets and liabilities denominated in currencies other than the functional currency of the operational entities in the group.
In the coding with a U S GAAP.
Our reported loss from continuing operation was $2 2 million in the fourth quarter 2021, compared to a loss from continuing operation was $1 2 million do you go quarter.
The company reported EBITDA from continuing operation.
For the fourth quarter was negative zero point $7 million.
Versus positive EBITDA from continuing operation of $1 6 million in the fourth quarter of last year.
Net loss attributed to central technologies shareholders in the fourth quarter was <unk> 2 million Boe.
Oh 14 cents per share versus a net loss of.
0.8 million or five cents per share.
In the fourth quarter of last year.
Our reported net loss includes a net loss of zero point 90 million from discontinued operation versus net income from discontinued operation of zero point $7 million.
The same period last year.
Added to same store operational contribution is the public platform expenses and amortization of intangible assets from historical acquisitions.
Corporate expenses and amortization expenses for the fourth quarter were $1 4 million versus $1 3 million.
The fourth quarter year before.
Revenues for the year end December 31st 2021 was $34 $90 million.
<unk> with revenues of $33 4 million.
In the fourth quarter.
Why are you.
The year over year increase of four 7% relates to some recovery in our business, which was impacted by COVID-19 pandemic.
The geography breakdown as a percentage of revenues for 2021 compared to 2020 is as follows.
North America, 46% versus 53% Europe , 26% versus 27%.
APAC, 23% versus 15% Latin America, 4% in both periods and others is 1% in both periods.
Full year gross profit was $22 million.
Representing gross margin of 63% versus $22 1 million or gross margin of 66, 3% last year.
The lower gross margin was primarily due to our revenue mix and some increases in their material costs.
Our 2021 operating expenses was $29 million, an increase of nine 7% compared to $19 1 million.
Last year.
Operating income from continuing operation was $1 1 million compared with $3 1 million in the 2020.
The decrease in operating income was due to lower gross margin contribution and higher operating expenses.
Net income attributable to same store technology shareholders for 2021 was $6 4 million or 28 cents per share versus.
Versus 0.4 million.
Well, 1% per share in 2020.
The reported net income in 2021 includes net income $8 6 million from discontinued operation versus $8 4 million in the same period last year.
In 2021, our EBITDA.
$2 6 million tourists recruit representing an EBITDA margin of seven 4%.
Compared with $4 3 million.
Representing an EBITDA margin of 12, 8% in 2020.
The Gulfport expenses and amortization expenses for the public logical were $4 4 million.
Versus $4 million.
In the same period the year before.
Cash and cash equivalent as of December 31st 2021 were $26 $4 million or $1 13 per share.
That concludes my remarks, operator, we would like to open the call to question.
Thank you we will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
Yeah.
First question comes from Ken Liddy with Oppenheimer.
Good afternoon.
On previous calls we've talked about finding a merger partner.
And that you had some delays due to the Covid pandemic.
Could you give us an update on.
Your status with acquisitions.
Currently we have a we have a few on the pipeline, but nothing is in there.
Okay.
Let's say mid stage as we can.
So as we discussed we don't have anything in front of us which isn't and.
The advanced situations.
Is that a status change.
It seems to us that.
You had some deals that you were close to closing.
Can you repeat please Kevin and engineering.
Oh I'm sorry.
Is that a status change it seemed like you were close to closing something.
Based on your.
Previous calls yeah, you're right we didn't set within succeeded in acquiring the opportunities that we had.
Someone else or the.
Much higher number than we did.
And are there still some targets that you have that.
Absolutely.
Could get closed this year.
Ah, we're looking but nothing is mature enough that we can discuss it now.
Sure.
Well no we don't have nothing in front of us in the mature mature stage now.
Understood.
And with regards to your warehouse.
Offering.
For.
Warehouse distributors.
Throughout the world.
Is there any type of update on.
Larger projects there.
On the logistics side of the business.
Exactly yes.
Yeah as I mentioned in my in the script.
And we have a few opportunities some of them are very are in progress.
This stage securing again, we are securing our warehouses and logistics centers worldwide.
Worldwide and this is a vertical that is going very nicely.
I understand your backlog isn't going to be quite what it was when you were mccall.
But how is the backlog comparing.
Or pipeline.
Our borders comparing this year compared to last years third time last quarter at the same time.
Well, it's a pretty stable backlog.
No compared to my God I'm, a gun was that project.
The company.
Project Division and do you have the backlog for E.
Sometimes more.
So the tone at all in between.
Getting appeal until we do fulfillment can vary between a and we extend days up two to three months. So backlog is not a problem at the two important now more important is the pipeline the pipeline is very strong data.
Where do we see it.
And hopefully we will be able to grow it and transfer it to a tour.
So we'll see.
And as far as containing costs.
Is there anything I can do besides a grow revenue too.
Offset some of the cost increases.
I understand you're raising prices are but.
Ah you're confidence that.
You'll be able to have returned to a positive EBITDA in coming quarters.
Ah.
Again for the operation.
South of the company Sandstorm itself.
That'd be does very nicely as I mentioned was around 20%.
Gross margins are above 60.
And we are targeting to keep it above 60% and again as I said, we don't see a major hit due to a material shortage.
Because we are managing this very tight with all our suppliers and subcontractors.
It looks like again, nothing nothing is a statement today, but it looks like we can support our 2022.
Sounds good.
<unk>.
As we see it today.
Okay. Thanks for taking my calls.
Thank you.
Once again, if you would like to ask a question. Please press star one on your telephone keypad for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Yeah.
Okay.
There are no further questions I would like to turn the floor over to Dror Sharon for closing remarks.
Thank you on behalf of the management of sense, though we'd like to thank you for your continued interest and long term support of our business.
Look forward to updating you next quarter if a good.
Good day and keep safe. Thank you bye bye.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Okay.
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