Senstar Technologies Ltd. Q4 2022 Earnings Call
Speaker 1: I to.
Speaker 2: Greetings and welcome to Censtar Technologies fourth quarter and year end 2022 results conference.......
Speaker 2: At this time, all participants are on the listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-0 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.
Speaker 2: Thank you, you may begin.
Speaker 3: Thank you, Robert.
Speaker 3: I would like to welcome all of you to the conference call and thank Senstar Technologies Management for hosting today's call. With us on the call today are Mr. Drora Sharan, CEO of Senstar Technologies, Mr. Fabian Robert, Managing Director of Senstar and interim CEO of Senstar Technologies,
Speaker 3: and Mr. Tomer Hay, CFO . Dror will summarize the key financial and business highlights followed by Tomer who will review Senstar's financial results in detail for the full year and the fourth quarter. We will then open the call for question and answer session.
Speaker 3: 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.
Speaker 3: CENSTAR does not assume any obligation to update that information.
Speaker 3: 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.
Speaker 3: 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, the recording of this recording is not being recorded.
Speaker 3: 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.censtartechnologies.com for the most directly comparable financial measures and related reconciliations. And with that, I'll stop there.
Speaker 3: I would now hand the call over to drawer. Please go ahead.
Speaker 3: the call over to Dror. Dror, please go ahead. Thank you, Kim.
Speaker 4: Thank you for joining us today to review Sensa Technologies, Court, Water and School Year 2022 financial results. As announced in our first releases earlier this year, I'm stepping down as the CEO and today we announce that the board of directors has appointed...
Speaker 4: Mr Fabian Hubert as interim CEO .
Speaker 4: Sabian is a deep understanding of our operations and our corporate strategy. He was appointed as a managing director of Synstar more than three years ago, and he was the architect behind the changes to our strategy during the COVID-19 pandemic.
Speaker 4: Shabian just joined the company more than five years ago as Vice President of Sales for our EMEA region. In that role, he streamlined the sales and support organizations and delivered significant growth and revenues in the region.
Speaker 4: I'm confident that Fabian will serve the company in the best way possible.
Speaker 4: Kevin joined me in that call and will resume responsibility as of tomorrow, April 21, 2020.
Speaker 4: Turning to our results for the fourth quarter in 2022, our strategic decision to divest Magal integration solutions for $35 million in cash in 2021 enabled us to concentrate on our core strengths and invest in areas with the greatest potential of growth.
Speaker 4: We delivered significant returns for our shareholders in 2022. We achieved an increase in operating income to $1.5 billion for the full year of 2022 compared to $1.1 million in 2021, resulting in a 13% rise in EBITDA to $2.9 billion.
Speaker 4: significant returns for our shareholders in 2022. We achieved an increase in operating income to 1.5 billion for the full year of 2022 compared to 1.1 million in 2021 resulting in a 13% rise in EBITDA to 2.9 billion dollars.
Speaker 4: While supply chain headwinds were less problematic compared to 2021, we still faced extended lead times and related price increases. We successfully passed most of the price increases on to our customers, which allowed us to maintain a strong gross margin of over 60% in 2022.
Speaker 4: We finished 2022 on a high note with fourth quarter revenue growth of 10% and maintained a strong stable growth margin. Our continued diligent management of expenses resulted in an increase of 37% in operating income.
Speaker 4: and a 13.2% increase in EBITDA Eurobarrel.
Speaker 4: We reduced our full year operating expense by more than 4% year over year. Sensei technology exited the year with a strong backlog while stabilizing our cash burn.
Speaker 4: Overall, we are pleased with our annual results for 2022, especially the increase in our operating income and evidence. We want to express our gratitude to our customers, employees, and stakeholders for their unwavering support throughout the year.
Speaker 4: During my tenure at Senstar, I have had the privilege of working alongside a remarkable team of professionals dedicated to driving success and delivering value to our stakeholders. Together, we have navigated significant challenges and achieved important milestones that have solidified the company's position as a leader in our industry.
Speaker 4: My primary accomplishment during my time here has been the strategic divestment of the MIGUEL integration solution for $35 million in cash and now rebranding and sense-of-class technologies. This allowed us to leverage our core strengths in perimeter intrusion and focus on our full growing vertical feel- Specific
Speaker 4: as well as the post merger integration of the water oversight previously emitted and the deep consolidation of our US side previously of Telus to central Ottawa.
Speaker 4: Through careful analysis and planning, we executed the venture efficiency. We not only streamlined our operation, but also delivered a significant return to our shareholders. In September 2021, we returned $40 million to our shareholders in the form of a cash conversion.
Speaker 4: following the previous two solutions when we returned $25,000 in cash.
Speaker 4: I would also like to acknowledge the exceptional work done by our team in navigating the COVID-19 pandemic. As the world faces these challenges, our team remains a priority for the future.
Speaker 4: study fast in its commitment to serving our customers while ensuring our employees' safety and well-being.
Speaker 4: Through the strategic action, we adapted to the changing landscape during COVID and the supply chain challenges, which allows us to continue providing essential products and services to our customers. Although COVID impacted our top line in 2021 and 2022, we have also been able to improve
Speaker 4: We manage operating expenses and cash with an eye towards positioning the company for long-term sustainable growth. We exit.
Speaker 4: 2022 with solid booking despite the longer sales cycle. I am happy to say we have not experienced any other cancellations and we continue to execute the opportunities in the pipeline.
Speaker 4: As I mentioned, we have a strong backlog of revenue and the company expected to deliver a portion of this backlog over the next 12 months.
Speaker 4: Several large orders currently in the final stage of negotiations are expected to close in the coming months. We are replenishing our backlog at a steady rate.
Speaker 4: In addition to those achievements, I aligned the company's resources along 4 key verticals to focus our sales efforts.
Speaker 4: By doing so, we better understand our customers' industries and provide them with solutions.
Speaker 4: Specifically designed to meet the needs. This position sets up for container growth.
Speaker 4: Advancing our product offering has been a top priority during my time at the Central.
Speaker 4: we had made. By investing in research and development and fostering cultural innovation, we introduce new solutions that have helped to differentiate us in the marketplace.
Speaker 4: The product and software sensor released in 2022 received industry recognition awards. And 2023 looks to be also a productive year of innovation.
Speaker 4: I would also like to highlight the successful advancement of our award-winning solution, the central synchrony common operating platform. With the recent release of version 8.4, through close collaboration with our talented team, we developed a cutting-edge product that has been recognized for its elevation and impact.
Speaker 4: Our fusion solution, which links to our PEED devices with our software, had a strong reception in the market. We remain on track to release two new products early this year and will continue to update the software's common operating platform and the fusion.
Speaker 4: I'm incredibly proud of the progress we have made together and I'm confident that the company is in a position for continued success.
Speaker 4: It has been an honour to lead such a talented and dedicated team and I will always be grateful for the experience. In closing, I want to thank all of our employees worldwide for their ongoing commitment to our strategy to deliver excellent and productive services, improve our profitability and ultimately deliver shareholder value.
Speaker 4: Now I will pass the call to our CFO Mr. Tomah Heim. Tomah, please go ahead and review the financial results.
Speaker 4: Thank you, Dror. Before I begin my financial review, I would like to express my gratitude to Dror for his long and valuable contribution to the sense-term-agal group.
Speaker 5: and extend my best wishes for his success in his new position.
Speaker 5: On a more personal note, working alongside Gros for those years, first as VP of Finance and later as his CFO , has been an extremely fulfilling experience.
Speaker 5: I have learned a great deal from you both professionally and personally.
Speaker 5: And I want to thank him for his support and unwavering presence whenever I need a beat.
Speaker 5: You look.
Speaker 5: Our reported revenue for the fourth quarter of 2022
Speaker 5: 9.9 million dollars.
Speaker 5: an increase of 10% compared with reported revenues of $9 million in the fourth quarter of 2021.
Speaker 5: of 10% compared with reported revenues of $9 million in the fourth quarter of 2021. The increase in the total revenue of the
Speaker 5: was primarily due to a recovery in some of our markets as well as our sales effort in the four key relative cards.
Speaker 5: The geography breakdown as a percentage of revenues for the fourth quarter of 2022 compared to the year ago quarter is as follows.
Speaker 5: North America 47% versus 41%.
Speaker 5: Europe 27% versus 25%, impact 10% versus 24%, Latin America 4% versus 5%, adults 12% versus 5%. Fourth quarter reported gross margin was 56.6% of revenues.
Speaker 5: versus 58.1% last year. The decrease in gross margin was finally due to a shift in the mix of products sold during the quarter and macro level business condition related to high material costs, components of the ability and labor costs.
Speaker 5: Our reported operating expenses were $4.7 million, a decrease of 27.6% from the prior year for quarter operating expenses of $6.5 million.
Speaker 5: The year-over-year decrease in operating expenses is due primarily to lower generating general inventory parameters courtesy of applicable manufacturers.
Speaker 5: expenses as well as decrease in selling expenses. Our reported operating income for the fourth quarter was $0.9 million compared to an operating loss of $1.2 million in the year ago period.
Speaker 5: Financial income was $0.3 million compared to financial expenses of $0.4 million in the fourth quarter last year.
Speaker 5: This is mainly a non-cash accounting effect we regularly report due to the adjustments of the valuation of our monetary assets and liabilities denominated in currencies other than the functional currency of the operational entity in the group in accordance with GAAP.
Speaker 5: Our reported income for the continuing operation was $3.5 million in the fourth quarter of 2022 compared to a loss from continuing operation of $2.2 million in the year ago quarter.
Speaker 5: The company's EBITDA from continuing operation for the fourth quarter was $1.2 million versus an EBITDA loss from continuing operation of negative $0.7 million in the fourth quarter plus theoverd