Q1 2023 Senstar Technologies Ltd. Earnings Call
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Greetings and welcome to the Sensar Technology first quarter 2023 Financial Results Conference call. At this time all participants are in 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, Kim Rogers of Hayden IR, investor relations firm for Senstar Technologies. Thank you. You may begin. Kim?
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 Kim Rogers of Hayden IR, investor relations firm for Senstar Technologies. Thank you, you may begin. Thank you, Kristen.
I'd like to welcome everyone to the conference call and thanks SendStar Technologies Management for hosting today's call. With us today are Mr. Fabian Hobert, interim CEO of SendStar Technologies, and Mr. Tomer Hay, CFO . Before we start, I'd like to point out that this conference call may contain projections.
for 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. Uncertainty regarding the duration and extent to which our future results of operations and overall financial performance may be impacted.
by the effects of the COVID-19 pandemic that are still unpredictable in some regions and could be significant, 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 www.gsa.gov.
SendStarTechnologies.com for the most directly comparable financial measures and related reconciliation.
with that I'd now like to hand the call over to Fabian. Fabian, go ahead please.
Thank you, Gail.
Good morning everyone and thank you for joining today's earnings call.
I'm pleased to provide an update on our company's performance and strategic direction. This is my first call in the role of Interim CEO and I am delighted to be speaking with you today. I want to begin by assuring our investors that as we move forward, we remain committed to our strategy, building upon the foundation we have previously constructed to grow Senstock and expand upon our solid position in the pizza market.
Our primary focus continues to expand operational capacity.
and reach and expand our product offerings and increase sales to existing customers. Starting with a look at the first quarter of 2023, revenue was in line with our expectation and reflects the seasonality of our business. Gross margin for the first quarter was primarily impacted by product mix. The high margin contract in Europe last year was not repeatedly supported.
We invested in our sales and marketing as well as R&D to support future product launches.
One of our top objectives is to expand our market share within high value verticals
while maintaining strong growth margins. We have deliberately shifted our focus away from commoditized markets.
recognizing the importance of sustaining profitability, and maximizing value for our customers.
To further scale our business, we concentrate on the high-value vertical market of energy, utilities, corrections and logistics.
These markets seek high value solutions and present attractive growth opportunities.
When SendStar already has an established present and brand recognition.
We aim to expand our scope in this vertical
We're targeting these verticals because they are characterized by significant appetite for complex security solutions. And they provide incremental opportunities to sell adjacent solutions that can increase the customer's lifetime value to us. An example is logistics, where we provide pitch solutions and we're developing adjacent solutions like our workflow engine. Another example is old field security, where we secure the production of processing facilities and can offer additional solutions.
for part-line protection based on our fiber patrol solution rates. We take pride in our global footprint and our ability to understand the evolving needs of our customers.
We see ample room for market share improvements. Our steady growth and profitability demonstrate our ability to differentiate from commodity products in the market.
we achieved significant growth in the US for the first time since the COVID-19 pandemic began.
The US and Europe typically represent over 70% of our total revenue. This quarter, the contribution from these two regions was about 80%. Due to the strong performance of the US from growth in corrections, one of our target verticals. In Europe , we were awarded a strategic contract in Q1 in one of our best performing verticals. We are advancing new business opportunities in the US and Europe with the potential to scale our business in our targeted verticals.
On the product front, we continue to prioritize R&D investment. Product innovation has been a key growth driver for Samstaff. We're actively developing next-generation sensors to drive innovation, evolving our video analytics, and advanced vertical solutions. Our next-generation sensors and solutions portfolio aligns directly with market demand. We're shifting our research and development from customization to
to cross the freedom initiative, allowing us to stay at the forefront of technological advancement.
Our success is based on our ability to deliver innovative security and risk management solutions backed by deep industry knowledge and maintaining a leading edge for our comprehensive platform. Our platform is differentiated by its ability to take information from separate systems and transform it into actionable information.
presented in a unifying space on our sensor symphony platform.
We use AI and the most up-to-date data visualization
video analytics to maximize the effectiveness of customer security.
From a personal standpoint, my objective is to achieve significant turnover growth in our four key verticals.
Representing.
To support this goal, we are fortifying our Salesforce to acquire new customers, further reinforcing our commitment to expanding our market presence. Now let's turn our attention to the first quarter. Given that the first quarter is typically our seasonally weakest quarter of the year, we achieved results close to our Q1 expectations and on par with the previous year. Notably, we experienced strong growth in the United States driven primarily by the collections vertical.
Near- and APAC regions were lower than Q1 2022, which is attributed to the successful completion of exceptional projects in Q1 2022.
Well, our margins were in line with our plan, they were lower than the exceptional Q1 2022 figures.
This is attributed mainly to the mix-up solution deployed during the flow.
In conclusion, we are confident in our strategic 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 where positioning ourselves for success.
We appreciate your ongoing support and look forward to updating you on our progress in the coming quarters.
Now, I will pass the call to our CFO Tomer Hay, please go ahead and review the plan as we go.
Thank you, Fabian.
Our reported revenues for the first quarter of 2023 were $6.4 million, a decrease of 5% compared with reported revenues of $6.8 million in the first quarter of 2022.
As Sabian mentioned, the decline was primarily due to the exceptional Q1 2022 project in Kenya and Apac region.
The geography breakdown has a percentage of revenues for the first quarter of 2023.
compared to the year ago, water is as follows. North America, including Latin, 62% compared to 45%.
Euro 31% compared to 38%, APAC 6% compared to 16%, and others is 1% in both periods.
First quarter reported gross margin was 55.7% of revenues compared to 65.8% last year.
The decrease in gross margin was primarily due to a shift in the mix of products stored during the quarter.
Our reported operating expenses were $5.3 million, an increase of 3.6% from the prior year's first quarter, operating expenses of $5.1 million.
The year-over-year increase in operating expenses is due primarily to an increase in selling and marketing expenses compared to a year-ago quarter.
Our reported operating loss for the first quarter was $1.7 million compared to an operating loss of $0.7 million in the year-ago period.
Financial income was $40,000 in the first quarter this year compared to financial expenses of $239,000 in the first quarter last year.
This is mainly a non-cash accounting effect we regularly report due to adjustments to the valuation of our monetary assets and liabilities denominated in currencies other than the functional currency of the operating entities in the group in accordance with GATT.
Net loss attributed to Senstar Technology shareholder in the quarter was $1.9 million or 8 cents per share compared to a net loss of $1.1 million or 5 cents per share in the first quarter of last year.
The companies reported EBITDA for the first quarter of 2023 was negative $1.4 million compared to negative $0.3 million in the first quarter of last year.
Cash and cash equivalents as of March 31st, 2023 were $14.7 million or $0.64 per share.
That concludes my remarks.
Operator, we like to open the call to questions now. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Gentlemen, it appears we have no questions at this time. I would now like to turn the floor back over to you for additional comments. Bane, do you have any questions at this time?
to updating you next quarter. Have a good day.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.