Q4 2023 Cemtrex Inc Earnings Call
Greetings and welcome to the Central <unk> fourth quarter and full fiscal year 2023 financial results Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the presentation. As a reminder, this conference is being recorded.
Before we begin the formal presentation I would like to remind everyone that statements made on the call and webcast may include predictions estimates or other information that might be considered forward looking and while these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause actual results to differ materially you are.
Cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to be Pfizer publicly released the results of any revision to these forward looking statements in light of new information or future events.
Throughout today's discussion we will attempt to present some important factors relating to our business that may affect our predictions you should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly on it particularly under the heading risk factors.
A press release detailing these results was issued on December 21, and it's available in the Investor Relations section of our company's website at <unk> Dot com.
Your host today.
Sagar, Gao Chief Executive Officer, and Paul Whitehorse, Chief Financial Officer will present unaudited results of operations for the fourth quarter and full fiscal year September 32023 at this time I will turn the call over to Sanjay Centrex, Chief Executive Officer.
Sag Argo.
Thank you operator.
And good afternoon, everyone.
I'm pleased to welcome you to today's fourth quarter and full fiscal year 2023 financial results Conference call.
The fourth quarter and fiscal year 2023 was highlighted by a third consecutive quarter of operating profit driven by the company's realignment and operating performance improvement.
For the full year subjects had revenue of $59 7 million an increase of 33%.
In combination with operational improvements and the full year also led to a gross margin improvement 680 basis points to 44%.
We continue to expect increases in our gross margin going forward over time as we make further enhancements in our businesses.
Overall fourth quarter operating income was positive for the third quarter in a row at point $2 million compared to an operating loss of $3 1 million a year ago.
We also believe that there's room within our inventory and asset base to drive extra liquidity in order to continue to maintain a healthy cash position.
Revenues in our security segment were led by icon with full year revenues, improving 46% to $34 7 million exceeding our earlier expectations of $28 million for fiscal year 'twenty three.
Revenue was driven by orders from border protection correction facilities and.
Other customers for our award winning Roughneck cameras, and Polaris video management software solutions.
But I found orders included a large correctional facility in current end customer that upgraded its security technology system with a new build their software and hardware.
With a $1 5 million.
Increasing modernization of the current security infrastructure is accelerating the growth of the border security market driven by the rise in geopolitical instabilities and an increase in border sort of fashion.
As customers seek to modernize their current security and infrastructure of icon continues to stand out with its advanced technologies and products recently Viscount launched a new cloud security platform called an RVO that integrates video access and entercom into one easy to use system powered by AI and face to face.
Based on that occasion.
This new cloud platform allows us to create a more value and create more value in our business over time by evolving <unk> into a recurring revenue business model. Additionally, with AI at the core of our roadmap and an IBM, we're excited to layer in new capabilities and benefits for our customers to deliver the most cutting edge security solutions over the months and years to come.
With the launch of an audio along with continued improvements to our core software platform Polaris.
We expect to drive further growth and see additional opportunity to grow gross margin percent in 2024.
Revenue for our industrial services segment AIA S increased 18% during the full year to $25 million exceeding our original target of $21 8 million for fiscal year, 2023, and up from $21 2 million in 2022.
The increase was mainly due to increased demand for our services and supported by the close of our highly synergistic acquisition of heightened mechanical based in Columbus.
EMEA, Pennsylvania, How's he is focused on steel fabrication and contracting primarily to the commercial and industrial water treatment industry as well as other service industries. As he provides the water treatment industry with a variety of fabricated vessel and equipment, including ASME pressure vessel heat exchangers mixed tanks reactors and other specialized fabricated equipment.
With the acquisition, enabling us to expand into new markets, including government and industrial verticals.
During the quarter AIA assets seem to have a million dollar order for the Pennsylvania Stuart town Stuart's town borrow authorities Stuart's down in wastewater treatment large dewatering improvements project.
The acquisition brings over approximately $11 million and immediately accretive although revenue at approximately 775000 and adjusted EBITDA when average over the last four years, but its client list of commercial and industrial facilities seasons team and extensive manufacturing equipment the.
The transaction was accretive in the fourth quarter of fiscal year 2023.
Along with the business purchased the company also acquired the real estate that is occupied and Columbia, Pennsylvania.
The gross profit margin for AIA has improved to 34% for the year compared to 30% for the year prior driven by increased prices and lower subcontractor costs.
I'll now turn the call over to Paul Black Hawk CFO to discuss financials Paul.
Thank you Sabra.
Revenue for the full year 'twenty.
20th twenty-three totaled $59 7 million compared to revenue of 45 million for the full year of 2020 two eight.
833% increase year over year.
Revenues for the fourth quarter of 2023 was $16 9 million compared to $11 8 million for the fourth quarter of 2022, an increase of 44%.
The increase in revenue for the year was due to increased demand for our company's products and services.
The security segment revenues for the years ended September 30th 'twenty, 'twenty, three and 2022.
$34 7 million and 23.8 million, respectively, an increase of 46%.
The increase was due to an increase in demand for security technology products under the Bicarb brands.
Industrial services segments revenues for the full year of 2023 increased by 18% to $25 million, primarily due to the increase in demand for its products and services and the additional revenue from the business related to the acquisition of Honey hygiene mechanical.
Gross profit for the full year of 'twenty to 'twenty, three with 26 million or 44% of revenues compared to gross profit of $16 6 million or 37% of revenues.
For the same period a year ago.
Mainly attributed to increased demand for products and services, along with increased prices and lower subcontractor costs.
Fourth quarter gross profit of $7 2 million increased 58% from $4 5 million in the prior year's quarter.
Our fourth quarter.
Total operating expenses for 2023 with $27 3 million of which $6 9 million were incurred in the fourth quarter.
Total operating expenses for 2022 with 37 million.
Decrease in total operating expenses was probably primarily driven by decreases in depreciation legal and accounting fees and research and development expenses related to the security segment's development of proprietary technology and next generation solutions.
<unk> seen it with security and surveillance systems software.
Operating loss for the full year of 2023.
Improved to $1 3 million as compared to an operating loss of $14 1 million with a full year of 2022.
Due to increased revenues increased gross profit and reduced operating expenses.
Operating income for the fourth quarter of 'twenty to 'twenty three.
It was <unk> 2 million as compared to an operating loss of $3 1 billion for the fourth quarter of 2022.
The increase was primarily due to an increase in gross profit for the period.
Operating activities used $2 $3 million worth of cash for the year ended September 30th 2023, compared to using $16 1 million for the year ended September 32022.
Net loss for the full year of 2023 was $9 3 million as compared to a net loss of $13 3 million in 2022.
Net loss in the fourth quarter of 'twenty, two 'twenty three totaled $1 2 million compared to a net income 0.0 9 million. So this fourth quarter was 22022.
Cash and cash and equivalents and restricted cash totaled $6 3 million at September 30th 2023, as compared to 11 5 million at September 30 of 2022.
Inventories increased to $8 7 million at September 30th 2023 from $8 5 million at September 30th 2022.
I will now turn the call back to saga for a review of our 'twenty 'twenty four outlook.
Thank you Paul.
Looking ahead, we are highly focused on delivering larger operating profits by driving topline growth, while maintaining tight cost control measures and our two operating businesses.
Icon has the ability to disrupt the status quo of how the security industry traditionally operate with at the Navajo next generation version of state of the art surveillance camera and Vms software.
Additionally, we see continued opportunity for organic growth and subsequent bolt on acquisitions at Aif that will drive attractive returns going forward for us.
After achieving operating profit consecutively for three quarters, and we are committed to achieving positive operating income in fiscal year 2024 on a full year basis in.
In 2023, we demonstrated our commitment and focus to delivering attractive operating result, and we are confident that as we stay on this path. We can deliver strong long term value for our shareholders going forward.
Thank you all for attending this call and now I would like to answer your questions operator.
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One moment please.
And our first question comes from the line of Larry a whole lot, but would hold a family office. Please proceed with your question.
Congratulations on another great quarter.
Larry: Couple of questions. If you have time first one is can you talk more about any traction.
You're seeing already with <unk>.
Yeah.
Sure. So you know, we just started getting that product out in the field and we're starting to get some early pilot projects with that so.
It's a new project new product, rather so it's going to take a little bit of time to really explain it and get some of these systems stood up but we're already getting interest in the product and we're gonna start ramping that up into 2024. So.
With any new product, it's just a little bit of a learning curve for folks.
We have to mobilize the whole organization.
To really ramp up these efforts, but the interest is certainly there and I think we're going to really start to hit.
Some solid momentum into 2024.
Great. Thanks, and second question is can you can provide any additional updates to the anticipated by kind of growth beyond what you've already messaged.
Speaker Change: Yeah, let's say.
I think generally speaking the demand for Viacom products is growing we have a great products and services from our cameras to the carton Polaris offering as well as with an audience. So.
I think in terms of our core offering that to generating more and more interest in the organizations products.
And so and especially many of our core customers are getting more and more.
Interested in improving and updating their security system and leveraging the latest and greatest technology. So we are seeing demand sort of pull through from that and I think generally speaking.
Just globally the demand for security solutions, and just increasing naturally just because of the world that we're living in today with more than crime and so forth. So I think from a macro perspective, we are a tailwind and then in terms of what we're doing sort of at the micro level within our own company, where we're able to drive.
Hum.
Speaker Change: Growth rate and so.
And I think you know in terms of our product roadmap to we have a lot of exciting things look to look forward too so.
Oh in terms of what exists today is really just the first incarnation and we have more features as far as AI that we're looking to do we have some exciting new hardware that we're gonna be launching next year or two so we're constantly.
Putting out new products into the market and we have an exciting product roadmap and I think everything we're doing is kind of layering on top of each other this is.
This is not the kind of industry, where you come out with you.
Some hot sexy product and you you conquer the world basically Viscount has been around for 55 years, and we want to steadily continued to build on the legacy that we've established in the market and that just comes from continuing to serve our customers well continuing to deliver exciting new products that improve their overall security.
In an environment and so forth. So I think we're doing that and we're steadily gaining more and more momentum each year as we continue to execute.
Great and then any new markets that you're thinking about entering leveraging and utilizing AI.
Speaker Change: Alright can you just repeat that question I got.
But can you talk about any new markets that you are considering entering with leveraging and utilization of artificial intelligence.
You mean outside of of icons core markets or yeah, you mean.
Or even within right if there's a new if theres, a new channel or segment, because I mean, I guess to the point I did see yesterday Glaris news right the integration of Vms into and alerts AI visual gone detection system. So you know I'm kind of thinking along that lines of how maybe.
Those kinds of things position you for an expanded reach for example into the municipal and government security segment.
Yeah, So I think in terms of.
How we think about AI.
Yeah, I mean, this could be a long answered question, but I'll do my best so.
Speaker Change: Basically.
We want to.
The way, we see our growth in this industry is by focusing on delivering value to customers, who are willing to pay more for better and better security solution. So what I mean by that is if you think about you know organizations that require.
And better security and they're willing to pay for it you know those are organizations like hospitals universities schools, and so forth right. So.
You know, we really focus on sort of the that part of the market you know where they need a professional grade solution or an enterprise grade solution and.
And so theres a number of verticals in that those markets that we serve already quite well in terms of corrections border protection. We obviously can do a number of schools health.
Our health care as well and really for us it's not necessarily about.
Expanding outside of that but it's about building better and better solution. So that we can take more and more market share within those areas, where theres a high willingness to pay because we think that.
Ultimately, it's about growing them.
The solution sale and for and for all the solution sales that we make we sell more and more software right and ultimately the more software we sell the more stickiness there is with their customers and the more we can grow our gross margin and so that's really the.
The sort of North star in terms of how we think about success in this market and what sort of drives how we think about it. So we wouldn't you wouldn't want to use AI to go capture a part of the market, where there isn't a lot of.
Willingness to pay for that incremental innovation right. So.
That's helpful.
Okay. No very helpful. Thank you very much for your time I appreciate it.
Sure.
Alright next question comes from the line of Alan at Rosenthal with Scarlett Knight Capital. Please proceed with your question.
Alan: Hi, great quarter. Thank you for taking my questions I have two.
Can you discuss the geographic.
Hmm.
Composition really of the Viacom business, that's growing so rapidly right now how much is domestic here in the United States. How much is Barnes and then a little add on to that.
And also you know kind of where you see the growth.
Alan: You know in each whether it's you know.
Outside the U S versus inside.
Yes, sure happy to talk about that so.
So as we think about this past fiscal year I would say most of the growth came domestically you know so.
Yeah, I would say, it's almost it's probably 85% to 90%.
The us domestic I'd say, probably 80, 515% international out of that 30, 34% $34 million.
Again, Thats just me off the cuff here, but.
So, but I think what's interesting really about this moment in time is that.
They're just so in the United States, there's enormous growth in terms of the need for security for.
Organizations that hadn't been a serious about it before so at school for instance, right religious institutions churches synagogues.
So they are now all spending more money than they ever had to because of just the nature of the world We live in today.
And so we are seeing growth here right and then obviously the innovation is driving the.
The adoption of new technologies, AI, and so forth. So I think that's going to be the growth driver here in the U S internationally.
A little bit of a different story.
And what's really driving that there is just a growing middle class and the growing economies around the world, whether it's Saudi Arabia, whether it's India, Indonesia and Malaysia.
Alan: And some of these economies that are starting to boom and have extremely.
Extremely high growth and so in those economies and youre seeing a more.
A widespread deployment of the security solutions because they are building so much infrastructure like train stations like police station.
<unk> Hospital.
And so as these economies are building all of that there isn't going to be a massive massive opportunity for growth there as well and so.
Alan: Hum.
I'd say, where we're excited about both markets you know I don't I, certainly don't want to downplay the opportunity for us in the U S. Because I think it's extremely promising but.
But I think some of the growth in some of these emerging markets can also be pretty fantastic as well for us. So you know frankly, we're focused on both but.
I may have mentioned on prior calls I mean, I think there's opportunities to to make it maybe a 50 50 split over time in terms of the amount of business, we're doing internationally versus domestically and so we're definitely focused on growing long term in an international market.
That's excellent. It's just actually made me think of another question here, what's the average when you get a new contract here and so on could you discuss kind of like what's the average I guess sale that you make and and if you see that number improving and and kind of how that works you know what I'm, saying.
Your average selling price you know on a solution for example.
You kind of describe how that works and if you've seen that number increase and you know what your expectation is because obviously as.
Alan: As you said demand is surging here. So you know what are you seeing in terms of pricing.
Yeah, you know I think giving you some rough math I can tell you that you know a couple of years ago. You know our average order size is probably around 50000 and I can tell you that you.
This past year that number was closer to 100000, maybe even a little bit over the phone.
So I think there's just a natural growth in terms of the kinds of projects. We're doing in terms of size and you know, we're we're hopeful and optimistic that that number will continue to grow okay and so.
But then there's also there's a lot of like if we sell lets say 100000 system over the next couple of years, we may sell a lot of smaller orders to continue to expand that system and support that customer or maybe they expand the building or something like that and maybe you want to add more cameras. So.
Yes.
So we do certainly benefit from some of that residual revenue.
But I think in general we are a systems solutions company, we sell generally on projects and so I think the idea is that we want to be increasing the size of the number of orders.
<unk> of the order or the average order that we're getting in the Oreo that's great. That's great. One last question.
Have you seen only overhang gear is probably the piece of debt that you got hanging out there with Chicago ventures, I know we've discussed it in the past, but you've got positive cash flow right. Now can you just kind of give an overview of kind of the way you view how.
How you want to handle that because I think once that sandal.
Alan: The Sky's the limit.
And I'll, just I'm gonna hang up right now, so I mean and listen.
Sure No I appreciate the question yeah.
Thank you.
Where.
We do have that debt outstanding.
We've been fortunate to have a really fantastic relationship with them and they've worked with us to extend that over time and they've.
They've been very supportive of us as we continue to improve our business. So ultimately I mean I think there is.
Alan: Ideally we continue to grow the business. So that we can you know you know pay.
Pay that down over time and get to a place. We had three operating you know three quarters of operating profit and <unk>.
I think I hope that as we continue to improve then we will be in a position to start to reduce that debt over time and continue to work with them as best as possible two to satisfy that debt and you know I think as our business improves I think we'll be in a better and better positioned to deal with that so you know we've been.
We were able to get that that extended and so we'll continue to work through that and you know I.
I think as the business improves its only going to get easier and easier for us to manage that.
Great Great job happy holidays to you and wish you a fabulous 2024. Thank you.
Thanks Al Thank you.
Yeah.
And we have reached the end of our question and answer session now now I'd like to turn the call back over to Mr. Goldberg for closing remarks.
Yeah.
Thank you operator, I would like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress in growth. If we were unable to answer any of your questions. Please feel free to reach out to our IR firm MZ group would be more than happy to assess thank you everyone happy holidays.
Okay.
And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
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