Q1 2025 Senstar Technologies Corp Earnings Call

Operator: Ladies and gentlemen, thank you for standing by.

Ladies and gentlemen, thank you for standing by and welcome to the <unk> Technologies' first quarter 2025 results conference call.

Operator: Welcome to the Senstar Technologies first quarter 2025 results conference. at all participants are at present in a listen.

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.

Corbyn Woodhull: Following management's formal presentation, instructions will be given for the question As a reminder, this conference is I would now like to hand over the call to Corbyn Woodhull of Hayden. Corbin, would you like Thank you, Shambhali.

Speaker Change: A reminder, this conference is being recorded I would now like to hand over the call to Corbin would all of Hayden IR Corbin would you like to begin.

Corbin: Thank you Mollie.

Corbyn Woodhull: I would like to welcome everyone to the conference call and thank Senstar Technologies Management for hosting today's call.

Speaker Change: I'd like to welcome everyone to the conference call and Thanks sensor technologies management for hosting today's call with us on the call today are Mr. Fabian whole bird CEO of sensor technologies, and Mitsubishi Kelly CFO KPN will summarize key financial and business highlights followed by Alicia who will review <unk> financial results for the first quarter of 2025, we will then open.

Corbyn Woodhull: With us on the call today are Mr. Fabien Haubert, CEO of Senstar Technologies, and Ms. Alicia Kelly, the CFO.

Corbyn Woodhull: Fabien will summarize key financial and business highlights, followed by Alicia, who will review Senstar's financial results for the first quarter of 2025.

Corbyn Woodhull: We will then open the call up for a question and answer session.

Speaker Change: The call up for a question and answer session.

Corbyn Woodhull: Before we start, I'd like to point out that the 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, and the competitive nature of the security systems industry.

Speaker Change: Before we start I'd like to point out that the 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 sense start to not guarantee that they will in fact occur.

Speaker Change: <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 the 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 documents filed.

Corbyn Woodhull: The unanticipated and unknown effect of the coronavirus, including on our operations and our clients, as well as other identified in documents filed by the company with the Securities and Exchange Commission.

Speaker Change: By the company with the Securities and Exchange Commission. In addition, during the course of this 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.

Corbyn Woodhull: In addition, during the course of this 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.

Corbyn Woodhull: You can also refer to the company's website at www.senstar.com for the most directly comparable financial measures and related reconciliations.

Corbin: The company's website at Www dot sensed our dot com for the most directly comparable financial measures and related reconciliations.

Fabien Haubert: And with that, I will now hand the call over to Fabien. Fabien, please go ahead. Thank you, Colvin. Thank you for joining us today to review Senstar technology this quarter 2025 financial results. We deliver strong first quarter results marked by solid execution and a well managed balance between growth and profitability. Our four core verticals increased by 33% in aggregate year over year, which led to 12.5% revenue growth and a robust expansion in both growth and EBITDA margin.

Speaker Change: And with that I will now hand, the call over to Fabian Fabian. Please go ahead.

Fabian: Thank you Gordon.

Fabian: Thank you for joining us today to review <unk> technology first quarter 2025 financial results.

Fabian: We delivered strong first quarter results marked by solid execution.

Fabian: They're well managed balance between growth and profitability.

Fabien Haubert: Our four core verticals increased by 33% in aggregate year over year, which led to a 12, 5% of revenue growth and a robust expansion in both gross.

Fabian: And EBITDA margin.

Fabien Haubert: Now moving to a review of quarterly highlights. Revenue in the first quarter was driven by a well-balanced mix of products with notable vertical market strength from energy, logistics, and correction. This performance reflects the sustained customer demand, and combined with our focus on design cost optimizations, drove the material growth margin expansion to 67.2% in the first quarter, comfortably above our target. We're continuing to invest for the long term growth of the company, while also focusing on cost control measures and monitoring headcount efficiency. which are contributing in a meaningful way to sustainable profitability. In the first quarter, operating expenses increased by 2% year over year and declined to 55% of revenue compared to the 61% in the prior year quarter.

Fabian: Now moving to a review quarterly highlights revenue in the first quarter was driven by the well balanced mix of products with notable vertical market strength from energy logistics and corrections.

Fabian: This performance reflects the sustained customer demand.

Fabian: And combined with our focus on diesel cost optimization drove a mapping of the gross margin expansion to 67, 2% in the first quarter comfortably above our targets.

Fabian: We're continuing to invest for the long term growth of the company.

Fabian: While also focusing on cost control measures and monitoring head count efficiency.

Fabian: Which are contributing in a meaningful way to sustainable profitability.

Fabian: In the first quarter operating expenses increased by 2% year over year and declined to 55% of revenue compared to the 61% in the prior year quarter.

Fabien Haubert: Based on double-digit revenue growth, margin expansion, and strict cost monitoring, EBITDA rose to 1.2 million and EBITDA margin reached 14.3%.

Fabian: Based on double digit revenue growth margin expansion and strict cost monitoring.

Fabian: EBITDA rose to $1 million to $2 million.

Fabian: EBITDA margin reached $14 three persons.

Fabien Haubert: Delta Global Diversification continues to strengthen. with North America EMEA and APAC delivering broad based gains across our key verticals. In North America, our largest markets are the percentage of sales, revenue increased by 6% in the first quarter, mainly due to the solid performance in corrections and utility. of particular particular note is the performance of Canda during the quarter, which increased revenue by 58% on strong demands for our utilities and corrections offerings. In EMEA, also one of our largest markets, revenue increased by 19% in the first quarter. Market demand in the region remains strong, especially in the logistics and energy vertical.

Fabian: First our global diversification continues to strengthen.

Fabian: With North America, EMEA, and APAC, delivering broad based gains across our key verticals.

Fabian: In North America, our largest market as a percentage of.

Fabian: Revenue increased by 6% in the first quarter, mainly due to the solid performance in corrections and utilities.

Fabian: Particularly particular note it.

Fabian: The performance of Canada during the quarter, which increased revenue by 58% on strong demand.

Fabien Haubert: For our utilities and corrections offering.

Fabian: In EMEA also one of our largest markets revenue increased by 19% in the first quarter.

Fabien Haubert: Market demand in the region remains strong.

Fabian: Actually in the logistics and energy verticals.

Fabien Haubert: Exiting last year, we made several strategic highest focus on business developments in our three main regions, Americas, EMEA and APAC. The team is now fully integrated with incentives aligned towards profitable growth in our core vertical. As a result of Senstar's sustained investment in Europe in previous years, the EMEA region now represents 30% of total revenue, up from 28% in the year-ago period. In Asia-Pacific, our revenue grew by 40% compared to the previous year's first quarter, the strongest regional growth rates among our covert markets. The powerful performance in the quarter was probably driven by increasing perimeter security requirement and energy and logistics.

Fabian: Exiting last year.

Fabian: We made several strategic hires focus on business development.

Fabian: Main regions Americas, EMEA and APAC.

Fabian: The team is now fully integrated with incentives aligned towards profitable growth in our core verticals.

Fabian: As a result of sensor sustained investments in Europe in previous years, the EMEA region now represent 30% of total revenue up.

Fabian: From 28 persons in the year ago period.

Fabian: In Asia Pacific.

Fabian: Our revenue grew by 40% compared to the previous year's first quarter, the strongest regional growth rates among our core vertical markets.

Fabien Haubert: The powerful performance in the quarter was probably driven by increasing perimeter security requirement that energy and logistics.

Fabien Haubert: Asia Pacific also increased revenue contribution in the quarter to 17% compared to 14% in the year ago period.

Fabian: Asia Pacific also increased revenue contribution in the quarter to 17%.

Fabian: <unk> to 14% in the year ago period.

Fabien Haubert: In Latam, the region declined as a percentage of revenue in the quarter, but we continue to identify new opportunities in this important market. Our international strategy remains focused on regions where our solutions can deliver the greatest value, specifically in markets prioritizing security, more than they ever have. Looking at revenue contribution per verticals, our four key verticals grew 33% in aggregate in the first quarter, driven primarily by strong performance in correction, energy and logistics. Interest and activity in data centers and alternative energy facilities continue to accelerate, reflecting their growth, growing momentum.

Fabian: And at the time the region declined as a percentage of revenue in the quarter, but we continue to identify new opportunities in this important market.

Fabian: Our international strategy remains focused on regions, where our solutions can deliver the greatest value specifically in market prices are rising security modernization.

Fabian: Looking at revenue contribution per vertical.

Fabian: Our four key verticals grew 33% in aggregate in the first quarter, driven primarily by strong performance in duration energy and logistics inter.

Fabian: Interest and activity in data centers, you know, Turkey energy facilities talking it to accelerate reflecting their growth growing momentum.

Fabien Haubert: I would like to reiterate the high priority we placed on technological innovation, a key differentiator for Senstar. multi sensor continues to gain traction and generate growing interest. Increased market awareness of its innovative capability has led to high levels of customer engagement and expanded testing and validation activity. We recently launched a new version of the product under the name Cascade Plus, which supports daisy chaining, enabling scalable deployments across complex environments. Our pipeline of new opportunities with new and existing customers is expanding, and we expect to secure new design wins with form of the sensor in the coming month, particularly among our customers who operate critical.

Fabian: I would like to reiterate the hydro Randy placed on technological innovation, a key differentiator for sandstorm.

Fabian: Multi sensor continues to gain traction and generate growing interest.

Fabian: Increased market awareness of this innovative capability has led to high levels of customer engagement and expanded testing and validation activity.

Fabian: We have recently launched a new version of the product the named Cascade, plus which supposed Daisy chaining anything's candidate deployments across complex environments.

Fabian: Our pipeline of new opportunities with new and existing customers is expanding.

Fabian: And we expect to secure new design wins with.

Fabian: That's sort of in the coming months, particularly among our customers who operate critical infrastructure.

Fabien Haubert: In summary, our first quarter results demonstrate meaningful progress in both top-line growth and margin expansion, underscoring the successful execution of our strategy to grow market share in key verticals and demonstrating the scalability of Senstar's operating model. Thank you for your attention.

Fabien Haubert: In summary, our first quarter results demonstrates meaningful progress in both top line growth and margin expansion underscoring the successful execution of our strategy to grow market share in key verticals and demonstrating the scalability of sensors operating model. Thanks.

Fabian: Thank you for your attention I will now turn the call over to Alicia for review of the financial results in more detail.

Alicia Kelly: I will now turn the call over to Alicia for a review of the financial research in more detail. Thank you, Fabien. Our revenue for the first quarter of 2025 was $8.4 million, representing a 12.5% increase compared to $7.5 million in the first quarter of 2020. This growth was driven by widespread, strong performance across our key geographic and vertical markets. Canada led the geographic regions with 58% year-over-year revenue growth. Strategic wins and expanded relationships with both new and existing clients contributed to the significant uptick, particularly in corrections and utility costs. The APAC region followed with a 40% increase in revenue fueled by the increasing perimeter security requirements in energy, logistics, and correctional projects.

Alicia: Thank you Fabian.

Alicia: Revenues for the first quarter of 2025 was $8 $4 million, representing a 12% increase compared to $7 5 million first quarter of 2024.

Fabian: Growth was driven by widespread strong.

Fabian: Performance across our key geographic and vertical markets.

Fabian: Canada led the geographic regions with 58% year over year revenue growth.

Fabian: T J wins, and expanding relationships with both new and existing clients contributed to the significant uptick, particularly in corrections and utilities vertical.

Fabian: APAC region, followed with a 40% increase in revenue fueled by the increasing perimeter security requirements and energy logistics and fractional projects EMEA delivered a solid 19% revenue growth supported by expanded adoption in the energy and logistics sectors.

Alicia Kelly: and Mia delivered a solid 19% revenue growth, supported by expanded adoption in the energy and logistics sector. In contrast, sales in the US were down slightly by 2% year over year, primarily as a result of the timing of contract awards, which can fluctuate quarter to quarter. As Fabien commented, Latam faced pressures in the quarter, but we continue to believe this market represents a significant opportunity to capture, given its growing demand for security modernization.

Fabian: In contrast sales in the U S were down slightly by 2% year over year, primarily as a result of the timing of contract awards, which can fluctuate quarter to quarter.

Fabian: I've seen even commented.

Fabian: Latam faced pressures in the quarter, but we continue to believe this market represents a significant opportunity to capture given its growing demand for security modernization.

Alicia Kelly: The geographical breakdowns, the percentage of revenue for the first quarter of 2025 compared with the prior year's quarter is as follows. North America 49% versus 50%. AMIA 30% versus 20%. APAC 17% versus 14% Latin America 3% versus 5% and all other regions were immaterial for both periods. First quarter gross margin was 67.2% compared to 59.6% in a year ago quarter. 752 basis point margin improvement was primarily the result of a more favorable product mix, component and design cost optimization, and efficiency gain from headcount streamlining. Our operating expenses were $4.6 million, up 2% compared to $4.5 million in the prior year's first quarter.

Fabian: The geographical breakdown as a percentage of revenue for the first quarter of 2025 compared with the prior year's quarter is as follows North America, 49% versus 52% EMEA up 30% versus 28%.

Alicia Kelly: APAC, 17% versus 14% Latin America, 3% versus 5% and all other regions were immaterial for both periods.

Fabian: First quarter gross margin was 67, 2% compared to 59, 6% in a year ago quarter.

Fabian: 752 basis point margin improvement was primarily the result of Barclays.

Fabian: As for product mix components and design cost optimizations.

Fabian: And efficiency gains from head count streamlining.

Alicia Kelly: Our operating expenses were $4 $6 million up 2% compared to $4 $5 million in the prior year's first quarter. The increases were driven by targeted marketing and selling spend in core growth.

Alicia Kelly: The increases were driven by targeted marketing and selling spend in core Growth Verticals and Markets, with a positive offset from research and development investment optimization. Strong revenue and a sizable increase in gross margin drove our operating income for the first quarter to $1 million, a significant improvement compared to the operating loss of $73,000 in a year-old period. The company's EBITDA for the first quarter was $1.2 million compared to $114,000 in the first quarter of last year. with margins expanding to 14.3% from 1.5% in the year ago quarter. These gains highlight the scalability of Senstar's operating model.

Fabian: Verticals and markets with a positive offset from research and development investment optimization.

Fabian: <unk> revenue and a sizable increase in gross margin drove our operating income for the first quarter to $1 million.

Fabian: A significant improvement compared to the operating loss of $73000 in a year ago period.

Alicia Kelly: The company's EBITDA for the first quarter was $1 2 million compared to 114000 in the first quarter of last year with margins expanding to 14, 3% from one 5% in the year ago quarter. These gains highlight the scalability sensors operating model.

Alicia Kelly: Financial income was $269,000 in the first quarter of this year, compared to $54,000 in the first quarter of 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 operational entities. in accordance with GAAP. Net income attributable to Senstar Technologies shareholders in the first quarter was $1 million. or $0.04 per share compared to a net loss of $746,000 or $0.03 per share in the first quarter of last year.

Fabian: Financial income was 269000 in the first quarter of this year compared to 54000 in the first quarter of last year. This is mainly noncash accounting effects. 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 operational entities in the group.

Fabian: In accordance with GAAP net income attributable to censor technology shareholders in the first quarter was $1 million.

Fabian: Or four cents per share compared to a net loss of $746000 or negative <unk> <unk> per share in the first quarter of last year.

Alicia Kelly: Added to Senstar's operational contribution are the public platform expenses and amortization of intangible assets from historical The corporate costs for the first quarter were approximately $494,000. Turning back to our balance sheet, cash and cash equivalents and short-term bank deposits as of March 31, 2025 were $22 million or $0.94 per share. This compares to $20.6 million or $0.88 per share as of December 31, 2020. The company had zero debt as of March 31.

Fabian: Atlanta sensors operational contribution.

Fabian: Platform expenses and amortization of intangible assets from historical acquisition.

Fabian: Corporate costs for the first quarter were approximately $494000.

Fabian: Turning back to our balance sheet cash and cash equivalents and short term bank deposits.

Fabian: March 31, 2025 were $22 million.

Fabian: <unk> 94 per share. This compares to $26 million R. E D for sure as of December 31, 2024, the company had zero debt as of March 31 2025.

Alicia Kelly: This concludes my remarks.

Fabian: This concludes my remarks.

Operator: Operator, can you please open the call for questions? Thank you. We will now be conducting a question and answer. If you would like to ask a question, please press star 1 on your telephone. a confirmation toll in the K line. You may press star two if you would like to remove your. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the button.

Speaker Change: Operator can you. Please open the call for questions now.

Speaker Change: 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, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys we.

Operator: We also ask each person asking the question to only limit themselves. Unknown Bye-bye. Speaker 1 And again, as a reminder, if anyone has any questions, you may press star.

Speaker Change: Also ask each person asking the question to the only limit themselves to two questions.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: And again as a reminder, if anyone has any questions you May press star one to join the queue.

Speaker Change: Okay.

Mike Dissler: Our first question comes from the line of Mike Dissler with AMNX, please proceed with Yes, good afternoon, all. Thanks for taking my call. Question. I was just wondering if you could just briefly skirt over the tariff issue and how it may or may not affect you. I can't imagine materially it will now versus it might have two or three years ago under the other structure that you had. And just any comment on that little color would be great. Thank you.

Speaker Change: Our first question comes from the line of Mike Distler with Ami next. Please proceed with your question.

Speaker Change: Yes.

Speaker Change: Afternoon, all thanks for taking my call question.

Speaker Change: I was just wondering if you could just briefly skirt over the tariff issue and how it may or may not affect you I can't imagine materially it will.

Speaker Change: Now versus if might have two or three years ago under the other structure that you had.

Speaker Change: Just.

Speaker Change: Any comment on that a little color would be great. Thank you.

Speaker Change: Alright.

Fabien Haubert: Okay, thank you very much for your question. So regarding tariffs of day-to-day, we're not impacted in the sense that we produce most of our goods in Canada, and the only tariff would be, of course, in the US. And we're not facing today any tariff from Canada to the US. That being said, we've been working on a plan to be able basically to, moving forward, have an assembly produced in the US to basically be able to mitigate those tariffs to next to zero. So we're having basically those things so far under control. As per the current situation, no impact.

Speaker Change: Thank you very much for your question. So regarding tariffs of day to day, we're not impacted in the sense that were produced most of our goods in Canada.

Speaker Change: And then on the tariff would be up in the U S and we're not facing today.

Speaker Change: Tariff from Canada to the U S that being said we've been working on the plan to be able basically to.

Speaker Change: Moving forward our hub.

Speaker Change: And that's some of the projects basically in the U S to basically be able to mitigate those tariffs to next to zero. So we are having but basically those things so far under control.

Speaker Change: As per the current situation no impact would 25% tariff com we felt already.

Fabien Haubert: Would a 25% tariff come? We have already worked on a plan to mitigate next to zero those impacts. What I cannot predict, if the tariff were to be different, then we would have to do our homework again. Right. I'm hopeful that you won't.

Speaker Change: Worked on a plan to mitigate mixed with zero those impacts.

Speaker Change: Okay, what I cannot predict the EBITDA.

Speaker Change: There has to be different than we would have to do over homework again.

Speaker Change: I'm hopeful that you want [laughter]. Thank you for the for clarifying that and continued success safety and I. Appreciate it. Thank you. Thank you. Thank you so much for your support and Trust Oh.

Mike Dissler: Thank you for the for clarifying that and continued success, Fabien. I appreciate it. Take care. Thank you. Thank you so much for your support and trust. Yes, thank you. Thank you.

Speaker Change: Yes. Thank you.

Speaker Change: Thank you.

Operator: And we have reached the end of the question and answer session.

Speaker Change: And we have reached the end of the question and answer session I would like to turn the floor back over to CEO Fabienne O'meara for closing remarks.

Fabien Haubert: I would like to turn the floor back over to CEO Fabien Haubert for On behalf of Senstar's management, I would like to thank our investors for their interest and long term support of our business.

Speaker Change: On behalf of Central's management, I would like to thank our investors for their interest and long term support of our business have a great day.

Fabien Haubert: Have a great day. Thank you.

Speaker Change: Thank you and this concludes today's conference you may disconnect. Your lines at this time and thank you for your participation have a great day.

Operator: And this concludes today's conference. You may disconnect your line at this for your participation and have a great day.

Speaker Change: Okay.

Operator: [music].

Unknown Attendee: Unknown Attendee, Unknown Shareholder, Kimberly Rogers, Fabien Haubert, Alicia Kelly, Senstar Tech

Unknown Attendee: Yeah.

Unknown Attendee: Sure.

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].