In the recent Senstar Technologies Third Quarter 2024 Earnings Call, CEO Fabien Haubert and CFO Alicia Kelly presented a positive financial trajectory for the company. Senstar Technologies (Ticker: SNT), a company specializing in security solutions, reported a revenue increase of 8.2% to $9.7 million in Q3 2024 from the same quarter the previous year. The company also saw a significant improvement in net income, posting a profit of $1.3 million compared to a loss in Q3 2023, buoyed by a robust gross margin and operational efficiencies.
Key Takeaways
- Q3 2024 revenue rose to $9.7 million, an 8.2% increase year-over-year.
- Gross margin improved significantly to 68%, up from 56.5% in Q3 2023.
- Net income for shareholders was $1.3 million, a turnaround from the previous year's loss.
- Operating expenses were trimmed by 3.6% to $4.8 million.
- Correctional facilities, utilities, and transportation were key growth areas.
- The company is focusing on enhancing product offerings with AI technologies and expanding into new markets like solar farms.
Company Outlook
- Senstar is targeting growth in AI, utilities, and solar farms.
- The MultiSensor product is a promising addition to the company's portfolio, though no specific revenue projections for 2025 were provided.
- Senstar aims to serve larger data centers requiring advanced security.
Bearish Highlights
- No specific forward-looking revenue projections were provided for the year 2025.
Bullish Highlights
- Strong demand in established markets has been met with successful investments.
- The company maintains a healthy cash position with $19.5 million in cash equivalents.
Misses
- The company did not comment on any areas where performance fell short of expectations or industry benchmarks.
Q&A Highlights
- CEO Fabien Haubert emphasized the company's role in providing situational awareness, not law enforcement.
- Analysts noted the synergy between Senstar's security services and the utility sector, especially data centers.
In summary, Senstar Technologies is solidifying its position in the security sector with a strong financial performance in the third quarter of 2024. The company's strategic focus on AI and expansion into new markets such as solar farms, coupled with its operational efficiencies, has resulted in increased profitability. While the company refrained from giving specific financial projections for the upcoming year, the overall tone of the earnings call was optimistic, with a clear path for future growth and innovation.
InvestingPro Insights
Senstar Technologies' recent financial performance aligns with several key metrics and insights from InvestingPro. The company's strong Q3 2024 results are reflected in its market performance, with InvestingPro data showing a significant 93.1% price total return over the past year. This impressive growth is further emphasized by the stock trading near its 52-week high, with the current price at 95.93% of its peak.
The company's improved profitability, as highlighted in the earnings call, is supported by InvestingPro data showing that Senstar has been profitable over the last twelve months. This is particularly noteworthy given the company's relatively small market cap of $52.21 million.
InvestingPro Tips indicate that Senstar "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," which aligns with the company's reported healthy cash position of $19.5 million in cash equivalents. This strong financial footing provides Senstar with the flexibility to invest in growth areas such as AI and expansion into new markets like solar farms.
However, investors should note that Senstar is "trading at a high earnings multiple" with a P/E ratio of 1130, suggesting that the market has high growth expectations for the company. This valuation metric underscores the importance of the company's focus on enhancing product offerings and expanding into new markets to justify its current market valuation.
For those seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Senstar Technologies, providing deeper insights into the company's financial health and market position.
Full transcript - Senstar Technologies Ltd (SNT) Q3 2024:
Operator: Greetings. And welcome to the Senstar Third Quarter 2024 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to hand over to Kim Rogers (NYSE:ROG) of Investor Relations. Thank you, and you may proceed, Kim.
Kim Rogers: Thank you, Claudia. Welcome, and thank you for joining us today. I want to thank the management of Senstar Technologies for hosting today’s call. With us on the call from the company are Mr. Fabien Haubert, CEO; and Ms. Alicia Kelly, CFO. 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. 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, as well as other risks identified in the document 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.senstartechnologies.com for the most directly comparable financial measures and related reconciliation. With that, I’ll now hand the call over to Senstar Technologies CEO, Fabien Haubert. Fabien, please go ahead.
Fabien Haubert: Thank you, Kim. Thank you for joining us today to review our third quarter 2024 financial results. Starting with an overview of this quarter performance, our revenue increased by 8% compared to Q3 2023 and is up 7% year-to-date compared to the same period last year. Gross margin was exceptionally strong at 68%, representing an 11.4%-point increase over Q3 2023. The improvement in the quarter was primarily driven by our ongoing streamlining activities, recent price adjustments, normalization in the component markets and a favorable product mix. Year-to-date, our gross margin of 63.9% aligns with our expectation to deliver a gross margin of 60% or better. Due to diligent expense controls, operating expenses decreased by 3.6% from Q3 2023 and 9.2% year-to-date. Our revenue growth and gross margin expansions combined with decrease in operating expenses led to a significant increase in our profitability. We experienced encouraging growth trends in the U.S. and EMEA, along with a 2% increase in revenue in our core verticals in Q3 2024 and a 9.8% increase year-to-date. Our growth this quarter reflects both our strategic focus and high potential sectors and the success of our tailored solutions. Correctional facilities demand in this sector is growing for enhanced security driven by the increasing emphasis on advanced security technology for public safety. Our integrated solution continues to resonate well in this sector, especially in the U.S., where correctional facilities are investing in modernization. Our offerings have helped strengthen our position as a trusted partner leading to an increase in contract wins. Utilities, this vertical continues to be one of our strongest, with broad-based demand across data centers, solar farms, energy generation, as well as telecom infrastructure. The security sector is increasingly focused on integrating security and monitoring for critical infrastructure and our solution addresses these needs with precision. In particular, data centers and solar farms have increasingly integrated our offerings, underscoring the reliability and scalability of our technology in protecting vital assets. This growth also reflects our expanded reach in the EMEA, U.S. and APAC regions, where utilities and large infrastructure projects prioritize improved security solutions. Transport, our growth in the transport sector has been driven by a mix of established customers and new market entrants, particularly in EMEA, where transport infrastructure development is advancing rapidly. We’ve seen strong adoption of our solution in the airport sector, which recognizes the need for secure monitoring systems. The market remains a priority as our technology aligns well with the demands of modern transportation security, particularly in the EMEA and Asia. Logistics and oil and gas. While revenue in logistics and oil and gas declined slightly, we continue to see opportunities in these sectors as companies for ways to enhance operational efficiency and protect critical assets. We’re seeing positive trends in the oil and gas industry, particularly in North America and EMEA, and we’re hoping this will contribute positively in future orders. Focusing on core verticals in these critical sectors and fine-tuning our solution to meet their unique needs with new products like the MultiSensor, we’re enhancing customer value and positioning ourselves for sustained growth. I’m happy to share that initial sales from MultiSensor are promising, highlighting the product’s innovative impact in the market. The future enhances our positions and builds on this initial momentum. We appointed a new VP of Product Management and Marketing with a solid background and proven track record in video technology to help expand our market presence beyond our traditional perimeter-focused solutions. Our strategy remains focused on business development to expand global market share across key verticals. We aim to bring on new end-users and existing markets while also gaining customers in new regions. The investments we made in established markets are already yielding results, driving growth in the second half of 2024. Likewise, our investments in new territories are beginning to pay off with identified projects now being rolled out. We’re seeing strong sustainable demand growth and are scaling our effort to meet it. In conclusion, we are encouraged by our financial progress this quarter and the strides we’ve made in key verticals. The Senstar team remains dedicated to executing our growth strategy and driving operational efficiency. We’re excited to build on these successes as we continue delivering value to our shareholders and advancing our long-term goals. Now, I will pass the call to our CFO, Alicia Kelly. Alicia, please go ahead and review the financial results.
Alicia Kelly: Thank you, Fabien. Our revenue for the third quarter of 2024 was $9.7 million, an increase of 8.2% compared with the revenue of $9 million in the third quarter of 2023. We saw sales growth in the U.S. of 12%. Growth was experienced in all four of our key verticals, but the most significant growth was reported from correctional sales as facilities invest in modernization. And we reported an increase in sales of 26% in Q3 versus the same period last year. Incremental sales were reported in oil and gas, utilities and the transportation segment. Other regions saw slight declines this quarter, but nothing material in nature. The geographical breakdown of the percentage of revenue for the third quarter of 2024 compared to the year-ago quarter is as follows; North America, 44% versus 43%; EMEA, 39% versus 34%; APAC, 14% versus 16%; Latin America, 3% versus 7%. And all other regions had a change of less than 1% in both periods. The third quarter reported gross margins of 68% of revenue, up compared to 56.5% in the year-ago period. The increase in gross margin was primarily due to product myth and price increases in the fourth quarter of 2023. Our operating expenses were $4.8 million, down 3.6%, compared to $4.9 million in the prior year’s third quarter. The decrease is a result of the streamlining of our corporate structure and realignment of our resources that we implemented in 2023. A strong gross margin and lower operating expenses drove an increase in our operating income for the third quarter to $1.8 million, a significant increase, compared to $123,000 in the year-ago period. Financial income was $111,000 in the third period of this year, compared to a financial expense of $64,000 in the third quarter of last year. 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 our operating entities in the group, in accordance with GAAP. Net income attributable to Senstar Technologies shareholders in the third quarter was $1.3 million or $0.06 per share, compared to a net loss attributable to Senstar Technologies shareholders of $122,000 or $0.01 per share, in the third quarter of last year. The company’s EBITDA for the third quarter was $2 million, compared to $322,000 in the third quarter of last year. Added to Senstar’ operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the third quarter were approximately $100, I am sorry, $1.5 million. Cash and cash equivalents and short-term bank deposits as of September 30, 2024 were $19.5 million or $0.84 per share. That concludes my remarks. Operator, we would like to open the call to questions now.
Operator: Thank you very much. [Operator Instructions] The first question comes from Danny Levine from LiveCo [ph]. Please proceed with your question, Danny.
Unidentified Analyst: Yeah. I’m happy to see that you are getting a new marketing person in there because the stock is under the radar. Do you know what the updated book value per share is on the stock?
Fabien Haubert: The book value, you mean?
Unidentified Analyst: You are right?
Fabien Haubert: The bookings or…
Unidentified Analyst: No. The book value per share at this point.
Alicia Kelly: No. We don’t have that information in front of us at this moment.
Unidentified Analyst: Okay. Well, it seems like you’re probably trading about even with what I believe is based on the new figures book value. And you only have a 50 million share float, so it would not take much of a -- it would not probably take one or two fairly exciting announcements to send your stock through the roof. There’s just no float there. And so it’s good to see that. One question I have is, are you targeting the AI sector as far your, is there any demand for AI companies for your products at all? Are there any synergies at all with AI?
Fabien Haubert: So, basically, AI is the generic word for intelligence and like…
Unidentified Analyst: Right.
Fabien Haubert: … every sensor manufacturer in the industry, we’re developing -- we are working on improving basically the intelligence of our devices. So we already have video intelligence. We analyze signals of the components. And we’re working basically, it’s my phone, and we are working basically, on strengthening our knowledge and performance in AI in general, yes.
Unidentified Analyst: In terms of AI companies, is there any demand for your products for security purposes in terms of their facilities and so forth?
Fabien Haubert: So, yes, I’m sure I’m getting your question properly. The need for AI basically is requested a bit everywhere from our customers who want solutions more and more intelligent. And to this extent, we’re improving, we’re working, striving at least, on increasing the intelligence of our solutions by using basically available technologies.
Unidentified Analyst: Right. And what I’m trying to ask, basically, is that the AI sector itself, the corporations, do they have a demand for your product in terms of securing their facilities and so forth?
Fabien Haubert: So we are -- I’m not sure I’m getting fully your question. I do apologize. So we’re focusing basically on, like, four to six verticals. The main verticals we’re focusing on are utilities, correction, oil and gas, logistics, and we’re very high attention as well on transport, airports and military and border control. And these are the verticals we’re serving mostly. And yes, those verticals are asking us basically to -- they’re expecting us to provide solutions which provide more and more intelligence on the way they’re using it.
Operator: Thank you very much. The next question comes from Ted Liddy [ph] from Oppenheimer & Co. Please proceed with your questions, Ted.
Ken Liddy: Hi. This is Ken Liddy. I just wanted to know, as far as the MultiSensor, you seem to be very optimistic. Do you see a material impact on growth in revenue in 2025 from the MultiSensor?
Fabien Haubert: So we’re not providing forward-looking statements, but we can say that the market is reacting extremely positively in the sense of the number of -- we had some interesting basically for sales and we have generated a lot of interest to different type of customers, which we’re now addressing. So that is where we are now. But we’re -- it’s too early. First of all, we’re not providing any forward-looking statements. And secondly, it’s too early to portion our sales in terms of how much we think it’s going to generate.
Ken Liddy: As far as profitability, given the low expenses, are you comfortable in saying that you expect to be profitable in the fourth quarter?
Fabien Haubert: So we’re not giving basically forward-looking statements on where we’re going to be in the year.
Ken Liddy: Okay. And you mentioned some new areas of markets for your verticals. Could you talk a little bit more about solar farm and the opportunity there?
Fabien Haubert: So solar farm is a -- yeah, it’s a vertical we’re currently addressing already, which is part of the verticals. It’s, okay, we classify it within the utilities, and basically, we see a lot of basically a big race in pretty much everywhere in the world of solar farm build and we see as well oil and gas company investing in this green energy and we’re seeing basically a high demand to protect solar farm plants. Absolutely, and we’re addressing this demand and we see some progress in our sales there.
Operator: Thank you very much. [Operator Instructions] The next question is a follow-up question from Ted Liddy from Oppenheimer. Please proceed with your question.
Ken Liddy: Yes. I wanted to have you expand on what you categorize as data centers.
Fabien Haubert: Oh! Interesting. So basically, data centers is basically -- all basically what is a data center, where places which host hard disk storage for utilities in distribution for video on demand, syringe data. So they’re the one that work. I think this is hard to be to be very. I think data is everywhere. So the main category of foreseeing is the big Internet provider will basically provide storage or basically video on demand or any clouded services. Then you have a lot of banking and financial institution which basically build their own data centers to provide services. It’s a bit limitless. I would say everywhere where hard disk is storing basically data for different type of customers where confidentiality requires a high level of protection. These are the data centers we’re protecting. We’re not addressing small company data centers where it’s only large provider providing service to third parties. That’s where we’re focusing today. Hope I answered your question.
Ken Liddy: Yes. You did. I have a follow up. Have you looked at markets for like, the big coin miners and the data centers, the farming mining they do there for some of the critical infrastructure for some of the companies like Intel (NASDAQ:INTC) and NVIDIA?
Fabien Haubert: So we’re trying to follow the request of everywhere people are building data centers. We didn’t focus on those in particular, but among others on those as well.
Ken Liddy: Okay. Great. Thanks for your comment.
Fabien Haubert: Thanks.
Operator: Thank you. The next question comes from Joseph Judge [ph], who is a private investor. Please proceed with your questions, Joseph.
Unidentified Analyst: Yes. Hi, sir. I was wondering, do you think that your technology will play any role with deporting some illegal immigrants and helping like track them down?
Fabien Haubert: Never directly. We’re trying to strive on making people safer in the world and what we’re doing basically...
Unidentified Analyst: Same with Israel, I guess. You are -- I’m hoping that you get like some really big contracts with the Israel border, too. And hopefully you can help secure their border including ours. Because I know you got border security in Canada, right? Canada. But not the Southern border yet.
Fabien Haubert: So, we’re a Canadian entity and we’re trying worldwide in every -- on the whole planet to try to make people safer and we’re working basically on making sure that when there’s separation between two countries, two areas, to make sure we can detect intrusion attempts. And indeed, borders is one of the markets we’re covering and we’re striving to make the world safer in this direction. So, the more we can help, the more we’ll be happy and the more we contribute to it.
Unidentified Analyst: Yeah. Because I believe you also have the technology to, say, look at some people’s tags. And will you be possibly helping the, like, law enforcement and federal government to track down certain people by being able to zoom in with their tags and are you going to play any part of that?
Fabien Haubert: So, not directly. What we’re doing today is we’re securing our first mission, basically, to try to detect intrusion wherever it is, mainly in our verticals and to report it. When we provide this information, we’ll leave it, basically, to the authorities or the players, the duty to track them and to take any action there. Our job today is to basically try to understand the situation, provide a situational awareness, whether there is an intrusion or not, or which nature. Our sensors, basically, work together to try to find, with the best accuracy, identify where an intrusion attempt is happening and then it goes to other parties who do the follow-up of the work.
Operator: Thank you. The next question comes from Mike Distler from AMX Holdings. Please proceed with your questions, Mike.
Mike Distler: Yes. Good afternoon, gentlemen. As a longer-than-two-decade holder and shareholder, I’ve been following the trajectory of the company for a very long time. I’m gratified with the results, so well done. My question, really, is to just more direct your focus rather than an answer, and that is, you already have the utility vertical as one of your three primary verticals, and these data centers that you spoke of just two questions ago to Ken, et cetera, that you are pursuing, it seems you have an automatic entree through the utilities who will be providing the power and therefore you could be working hand-in-hand to, as they try to garner data center business, you would be providing the security for both the utility, as well as the data center themselves. I just want to point that out. I don’t mean to sound patronizing in any way. I’m just a shareholder trying to help out, but I think the opportunity is vast and substantial, and I think, you guys have the ability now to execute. I wish you luck on that and if you have any comments, I’d appreciate it. Thank you very much.
Fabien Haubert: Thank you so much for this really great comment. It’s exactly why we love data centers, because on top of protecting the data centers themselves, they give, indeed, the possibility to secure as well the infrastructure, aiming to transmit the data and to power them. So we’re totally aligned with this strategy and that’s where we’re putting our efforts.
Mike Distler: I had no doubt.
Fabien Haubert: And thank you for your investment and trust in us.
Mike Distler: Oh! Yes. No. Thank you. You guys are doing great. Appreciate it.
Fabien Haubert: Thank you.
Operator: Thank you very much. Ladies and gentlemen, we have reached the end of the question-and-answer session. I’d now like to turn the call back to Fabien Haubert for closing remarks. Thank you, sir.
Fabien Haubert: So on behalf of the management of Senstar, I’d like to thank you for your continued interest and long-term support of our business. We look forward to sharing more updates with you in the coming quarters. Have a good day.
Operator: Thank you very much. Ladies and gentlemen, that does conclude today’s conference. Thank you so much for joining us. You may now disconnect your lines.
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