Senstar Technologies reports strong Q2 2025 results with 16.2% revenue growth and margin expansion, bolstered by strategic investments in core verticals.

OPERATOR - (00:01:52)

Ladies and gentlemen, thank you for standing by. Welcome to Senstar Technologies second quarter 2025 results conference call. 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. As a reminder, this conference is being recorded. I would now like to hand the call over to Corbin Woodhull of Hayden IR. Corbin, would you like to begin?

Corbin Woodhull - Moderator - (00:02:18)

Thank you Paul. I would like to welcome everyone to the conference call and thank Senstar Technologies Management for hosting today's call. With us on the call today are Mr. Fabian Hobert, CEO of Senstar Technologies and Ms. Alicia Kelly, the CFO. Fabian will summarize key financial and business highlights followed by Alicia who will review Senstar's financial results for the second quarter of 2025. We will then open the call for a question and answer session. I would like to remind participants that all financial figures discussed today are US Dollars and all comparisons are on a year over year basis unless otherwise indicated. 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, the competitive nature of the security systems industry, 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 the company's website@www.senstar.com for the most directly comparable financial measures and related reconciliation. And with that I would now hand the call over to Fabian. Fabian, please go ahead.

Fabian Hobert - Chief Executive Officer - (00:03:51)

Thank you Corbin, thank you for joining. Us today to review Senstar Technologies second quarter 2025 financial results. We delivered strong second quarter results marked by By the successful execution of our growth strategy and targeted investments to drive sales across our key verticals and geographies. Revenue for our four core verticals increased. By 27% in aggregate year over year. Which led to total consolidated revenue growth of 16.2% and robust expansion in both gross and EBITDA Margins now moving on to a review of quarterly highlights, Revenue in the second quarter was driven by a well balanced mix of products with notable vertical market strength from energy and corrections. These results reflect the sustained customer demand and when combined with our cost optimizations and focus on selling high value added solutions drove a material gross margin expansion to 66.1% in the second quarter, comfortably above our targets. We're continuing to invest in technological innovation to protect our competitive positioning and fuel. Growth while diligently managing costs to deliver margin expansions and sustainable profitability. In the second quarter, operating expenses remained relatively stable as a percentage of revenue at 56% compared to 55% in the prior year quarter despite an 18% increase in absolute terms. This operational leverage combined with strong double. Digit growth in revenue and gross profit. Drove EBITDA to 1.1 million. EBITDA margin expanded by 161 basis points to 11.8%. Net income increased significantly compared to the same period last year in terms of the core geographic market we served, Senstar's global diversification continues to strengthen with EMEA North America and LATAM delivering broad based. Double digit gains across our key verticals. In EMEA, the region is becoming a larger contributor to revenue and grew by 52% in the second quarter while also. Gaining over 800 basis points in share of total sales. Our sustained investment in Europe over the previous years are coming to fruition with the EMEA region now representing 35% of total revenue up from 27% in the year ago period. The main verticals driving this record in the region include energy, particularly oil and gas along with solar, farms and electrical generation. In addition, there has been solid customer adoption in high asset value airport and data center infrastructure. In North America, which remains our largest. Market as a percentage of sales, revenue. Increased by 29% in the second quarter mainly due to continued momentum in the. Correction and utilities verticals. North America delivered solid growth in the quarter despite moderate sales performance in Canada declining slightly in the second quarter after a strong first quarter. In the second quarter of this year. The Asia Pacific region faced a challenging year over year comparison against exceptionally strong growth of 1.35% in the prior year. Quarter resulting in 47% revenue decline versus. The same quarter last year. The year ago quarter included a large. Customer contract which did not repeat this quarter. Historically, APAC has been among the fastest growing region for Senstar and we're continuing. To experience strength from data centers, utility and airport perimeter security solutions. In contrast, the LATAM region returned to. Growth in the second quarter with revenue increased by 26% compared to the year ago period. We attribute this turnaround to the successful execution of our strategy aimed at delivering. Industry leading solutions to international markets where security modernization is becoming an increasing priority. Looking at revenue contribution per vertical, our. 4 key verticals grew 27% in aggregate. In the second quarter, driven primarily by. Strong performance corrections and energy. We're continuing to identify material growth across material growth opportunities across renewable energy data centers and utilities, and SENSAS is reinforcing. Its commitment to further penetrate those verticals. And capture market share in terms of product updates. Technological innovation is the cornerstone of our. Strategy to strengthen our competitive positioning in the market. We're continuing to make meaningful progress with Multi Sensor, an important validation by our customers. Senstar is focused on delivering advanced and disruptive security solutions tailored to our targeted vertical markets. We aim to enhance security and operational efficiency by combining cutting edge sensors with intelligence information management software. This strategy enables senstar to grow its market share within core sectors while expanding its scope by offering differentiated high value solutions that sustain our growth margins of 60% and above. In addition, Senstar is actively working to broaden its addressable market by targeting the protection of critical points within non critical infrastructure such as hospitals, educational institutions and logistic facilities. Leveraging our unrivaled multi sensor, we deliver unique performance by eliminating nuisance alarm rate, optimizing total cost of ownership and significantly reducing installation and maintenance cost, unlocking opportunities. In a much larger market segment. Turning to other strategic initiatives as discussed. On the prior earning conference call, we're pleased with the execution of our business development team. Following the addition of several key hires. Earlier in this year, the team is now fully ramped and gaining traction with their core focus on driving growth through new customer acquisition and broader penetration within our core verticals. Based on encouraging initial results, we plan to expand the team further to support the development of several large key accounts and accelerate market share gain across high potential sectors. In summary, our second quarter results demonstrate. The resiliency of our business model with. Continued momentum in both revenue growth and margin expansion. We remain focused on differentiating ourselves from the competition by investing in innovative security solutions for our international customer base. I want to express my gratitude to our employees for their strong execution of our strategy to grow our market share across key global verticals, to our valued customers for their continued partnerships and to our shareholders for their ongoing support. Thank you for your attention. I will now turn the call over to Alicia for a review of the financial results in more detail.

Alicia Kelly - Chief Financial Officer - (00:11:51)

Thank you Fabian. Our revenue for the second quarter of 2025 was $9.7 million representing a 16.2% increase compared to 8.3 million in the. Second quarter of 2024. The sales expansion was driven by holistic growth across our key geographic and vertical. Market with corrections energy and utilities serving as strong contributors. EMEA led the geographic regions with 52%. Year over year revenue growth. New customer wins and increased cross-selling. With existing customers drove the successful performance in the quarter, most notably the energy. Data center and airport perimeter security verticals. The US followed with a 35% increase in revenue, fueled mainly by the continued. Demand in the corrections energy and utility. Industries where customers are increasingly seeking innovative security solutions. The LATAM region experienced an important inflection point in the quarter with revenue increasing by 26%. As we have stated in the prior quarters, demand for security modernization in LATAM. Remains and we continue to believe the. Region represents an important growth opportunity. The Asia Pacific region on the other hand, experienced pressure in the quarter with sales declining by 47%, primarily resulting from. The phase out of a customer contract that did not contribute revenue in the. Current quarter in addition to the challenging. Year ago growth comparison that Fabian discussed previously. Similarly, revenue from Canada declined in the quarter due to normal quarterly fluctuations in. The timing of contract awards, but we. Remain well positioned to capture new projects. Through the remainder of this year. As mentioned in Q1, Canada was the. Strongest growing region with sales primarily generated. By the corrections in energy cycle segments. The geographical breakdown as a percentage of. Revenue for the second quarter of 2025 compared to the prior year quarter is. As North America 53% versus 47% EMEA. 35% versus 27% APAC 11% versus 23% Latin America remained at 1% and all other regions were immaterial for both periods. Second quarter gross margin was 66.1% compared. To 63.2% in the year ago quarter. This 292 basis. Point margin improvement was primarily the result. Of strong expense controls, more favorable product. Mix and component and design cost optimizations. Our operating expenses were $5.4 million up. 18% compared to 4.6 million in the prior year's second quarter. The increase was primarily driven by one time non reoccurring administrative cost associated with. Finalizing the corporate redomiciliation from Israel to Canada as well as the addition of key personnel to keep our company headcount and targeted 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 second quarter to $1 million, a 46% improvement compared to 700k in the. Prior year ago period. Operating margin expanded by over 200 basis. Points, reaching 10.1% in the quarter. The company's EBITDA for the second quarter was 1.1 million compared to 846,000 in the second quarter of last year, with. Margins expanding by 161 basis points to. 11.8% from 10.2% in the year ago quarter. These gains underscore the operating leverage in Sunstar's operating model. As we scale financial expense was 330,000 in the second quarter of this year compared to financial income of 103,000 in. The second quarter of last year. This is mainly a non cash accounting. Effect we regularly report due to adjustments. 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 Technology shareholders in the second quarter was $1.2 million. Or $0.05 per share, compared to a. Net income of $493,000 or $0.02 per share in the second quarter of last year. Added to Senstar's operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the second quarter were approximately $865,000 compared to roughly $400,000. In the year ago period. Turning next to our balance sheet, cash. And cash equivalents and short term bank. Deposits as of June 30, 2025 were $21.9 million or $0.94 per share. This compares to 20.6 million or $0.88 per share as of December 31, 2024. The company had zero debt as of June 30, 2025. This concludes my remarks. Operator, we would like to open the call to questions now.

OPERATOR - (00:17:34)

Thank you. We'll 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 2 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. One moment please while we poll for questions. Our first question is from Noam Natash with IMA Value.

Noam Natash - Equity Analyst - (00:18:20)

Hi guys, thanks for a great quarter. If you can elaborate about the one time expense. What's the expense? Exactly. And if you can elaborate about border control segment and biddings.

UNKNOWN - (00:18:48)

Okay, if you agree.

Fabian Hobert - Chief Executive Officer - (00:18:51)

I'm fine with starting with the border control before to let Alicia comment on the one time expense. So border control is not one of our main target verticals. But clearly as per current situation where tension between countries is very high, yes, we're active in this sector. The main reason why we're not active in this vertical is that it is highly scalable because it depends basically on specific. I would say on specific circumstances due to political or whatever scenarios. But as far as we can contribute to make them safer, we're happy to technologically contribute to those supporting our partners. I hope I answer your question. So we cover this market without being a fundamental of our verticals. Alicia, are you fine.

Alicia Kelly - Chief Financial Officer - (00:19:55)

You're welcome for the first part of your question. So the one time administration fees were. Relating to consulting fees for concluding the. Final processes related to our Israeli entity. Now that we've completed the flip and. We have redomiciled to Canada, there was. A couple of outstanding activities that just needed to be closed up in order to finish with that legal entity.

Noam Natash - Equity Analyst - (00:20:26)

Thank you very much. Thank you.

OPERATOR - (00:20:33)

Thank you. There are no further questions at this time. Mr. Holberg, would you like to make your closing statement?

Fabian Hobert - Chief Executive Officer - (00:20:40)

On behalf of Senstar Management, I would like to thank our investors for their. Interest and long term support of our business. Have a great day.

OPERATOR - (00:20:53)

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Saint - (00:21:12)

Saint.