Cemtrex Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 12, 2024

There are 4 speakers on the call.

Operator

Greetings, and welcome to the SunTrust First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I would like to remind everyone The statements made on the call and webcast may include predictions, estimates or other information that might be considered forward looking.

Operator

While these forward looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause the 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 revise or publicly release the statements 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 information, factors relating to our business that may affect our predictions. You should also review our most recent Form 10 ks and Form 10 Q for a more complete discussion of these factors and other risks, particularly under the heading Risk A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our company's site, pentrax.com.

Operator

Your host today, Sagar Goebel, Chief Executive Officer and Paul Wykoff, Chief Financial Officer, will present unaudited results of the operations for the Q1 ended December 31, 2023. At this time, I will turn the call over to SunTrust's Chief Executive Officer, Auger Global.

Speaker 1

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's Q1 2024 Financial Results Conference Call. The Q1 of fiscal year 2024 was highlighted by the company's realignment and operating performance improvement. For the Q1, CEMTREX had revenue of $16,900,000 an increase of 41%. For the Q1, our gross margin held at 42% supported by operational improvements.

Speaker 1

We continue to expect increases in our gross margin going over time as we make further enhancements in our business. During the quarter, we took additional steps to reduce operating expenditures, including a $1,000,000 reduction in our overhead in our Security segment that should start to be realized in our fiscal Q2 going forward. Operating loss for the Q1 improved to $700,000 compared to an operating loss of $2,000,000 a year ago. We also believe that there's room within our inventory and asset base to draw extra liquidity in order to maintain a healthy cash position. Revenues in our Security segment were led by Vicon with 1st quarter revenues improving 31% to 9,200,000 Vicon orders during the Q1 reflected its ability to capture repeat customers with a recent $800,000 2nd phase order from a current school district customer in New Jersey to develop its security technology system with new solutions, expanding on the customer's previous order.

Speaker 1

Vicon's award winning roughneck cameras and Valeris video management software solutions are being chosen to meet the unique challenges and locations ranging from border protection, correction facilities and schools that require an advanced solution of technologies to monitor people and protect areas. Increasing modernization of the current security infrastructure is accelerating the growth of the border security market, driven by the rise of geopolitical instabilities and an increase in border threat assessment. As customers seek to modernize their current infrastructure. Vicon continues to stand out with its advanced technologies and products. Vicon launched a new cloud security platform called Anavio that integrates video access and intercom in one easy to use system powered by AI and face based authentication.

Speaker 1

This new cloud platform allows us to create more value in our business over time by evolving Vicon into a recurring revenue business model. Additionally, with AI at the core of our roadmap and Inovio, we're excited to layer in new capabilities and benefits for our customers to deliver the most cutting edge security solutions over the months years to come. With the launch of Inovio along with continued improvements to our core software platform Valerius, we expect to drive further growth and see additional opportunity to grow gross margin percent in 2024. Revenue for our Industrial Services segment, AIS increased 55 percent to $7,700,000 The increase was mainly due to an increased demand for our services and supported by the close of our highly synergistic acquisition of Hi V Mechanical. This continued growth was highlighted by our recent announcement of $3,800,000 in new orders for 2 projects, including a $2,200,000 order for a geothermal system update a Northeastern School District and a $1,600,000 order for the fabrication of a key component for a motion control technologies company.

Speaker 1

AIS continues to build profitable revenue growth with additional wins in new government and industrial verticals in a variety of service industries and new geographies. I'll now turn the call over to Paul Weikauf, CFO, to discuss financials. Paul?

Speaker 2

Thank you, Sagar. Revenue for the Q1 of 20242023 was $16,900,000 $12,000,000 respectively, an increase of 41%. The Security segment revenues for the Q1 of 2024 increased by 31% to $9,200,000 The Security segment increase was due to an increase for demand for security technology products under the Vicon brand. The Industrial Service segment revenues for the quarter increased by 55 percent to $7,700,000 mainly due to increased demand for the segment services as well as additional revenue due to the Hizy acquisition. Gross profit for the Q1 of 2024 was $7,100,000 or 42 percent of revenues as compared to gross profit of $5,000,000 or 42 percent of revenues for the Q1 of fiscal year 2023.

Speaker 2

Total operating expenses for the 3 months ended December 31, 2023, were $7,800,000 compared to $7,000,000 in the prior year's quarter. Operating loss for the Q1 of 2024 was $700,000 as compared to an operating loss of $2,000,000 for the Q1 of 2023. The improvement was primarily due to an increase in the gross profit for the period due to growing revenues in both segments of our business. Net loss for the Q1 of 2024 was $1,200,000 as compared to a net loss of $6,300,000 in Q1 of 2023, an improvement of $5,100,000 Cash and cash equivalents and restricted cash totaled $4,000,000 at December 31, 2023, as compared to $6,300,000 at September 30, 2023. Inventories decreased to $7,900,000 at December 31, 2023 from $8,700,000 at September 30,

Speaker 1

Thank you, Paul. Looking ahead, we are highly focused on delivering larger operating profit by driving top line growth while maintaining tight cost control measures in our 2 operating businesses. Vicon has the ability to disrupt status quo of how the security industry traditionally operates with its Navios next generation version, state of the art surveillance cameras and BMS software. Along with its next generation technology, Vicon's evolution into recurring revenue business model will help drive additional market share gains. AIS is rapidly expanding into new markets and customer opportunities supported by its recent acquisitions.

Speaker 1

We also continue to explore additional acquisition opportunities that could drive further growth and expansion within our business segment. Looking ahead, we are focused on delivering attractive operating results, driving growth and combined with tight expense control committed to achieving positive operating income in fiscal year 2024 on a full year basis. We are confident that as we stay on this we can deliver strong long term value for our shareholders going forward. Thank you all for attending. And now I would like to answer your questions.

Speaker 1

Operator?

Operator

Our first question is from Larry Holland with Holland Family Office. Please proceed with your question.

Speaker 3

Thanks for taking my question and just want to say congratulations on the Q1 top line performance. My question is for the Security and Industrial segments, what drove the strong performance? And do you see the same trends continuing in the fiscal second quarter?

Speaker 1

Thanks for the question, Larry. So I think within both of our businesses, Maybe I'll start with each one at a time. So in our Security segment, I like to look at things both at the macro level and level. So at the macro level, we continue to see strong tailwinds as organizations, both big and small, continue to make Security a priority, and that's just a reflection of the environment that we live in and the times. So security continues to remain a big, big priority and we're continuing to see investments made to upgrade security solutions, expand security infrastructure and continue to invest in the latest and greatest technologies.

Speaker 1

So I think that's what's happening in the background. At The organization level, I think Vicon is doing a lot of great things. We're continuing to put out new products, upgrade old products and continue to really competitive in the market with our award winning roughneck cameras. Valerius is continuing to win the hearts and minds of our customers. And so we're seeing a lot of expansion opportunities with that core product that we've been continuing to make better every day.

Speaker 1

And then Inavio, really we just started the marketing and sales activities for Inavio. So we're starting to ramp that up really this quarter. So we're already getting interest from customers and we're starting to ramp that up. And so all of these things are kind of layering on top of each other to build really positive momentum for the company. So we're excited about that and I think that allows us to have confidence going forward that Vicon will continue to grow on the order of 15% to 20% on average over the next couple of years.

Speaker 1

So we're feeling really good about that. On the industrial side of our business, we continue to see at the macro level that demand for industrial services continues to trend higher. We're not seeing any weakness from that regard, which gives us again confidence that the outlook remains positive for us. As you know, reshoring a manufacturing back to United States, investment in infrastructure here in the U. S.

Speaker 1

All contribute to the growing demand for industrial services and capabilities, which AIS is a leader in. And so that's really what's happening behind in sort of the larger picture. And then organizationally, again, AIS is operating on all cylinders. The integration of the acquisition has gone really well and we're continuing to see that drive growth at the top line as well as at the operating income line with the business. So overall, we're quite pleased with the results and we're optimistic hopeful that that will continue to happen as we go forward.

Speaker 1

And then we're going to continue to look for additional bolt on acquisitions that could continue to drive further growth in that segment as well. So I think it's on both sides of the business, there's a lot to be excited about.

Speaker 3

Great. Thank you. My second and last question, how should we think about operating income for Q2 Given the slight sequential decline, and then because I think we touted the 3rd consecutive quarter of operating income in the last reporting period.

Speaker 1

Yes. So a couple of things to point out there. Operating income didn't land where we were hoping it would. There were some one time expenses that we encountered in this past quarter, some of them around payroll expenses and so forth. So I think, in general, the quarter was a little bit higher than the prior 3 quarters from an OpEx perspective.

Speaker 1

So that certainly contributed to that. I don't expect subsequent quarters to have as high of an OpEx because of the timing of some of those expenses. And then on top of that, we did reduce overhead by about $1,000,000,000 in change or so, give or take. That should also continue to make profitability a little bit more manageable and a little bit as we continue to grow and really tuck those profits into our belt. So that's In terms of how we think about it.

Speaker 1

So I think overall, we remain committed to having an operating profit this year. Our business is unfortunately a little bit lumpy, so it's always hard to predict exactly when orders will land and get booked and invoice. But based on the overall macro picture and the overall environment, we still feel good about that despite

Operator

the loss in the Q1.

Speaker 3

Great. Thank you.

Operator

Thank you. There are no further questions at this time. I would now like to hand the floor over to Mr. Goldman for his closing remarks.

Speaker 1

Thank you, operator. I would like to thank each of you for joining our earnings call today and look forward to continuing to update you on our ongoing progress and growth. If you have any further questions after this call, please feel free to reach out to our IR firm, MZ Group, who would be more than happy to and get your questions answered. Thank you for your time.

Operator

This concludes today's conference.

Powered by Quartr

Key Takeaways

  • 41% YoY revenue growth to $16.9 M led by a 31% increase in Security and 55% jump in Industrial Services.
  • Operating loss narrowed to $0.7 M from $2.0 M a year ago, driving net loss down by $5.1 M to $1.2 M.
  • Maintained a 42% gross margin and implemented a $1 M overhead cut in Security, targeting further margin expansion.
  • Launched Anavio, an AI-powered cloud security platform, shifting Vicon toward a recurring-revenue model.
  • Cash and cash equivalents fell to $4.0 M at quarter-end from $6.3 M, reflecting liquidity drawn from inventory and assets.
AI Generated. May Contain Errors.
Earnings Conference Call
Cemtrex Q1 2024
00:00 / 00:00