Cemtrex Q2 2024 Earnings Call Transcript

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May 14, 2024

There are 3 speakers on the call.

Operator

Greetings, and welcome to the CEMTREC Second Quarter 20 24 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 that 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 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 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 ks and Form 10 Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors.

Operator

A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our company's website, simtrex.com. Your host today, Sagar Govil, Chief Executive Officer and Paul Wyckoff, Chief Financial Officer, will present unaudited results of operations for the Q2 ended March 31, 2024. At this time, I will turn the call over to SimTrack's Chief Executive Officer, Sagar Govil. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's Q2 2024 financial results conference call. The Q2 of our fiscal year 2020 4 was highlighted by new technology deployments and continued overall growth across our business. For the Q2, CEMTRIX had revenue of 17,200,000 dollars an increase of 7% and our gross margin was 40%. Operating loss for the Q2 was 1,000,000 dollars compared to operating income of $400,000 a year ago.

Speaker 1

Operating loss for the 6 month period was $1,800,000 compared to $1,500,000 in the prior year, despite higher sales. However, these results include approximately $1,000,000 in one time expenses from employee related charges and legal expenses that we do not anticipate incurring in the future. Our goal of reaching a full year operating profit remains and we are working hard to drive revenue and maintain tight cost controls. Revenues in our security segment in the 2nd quarter decreased by 18% to $8,100,000 The decrease was due to the delay of certain projects in the Security segment's products and services. Despite the delay in some of the Vicon projects, the segment is still showing year over year growth for the first half of the fiscal year.

Speaker 1

Vicon continued to introduce new technologies and products, including the deployment of Inovio, Vicon's innovative new cloud security platform. Inovio enabled users to manage their access control, video and intercom via a single tool to streamline and ultimately achieve complete situational awareness and control. Some of the new features of Innovio include face authentication that ensures only authorized people can access facilities and a powerful person of interest feature whereby users can forensically track a specific person or multiple people throughout a facility. We continue to invest in our sales and marketing resources in the security segment with the goal of driving sales growth over the next several quarters. We are also striving to increase operational efficiency and have reduced inventory by over $1,000,000 for this fiscal year.

Speaker 1

With the launch of Inovio along with new technologies and continued improvements to our core software platform, Valeris, we expect to drive further growth and see additional opportunity to grow gross margin in 2024. Revenue for our Industrial Services segment, AIS increased 47% to $9,100,000 mainly due to increased demand for our services as well as additional business from the highly synergistic acquisition of Hygiene Mechanical. We believe this segment will produce a record year of revenue driven by new orders from leading companies and a robust growth pipeline. We continue to believe with additional orders ahead, AIS has the potential to reach more than 30% annual growth in fiscal year 2024. During the Q2, AIS secured orders including a $1,600,000 order for 2 relocation projects from a leading printing and graphic company and a $500,000 order to remove existing equipment for an engineering and construction company, which affirms AIS' commitment to delivering excellence across its service offerings.

Speaker 1

I'll now turn the call over to Paul Wykoff, our CFO, to discuss financials.

Speaker 2

Thank you, Sagar. Revenue for the 2nd quarters of 20242023 were $17,200,000 and $16,100,000 respectively, an increase of 7%. The Security segment revenues for the Q1 of fiscal 2024 decreased by 18% to 8,100,000 decrease was due to delay of multiple projects for the segment's products and services. The Industrial Services segment revenues for the quarter increased by 47 percent to $9,100,000 mainly due to increased demand for the segment services as well as additional revenue due to the Hiez acquisition completed during the Q4 of fiscal year 2023. Gross profit for the Q2 of 2024 was $6,900,000 or 40 percent of revenues as compared to gross profit of $7,300,000 or 46 percent of revenues for the Q2 of 2023.

Speaker 2

Total operating expenses for the 3 months ended March 31, 2024 were $8,000,000 compared to $7,000,000 in the prior year's quarter. Operating loss for the Q2 of 2024 was $1,000,000 as compared to an operating income of $400,000 for the Q2 of 2023. The operating loss was primarily due to a decrease in gross profit in our security segment and overall increased payroll expenses. Net loss for the Q2 of 2024 was $1,600,000 as compared to a net loss of $600,000 in the Q2 of 2023. Cash, cash equivalents and restricted cash totaled $4,100,000 at March 31, 2024 as compared to $6,300,000 at September 30, 2023.

Speaker 2

Subsequent to the Q2, the company closed a firm commitment underwritten public offering with gross proceeds of the company of approximately $10,000,000 Inventories decreased to $7,400,000 at March 31, 2024 from $8,700,000 at September 30, 2023. I will now turn the call back to Sagar for a review of our 2024 outlook.

Speaker 1

Thank you, Paul. Looking ahead, we are well positioned to build on our momentum and remain focused on our goal achieve positive operating income in fiscal year 2024 on a full year basis. We have strengthened our balance sheet from the 10,000,000 upsized underwritten public offering we closed, of which a portion of the proceeds were used to pay off some of our indebtedness. We continue to explore acquisition opportunities that have the potential to enhance our market reach and service capabilities and further drive growth in the months and years ahead. We remain focused on delivering incremental growth and positive operating results along with diligent balance sheet management and we are committed to achieving positive operating income for the full year fiscal year 2024.

Speaker 1

Thank you all for attending. And now we'd like to answer your questions. Operator?

Operator

Thank you. And ladies and gentlemen, we will now begin the question and answer And your first question comes from the line of Jared Cohen with J. M. Cohen and Company. Your line is open.

Speaker 1

Hello?

Operator

And we currently have no questions at this time. I would like to turn it back to Sagar Govil for further remarks.

Speaker 1

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 and growth. If we are unable to answer any of your questions, please feel free to reach out to our IR firm, Enzi Group, who would be more than happy to assist. Thank you.

Operator

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.

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Key Takeaways

  • Company-wide revenue rose 7% year-over-year to $17.2 million in Q2, with a 40% gross margin, but reported a $1 million operating loss largely due to approximately $1 million in one-time employee and legal expenses.
  • Security segment revenue fell 18% to $8.1 million on project delays, yet the launch of Inovio, a cloud security platform with face authentication and person-of-interest tracking, positions the segment for future growth.
  • Industrial Services (AIS) revenue jumped 47% to $9.1 million, driven by strong demand and the Hygiene Mechanical acquisition, and the company expects this segment to deliver over 30% annual growth in fiscal 2024.
  • After securing ~$10 million in gross proceeds from an underwritten public offering and reducing debt, the company strengthened its balance sheet (cash of $4.1 million) and remains focused on achieving full-year positive operating income in fiscal 2024.
A.I. generated. May contain errors.
Earnings Conference Call
Cemtrex Q2 2024
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