Cemtrex Q3 2024 Earnings Call Transcript

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August 14, 2024

Key Takeaways

  • Revenue for Q3 was flat at $14.7 million, with the Industrial Services segment up 49% to $8.5 million offset by a 31% drop in Security segment revenues to $6.2 million due to project delays.
  • The company reported an operating loss of $3.2 million (net loss of $9.1 million), reflecting lower gross margins in Security and higher G&A expenses, including about $2 million of one-time charges.
  • Inventory was reduced by over $1 million to $7.5 million this fiscal year as part of ongoing efficiency initiatives.
  • A $10 million upsized public offering strengthened the balance sheet, paid down debt, and positions the company to pursue value-add acquisitions.
  • Management expects fiscal 2025 growth driven by the launch of the Inovio cloud security platform, enhancements to the core Valeris software, and continued momentum in Industrial Services.
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Earnings Conference Call
Cemtrex Q3 2024
00:00 / 00:00

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Semtrex Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen mode only. A question and 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 10 Q4 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, semtrex.com. Your host today, Sagar Gavil, Chief Executive Officer and Paul Wyckoff, Chief Financial Officer, will present unaudited results of operations for the fiscal Q3 ended June 30, 2024. At this time, I will turn the call over to Semtech's Chief Executive Officer, Doctor. Agar Govil.

Speaker 1

Thank you, operator. Good afternoon, everyone. I'm pleased to welcome you to today's Q3 dollars Significant demand for AIS products and services drove a 49% increase in revenue to $8,500,000 which was offset by decreases in Vicon revenue, primarily due to the delay of multiple projects. Operating loss for the Q3 was $3,200,000 compared to operating income of $100,000 a year ago, mainly due to decreased gross profit in our security segment and increased G and A expenses. The operating loss for the 9 month period was approximately $5,000,000 compared to $1,500,000 a year ago despite the higher sales.

Speaker 1

However, these results include approximately $2,000,000 in one time expenses related to employee related one time charges, legal expenses and some bad debt write offs. We remain committed to our goal of achieving a full year operating profit and are working hard to drive revenue while maintaining tight cost controls. In our Security segment, despite project delays, team at Vicon continues to push the deployment of new technologies and products with investments into sales and marketing resources that we believe will drive sales over the next several quarters. We also were able to reduce our inventory by over $1,000,000 this fiscal year as we strive to make our operations more efficient. We expect with the launch of the innovative new cloud security platform, Inovio, along with new technologies to be released later this year and continued improvements to our core software platform, Valeris, we are confident that in fiscal year 2025, ICON will see strong growth in revenue.

Speaker 1

Our Industrial Services segment delivered another strong quarter on orders from leading companies, building a pipeline of growth that we believe will produce a record year of revenue. We continue to believe with additional orders ahead, AIF has the potential to reach more than 30% annual revenue growth in fiscal year 2024 with further growth in fiscal year 2025. During the quarter, we took the opportunity to improve our balance sheet with a $10,000,000 upsized underwritten public offering, of which a portion of the proceeds were used to pay off some of our indebtedness. Looking ahead, we are now well positioned for additional growth and to reach our goal of achieving positive operating income in the future. The strength in balance sheet also provides the ability to explore acquisition opportunities that can enhance our market reach and service capability as we continue to seek long term value for our shareholders.

Speaker 1

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

Speaker 2

Thank you, Sagar. Revenue for the 3rd quarters of 20242023 was a flat $14,700,000 The Security segment revenues for the Q3 of 2024 decreased by 31% to 6,200,000 dollars The Security segment decrease was due to a delay of multiple projects for the segment services products and services and overall economic conditions in the industry. The Industrial Services segment revenues for the quarter increased by 49% to 8,500,000 dollars mainly due to the increased demand for the segment services as well as additional revenue due to the Hy Vee acquisition completed during the Q4 of fiscal year 2023. Gross profit for the Q3 of 2024 was $5,900,000 or 40 percent of revenues as compared to gross profit of $6,500,000 or 44 percent of revenues for the Q3 of 2023. Total operating expenses for the 3 months ended June 30, 2024 were $9,100,000 compared to 6,400,000 dollars in the prior year's quarter.

Speaker 2

Operating loss for the Q3 of 2024 was $3,200,000 as compared to operating income of $100,000 for the Q3 of 2023. The operating loss was primarily due to the decrease in gross profit in our securities segment and overall increase in G and A expenses. Net loss for the Q3 of 2024 was $9,100,000 as compared to a net loss of $1,200,000 in the Q3 of 2023. Cash and cash equivalents and restricted cash totaled $7,600,000 at June 30, 2024 as compared to $6,300,000 at September 30, 2023. Inventories decreased to $7,500,000 at June 30, 2024 from $8,700,000 at September 30, 2023.

Speaker 2

I will now turn the call back to Sagar for a review of our 2024 outlook.

Speaker 1

Thank you, Paul. In summary, with a fortified balance sheet from the $10,000,000 upsize offering we closed, we're making steady progress toward our goal of achieving positive operating income in the future. On the acquisition front, we are consistently evaluating potential value add acquisition opportunity that can further accelerate our growth. As we execute on our strategic initiatives, while prudently managing our balance sheet, we are well positioned for long term growth. We look forward to providing additional updates in the months to come as we work to build long term value for our shareholders.

Speaker 1

I thank you all for attending and now I would like to answer your questions. Operator?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. We have one who raised hands, which is Richard Arnold. However, I think the line or a decline from the polling process. As of right now, there is no analysts or participants is raising hands for any questions.

Operator

There are no further questions at this time. I would now like to turn the call back over to Mr. Sager Gavil for his closing remarks.

Speaker 1

Thank you, operator. I'd 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 we were unable to answer any questions, please feel to reach out to our IR firm, MZ Group, who would be more than happy to assist. Thanks, everyone. Bye bye.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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