Cemtrex Q3 2024 Earnings Report

Cemtrex EPS Results

• Actual EPS: -$94.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Cemtrex Revenue Results

• Actual Revenue: $14.69 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Cemtrex Announcement Details

• Quarter: Q3 2024
• Date: 8/14/2024
• Time: N/A
• Conference Call Date: Wednesday, August 14, 2024
• Conference Call Time: 5:00PM ET

Cemtrex (NASDAQ:CETX), Inc. is an industrial technology company that develops and manufactures advanced electronics, automation systems and digital transformation solutions for a broad range of markets. Headquartered in New York, the company focuses on integrating hardware, software and connectivity to streamline industrial processes and enhance operational efficiency. Its core competencies include precision electronics assembly, automated manufacturing platforms and custom-engineered equipment for clients in transportation, energy and critical infrastructure sectors.

Through its Industrial Technologies segment, Cemtrex provides turn-key electronics manufacturing services, precision machining and robotic process automation. This division supports original equipment manufacturers (OEMs) and system integrators by delivering complex assemblies, testing services and value-added engineering. The company’s specialized facilities enable rapid prototyping, batch production and the implementation of Industry 4.0 practices, incorporating real-time monitoring and predictive maintenance capabilities.

The Digital Technologies arm leverages Internet of Things (IoT), artificial intelligence and cloud analytics to deliver smart-facility, security and safety solutions. Under its Xtion™ platform, Cemtrex offers configurable sensor networks, video surveillance and access control systems designed for transit agencies, law enforcement, utilities and corporate campuses. Integrated dashboards and mobile applications allow end users to visualize data, conduct remote diagnostics and automate workflows across disparate assets.

Founded in 2005 and publicly listed on NASDAQ under the ticker CETX, Cemtrex has expanded its footprint across North America, serving customers in both public and private sectors. The company continues to invest in research and development to refine its product portfolio and pursue opportunities in next-generation industrial automation and data-driven operations.

Cemtrex Q3 2024 Earnings Call Transcript

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.

Presentation

[Operator]

Greetings, and welcome to the Cemtrex third quarter 2024 financial results conference call. At this time, all participants are in listen mode only. 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. 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.

[Operator]

Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to this 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-K and 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our company's website, cemtrex.com. Your host today, Saagar Govil, Chief Executive Officer, and Paul Wyckoff, Chief Financial Officer, will present unaudited results of operations for the fiscal third quarter ended June 30, 2024.

[Operator]

At this time, I will turn the call over to Cemtrex Chief Executive Officer, Saagar Govil.

[Saagar Govil, CEO at Cemtrex]

Thank you, operator. Good afternoon, everyone. I'm pleased to welcome you to today's third quarter 2024 financial results conference call. We continue to see momentum in our segments during the third quarter, sustaining revenue year-over-year at $14.7 million. Significant demand for AIS products and services drove a 49% increase in revenue to $8.5 million, which was offset by decreases in Vicon revenue, primarily due to the delay of multiple projects. Operating loss for the third quarter was $3.2 million, compared to operating income of $0.1 million a year ago, mainly due to decreased gross profit in our security segment and increased SG&A expenses. The operating loss for the nine-month period was approximately $5 million, compared to $1.5 million a year ago, despite the higher sales.

[Saagar Govil, CEO at Cemtrex]

However, these results include approximately $2 million 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, the 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 million this fiscal year as we strive to make our operations more efficient.

[Saagar Govil, CEO at Cemtrex]

We expect with the launch of the innovative new cloud security platform, Anavio, along with new technologies to be released later this year and continuing improvements to our core software platform, Valerus, we are confident that in fiscal year 2025, Vicon will see strong growth in revenue. 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, AIS 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 million upsized underwritten public offering, of which a portion of the proceeds were used to pay off some of our indebtedness.

[Saagar Govil, CEO at Cemtrex]

Looking ahead, we are now well positioned for additional growth and to reach our goal of achieving positive operating income in the future. The strengthened 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. I'll now turn the call over to Paul Wyckoff, CFO, to discuss the financials.

[Paul Wyckoff, CFO at Cemtrex]

Thank you, Saagar. Revenue for the third quarters of 2024 and 2023 was a flat $14.7 million. The security segment revenues for the third quarter of 2024 decreased by 31% to $6.2 million. The security segment decrease was due to a delay of multiple projects for the segment's services, products and services, and overall economic conditions in the industry. The industrial services segment revenues for the quarter increased by 49% to $8.5 million, mainly due to the increased demand for the segment's services, as well as additional revenue due to the Heisey acquisition completed during the fourth quarter of fiscal year 2023.

[Paul Wyckoff, CFO at Cemtrex]

Gross profit for the third quarter of 2024 was $5.9 million, or 40% of revenues, as compared to gross profit of $6.5 million, or 44% of revenues, for the third quarter of 2023. Total operating expenses for the three months ended June 30, 2024, were $9.1 million, compared to $6.4 million in the prior year's quarter. Operating loss for the third quarter of 2024 was $3.2 million, as compared to operating income of $0.1 million for the third quarter of 2023. The operating loss was primarily due to the decrease in gross profit in our security segment and overall increase in G&A expenses.

[Paul Wyckoff, CFO at Cemtrex]

Net loss for the third quarter of 2024 was $9.1 million, as compared to a net loss of $1.2 million in the third quarter of 2023. Cash and cash equivalents and restricted cash totaled $7.6 million at June 30, 2024, as compared to $6.3 million at September 30, 2023. Inventories decreased to $7.5 million at June 30, 2024, from $8.7 million at September 30, 2023. I will now turn the call back to Saagar for a review of our 2024 outlook.

[Saagar Govil, CEO at Cemtrex]

Thank you, Paul. In summary, with a fortified balance sheet from the $10 million upsized 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 opportunities 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. 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. Should you have a question, please press the star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you use a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. We have one who raised hands, which is Richard Arnold. However, I think the line or he declined from the polling process. As of right now, there is no analysts or participants who is raising hand for any questions. As a reminder, if you wish to ask a question, please press star one. There are no further questions at this time.

[Operator]

I would now like to turn the call back over to Mr. Saagar Govil for his closing remarks.

[Saagar Govil, CEO at Cemtrex]

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 free 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.

Participants

Executives

• Paul Wyckoff, CFO
• Saagar Govil, CEO