Gross Margin up 200 Basis Points to 44% in Q3'23
Management to Host Conference Call Today at 5:00 p.m. ET
Brooklyn, NY, Aug. 10, 2023 (GLOBE NEWSWIRE) --- Cemtrex Inc. (NASDAQ: CETX, CETXP), an advanced security technology and industrial services company, has reported its financial and operational results for the third quarter ended June 30, 2023.
Key Third Quarter FY 2023 and Subsequent Highlights
- Revenue for Q3'23 increased 22% to $14.7 million, compared to revenue of $12.1 million for Q3'22.
- Security segment revenues increased 36% to $9.0 million in Q3'23 as border protection vertical drives new order volumes for Vicon.
- Gross margin up 200 basis points to 44% in Q3'23 from 42% in the prior year quarter
- Operating income of $0.1 million for Q3'23 compared to operating loss of $1.5 million in Q3'22, and second consecutive positive quarter from $0.4 million in Q2'2023.
- Closed the acquisition of Heisey Mechanical Ltd., a leading service contractor and steel fabricator that specializes in industrial and water treatment markets, on July 1st, 2023, adding approximately $11 million in revenue, positive cash flow and expands capabilities and customers into new markets.
- Received a $1.1 million order through Vicon Industries from a current large border protection customer in Texas to develop its security technology system with new solutions, expanding on the customer's $1.5 million order in January 2023.
- Cash, cash equivalents and restricted cash as of June 30, 2023 was $6.4 million.
Management Commentary
Cemtrex Chairman and CEO, Saagar Govil, commented on the results: "The third quarter of fiscal year 2023 was highlighted by continued sales execution by Vicon with multiple large orders, and the closing of our acquisition of Heisey Mechanical, an established contractor in a growth market that is highly synergistic with our Advanced Industrial Services ("AIS") subsidiary. The quarter culminated in revenue growth of 22% year over year and, in combination with operational improvements and a gross margin improvement of 200 basis points to 44%. We expect gross margin to continue to increase as we make further enhancements in Vicon's business. Overall operating income for the quarter increased to $0.1 million compared to an operating loss of $1.5 million a year ago and was our second quarter of consecutive operating income. With the actions we have taken to drive business improvement and the increasing demand for security solutions, we expect to achieve a full year operating profit for fiscal year 2024. We also believe that there is room within our inventory and asset base to draw extra liquidity in order to continue to maintain a healthy cash position.
"Turning to our Security segment, Vicon year over year revenues improved 36%, driven by strong demand from customers for its award-winning Roughneck cameras and Valerus video management software solutions. Vicon orders included a follow-up $1.1 million order from a current large border protection customer in Texas to expand its security technology system with new security solutions, a follow-on to its $1.5 million order earlier in the year. 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 assessments.
"Another $0.8 million order for a new prison being built in the United Kingdom includes a full end-to-end system of Vicon's surveillance products including hardware and software, equipped with the latest smart technologies to better protect prisoners, staff and public. We see demand in the U.S and internationally from corrections facilities as a growth driver for us, as they are increasingly focusing on deploying the latest and greatest technologies.
"With Vicon on track to launch more products this year, as well as continued improvements to our core software platform Valerus, we expect to drive further growth. We believe revenues for Vicon Industries, based on our current demand, will exceed our earlier expectations of $28.0 million for fiscal year 2023 given the growing demand for our products and solutions. Additionally, we see further opportunity to grow our Gross Margin Percent in fiscal year 2024.
"Revenue for our Industrial services segment, AIS, increased 5% during the quarter mainly due to increased demand for our services. We believe AIS will continue to expand revenues and may exceed our original 3% target of $21.8 million for fiscal year 2023 driven by continued strength in the Industrial Services market. The Gross Profit Margin for AIS improved to 36% for the quarter compared to 30% for the prior year quarter driven by lower subcontractor costs. The Gross Margin Percent is expected to maintain or exceed approximately 34% for the fiscal year 2023 for Advanced Industrial Services. Looking ahead, we believe that continued reshoring of manufacturing to the US as well investments in US infrastructure will play a key role in AIS' long-term growth.
"Recently we closed on the highly synergistic acquisition of Heisey Mechanical, which is focused on steel fabrication and contracting primarily to the commercial and industrial water treatment industry, as well as other service industries. The acquisition brings over $11.6 million in immediately accretive annual revenue and approximately $775K in adjusted EBITDA, when averaged over the last four years, with its client list of commercial and industrial facilities, a seasoned team and extensive manufacturing equipment. We expect the transaction to be accretive in the fourth quarter of fiscal year 2023.
"Looking ahead, we are highly focused on Vicon's ability to disrupt the status quo of how the security industry traditionally operates with its upcoming next generation version of state-of-the-art surveillance cameras and VMS software. After achieving operating profit consecutively for the second and third fiscal quarters, we are optimistic we can achieve full year positive operating income in fiscal year 2024 while driving attractive top line and bottom line growth. We look forward to providing additional updates in the months to come as accelerate our efforts to build long-term value for our shareholders," concluded Govil.
Third Quarter FY 2023 Financial Results
Revenue for the three months ended June 30, 2023, and 2022 was $14.7 million and $12.1 million, respectively, an increase of 22%. Revenue for the nine months ended June 30, 2023, and 2022 was $42.8 million and $33.3, respectively, an increase of 29%. The Security segment revenues for the three months ended June 30, 2023, increased by 36% to $9.0 million. The Security segment increase was due to an increased demand for security technology products under the Vicon brand. The Industrial Services segment revenues for the quarter increased by 5% to $5.7 million, mainly due to increased demand for the segment's services.
Gross Profit for the third quarter of 2023 increased to $6.5 million, or 44% of revenues as compared to gross profit of $5.0 million, or 42% of revenues for the year ago period, mainly attributed to increased demand for our products and services along with increased prices and lower subcontractor costs.
Total operating expenses for three months ended June 30, 2023, were $6.4 million, compared to $6.6 million in the prior year's quarter.
Operating income for the third quarter of 2023 was $0.1 million as compared to an operating loss of $1.5 million for the third quarter of 2022. The increase was primarily due to an increase in gross profit for the period.
Net loss for the quarter ended June 30, 2023 was $1.1 million, as compared to a net loss of $0.7 million in 2022, an increase of 68%. Net loss increased in the third quarter as compared to the same period last year primarily due to a decrease in Other Income.
Cash, cash equivalents and restricted cash totaled $6.4 million at June 30, 2023, as compared to $11.4 million at September 30, 2022.
Inventories increased to $8.7 million at June 30, 2023, from $8.5 million at September 30, 2022.
Third Fiscal Quarter 2023 Results Conference Call
Cemtrex Chief Executive Officer Saagar Govil and Chief Financial Officer Paul Wyckoff will host the conference call, followed by a question-and-answer period.
To access the call, please use the following information:
| Date: | Thursday, August 10, 2023 |
| Time: | 5:00 p.m. Eastern time, 2:00 p.m. Pacific time |
| Toll-free dial-in number: | 1-877-300-8521 |
| International dial-in number: | 1-412-317-6026 |
| Conference ID: | 10180809 |
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact MZ Group at 1-949-491-8235.
The conference call will be broadcast live and available for replay at https://viavid.webcasts.com/starthere.jsp?ei=1624573&tp_key=b23bd1b76b and via the investor relations section of the Company's website at www.cemtrex.com.
A replay of the conference call will be available after 8:00 p.m. Eastern time through August 24, 2023.
| Toll-free replay number: | 1-844-512-2921 |
| International replay number: | 1-412-317-6671 |
| Replay ID: | 10180809 |
About Cemtrex
Cemtrex Inc. (CETX) is a company that owns two operating subsidiaries: Vicon Industries Inc and Advanced Industrial Services Inc.
Vicon Industries, a subsidiary of Cemtrex Inc., is a global leader in advanced security and surveillance technology to safeguard businesses, schools, municipalities, hospitals and cities. Since 1967, Vicon delivers mission-critical security surveillance systems, specializing in engineering complete security solutions that simplify deployment, operation and ongoing maintenance. Vicon provides security solutions for some of the largest municipalities and businesses in the U.S. and around the world, offering a wide range of cutting-edge and compliant security technologies, from AI-driven video analytics to fully integrated access control solutions. For more information visit www.vicon-security.com
AIS - Advanced Industrial Services, a subsidiary of Cemtrex, Inc., is a premier provider of industrial contracting services including millwrighting, rigging, piping, electrical, welding. AIS Installs high precision equipment in a wide variety of industrial markets including automotive, printing & graphics, industrial automation, packaging, and chemicals. AIS owns and operates a modern fleet of custom designed specialty equipment to assure safe and quick installation of your production equipment. Our talented staff participates in recurring instructional training, provided to ensure that the most current industry methods are being utilized to provide an efficient and safe working environment. For more information visit www.ais-york.com
For more information visit www.cemtrex.com.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the closing of the offering, gross proceeds from the offering, our new product offerings, expected use of proceeds, or any proposed fundraising activities. These forward-looking statements are based on management's current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward looking statements. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. These risks and uncertainties are discussed under the heading "Risk Factors" contained in our Form 10-K filed with the Securities and Exchange Commission. All information in this press release is as of the date of the release and we undertake no duty to update this information unless required by law.
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (Unaudited) | ||||||||
| June 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and equivalents | $ | 5,628,839 | $ | 9,895,761 | ||||
| Restricted cash | 805,273 | 1,577,915 | ||||||
| Short-term investments | 13,663 | 13,721 | ||||||
| Trade receivables, net | 7,507,755 | 5,399,216 | ||||||
| Trade receivables - related party | 578,388 | - | ||||||
| Inventory -net of allowance for inventory obsolescence | 8,719,740 | 8,487,817 | ||||||
| Prepaid expenses and other assets | 3,089,416 | 2,421,644 | ||||||
| Assets of discontinued operations | - | 3,971,693 | ||||||
| Total current assets | 26,343,074 | 31,767,767 | ||||||
| Property and equipment, net | 6,180,771 | 5,280,442 | ||||||
| Right-of-use assets | 2,213,341 | 2,641,198 | ||||||
| Royalties receivable - related party | 691,611 | - | ||||||
| Note receivable - related party | 761,585 | 761,585 | ||||||
| Goodwill | 3,906,891 | 3,906,891 | ||||||
| Other | 1,646,403 | 1,399,745 | ||||||
| Total Assets | $ | 41,743,676 | $ | 45,757,628 | ||||
| Liabilities & Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 3,725,105 | $ | 3,050,937 | ||||
| Accounts payable - related party | 3,372 | 19,133 | ||||||
| Short-term liabilities, net of unamortized original issue discounts | 17,185,167 | 16,894,743 | ||||||
| Lease liabilities - short-term | 716,896 | 754,495 | ||||||
| Deposits from customers | 34,281 | 73,144 | ||||||
| Accrued expenses | 3,536,097 | 2,271,188 | ||||||
| Deferred revenue | 2,060,570 | 1,551,088 | ||||||
| Accrued income taxes | 49,075 | 94,848 | ||||||
| Liabilities of discontinued operations | - | 805,219 | ||||||
| Total current liabilities | 27,310,563 | 25,514,795 | ||||||
| Long-term liabilities | ||||||||
| Loans payable to bank | 54,578 | 110,331 | ||||||
| Long-term lease liabilities | 1,496,445 | 1,822,468 | ||||||
| Notes payable | 1,379,743 | - | ||||||
| Mortgage payable | 2,110,020 | 2,160,169 | ||||||
| Other long-term liabilities | 528,952 | 807,898 | ||||||
| Paycheck Protection Program Loans | 60,695 | 97,120 | ||||||
| Deferred Revenue - long-term | 623,007 | 607,309 | ||||||
| Total long-term liabilities | 6,253,440 | 5,605,295 | ||||||
| Total liabilities | 33,564,003 | 31,120,090 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders' equity | ||||||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized, Series 1, 3,000,000 shares authorized, 2,293,016 shares issued and 2,228,916 shares outstanding as of June 30, 2023 and 2,079,122 shares issued and 2,015,022 shares outstanding as of September 30, 2022 (liquidation value of $10 per share) | 2,293 | 2,079 | ||||||
| Series C, 100,000 shares authorized, 50,000 shares issued and outstanding at June 30, 2023 and September 30, 2022 | 50 | 50 | ||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized, 957,760 shares issued and outstanding at June 30, 2023 and 754,711 shares issued and outstanding at September 30, 2022 | 958 | 755 | ||||||
| Additional paid-in capital | 68,302,617 | 66,641,698 | ||||||
| Accumulated deficit | (62,947,549 | ) | (54,929,020 | ) | ||||
| Treasury stock, 64,100 shares of Series 1 Preferred Stock at June 30, 2023 and September 30, 2022 | (148,291 | ) | (148,291 | ) | ||||
| Accumulated other comprehensive income | 2,306,346 | 2,377,525 | ||||||
| Total Cemtrex stockholders' equity | 7,516,424 | 13,944,796 | ||||||
| Non-controlling interest | 663,249 | 692,742 | ||||||
| Total liabilities and shareholders' equity | $ | 41,743,676 | $ | 45,757,628 | ||||
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Revenues | $ | 14,730,140 | $ | 12,108,904 | $ | 42,773,779 | $ | 33,268,316 | ||||||||
| Cost of revenues | 8,249,497 | 7,068,797 | 23,914,249 | 21,236,178 | ||||||||||||
| Gross profit | 6,480,643 | 5,040,107 | 18,859,530 | 12,032,138 | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 5,376,960 | 5,381,529 | 16,456,602 | 16,095,373 | ||||||||||||
| Research and development | 1,049,909 | 1,189,875 | 3,895,717 | 3,660,883 | ||||||||||||
| Total operating expenses | 6,426,869 | 6,571,404 | 20,352,319 | 19,756,256 | ||||||||||||
| Operating income/(loss) | 53,774 | (1,531,297 | ) | (1,492,789 | ) | (7,724,118 | ) | |||||||||
| Other income/(expense) | ||||||||||||||||
| Other income | 34,652 | 2,315,500 | 394,073 | 3,336,560 | ||||||||||||
| Interest expense | (1,254,185 | ) | (925,545 | ) | (3,717,557 | ) | (3,641,432 | ) | ||||||||
| Total other (expense)/income, net | (1,219,533 | ) | 1,389,955 | (3,323,484 | ) | (304,872 | ) | |||||||||
| Net loss before income taxes | (1,165,759 | ) | (141,342 | ) | (4,816,273 | ) | (8,028,990 | ) | ||||||||
| Income tax benefit/(expense) | (19,641 | ) | 247,941 | (19,641 | ) | 247,941 | ||||||||||
| (Loss)/income from Continuing operations | (1,185,400 | ) | 106,599 | (4,835,914 | ) | (7,781,049 | ) | |||||||||
| Income/(loss) from discontinued operations, net of tax | 13,281 | (838,301 | ) | (3,212,108 | ) | (2,282,399 | ) | |||||||||
| Net loss | (1,172,119 | ) | (731,702 | ) | (8,048,022 | ) | (10,063,448 | ) | ||||||||
| Less loss in noncontrolling interest | (25,595 | ) | (50,909 | ) | (29,493 | ) | (183,457 | ) | ||||||||
| Net loss attributable to Cemtrex, Inc. shareholders | $ | (1,146,524 | ) | $ | (680,793 | ) | $ | (8,018,529 | ) | $ | (9,879,991 | ) | ||||
| Income (loss) per share - Basic & Diluted | ||||||||||||||||
| Continuing Operations | $ | (1.29 | ) | $ | 0.21 | $ | (5.83 | ) | $ | (10.94 | ) | |||||
| Discontinued Operations | $ | 0.01 | $ | (1.14 | ) | $ | (3.89 | ) | $ | (3.29 | ) | |||||
| Weighted Average Number of Shares-Basic & Diluted | 897,897 | 736,506 | 824,689 | 694,758 | ||||||||||||
Cemtrex, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the nine months ended | ||||||||
| June 30, | ||||||||
| Cash Flows from Operating Activities | 2023 | 2022 | ||||||
| Net loss | $ | (8,048,022 | ) | $ | (10,063,448 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities | ||||||||
| Depreciation and amortization | 698,269 | 1,038,138 | ||||||
| Loss on disposal of property and equipment | 69,611 | 161,814 | ||||||
| Noncash lease expense | 614,254 | 524,500 | ||||||
| Bad debt expense (recovery) | (155 | ) | (7,584 | ) | ||||
| Share-based compensation | 93,313 | 111,402 | ||||||
| Income tax expense/ (benefit) | - | (247,941 | ) | |||||
| Interest expense paid in equity shares | 276,151 | 1,627,046 | ||||||
| Accrued interest on notes payable | 1,858,631 | 635,001 | ||||||
| Amortization of original issue discounts on notes payable | 1,200,200 | 908,333 | ||||||
| Gain/(loss) on marketable securities | 58 | (2,234,478 | ) | |||||
| Discharge of Paycheck Protection Program Loans | - | (971,500 | ) | |||||
| Changes in operating assets and liabilities net of effects from acquisition of subsidiaries: | ||||||||
| Trade receivables | (2,108,384 | ) | 445,590 | |||||
| Trade receivables - related party | (578,388 | ) | 14,641 | |||||
| Inventory | (231,923 | ) | (2,565,778 | ) | ||||
| Prepaid expenses and other current assets | (667,772 | ) | 125,344 | |||||
| Other assets | (246,658 | ) | (159,526 | ) | ||||
| Accounts payable | 816,040 | 1,012,206 | ||||||
| Accounts payable - related party | (15,761 | ) | - | |||||
| Operating lease liabilities | (550,019 | ) | (456,042 | ) | ||||
| Deposits from customers | (38,863 | ) | (374,978 | ) | ||||
| Accrued expenses | 1,264,909 | (444,238 | ) | |||||
| Deferred revenue | 525,180 | 470,685 | ||||||
| Income taxes payable | (45,773 | ) | (59,588 | ) | ||||
| Other liabilities | (278,946 | ) | (159,526 | ) | ||||
| Net cash used by operating activities - continuing operations | (5,394,048 | ) | (10,669,927 | ) | ||||
| Net cash provided by operating activities - discontinued operations | 2,474,863 | 41,562 | ||||||
| Net cash used by operating activities | (2,919,185 | ) | (10,628,365 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | (761,470 | ) | (727,955 | ) | ||||
| Proceeds from sale of property and equipment | 26,205 | 51,262 | ||||||
| Investment in MasterpieceVR | - | (500,000 | ) | |||||
| Proceeds from sale of marketable securities | - | 12,182,932 | ||||||
| Purchase of marketable securities | - | (10,214,044 | ) | |||||
| Net cash (used in)/provided by investing activities - continuing operations | (735,265 | ) | 792,195 | |||||
| Net cash used by investing activities - discontinued operations | - | (39,388 | ) | |||||
| Net cash (used in)/provided by investing activities | (735,265 | ) | 752,807 | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from notes payable | - | 8,000,000 | ||||||
| Payments on debt | (844,370 | ) | (1,176,763 | ) | ||||
| Payments on Paycheck Protection Program Loans | (20,154 | ) | - | |||||
| Payments on bank loans | (416,467 | ) | (920,939 | ) | ||||
| Net cash provided by financing activities - continuing operations | (1,280,991 | ) | 5,902,298 | |||||
| Net cash used by financing activities - discontinued operations | - | - | ||||||
| Net cash (used)/provided by financing activities | (1,280,991 | ) | 5,902,298 | |||||
| Effect of currency translation | (104,123 | ) | (397,840 | ) | ||||
| Net decrease in cash, cash equivalents, and restricted cash | (4,935,441 | ) | (3,973,260 | ) | ||||
| Cash, cash equivalents, and restricted cash at beginning of period | 11,473,676 | 17,186,323 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 6,434,112 | $ | 12,815,223 | ||||
| Balance Sheet Accounts Included in Cash, Cash Equivalents, and Restricted Cash | ||||||||
| Cash and equivalents | $ | 5,628,839 | $ | 11,442,487 | ||||
| Less cash attributed to discontinued operations | - | (145,984 | ) | |||||
| Restricted cash | 805,273 | 1,518,720 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 6,434,112 | $ | 12,815,223 | ||||
