Senstar Technologies Corporation Common Shares 2026 Q2 Earnings Call

Welcome to everyone joining us today, and thank you to Senstar Technologies management for hosting the call. Joining us today are Mr. Fabien Haubert, the CEO of Senstar Technologies, and Ms. Alicia Kelly, the CFO of Senstar Technologies. Fabien will summarize key business and financial highlights, followed by Alicia, who will review Senstar's second quarter 2026 financial results. We will then open the call for questions. Unless otherwise indicated, all financial figures discussed today are in U.S. dollars in all comparisons year-over-year. Before we begin, please note this conference call may contain forward-looking statements, including projections regarding future events and Senstar's future performance. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied by such statements.

For discussion of these and other risks, please refer to the risk factors and other information in Senstar's filings with the U.S. Securities and Exchange Commission. Senstar undertakes no obligation to update any forward-looking statements except as required by law. During the call, we will also discuss certain non-GAAP financial measures. These measures should be considered in addition to and not a substitute for the most directly comparable GAAP measures. Reconciliations are included in our earnings release in accordance with Regulation G. You can also refer to Senstar's website at www.senstar.com for the most directly comparable financial measures and related reconciliations. With that, I will turn the call over to CEO, Fabien Haubert.

Fabien, please go ahead. Thank you, Corbin, and thank you to everyone joining us today to review Senstar Technologies' second quarter 2026 results.

Our second quarter results reflect continued execution of our strategy, including revenue of $10.4 million, up 8% year-over-year, and a return to profitability. LiDAR again performed strongly and continues to be an important contributor to our growth. We believe this momentum reflects the contribution of Senstar sales infrastructure to Blickfeld growth. The combined business is beginning to generate synergies, and Blickfeld reported positive EBITDA in the second quarter. We believe integration is progressing as planned, and we're working to realize efficiency gain and expand our addressable markets. Let me provide some context on the demand environment, which remains healthy. We saw particularly strong momentum in EMEA and APAC, supported by demand from utilities, data centers, and airports.

EMEA's performance in the first quarter continued into the second quarter, with revenue increasing 14% year-over-year and 26% year-to-date. Growth was primarily driven by utilities, data centers, airports, and energy. LiDAR sales momentum is building, supported by increasing business development investments, including the recent hiring of a regional sales director in the Middle East. Our EMEA pipeline continues to strengthen, and we expect the region to remain an important contributor to the business. Asia Pacific was the fastest-growing region in the second quarter, with revenue increasing 93% year-over-year, a rebound from the prior quarter. Revenue in the region grew 21% year-to-date. Growth in the second quarter was driven by utilities, data centers, and airports, reflecting improved activity in South Asia and Japan. LiDAR sales in the region remain at an early stage, which we believe provides an opportunity as adoption develops.

In the U.S., second quarter revenue declined 14% year-over-year and 17% year-to-date. The correction vertical continues to experience project delays related to the federal government shutdown. No major projects have been canceled, and we're seeing initial signs of recovery. We expect activity to resume in the second half of the year. Growth in U.S. LiDAR sales and continued strength in utilities substantially offset the softness in U.S. correction. We also continue to add talent, including the appointment of a new vice president of sales, USA and Latin America, with experience across security, LiDAR, utilities, and data centers. Turning to our four core vertical markets. Performance was mixed in the quarter, declining approximately 18% year-over-year, primarily because of the slower activity in the correction market during the first half of the year.

Utilities was a highlight, with sales increasing 17% year-over-year, driven by data centers, telecommunication, and solar farms. Growth was broad-based across regions. Transport also grew in the quarter, and we remain focused on adding new logos and expanding relationships with existing customers through cross-selling. More broadly, the performance of our four verticals continues to be affected by weakness in the U.S. correction markets. However, underlying demand remains active. We have not experienced customer project losses, and we recorded several wins in APAC during the quarter. LiDAR remains a key proof point of our strategy. On a combined basis, LiDAR solutions grew nearly 100% year-over-year and now represents 20% of our global sales, compared with 11% in the first quarter. Senstar sales force generating a meaningful portion of that growth.

We believe the results support the strategic rationale of the Blickfeld acquisition, which combined Blickfeld technology and know-how with Senstar partner network and sales force. This combination enhances our position in targeted vertical markets. We're seeing a growing pipeline in security and volume monitoring application with opportunities across North America, Latin America, EMEA, and APAC. Blickfeld is also complementary to our existing portfolio, with limited overlap across sales channels. Its LiDAR solution primarily competes with thermal camera solution in perimeter and outdoor application. Growth reported by our closest peers in LiDAR across security, volume monitoring, and traffic monitoring reinforces our confidence in the long-term market opportunities. Product innovation remains important to Senstar, and we continue to advance product and solution in response to customer needs. Specifically, we're in the final development stage of two planned launches.

Embedded FiberTrench, our next generation fiber optic sensing technology designed for perimeter intrusion detection systems and critical infrastructure protection, are expected to be fully released by the end of the third quarter. The Embedded FiberTrench is intended to broaden the fiber PIDS market to include short distance application, traditionally using alternative technologies. Its embedded AI engine is designed to improve situational awareness when evaluating intrusion attempts and reduce nuisance alarm rate. Symphony Workflow Engine, the customizable tool is integrated into the Senstar Symphony common operating platform to automate tasks for security and logistics operators. We expect the workflow engine to support software sales and recurring revenue over time. We currently expect both innovation to be released in the second half of 2026, and we intend to showcase the security solution at the upcoming Global Security Exchange in Atlanta.

Overall, our confidence is supported by customer engagement, order activity, geographic diversification, and expanding LiDAR opportunity. We believe the benefits of the Blickfeld acquisition are beginning to emerge alongside continued growth in utility, growth in EMEA and APAC, and an expected recovery of the U.S. correction market. Our diversified pipeline is converting to revenue, and improving revenue conversion remains a key priority. With our team, product, solution, and experience in place, we believe we're positioned to execute on our goals for the year and pursue sustainable profitable growth. Before turning the call over to Alicia, I'd like to thank our employees for their continued dedication, our customers for their trust, and our shareholders for their support. I will now turn the call over to Alicia for a more detailed review of the financial results.

Thank you, Fabien. Revenue in the second quarter of 2026 was $10.4 million, compared to $9.7 million in the year-ago quarter, and was in line with our financial plan. This 8% increase year-over-year reflected strength in APAC and EMEA. LiDAR sales nearly doubled, partially offsetting continued weakness in the U.S. corrections vertical related to project delays following the federal government shutdown in late 2025. APAC was the strongest performing geographic market in the quarter, with revenue increasing 93% year-over-year. Growth was driven by steady demand in utilities, data centers, corrections, and airports. Japan and South Asia reported accelerated growth during the quarter, while LiDAR is showing encouraging early indicators. EMEA strength in the first quarter continued into the second quarter, with revenue increasing 14% year-over-year. Performance related broad-based gains across the region with particular strength in utilities, airports, data centers, and energy.

LiDAR applications continue to generate inbound customer interest, and our business development efforts remain focused on capturing the long-term growth opportunities in the region. Revenue from North America declined 12% in the quarter, driven by a 14% decline in the U.S. As Fabien noted, U.S. performance related challenging market conditions, including continued pressure on the corrections vertical and project delays related to the federal government shutdown. We have not lost any customer projects, and we expect activity to resume in the second half of the year as early signs of recovery have emerged. Canada returned to growth after a challenging first quarter, with revenue increasing 19%. Canada remains an important market, and we continue to focus on serving customers in the region.

The geographical breakdown of the second quarter revenue compared to the prior quarter was as follows: North America, 43% versus 53%, EMEA, 37% versus 35%, APAC, 19% versus 11%, and all other regions immaterial in both periods. Second quarter gross margin was 64.2%, compared with 66.1% in the year ago quarter. The change primarily reflected product mix, and the second quarter margin was in line with our plan. Sequentially, our gross margin increased from 60% in the first quarter of 2026, driven by healthier product mix in the second quarter. Operating expenses were $6.4 million, up 18% from $5.4 million in the year ago quarter, and represented 60.9% of revenue, compared to 56% in the year ago period.