Senstar Technologies Ltd. (SNT) Q3 2026 Earnings Report, Transcript and Summary

Hello. Welcome to Senstar Technologies Conference Call to discuss its third quarter 2026 results. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Corbin Woodhull of Hayden IR. Corbin, please begin.

Thank you, Bill. 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 third 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 and all comparisons year-over-year. Before we begin, please note that this conference call may contain forward-looking statements, including statements regarding government, procurement and corrections project timing, pipeline conversion, LiDAR adoption, product launch timing, acquisition integration 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 a 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 discuss certain non-GAAP financial measures. These measures should be considered in addition to and not as 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' third quarter 2026 results. Third quarter revenue was a record for Senstar, with revenue increasing by 37% year-over-year to $13.1 million, the highest for the third quarter in our history. Following a slow start of the U.S. government market in the first half of this year, we remain focused on strategic execution, prioritizing scalable deployment and converting our pipeline into revenue. And discipline paid off in the quarter with year-to-date revenue expanding by 14% versus the year ago period. Importantly, growth in the quarter was broad-based as all our core geographic regions and our key verticals contributed to our top line trajectory along with continued expansion in profitability. The U.S. market returned to growth with revenue increasing 23%. The EMEA and APAC each grew 50% and LiDAR sales doubled, solidifying our combination with Blickfeld as a key competitive differentiator for Senstar. I also want to be clear about what drove this quarter. It was not one large project, but rather a healthy demand in the verticals we target, a strong sales and technical team, a growing partner network and steady wins with new logos. As a result, our 4 key verticals grew approximately 15% combined, led by utilities and a return to pre-shutdown activity in correction. The year-over-year growth in profitability for the third quarter demonstrate the scalability of the business as evidenced by healthy expansion in operating income to $1.9 million from $1.1 million and a 55% increase in adjusted EBITDA to $2.1 million. This performance illustrates the attractiveness of our business model and our disciplined cost management across sales, marketing and R&D. Let me provide some context on the demand environment, which as anticipated, has improved meaningfully. We saw particularly strong momentum in each of our core geographic markets, supported by demand from utilities and the U.S. correction vertical, stabilizing to the levels before last year shutdown. The factors behind our recent performance is strong and come from several sources supported by the breadth of our customer base and demand across our markets. Following a strong third quarter in the U.S., the U.S. is back to growth with revenue now in line with last year on a year-to-date basis. The corrections market activity has returned to the normalized cadence of the pre-shutdown period, and we anticipate correction to remain a strong vertical. We recently added a new Vice President for the U.S. and Latin America, who is already successfully executing a plan to expand our market share in utilities and data centers, in addition to driving LiDAR penetration throughout the territory. We secured solid wins in U.S. data centers and utilities, all of which are verticals we remain focused on gaining share. We also saw strong growth in LiDAR-based parking monitoring in the U.S., and we are working to expand this promising application. EMEA's strong performance in the first half of 2026 accelerated in the third quarter, pushing revenue growth to 35% year-to-date. Our performance reflects investments made over the past several years to strengthen our presence in this large attractive markets where customers are investing in critical infrastructure security supported by regulation. We had major wins in airports, solar farms, energy, utilities, data centers, and military sites in the region, and we anticipate this will continue to grow. This included LiDAR and its strong progress in EMEA region, with new references in volume monitoring and traffic application that point to significant future runway for growth. We plan to keep investing in business development to win new logos and drive long-term growth. Asia-Pacific remained among the fastest-growing region in the third quarter, with revenue increasing 31% year-to-date. Large wins in corrections, data centers, utilities and airports, mainly in South Asia and Japan drove the gains this quarter. These rapidly growing markets present significant opportunity for Senstar, supported by our established market presence and strong partner networks. We plan to continue investing in the capabilities to further strengthen our competitive position and capitalize on growing demand. LiDAR sales in the Asia-Pacific regions are in the early stages and our first successful implementation in the third quarter represents an initial step in developing this market. To expand on LiDAR, the Blickfeld acquisition has become an important competitive differentiator for Senstar. LiDAR sales more than doubled on both a year-over-year and sequential basis, representing 20% of our total sales in Q3, as compared with 20% in the second quarter and 11% on the first. In the third quarter, Blickfeld was adjusted EBITDA profitable for the second consecutive quarter. LiDAR represents a significant growth opportunity for Senstar, expanding our addressable market while strengthening our competitive position in perimeter security. The technology complements our existing portfolio in security by protecting areas where traditional space solutions are not practical, while also providing a competitive alternative to thermal cameras in the large perimeter markets. Through our expanding network of resellers and distributors, we're extending our reach with LiDAR to new markets and noncritical infrastructure applications like museums, logistic hubs, VIP sites, and industrial sites significantly expanding Senstar's existing total addressable market. Beyond security, LiDAR is opening new markets for Senstar in industrial volume monitoring, including petrochemicals, transportation, agriculture, and construction materials. Demand for this solution is growing, while traffic monitoring is an emerging opportunity where we are working to expand our market presence. Our LiDAR sales pipeline continues to strengthen, supported by an increasing number of demonstration and proof-of-concept projects underway globally. We believe the strong performance of our LiDAR business validates the strategic rationale of the Blickfeld acquisition, as it combines differentiated technology with Senstar's established global sales and distribution networks to accelerate commercialization and expand our market opportunities. Turning to our 4 core vertical markets. We delivered a significant turnaround in the quarter with sales from our core verticals increasing by 15% year-over-year. This growth is the result of the strong performance coming from solar farms, utilities, and data centers. Product innovation remains a priority for Senstar as we advanced 2 important product milestones designed to address evolving customer needs and increasingly complex security threats. One is the embedded fiber range. During the quarter, we successfully launched our new embedded AI-driven fiber sensing solution at the Global Security Exchange, and early market feedback has validated this initiative. The launch represents another lever to broaden our addressable market, leveraging AI-based classification running directly on the device enables our systems to significantly reduce nuisance and false alarm rates. With coverage of both short- and long-range fiber application, we can offer this level of precision, not only to large critical infrastructure sites, but to any site that needs an accurate efficient perimeter solution, all while lowering installation complexity and total cost of ownership. Number 2 is SensorFlow, our hybrid software platform. SensorFlow is expected to launch within a couple of weeks. SensorFlow adds scenario-based intelligence and advanced critical graphical interface, operational reporting, and preventive maintenance application for the installed base, complementing Senstar Symphony and supporting the company's strategy to grow recurring revenue. This product initiative advances our strategy of pairing best-in-class perimeter detection with intelligent recurring software. We're encouraged by our early momentum with these initiatives and look forward to sharing more as they ramp. In summary, we delivered a record third quarter performance with accelerated growth from our core verticals and geographic markets. We see favorable demand trends supported by our diversified customer base and broad market exposure. The U.S. federal and government activity is returning to pre-shutdown levels. We see opportunity for growth across our target verticals and with security threats our customers face are becoming more complex every day. The LiDAR market is expanding rapidly, both within and beyond security. Our business development team continues to add new logos regularly and existing customers keep coming back from new projects and adopting our new technology. We remain focused on converting our expanding pipeline into revenue and believe a diversified customer base and broad-based demand position us well for continued growth. Before turning the call over to Alicia, I would 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 third quarter of 2026 was $13.1 million compared with $9.5 million in a year ago quarter and was in line with our financial plan. This 37% increase year-over-year reflected strength across all our core verticals and geographic markets. Following pressure in the U.S. corrections vertical related to project delays from the federal government shutdown in late 2025, the U.S. returned to growth with a 23% year-over-year revenue increase, while both EMEA and APAC grew 50% and LiDAR sales doubled. EMEA was the strongest performing geographic market in the quarter with revenue increasing 50% year-over-year. Growth was driven by large wins in airports, solar farms, utilities, and data centers, all of which represent markets with strong and sustained demand. LiDAR is generating robust momentum in the region as well, particularly within volume and traffic monitoring applications. APAC strength in the first half of 2026 continued into the third quarter, with revenue increasing 50% year-over-year. Performance reflected broad-based gains across the region, with particular strength in corrections, data centers and utilities in addition to airports in South Asia and Japan. Inbound interest in our LiDAR applications remained strong and our first successful implementation in the third quarter opens a meaningful growth opportunity in the region. Revenue from North America returned to growth with 26% year-over-year increase in the quarter, driven by a 23% expansion in the U.S. As Fabien noted, U.S. performance benefited from investment activity following the federal government shutdown and healthy demand across our target verticals. LiDAR continued to make strong sales traction and pipeline expansion with continued investments expected to generate long-term growth in the technology. Sales in Canada grew for the second consecutive quarter after a challenging first quarter with revenue increasing 62%. Canada remains an important market, and we continue to focus on serving customers in the region. The geographical breakdown of the third quarter 2026 revenue compared with the prior year quarter was as follows: North America, 47% versus 51%; EMEA, 39% versus 36%; APAC, 13% versus 12% and all other regions are immaterial in both periods. Third quarter gross margin was 66.3% compared with 67.3% in the year ago quarter. The change primarily reflected product mix. The third quarter margin was in line with our plan. Sequentially, gross margin increased approximately 210 basis points from 64.2% in the second quarter of 2026, driven by a healthier product mix in the third quarter. Operating expenses were $6.8 million, up 29% from $5.2 million in the year ago quarter and represented 51.8% of revenue compared to 55.2% in the year ago period and down from 60.9% in the prior quarter. Roughly $1.3 million of the $1.5 million increase came from integrating Blickfeld. The remaining $200,000 was a bad debt reserve related to a specific customer receivable. The business remains committed to recovering this debt. Our investment in product development and commercial capabilities are now yielding tangible results, reinforcing our commitment to maintaining a high level of R&D investment to drive continued innovation and growth. In tandem, selling and marketing, and general administration expenses remain controlled. Operating income for the third quarter of 2026 was $1.9 million compared with $1.1 million in the third quarter of 2025. Operating income was in line with internal forecast for the quarter and primarily supported by profitable revenue growth and increased contribution of LiDAR sales. Adjusted EBITDA for the third quarter was $2.1 million with adjusted EBITDA margin of 15.7% and compared with $1.3 million and 13.9%, respectively, in the third quarter of 2025. Adjusted EBITDA outpaced revenue growth with a 55% year-over-year improvement driven collectively by strong top line performance and diligent cost control. Financial loss was $126,000 in the third quarter of 2026 compared with financial income of $282,000 in the third quarter of 2025. The difference primarily reflects a noncash accounting effect from adjustments to the valuation of monetary assets and liabilities denominated in currencies other than the functional currency of the group's operating entities in accordance with GAAP. Net income attributable to Senstar Technologies shareholders was $1.5 million or $0.07 per share in the third quarter of 2026 compared with net income of $1 million or $0.04 per share in the third quarter of 2025. Net income also reflects public company platform expenses and amortization of intangible assets from historical acquisitions. Corporate expenses for the third quarter were approximately $441,000 compared to $891,000 in the year ago period. The difference largely coming from due diligence costs related to Blickfeld incurred during Q3 of 2025. Turning now to the balance sheet. Cash and cash equivalents and short-term bank deposits, excluding $100,000 of restricted cash related to Blickfeld closing balances were $8.4 million as of September 30, 2026, or $0.36 per share. This is a sequential increase from $8 million cash position as of June 30, 2026, and compares with $22.5 million or $0.96 per share as of December 31, 2025. The company has no debt as of September 30, 2026. The decrease in cash during the period ended September 30, 2026, primarily reflected the EUR 10.4 million cash-funded acquisition of Blickfeld, which closed in February 2026. The business continues to make an assessment for the purchase accounting for Blickfeld acquisition. It remains preliminary while the company completes the valuation of its acquired inventory, fixed assets and identifiable intangible assets. The resulting allocation may affect cost of sales, depreciation and amortization and reported results. The company is assessing the amounts and the timing of those effects, including the impact, if any, on previously reported periods. That concludes my remarks. Operator, we'd like to open the call now for questions.

[Operator Instructions] There are no further questions at this time. Mr. Haubert, would you like to make your concluding statement?

On behalf of Senstar management, I'd like to thank our investors for their interest in our long-term support of our business. Have a great day.

Ladies and gentlemen, thank you for attending our call. That will conclude today's teleconference call. Please disconnect your lines, and have a wonderful day.