Cemtrex, Inc. Q4 FY2023 earnings call

Key Points - Fourth quarter 2023 had operating income of $0.2 million, third consecutive quarter of operating profit. - Full-year 2023 saw revenue increase by 33% to $59.7 million, with gross margin improving 680 basis points to 44%. - Vicon launched the Anavio cloud security platform, integrating video, access, and intercom with AI and face-based authentication, aiming to evolve into a recurring revenue model. - AIS acquired Heisey Mechanical, bringing over approximately $11 million in annual revenue and expanding into new markets like government and industrial verticals, with AIS's gross profit margin improving to 34% in 2023 from 30% in 2022.

The security segment had full-year 2023 revenues of $34.7 million, an increase of 46% from $23.8 million in 2022. Vicon led this growth, with revenues improving 46% driven by orders from border protection, corrections facilities, etc. The industrial services segment (AIS) had full-year 2023 revenues of $25 million, a 18% increase from $21.2 million in 2022, mainly due to increased demand and the acquisition of Heisey Mechanical. Full-year 2023 revenue totaled $59.7 million, a 33% increase from $45 million in 2022, and gross margin improved to 44% from 37% the prior year.

Forward-Looking Statements - Expect gross margin to continue increasing as business enhancements are made. - Committed to achieving positive operating income for the full fiscal year 2024. - Vicon's Anavio and product roadmap, including AI features and new hardware, are expected to drive growth in 2024.

Q: Can you talk more about any traction you're seeing already with Anavio?

A: We just started getting the product out into the field and have early pilot projects. It's a new product, so it'll take time to ramp up, but there's interest and we'll ramp it up into 2024.

Q: Can you provide any additional updates to the anticipated Vicon growth beyond what you've already messaged?

A: Demand for Vicon products is growing due to market tailwinds (geopolitical instabilities, security infrastructure modernization). There's an exciting product roadmap with AI features and new hardware to be launched in 2024, and we aim to steadily build on our legacy by serving customers well.

Q: Can you talk about any new markets that you're considering entering with, you know, leveraging and utilization of artificial intelligence?

A: We focus on delivering value to customers willing to pay for better security solutions in existing verticals like hospitals, universities, schools, etc., rather than expanding outside these areas, aiming to grow solution sales and software stickiness to increase gross margin.

Q: Can you discuss the geographic composition really of the Vicon business that's growing so rapidly right now, how much is domestic here in the United States, how much is foreign?

A: Most growth in past fiscal year was domestic (approx 85-90%), with international making up ~15%. Domestic growth driven by increased security needs in schools, religious institutions, etc. International growth potential in emerging economies with growing middle classes and infrastructure development.

Q: What's the average, when you get a new contract here and so on, could you discuss what's the average, I guess, sale that you make?

A: A couple years ago, average order size was around $50,000; in 2023, it was closer to $100,000, and we expect this number to continue growing as we secure larger projects and benefit from residual revenue from customer expansions.

Q: The only overhang here is probably the piece of debt that you've got hanging out there with Chicago Ventures. Can you just kind of give an overview of kind of the way you view how you want to handle that?

A: We have a good relationship with Chicago Ventures, who've worked with us to extend the debt. We aim to continue growing the business to pay down the debt over time as we achieve operating profit and improve our financial position.