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Welcome to Senstar Technologies First Quarter 2026 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the call over to Corbin Woodhull of Hayden IR. Corbin, would you like to begin?

Thank you, Sherry. I would like to welcome everyone to the conference call and thank Senstar Technologies Management for hosting today's call.

With us on the call today are Mr. Fabien Haubert, CEO of Senstar Technologies; and Ms. Alicia Kelly, the CFO. Fabien will summarize key financial and business highlights, followed by Alicia, who will review Senstar's financial results for the first quarter of 2026. We will then open the call for a question-and-answer session.

I would like to remind participants that all financial figures discussed in today's call are in U.S. dollars and all comparisons are on a year-over-year basis, unless otherwise indicated. Before we start, I'd like to point out this conference call may contain projections or other forward-looking statements regarding future events or the company's future performance. These statements are only predictions and Senstar cannot guarantee that they will, in fact, occur. Senstar does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand, the competitive nature of the security systems industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, we have reconciled our non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements.

And with that, I will now turn the call over to Fabien. Fabien, please go ahead.

Thank you, Corbin, and thank you to those joining us today to review Sensor Technologies Third Quarter 2026 financial results. Our first quarter results reflect continuous project timing delays and elongated customer procurement cycles in portion of our business, particularly in the U.S. government markets and mainly in corrections. Despite this near-term pressure, we continue to see healthy customer engagement and pipeline activity across several of our strategic growth areas.

We're seeing strong underlying momentum across our business and encouraging traction in a number of important growth areas. At the headline level, we reported consolidated revenue of $8.1 million, a 4% decline versus the first quarter of 2025.

As we anticipated, the first quarter of 2026 was transitional and shaped by a few transitory dynamics. Because of this, I will provide more granular details behind our performance as the story is more nuanced than a single percentage.

Now on to review of quarterly highlights and business drivers. Our first quarter performance can be explained by the following factors: continued pressure in the U.S. correction markets following the federal government shutdown and delayed funding deployment. However, while projects in this vertical has been delayed, we did not record any major loss, and we expect most of them to convert over the remainder of 2026. The absence of the large nonrecurring energy project in APAC that benefited the year ago quarter, which, by its nature, did not repeat.

And with Blickfeld revenue coming online 6 weeks after the quarter starts, we have sold that operating costs with less than half a quarter of revenue affecting profitability in Q1. We have retained previously planned projects in our pipeline, though timing has shifted into the second half of 2026. This gives us confidence in the strength of our pipeline and the overall demand environment. Performance across our core vertical markets was mixed in the quarter, declining approximately 25% year-over-year.

The decline was primarily driven by the U.S. correction market weakness as well as tougher comparison in energy due to nonrecurring project in the first quarter of 2025. As a positive offset utility posted plus 40% growth versus the prior year quarter, continued strength in telecom and data centers.

More broadly, traction across these verticals remain on course worldwide, and we're focused on opening new logos while deepening our cross-selling opportunities. On the technology front, I want to spend a moment on LiDAR, because it is increasingly central to our story.

In the first quarter, consolidated LIDAR revenue reached 11% of total revenue and order intake has been strong with the majority of recent bookings scheduled for delivery in Q2 and beyond. It's important to understand that LiDAR is complementary to Senstar solutions and significantly broadens our addressable market. We're pleased to report that combined LiDAR cells across Blickfeld and Senstar grew by approximately 4x during the first quarter, the first full quarter validating the strategic rationale and demonstrating strong early commercial traction.

These figures I provided to offer context on the scale of the LiDAR business prior to the acquisition and may not be disclosed quarterly in the future. Our closest peers in the LiDAR security market are growing at close to 50% per year, and we're confident we can achieve high growth rate in LiDAR as we scale with securely applications, volume and traffic monitoring representing the factors where we are deploying the most resources.

LiDAR is becoming a technological cornerstone of same-store technology in place, an increasingly important role in our long-term strategic plan. The integration of the Blickfeld and Senstar commercial teams is progressing well. we're aligning our go-to-market strategies across multiple regions, and the response from customers has been outstanding, proof of concepts, evaluations and form of rotation are being run across all our traditional vertical worldwide, and we continue to expect accelerated growth globally without requiring significant investments.

Together, we're well portioned to scale our LiDAR capabilities globally leveraging sensor customer relationships and like technology and market presents. Product innovation has always been a key differentiator for Senstar and the first quarter of the year was no exception. At ISC Westy Springs, we introduced two major innovations that received exceptionally positive market reception. One, our next generation embedded fiber platform features a compact ruggedized AI-enhanced architecture that significantly improved detection performance, ease of deployment and operational robustness, all with a fully redesigned graphical user interface. This represents the next chapter of our market-leading fiber perimeter detection franchise.

Through the Sensor Flow engine, which is the next major enhancements were Senstars' software management platform. It brings intelligent workflow engine functionality and the new graphical interface that enables sophisticated scenario understanding across sensors and over time, transforming our security management software and video management software platforms into an operational intelligence system.

Both innovations are on track for market release in the second half of 2026, and we believe that will reinforce our competitive positioning and support expansion within existing accounts. Turning to our geographic performance. The quarter reflected a mix of near-term timing pressure along some continued strength in several strategic growth areas.

The primary drivers of the slight year-over-year overall decline was the temporary U.S. federal government shutdown, which impacted portions of our U.S. Corrections business, as well as a difficult comparison against several large nonretained projects recognized in the prior year, particularly in APAC.

At the same time, we continue to see encouraging traction across a number of important markets and geographies. Europe, Middle East and Africa delivered strong growth in the quarter, reflecting the benefits of our long-term investment in the region. Expanding customer relationships and growing demand across utilities, telecom, energy, military and security applications. We are also seeing increasing LiDAR engagement in EMEA, including activity in traffic and volume monitoring alongside our traditional perimeter secured business.

In North America, while the U.S. correction market remained pressured by the federal shutdown and delayed procurement activity, customer engagement and project activity levels remain healthy. We also continue to see encouraging order activity in LiDAR and ongoing commercial engagements across data centers, utilities, energy, airport and industrial application. In APAC, results were impacted primarily by difficult operations against unusually strong prior year project activity.

Excluding this non-electric project, customer activity levels remain constructive, and we continue to invest in expanding our presence across key verticals, including data centers, energy transport, utilities and corrections. Overall, while product timing continues to impact midterm revenue conversion during the quarter, we remain encouraged by customer engagements, order activity, geographic diversification and the expanding contribution from LiDAR-related opportunities.

To summarize, we recognize the need to improve consistency in quarterly performance. At the same time, our booking, customer engagement order activity and the diversification of our pipeline continue to support our confidence in the long-term opportunity, and we remain focused on improving revenue conversion over the coming quarter.

The confidence is supported by the following: one, EMEA continues to deliver strong growth, supported by our long-term investment in the region and increasing demand across verticals; two, we continue to see healthy customer engagement and project activity in the U.S. correction market despite delayed procurement activity associated with the federal shutdown as well as in the utilities data centers and energy sectors; LiDAR ,#3, is becoming an increasively potent growth driver for Senstar as the Blickfeld combination strengthens our position in these high-growth markets; four, we're launching two new innovative products in the second half of 2026 that we believe will reinforce our competitive positioning and support expansion within existing accounts; and five, our pipeline remains diversified across multiple geographies, technologies and end markets, supporting future growth opportunities as project timing normalizes.

Before turning the call over to Alicia, I would like to thank our employees for the continued dedication, our customer for their trust and our shareholders for their ongoing support. I will now turn the call over to Alicia for a review of the financial results in more detail.

Thank you, Fabien. Our revenue for the first quarter of 2026 was $8.1 million, which compared to $8.4 million in the year ago quarter. This year-on-year reduction is related to nonrecurring project timing in APAC and impacts from the federal government shutdown in the U.S., positively offset by a stronger performance from LiDAR.

The EMEA region was the strongest performing geographic area in the quarter, with revenue increasing by 43% year-over-year. Growth in the region was fueled by steady demand in utilities, telecom, energy, corrections, solar farms and military.

As Fabien discussed previously, LIDAR applications continue to generate accelerated inbound customer demand, including significant opportunities within traffic and volume monitoring.

Revenue from North America declined by 20% in the quarter, driven by a 21% revenue decline in the U.S. As Fabien commented, the performance in the U.S. was attributed to challenging market dynamics. Including a 35% reduction in the corrections vertical and the impact of the federal government shutdown and associated project delays that we expect to resume in 2026.

Canada experienced pressure in the quarter as well, with revenue declining by 14%. We experienced solid traction in energy, military, utilities and corrections verticals, and we remain focused on serving our customers in this important region. The APAC region declined by 30% in the quarter due to challenging year-over-year comparisons, which included a large energy project in the first quarter of 2025 that did not reoccur.

The quarter included contribution from energy, corrections, utilities, telecoms, data centers and growing traction in the transport vertical. Our geographic breakdown as a percentage of revenue for the first quarter of 2026 compared to prior year quarter is as follows: North America, 41% versus 49%; EMEA, 45% versus 30%; APAC, 13% versus 17%. All other regions were immaterial for both periods.

First quarter gross margin of 60% compared to 67.2% in the year ago quarter. This variation in gross margin is primarily the result of less favorable product mix, lower revenue and overhead expense cadence.

Our operating expenses were $5.5 million, representing an 18% increase compared to $4.6 million in the first quarter of the prior year. Operating expenses represent 67.5% of revenue compared to 54.8% in the year ago period. The acquisition of Blickfeld contributed approximately $600,000 in incremental operating expenses during the ownership period.

The largest year-over-year increases were in G&A and marketing. Marketing costs increased primarily due to the addition of the Blickfeld sales commercial structure as well as targeted investments in sales and marketing initiatives within the Senstar Group. The increase in G&A was mainly attributable to the Blickfeld acquisition, foreign exchange impacts and in the extraordinary bad debt provision of approximately $100,000.

The operating loss for the first quarter of 2026 was $603,000 compared to operating income of $1 million in the first quarter of last year. Operating loss for the quarter was primarily driven by revenue declines and high G&A expenses. The company's EBITDA for the first quarter was a loss of $403,000 compared to positive EBITDA of $1.2 million first quarter of last year.

Financial loss was $49,000 in the first quarter of this year compared to financial income of $269,000 in the first quarter of last year. This is mainly a noncash accounting effect we regularly report due to the adjustments of the evaluation of our monetary assets and liabilities denominated in currencies other than the functional currency of the operational entities in the group in accordance with GAAP.

Net income attributable to Senstar Technology shareholders in the first quarter was a loss of $800,000 or a loss of $0.04 per share compared to net income of $1 million or $0.04 per share in the first quarter of last year.

Added to Senstar's operational contribution are the [ comparable ] platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the first quarter were approximately $420,000 compared to roughly $500,000 in the year-ago period. Turning next to our balance sheet.

Cash and cash equivalents and short-term bank deposits were $10.6 million, or $0.45 per share as of March 31, 2026. This excludes restricted cash of $900,000. The restricted cash relates to Blickfeld's closing balances. This compares to $22.5 million or $0.96 per share as of December 31, 2025. The company has no debt as of March 31, 2026.

This concludes my remarks. Operator, we would like to open the call to questions now.

[Operator Instructions]. Our first question is from Ken Liddy with Oppenheimer & Company.

Could you talk more about your opportunities that are not security-related for LiDAR?

Sure. So thanks, Ken, for this question. So we see two main basically applications on on-security. The main one today is what we call the volume metering. So it's using the LiDAR, LiDAR basically provides digital twin and our 3D rebuild pictures of environment. And when using this technology to measure on the fly, basically, volumes of both materials like salt, like sand, like fertilizer, petrochemicals and so on.

There's been one of the major verticals of Blickfeld mainly in the U.S., and it has a very strong traction. We've been working so far mainly in the salt measuring for basically solving the roads and DOTs, but we're expanding to petrochemicals and others.

We see very high potential in this application in the future, via, as I've mentioned, petrochemical application, fertilizer anything related to bulk transports because you can measure on the spot, the exact volume of basically a truck or whatsoever or a container without stopping the operation and optimize your logistics streams of these materials.

And with regards to the traffic, could you talk about what type of application...

Thank you very much. So traffic monitoring is one of the -- which we foresee basically in the future has a very strong growth potential. You have two main applications, you have highways and whatsoever and what we call the Crossroads. Today, Crossroads is very complex in the sense that you need to excavate and to put sensors below its growth, its crosspoints to measure the number of vehicles crossing and whatever, with a lot of uncertainty.

Putting a LiDAR gives you the possibility to classify basically the type of vehicles, cars, bikes, parts, their speed, their direction and to give basically lots of information in the purpose of Smart City management. It's a business that is picking up worldwide. And when -- where Blickfeld had some first very interesting wins prior to the acquisitions, which we are deploying and we're willing to invest a lot.

I would see that as something which is not short term, but short term, midterm, I would say, but we believe a very high growth potential in this vertical as well.

Staying on LiDAR. Previously, you worked with Blickfeld on a small airport, I believe, in Europe. Is there any opportunities like that?

Yes, we have plenty. So basically, that's what we have said, we are -- if you take basically the LiDAR sales and I've given those figures, which we will not repeat over time. But if you take the lines of the period, they went to 0 last year to 11% of the whole quarter, taking into account that life sales were only accounted from the 14th of February until the end of the quarter, it represents 11% from 0 last year. So you can see the growth.

Number two, if you take basically the invoice of both companies from January 1 until the end of the quarter, both companies, the sales has been multiplied by 4 versus last year. So it gives an idea of traction. So we have been able to sell in correction in airport, in -- oh gosh, it's a data center, of course.

And so it's been everywhere we had the security footprint we're basically either making proofs of concept or sales of this application on top of the perimeter. And that has been an amazing success, and we see basically a very high potential growth in the secure application it's hard to give an exact project because we currently have tens of projects which we're running. And it's expanding our markets by the potential target seems to us between 5x and 10x the current total addressable market.

Are you converting more long-term customers into permanent customers rather than repeat customers rather than one project to another project, getting larger -- getting more repay customers on security?

So we see 3 -- oh, sorry, sorry, Ken. I thought you were done, excuse me, Ken.

Go ahead.

So we see three basically top of customers. So it's not the new of the old. We see three ways to market to promote the LiDAR. The first one is pretty much all our existing customers are currently basically investigating or purchasing according our LiDAR on top of the current relationship. So that's something which we see as a as a major win. On top of it, we have a new range of customers for other applications which are interested.

And finally, we're working as well with distributors to distribute the product much broadly for different applications. So in our vertical, it's working with existing and new ones. And we're trying to broaden it with approaching and working with distributors to broaden the spread to the market for different application, eventually less critical. But yes, we see a traction pretty much in our verticals and beside our verticals.

And one more question. With regards to your overall pipeline for the company, is it greater now than it was in, say, December 31 or about the same? Or has it declined?

So it's hard to answer precisely this question. I would with a lot of questions tell you globally that it's kind of comparable. We have a very strong pipeline. What I can say, the LiDAR pipeline is increasing tremendously from 1 quarter to the other continually for a couple of quarters, tremendously.

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

Thank you. On behalf of Sensor management, I would like to thank our investors for their interest and long-term support of our business. Have a good day.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Ladies and gentlemen, thank you for standing by. Welcome to the Senstar Technologies Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to hand the call over to Corbin Woodhull of Hayden IR. Corbin, would you like to begin?

Thank you, Latanya. I would like to welcome everyone to the conference call and thank Senstar Technologies management for hosting today's call.

With us on the call today are Mr. Fabien Haubert, CEO of Senstar Technologies; and Ms. Alicia Kelly, the CFO. Fabien will summarize key financial and business highlights, followed by Alicia, who will review Senstar's financial results for the fourth quarter and full year of 2025.

We will then open the call for a question-and-answer session. I would like to remind participants that all financial figures discussed today are in U.S. dollars and all comparisons are on a year-over-year basis, unless otherwise indicated.

Before we start, I'd like to point out this conference call may contain projections or other forward-looking statements regarding future events or the company's future performance. These statements are only predictions, and Senstar cannot guarantee that they will, in fact, occur. Senstar does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand, the competitive nature of the security systems industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, we have reconciled our non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements.

You can also refer to the company's website at www.senstar.com for the most directly comparable financial measures and related reconciliations. And with that, I would now hand the call over to Fabien. Fabien, please go ahead.

Thank you, Corbin, and thank you to those joining us today to review Senstar Technology fourth quarter and full year 2025 financial results.

We continue to deliver solid full year performance with growth in revenue, margin expansion and continued profitability. In 2025, revenue was $36.4 million. Gross margin expanded to 65.5%, and we delivered net income of $3.2 million, while maintaining a strong balance sheet with $22.5 million in cash and no debt.

Those results reflect steady demand across our business and the trends of our operating model. Importantly, revenue from our core verticals grew 5% for the year, supported primarily by continued strength in correction and energy, particularly in North America and EMEA.

The performance reinforces the resilience of our business and the relevance of our solutions across critical infrastructure markets. Now on to a review of quarterly and annual highlights. Moving to the fourth quarter, we encountered more challenging conditions than anticipated. Revenue declined 14% year-over-year to $8.8 million, which also impacted margins in the quarter.

The fourth quarter was impacted by several nonrecurring and timing-related factors, not a change in the underlying demand. Those factors include delays of government projects, mainly in the U.S. correction verticals following the U.S. federal government shutdown and a nonrecurring European telecom utility project, which will convert to further revenue generation in 2026.

Most of these projects have shifted into 2026 and [ future ] period. This gives us confidence in the strength of our pipeline, which continues to grow and the overall demand environment as reflected in our full year results, where our core verticals grew by 5% despite the fourth quarter timing impact. Looking more closely at our verticals, we continue to see meaningful opportunities across data centers, energy, utilities, correction, airports and solar farms.

These key verticals are increasingly focused on security and operational intelligence, which aligns well with our technology and capability. Our strategy remains focused on repeatable deployment and scalable account expansion where we can leverage our installed base and deepen relationship with key customers over time to cross-sell our advanced technology solutions dedicated to demanding verticals.

On the technology front, 2025 marks a breakout year for LiDAR adoption and customer engagement across multiple verticals with LiDAR increasingly deployed alongside our traditional solutions with no cannibalization effect. This translated into strong LiDAR sales growth, mainly in the fourth quarter.

This is an important distinction as LiDAR is expanding our target market, creating new use cases across virtually all our verticals and enabling Senstar to address a broader range of customer applications. We saw strong growth in LiDAR-related sales and activity with continued momentum and solid pipeline creation. Customer acceptance of LiDAR for both security and operational applications has accelerated dramatically, driving robust pipeline expansion within the strategic initiative, competing and enhance our unrivaled PIDS and software range.

Our 3D LiDAR technology in secure application does not compete directly with our current fence detection solution, but with alternative technologies such as thermal cameras, video and analytics, radar, 2D LiDAR and others. It also addresses further surveillance needs for several other critical points within our vertical market, expanding considerably our addressable market and customer use cases.

Our acquisition of Blickfeld completed in the beginning of 2026 represent a transformative step to enhance our competitive position and capture share of this rapid growth market. Our expectation for accelerated growth globally without requiring significant investment is supported by maximizing our global unrivaled sales and technical footprint across its current vertical markets to [ distribute ] this groundbreaking technology.

On top of that, Blickfeld offers high-growth perspectives in volume monitoring and traffic application where Blickfeld has already developed a footprint. Turning to our geographic performance. U.S. and LatAm remain our strongest market for the full year of 2025 with solid contribution from corrections and energy.

Throughout 2025, we secured important new wins across health care, utilities, oil and gas and energy, while data center, airports and increasingly LiDAR continue to generate meaningful pipeline creation. Revenue from the U.S. and LatAm region increased 5% for the year, but declined by 20% in the fourth quarter due to government funding delays following the government shutdown.

Encouragingly, most of those projects are still alive, and we have seen some positive activity in support of our view that this was largely a timing issue. Canada was a standout performer, returning to growth with over 110% revenue increase in the fourth quarter and 22% for the full year, driven by strong wins in correction and utilities.

Our methodical investment in the EMEA region over the last several years are positioning Senstar to capture new opportunities with key accounts in targeted verticals. The region delivered low single-digit revenue growth for the year, reflecting underlying resilience and continued customer demand, though the fourth quarter was impacted by difficult comparison related to a large-scale nonrecurring utility telecom project in the prior year, which is expected to drive revenue in 2026.

We secured major wins in solar farms, energy, data centers, correction and airports. And together with strong pipe creation, we have renewed conviction behind the region's growth prospects in the coming quarters. We're encouraged by the steady demand we see in the region. Supporting a robust pipeline and favorable growth outlook, the EMEA region is experiencing a significant increase in requests for LiDAR applications as well.

In Asia Pacific, performance improved in the fourth quarter with 21% growth. On an annual basis, Asia Pacific declined 9%, reflecting the impact of a material nonrecurring project in Q2 2024. We're optimistic by recent wins and continued pipeline development across the key verticals, including solid wins in data centers and correction serving as a great source of momentum for quarters and years to come.

Across all regions, our business development strategy is gaining traction. We're expanding our presence with key accounts, increasing cross-selling opportunities and building a more diversified and resilient revenue base. Together with Blickfeld, we also secured several promising projects across military and government airport corrections and data centers.

Looking ahead to 2026, we're enthusiastic about the opportunities in front of us. We're seeing continued activity across data centers, utilities, energy and LiDAR, supported by a growing pipeline. Our business development strategy is centered on high-growth verticals, an appetite for complexity, opportunities for scalability worldwide and leveraging our pre-existing footprint.

Senstar is making inroads with new key accounts and deepening existing customer relationships. Our pipeline is growing further supporting improved market penetration and enhanced revenue diversification. The addition of Blickfeld to our current portfolio will further assist us in expanding our range of solutions and address more security and nonsecurity applications to our current targeted vertical markets. We're also substantially broadening our current addressable market and strengthening our ability to successfully approach verticals we were not physically present.

Importantly, Senstar will actively support and further develop Blickfeld's efforts to expand their position in volume and traffic monitoring applications, which are extremely attractive markets, combining vertical excellence, high-growth margins and worldwide scalability.

I will work together with Blickfeld to develop positive synergies with the [indiscernible] to accelerate its growth. We entered 2026 with an expanding pipeline and are focused on converting that activity into revenue. At the same time, we remain disciplined in costs, ensuring we balance investments in growth with continued operational efficiency.

In summary, we entered the new year with a strong balance sheet, steady demand across our core markets, exciting pipeline and an enhanced technology portfolio. Our focus is on execution, converting our pipeline into revenue, expanding within key verticals and driving sustained growth over time.

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 ongoing support. I will now turn the call over to Alicia for a review of the financial results in more detail.

Thank you, Fabien. Our revenue for the fourth quarter of 2025 was $8.8 million, which compared to $10.2 million in the year ago quarter. This year-over-year reduction is related to nonrecurring project timing and delays in government projects following the federal government shutdown in the U.S., positively offset by stronger performance from the energy vertical.

The Asia Pacific region was the strongest performing geographic region in the quarter, with revenue increasing 21% year-over-year. Growth in the region was fueled by steady demand in data centers, utilities and health care.

Revenue from the U.S. and LatAm declined by 20% in the quarter. As Fabien commented, the performance in the U.S. was impacted by challenging market dynamics, including the delays in government projects following the federal government shutdown.

Canada delivered a positive offset to performance in North America in the quarter, with revenue increasing by 110% versus the fourth quarter of last year. The EMEA region declined by 24% in the quarter due to a challenging year ago comparison, which included a large telecom project in the fourth quarter of 2024 that did not reoccur. The quarter included contributions from the government, airports, corrections and data center verticals.

The geographical breakdown as a percentage of revenue for the fourth quarter of 2025 compared to the prior year quarter is as follows: North America, 44% versus 42%; EMEA, 41% versus 46%; APAC, 15% versus 11% and all other regions were immaterial for both periods. Fourth quarter gross margin of 61.5% compares to 64.5% in the year ago quarter.

The variation in gross margin is primarily the result of less favorable product mix in addition to tariff impacts associated with a U.S.-based project, lower revenue and overhead expense cadence. Our operating expenses were $5.6 million, up 8% compared to $5.1 million in the prior year fourth quarter and represented 63.3% of revenue versus 50.2% in the year ago period.

The increase was primarily driven by G&A expense growth of 30% due to the transaction costs associated with Blickfeld acquisition. As a positive offset to the research and development investment, we were awarded a onetime government subsidy for our AI development and initiatives, validating our innovative technology solutions.

Operating loss for the fourth quarter of 2025 was $159,000 compared to operating income of $1.5 million for the fourth quarter of last year. Operating loss for the quarter was primarily driven by revenue declines and higher G&A costs.

The company's EBITDA for the fourth quarter was $35,000 compared to $1.6 million in the fourth quarter of last year. Financial loss was $150,000 in the fourth quarter of this year compared to financial income of $463,000 in the fourth quarter of last year. This is mainly a noncash accounting effect we regularly report due to adjustments in the valuation of our monetary assets and liabilities denominated in currencies other than the functional currency of the operating entities in the group in accordance with GAAP.

Net loss attributable to Senstar Technologies shareholders in the fourth quarter was $33,000 or $0.00 per share compared to net income of $1.6 million or $0.07 per share in the fourth quarter of last year.

Added to Senstar's operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the fourth quarter were approximately $925,000 compared to roughly $680,000 in the year ago period.

Turning now to the full year results. Revenue for the full year 2025 was $36.4 million, an increase of 2% compared to $35.8 million in 2024. Growth EMEA was driven by the North American region and LatAm with strength in the corrections and energy verticals.

The U.S. led the revenue growth of 9%, followed by stable single-digit growth in EMEA, offset by a 9% decline in Asia Pacific. The geographical breakdown as a percentage of revenue for 2025 compared to 2024 is as follows: North America, 49% versus 45%; EMEA, 36%, the same as the prior year; APAC, 14% versus 15%; and Latin America, 1% versus 3%, 2025 gross margin was 65.5% compared to 64.1% in 2024.

The roughly 150 basis point improvement in gross margin was largely attributable to the balanced product mix, product redesigns and efficiency gains in our material purchase process. Our operating expenses were $20.8 million, up 9% compared to 2024.

The increase is the result of investments made in business development as well as transactional costs associated with Blickfeld acquisition, which was announced in December of 2025, as well as the closing of the related cost for a foreign entity.

Operating income for 2025 was $3 million compared to $3.9 million in 2024. The decline in operating income was related to slower revenue growth and increases in general and administration costs associated with Blickfeld transaction and the closing of the foreign entity. Financial income was $71,000 in 2025 compared to $731,000 in 2024.

Net income attributable to Senstar Technologies shareholders in 2025 was $3.2 million or $0.14 per share compared to $2.6 million or $0.11 per share in 2024.

The company's EBITDA for 2025 was $3.7 million compared to $4.6 million in 2024. Added to Senstar's operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions.

Our corporate expenses for 2025 were $3.2 million compared to $2.2 million in 2024. Turning now to our balance sheet. Cash and cash equivalents and short-term bank deposits as of December 31, 2025, were $22.5 million or $0.96 per share.

This compares to $20.6 million or $0.88 per share as of December 31, 2024. The company has 0 debt as of December 31, 2025. That concludes my remarks. Operator, we'd like to open the call now to questions.

[Operator Instructions] The first question comes from [ Ted ] Liddy with Oppenheimer.

With regards to the Blickfeld acquisition, is there a specific vertical or opportunity you see for the technology?

Yes. Thanks, [ Ted ]. Yes, indeed, we -- today, we're seeing 3 main paths for growth. First of all, the LiDAR within our current verticals, the one we are addressing increases tremendously the addressable market in the sense that in a lot of cases, people don't go ahead with sensors or buried solution that will privilege I would say, cableless or wireless solutions such as thermal cameras, such as radar, video and analytics and with LiDAR, we're able with the 3D LiDAR, we're able to address one part of that where we were not able to compete in the past when the decision from an end user was not to secure mechanically the fence.

So that's the first addressable market, which we see absolutely rising to us because the technology provides USPs, which can defeat and beat other technologies. So that's the number one. Number two, I would say, within our current verticals that the LiDAR give us the possibility to address spots, which we did not address before.

Typically, when you have sally ports, or roofs or corridors or outside zones, without a fence. So that's increasing tremendously there. So within our verticals, we're already developing a pipeline there.

On top of it, volume monitoring application to basically on the spot monitor bulk for petrochemicals, for fertilizer, for salt, for whatever that can be bulk, LiDAR gives the possibility to do live measure on the spot, and it's a vertical on which Blickfeld is already very active, and we are committed to supporting them developing further the vertical.

Last but not least, the traffic application with crossroad monitoring and tunnels and whatever where Blickfeld already has a footprint is a vertical where we see very close to ours, a very good path to growth. So there are the 3 main directions we want to leverage Blickfeld and the LiDAR technology for. I hope I have answered your question, [ Ted ].

Yes, you have. And as far as Blickfeld is concerned, are the charges we saw in the fourth quarter, are you expecting more in the first quarter? Or is that mostly behind you? Or what can we expect?

So [ Ted ], I cannot comment on the first quarter. What I can tell you is that the LiDAR sales in the fourth quarter are only Senstar sales because we used to have an OEM partnership with a technology partnership with Blickfeld.

And so the sales of Blickfeld are not part of the Q4 results. In Q1, there will be basically -- we will present later on the sales from Senstar of our LiDAR and of course, of the Blickfeld entity.

And [ Ted ], just to clarify for your question there. So we have incurred the cost through 2025 for Blickfeld, and we expect that there will be some costs still in the future period, but not substantial.

Okay. Good. And one other question with regards to the projects that were delayed in the United States. Have any of those projects broke ground or are you moving forward? Or is that still pending?

So all of them are moving forward. That's what I can say. All the one we have identified in Q1 are still alive and working on. And we have good hopes to convert some of them in the quarters to come.

I want to be careful because you're never protected against another shutdown or whatsoever. But those projects are still alive. What I mean alive is we still work on them with the operational entity from the customers and whatsoever.

So we did not encounter major losses there or project [ desperation ] or whatsoever. They're still on, and we still have good hope they will materialize in the quarters to come.

And the -- I think it was the telecom project in the [ EMEA ] area, you're expecting that to hit again in 2026, '27, [ 2026 ].

Absolutely. We expect some piece of it in '26. We don't know exactly. It was a multiphase project, basically. The first huge phase has occurred last year.

The further phase got, I would say, delayed for some reason outside our control. But yes, some of it will reoccur in the coming quarters, absolutely.

And I thought there were some charges with regards to closing of a foreign office. Where was that located?

So that's the relocation of our -- that's related to the relocation of the company, which occurred early 2025 in Canada, and we've closed basically the previous entity, which was the legacy of the Magal office.

Understood. And what is your employee count? How much has that gone up with the Blickfeld acquisition?

It went up 28 people with the acquisition. So we're around 150 people with Blickfeld.

There are no further questions at this time. I would like to turn the call back to Mr. Haubert. Would you like to make your concluding statement?

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

Thank you, ladies and gentlemen, for your participation today. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Ladies and gentlemen, thank you for standing by. Welcome to Senstar Technologies Third Quarter 2025 Results Conference Call. [Operator Instructions] Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Corbin Woodhall of Hayden IR. Corbin, would you like to begin.

Thanks. Senstar Technologies management for hosting today's call. With us on the call today are Mr. Fabian Halbert, Chief Executive Officer of Senstar Technologies; and Ms. Alicia Kelly, the Chief Financial Officer. Fabian will summarize key financial and business highlights, followed by Alicia, who will review Senstar's financial results for the third quarter of 2025.

We will then open the call for a question-and-answer session. I would like to remind participants that all financial figures discussed today are in dollars and all comparisons are on a year-over-year basis, unless otherwise indicated. Before we start, I'd like to point out this conference call may contain projections or other forward-looking statements regarding future events or the company's future performance. These statements are only predictions and Senstar cannot guarantee that they will, in fact, occur. Senstar does not assume any obligation to update that information. Actual results or events may differ materially from those projected including as a result of changing market trends, reduced demand, the competitive nature of the security systems industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, we have reconciled our non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to the company's website at www.senstar.com for the most directly comparable financial measures and related reconciliations. And with that, I will now hand the call over to Fabian. Fabein, please go ahead.

Thank you, Carmen, and thank you to those joining us today to review Senstar Technologies Third Quarter 2025 financial results. We continue to deliver on our strategic objectives throughout the first 9 months of 2025, while balancing targeted investments to drive long-term market share gains across our key verticals and geographies. Revenue from our 4 core verticals increased by 12% in aggregate year-over-year and 23% on a year-to-date basis with notable strength from the correction and energy verticals. In parallel, our disciplined operating models generated gross margin above our targets as well as continued profitability and a growing cash balance with no debt. Those results reflect our differentiated technology and strong execution in addressing the needs of our customers.

Our performance is driven by an unwavering focus on generating sustainable growth across our core and emerging verticals. Now moving on to a review of quarterly highlights. Revenue in the third quarter was relatively flat compared to the same quarter last year, reflecting the impact of our fuels contract in the prior year that did not recur. On a year-to-date basis, revenue increased by 8%. We are prioritizing repeatable deployments and scalable account growth and experiencing increasing market demands were advanced differentiate solutions as well as tailwinds from growing legislation around the security of critical infrastructure. Our gross margin of over 67% reflects the differentiation power of sensor technology in the competitive markets and underscores the team's success in meeting the growing global demand for security modernization. We continue to invest in technological innovation to boost our competitive strength and gain market share in scalable verticals.

Consistent with prior quarters, we maintain rigorous our margin objectives aimed at generating sustained profitability going forward. Operational leverage, combined with stable revenue generation drove third quarter net income to $1 million and $3.2 million year-to-date, a significant improvement versus the comparable 9-month period in 2024. In terms of core geographic markets, Sensor diversified footprint continues to strengthen with North America delivering broad-based double-digit gains across our key verticals. North America remains our largest as best market as a percentage of our sales, with revenue increasing by 17% in the third quarter, mainly due to continued momentum in the correction and utilities verticals as was the case in the prior quarter.

Revenue from the U.S.A. was particularly strong increasing by 22% in the third quarter, driven by the successful efforts of our business development team to gain market share across multiple high-growth verticals. Sales from Canada increased by 7% on a year-to-date basis, sustained by utilities and correction. Our methodical investments in the EMEA region over the last several years, our positioning sensor to capture new opportunities with key accounts in targeted verticals, transport, utilities, solar farms, logistics and data centers are continuing to show momentum and robust customer adoption, leading to 15% revenue growth year-to-date. The Asia Pacific region is stabilizing.

Following a decline in the second quarter of 2025. Our business development and strategy is starting to deliver new wins across data centers, utilities, correction and logistics verticals. APAC remains a key market for Senstar and the achievements of our business development team are positioning the company for long-term gains in the region. Moving on to product updates, technological innovation is the cornerstone of our playbook to advance our competitive positioning and capture market share. Our advanced proprietary technology translated to impactful wins for our AI-powered intrusion detection systems, multisensor cases, leveraging the first-generation sensored center, place had support for daisy chaining up to 16 devices as well as power of Ethernet support for third-party devices, covering 100 meters distance for a single POE connection.

Our industry-leading technology virtually eliminates use cell on rates optimize total cost of ownership and reduces installation and maintenance expenses, opening the door to significantly larger market opportunities. The momentum generated from multi sensor is in full alignment with our focus on delivering disruptive security solution. and the targeting of highly scalable projects and customers alike. Turning to other strategic initiatives. As discussed on the prior earnings conference call, Senstar is actively working to broaden this addressable market by targeting the security of critical points within not critical infrastructure, such as hospitals, museums, and educational institution and logistic facilities.

Our business development team is successfully expanding into new while deepening existing customer relationship through cross-selling. The team is fully ramped and increasingly converting pipeline opportunities into incremental sales across our target verticals and geographies. The sales strategy of our business development team is centered on high-growth verticals, and appetite for complexity, opportunities for scalability worldwide and leveraging our preexisting footprint. These efforts will be sustained as we build upon the development of large key accounts aimed at accelerating market share gains across high-potential sectors. In summary, our third quarter results demonstrate the resilience of our business model.

Execution of our disciplined strategy is expanding our market presence, strengthening competitiveness in core verticals and accelerating growth in high-value solutions while upholding our 60%-plus gross margin profile. With the momentum generated throughout the first 9 months of this year, and a growing pipeline of opportunities to capture, we reiterate our commitment to sustainable business and profitability. We remain dedicated to innovation, investing in next-generation security solutions that enhance our competitive position and support customers worldwide. Before turning the call to Alicia, I want to express my gratitude to our employees for the strong execution of our strategy to grow market share across key global verticals to our valued customers for their continuous partnerships and to our shareholders for their ongoing support. Thank you for your attention.

I will now turn the call over to Alicia for a review of the financial results in...

Thank you, Fabien. Our revenue for the third quarter of 2025 was $9.5 million, declining modestly by 2% compared to $9.7 million in the third quarter of 2024. On a year-to-date basis, revenue increased by 8%, driven by corrections, rapid gains in energy, coupled with growing momentum from utilities and data centers. The U.S. was the strongest performing geographic market in the quarter with revenue increasing by 22% year-over-year and 19% on a year-to-date basis versus the prior year period. .

Growth in the region was fueled by steady demand in corrections and energy verticals, along with new customer wins resulting from our business development team's efforts to grow market share. Revenue from the EMEA region declined by 10% in the quarter, though increasing by 15% on a year-to-date basis. In the year ago quarter, -- in the year was awarded multiple large contract wins, leading to challenging comparisons in the third quarter of this year. New customer wins and increased cross-selling with existing customers drove the performance in the first 9 months of the year, most notable, the transport, utilities, renewable energy and data center verticals. Asia Pacific experienced continued pressure in the quarter, with sales declining by 14% primarily resulting from the phaseout of a customer contract that did not contribute revenue in the current quarter.

As Fabien discussed previously, the rate of decline improved as our business developed and focused on key account initiatives helped to secure strategic wins in data center, utilities, corrections and logistics. Similarly, revenue from Canada declined 21% in the quarter due to the normal quarterly fluctuations in the timing of contract awards. However, Canada's revenue increased 7% on a year-to-date basis on sustained traction with utility and correction verticals. LATAM continues to represent a growth opportunity for Senstar. So the region remains smaller in terms of revenue contributions. As we have stated in prior quarters, demand for security modernization in LATAM remains and we continue to be well positioned to capitalize on opportunities in the region. The geographical breakdown as a percentage of revenue for the third quarter of 2025 compared to the prior year quarter is as follows: North America, 51% versus 43%; EMEA, 36% versus 39%; APAC, 12% versus 14% and all other regions were immaterial for both periods.

Third quarter gross margin of 67.3% compared to 68% in the year ago quarter. The stability in gross margin is primarily the result of favorable product mix diligent expense controls and components and design optimization. Our operating expenses were $5.2 million, up 10% compared to $4.8 million in the prior year third quarter and represented 55% of resin versus 49.1% in a year-ago period. The increase was primarily driven by G&A expense growth of 47% and due to an exceptional cost association with the consulting engagement in support of strategic growth, in addition to targeted selling expense in core and emerging vertical end markets. As a positive offset to research and development investments, we were awarded a onetime government subsidy for an AI development and initiative, validating our infinitive technology solutions.

Relatively flat revenue and gross margin drove our operating income for the third quarter to $1.1 million, down 37% compared to $1.8 million in the year ago period. Operating margin of 12.1% in the third quarter of 2025 compared to 18.8% in the year-ago period. On a year-to-date basis, operating income increased by 31% to $3.1 million. reflecting the value of our platform, solid execution in a competitive market and disciplined operating model. The company's EBITDA for the third quarter was $1.3 million compared to $2 million in the third quarter of last year, with EBITDA margins contracting to 13.9% from 20.7% in the year ago quarter. Financial income was 2 in the third quarter of this year compared to financial income of $111,000 in the third quarter of last year. This is mainly a noncash accounting effect we regularly report on due to adjustments to the valuation of our monetary assets and liabilities, denominating currencies other than the functional currency of the operating entities in the group in accordance with GAAP.

Net income contributed to Senstar Technologies shareholders in the third quarter was $1 million or $0.04 per share compared to net income of $1.3 million or $0.06 per share in the third quarter of last year. Added to Sensor's operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the third quarter were approximately $890,000 compared to roughly 470,000 in a year ago period. Turning to the balance sheet. Cash and cash equivalents and short-term bank deposits as of September 30, 2020, were $21.7 million or $0.93 per share. This compares to $20.6 million or $0.88 per share as of December 31, 2024. The company had 0 debt as of September 30, 2025. Before opening the lines for Q&A, I'd like to remind those listenings that we will be attending the 22nd Annual Security Investor Conference on December 17 and 18, posted by Raymond James in New York City. We encourage those who are interested to register with your Raymond Gen sales representative. That concludes my remarks. Operator, we would like to open the call for questions now.

[Operator Instructions] Our first question comes from the line of Mike Distiller with AMX Holdings.

Quick question and comment. The only question I had on the financials was just on the corporate expense side. You went from, I don't know, 430, I think, to $980. I was just wondering why those -- why there was such a tremendous jump over 100% is the simple question.

Yes. So the corporate expenses went from $470 million to $890 million this quarter, and that would be the cost, the abnormal costs that we were speaking about in terms of the consulting fees. .

Okay. And the only other thing, I understand the consulting fee having been and I've been almost 30-year member of the collection of shareholders. Just quickly, the interesting part about the AI development, and I'm not on the bandwagon necessarily, but I think you guys already pursuing this in terms of not just sales -- this more a comment than a question, not just sales but partnerships. I know that your business development sales folks are already directed this way and whether it's the protection of actual facilities or energy behind those facilities. I just know that your legacy utility companies, your current 20-year relationships. Those folks are also dipping their toes into providing that energy, not just all these new new fangled degrees, et cetera. So I know you're on this, and I just thought you had any comments. I'd be happy to it.

So related to AI in particular?

Yes. And the energy involved right, both of them. Okay. So I'm not sure I'm going to try to -- I understand you're going to okay. We use today, there are 3 ways which AI crosses our world. The first way is that we have sensors which analyzes data coming from the sensors on fences, buried, and we're developing.

Of course, we're working with AI models who are helping having 100% detection resetting next to 0 the forearm rate and helping us not only but to classify the information to provide not only alarms, but what we call situational awareness. That's the number one. The #2 use of AI, like every company, we're taking steps ahead to use AI to smoothen our process to be quicker, faster, more efficient. And of course, we're working and implementing of course, following the compliance of all data protection or whatever to improve our performance.

On the third way, AI is translating into the building of a lot of new data centers. And those data centers that you refer, need power. So yes, indeed, the development of AI worldwide does translate as we see it in a multiplication of the data centers in the complex signification of the data centers, which lead themselves to the multiplication of new power generation solar, it could be the small and modular reactors. It could be a different source of generation, which we intend to ensure the protection of both data centers themselves and their use of power. Does it answer your question?

Yes, sir. Just 1 more comment is just that your business development I'm sure, is already doing this, is working in tandem in partnership with like in kind, meaning not only using AI to improve send stores products, but to actually integrate the construction of these facilities, we view with you folks at the desk, helping them out and they helping you out. And I just think that kind of partnership would benefit both. I'm not -- obviously, I'm a long-term player here. And I just wanted to -- I'm sure your people are doing this and I just thought I'd stress that some of those like in kind sit downs before shovels hit the ground are super helpful. That's it. And I thank you for your continued success, and that's -- that's my comment. .

Thank you very much. Thank you for your support and trust in our company.

Our next question comes from the line of Ken Liddy with Oppenheimer.

You mentioned in the call that the multisensor is showing some progress. I wanted to see what what customers, what verticals are most interested in deploying the multisensor and their solution, the security solution.

Okay. Thank you for your question. So we have -- I can answer it -- we're not giving typically names of customers or whatever. But what I can tell is that -- we have 2 data multicenter. The first multisensor is the first generation is used as a stand-alone product. And we have been basically mainly broadening a lot of PCs in many verticals to secure seaports of prison to secure, I would say, callable entrances of, I would say, utilities, power generation, whatever. We have deployed it as well into to secure some logistic premises, and we're pushing it via distribution. So it's a bit hard to say everywhere has been going because we have been starting to push it through distribution.

So we have the water is starting to boil, generating more and more interest. And the product is broadly currently tested to be evaluated as standard or whatsoever. And that is happening in a lot of verticals. Some we have access because we know us. Some we do not see. So yes, we see a movement happening here, which is very encouraging. On top of it, we have the multicenter daisy change and that you can use as a vertical sense using different technology video, radar, PIR, accelerometer with old process with intelligence used in daisy-chain like to secure a perimeter. And we have basically had some very interesting first wins. The product mantra is not long back, and we had some very interesting first wind in the data center world with this solution.

Okay. That's helpful. And if customers try to secure a prison, are they ordering 1 multisensor or several multi sensors? How does that work?

So you have 2 cases. When a lot of critical infrastructure business, are rather conservative and evaluating and standardizing some technologies because before it becomes authorized to bid with because you go through lots of public tenders and then so on. So in this case, they order typically 1 and 2, to put in place 2 stage for several months. That's 1 thing.

When we work, it depends on the nature. Some are sold. It depends on the nature of the presence of the place. In some cases, you will have many seller port to be guarded. And depending on the size and the configuration and what you want to use it for, you might do 2, 3, 4, 5 multiply the number of sites or very often what happens is that people use it to secure spot which is showing some problems today and to replace different technologies. In other words, to make it simple. When people build something from scratch, they will design it to run the product. That can take several weeks or months before it happens. The way it's been used so far is these products solve problems with other technology have difficulty to solve other than using in combination. They buy basically 1, 2 of those to basically fix their current issue before redesigning their systems. So when it's a fireman fire fighter is going to be a couple of units when they think long term, then the units can be higher.

Understood. And then 1 other question. Typically, the fourth quarter tends to be 1 of your 2 biggest quarters of the year. Do you see that being playing out that way this?

I'm sorry, we're not giving forward-looking statements. I do regret there. It's not something we can share. What I can tell you is that the whole team is working as hard as they can to deliver the best result possible.

Is there a particular region or a vertical that is looking stronger than others at this point? The future, not for the quarter, I'm saying overall in your business.

Okay. Let's put it this way. I cannot give forward-looking statements. That being said, we have 2 strong areas which are North America, U.S.A. mainly, and Europe, which we want to keep boosting and investing a lot. So we're working hard to develop those. On the verticals, our core verticals are heavily growing, and we want to keep basically investing on those. Some areas, we show some verticals more than the other. So it's hard to give you an answer per globally. But what we see is that overall, those 4 verticals keep growing 2 digits even when the turnover is rather stable, which is really proving that we're adopting the right strategy.

Our next question comes from the line of Noam Nakash with IMA Value Fund.

Yes. Fabien. The question is without the ending of the Asia Pacific contracts. What is the calculated growth for the company in the quarter.

It's hard to say. I'm afraid I cannot comment it. Let's put it this way. We had 1 very large 1 this last year, which did not reoccur. It's hard to provide a comment, and we're not getting into this level of details. So let's put it this way, it was sufficiently material last year that it has been hard to compensate with the growth associated by other verticals.

And just another follow-up. Looking forward, you wrote about the operating model of 10% organic growth, do you think it's still the run rate going forward?

We are striving and fighting for it, Noam. That's the 1 thing I can tell you. Please, apologies, but we're not authorized to provide some looking for statements. But what I can tell you is that the whole team has been and keep being extremely involved to work on developing a sustainable growth.

Thank you. Another follow-up, if I may. The consulting fees, do you believe they will support future growth?

At least, it's what we hope. We have invested substantial money to work on -- to work on different ways to grow. And absolutely, we were -- at least this investment we made a hard to build our growth is -- we hope is -- we'll translate into some future growth. It's a hope, it's a wish and we work hard on it.

Thank you. Next question comes from the line of Ken Liddy with Oppenheimer.

In your operating expenses, your general and administrative are up considerably in the quarter and for the year. Is that from hiring new people to develop your business?

The major increase in our expenses has been in a large consulting fee to work on our future growth. On top of it, there are some investments being made, of course, to be able to sustain the growth. I will quote business development, where we have invested some, but I want to insist that most of this increase in operation came from G&A around this consultant fee around the growth focus. And where -- is there a specific region that is...

Is there a specific region that is directed that you try to grow? Like is there a specific reason or specific vertical that you're trying to grow?

We want to keep growing globally. We believe that -- our goal is to grow globally by gaining market share in our verticals globally by basically increasing our footprint in our vertical -- of course, working on cross-selling our solution by adding by combining technologies because we have a very ample portfolio and on top of it, developing what we said, securing noncritical spots, excuse me, of noncritical infrastructure. But yes, globally, we want to address this close globally.

Understood. And the consulting fee about how much was that in the quarter?

I'm afraid we cannot disclose in detail, but it was a substantial part substantial part of it -- vast majority of this expense rate.

And should we expect that in future quarters? Or is this more of a onetime -- so it's only what you call exceptional. We cannot comment whether there will be further expenses like that so far.

But it's not something which -- it is not something which we want to make structural, okay? It's exceptional, sometimes exceptional could...

There are no further questions at this time. Mr. Haubert, would you like to make your concluding statements.

Thank you. On behalf of sensors management, I would like to thank our investors for their interest and long-term support of our business. Have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, thank you for standing by. Welcome to the Senstar Technologies Second Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to hand the call over to Corbin Woodhull of Hayden IR. Corbin, would you like to begin?

Thank you, Paul. I would like to welcome everyone to the conference call and thank Senstar Technologies' management for hosting today's call. With us on the call today are Mr. Fabien Haubert, CEO of Senstar Technologies; and Ms. Alicia Kelly, the CFO. Fabien will summarize key financial and business highlights, followed by Alicia, who will review Senstar's financial results for the second quarter of 2025. We will then open the call for a question-and-answer session. I would like to remind participants that all financial figures discussed today are in U.S. dollars and all comparisons are on a year-over-year basis, unless otherwise indicated.

Before we start, I'd like to point out that this conference call may contain projections or other forward-looking statements regarding future events or the company's future performance. These statements are only predictions, and Senstar cannot guarantee that they will, in fact, occur. Senstar does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand, the competitive nature of the security systems industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, we have reconciled our non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to the company's website at www.senstar.com to the most directly comparable financial measures and related reconciliations.

And with that, I would now hand the call over to Fabien. Fabien, please go ahead.

Thank you, Corbin. Thank you for joining us today to review Senstar Technologies' second quarter 2025 financial results. We delivered strong second quarter results marked by the successful execution of our growth strategy and targeted investments to drive sales across our key verticals and geographies. Revenue for our 4 core verticals increased by 27% in aggregate year-over-year, which led to total consolidated revenue growth of 16.2% and robust expansion in both gross and EBITDA margins.

Now moving on to a review of quarterly highlights. Revenue in the second quarter was driven by a well-balanced mix of products with notable vertical market strength from energy and corrections. These results reflect the sustained customer demand and, when combined with our cost optimizations and focus on selling high value-added solutions, drove material gross margin expansion to 66.1% in the second quarter, comfortably above our targets. We're continuing to invest in technological innovation to protect our competitive positioning and fuel growth while diligently managing costs to deliver margin expansion and sustainable profitability.

In the second quarter, operating expenses remained relatively stable as a percentage of revenue at 56% compared to 55% in the prior year quarter despite an 18% increase in absolute terms. This operational leverage, combined with strong double-digit growth in revenue and gross profit, drove EBITDA to $1.1 million. EBITDA margin expanded by 161 basis points to 11.8%. Net income increased significantly compared to the same period last year.

In terms of the core geographic markets we served, Senstar global diversification continues to strengthen with EMEA, North America and Lat Am delivering broad-based double-digit gains across our key verticals. In EMEA, the region is becoming a larger contributor to revenue and grew by 52% in the second quarter while also gaining over 800 basis points in share of total sales. Our sustained investment in Europe over the previous years are coming to fruition with the EMEA region now representing 35% of total revenue, up from 27% in the year ago period. The main verticals driving this record in the region include energy, particularly oil and gas, along with solar farms and electrical generation. In addition, there has been solid customer adoption in higher set value airport and data center infrastructure.

In North America, which remains our largest market as a percentage of sales, revenue increased by 29% in the second quarter, mainly due to continued momentum in the correction and utilities verticals. North America delivered solid growth in the quarter despite moderate sales performance in Canada, declining slightly in the second quarter after a strong first quarter.

In the second quarter of this year, the Asia Pacific region faced a challenging year-over-year comparison against exceptionally strong growth of 135% in the prior year quarter, resulting in a 47% revenue decline versus the same quarter last year. The year ago quarter included a large customer contract, which did not repeat this quarter. Historically, APAC has been among the fastest-growing regions for Senstar, and we're continuing to experience strength from data centers, utility and airport perimeter security solutions.

In contrast, the Lat Am region returned to growth in the second quarter with revenue increase by 26% compared to the year ago period. We attribute this turnaround to the successful execution of our strategy aimed at delivering industry-leading solution to international markets where security modernization is becoming an increasing priority.

Looking at revenue contribution per vertical. Our 4 key verticals grew 27% in aggregate in the second quarter driven primarily by strong performance in correction and energy. We're continuing to identify material growth opportunities across renewable energy, data centers and utilities, and Senstar is reinforcing its commitment to further penetrate those verticals and capture market share.

In terms of product update, technological innovation is the cornerstone of our strategy to strengthen our competitive positioning in the market. We're continuing to make meaningful progress with MultiSensor, an important validation by our customers. Senstar is focused on delivering advanced and disruptive security solutions tailored to our targeted vertical markets. We aim to enhance security and operational efficiency by combining cutting-edge sensors with intelligence information management software. This strategy enables Senstar to grow its market share within core sectors while expanding its scope by offering differentiated high-value solutions that sustain our gross margins of 60% and above.

In addition, Senstar is actively working to broaden its addressable market by targeting the protection of critical points within noncritical infrastructure, such as hospitals, educational institution and logistics facilities. Leveraging our unrivaled MultiSensor, we deliver unique performance by eliminating nuisance alarm rate, optimizing total cost of ownership and significantly reducing installation and maintenance costs, unlocking opportunities in a much larger market segment.

Turning to other strategic initiatives. As discussed on the prior earnings conference call, we are pleased with the execution of our business development team following the addition of several key hires earlier in this year. The team is now fully ramped and gaining traction with their core focus on driving growth through new customer acquisition and broader penetration within our core verticals. Based on encouraging initial results, we plan to expand the team further to support the development of several large key accounts and accelerate market share gain across high potential sectors.

In summary, our second quarter results demonstrate the resiliency of our business model with continued momentum in both revenue growth and margin expansion. We remain focused on differentiating ourselves from the competition by investing in innovative security solution for our international customer base. I want to express my gratitude to our employees for the strong execution of our strategy to grow our market share across key global verticals, to our valued customers for their continued partnerships and to our shareholders for their ongoing support. Thank you for your attention.

I will now turn the call over to Alicia for a review of the financial results in more detail.

Thank you, Fabien. Our revenue for the second quarter of 2025 was $9.7 million, representing a 16.2% increase compared to $8.3 million in the second quarter of 2024. The sales expansion was driven by holistic growth across our key geographic and vertical markets with corrections, energy and utilities serving as strong contributors.

EMEA led the geographic regions with 52% year-over-year revenue growth. New customer wins and increased cross-selling with existing customers drove the successful performance in the quarter, most notably the energy, data center and airport perimeter security verticals. The U.S. followed with a 35% increase in revenue, fueled mainly by the continued demand in the corrections, energy and utility industries where customers are increasingly seeking innovative security solutions. The Lat Am region experienced an important inflection point in the quarter with revenue increasing by 26%. As we have stated in the prior quarters, demand for security modernization in Lat Am remains, and we continue to believe the region represents an important growth opportunity.

The Asia Pacific region, on the other hand, experienced pressure in the quarter, with sales declining by 47%, primarily resulting from the phaseout of a customer contract that did not contribute revenue in the current quarter, in addition to the challenging year ago growth comparison that Fabien discussed previously. Similarly, revenue from Canada declined in the quarter due to normal quarterly fluctuations in the timing of contract awards, but we remain well positioned to capture new projects through the remainder of this year. As mentioned, in Q1, Canada was the strongest growing region with sales primarily generated by the corrections and energy segments.

The geographical breakdown as a percentage of revenue for the second quarter of 2025 compared to the prior year quarter is as follows: North America, 53% versus 47%; EMEA, 35% versus 27%; APAC, 11% versus 23%; Latin America is even at 1%; and all other regions were immaterial for both periods.

Second quarter gross margin was 66.1% compared to 63.2% in the year ago quarter. This 292 basis point margin improvement was primarily the result of strong expense controls, more favorable product mix and component and design cost optimization. Our operating expenses were $5.4 million, up 18% compared to $4.6 million in the prior year second quarter. The increase was primarily driven by onetime nonreoccurring administrative costs associated with finalizing the corporate redomiciliation from Israel to Canada as well as the addition of key personnel to keep our company headcount and targeted selling spend in core growth verticals and markets with a positive offset from research and development investment optimization.

Strong revenue and a sizable increase in gross margin drove our operating income for the second quarter to $1 million, a 46% improvement compared to $700,000 in the prior year ago period. Operating margin expanded by over 200 basis points, reaching 10.1% in the quarter. The company's EBITDA for the second quarter was $1.1 million compared to $846,000 in the second quarter of last year with margins expanding by 161 basis points to 11.8% from 10.2% in the year ago quarter. These gains underscore the operating leverage in Senstar's operating model as we scale.

Financial expense was $330,000 in the second quarter of this year compared to financial income of $103,000 in the second quarter of last year. This is mainly a noncash accounting effect we regularly report due to adjustments to the valuation of our monetary assets and liabilities denominated in currencies other than the functional currency of our operating entities in the group in accordance with GAAP.

Net income attributable to Senstar Technologies shareholders in the second quarter was $1.2 million or $0.05 per share compared to a net income of $493,000 or $0.02 per share in the second quarter of last year. Added to Senstar's operational contribution are the public platform expenses and amortization of intangible assets from historical acquisitions. The corporate expenses for the second quarter were approximately $865,000 compared to roughly $400,000 in the year ago period.

Turning next to our balance sheet. Cash and cash equivalents and short-term bank deposits as of June 30, 2025, were $21.9 million or $0.94 per share. This compares to $20.6 million or $0.88 per share as of December 31, 2024. The company has 0 debt as of June 30, 2025.

This concludes my remarks. Operator, we would like to open the call to questions now.

[Operator Instructions] Our first question is from Noam Nakash with IMA Value.

Thanks for a great quarter. If you can elaborate about the onetime expense, how -- what's the expense exactly? And if you can elaborate about border control segment and biddings.

Okay. If you agree, I'm fine with starting with the border control before to let Alicia comment on the onetime expense. So border control is not one of our main target verticals. But clearly, as per current situation where tension between countries is very high, yes, we're active in this sector. The main reason why we're not active in this vertical is that it is highly scalable because it depends basically on specific, I would say -- on specific circumstances due to political or whatever scenarios. But as far as we can contribute to make them safer, we're happy to technologically contribute to those supporting our partners. I hope I answered your question. So we cover this market without being a fundamental of our verticals. Alicia, [indiscernible].

For the first part of your question, so the onetime administration fees were relating to consulting fees for concluding the final processes related to our Israeli entity. Now that we've completed the flip and we have redomiciled to Canada, there was a couple of outstanding activities that just needed to be closed up in order to finish with that legal entity.

Thank you. There are no further questions at this time. Mr. Haubert, would you like to make your closing statement?

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

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.