Multiple large orders for Vicon Industries‘ equipment helped drive revenues up 37% for parent company Cemtrex Inc. (NASDAQ: CETX, CETXP) during its fiscal second quarter ended March 31, 2023. Revenue for Q2 2023 increased to $16.1 million, compared to revenue of $11.7 million for Q2 2022.
Cemtrex’s security segment revenues increased 47% to $9.9 million in as border protection vertical drove new order volumes for Vicon. The company’s gross margin hit 46%, up from 32% in the prior year quarter. Operating income was $0.4 million for Q2 compared to operating loss of $2.9 million last year. Cash and equivalents as of March 31, 2023 was $6.6 million.
Vicon recently launched a new suite of AI-based analytics with enhanced lineup of Vicon Roughneck AI Camera series. The company received an $800,000 order through Vicon Industries for a new prison being built in the United Kingdom to install a full end-to-end system of Vicon’s surveillance products including hardware and software. Also, Vicon received a $1.5 million in January, and a follow-up order for $1.1 million in May, from a large border protection customer in Texas to expand its security technology system with new security solutions.
As a result of the company’s performance, Cemtrex announced a capitalization restructure, effecting a 1-for-35 reverse stock split.
Cemtrex Chairman and CEO Saagar Govil notes, “The second quarter of fiscal year 2023 was highlighted by a return to operating profit driven by the sweeping efforts we have taken throughout the business. Sales execution by Vicon with multiple large orders, resulted in revenue growth of 37% year over year. In combination with operational improvements, the quarter led to a gross margin improvement of 1360 basis points to 46%. We continue to expect increases in our gross margin over the next couple of quarters as we make further enhancements in Vicon’s business. Overall operating income for the quarter increased to $0.4 million compared to an operating loss of $2.9 million a year ago.
“Our quarterly performance is now reflecting our shift in focus to the Vicon and Advanced Industrial Services (AIS) businesses. With the actions we have taken to drive business improvement and the increasing demand for security solutions, we expect to achieve a full year operating profit for FY 2024. We also believe that there is room within our inventory and asset base to draw extra liquidity in order to continue to maintain a healthy cash position.
“Turning to our businesses, year over year improving revenues in our Security segment were led by Vicon with a 47% increase, driven by strong demand from customers for its award-winning Roughneck cameras and Valerus video management software solutions. During the quarter we released a new suite of AI-based analytics in an enhanced Vicon Roughneck® AI Camera series, further improving our unified VMS platform for controlling video, access control, license plate recognition (LPR), and other integrated applications. We view this release as the first step in our AI roadmap and ultimately believe that AI is going to contribute massively to improving the security industry, and our product roadmap is intensely focused on leveraging these new AI tools to deliver features and benefits over the coming months and years.
“Vicon orders included a recent $1.5 million order and follow-up $1.1 million order from a current large border protection customer in Texas to expand its security technology system with new security solutions. Increasing modernization of the current security infrastructure is accelerating the growth of the border security market, driven by the rise of geopolitical instabilities and an increase in border threat assessments.
“Another $800,000 order for a new prison being built in the United Kingdom includes a full end-to-end system of Vicon’s surveillance products including hardware and software, equipped with the latest smart technologies to better protect prisoners, staff and public. We see demand in the U.S and internationally from corrections facilities as a growth driver for us, as they are increasingly focusing on deploying the latest and greatest technologies.
“With Vicon on track to launch more products this year, as well as continued improvements to our core software platform Valerus, we expect to drive further growth. We believe revenues for Vicon Industries, based on our current demand, will exceed our earlier expectations of $28.0 million for fiscal year 2023 given the growing demand for our products and solutions. Additionally, we see further opportunity to grow our Gross Margin Percent in FY 2024.
“Revenue for our Industrial services segment, AIS, increased 23% during the quarter mainly due to increased demand for our services. We believe AIS will continue to expand revenues and may exceed our original 3% target of $21.8 million for fiscal year 2023 driven by continued strength in the Industrial Services market. The Gross Profit Margin for AIS improved to 36% for the quarter compared to 29% for the prior year quarter driven by increased prices and lower subcontractor costs. The Gross Margin Percent is expected to maintain or exceed approximately 34% for the FY 2023 for Advanced Industrial Services. Looking ahead, we believe that continued reshoring of manufacturing to the US as well investments in US infrastructure will play a key role in AIS’ long-term growth.
“Looking ahead, we are highly focused on Vicon’s ability to disrupt the status quo of how the security industry traditionally operates with state-of-the-art surveillance cameras and VMS software. With achieving a critical milestone of operating profit for the quarter, we are optimistic for the year ahead and the ability to achieve full year positive operating income in FY 2024 while driving attractive top line growth. We look forward to providing additional updates in the months to come as accelerate our efforts to build long-term value for our shareholders,” concluded Govil.