[Management View]
Senstar reported significant margin expansion in Q2 2025, driven by a favorable sales mix and disciplined cost optimization. EMEA delivered notable growth, now comprising 35% of total revenue, attributed to regional investments and vertical strength in energy and infrastructure. Strategic priorities include accelerated business development and innovation in multi-sensor technology to advance competitive positioning. No financial leverage was present at quarter-end, providing flexibility for further investment or operational initiatives.

[Outlook]
Management provided performance guidance indicating continued revenue growth and margin expansion. Future plans include further penetration in data center, utility, airport, and energy verticals, along with targeting noncritical infrastructure segments such as hospitals, educational institutions, and logistics facilities.

[Financial Performance]
Senstar's Q2 2025 financial performance showed strong YoY growth:
- Total revenue increased by 16.2% YoY.
- Gross margin expanded to 66.1%, up 292 basis points.
- Operating expenses rose by 18% due to one-time redomiciliation costs and strategic hires.
- Operating margin improved to 10.1%, with operating income up 46%.
- EBITDA increased to $1.1 million, up from $846,000, with EBITDA margin rising to 11.8%.
- Net income more than doubled to $1.2 million, or 5¢ per share.
- Cash and short-term deposits stood at $21.9 million, with no debt.

[Q&A Highlights]
Question 1: Thanks for a great quarter. If you can elaborate about the one-time expense. What is the expense exactly, and if you can elaborate about the border control segment and biddings.
Answer: Fabien Haubert: Border control is not one of our main target verticals, but given the current geopolitical tensions, we are active in this sector. It is highly scalable and depends on specific circumstances such as political or war scenarios. We contribute technologically to make borders safer, supporting our partners without it being a fundamental vertical for us.
Alicia Kelly: The one-time administration fees were related to consulting fees for concluding the final processes of our Israeli entity. Now that we have redomiciled to Canada, there were a few outstanding activities that needed to be closed up to finish with that legal entity.

[Sentiment Analysis]
The tone of analysts was positive, appreciating the strong quarterly performance and strategic clarity. Management's tone was confident, emphasizing growth and innovation while addressing specific queries with detailed explanations.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | Change |
|---------------------------|-----------------|-----------------|-----------------|
| Total Revenue | $9.7 million | $8.3 million | +16.2% |
| Gross Margin | 66.1% | 63.2% | +292 bps |
| Operating Expenses | $5.4 million | $4.6 million | +18% |
| Operating Margin | 10.1% | 8.1% | +200 bps |
| EBITDA | $1.1 million | $846,000 | +30% |
| EBITDA Margin | 11.8% | 10.2% | +161 bps |
| Net Income | $1.2 million | $493,000 | +143% |
| Cash and Short-term Deposits | $21.9 million | $20.6 million | +6.3% |

[Risks and Concerns]
Risks include changing market trends, reduced demand, and the competitive nature of the security systems industry. Additionally, geopolitical tensions and nonrecurring costs related to redomiciliation may impact future performance.

[Final Takeaway]
Senstar's Q2 2025 results demonstrate robust revenue growth and significant margin expansion, driven by strategic investments and cost optimizations. The company is well-positioned for continued growth, with a focus on innovation and expanding its market share in key verticals and geographies. Management's confident outlook and detailed responses to analyst queries underscore their commitment to sustaining profitability and competitive positioning.