REG - Spectra Systems Spectra Systems-SPSC - Audited results for year ended 31 December 2024
31/03/2025 07:15
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RNS Number : 7843C Spectra Systems Corporation 31 March 2025
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Spectra Systems Corporation
Audited results for the twelve months ended 31 December 2024
Spectra Systems Corporation (the "Company"), a leader in machine-readable high
speed banknote authentication, brand protection technologies, and gaming
security software, is pleased to announce its results for the twelve months
ended 31 December 2024.
Financial highlights (Including the consolidations of Cartor Security Printers
("CSP"), a wholly owned foreign subsidiary acquired in December 2023):
· Revenue of $49,191k (2023: $20,288k) up 142.5%
· Adjusted EBITDA(1) up 77.9% at $14,929k (2023: $8,394k)
· Adjusted PBTA(1) up 46.6% to $12,064k (2023: $8,231k)
· Adjusted earnings per share(2) up 36% to US 18.9 cents (2023:
US 13.9 cents)
· Cash generated from operations of $9,899k (2023: $7,524k)
· Cash(3) of $13,354k (2023: $13,253k) and debt(4) of $4,359k
(2023 $5,583k) at
31 December
· The Board are declaring an annual dividend of $0.116 per share
(2023: US 0.116) to be paid in June 2025
1 Before stock compensation expense and excludes non-controlling interest
2 Before amortization and stock compensation expense, excludes non-controlling
interest
3 Excludes approximately $2 million (2023: $513k) of restricted cash and
investments
4 Cartor Holding Limited debt acquired on 21 December 2023 as part of the CSP
acquisition
Operational highlights:
· Sensor manufacturing contract signed on July 15, 2024
· Sensor development program transitioning to manufacturing in Q3
2025
· Central bank materials order for 2023-2024 period completed on
schedule
· Final third-party component test with middle eastern central
bank successfully passed resulting in approval of our substrate with this
security feature
· Successful print trials with a major tax stamp partner for
newest version of smartphone authentication
Commenting on the results, Nabil Lawandy, Chief Executive Officer, said:
"The Company has significantly increased revenue, adjusted profit before tax
and amortization and adjusted EBITDA, which are all ahead of the prior year
and in line with market expectations driven primarily through the executed
sensor manufacturing contract. EPS has increased 36% from the prior year,
including the issuance of additional shares to Cartor Security Printers as
part of the acquisition cost. Our cash position remains strong after the CSP
acquisition. Cash generation was driven by sensor development milestone
payments, a $9.4M sensor manufacturing prepayment, expected strong pre-Covid
19 level sales of covert materials to a central bank, and strong optical
materials sales. With respect to raw materials used in our security
products, they are outside the target list of current tariffs and hence will
not affect our margins on sales of optical materials.
The acquisition of CSP is transformative and brings security printing and
polymer substrate printing into the core capabilities of the Company. Through
efforts at CSP, we have continued our progress with a major central bank to
achieve qualification and eventual near-term participation in a tender for
polymer banknote substrates. CSP also brings many optical materials
opportunities through their existing sales pipelines and has provided Spectra
with rapid access to a number of large corporate partners which can
effectively adopt and drive sales of our cutting-edge authentication
technologies.
The combination of the sensor revenues expected with the execution of the
manufacturing contract, the expected sensor maintenance contract in 2025, the
increased opportunities for optical materials with smartphone verification,
and downstream polymer substrate sales, give the board confidence for
significant increases in revenues, cash generation, and continued long-term
growth.
The Board therefore believes that the Company is on track to achieve record
earnings in 2025"
Spectra Systems Corporation Tel: +1 (0)401 274 4700
Dr. Nabil Lawandy, Chief Executive Officer
Zeus (Nominated Adviser and Joint Broker) Tel: +44 (0)20 3829 5000
James Joyce / James Bavister (Investment Banking)
Fraser Marshall (Corporate Broking)
Allenby Capital Limited (Joint Broker) Tel: +44 (0)20 3328 5665
Nick Naylor/James Reeve (Corporate Finance)
Amrit Nahal/Guy McDougall (Sales and Corporate Broking)
The person responsible for arranging the release of this announcement on
behalf of the Company is Dr. Nabil Lawandy, Chief Executive Officer of the
Company.
Chief Executive Officer's statement
Introduction
We are delighted to report that we outperformed the 2023 earnings results with
revenue for the year up 142.5% at $49,191k (2023: $20,288k), primarily driven
by pre-production development contracts as well as strong demand for our
materials to meet production requirements of our long-standing central bank
customer, as well as the acquisition of CSP into our operations.
As a result of the increased revenue, adjusted EBITDA (before stock
compensation expense) for the year increased 77.9% to $14,929k compared to the
prior year of $8,394k.
Having generated cash from operations of $9,899k (2023: $7,524k), cash at the
end of the period was $13,354k (2023: $13,253k), excluding approximately $2M
of restricted cash and investments (2023: $513k). This also follows the
$5,595k paid to shareholders during June in the form of the Company's dividend
of $0.116 per share.
Review of Operations
Physical and Software Authentication Business
The Physical and Software Authentication Systems business generated revenue of
$30,958k (2023: $18,164k) and Adjusted EBITDA of $13,299k (2023: $8,005k).
Authentication Systems revenues were driven by strong pre-Covid 19 levels of
covert materials sales, continuing funding for sensor development by our
customer and sensor manufacturing revenues. Of particular importance for
future high margin revenues is CSP's support of industrial scale testing of
our optical materials as well as production of our polymer substrate for
qualification and marketing needs.
Our optical materials business received orders from a new K-cup customer in
2024 and has significantly grown the potential of this side of the business
around the enhanced and upgraded smartphone technology which has been
validated on an industrial scale by CSP.
On the software security side of the Company's business, the Secure
Transactions Group generated an Adjusted EBITDA of $(8)k (2023: $132k) on
revenue of $1,956k (2023: $1,670k). The 2024 results are higher in revenue
but not in line with earnings expectations. The earnings are lower due to
hedging on staffing with expensive contract employees which in hindsight could
have been converted to employees. We expect 2025 to achieve higher revenues
and significantly positive earnings associated with this software operation.
Security Printing Business (CSP)
CSP generated revenue of $16,277k and adjusted EBITDA of $1,638k for the
period ending 31 December 2024. During 2024, additional development expenses
of $265,000 were required to complete all the substrate requirements,
including the incorporation of third-party security feature which was the last
outstanding requirement and not under our control. We expect that in 2025,
we will receive full qualification by a central bank that has been evaluating
our substrate for over two years.
Within a year, after a smooth and successful integration, key CSP staff as
well as our UK based sales director have daily calls with the Spectra
materials and business development team in Rhode Island. Discussions take
place on all aspects of the business with a focus on polymer substrate
qualification and scale-up printing of our newest smartphone materials and
technology which has resulted in strong traction with corporate partners
important for commercial success.
On the back of a full polymer substrate qualification, we will implement an
already planned reduction of workforce at CSP UK and France to both improve
productivity and restructure the business around polymer substrate production
and a select group of customers in areas where contracts are long term and
Spectra's technology can be the differentiating factor to win new business and
increase margins.
Prospects
The Company continues to have number of new short-term and long-term
prospects. The short-term opportunities are expected in the 2025-2027 period
and the long-term opportunities are expected in the 2027-2030 time
frame.
The short-term opportunities include:
· Execution of a new maintenance agreement for sensors
currently being manufactured
· Delivery of all sensors to our customer to increase cash to
the highest levels in company history
· Full qualification of our Fusion polymer substrate with a
major central bank
· Sales of Fusion polymer substrate to a central bank and an
invitation to tender for another
· Provide laminate printing including Spectra optical materials
for a major Asian passport authority
· Swiss Post postage stamp contract
· Adoption of our smartphone technology and sale of our
materials for several billion tax stamps per annum with a corporate partner
· Adoption of our covert technology in an EU passport
Long-term opportunities include:
· Further increase of covert authentication material sales by a
central bank
· customer
· Covert materials sales for passports
· Two additional central bank tenders
· Sale of covert machine -readable polymer substrate to a
central bank
· Spirits tracking with two-level continuous ink jet materials
developed for major
· player in tax and revenue stamps
The combination of these prospects generated directly by Spectra Systems Rhode
Island and CSP independently and collaboratively, has positioned the Company
to accelerate its revenue and earnings growth over the coming years. We
continue to develop cutting edge technologies with our expanded security
printing capabilities and expertise to remain a technology leader in the
authentication industry and to offer our shareholders growth through
innovation and dedication, serving both new and existing customers.
Dividend
With the Company having a ninth year of sustainable profits, reaching their
highest levels ever, and having sufficient resources to execute on its growth
plans with its existing cash reserves, the Board is delighted to again issue a
dividend. Our dividend policy takes account of the Group's profitability,
underlying growth, and maintenance of sufficient cash reserves. The Board
therefore intends to pay an annual dividend of $0.116 per share on June 27,
2025 to shareholders of record as of June 13, 2025.
Nabil M. Lawandy
Chief Executive Officer
March 26, 2025
Consolidated statements of income
for the years ended 31 December:
2024 2023
Audited Audited
USD '000 USD '000
Revenue
Product $ 43,052 $ 13,401
Service 6,139 6,453
License and royalty - 434
Total revenues 49,191 20,288
Cost of sales 25,702 6,664
Gross profit 23,489 13,624
Operating expenses
Research and development 2,161 1,450
General and administrative 8,392 4,198
Sales and marketing 1,457 824
Total operating expenses 12,010 6,472
Operating profit 11,479 7,152
Interest income 150 376
Interest expense (198) -
Foreign currency income (loss) (127) (73)
Profit before taxes 11,304 7,455
Income tax expense 2,802 1,430
Net income 8,502 6,025
Net loss attributable to noncontrolling interest (18) (23)
Net income attributable to Spectra Systems Corporation
$ 8,520 $ 6,048
Earnings per share
Basic $ 0.18 $ 0.13
Diluted $ 0.17 $ 0.12
All of the Group's operations are continuing
Consolidated statements of comprehensive income
for the years ended 31 December:
2024 2023
Audited Audited
USD '000 USD '000
Net income $ 8,502 $ 6,025
Other comprehensive income (loss)
Unrealized loss on currency exchange (294) (110)
Reclassification for realized loss in net income 127 73
Total other comprehensive loss (167) (37)
Comprehensive income 8,335 5,988
Net loss attributable to non-controlling interest (18) (23)
Comprehensive income attributable to Spectra Systems Corporation
$ 8,353 $ 6,011
Consolidated balance sheets as of 31 December:
2024 2023
Audited Audited
USD '000 USD '000
Current assets
Cash and cash equivalents $ 13,354 $ 13,253
Trade receivables, net of allowance 3,000 3,777
Unbilled and other receivables 4,597 1,394
Inventory 6,206 6,507
Prepaid expenses 1,152 1,207
Total current assets 28,309 26,138
Non-current assets
Property, plant and equipment, net 9,048 11,098
Operating lease right of use assets, net 5,684 6,308
Intangible assets, net 13,511 13,514
Investments 95 95
Restricted cash 2,063 513
Deferred tax assets, net 2,093 1,844
Other assets 171 586
Total non-current assets 32,665 33,958
Total assets $ 60,974 $ 60,096
Current liabilities
Accounts payable $ 3,631 $ 2,753
Accrued expenses and other liabilities 1,034 813
Line of credit 453 561
Operating lease liabilities, short term 798 1,107
Taxes payable 1,423 514
Third party loans 2,851 1,454
Deferred revenue 4,967 6,058
Total current liabilities 15,157 13,260
Non-current liabilities
Operating lease liabilities, long term 4,969 5,275
Third party loans 1,508 4,129
Contingent consideration 2,513 3,819
Deferred revenue 499 1,500
Total non-current liabilities 9,489 14,723
Total liabilities 24,646 27,983
Stockholders' equity
Common stock 482 460
Additional paid in capital - common stock 57,605 56,152
Accumulated other comprehensive loss (378) (211)
Accumulated deficit (21,936) (24,861)
Total Spectra Systems stockholders' equity 35,773 31,540
Non-controlling interest 555 573
Total liabilities and stockholders' equity $ 60,974 $ 60,096
Statements of cash flows
for the year ended 31 December:
2024 2023
Audited Audited
USD '000 USD '000
Cash flows from operating activities
Net income $ 8,502 $ 6,025
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,194 1,055
Stock-based compensation expense 192 180
Lease expense 11 18
Deferred taxes (228) (886)
Changes in operating assets and liabilities
Accounts receivables 752 2,092
Unbilled and other receivables (3,200) 245
Inventory 258 (1,470)
Prepaid expenses and other assets 445 (450)
Accounts payable 912 (345)
Accrued expenses and other liabilities 1,140 (190)
Deferred revenue (2,079) 1,250
Net cash provided by operating activities 9,899 7,524
Cash flows from investing activities
Restricted cash and investments (1,550) -
Payment of patent and trademark costs (689) (332)
Proceeds from sale of equipment - 9
Acquisition of Cartor Holdings Limited, net of Acquired Cash - (6,201)
Purchases of property, plant and equipment (745) (151)
Net cash used in investing activities (2,984) (6,675)
Cash flows from financing activities
Dividends paid (5,595) (5,182)
Repurchase of shares - -
Third party loan principle payment (1,129) (31)
Line of credit (139) 113
Net cash used in financing activities (6,863) (5,100)
Effect of exchange rate on cash and cash equivalents
49 8
Net increase (decrease) in cash and cash equivalents 101 (4,243)
Cash and cash equivalents, beginning of year 13,253 17,496
Cash and cash equivalents, end of year $ 13,354 $ 13,253
Non-cash investing activities
Contingent consideration
-
3,819
Equity used for investment on CPS
1,278
2,805
Notes to financial information
1. Basis of preparation
This report was approved by the Directors on the 26th day of March 2025.
This financial information has been prepared using the recognition and
measurement principles of US Generally Accepted Accounting Principles. The
Group has not elected to apply IAS 34 Interim Financial Reporting.
The principal accounting policies used in preparing the interim results are
those the Company expects to apply in its financial statements for the year
ending 31 December 2024 and are unchanged from those disclosed in the
Company's Annual Report for the year ended 31 December 2023.
2. Earnings per share
The calculation of basic earnings per share is based on the net income divided
by the weighted average number of common shares outstanding. Diluted earnings
per share is calculated by considering the dilutive impact of common stock
equivalents under the treasury stock method as if they were converted into
common stock as of the beginning of the period or as of the date of grant, if
later. Excluded from the calculation of diluted earnings per common share for
the years ended 31 December 2024 and 2023 were 0 and 132,000 shares,
respectively, related to stock options because their exercise prices would
render them anti-dilutive. The following table shows the calculation of basic
and diluted earnings per common share.
Full Year Full Year
to 31 Dec 2024 to 31 Dec 2023
Numerator:
Net income $ 8,520,046 $ 6,047,921
Denominator:
Weighted average common shares 48,023,360 45,074,264
Effect of dilutive securities:
Stock Options 935,229 3,687,690
Diluted weighted average common shares 48,958,589 48,761,954
Earnings per common share:
Basic: $ 0.18 $ 0.13
Diluted: $ 0.17 $ 0.12
3. Copies of this statement are available to the public on the Company's
website at http://www.spsy.com (http://www.spsy.com) .
4. Reclassification: Certain reclassifications have been made to prior period
amounts in order to confirm to current period presentation.
5. CSP acquisition - On December 21, 2023, the Company acquired 100% of the
shares of Cartor Holdings Limited ("Cartor") in a cash and stock deal for a
maximum consideration of £10.5 million. At completion, the Company paid £5.5
million in cash, issued 947,494 new shares of common stock of $0.01, at an
issue price of £2.11 per share, and assumed £5.5 million in third party
loans. Another £3 million of shares will be issued to the seller subject to
certain contingent contract and milestone performance in the first 18 months
post-acquisition. Total consideration was approximately $13.4 million.
6. Nature of financial information
The Preliminary Announcement set out above is an extract from the forthcoming
Annual Report and Accounts and does not represent statutory accounts for
Spectra Systems Corporation. The statutory accounts of Spectra Systems
Corporation in respect of the period ended 31 December 2024 will be delivered
to the Registrars of Companies before the Company's Annual General Meeting.
It is anticipated that the Annual Report and Accounts will be circulated to
shareholders of Spectra Systems Corporation by April 2025.
Appendix - Reconciliation of Non-GAAP measures
The Company publishes certain additional information in a non-statutory format
in order to provide readers with an increased insight into the underlying
performance of the business. Reconciliations to the GAAP measures are shown in
the following tables:
2024 2023
USD '000 USD '000
Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA):
Operating profit $ 11,479 $ 7,152
Depreciation 2,690 466
Amortization 560 584
Stock compensation 182 180
Operating loss - noncontrolling interest 18 23
Stock compensation - noncontrolling interest (10) (11)
Adjusted EBITDA $ 14,919 $ 8,394
Adjusted profit before taxes and
amortization (PBTA):
Profit before taxes $ 11,304 $ 7,455
Amortization 560 584
Stock compensation 182 180
Operating loss - noncontrolling interest 18 23
Stock compensation - noncontrolling interest (10) (11)
Adjusted PBTA $ 12,054 $ 8,231
Adjusted earnings per share:
Adjusted PBTA $ 12,054 $ 8,231
Income tax expense (2,802) (1,430)
Adjusted earnings $ 9,252 $ 6,801
Diluted weighted average common shares 48,958,589 48,761,954
Adjusted earnings per share $ 0.189 $ 0.139
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