REG - Spectra Systems Spectra Systems-SPSC - Interim Results for Six Months Ended 30 June 2025
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RNS Number : 1078B Spectra Systems Corporation 29 September 2025
Spectra Systems Corporation
Interim Results for the Six Months Ended 30 June 2025
Spectra Systems Corporation ("Spectra Systems" or the "Company"), a leader in
machine-readable high speed banknote authentication, security printing, brand
protection technologies and gaming security software, is pleased to announce
its interim results for the six months ended 30 June 2025.
Financial highlights:
Revenue of $34,965k (2024: $22,739k) up 54%
Adjusted EBITDA(1) up 101% at $15,764k (2024: $7,847k)
Adjusted PBTA(1) up 130% to $14,346k (2024: $6,225k)
Adjusted earnings(2) per share up 85% to US $20.8 cents (2024: US $11.2
cents)
Cash usage during operations $(670k) (2024: $262k)
Cash(3) of $2,556k (2024: $4,444k) and debt(4 )of $3,718k (2024 $4,803k) at
30 June 2025
1 Before stock compensation expense and excludes non-controlling interest
2 Before amortization and stock compensation expense, excluding
noncontrolling interest and fewer remaining tax credits
3 Does not include $5,000,000 (2024: $2,025,000) of restricted cash (Central
bank customer) and investments
4 Cartor Holding Limited debt acquired on 21 December 2023
Operational highlights:
· Completed balance of fiscal year 2024-2025 order
· Our Fusion substrate was selected by a major banknote printer as part
of their response to a central bank tender which is expected to be awarded in
H2
· Provided major Middle Eastern central bank with another 10,000-sheet
sample of our Fusion substrate for additional testing
· Produced a cutting-edge polymer house note with Casa de Moeda
(Brazilian government printing facility) with both our sustainable polymer and
machine-readable covert authentication capability
· 28% increase in sales of optical materials for document and brand
authentication
· Successful offset print trial for second generation smartphone
technology with a major tax stamp printer with a second test planned for H-2
using flexographic printing
· Validated one of our new covert features with the two largest
suppliers of forensic equipment for passport control
Commenting on the results, Nabil Lawandy, Chief Executive Officer, said:
"The Company's first half revenues and earnings are up from the six months
ending 30 June 2024, with increases of 54% and 130% for revenue and PBTA,
respectively. The increased revenue in the first half is derived from cost
accounting-based revenue recognition on the $39,600K manufacturing contract
with a central bank customer, sales of covert materials, exceptional
performance from the gaming software security group, and sales of optical
materials."
"Our efforts to exploit our credibility in high-security solutions for
banknotes have resulted in a request to submit pricing to a European passport
authority as well as undertake a sample trial with a major supplier of
security paper in H2. Further leveraging our expertise, we have commenced
trials and pricing discussions with the same paper supplier to protect
documents printed on conventional office paper."
"Our Fusion polymer substrate efforts have yielded tangible commercial
prospects in the near term. The selection of our substrate by a major banknote
printer for their response to a tender by a central bank is a major milestone.
In addition, we have submitted another 10,000-sheet sample to our Middle
Eastern central bank partner and downstream customer for qualification. With
the next tender now expected in Q2-Q3 of 2026, we have been asked to provide
another 10,000-sheet sample in October for further testing. As stated
previously, the expectation is that once we formally qualify, we will receive
a small order which will be followed by an invitation to tender."
"In H1, the security printing segment of our business has supported our
polymer substrate efforts with a major banknote printer as well as with our
ongoing qualifications with a Middle Eastern central bank. In addition, the
Cartor security printing group has developed the relationship and provided
the substrate for production of a house note by the government printing arm of
Brazil."
"With recently announced advances in our smartphone technology, which allow
for a larger number of smartphone models and a faster response. These
developments have fueled traction with a significant tax stamp customer
opportunity. This opportunity has been delayed by the customer, but their
interest remains high, and we expect a second trial in H2 following the very
successful trial in H1."
"The combination of the sensor contract award, the continued strong covert
material sales, a boost in optical materials sales, an exceptional performance
by the gaming software operation, and the significant advancements in the
commercialization of our polymer substrate have positioned us for growing our
profitability in the coming years."
"The Board therefore believes that the Company is on track to achieve record
earnings and meet market expectations for the full year."
Spectra Systems Corporation Tel: +1 (0)401 274 4700
Dr. Nabil Lawandy, Chief Executive Officer
Zeus Capital Limited (Nominated Adviser and Joint Broker)
Tel: +44 (0)20 3829 5000
James Joyce / James Bavister/ Andrew de Andrade (Investment Banking)
Fraser Marshall (Sales and Corporate Broking)
Allenby Capital Limited (Joint Broker)
Tel: +44
(0)20 3328 5665
Nick Naylor/James Reeve (Corporate Finance)
Amrit Nahal/ Tony Quirke (Sales and Corporate Broking)
David Johnson (Analyst)
Chief Executive Officer's statement
Introduction
In H1 2025, we have already achieved a PBTA level which is 57% of the market
expectations for the year and are confident we will achieve market
expectations for the full year.
Revenue was up 54% at $34,965k (2024: $22,739k) for the first half of the
year. The increased revenue in the first half is primarily driven by the
continued cost accounting-based revenue recognition on the $39.6M
manufacturing contract, milestone payments from the pre-production development
contract with a central bank customer, sales of covert materials, increased
optical materials sales relative to H1 2024, and exceptional revenue from the
gaming software group. As a result of the revenue recognition from the
sensor contract and high margins, adjusted EBITDA (before stock compensation
expense) for the half year increased 101% to $15,764k compared to the prior
year of $7,847k.
Having spent cash from operations of $670k (2024: $262k), cash at the period
end amounted to $2,556k (2024: $4,444k), excluding $5 million of restricted
cash (2024: $2,025k), reflecting (i) the $5,601k paid to shareholders during
June (2024: $5,593k) in the form of the Company's annual dividend of $0.116,
and (ii) significant pre-purchasing of sensor manufacturing components and
equipment, aggressive polymer substrate marketing efforts, and federal and
state tax prepayments. Unrestricted cash is expected to rapidly increase
beginning in H2 2025 with the first payment for sensors and release of $1,000k
of restricted cash. In 2026, with the completion of the balance of sensors
being built, cash from the sensor contract is expected to further increase by
an additional $26,600k since the first prepayment of $9,400k in 2024. The
remaining cash will be received over a period of a few years as sensors are
deployed.in the field.
Operating expenses decreased in H1 with reductions of 6% in general and
administrative expenses, 33% in selling and marketing expenses, and 10% in
research and development. Spectra Systems is reporting $3.7 million debt on
30 June. This is a 22.6% reduction from the debt carried in H1 2024 with the
remaining debt at an average interest rate of 3.06%. This increase relative
to the average rate at the time of the acquisition is due to the repayment of
significant interest-free customer debt and purchases of critical equipment
for the advancement of polymer production.
Review of Operations
Authentication and Security Printing Business
The Authentication Systems business generated revenue of $23,582k (2024:
$13,773k) and Adjusted EBITDA of $14,277k (2024: $7,005k).
Revenue growth in the first half was primarily driven by the continued cost
accounting-based revenue recognition on the $39,600K manufacturing contract,
milestone payments from the pre-production development contract with a central
bank customer, sales of covert materials, increased sales of optical materials
relative to H1. In 2024 we recognized $8,167k of the production contract
value, and in H1 of 2025 we recognized $11,278k. By the end of H1 we ave
recognized 49.2% of the contract. We expect to produce our first batch of
sensors in H2 of 2025 and complete the sensor manufacturing in H2 of 2026. The
first batch of sensor production this year and the manufacturing of the entire
sensor order will bring cash in H2 of this year and begin significantly
re-building our cash position through 2026. During H2 of 2025, the customer
will also release $950k of restricted cash and a further $3,000K by the end of
2026. As a result of the increased revenue, and product weighted high
margins, adjusted EBITDA (before stock compensation expense) for the half year
increased 101% to $15,764k compared to the prior year of $7,847k.
The security printing group generated an EBITDA of $426k on a turnover of
$9,293k in H1 which when combined with $1,173k of depreciation resulted in a
net loss of $ 847k. The losses in H1 are due primarily to changes to the
invoicing and delivery policy by a major customer following their acquisition
and continued customer-specific polymer substrate development. Based on H2
planning, the full year is expected to result in significantly improved
performance. In H1 we have submitted several responses to tenders for
passports as well as hybrid stamps which include optical materials from the
USA-based operation.
Repeatable and growing profits from the Cartor security printing group will
require the elimination of unpredictable earnings from small jobs that do not
financially support their staffing requirements. As previously referenced,
there is an executable plan for restructuring the business, which will refocus
management on the goal of producing polymer banknote substrate while defraying
labour and infrastructure costs through multi-year postal and tax stamp
contracts with technologically leveraged margins. We plan to restructure the
security printing operations by Q2 of 2026. Modeling predicts that this will
generate repeatable and significant profitability even in the absence of
Fusion sales while having the capability to produce substrate for over 2.5
billion notes per annum.
Our smartphone technology has been greatly enhanced to allow virtually all
phones with a camera to be used and to provide a faster and easier user
experience. At the start of H1, we partnered with a major track and trace
provider for a significant multi-billion stamps per annum opportunity.
Despite a highly successful trial, the partnership agreement was breached by
our partner, and we have since shifted our efforts directly to the customer.
With the securing of a local agent and the successful first trial, we are
expecting a second trial using a different printing method to accommodate the
customer's equipment utilization preferences. Through our security printing
group, we have also made business development inroads with several national
postal organizations to use smartphone technology to prevent reuse and
counterfeit stamp sheets sold at very low prices on the internet.
The gaming security software side of the Company's business, the Secure
Transactions Group, generated an Adjusted EBITDA of $1,062k (H1 FY24: $143k)
on revenue of $2,089k (H1 FY24: $1,087k). The H1 results are significantly
higher than expected and were driven by new requirements for increased player
options for USA state lotteries. We have been systematically changing our
profit margins as contracts come up for renewal and are optimistic that 2025
will usher in a new and more consistently profitable gaming software business.
Strategy and Prospects
The Company's strategy for increasing revenue and earnings continues to be
focused on selling more products to existing customers, penetrating other
security markets including tax stamps, passports and labels in parallel to
selling cutting edge polymer substrates into the fastest growing segments of
the banknote industry.
With the expected cash build-up commencing in H2 2025 and continuing through
2026, we continue to evaluate acquisitions of synergistic, strategic and
profitable businesses.
Nabil M. Lawandy
Chief Executive Officer
September 29, 2025
Consolidated statements of income for the half year ended 30 June 2025
Half Year Half Year Full Year
to 30 Jun 2025 to 30 Jun 2024 to 31 Dec 2024
Unaudited Unaudited Audited
USD '000 USD '000 USD '000
Revenues
Product $ 32,295 $ 19,252 $ 43,052
Service 2,670 3,487 6,139
Total revenues 34,965 22,739 49,191
Cost of sales 15,043 10,036 25,702
Gross profit 19,922 12,703 23,489
Operating expenses
Research and development 1,210 1,348 2,161
General and administrative 4,124 4,385 8,392
Sales and marketing 511 767 1,457
Total operating expenses 5,845 6,500 12,010
Operating profit 14,077 6,203 11,479
Interest income (expense) 15 (308) (48)
Foreign currency gain(loss) (32) (3) (127)
Profit before taxes 14,060 5,892 11,304
Income tax expense 4,000 650 2,802
Net income 10,060 5,242 8,502
Net income (loss) attributable to noncontrolling interest
(4) (8) (18)
Net income attributable to Spectra Systems Corporation
$ 10,064 $ 5,250 $ 8,520
Earnings per share
Basic $ 0.21 $ 0.11 $ 0.18
Diluted $ 0.21 $ 0.11 $ 0.17
Consolidated statements of comprehensive income for the half year ended 30
June 2025
Half Year Half Year Full Year
to 30 Jun 2025 to 30 Jun 2024 to 31 Dec 2024
Unaudited Unaudited Audited
USD '000 USD '000 USD '000
Net income $ 10,060 $ 5,242 $ 8,502
Unrealized gain (loss) on currency exchange
(638) (52) (294)
Reclassification for realized (gain) loss in net income
32 3 127
Total other comprehensive
Loss 670 (49) (167)
Comprehensive income 10,730 5,193 8,335
Net gain (loss) attributable to noncontrolling interest
(4) (7) (18)
Comprehensive income attributable to Spectra Systems Corporation $ 10,734 $ 5,200 $ 8,353
Consolidated balance sheets as of 30 June 2025
As of As of As of
30 Jun 2025 30 Jun 2024 31 Dec 2024
Unaudited Unaudited Audited
USD '000 USD '000 USD '000
Current assets
Cash and cash equivalents $ 2,556 $ 4,444 $ 13,354
Trade receivables, net of allowance 2,558 8,653 3,000
Unbilled and other receivables 14,431 1,461 4,597
Inventory 9,153 11,168 6,206
Prepaid expenses 827 1,401 1,152
Total current assets 29,525 27,128 28,309
Non-current assets
Property, plant and equipment, net 9,195 10,311 9,048
Operating lease right of use assets, net 5,535 6,063 5,684
Intangible assets, net 13,797 13,331 13,511
Restricted cash and investments 5,000 2,026 2,063
Investments 102 95 95
Deferred tax assets 1,020 1,844 2,093
Other assets 65 577 171
Total non-current assets 34,714 34,247 32,665
Total assets $ 64,239 $ 61,375 $ 60,974
Current liabilities
Accounts payable $ 4,993 $ 3,150 $ 3,631
Accrued expenses & other liabilities 976 2,488 1,034
Line of credit 1,246 453
Operating lease liabilities, short term 330 569 798
Taxes payable 1,592 78 1,422
Short-Term Loans 1,866 1,712
Deferred revenue 2,025 7.789 4,967
Total current liabilities 13,028 14,071 14,018
Non-current liabilities
Operating lease liabilities, long term 5,341 5,568 4,969
Third party loans 1,852 4,803 2,647
Contingent consideration 2,513 2,528 2,513
Deferred revenue - 1,329 499
Total non-current liabilities 9,706 14,228 10,628
Total liabilities 22,734 28,299 24,646
Stockholders' equity
Common stock 482 482 482
Additional paid in capital - common stock 57,654 57,495 57,605
Accumulated other comprehensive loss 292 (260) (378)
Accumulated deficit (17,473) (25,206) (21,935)
Total Spectra Systems Corporation stockholders' equity
40,955 32,511 35,774
Noncontrolling interest 550 565 555
Total stockholders' equity ` 41,505 ` 33,076 36,328
Total liabilities and stockholders' $ 62,239 $ 61,375 $ 60,974
Equity
Consolidated statements of cash flows for the half year ended 30 June 2025
Half Year Half Year Full Year
to 30 Jun 2025 to 30 Jun 2024 to 31 Dec 2024
Unaudited Unaudited Audited
USD '000 USD '000 USD '000
Cash flows from operating activities
Net income $ 10,060 $ 5,242 $ 8,502
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 1,696 1,562 3,194
Stock-based compensation expense 49 75 192
Lease amortization expense 53 - 10
Deferred taxes 1,000 10 (228)
Provision for excess and Obsolete Inventory
Changes in operating assets and liabilities
Accounts receivables 659 (4,889) 752
Unbilled and other receivables (9,805) (68) (3,200)
Inventory (2,631) (4,689) 258
Prepaid expenses 465 (199) 445
Accounts payable 1,173 413 912
Accrued expenses and other liabilities 65 1,242 1,140
Deferred revenue (3,454) 1,563 (2,079)
(670) 262 9,899
Net cash provided by operating activities
Cash flows from investing activities
Restricted cash and investments (2,937) (1,513) (1,550)
Payment of patent and trademark costs (358) (150) (689)
Acquisition of Cartor Holdings Limited, net of Acquired Cash - (508) -
Purchases of property, plant and equipment (993)
- (745)
Net cash provided by (used in) investing activities (4,288) (2,171) (2,984)
Cash flows from financing activities
Dividends paid (5,602) (5,594) (5,595)
Finance payments (1,035) (1,303) (1,128)
Line of credit 794 - (140)
Proceeds from exercise of stock options - 11 -
Net cash used in financing activities (5,843) (6,886) (6,863)
Effect of exchange rate on cash and cash equivalents
44 (14) 49
Net increase(decrease) in cash and cash equivalents (10,757) (8,809) 101
Cash and cash equivalents, beginning of period
13,313 13,253 13,253
Cash and cash equivalents, end of period $ 2,556 $ 4,444 $ 13,354
Notes to financial information
1. Basis of preparation
This report was approved by the Directors on the 27 September 2025.
This financial information has been prepared using the recognition and
measurement principles of US Generally Accepted Accounting Principles (GAAP).
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 2025 and are unchanged from those disclosed in the
Company's Annual Report for the year ended 31 December 2024.
The results for the half year are unaudited. The financial information for the
year ended 31 December 2024 does not constitute the full statutory accounts
for that period. The Annual Report and financial statements for the year ended
31 December 2024 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the financial statements for the year ended 31
December 2024 was unmodified and did not draw attention to any matters by way
of emphasis.
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 six months ended June 30, 2025, and the year ended December 31, 2024, were
132,000 and 0 shares related to stock options, respectively, because their
exercise prices would render them anti-dilutive. For the six months ended June
30, 2024, 132,000 were excluded from the calculation of diluted earnings per
common share. The following table shows the calculation of basic and diluted
earnings per common share.
Half Year Half Year Full Year
to 30 Jun 2025 to 30 Jun 2024 to 31 Dec 2024
Numerator:
Net income $ 10,059,597 $ 5,249,439 $ 8,520,046
Denominator:
Weighted average common shares 48,270,831 48,228,972 48,023,360
Effect of dilutive securities:
Stock Options 755,756 1,430,604 935,229
Diluted weighted average common shares
49,026,587 49,659,576 48,958,589
Earnings per common share:
Basic: $ 0.21 $ 0.11 $ 0.18
Diluted: $ 0.21 $ 0.11 $ 0.17
3. Copies of this statement are available to the public on the Company's
website at http://www.spsy.com.
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:
Half Year Half Year Full Year
to 30 Jun 2025 to 30 Jun 2024 to 31 Dec 2024
Unaudited Unaudited Unaudited
USD '000 USD '000 USD '000
Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA)
Operating profit $ 14,077 $ 6,203 $ 11,479
Depreciation 1,400 1,311 2,690
Amortization 240 251 560
Stock compensation 43 75 182
Operating loss - noncontrolling interest 4 8 18
Stock compensation - noncontrolling interest - (1) (10)
Adjusted EBITDA $ 15,764 $ 7,847 $ 14,919
Adjusted profit before taxes and
amortization (PBTA)
Profit before taxes $ 14,060 $ 5,892 $ 11,304
Amortization 240 251 560
Stock compensation 43 75 182
Operating loss - noncontrolling interest 4 8 18
Stock compensation - noncontrolling interest - (1) (10)
Adjusted PBTA $ 14,347 $ 6,225 $ 12,054
Adjusted earnings per share
Adjusted PBTA $ 14,347 $ 6,225 $ 12,054
Income tax expense (4,000) (650) (2,802)
Adjusted earnings $ 10,347 $ 5,575 $ 9,252
Diluted weighted average common shares 49,026,587 49,659,576 48,958,589
Adjusted earnings per share $ 0.211 $ 0.112 $ 0.189
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