Shares of Cemtrex, Inc. CETX have lost 7.9% since the company reported its earnings for the quarter ended Dec. 31, 2024. This compares to the S&P 500 Index’s 0.02% decline over the same time frame. Over the past month, the stock lost 32.2% versus the S&P 500’s 2% rise.

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Earnings Performance and Segmental Overview

For the fiscal first quarter of 2025, Cemtrex reported revenues of $13.7 million, marking an 18.6% year-over-year decline from $16.9 million in the same period last year. The decrease was primarily attributed to the company’s Security segment, which saw a sharp 40.5% dip in revenues to $5.5 million from $9.2 million in the prior-year quarter, as demand for security technology products under the Vicon brand weakened. Meanwhile, the Industrial Services segment posted a 7.5% revenue increase to $8.3 million from $7.7 million in the prior-year quarter, benefiting from strong market demand and recent contract wins.

Gross profit for the quarter declined 19.5% to $5.7 million, representing 41.5% of revenues, from $7.1 million, or 41.9% of revenue, in the prior-year period. Operating expenses increased 2.1% to $7.9 million from $7.8 million, primarily due to higher salaries, general and administrative expenses, and research and development (R&D) investments in security technology.

Cemtrex reported an operating loss of $2.3 million, widening from $0.7 million a year ago. The net loss increased to $28.9 million from $1.3 million in the previous year’s quarter, largely due to $25.8 million in non-cash warrant-related losses.

Other Key Business Metrics

Cash, cash equivalents, and restricted cash totaled $5.5 million as of Dec. 31, 2024, compared with $5.4 million as of Sept. 30, 2024. The company’s inventory increased significantly to $11.1 million as of Dec. 31, 2024, from $6.9 million as of Sept. 30, reflecting preparation for anticipated orders.

Cemtrex’s accounts payable declined to $3.5 million as of Dec. 31 from $4.5 million as of Sept. 30, 2024, while the company’s revolving line of credit increased to $4.1 million as of Dec. 31 from $3.1 million as of Sept. 30, 2024.

Management Commentary and Market Outlook

Chairman and CEO Saagar Govil acknowledged the challenges faced by the Security segment but noted a turnaround in January 2025, with record orders, including a $10.4 million contract for Valerus surveillance system expansion for a state government corrections facility in the mid-Atlantic region. The company expects fiscal second-quarter sales to put it on track for year-over-year growth of 15-20%.

Vicon launched the NEXT Modular Camera System, integrating AI analytics and Hailo-15 edge AI processing, a development management believes will strengthen its position in the security industry. Additionally, the segment introduced an AI-driven gun detection feature for its cameras, targeting enhanced public safety.

The Industrial Services segment continued to gain traction, securing two wastewater infrastructure projects worth $6.7 million. CETX aims to drive further growth in this segment through additional acquisitions.

Factors Influencing Results

The steep net loss was primarily due to a $25.8 million charge related to the excess fair value of exercised warrants, which resulted from CETX’s multiple reverse stock splits. Additionally, the decline in security segment revenues was compounded by industry-wide demand softness and uncertainty regarding public-sector contracts amid the federal administration transition.

Guidance

While Cemtrex did not provide explicit financial guidance, management reiterated its optimism about both business segments. The Security division anticipates a rebound with growing demand for AI-powered surveillance solutions, while the Industrial Services unit is expected to maintain steady growth through project completions and new contract wins.

Other Developments

During the quarter, Cemtrex executed a 60:1 and a subsequent 35:1 reverse stock split to maintain compliance with Nasdaq’s minimum bid price requirements. The company also restructured its royalty agreement related to the divestiture of Cemtrex XR, eliminating a prior $820,000 minimum royalty obligation.

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