Magal Security Systems Ltd. Reports First Quarter 2017 Financial Results

YEHUD, Israel, May 30, 2017 /PRNewswire/ --

Magal Security Systems, Ltd. (NASDAQ: MAGS) today announced its financial results for the three month period ended March 31, 2017. Management will hold an investors' conference call later today (at 9am Eastern Time) to discuss the results.

FIRST QUARTER RESULTS SUMMARY

    --  Revenue grew year-over-year by 14% to $14.3 million;
    --  Higher level of operating expenses led to operating loss of $0.9
        million, primarily due to increased investment in sales and marketing to
        capitalize on opportunities, particularly in the North American market;
    --  Incurred non-cash financial-expense of $2.4 million due to a sharp
        quarterly variation in the US dollar/Israeli shekel exchange rate;
    --  Net loss of $3.7 million in the quarter;
    --  EBITDA loss of $0.4 million in the quarter;
    --  Net cash and equivalents of $50.7 million at quarter-end.

FISRT QUARTER 2017 RESULTS

Revenues for the first quarter of 2017 were $14.3 million, an increase of 14% compared with revenues of $12.6 million in the first quarter of 2016.

Gross profit for the first quarter of 2017 was $7.4 million, or 51.7% of revenues, compared with a gross profit of $6.2 million or 49.6% of revenues, in the first quarter of 2016. The change in gross margin between quarters is a function of the revenue mix between volume of projects executed, and volume of products and services sold.

Operating loss for the first quarter of 2017 was $0.9 million compared to operating income of $0.6 million in the first quarter of 2016. The main difference was due to a higher level of operating expenses in the current quarter, which was primarily an increase in sales and marketing expenses, which grew to $4.8 million from $2.6 million in the first quarter of 2016.

Financial expenses, net, for the first quarter of 2017 were $2.6 million compared with financial expenses of $0.6 million in the first quarter of 2016. In Israel, Magal's functional currency is the Israeli Shekel and the vast majority of Magal's cash deposits are held in US dollars. Because the US dollar declined in value by 5.5%, between the end of 2016 and the end of the first quarter of 2017, the Company recorded a non-cash financial expense due to the reduction in the Israeli shekel value of its US dollar deposits, leading to the high level of financial expense in the current quarter.

Net loss in the first quarter of 2017 was $3.7 million, or $0.16 per share, compared with a net loss of $0.5 million, or $0.03 per share in the first quarter of 2016.

EBITDA in the first quarter of 2017 was a negative $0.4 million, compared to a positive EBITDA of $0.9 million in the first quarter of 2016.

Cash, short term deposits and restricted deposits, net of bank debt, as of March 31, 2017, were $50.7 million, or $2.21 per share, compared with cash and short term deposits, net of bank debt, of $52.5 million, or $2.29 per share, as of December 31, 2016.

MANAGEMENT COMMENT

Commenting on the results, Mr. Saar Koursh, CEO of Magal, said, "Our first quarter is typically a seasonally weak quarter; however, we still achieved revenue growth of 14% over the first quarter of last year. Our net income was negatively impacted by a non-cash financial expense related to a relatively sharp quarterly change in the US dollar/Israeli shekel exchange rate and its effect on our sizable US dollar denominated cash holdings. In addition, we significantly increased our investment in sales and marketing, primarily in the United States. This is because we see many solid opportunities in our end-markets that we intend to capitalize on. We believe that these investments, together with our strong balance sheet, will enable us to pursue many opportunities for growth, and will position Magal well for long-term prosperity."

INVESTORS' CONFERENCE CALL INFORMATION:

The Company will host a conference call later today, May 30, 2016, at 9:00 a.m. Eastern Time and 4:00 p.m. Israel time.

To participate, please call one of the following teleconferencing numbers:

US: +1-888-407-2553; Israel: 03-918-0687; UK: 0-800-917-9141; Intl.: +972 3 918 0687

If you are unable to connect using the toll-free numbers, please try the international dial-in number.

The call will also be webcast live. The link to access the call can be found in the investor relations section of the company's website or direct from the attached link:

http://www.veidan-stream.com/?con=Magal_Security_Systems_Q1_2017_Results_Conference_Call

A replay link of the call will be available from the day after the call from the above link.

ABOUT MAGAL

Magal is a leading international provider of solutions and products for physical and video security solutions, as well as site management. Over the past 45 years, Magal has delivered its products as well as tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 80 countries - under some of the most challenging conditions.

Magal offers comprehensive integrated solutions for critical sites, managed by Fortis4G - our 4th generation, cutting-edge PSIM (Physical Security Information Management system). The solutions leverage our broad portfolio of homegrown PIDS (Perimeter Intrusion Detection Systems), advanced VMS (Video Management Software) with native IVA (Intelligent Video Analytics) Security solutions.

Forward Looking Statements

This press release contains forward-looking statements, which are subject to risks and uncertainties. Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements. A number of these risks and other factors that might cause differences, some of which could be material, along with additional discussion of forward-looking statements, are set forth in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission.

Information with Regard to non-GAAP Financial Measures

The Company presents its financial statements in accordance with U.S. GAAP. Magal's management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. EBITDA is provided in this press release and the accompanying supplemental information because management believes this non-GAAP measure is useful for investors and financial institutions as it facilitates operating performance comparisons from period to period. As presented in this release, the term EBITDA consists of net profit (loss) according to U.S. GAAP, excluding net financing expenses, taxes, depreciation and amortization. EBITDA should not be considered in isolation or as a substitute for net profit (loss) or other statement of operations data prepared in accordance with GAAP as a measure of profitability. A reconciliation between the Company's results on a GAAP and non-GAAP basis is provided in a table below.

* Tables to follow *

MAGAL SECURITY SYSTEMS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All numbers except EPS expressed in thousands of US$)


                                     Three Months

                                    Ended March 31,

                               2016                       2017 % change
                               ----                       ---- --------

    Revenue                  12,603                     14,335          14

    Cost of revenue           6,357                      6,924
                              -----                      -----


    Gross profit              6,246                      7,411          19

    Operating expenses:

       Research and
        development, net      1,276                      1,605          26

       Selling and
        marketing             2,606                      4,798          84

       General and
        administrative        1,741                      1,860           7

    Total operating
     expenses                 5,623                      8,263          47
                              -----                      -----


    Operating income
     (loss)                     623                      (852)

    Financial expenses,
     net                      (859)                   (2,636)
                               ----                     ------


    Loss before income
     taxes                    (236)                   (3,488)


    Taxes on income             227                        205
                                ---                        ---


    Net loss                  (463)                   (3,693)
                               ====                     ======


    Loss attributable
     to non-
     controlling
     interests                 (13)                       (5)
                                ---                        ---


    Net loss
     attributable to
     Magal
     shareholders'            (476)                   (3,698)
                               ====                     ======


    Basic and diluted
     net earnings per
     share                  ($0.03)                   ($0.16)
                             ======                     ======




    Weighted average
     number of shares
     used in computing
     basic and diluted
     net earnings
     (loss) per share    16,398,872                 22,916,333
                         ==========                 ==========




                            Three Months

                           Ended March 31
                           --------------

                               2016                       2017

                            %                         %
                           ---                       ---


    Gross margin               49.6                       51.7

    Research and
     development, net
     as a % of revenues        10.1                       11.2

    Selling and
     marketing as a %
     of revenues               20.7                       33.5

    General and
     administrative  as
     a % of revenues           13.8                       13.0

    Operating margin            4.9                          -

    Net  margin                   -                         -

MAGAL SECURITY SYSTEMS LTD.
RECONCILLATION OF EBITDA TO NET LOSS
(All numbers expressed in thousands of US$)


                                            Three Months

                                           Ended March 31,

                                           2016                   2017
                                           ----                   ----


    GAAP Net loss                         (463)               (3,693)

       Less:

       Financial expenses, net            (859)               (2,636)

       Taxes on income                    (227)                 (205)

       Depreciation and amortization      (288)                 (450)

    EBITDA                                  911                  (402)
                                            ---                   ----

MAGAL SECURITY SYSTEMS LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All numbers expressed in thousands of US$)


                                  December 31,         March 31,

                                                  2016               2017
                                                  ----               ----

    CURRENT ASSETS:

    Cash and cash equivalents                  $19,692            $16,889

    Short-term bank deposits                    31,036             32,028

    Restricted deposits                          1,809              1,830

    Trade receivables, net                      13,702             11,790

    Unbilled accounts receivable                 4,232              3,475

    Other accounts receivable and
     prepaid expenses                            2,751              3,441

    Inventories                                  6,818              7,198


    Total current assets                        80,040             76,651
                                                ------             ------




    LONG TERM INVESTMENTS AND
     RECEIVABLES:


    Long-term trade receivables                    308                225

    Long-term deposits and
     restricted bank deposits                      126                134

    Severance pay fund                           1,321              1,397

    Deferred income taxes                        2,114              2,178
                                                 -----              -----


    Total long-term investments
     and receivables                             3,869              3,934
                                                 -----              -----


    PROPERTY AND EQUIPMENT, NET                  5,301              5,424
                                                 -----              -----


    INTANGIBLE ASSETS, NET                       4,933              4,761
                                                 -----              -----


    GOODWILL                                    11,850             12,013


    TOTAL ASSETS                              $105,993           $102,783
                                              ========           ========


                                                 December 31,                       March 31,

                                                                             2016                  2017
                                                                             ----                  ----


    CURRENT LIABILITIES:


    Trade payables                                                         $4,040                $3,008

    Customer advances                                                       5,602                 3,165

    Other accounts payable and
     accrued expenses                                                      11,646                11,844
                                                                           ------                ------


    Total current liabilities                                              21,288                18,017
                                                                           ------                ------


    LONG-TERM LIABILITIES:

    Deferred revenues                                                         472                   472

    Deferred income taxes                                                     167                   170

    Accrued severance pay                                                   2,089                 2,197

    Other long-term liabilities                                                59                    58


    Total long-term liabilities                                             2,787                 2,897
                                                                            -----                 -----


    SHAREHOLDERS' EQUITY

    Share Capital: Ordinary shares
     of NIS 1 par value -

                                    Authorized: 39,748,000 shares at
                                     December 31, 2016 and March 31,
                                     2017; Issued and outstanding:
                                     22,894,348 shares at December 31,
                                     2016 and 22,952,448 shares at March
                                     31, 2017                                 6,679                 6,694

    Additional paid-in capital                                             93,441                93,753

    Accumulated other comprehensive
     loss                                                                 (1,923)              (1,471)

    Foreign currency translation
     adjustments (stand alone
     financial statements)                                                    412                 3,277

    Accumulated deficit                                                  (16,600)             (20,298)
                                                                          -------               -------


    Total shareholders' equity                                             82,009                81,955

    Non-controlling interest                                                 (91)                 (86)
                                                                              ---                   ---


    TOTAL SHAREHOLDERS' EQUITY                                             81,918                81,869
                                                                           ------                ------


    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY                                                $105,993              $102,783
                                                                         ========              ========

For more information:

Magal Security Systems Ltd.
Saar Koursh, CEO

Tel: +972-3-539-1421
E-mail: elishevaa@magal-s3.com
Web: http://www.magal-s3.com

GK Investor Relations
Ehud Helft / Gavriel Frohwein

Tel: (US) +1-646-688-3559
E-mail: magal@gkir.com

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SOURCE Magal Security Systems Ltd