Magal Security Systems Ltd. Reports Second Quarter 2019 Financial Results

YEHUD, Israel, Aug. 15, 2019 /PRNewswire/ -- Magal Security Systems, Ltd. (NASDAQ: MAGS) today announced its financial results for the three and six months ended June 30, 2019. Management will hold an investors' conference call later today (at 10:00 am Eastern Time) to discuss the results.

SECOND QUARTER 2019 HIGHLIGHTS

    --  Revenue of $19.7 million, 38% of which were product revenues, versus 31%
        of revenues in Q2 last year
    --  Operating income of $0.2 million and net loss of $0.3 million
    --  EBITDA of $0.7 million
    --  Quarter-end net cash at $52.2 million

MANAGEMENT COMMENT

Commenting on the results, Mr. Dror Sharon, CEO of Magal, said, "We are pleased with the overall trends in our product revenues in the first half of the year, which have grown year-over-year since 2017. Furthermore, we are successfully executing on our strategy of expanding sales in strategic verticals. Our new oil & gas and logistics & transportation verticals are seeing increased interest from both existing and potential customers."

"With regard to revenues from projects, in the second quarter of this year we experienced a general delay in tenders for new security projects in Latin America and Canada, mainly due to budget and political reasons, related to our core verticals in these territories. This had a significant impact on our results during the first half of the year compared to 2018. With that said, looking to the years ahead, we have a strong projects backlog and our pipeline is more geographically and vertically diverse than last year. We are also pleased that our project business in other geographies, including Israel, Africa and Spain performed well this quarter."

SECOND QUARTER 2019 RESULTS

Revenues were $19.7 million, a decrease of 22% compared with revenues of $25.3 million in the second quarter of 2018.

Revenues from projects represented approximately 62% of total revenues, while revenues from products represented approximately 38% of total revenues. Revenues from projects and products decreased by approximately 31% and 4%, respectively, year over year.

Gross profit was $8.4 million, or 42.6% of revenues, compared with gross profit of $11.1 million, or 43.6% of revenues, in the second quarter of 2018. The change in gross margin between quarters is a function of the revenue mix in the particular quarter and the volume of revenues.

Operating income was $0.2 million compared to operating income of $2.1 million in the second quarter of 2018.

Financial expenses were $0.4 million compared to financial income of $0.5 million in the second quarter of 2018. This is mainly driven by the strong depreciation of the US dollar against the New Israeli shekel and the Canadian dollar during the second quarter, lowering the value of the Company's US dollar denominated monetary assets and thus leading to a higher level of non-cash financial expenses.

Net loss attributable to Magal shareholders' was $0.2 million, or $0.01 per share, compared with net income of $1.7 million, or $0.08 per share in the second quarter of 2018.

EBITDA was $0.7 million compared with $2.6 million in the second quarter of 2018.

Cash, short term deposits and restricted deposits, net of bank debt, as of June 30, 2019, was $52.2 million, or $2.26 per share, compared with cash and short term deposits, net of bank debt, of $55.0 million, or $2.38 per share, at December 31, 2018.

INVESTORS' CONFERENCE CALL INFORMATION:

The Company will host a conference call later today, August 15, 2019, at 10am Eastern Time and 5pm Israel time.

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

US: 1 888 668 9141; Israel: 03 918 0610; UK: 0 800 917 5108; Intl.: +972 3 918 0610

A replay of the call will be available on the Company's website for three months from the day after the call. The link to the replay will be accessible at www.magalsecurity.com.

ABOUT MAGAL SECURITY SYSTEMS LTD.

Magal is a leading international provider of physical and video security solutions and products, as well as site management. Since 1969, Magal has delivered its products as well as tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 100 countries - under the most challenging conditions.

Magal offers comprehensive integrated solutions for critical sites, managed by Fortis4G - our 4th generation, cutting-edge physical security information management system (PSIM). The solutions leverage our broad portfolio of home-grown solutions including, PIDS (Perimeter Intrusion Detection Systems) and Symphony, our 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.



                                                                                                                                                  
              
                MAGAL SECURITY SYSTEMS LTD.


                                                                                                                                          
       
         UNAUDITED CONDENSED CONSOLIDATED
                 STATEMENTS OF OPERATIONS


                                                                                                                                            
       
               (All numbers except EPS expressed in thousands of US$)




                                                                                                                     
      
      Three Months                                          
              
                Six Months

                                                                                                                    
      
      Ended June 30,                                                               Ended June 30,


                                                                                                                                     2019                                                  2018                                        % change       2019       2018 % change




              
                Revenue                                                                                                19,697                                                25,348                                            (22)     40,887     42,603      (4)



              
                Cost of revenue                                                                                        11,305                                                14,286                                            (21)     23,524     23,985      (2)






              
                Gross profit                                                                                            8,392                                                11,062                                            (24)     17,363     18,618      (8)



              
                Operating expenses:



                 Research and development, net                                                                                     1,694                                                 1,822                                             (7)      3,548      3,427        4



                 Selling and marketing                                                                                             4,238                                                 4,875                                            (13)      8,508      9,108      (7)



                 General and administrative                                                                                        2,265                                                 2,288                                             (1)      4,641      3,973       16



              Total operating expenses                                                                                             8,197                                                 8,985                                             (9)     16,697     16,508        1






              
                Operating income                                                                                          195                                                 2,077                                                        666      2,110



              Financial income (expenses), net                                                                                     (363)                                                  522                                                    (1,094)       639






              
                Income (loss) before income taxes                                                                       (168)                                                2,599                                                      (428)     2,749





              Taxes on income                                                                                                        134                                                   696                                                        537      1,013






              
                Net income (loss)                                                                                       (302)                                                1,903                                                      (965)     1,736






              Income (loss) attributable to redeemable non-controlling                                                              (66)                                                  173                                                      (176)       173
    interests and non-controlling interests






              
                Net income (loss) attributable to Magal shareholders'                                                   (236)                                                1,730                                                      (789)     1,563






              
                Basic net income (loss) per share                                                                     ($0.01)                                                $0.08                                                    ($0.03)     $0.07






              
                Diluted net income (loss) per share                                                                   ($0.01)                                                $0.07                                                    ($0.03)     $0.07







                            Weighted average number of shares used in computing basic net income (loss) per share              23,146,823                                            23,042,346                                                 23,104,160 23,037,456





                            Weighted average number of shares used in computing diluted net income (loss) per share            23,146,823                                            23,286,703                                                 23,104,160 23,318,174





                                                                                                                           Three Months                                                                                      Six Months

                                                                                                                          Ended June 30,                                                                                   Ended June 30,



                                                                                                                                     2019                                                  2018                                                       2019       2018

                                                                                                                                        %                                                    %                                                         %         %






              Gross margin                                                                                                          42.6                                                  43.6                                                       42.5       43.7



              Research and development, net as a % of revenues                                                                       8.6                                                   7.2                                                        8.7        8.0



              Selling and marketing as a % of revenues                                                                              21.5                                                  19.2                                                       20.8       21.4



              General and administrative  as a % of revenues                                                                        11.5                                                   9.0                                                       11.4        9.3



              Operating margin                                                                                                       1.0                                                   8.2                                                        1.6          5



              Net  margin                                                                                                                                                                 7.5                                                                        4.1



                      
              
             MAGAL SECURITY SYSTEMS LTD.


      
              
                 
             RECONCILLATION OF EBITDA TO NET INCOME (LOSS)


              
              
             (All numbers expressed in thousands of US$)




                                                           Three Months                                 Six Months

                                                           Ended June 30,                                 Ended June 30,

                                                                                       ---

                                      2019                  2018                            2019     2018

                                                                                                   ---



                   GAAP Net income
                    (loss)           (302)                1,903                           (965)   1,736



        Less:


         Financial income
          (expenses), net            (363)                  522                         (1,094)     639


         Taxes on income               134                   696                             537    1,013


         Depreciation and
          amortization               (521)                (499)                         (1049)   (976)

                                                                                                   ---


     EBITDA                           716                 2,576                           1,715    3,086

                                                                                                   ---


                                         
              
               MAGAL SECURITY SYSTEMS LTD.


                               
              
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                 
              
               (All numbers expressed in thousands of US$)




                                                                           June 30,             
         
     December 31,


                                                                               2019                               2018




              
                CURRENT ASSETS:


               Cash and cash
                equivalents                                                 $42,016                            $38,665


               Short-term bank
                deposits                                                      7,014                             13,150


               Restricted deposits                                            3,208                              3,135


               Trade receivables,
                net                                                          14,481                             14,176


               Unbilled accounts
                receivable                                                    4,967                              6,050


               Other accounts
                receivable and
                prepaid expenses                                              3,774                              4,126


               Inventories                                                   13,795                             13,863




                            Total current assets                             89,255                             93,165







               Long term investments and receivables:




               Long-term deposits
                and restricted bank
                deposits                                                        165                                146


               Severance pay fund                                             1,292                              1,289


               Deferred tax assets                                            3,529                              3,459





                            Total long-term
                             investments and
                             receivables                                      4,986                              4,894





                            PROPERTY AND
                             EQUIPMENT, NET AND
                             OPERATING LEASE                                 10,806                              6,347
    RIGHT-OF-USE ASSETS





                            GOODWILL AND
                             INTANGIBLE ASSETS,
                             NET                                             15,541                             14,765




               Total assets                                                $120,588                           $119,171


                                                                                                          
              
                MAGAL SECURITY SYSTEMS LTD.


                                                                                                
              
                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                  
              
                (All numbers expressed in thousands of US$)




                                                                                                                                                     June 30,                      
     
     December 31,


                                                                                                                                                                            2019                         2018

                                                                                                                                                                                                         ---




     
                CURRENT LIABILITIES:





     Trade payables                                                                                                                                                      $5,320                       $6,359



     Customer advances                                                                                                                                                    7,343                       10,170



     Deferred revenues                                                                                                                                                    1,876                        2,387



     Other accounts payable and accrued expenses                                                                                                                         12,572                       13,226



     Short-term operating lease liabilities                                                                                                                               1,028

                                                                                                                                                                                                         ---




     
                Total current liabilities                                                                                                                              28,139                       32,142

                                                                                                                                                                                                         ---




     LONG-TERM LIABILITIES:



     Deferred revenues                                                                                                                                                    1,232                        1,344



     Deferred tax liabilities                                                                                                                                               181                          182



     Accrued severance pay                                                                                                                                                2,209                        2,181



     Long-term operating lease liabilities                                                                                                                                3,193



     Other long-term liabilities                                                                                                                                            255                          351





     
                Total long-term liabilities                                                                                                                             7,070                        4,058

                                                                                                                                                                                                         ---




     
                Redeemable non-controlling interest                                                                                                                     1,731                        1,755

                                                                                                                                                                                                         ---




     
                SHAREHOLDERS' EQUITY



     Share Capital: Ordinary shares of NIS 1 par value -


                                                             
              Authorized: 39,748,000 shares at June 30, 2019 and December 31, 2018;                                6,750                        6,721
                                                             Issued and outstanding: 23,153,985 shares at June 30, 2019 and 23,049,639
                                                             shares at December 31, 2018



     Additional paid-in capital                                                                                                                                          94,874                       94,205



     Treasury shares                                                                                                                                                      (375)



     Accumulated other comprehensive loss                                                                                                                                 (935)                     (1,827)



     Foreign currency translation adjustments (stand alone financial statements)                                                                                          4,816                        2,795



     Accumulated deficit                                                                                                                                               (21,467)                    (20,678)

                                                                                                                                                                                                         ---




     Total shareholders' equity                                                                                                                                          83,663                       81,216



     Non-controlling interest                                                                                                                                              (15)

                                                                                                                                                                                                         ---




     
                TOTAL SHAREHOLDERS' EQUITY                                                                                                                             83,648                       81,216

                                                                                                                                                                                                         ---




     
                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                           $120,588                     $119,171

                                                                                                                                                                                                         ===

For more information:


                   Magal Security Systems Ltd.      
              
                GK Investor Relations
                                                    Ehud Helft / Gavriel Frohwein
                   Diane Hill, Assistant to the CEO Tel: (US) +1 646 688 3559
                                                    E-mail: magal@gkir.com

     Tel: +972-3-539-1421


     E-mail:  dianeh@magal-s3.com


     Web:  www.magalsecurity.com

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SOURCE Magal Security Systems Ltd