Magal Security Systems Ltd. Reports First Quarter 2020 Financial Results

YEHUD, Israel, May 14, 2020 /PRNewswire/ -- Magal Security Systems, Ltd. (NASDAQ: MAGS) today announced its financial results for the three months ended March 31, 2020. Management will hold an investors' conference call later today (at 10 a.m. Eastern Time) to discuss the results.

FIRST QUARTER 2020 RESULTS SUMMARY (all comparisons are to the first quarter of 2019)

    --  Revenue of $17.4 million compared to $21.2 million
    --  Gross margin 45.8% compared to 42.3%
    --  Operating income of $0.2 million compared to $0.5 million
    --  Net income attributable to Magal's shareholders of $0.4 million compared
        to a net loss of ($0.6) million
    --  EBITDA of $0.7 million, or EBITDA margin of 4.1% compared to $1.0
        million, or EBITDA margin of 4.7%
    --  $54.4 million, or $2.35 per share, of cash and cash equivalents and
        short-term deposits and restricted cash and deposits

Mr. Dror Sharon, Chief Executive Officer of Magal, said "The first quarter results reflect our priority to protect our employees, remain engaged with our customers and continue to grow our pipeline of business during the COVID-19 outbreak. Business delays due to COVID-19 restrictions impacted Magal's Integrated Solutions division's ability to meet with clients, and Senstar's Product division shipments, compressing revenue in the quarter. Our strategy to diversify revenues helped our results, as evidenced by our recent win in Africa for the Djibouti seaport security system design and installation. While we are diversified, serving numerous vertical markets, the economic disruption related to COVID-19 negatively impacted our Oil and Gas, Logistics and to a lesser extent, Corrections verticals. The Oil and Gas sector was affected by the dramatic decline in oil prices, which caused delays in large projects. We remain engaged with these customers and continue to see purchase orders. We experienced some temporary delays in revenue execution for some of our Logistics customers, mainly in Europe. The Corrections facilities vertical, primarily based in North America, was impacted by temporary closures, driven by the COVID-19 outbreak.

We maintained profitability with cost savings and efficiencies that we enacted in the first quarter to reduce operating expenses. We continue to innovate and are launching new solutions in our Symphony VMS platform that address unique COVID-19 surveillance and enforcement needs for our customers. Our goal in 2020 is to manage our costs and maintain profitability while positioning the Company for recovery and growth. Magal's sound financial standing with a cash balance of over $54 million, with no debt, gives us great confidence in our ability to execute our long-term strategy to grow revenue, improve profitability and identify new M&A opportunities arising from the global crisis."


Revenue was $17.4 million compared with revenue of $21.2 million in the first quarter of 2019. The decline in revenue was primarily due to the completion of a large project in Latin America in the first quarter of the prior year. Senstar Product division sales remained stable in the first quarter despite shipment delays arising from technical limitations related to the impact of COVID-19 on our customers. Revenue from Magal's Integrated Solutions division (projects) represented approximately 58% of total revenue, while external revenue from the Senstar Products division represented approximately 42% of total revenue. Revenue, not including inter-company revenue, from Magal's Integrated Solutions (projects) and the Senstar Products divisions decreased by 24% and 6%, respectively, compared to the first quarter of 2019.

Gross profit was $8.0 million, or 45.8% of revenue in the first quarter of 2020 compared with gross profit of $9.0 million, or 42.3% of revenue, in the year-ago period. The increase in gross margin in the quarter was driven by Senstar product sales with mix favoring higher margin IP-based products and services, partially offset by an impact of the reduction in the projects revenue of Magal's Integrated Solutions division.

Operating expense decreased 8.8% to $7.8 million in the first quarter of 2020 compared to $8.5 million in the prior-year period. The decline in operating expense was primarily due to delays in new hiring, reduction in travel and marketing, as well as cost efficiency measures taken in the quarter.

Operating income was $0.2 million in the first quarter of 2020 compared to $0.5 million in the parallel period of 2019.

Financial income was $0.5 million in the first quarter of 2020 compared to a financial loss of $(0.7) million in the year-ago period. Magal's functional currency in Israel is the Israeli Shekel (NIS) and the vast majority of Magal's cash deposits are held in US dollars. Because of the appreciation of the US dollar against the NIS during the quarter, the Company recorded non-cash financial income.

Net income attributable to Magal shareholders was $0.4 million, or $0.02 per share, compared with a net loss of $(0.6) million, or $(0.02) per share in the first quarter of 2019.

EBITDA was $0.7 million in the first quarter of 2020 compared with $1.0 million in the first quarter of 2019.

Cash and cash equivalents, short term deposits and restricted cash and deposits as of March 31, 2020, was $54.4 million, or $2.35 per share, compared with cash and short-term deposits of $51.6 million, or $2.23 per share, at December 31, 2019.


The Company will host a conference call later today, MAY 14, 2020. The call will begin promptly at: 10:00 am Eastern Time; 5:00 pm Israel Time; 3:00 pm UK Time.

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

    --  US: 1-877-407-9716
    --  Israel: 1-809-406-247
    --  UK: 0-800-756-3429
    --  International: 1-201-493-6779

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 The replay pin number is 13702170.


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. In addition, there is uncertainty about the spread of the COVID19 virus and the impact it will have on the Company's operations, the demand for Company's products, global supply chains and economic activity in general.

For more information:

              Magal Security Systems Ltd. 
              IR Contact:

              Diane Hill,                 
            Brett Maas

              Assistant to the CEO        
     Managing Partner, 
            Hayden IR

     Tel: +972-3-539-1421                   
     +1 646-536-7331



* Tables to follow *



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

                Three Months

                Ended March 31,

                                                                                  2020                                                     2019 % change

                            Revenue                                             17,443                                                   21,190     (18)

                            Cost of revenue                                      9,450                                                   12,219     (23)

                            Gross profit                                         7,993                                                    8,971     (11)

                Operating expenses:

                  Research and development,
                   net                                                           1,617                                                    1,854     (13)

                  Selling and marketing                                          3,983                                                    4,270      (7)

                  General and administrative                                     2,156                                                    2,376      (9)

               Total operating expenses                                          7,756                                                    8,500      (9)

                            Operating income                                       237                                                      471

               Financial income
                (expenses), net                                                    470                                                    (731)

                            Income (loss) before income
                             taxes                                                 707                                                    (260)

              Taxes on income                                                     198                                                      403

                            Net income (loss)                                      509                                                    (663)

               Income (loss) attributable
                to redeemable non-
                controlling                                                         70                                                    (110)
    interests and non-controlling interests

                            Net income (loss)
                             attributable to Magal's
                             shareholders                                          439                                                    (553)

                            Basic and diluted net
                             income (loss) per share                             $0.02                                                  $(0.02)

                            Weighted average number of
                             shares used in computing                       23,153,985                                               23,061,497
    basic and diluted net income (loss) per

                                                                              Three Months

                                                                            Ended March 31,

                                                                                  2020                                                     2019

                                                                                     %                                                       %

              Gross margin                                                       45.8                                                     42.3

               Research and development,
                net as a % of revenues                                             9.3                                                      8.7

               Selling and marketing as a
                % of revenues                                                     22.8                                                     20.2

               General and administrative
                as a % of revenues                                                12.4                                                     11.2

              Operating margin                                                    1.4                                                      2.2

              Net margin                                                          2.5



                (All numbers expressed in thousands of US$)

                                                                     Three Months

                                                                     Ended March 31,

                                                  2020                2019

                     GAAP Net income (loss)        509               (663)


           Financial income
            (expenses), net                        470               (731)

           Taxes on income                         198                 403

           Depreciation and
            amortization                         (486)              (528)

       EBITDA                                     723                 999



         (All numbers expressed in thousands of US$)

                                                                                                                                                  March 31, December 31,

                                                                                                                                                       2020          2019

                CURRENT ASSETS:

              Cash and cash equivalents                                                                                                            $41,578       $34,531

              Short-term bank deposits                                                                                                              12,474        16,749

              Restricted cash and deposits                                                                                                             312           324

              Trade receivables, net                                                                                                                13,173        18,697

              Unbilled accounts receivable                                                                                                           7,146         8,897

              Other accounts receivable and prepaid expenses                                                                                         4,200         4,510

              Inventories                                                                                                                           12,482        12,605

                Total current assets                                                                                                     91,365        96,313


              Long-term deposits, restricted bank deposits and other long-term accounts                                                                128           134
    receivable and prepaid expenses

              Severance pay fund                                                                                                                     1,333         1,363

              Deferred tax assets                                                                                                                    3,724         4,215

              Operating lease right-of-use assets                                                                                                    3,385         3,492

                Total long-term investments and receivables                                                                               8,570         9,204

                PROPERTY AND EQUIPMENT, NET AND OPERATING LEASE                                                                           5,860         6,256

                GOODWILL AND INTANGIBLE ASSETS, NET                                                                                      14,012        15,276

              Total assets                                                                                                                        $119,807      $127,049



                (All numbers expressed in thousands of US$)

                                                                                                                                                   March 31,                      December 31,

                                                                                                                                                                           2020                     2019


                CURRENT LIABILITIES:

     Trade payables                                                                                                                                                     $4,258                   $5,438

     Customer advances                                                                                                                                                   4,339                    5,587

     Deferred revenues                                                                                                                                                   2,010                    2,558

     Other accounts payable and accrued expenses                                                                                                                        14,649                   14,609

     Short-term operating lease liabilities                                                                                                                                891                      919


                Total current liabilities                                                                                                                             26,147                   29,111



     Deferred revenues                                                                                                                                                   1,673                    1,769

     Deferred tax liabilities                                                                                                                                              189                      178

     Accrued severance pay                                                                                                                                               2,189                    2,251

     Long-term operating lease liabilities                                                                                                                               2,438                    2,515

     Other long-term liabilities                                                                                                                                           330                      371

                Total long-term liabilities                                                                                                                            6,819                    7,084


                Redeemable non-controlling interest                                                                                                                    2,965                    3,048


                SHAREHOLDERS' EQUITY

     Share Capital: Ordinary shares of NIS 1 par value -

              Authorized: 39,748,000 shares at March 31, 2020 and December 31, 2019;                              6,750                    6,750
                                                             Issued and outstanding: 23,153,985 shares at March 31, 2020 and
                                                             23,153,985 shares at December 31, 2019

     Additional paid-in capital                                                                                                                                         94,739                   94,696

     Accumulated other comprehensive loss                                                                                                                              (3,793)                   (627)

     Foreign currency translation adjustments (stand-alone financial statements)                                                                                         4,618                    5,924

     Accumulated deficit                                                                                                                                              (18,522)                (18,961)


     Total shareholders' equity                                                                                                                                         83,792                   87,782

     Non-controlling interest                                                                                                                                               84                       24


                TOTAL SHAREHOLDERS' EQUITY                                                                                                                            83,876                   87,806


                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                          $119,807                 $127,049


View original content:

SOURCE Magal Security Systems Ltd