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."
FIRST QUARTER 2020 RESULTS
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.
INVESTORS' CONFERENCE CALL INFORMATION:
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 www.magalsecurity.com. The replay pin number is 13702170.
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. 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
E-mail: dianeh@magal-s3.com
Brett@HaydenIR.com
Web: www.magalsecurity.com
* 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,
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 $(0.02)
Weighted average number of
shares used in computing 23,153,985 23,061,497
basic and diluted net income (loss) per
share
Three Months
Ended March 31,
2020 2019
% %
Gross margin 45.8 42.3
Research and development,
net as a % of revenues 9.3 8.7
Selling and marketing as a
% of revenues 22.8 20.2
General and administrative
as a % of revenues 12.4 11.2
Operating margin 1.4 2.2
Net margin 2.5
MAGAL SECURITY SYSTEMS LTD.
RECONCILLATION OF EBITDA TO NET INCOME (LOSS)
(All numbers expressed in thousands of US$)
Three Months
Ended March 31,
2020 2019
GAAP Net income (loss) 509 (663)
Less:
Financial income
(expenses), net 470 (731)
Taxes on income 198 403
Depreciation and
amortization (486) (528)
EBITDA 723 999
MAGAL SECURITY SYSTEMS LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(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 INVESTMENTS AND RECEIVABLES:
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
RIGHT-OF-USE ASSETS
GOODWILL AND INTANGIBLE ASSETS, NET 14,012 15,276
Total assets $119,807 $127,049
MAGAL SECURITY SYSTEMS LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All numbers expressed in thousands of US$)
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
---
LONG-TERM LIABILITIES:
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
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