Magal Security Systems announced its financial results for the three month period ended March 31, 2017.
Magal Security Systems announced its financial results for the three month period ended March 31, 2017.
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
FIRST 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.”