Senstar Technologies Ltd (SNT) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Magal Security Systems' fourth quarter 2009 results conference call.

(Operator Instructions).

I would now like to hand over the call to Mr.

Kenny Green of CCG Investor Relations.

Mr.

Green, would you like to begin?

Thank you, operator.

I'd like to welcome all of you to the conference call and thank Magal's management for hosting this call to discuss the results of the full year of 2009.

With us on the call today are Mr.

Eitan Livneh, President and CEO, and Mr.

Ilan Ovadia, CFO.

Eitan will summarize the key highlights, followed by Ilan, who will review Magal's financial performance of the fourth quarter and full year 2009.

We will then open the call for the question and answer session.

Before we start I'd like to point out that this conference call may contain projections or other forward-looking statements regarding future events or the future performance of the Company.

These statements are only predictions and Magal cannot guarantee that they will, in fact, occur.

Magal does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand and the competitive nature of the Security Systems industry, as well as other risks identified in the documents filed by the Company with the Securities and Exchange Commission.

And, with that, I would now like to hand over the call to Mr.

Eitan Livneh.

Eitan.

Good afternoon, everyone, and welcome to Magal's results conference call.

2009 ends a period of internal perception and change of Magal, and we see the 2009 as a year in which we began a turnaround with Magal.

I believe that the changes initiated by the new management team during this year will provide a solid foundation for the year 2010 and beyond.

Over the past year, and up until now, we have focused on improving every area of the business.

We took every effort to research and investigate every aspect of the Company from an operational, financial and strategic standpoint.

This has included making some key management changes, rationalizing all costs, as well as consolidating our North American business into one unit, realizing significant cost savings.

We also saw a complete change of leadership at Magal which enables us to make many changes and improvements, work processes and develop the new strategy for the Company going forward.

While our business was going through this process of strategic evaluation and change, the global economy moved into recession and the market became difficult to navigate.

While making the necessary changes to manage this internally, we also took the position to rationalize -- reduced costs across the board.

We cut the workforce by about 10% and temporarily reduced salaries by a further 10%, saving a significant amount on the annual basis.

While we still have more to do, our [higher] gross margin and significantly lower operating expenses, which are very clear in our results today, is a clear statement to our success in this regard.

As I mentioned last quarter, as part of the process in September 2009 we made the decision to discontinue the operation of our European subsidiary, and we sold the subsidiary in December 2009.

Our subsidiary required us to invest extensive management time and effort, which management felt was not justified in light of the overall performance.

Looking towards 2009 -- 2010, sorry, my overall goal is to bring the Company back to growth and profitability.

In terms of re-establishing our growth we are leveraging our expertise and core competencies in the Security Sensors, Command and Control, Intelligent Video Analytic space.

We have increased focus on development of some highly advanced products which we hope will cement our technological leadership for the years ahead, drive our long-term growth and increase our market share.

We also saw additional potential for our Command and Control FORTIS solution, and we are planning on releasing a major update with many additional capabilities in the future.

We also consolidated and increased our global sales effort as well as improving our coordination between marketing and R&D.

We are building up our marketing channel by establishing cooperation and partnership agreements to leverage our lead base internationally and extend our customer offering.

Our agreements with DVTEL and ICX are prime examples to this.

In summary, we have gone through many changes and I believe provide a foundation for a better result in the future.

We are now working on our goal for the year 2010 to bring the business back to growth and profitability, and we are enthusiastic about Magal's future and long-term potential.

I'd like to introduce Ilan Ovadia, our new CFO, who will provide a summary of the financial results in a moment.

Ilan is an experienced CFO with over 15 years under his belt and joining us from Haifa Chemicals.

We believe Ilan will be a valuable addition to Magal's management team and has already begun to contribute very positively to our business.

Ilan, please go ahead with your summary.

Thank you, Eitan.

Good afternoon and good morning to all of you.

I will summarize our fourth quarter 2009 results and then go on to the full-year result.

Revenues for the fourth quarter 2009 were $15m.

This was a 10% decrease over last year's revenues.

Gross profit for the fourth quarter was $5.7m, or 38.3 percentage of revenue, compared with $5.9m in the fourth quarter of last year, or 35.4 percentages of revenue.

Operating expenses for the fourth quarter, included R&D expenses of $1.4m, or 9% of the revenue.

Sales and marketing were $3m, or 20% of revenue, and G&A expenses were $2.2m, or 15% of revenue.

Ongoing operating expenses totaled $6.6m.

This is compared with $14.2m in expenses in the fourth quarter 2008, which included some one-time expenses, including special post-employee -- post-employment benefits, expenses and goodwill impairment, which totaled $4.9m.

Even excluding the one-time expenses in 2008 operating expenses were significantly lower than those of 2008.

Operating loss for the fourth quarter 2009 were $887,000, compared to an operating loss of $8.3m in the fourth quarter 2008.

In the fourth quarter Magal recorded a net income of $4.3m from discontinuing operations, which was primarily due to the capital gain generated from the sale of the European subsidiary whose results were classified as discontinuing operations.

Net income attributable to Magal shareholders for the fourth quarter 2009 was $2m, or $0.19 per share, compared to a loss in the fourth quarter 2008 of $24m, or $2.31 per share.

Net loss per share from continuing operations in the fourth quarter of 2009 was $0.22 per share.

And now for the full-year result.

Revenues for 2009 were $54.5m, which are 4.5 percentage below those reported for 2008.

Israel represents 24% of revenue, North America 25%, Europe 20%, Latin America 6% and the Rest of the World 25%.

Gross profit for the year totaled $21.2m, a growth of 8.4 percentage compared with the $19.5m reported last year.

Gross margin in 2009 was 38.9% compared with the 34.9% (sic - see press release) in 2008.

In terms of operating expenses R&D expenses were $4.8m, or 8.8 percentage of revenue.

The sales and marketing were $10.9m, or 20% of revenue, and G&A expenses were $8.2m, or 15.1% of revenue.

Operating expenses totaled $23.9m, or 30% below, when compared with $34.1m in 2008, which included some one-time expenses, including special post-employment benefit expenses and goodwill impairment which totaled $5.4m.

Operating loss for 2009 was $2.7m compared with an operating loss of $14.6m in 2008.

Net loss attributable to Magal shareholders for 2009 was $855,000, or $0.08 per basic share, compared with a net loss in 2008 of $32.6m, or $3.14 per basic share.

Net loss per share from continuing operations in 2009 was $0.49 per share.

Turning to the balance sheet, our net cash position, which are cash and cash equivalents, marketable securities and short-term bank deposits, [less] current bank debt, was [$3.6m], an increase of $8.5m compared with a negative net cash position as of December 31, 2008.

The improvement in cash position was mainly achieved as a result of the positive cash flow provided by operating activities, as well as the proceeds from the sale of our European subsidiary.

As of December 31, 2009 we have 289 employees worldwide, compared with 322 employees as of December 31, 2008.

And now I'd like to hand the call back to Eitan.

Eitan, please.

Thank you, Ilan.

Before we will move on to the question and answer session I'd like to mention our investor relations activities in the coming quarter.

Together with the Chairman, Mr.

Jacob Perry, I intend to meet with you, our institutional investors, in the United States in the coming quarter.

Please feel free to contact our investor relations team to schedule a meeting with us.

With that, we will open the call to investor questions.

Operator, please.

Thank you.

(Operator Instructions).

The first question is from Ken Liddy of Wells Fargo.

Please go ahead.

Good afternoon.

I just wanted to find out what opportunities you're seeing currently in both Israel and worldwide.

Good afternoon, Ken, Eitan speaking.

I hope that in the coming weeks we will be able to release some good news regarding new opportunities, which I cannot elaborate at the moment because they are not yet in hand.

And we hope that the remaining 2010 will be better, even though the market is still, for us, I must admit, under a sort of a recession.

Processes in this world of security is slowing, still in a slow mode, while decision makers' budgets worldwide are not yet released to our business.

Even though some activities that were started months ago are about to conclude in the next few weeks and I believe that we will be able to share with you some of the good things.

Are these significant contracts you're pursuing?

Well, significantly is a relative question and, relatively, I hope they will be.

And what regions of the world are they; in Israel or North America, Latin America?

There will be, I hope, at least one in Latin America and some, hopefully, also in the rest of the -- in the other parts of the world.

Do you see an opportunity for work on the new Israeli/Egyptian barrier?

Well, I can share with you my hopes, but it's much, much too early to say.

The Israeli government just two or three weeks ago approved the whole project and they start with the design which is a very early stage.

So, speaking about national budget, I wouldn't see it in the near future.

And if it will come to a real project, then Magal is looking forward to get some of that.

Eitan, could you explain the slowdown in press releases?

Last conference call you made it clear that you wanted to communicate further with shareholders.

I'm not sure I understand your question.

Can you repeat?

Could you explain the lack of press releases regarding some of the activities in the quarter?

Mainly two reasons.

First, there was not a major contract or a major event, other than the fact that we have replaced the CFO, and we released that when it happened.

It's not necessarily a good sign, but from my personal experience with our new CFO it's a promising one.

And second is the fact that I took upon myself to stabilize the Company after the event that was -- happened in Magal in the last 12 months, as I thought in the last quarter of 2009 that it's more important.

And actually when I met some of you in my US trip, I explained it, and actually that's what we did.

And I can tell you that my -- with that -- respect to that the management and the Company is now under a much stable, still a way to go to improve our performance, but the Company is in a stable situation.

As far as North America, do you see any new opportunities in general?

I know that was an area that management talked about trying to penetrate.

No, unfortunately, the US, to us, is still in a -- I don't want to say in crisis -- economic crisis situation, but definitely it's not in a high opportunity situation.

So the budgets that we are following is not yet available in the market.

And is Latin America still looking promising?

Latin America in general is better.

And when can we expect to hear some details of some of these activities as far as when?

You'd say the next few weeks or several weeks?

Once we will publish it you will see the details, which I cannot speak about at the moment but, yes, it's from Latin America.

So it's a good sign by itself, but it's Latin America is in a more active situation.

Okay, thanks.

Thank you.

(Operator Instructions).

Mr.

Livneh, now would you like to make a concluding statement?

Thank you.

On behalf of myself, the management of Magal, I would like to thank you all for your continued interest in our business and for taking part in this conference call.

And I look forward to speaking to you again in this conference call, and probably earlier, as I mentioned before, in the meetings.

And have a good day, all of you.

Thank you very much, all.

Thank you.

This concludes the Magal Security Systems' fourth quarter 2009 results conference call.

Thank you for your participation.

You may go ahead and disconnect.