YEHUD, Israel – Magal Security Systems (NASDAQ: MAGS), based here, reported a first quarter net loss of $3.7 million or 16 cents per share, compared to a net loss of $500,000 or 3 cents per share in the same period the year prior.
Revenues for the three-month period ending March 31 were $14.3 million, an increase of 14% compared to $12.6 million in the first quarter of 2016.
Gross profit for the first quarter was $7.4 million or 51.7% of revenues, compared with $6.2 million or 49.6% of revenues in the same period the year prior. The change in gross margin between quarters was attributed to the revenue mix between volume of projects executed and volume of products and services sold.
Operating losses for the first quarter of 2017 were $900,000 compared to operating income of $600,000 in the same period the year prior. 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.
Net financial expenses for the first quarter were $2.6 million compared with $600,000 in the first quarter of 2016. In Israel, Magal’s functional currency is the Israeli Shekel while the majority of the company’s cash deposits are held in U.S. dollars. Magal reported its net income was negatively impacted by a non-cash financial expense related to a relatively sharp quarterly change in the U.S. dollar/Israeli shekel exchange rate, which led to the high level of financial expense in the current quarter.
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Earnings before interest, tax, depreciation and amortization in the first quarter was a negative $400,000, compared to a positive EBITDA of $900,000 in the first quarter of 2016.
“Our first quarter is typically a seasonally weak quarter; however, we still achieved revenue growth of 14% over the first quarter of last year,” says Magal CEO Saar Koursh.
Koursh explains the company significantly increased its investment in sales and marketing during the quarter, 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,” he says.
Magal’s portfolio includes integrated solutions for critical infrastructure, such as its Fortis4G physical security information management (PSIM) system, perimeter intrusion detection systems (PIDS) and video management software (VMS).
