Project Division
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MAGAL SECURITY SYSTEMS Focused Solutions for the World’s Security Needs Kobi Vinokur, CFO March 2020 1 / SAFE HARBOR/ Statements concerning Magal Security’s business outlook or future economic performance, product introductions and plans and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements'' as that term is defined under U.S. federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions affecting Magal Security’s industry and target markets in particular; shifts in supply and demand; market acceptance of new products and continuing products' demand; the impact of competitive products and pricing on Magal Security’s and its customers' products and markets; timely product and technology development/upgrades and the ability to manage changes in market conditions as needed; the integration of acquired companies, their products and operations into Magal Security’s business; and other factors detailed in Magal Security’s filings with the Securities and Exchange Commission. Magal Security assumes no obligation to update the information in this release. Estimated growth rates and other predictive statements represent Magal Security’s assumptions and expectations in light of currently available information. Estimated growth rates and other predictive statements, are based on industry trends, circumstances involving clients and other factors, and they involve risks, variables and uncertainties. Magal Security’s actual performance results may differ from those indicated in this presentation. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein. 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. 2 / MAGAL AT A GLANCE / Market Cap: $58M 2019 Total Revenue: $86.8M Technology Focus Global Presence Israel Recurring 11% 22% Revenue Europe Enterprise R&D & 13% Products ~20% Total Value Technicians North America Net Cash 40% Employees $11m 175 South and Latin America $51m Projects 420 9% 22% 60% Africa 23% Others 7% of revenues spent on R&D • Leader in customized security products and turnkey solutions with decades of experience • Growing presence with focus on key vertical markets • Two operating divisions • Magal Security global provider of turnkey projects • Senstar recognized tech-rich product brand • Scalable model – near-term goal to increase revenue by 50% and increase EBITDA margin from 9% to 14% * Financial metrics reflect calendar year as of 12/31/2019 3 / MAGAL DELIVERS SOLUTIONS IN HIGHEST GROWTH SEGMENT / Security is a Global Problem Projected to Grow at a CAGR of 10% to Over $526 Billion by 2026* Industry Growth Drivers • Increasing security threats to infrastructure and populations • Increasing government regulation to fight terrorism • Rising labor costs driving tech-based solutions Magal operates in one of the highest growth market segments - physical security to safeguard people, places and materials Electronic Access Control VMS Video Surveillance System Integration Perimeter Intrusion Remote Detection Monitoring Systems 4 * Source: Verified Market Research, Global Security Solutions Market report October 2018 / CORE MAGAL MARKET - PERIMETER INTRUSION PROTECTION / Protecting Critical Infrastructure While Meeting Operational and Regulatory Requirements Electronic VMS Command and Access Control Video Analytics Control EAC Symphony FORTIS Fence Mounted Sensor FlexZone / FiberPatrol Covert Sensor OmniTrax VMS Video Analytics Intelligent Lighting / Symphony Fence Sensor Senstar LM100 Volumetric Sensor XField Microwave Sensor UIltraWave 5 / TARGETING KEY VERTICAL MARKETS / Characteristics Have unique security AIRPORT BORDERS OIL & GAS CORRECTIONS requirements suited to Magal’s capabilities • Vulnerable - readily accessible to public REGULATED CRITICAL • Increasingly use tech- CANNABIS SAFE CITY INFRASTRUCTURE LOGISTICS centric products • Require tailored solutions MILITARY VIP SITES FACILITIES SMART CITY SEAPORTS 6 / MAGAL’S TWO OPERATING DIVISIONS/ ~40% of ~60% of Revenues revenues Product division – tech-rich, proprietary Project division - turnkey security projects globally • Perimeter intrusion detection systems (PIDS) • Perimeter intrusion protection for critical • Advanced Video Management Software (VMS) infrastructure security • Intelligent Video Analytics (IVA) • Comprehensive solutions offering • Electronic Access Control (EACS) • Leverages Magal/Senstar’s full suite of products • Symphony - security and information • Features proprietary Fortis 4G Command & management platform Control platform • Sells to system integrators and distribution channels • Global sales directly to end users or to large-scale contractors • Fastest growing division with highest contribution margins • Large, variable sales to defined customer base with high barriers to entry 7 / GLOBAL FOOTPRINT TO SUPPORT OPERATIONS / / MAIN FACILITIES / TWO OPERATING DIVISIONS SUPPORTED GLOBALLY Israel / Yehud Security products under the Senstar brand Corporate HQ & Magal Israel Projects Canada / Ottawa & Waterloo Security solutions and turnkey projects under the Magal brand PIDS & VMS R&D Centers Manufacturing Mexico / Cuernavaca Projects and Products United States / Philadelphia Fiber Optic Technologies R&D Center Philippines / Clark Technical support center Germany/ Ravensburg and Hanau Product distribution - Europe 8 / PROJECT DIVISION - CORE COMPETENCIES / Consulting Analyze and identify Turnkey Security Projects For Maintenance, security concerns Governments And Enterprises Support & Design Training • Comprehensive offering Full suite of support New projects or existing • Recurring revenue from maintenance, options system upgrades or support and training replacements • Customized solutions capabilities Core Project Division Competencies Installation Integration Over 50 years Full-service systems installation Project integrator experience Management & Supervision Manage every stage through completion 9 / PROJECT DIVISION – PROPRIETARY INTERGATED SOLUTIONS/ Cyber Security Access Control External Data FORTIS Proprietary Command and Control Perimeter Systems Facial • Centralized proprietary Physical Security Recognition Information Management (PSIM) monitoring • Holistic integrations for all security and Robots & Drones and Balloons operational systems Anti-drone • Vendor agnostic • Effective decision making on real-time events Integrated by Smart Gates FORTIS 4G Thermal Imaging • Future delivery as cloud solution IVA & LPR CCTV/Cameras Public Address Mobile Forces 10 / PROJECT DIVISON DELIVERS COMPREHENSIVE EFFECTIVE SOLUTIONS / Project division executes construction and installation using sensors and tech-rich products 11 / SENSTAR PRODUCTS LEVERAGING CORE EXPERTISE TO NEW MARKETS / Recognized Brand Leader in Security Products VMS • Ranked one of 2019’s top 10 growth brands in Video global physical security sector * Management Competitive advantages – performance, reliability $3.7B and quality IP-rich Proprietary Technology EACS Electronic • 24 issued patents and 8 patents pending Access Control PIDS $550 M • Annual R&D investment of ~$5.5 million $7.5B Expanded addressable market with ESC and VMS acquisitions (2018, 2016) Cross-selling drives growth * ASMAG.com 2019 a&s Security 50 December 2019 Source: Markets & Markets, June 2018 12 / SENSTAR’S INTRUSION DETECTION FOR UNIQUE SECURITY NEEDS / Case Study Perimeter security requirements for a critical cargo Challenge – Secure a five-mile airport perimeter subject to airport in North American … harsh weather conditions and surrounded by busy roads, pedestrian traffic and public transportation Solution –Multilayered Perimeter Intrusion Detection Technology • Fiber optic fence-mounted and buried intrusion detection systems • Senstar’s Network Manager software to manage alarms from the multiple systems Outcome – High praise for Senstar’s solution with …where traditional PIDS and video surveillance improved security through improved system management proved ineffective, expensive and unmanageable and lower cost with reduced nuisance alarm rate (NAR) 13 / PRIORITIZING RESOURCES ON FOUR KEY VERTICALS FOR 2020/ • Rapid growth of security needs in these verticals benefit Product and Project divisions • Able to leverage core capabilities, market leadership, new products and high standards • Investing in BD and Sales; targeting for M&A opportunities Core vertical for product High growth industry division with PIDS for new operational needs - VMS analytics for logistics to track damaged good, and reduce lost CRITICAL LOGISTICS items INFRASTRUCTURE Market leader in the Magal’s differentiated U.S. with momentum to capabilities and high increase market share standards of quality for security align with this capital-intensive sector’s CORRECTIONS OIL & GAS unique needs 14 / EXECUTING A STRATEGY TO DRIVE GROWTH / Growth Drivers Divisional Revenue 2017 - 2019 • 2020 focus on growth in key verticals ($ in millions) • Selling core security solutions