Roundhill Magnificent Seven ETF
Q1 2021 Earnings Call Transcript

Published: 24 May 2021

[Operator:]

Greetings and welcome to the Magal Security Systems Ltd. First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Brett Maas of Hayden IR. Thank you. You may begin.

[Brett Maas:]

Thank you, operator. I would like to welcome all of you to the conference call and thank Magal’s management for hosting this call. With us today on the call is Dror Sharon, CEO of Magal; and Kobi Vinokur, CFO. Dror will summarize key financial and business highlights, followed by Kobi who will review Magal’s financial performance of the quarter -- for the first quarter. We will then open the call for question-and-answer session.

[Dror Sharon:]

Thank you, Brett. Thank you all for joining us today. The first quarter results were acceptable given that many regions were operating continue to be impacted by COVID restriction that limit business activities. Despite those limitations, were approached 2020 prior quarter's performance on revenue and gross margins. This quarter we reported Magal Integrated Solutions as a discontinued operation. Since the company is still control the Magal segment it is considered a related party. As a result, the reported revenue of $6.5 million that excludes Senstar sales to Magal Integrated Solution of $0.6 million. After completion of the divestiture, Senstar just would include Magal's ongoing sales in reported revenue. For today's session, my comments to follow would speak to the company's result, including sales to Magal. On this basis, Senstar sales in the first quarter including Magal Integrated revenue was $7.5 million, a decrease of 9% from the first quarter Senstar revenue in Q1 2020. The decline is due to the impact of COVID on our target verticals in the U.S., APAC, and Latin America. In the first quarter of 2021, we started to see business activities begin returning to normal, in particularly, in Europe, but we are still not 100% recovered.

[Kobi Vinokur:]

Thank you, Dror. As Dror mentioned, we are reporting this quarter the results of continuing operations, based primarily on Senstar's standalone revenue and on the corporate entity containing costs of public platform. In addition, we show in a separate line on our P&L the net result of Magal Integrated Solutions, defined as net loss from discontinued operations.

[Operator:]

Thank you. At this time, we'll be conducting a question-and-answer session. Thank you. Our first question comes from the line of Mike Distler with Amnx Holdings. Please proceed with your question.

[Mike Distler:]

Yes, good afternoon, gentlemen. How are you? As you know, I'm a long time shareholder, hope as well. I appreciate the depth of your conversation with shareholders this morning. I know it was not easy to get through all that. My only question just regarding the go forward is the -- is there an expiration date or a time limit when Magal no longer seeks to purchase Senstar material, Senstar software, Senstar products, et cetera? And related to that, do you think the ongoing concern will be renamed Senstar seems appropriate enough, but I was just -- you may have some update on that. So, it's really a two-part question. And thank you very much for your time.

[Dror Sharon:]

Hi Mike, thank you. First, Magal hopefully will remain a customer of Senstar for many years to come. So, there's no reason to -- as long as the products are in good quality and good price, I feel Magal will continue to purchase those solutions from Senstar. So, there's nothing in the agreement that says stop -- prohibit them from using Senstar as a product supplier. About your second question, we left to update the name. We are currently discussing it internally and once it will be approved by the Board of Directors, then we'll share it with the market.

[Mike Distler:]

Okay, I assume you're on board with all that. I just -- finally, just in closing the -- I just want to make sure that you bring along all of your many shareholders -- I don't mean the 44% holder, but -- that you bring along all of the shareholders who've been with you for a very long time and just keep them in the loop as you did today and as you have been doing both of you for the last, couple of years kind of thing, I just make sure because communication is the bond because information is power. So, thank you for updating us today and I look forward to three months from now. Continued success.

[Dror Sharon:]

Thank you, Mike.

[Mike Distler:]

Thank you.

[Operator:]

Thank you. Our next question comes from Sal DeTurris, Private Investor. Please proceed with your question.

[Sal DeTurris:]

Good afternoon, gentlemen. Yes, I had a question last conference call and I had the same question again, on the foreign tax withheld on the Magal dividend in December of 2020, it was noted that there would be an instruction letter posted on the Magal website to see if one could qualify for an exemption or a lower tax rate. Can you give me an update to the status of that instruction letter?

[Kobi Vinokur:]

Yes, unfortunately, it's being delayed and delayed. It's beyond our control in a way because the entire activity is done with the Israeli tax authorities. We're assisted by our tax consultants in this matter. And the tax authorities in Israel, unfortunately, they have their own pace and there were delays due to the COVID lockdowns and limitations and recently, we also had some political issues in Israel. So, we really -- we get promised on a daily and weekly basis to finalize this. It's very extraordinary given the -- I would say relative non-complexity of the matter. So, I hope that for the next -- during the next month or so, we'll be able to issue this letter. We are on it.

[Sal DeTurris:]

Okay. Thank you very much.

[Dror Sharon:]

Thank you.

[Operator:]

Thank you. Ladies and gentlemen, there are no further questions at this time. I'll turn the floor back to Mr. Sharon for any final comments.

[Dror Sharon:]

Okay, thank you operator. On behalf of the management of Magal, I would like to thank you for your continued interest in long-term support of our business. I look forward to updating you next quarter. Have a safe and good day.

[Operator:]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.