Saar Koursh - CEO Ilan Ovadia - CFO Kenny Green - GK Investor Relations.

Sam Rebotsky - SER Asset Management.

Ladies and gentlemen, thank you for standing by. Welcome to Magal’s First Quarter 2015 Results Conference Call. All participants are at present in listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded.

You should have all received by now the company’s press release. If you have not received it, please contact Magal’s Investor Relations team at GK Investor Relations or view it in the news section of the company’s Web site, www.magal-s3.com. I would now like to hand over the call to Mr. Kenny Green of GK Investor Relations. Mr.

Green, would you like to begin?.

Thank you, operator. Welcome to Magal's first quarter 2015 conference call. I would like to welcome all of you to the conference call and I’d like to thank Magal's management for hosting this call. With us on the call today are Mr. Saar Koursh, CEO; and Mr. Ilan Ovadia, CFO.

Saar will summarize the key highlights followed by Ilan who will review Magal’s financial performance for the quarter. 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 like to hand the call over to Saar. Saar, please go ahead..

Thank you, Kenny. I would like to welcome you all and thank you for joining us today. This is my first investor conference with our shareholders. I intend Magal to continue its tradition of being transparent and open with the investor, and I do look forward continuing our discussion on a regular quarterly basis.

Magal’s first quarter of the year is typically seasonally the weakest one because of installing perimeter fence during the winter months in the northern part of the globe, especially in Canada where we have our major subsidiary, is difficult.

This winter in North America was particularly bad leading to lower than normal revenues from our Northern America subsidiaries affecting our overall revenue levels. While revenue was 6% below those of last year, on the bottom line we saw substantial improvement reporting a loss of 450,000 versus 2 million in the first quarter of last year.

This was due to the continued improvement made to the cost structure as well of the strengthening of the U.S. dollar versus the operating local currencies of our subsidiaries and efficiency measures implemented within Magal over the past year, a process which I intend to continue.

While cost efficiency is important to us, I also intend to increase resources in R&D. Over the coming years, we see significant growth potential from our technology geared to our homeland security market.

In particular, we intend to focus our R&D effort on four areas, which are fence and wall-mounted integrated sensor, fiber optic intrusion detection and location systems for perimeters and pipelines; RoboGuard, our agile surveillance robot and cyber security for securing networks.

One of the main highlights from my first few weeks in Magal was our first major order for security system combining and integrating both physical as well as logical cyber security.

The order was for an integrated security solution for several sites of a national power supplier in Latin America, including the integration of hundreds of existing new cameras, several high-end thermal cameras and smart car and pedestrian gates.

The IP networks underlying this will be managed by our CyberSeal's Tungsten advanced switches with built-in cyber security, optimized for security networks. We are excited with the first order, which prove our concept of converging physical and logical security markets.

While the process is long and we still have much work to do in educating our markets, I believe CyberSeal represent a long-term growth engine for us. One of the first changes I have made since coming to Magal is merging the CyberSeal activities fully into Magal’s core operations making the activities central to all of our R&D.

This process we hope to complete in the second quarter. My goal is to work increasingly in a unified company and extend some of the synergies that are untapped within the various subsidiaries.

We do believe that our efforts along with the growing awareness for cyber threats, industrial control system, the security and network itself and to the Internet of Things will yield improving results next year.

With regard to the RoboGuard we see ongoing interest and we are in ongoing contacts with airports, seaports, prisons, military bases, network power stations and other sites protecting critical assets. We are currently involved in a product trial with an important government customer, which we hope will lead to orders.

We hope to see further initial customer installations for RoboGuard in the upcoming few months. I would like now to briefly summarize the performance in our various regions. In Latin America, in particular in Mexico, we are seeing solid improvement over last year. Projects are moving ahead and progressing.

In Europe, we see general recovery and growth after a few years of stalled budget there. With regard to Africa, last year was strong overall and we completed some major projects there.

The new projects received in the past few months have been smaller scale and more diversified between different customer and different countries, and we continue to deliver on these. We have a lot of solid references in the region and we are competing in a number of tenders these days.

Our North American subsidiaries were weak in the first quarter due to particularly bad weather over the winter. In Israel, we completed some major projects in the past few months and we are waiting for some new ones to come into the pipeline. In particular, the southern border tender is being moving ahead.

We are participating in the trial and that is just the beginning and we believe we have a good chance of winning at least a big portion of the tender. We’ll update you as soon as this develops. In summary, I have joined the company where I see significant amount of potential part of which is untapped.

I have been impressed by the quality of the skilled and motivated staff around me, and I believe together we can achieve great things. I am passionate to drive the company to the next phase.

Over the upcoming quarters I am aiming to enhance our internal synergy, strengthen our engineering resources and capabilities, increase our offering to customers and to continue focusing improving efficiencies. I look forward to update you more on my plans and progress in the upcoming quarters.

I will now hand the call over to Ilan for the financial review.

Ilan?.

Israel 32%, North America 24%, Africa 20%, Europe 8%, South and Latin America 7% and the rest of the world amounted to 9%. Gross profit in the quarter was $4.4 million, or 37.7% of the revenues, an increase of 8.5% compared to the gross profit of $4.1 million, or 32.7% of revenues, in the first quarter of 2014.

The high level of gross margin in the first quarter of this year was a function of the revenue mix, and in particular the high revenue level this quarter. Our operating expenses in the quarter amounted to $5.6 million in the quarter compared to $6.4 million in the first quarter of last year. Operating loss in the quarter was $1.2 million.

This is compared to an operating loss of $2.3 million in the first quarter of 2014. Financial income in the quarter amounted to $675,000 compared to financial income of $399,000 in the first quarter of 2014. It is important to note that Magal’s cash deposits are in U.S. dollars, Israeli shekel and Canadian dollars.

However, while Magal posts its results in U.S. dollars, Magal’s functional currency in Israel is Israeli shekel and in Canada is the Canadian dollar and because of this full appreciation of the U.S. dollar versus Magal’s functional currencies, this led to increased financial income. Net loss in the quarter was $450,000 or $0.03 per share.

This is compared to the net loss of $2 million or $0.12 per share in the first quarter of 2014. Cash, short-term deposits and restricted deposits, net of bank debt as of March 31, 2015 were $29.9 million or $1.83 per share compared with the cash and bank deposits, net of bank debt of $28 million or $1.73 per share on December 31, 2014.

That concludes my remarks. We would be happy to take your questions now.

Operator?.

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions]. The first question is from Sam Rebotsky of SER. Please go ahead..

Good morning. Saar, good luck in the new situation and hopefully you’ll improve what was done before and go forward now.

Could you tell me what the backlog is as far as the slowness in the first quarter, which is the normal process?.

Okay. Thank you for the good words and this is my intention. Backlog was increased compared to year end, and at the end of the previous quarter and it’s in the range of what we saw in the same time last year..

Okay.

So this is – now as far as the bids that you have out and the type of work, do you have significantly more bids previously or there are more opportunities developing?.

At this stage, I would say it’s in the same range that we saw in the previous year..

Okay. All right, look, good luck and hopefully we’ll improve the profitability and get some good new contracts. Good luck..

Thank you very much..

[Operator Instructions]. There are no further questions at this time. Before I ask Mr. Koursh to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available in three hours on Magal’s Web site, www.magal-s3.com. Mr. Koursh, would you like to make your concluding statement..

Thank you. On behalf of the --.

Mr. Koursh, there is an additional question.

Would you like to take it?.

Yes, please..

Okay. The next question is from [Michael Dissler] [ph].

Would you like to go ahead?.

Yes, thank you. Welcome aboard, Mr. Koursh. I’m a long-term shareholder. You probably heard me on the last quarterly call. I’ll be very brief. I know you got both hands into the well to try and bring together all of the assets of the company. I look forward to your future quarterly call.

I realize that a lot of what you do is going to be integrated in infrastructure protection and I just want to point out I understand that gas, oil, you mentioned pipelines, I’m sure water is into that, no pun intended there. And I just want to wish you good luck on those endeavors.

The only thing I did wish to point out in terms of your North American operations and I know people do this routinely with the firm. I was a long-term shareholder in a small company that was bought up by a larger company this year. The successor company is something called Lindsey Manufacturing.

I am not a shareholder in Lindsey, I am not a financial dealer or a broker, just a private investor. I merely point it out because the company they bought was directly involved in Internet of Things with a smaller company called Lexus Corporation.

And they – this Lindsey Corporation is basically in these water management and distribution, a substantially large company. And I’m pointing it out merely as an example of the type of spider-like web that I believe that Magal could use in the future.

I don’t pinpoint Lindsey per se only that I have experience as a former shareholder of the company it purchased.

But merely pointing out that I believe that Magal could use its resources even more tactfully to branch out so that not only is our sales dependent upon our own meaning Magal S3’ own independent and direct representative, but through some sort of partnership with these companies that have larger footprints in areas that definitely will apply to the CyberSeal, CyberGuard, RoboGuard type collection or cadre of products in a way that would just amplify the footprint of Magal itself.

So I merely point it out as representative and not emblematic of what I believe you’ll be able to accomplish and I look forward to your future quarterly calls and wish you good luck. Thank you for taking this call..

Thank you for the information and we definitely will look into it. I appreciate if you can send us more information in writing..

I will be happy to do so..

Thank you..

Mr. Koursh, would you like to make your concluding statement..

Yes, thank you. On behalf of the management of Magal, I would like to thank you all for your continuing interest and long-term support for our business. If you have any questions, please feel free to call my IR team whose contact details are on the press release. I look forward talking with you next quarter. Have a good day. Thank you..

Thank you. This concludes the Magal Security Systems’ first quarter 2015 results conference call. Thank you for your participation. You may go ahead and disconnect..