Exhibit 99.1
RAE Systems Inc.
(AMEX: RAE) Kaufman Bros.
2005, 8th Annual Investor Conference
Don Morgan, VP & CFO
Hazardous Environment Detection Solutions
Safe Harbor Statement
This presentation (including information incorporated or deemed incorporated by reference herein) contains “forward-looking statements” within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are those involving future events and future results that are based on current expectations, estimates, forecasts, and projects as well as the current beliefs and assumptions of our management. Words such as “outlook”, “believes”, “expects”, “appears”, “may”, “will”, “should”, “anticipates”, or the negative thereof or comparable terminology, are intended to identify such forward looking statements. Any statement that is not a historical fact, including estimates, projections, future trends and the outcome of events that have not yet occurred, is a forward-looking statement. Forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed under the section entitled “Risk Factors” in our reports filed with the SEC. Many of such factors relate to events and circumstances that are beyond our control. You should not place undue reliance on forward-looking statements.
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Our Business
PRODUCTS
Detect toxic gases & radiological agents
SYSTEMS
Provide integrated & actionable threat information
Portable Rugged Battery operated
Wireless networks Remote monitoring / Web Integrated data (GPS, weather) Application-specific system SW
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Markets
Industrial / Environmental Safety & Hygiene
Confined Space
Hazardous Waste
Oil & Gas
Environmental Monitoring
Homeland Security
Military
First Responders
Public Venue Protection
Port / Border Security
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Customers
Purchase Drivers
Regulatory
Health & Safety
Security
Economic
Enterprise
Government
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RAE Systems Business Segments
Portables
Integrated Wireless Systems
Components & Accessories
Services
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Business Segment Mix—2004
Distribution
17%
Service
4%
Consumables
13%
Integrated Wireless Systems
18%
Portables
48%
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Global Operations
Headquarters in Silicon Valley, USA
Cost-efficient infrastructure in China
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Worldwide Presence
Beijing
Shanghai
San Jose, CA
Denmark
Benelux U.K. France Spain
Tokyo
Hong Kong
Singapore
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Geographic Mix—2004
Europe
10%
Asia
25%
Americas
65%
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Channels & Partnerships
Americas
Direct sales Distributors & reps
Asia
Direct sales through KLH in China HK sales office Distributors elsewhere
Europe
HQ in Denmark with pan-European direct sales staff Subsidiaries in U.K & France Direct presence in Middle East
OEM
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Products, Technology & Applications
Hazardous Environment Detection Solutions
Hazard Detection Evolution
Past Present Future
Pervasive Sensing
(unmanned multiple sensors, wireless mesh network)
Area Monitoring
(manned multiple monitoring products, wireless point-to-point network)
Measurement
(instrument data)
Alarm
(detect & warn)
Personal Monitoring
Warn
Quantify &/or Identify
Interpret &/or Predict
Automate
Value-Add = Real-Time Decision Support
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Technology & Products
Technology
Pervasive Sensing
(unmanned multiple sensors, mesh network)
Area Monitoring
(manned multiple monitoring products, point-to-point network)
Measurement
(instrument data)
Alarm
(detect & warn)
Personal Monitoring
Technical Complexity
Sensor Technology
Product
Integrated Systems
Wireless
Mesh
Point-to- Point
RAEWatch
AreaRAE
MultiRAE MiniRAE 2000 ppbRAE
ToxiRAE BadgeRAE
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Sensor Technology
Speciation
Radiation
Infrared
Solid Polymer
Electro-chemical
Ion Mobility
Corona Discharge
Chemical Detection Tube
Combustible
A World leader in photo-ionization technology for detection of volatile organic compounds
(e.g. gasoline, benzene)
Photo-Ionization Detection (PID)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Intellectual Property
18 patents focused on chemical sensor technologies
9 years remaining on fundamental PID patents
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Applications
Government
Environmental Agency
First Responders, Military
Enterprise
Pervasive Sensing
(unmanned multiple sensors, mesh network)
Area Monitoring
(manned multiple monitoring products, point-to-point network)
Measurement
(instrument data)
Alarm
(detect & warn)
Personal Monitoring
Hazardous material remediation/clean-up
Perimeter Monitoring
(nuclear plant, hazardous waste dump)
Incident command, venue security
Perimeter Monitoring
(embassy, military base)
Supply Chain
Industrial safety & security
(factory, refinery, confined space, IAQ, HAZMAT)
Perimeter Monitoring
(airport, factory, casino, hotel)
“Smart Building” IAQ
& Security
Supply Chain
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Application Scenarios
Incident Command
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Application Scenarios
Public Venue Security
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Emerging Application Scenarios
Building Air Quality Monitoring
Sensor/RF Node
Network Interrogator
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Emerging Application Scenarios
Perimeter Monitoring
Sensor/RF Node
Network Interrogator
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Emerging Application Scenarios
Cargo Container Monitoring
Interior sensors monitor and communicate through the door lock sensor to the Network Access Point and onto the Satellite Communicator
Door lock sensor protects against intrusion and responds to RFID signals to transmit container log to RAE reader at portal on the dock
Sensor/RF Node Door Lock and RFID Network Access Point Satellite Communicator
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Emerging Application Scenarios
Truck/Trailer Theft Prevention
Door Lock
Door Lock
Sensor/RF Node Network Interrogator Satellite Communicator
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Markets & Growth Opportunities
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Market Opportunity
United States Homeland Security Spending
$41.1 Billion
FY2006 budget request 7% Y/Y growth
U.S. Department of Homeland Security
United States Chemical Sensor Market Size
$2.8 Billion
8.5% projected growth per year through 2008
Freedonia report:
Chemical Sensors to 2008: Liquid, Gas & Biosensors
China Growth of Investment in Fixed Assets
(factories, equipment, property & infrastructure)
25.8%
in 2004
The Economist 27 Jan 2005
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Market Drivers
Developing countries
Growing industrial infrastructure Increasing focus on human health & safety
Industrialized world
Terrorism & other safety concerns Environmental & industrial regulations
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Competitive Environment
History: North American mining industry
COMPETITIVE
STRENGTHS
A technology leader in PID & emerging wireless systems
Strong brand
Broad product offering
Cost-efficient infrastructure in China
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Emerging Market Potential
Personal Protection
Area Protection
Pervasive Sensing
Information Value
Real-time Decision Support
Millions
Unit Pricing $10,000 $500
$0.10
Thousands
Number of Sensors
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Growth Strategy
Expand leadership position in emerging wireless sensor networks Enhance & defend portable product line Increase revenue in Europe & Asia Aggressively pursue rapidly growing safety market in China Selectively pursue strategic acquisitions & partnerships
Gain scale &/or address adjacent products & markets (accretive) Acquire complementary technologies
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Financial Overview
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Company History
KLH acquisition
Established operations in China
Moved to AMEX
$1.1M angel funding
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Company founded by Robert I. Chen (current CEO) & Peter Hsi (current CTO)
Sept. 11, 2001
Public via reverse merger $32 M secondary offering
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Revenue Growth $50 $40 $30 $20 $10
1998 1999 2000 2001 2002 2003 2004
Annual Revenue in $M USD
CAGR 30% $9.4M $10.8M $18.4M $19.0M $21.8M $31.4M $45.5M
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2005 Guidance
(*per July 2005 conference call)
2005 Sales Guidance -$55M to $60M*
Annual Revenue in $M USD $50 $40 $30 $20 $10
1998 1999 2000 2001 2002 2003 2004 2005E* $9.4M $10.8M $18.4M $19.0M $21.8M $31.4M $45.5M $55-60M (E)
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Income Statement
2005 Comparison by Quarter
Expenses
Q1 2005 Q1 2004 Q2 2005 Q2 2004
Revenue $12.2 M $7.8 M $13.6 M $10.5 M
COGS $5.0 M $2.9 M $5.3 M $4.0 M
Gross Profit $7.2 M $4.9 M $8.3 M $6.5 M
Sales & Mktg $3.4 M $2.1 M $4.4 M $2.4 M
R&D $1.0 M $0.9 M $1.4 M $1.0 M
G&A $2.6 M $1.7 M $3.4 M $2.0 M
Loss on Lease $2.0 M
TOTAL $7.0 M $4.7 M $11.2 M $5.4 M
Net Income (Loss) $0.1 M $0.0 M $(1 .3)M $0.9 M
EPS $0.00/share $0.00/share $(0.02)/share $0.02/share
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High-Leverage Business Model
Gross Margin 50%—60%
Pre-Tax Operating Income Target
10%—20%
Strong Balance Sheet
* As of June 30, 2005
Cash & Investments $30.0 M
Debt $1.7 M
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Summary
RAE Systems Investment Proposition
Growing worldwide markets
Broad customer base & rapidly emerging applications
Sustainable technical advantages
Proprietary sensor technology
System know-how & domain knowledge
Growing consumables & service revenue
High-margin “annuity” business
Strong brand & worldwide market presence
Globally distributed infrastructure
Localized sales & support / cost-efficient manufacturing in China
Financial strength
Strong balance sheet
High-leverage business model
Access to capital
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