Protection through Detection Protection through Detection RAE Systems Inc. RAE Systems Inc. (AMEX: RAE) (AMEX: RAE) Bob Chen, President & CEO Bob Chen, President & CEO Don Morgan, Vice President & CFO Don Morgan, Vice President & CFO May 2006 May 2006 Exhibit 99.1 |
Protection through Detection Protection through Detection 2 2 Safe Harbor Statement 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. |
Protection through Detection Protection through Detection 3 3 Mission Mission Provide Provide Rapidly-deployable Rapidly-deployable Sensor Networks Sensor Networks that enable customers to identify that enable customers to identify safety and security threats in real-time safety and security threats in real-time |
Protection through Detection Protection through Detection 4 4 Company History Company History 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 2005 Company founded by Company founded by Robert I. Chen (current CEO) Robert I. Chen (current CEO) & Peter Hsi (current CTO) & Peter Hsi (current CTO) $1.1M angel $1.1M angel funding funding Public via Public via reverse merger reverse merger $32 M $32 M secondary secondary offering offering KLH acquisition KLH acquisition Moved to AMEX Moved to AMEX Sept. 11, Sept. 11, 2001 2001 Established operations Established operations in China in China |
Protection through Detection Protection through Detection 5 5 SYSTEMS Provide integrated & Provide integrated & actionable threat actionable threat information information Products Products Handheld Handheld Detect toxic gases & Detect toxic gases & radiation sources radiation sources Portable Portable Rugged Rugged Wireless network Wireless network compatible compatible Rapidly deployable wireless networks Rapidly deployable wireless networks Remote monitoring / Web enabled Remote monitoring / Web enabled Integrated data Integrated data (GPS, weather) Application-specific system SW Application-specific system SW |
Protection through Detection Protection through Detection 6 6 Government & Security Government & Security Military Military First Responders First Responders Public Venue Public Venue Protection Protection Port / Border Port / Border Security Security Industrial / Environmental Safety Industrial / Environmental Safety Confined Space Confined Space Hazardous Waste Hazardous Waste Oil & Gas Oil & Gas Environmental Environmental Monitoring Monitoring Markets Markets |
Protection through Detection Protection through Detection 7 7 Customers Customers Regulatory Economic Purchase Purchase Drivers Drivers Health & Safety Security Health & Safety Security Commercial Commercial Government Government |
Protection through Detection Protection through Detection 8 8 RAE Systems Business RAE Systems Business Components & Accessories Components & Accessories Services Services Portables Portables Integrated Integrated Wireless Systems Wireless Systems |
Protection through Detection Protection through Detection 9 9 2005 Business Mix 2005 Business Mix Portables Portables 41% 41% Integrated Integrated Systems Systems 14% 14% KLH KLH 30% 30% Service Service 3% 3% Consumables Consumables 12% 12% |
Protection through Detection Protection through Detection 10 10 2005 Distribution Business Mix 2005 Distribution Business Mix Engr. Services Engr. Services 16% 16% RAE Mfg. RAE Mfg. 26% 26% KLH Mfg. KLH Mfg. 35% 35% OEM Resale OEM Resale 23% 23% |
Protection through Detection Protection through Detection 11 11 Worldwide Presence Worldwide Presence Shanghai Shanghai Tokyo Tokyo Hong Kong Hong Kong Singapore Singapore France France Spain Spain U.K. U.K. Benelux Benelux Beijing Beijing San Jose, CA San Jose, CA Denmark Denmark Dubai Dubai |
Protection through Detection Protection through Detection 12 12 Geographic Mix Geographic Mix Americas Americas 66% 66% Europe Europe 10% 10% Asia Asia 24% 24% Americas Americas 56% 56% Europe Europe 11% 11% Asia Asia 33% 33% 2004 2004 $ 45.8M $ 45.8M 2005 2005 $ 60.3M $ 60.3M |
Protection through Detection Protection through Detection 13 13 Sensor Technology Sensor Technology 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Combustible Chemical Detection Tube Corona Discharge Ion Mobility Electro-chemical Solid Polymer Infrared Radiation Radiation Speciation A world leader in photo- A world leader in photo- ionization technology for ionization technology for detection of volatile detection of volatile organic compounds organic compounds (e.g. gasoline, benzene) (e.g. gasoline, benzene) 2005 2006 Photo-Ionization Detection (PID) |
Protection through Detection Protection through Detection 14 14 Intellectual Property Intellectual Property 18 patents focused on 18 patents focused on chemical sensor chemical sensor technologies technologies 9 years remaining on 9 years remaining on fundamental PID patents fundamental PID patents |
Protection through Detection Protection through Detection 15 15 BadgeRAE BadgeRAE ToxiRAE ToxiRAE MultiRAE MultiRAE MiniRAE 2000 MiniRAE 2000 ppbRAE ppbRAE AreaRAE AreaRAE Alarm Alarm Measurement Measurement Hazard Detection Evolution Hazard Detection Evolution Area Monitoring Area Monitoring Pervasive Sensing Pervasive Sensing RAEWatch RAEWatch Value Real-time Decision Support Value Real-time Decision Support |
Protection through Detection Protection through Detection 16 16 Application Scenarios Application Scenarios Incident Command & Control Incident Command & Control |
Protection through Detection Protection through Detection 17 17 Application Scenarios Application Scenarios Public Venue Security Public Venue Security |
Protection through Detection Protection through Detection 18 18 Emerging Emerging Application Scenarios Application Scenarios Building Air Quality & Security Monitoring Building Air Quality & Security Monitoring Sensor/RF Node Sensor/RF Node Network Interrogator Network Interrogator |
Protection through Detection Protection through Detection Markets & Markets & Growth Opportunities Growth Opportunities |
Protection through Detection Protection through Detection 20 20 Convergence of Safety and Security Convergence of Safety and Security High Low Low High Degree of Security Canary Pre-1900s Personal Protection 1900s Area Protection 2000s Pervasive Sensing and Integrated Data Management Today Guns, Gates & Guards Video Surveillance Analog 1980s Digital 1990s |
Protection through Detection Protection through Detection 21 21 Market Opportunity Market Opportunity Homeland Homeland Security Security Spending Spending $41.1 Billion $41.1 Billion FY2006 budget request FY2006 budget request 7% Y/Y growth 7% Y/Y growth U.S. Department of U.S. Department of Homeland Security Homeland Security Chemical Chemical Sensor Sensor Market Size Market Size $2.8 Billion $2.8 Billion 8.5% projected growth per 8.5% projected growth per year through 2008 year through 2008 Freedonia report: Freedonia report: Chemical Sensors to Chemical Sensors to 2008: Liquid, Gas & 2008: Liquid, Gas & Biosensors Biosensors Growth of Growth of Investment in Investment in Fixed Assets Fixed Assets (factories, equipment, (factories, equipment, property & infrastructure) property & infrastructure) 25.8% 25.8% in 2004 in 2004 United States United States United States United States China China The Economist The Economist 27 Jan 2005 27 Jan 2005 |
Protection through Detection Protection through Detection 22 22 Market Drivers Market Drivers Industrialized countries Industrialized countries Terrorism & other safety Terrorism & other safety concerns concerns Environmental & industrial Environmental & industrial regulations regulations Developing countries Developing countries Growing industrial Growing industrial infrastructure infrastructure Increasing focus on human Increasing focus on human health & safety health & safety |
Protection through Detection Protection through Detection 23 23 Competitive Environment Competitive Environment History: North American mining industry History: North American mining industry COMPETITIVE COMPETITIVE STRENGTHS STRENGTHS • • Leader in wireless Leader in wireless sensing systems sensing systems • • Strong brand Strong brand • • Broad sensor Broad sensor product offering product offering • • Strong presence in Strong presence in China market China market |
Protection through Detection Protection through Detection 24 24 Emerging Market Potential Emerging Market Potential Time Time Personal Personal Protection Protection Area Area Protection Protection Pervasive Pervasive Sensing Sensing 2015 2015 2005 2005 2010 2010 |
Protection through Detection Protection through Detection 25 25 Growth Strategy Growth Strategy Expand leadership & partnerships in wireless Expand leadership & partnerships in wireless sensor networks for safety and security sensor networks for safety and security Increase market share in Europe & Asia Increase market share in Europe & Asia through channel development through channel development Aggressively pursue rapidly growing safety Aggressively pursue rapidly growing safety & environmental markets in China & environmental markets in China Selectively establish strategic partnerships & Selectively establish strategic partnerships & acquire complementary solutions acquire complementary solutions |
Protection through Detection Protection through Detection Financial Financial Overview Overview |
Protection through Detection Protection through Detection 27 27 Revenue Growth Revenue Growth 9.4 10.8 18.398 19.039 21.828 31.361 45.54 60.3 $10 $10 $20 $20 $30 $30 $40 $40 2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 $31.4M $31.4M $21.8M $21.8M $19.0M $19.0M $18.4M $18.4M $10.8M $10.8M $9.4M $9.4M $45.5M $45.5M CAGR CAGR 30% 30% $50 $50 $60 $60 2005 2005 $60.3M $60.3M |
Protection through Detection Protection through Detection 28 28 2006 Guidance 2006 Guidance (*per May 2006 conference call) (*per May 2006 conference call) $10 $10 $20 $20 $30 $30 $40 $40 2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 $31.4M $31.4M $21.8M $21.8M $19.0M $19.0M $18.4M $18.4M $10.8M $10.8M $9.4M $9.4M $68-73M $68-73M (E) (E) 2006 Sales 2006 Sales Guidance Guidance $68M to $73M* $68M to $73M* $50 $50 2005 2005 $45.5M $45.5M $60 $60 $70 $70 $60.3M $60.3M 2006e* 2006e* |
Protection through Detection Protection through Detection 29 29 Income Statement Income Statement 2003 -2005 Comparison 2003 -2005 Comparison Total Year Total Year 2003 2003 Total Year Total Year 2004 2004 Revenue Revenue Gross Profit Gross Profit R&D R&D Sales & Sales & Mktg Mktg G&A G&A Net Net Income (Loss) Income (Loss) EPS EPS $ 60.3 M COGS COGS $( 0.8)M $35.6 M $ 16.6 M $ 24.7 M TOTAL TOTAL $ 5.3 M $ 13.3 M $ 37.2 M $(0.01)/share $45.5 M $2.3 M $ 27.0 M $ 10.3 M $18.5 M $ 4.3 M $ 8.9 M $ 23.5 M $0.04 /share $ 31.4 M $ 2.7 M $19.3 M $ 7.3 M $12.1 M $ 3.0 M $ 5.2 M $ 15.5 M $ 0.06/share $ 2.0 M Loss on Loss on Lease Lease Total Year Total Year 2005 2005 |
Protection through Detection Protection through Detection 30 30 Income Statement Income Statement Q1 2006/2005 Q1 2006/2005 Comparison Comparison 2006 -Unaudited 2006 -Unaudited Q1 Q1 2006 2006 Q1 Q1 2005 2005 Revenue Revenue Gross Profit Gross Profit R&D R&D Sales & Sales & Mktg Mktg G&A G&A Net Net Income (Loss) Income (Loss) EPS EPS COGS COGS TOTAL TOTAL $12.2 M $0.1 M $ 7.2 M $ 3.4 M $ 5.0 M $ 1.1 M $ 2.5 M $ 7.0 M $ 0.00 /share $ 12.4 M $ (1.0) M $ 6.7 M $ 4.1 M $ 5.7 M $ 1.3 M $ 2.9 M $ 8.3 M ($ 0.02)/share Loss on Loss on Lease Lease |
Protection through Detection Protection through Detection 31 31 High-Leverage High-Leverage Business Model Business Model Gross Margin Gross Margin 50% - 50% - 60% 60% Pre-Tax Pre-Tax Operating Income Operating Income Target Target 10% - 10% - 20% 20% Strong Strong Balance Sheet Balance Sheet Cash & Cash & Investments* Investments* $ 28.3 M $ 28.3 M Debt* Debt* $ 1.6 M $ 1.6 M * As of March 31, 2006 |
Protection through Detection Protection through Detection 32 32 Summary Summary RAE RAE Systems Systems Investment Investment Proposition Proposition Growing worldwide safety & security markets Convergence of Safety & Security Broad customer base & rapidly emerging applications Sustainable technical advantages Proprietary sensor technology System know-how & domain knowledge Strong brand & worldwide market presence Products deployed in over 65 countries Localized sales & support / cost efficient manufacturing in China Financial strength Strong balance sheet and access to capital High-leverage business model |
Protection through Detection Protection through Detection 33 33 Contact Us Contact Us Company Information: Company Information: InvestorRelations@RAESystems.com InvestorRelations@RAESystems.com 408-952-8449 408-952-8449 www.RAESystems.com www.RAESystems.com IR Agency Contact: IR Agency Contact: Kirsten Chapman Kirsten Chapman 415-433-3777 415-433-3777 Kirsten@lhai-sf.com Kirsten@lhai-sf.com |
Protection through Detection Protection through Detection 34 34 18. Emerging Application - Building Air Quality Monitoring 19. Markets & Growth Opportunities 20. Convergence of Safety & Security 21. Market Opportunity 22. Market Drivers 23. Competitive Environment 24. Emerging Market Potential 25. Growth Strategy 26. Financial Overview 27. Revenue Growth 28. 2006 Guidance 29. Income Statement 2003-2005 30. Income Statement Q1/2006 vs. Q1/2005 31. High-Leverage Business Model 32. Summary 33. Contact Us 34. Index Index Index 1. RAE Systems Inc. 2. Safe Harbor 3. Mission 4. Company History 5. Products 6. Markets 7. Customers 8. RAE Systems Business 9. 2005 Business Segment Mix 10. 2005 Distribution Business Mix 11. Worldwide Presence 12. Geographic Mix 13. Sensor Technology 14. Intellectual Property 15. Hazard Detection Evolution 16. Application Scenarios - Incident Command 17. Application Scenarios - Public Venue Security |