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 Bob Durstenfeld, Director, Corp. Marketing Bob Durstenfeld, Director, Corp. Marketing Fall 2006 Fall 2006 Exhibit 99.1 |
Protection through Detection 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 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 4 Company History Company History 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 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 $1.1M angel 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 2006 2007 Aegison Aegison DVR DVR acquisition acquisition |
Protection through Detection 5 Products Products Handheld Handheld Detect toxic gases Detect toxic gases & radiation sources & radiation sources Portable Portable Rugged Rugged Wireless network Wireless network compatible compatible Sensor Systems Sensor Systems Integrated & Integrated & actionable threat actionable threat information information Mobile & fixed Mobile & fixed digital video storage digital video storage Integrated sensor Integrated sensor data data Integrated Integrated Video Systems Video Systems Sensor triggered Sensor triggered video storage video storage Rapidly deployed Rapidly deployed Wireless networks Wireless networks /Web enabled remote /Web enabled remote monitoring monitoring Integrated data Integrated data (GPS, (GPS, weather) weather) |
Protection through Detection 6 Global Convergence of Safety and Security Global 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 7 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 8 Government Government Commercial Commercial Customers Customers Regulatory Economic Purchase Purchase Drivers Drivers Health & Safety Security Health & Safety Security |
Protection through Detection 9 RAE Systems Business RAE Systems Business Components & Accessories Services Instrumentation Security Systems |
Protection through Detection 10 2005 Business Mix 2005 Business Mix Instrumentation 55% KLH 30% Service 3% Consumables 12% |
Protection through Detection 11 2005 KLH Business Mix 2005 KLH 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 12 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 13 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 14 Sensor Technology Sensor Technology Photo-Ionization Detection (PID) 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 |
Protection through Detection 15 Intellectual Property Intellectual Property 20 patents focused on 20 patents focused on chemical sensor and chemical sensor and digital video technologies digital video technologies 9 years remaining on 9 years remaining on fundamental PID patents fundamental PID patents |
Protection through Detection 16 Alarm Alarm Measurement Measurement BadgeRAE BadgeRAE ToxiRAE ToxiRAE MultiRAE MultiRAE MiniRAE 2000 MiniRAE 2000 ppbRAE ppbRAE AreaRAE AreaRAE 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 17 Application Application Incident Command & Control Incident Command & Control |
Protection through Detection 18 Application Application Public Venue Security Public Venue Security |
Protection through Detection 19 Application Application Fixed and Mobile Digital Video Fixed and Mobile Digital Video |
Protection through Detection 20 Emerging Emerging Application Application Building Air Quality & Security Monitoring Building Air Quality & Security Monitoring Sensor/RF Node Sensor/RF Node Network Interrogator Network Interrogator |
Protection through Detection Markets & Markets & Growth Opportunities Growth Opportunities |
Protection through Detection 22 Market Opportunity Market Opportunity Homeland Security CBRNE Spending $421 Million FY2006 budget request 7% Y/Y growth U.S. Department of Homeland Security And Civitas Group Industrial Chemical Sensor Market $2.8 Billion 8.5% projected growth per year through 2008 Freedonia report: Chemical Sensors to 2008: Liquid, Gas & Biosensors China Industrial Spending Growth +17 % Jan-June ’05 to ‘06 (factories, equipment, property & infrastructure) National Bureau of Statistics Aug. 2006 |
Protection through Detection 23 Market Drivers Market Drivers Industrialized countries Industrialized countries Terrorism and other safety Terrorism and other safety and security concerns and security 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 and security health, safety and security |
Protection through Detection 24 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 25 Information Information Value Value Real-time Real-time Decision Decision Support Support Emerging Market Potential Emerging Market Potential $500 $500 $10,000 $10,000 $0.10 $0.10 Thousands Thousands Millions Millions Number of Sensors Number of Sensors Personal Personal Protection Protection Area Area Protection Protection Pervasive Pervasive Sensing Sensing |
Protection through Detection 26 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 & security markets in China environmental & security markets in China Selectively establish strategic partnerships & Selectively establish strategic partnerships & acquire complementary solutions acquire complementary solutions |
Protection through Detection Financial Financial Overview Overview |
Protection through Detection 28 Revenue Growth Revenue Growth $10 $10 $20 $20 $30 $30 $40 $40 2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 $31.4M $21.8M $19.0M $18.4M $10.8M $9.4M $45.5M CAGR CAGR 30% 30% $50 $50 $60 $60 2005 2005 $60.3M |
Protection through Detection 29 2006 Guidance 2006 Guidance (*per July 2006 conference call) (*per July 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 $21.8M $19.0M $18.4M $10.8M $9.4M $64-68M (E) 2006 Sales 2006 Sales Guidance Guidance $64M to $68M* $64M to $68M* $50 $50 2005 2005 $45.5M $60 $60 $70 $70 $60.3M 2006 E* 2006 E* |
Protection through Detection 30 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 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 31 Income Statement Income Statement Q2 and Six Months Ended June 30 -- Q2 and Six Months Ended June 30 -- 2006/2005 2006/2005 Comparisons Comparisons 2006 -Unaudited 2006 -Unaudited Q2 2006 Q2 2005 Revenue Gross Profit R&D Sales & Mktg G&A Net Income (Loss) EPS COGS TOTAL $ 13.6 M $ (1.3) M $ 8.3 M $ 4.5 M $ 5.3 M $ 1.4 M $ 3.3 M $ 11.2 M $ (0.02) /share $ 15.9 M $ (0.05) M $ 8.5 M $ 4.4 M $ 7.4 M $ 1.5 M $ 3.0 M $ 8.9 M $ 0.00/share $ 2.0 M Loss on Lease 6 Mos 2006 6 Mos 2005 $ 25.9 M $ (1.2) M $ 15.5 M $ 7.9 M $ 10.4 M $ 2.5 M $ 5.8 M $ 18.2 M $ (0.02) /share $ 28.3 M $ (1.1) M $ 15.2 M $ 8.5 M $ 13.1 M $ 2.7 M $ 6.0 M $ 17.2 M $ (0.02)/share $ 2.0 M |
Protection through Detection 32 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* $ 26.3 M $ 26.3 M Debt* Debt* $ 1.7 M $ 1.7 M * As of June 30, 2006 |
Protection through Detection 33 Summary Summary RAE Systems Investment Proposition RAE Systems Investment Proposition Growing worldwide safety & security markets Growing worldwide safety & security markets Convergence of Safety & Security Broad customer base & rapidly emerging applications Sustainable technical advantages Sustainable technical advantages Proprietary sensor technology System know-how & domain knowledge Strong brand & worldwide market presence Strong brand & worldwide market presence Products deployed in over 65 countries Localized sales & support / cost-efficient manufacturing in China Financial strength Financial strength Strong balance sheet and access to capital High-leverage business model |
Protection through Detection 34 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 35 Index Index 1. RAE Systems Inc. 2. Safe Harbor 3. Mission 4. Company History 5. Products 6. Convergence of Safety & Security 7. Markets 8. Customers 9. RAE Systems Business 10. 2005 Business Segment Mix 11. 2005 KLH Business Mix 12. Worldwide Presence 13. Geographic Mix 14. Sensor Technology 15. Intellectual Property 16. Hazard Detection Evolution 17. Application - Incident Command 18. Application - Public Venue Security 19. Application - Fixed & Mobile Digital Video 20. Emerging Application - Building Air Quality Monitoring 21. Markets & Growth Opportunities 22. Market Opportunity 23. Market Drivers 24. Competitive Environment 25. Emerging Market Potential 26. Growth Strategy 27. Financial Overview 28. Revenue Growth 29. 2006 Guidance 30. Income Statement 2003-2005 31. Income Statement Q2/2006 vs. Q1/2005 32. High-Leverage Business Model 33. Summary 34. Contact Us 35. Index |