BOS Better Online Solutions Ltd (BOSC) 2022 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the BOS Second Quarter 2022 Results Conference Call.

(Operator Instructions)

As a reminder, this conference call is being recorded and will be available on the BOS website as of tomorrow. With us on the line today are Mr. Ziv Dekel, Chairman; Mr. Eyal Cohen, CEO; and Mr. Moshe Zeltzer, CFO.

Before I turn the call over to Mr. Cohen, I would like to remind everyone that forward-looking statements for the respected company's business financial condition and results of its operations are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated.

Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities.

I would now like to turn the call over to Mr. Eyal Cohen, Chairman (sic) [CEO]. Mr. Cohen, please go ahead.

CEO, not Chairman, sorry. Thank you for joining our call today. We have progressed towards BOS's long-term growth during the first -- during the year's first half, and our revenues grew by 28% compared to the comparable period last year. The RFID division revenues grew by 22% in the year's first half compared to the comparable period last year. In addition, this division completed the integration of its earlier this year's acquisition.

The Supply Chain division has leveraged the global shortage of electronic components, and its revenue grew by 40% in the first half of the year compared to the comparable period last year. In addition, the Supply Chain division has established a new sales engineering department to increase the number of electronic manufacturers we represent, which is a substantial element for long-term growth.

In the Robotics division, we made some progress in increasing the portion of revenues from the sale of catalog machines versus customer admissions, which we believe will improve the profitability of this division. You are invited to review our catalog machines on the BOS ROBOTICS website.

In addition, the Robotics division successfully developed and launched a new line of automatic sorter machines for logistics centers, which we believe has good self potential, and we will distribute impressive videos soon. On the cost side, we are in a challenging period, characterized by increased operational costs. Hence, recently, we purchased part of the facility's [re-lease].

In addition, we plan to relocate the Robotic factory by the end of this year. Furthermore, there are shortages in goods and employees. However, the BOS approach sees it as a business opportunity rather than a business (inaudible). That completes my review. Thank you.

Let me go to the Q&A session.

(Operator Instructions) The first question is from Todd Felte of AGES Financial Services.

Congratulations on another strong quarter. I noticed that you've done over $21 million in revenue for the first 6 months and your guidance is only for $35 million for the year. And historically, the fourth quarter has been your strongest quarter. Do you expect a downturn in business, going forward? I'm just curious as to why you haven't raised your guidance levels.

Thank you, Todd. No, I think you are right. The second half of the year is much stronger than the first half of the year, historically. So -- but the projection we provided that we will exceed the $35 million, so I'm sure that we'll exceed this number.

Okay. That's great to hear. And moving on to the Robotics. I see that you had the first gross profit for the Robotics division in quite some time, and the overall operating loss has really improved. Do you expect the Robotics division to become profitable within the next year?

Yes. This is the plan, and we did a lot of restructuring on this division, in addition to changing the business strategy. And as I mentioned, we also relocated the factory to a new place in order to save significant cost. So we are reducing the burn rate of this division and changing the business model of this division. And I think you will see the fruits in the next year.

Okay. And then my final question just refers to the market environment in Israel. I saw a report on Bloomberg, where inflation is at a high for Israel in the last few years. And how does that affect your company? And are you able to pass on much of these price increases?

It's a big challenge in two aspects. First, on the financial expenses, although we don't have a huge amount of loans, but we have loans. And recently, we acquired the facilities -- part of the facilities that we are working in [regional] Israel.

We will consume, I think, in the coming day, a loan of ILS 4.5 million. So the interest has -- will have an impact, but it's better to have these assets in our hands rather to continue to visit because the rent price are going dramatically up.

Regarding the inflation, there are two elements here. First, to build a mechanism that we will be able to adjust the sales price to our clients more frequently, not as we used in the past to do it once in 2 years or 3 years or not at all. So we have to change -- we are working to change our information system that will support it.

And we completed -- I think we complete -- we are very close to complete this stage. And we're also doing a round of changing sales price to our client, the client that we are in an annual contract with them. And we are doing well in that aspect.

On the other hand, the inflation has a very bad impact on the payroll, and we have to face with it. And in order to face with it, we have to increase the sales price. So it's a big [risk], but this is part of the business for the coming year or 2.

Okay. And one last question. I noticed in the first half of the year, you had a substantial amount of orders from the Israeli military. And I had read an article where Israeli military orders were up over 900%, based on the fact that no one is ordering any Russian military equipment. Is the military division and your supplying of components, is that still a big factor in your business? And do you expect it to continue?

Absolutely. As you can see in the Supply Chain, the growth in revenues is about 40% in the first half of the year compared to the comparable period last year. So it's clearly effect of the trend that you just mentioned. And our backlog also is in a record number, which is above $20 million, which is a record number compared to any period in the history of BOS. And it's a direct effect of the growth in the military segment in Israel.

Okay. That's great to hear. Congratulations on a great quarter, and I know most shareholders should be very happy with it. Thank you.

(Operator Instructions) There are no questions at this time. Before I ask Mr. Dekel to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available on the company's website www.boscom.com by tomorrow.

Mr. Dekel, would you like to make your concluding statement?

Yes. So hello, everybody. What Eyal has just described is the picture as well as the key elements of both strategic brand manifestations, which we already are implementing, of which the full [fruition] of that is yet to come. (inaudible) see a significant improvement has been made, and I can see the springs of [fruit] partly from -- also from Todd asked before.

We are working closely with the company. I trust BOS' management team, led by Eyal's vigorous leadership, investing in all aspects and levels of the system, an innovative Board and imaginary thinking. I'm highly impressed by the team's commitment to the company and to the target of improving shares of the value. Thank you for being with us today. Looking forward to meet again on BOS in third quarter call. Thank you, everybody.

This concludes BOS Second Quarter 2022 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.