BOS Better Online Solutions Ltd (BOSC) 2023 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the BOS First Quarter 2023 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 respective 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 over the call to Mr. Eyal Cohen, CEO. Mr. Cohen, please go ahead.

Hello, and thank you for joining our call today. BOS empowers technologies for inventory efficiency through its 3 business divisions. The Robotics division develops customer in robotic sales and integrate off-the-shelf robots that automate routine human activities in the production, assembly, parking and sorting of inventory. The RFID division integrates software and hardware for marking, tracking and managing inventory through the supply chain. Our Supply Chain division distributes electronic components.

BOS' competitive advantage is built on 20 years in the business of inventory efficiency. Built on client trust of more than 2,000 active clients, quality service, comprehensive and innovative offering. Those points are critical criteria for keeping our clients.

Summaries in development. Our Supply Chain division distributes electronic components. Historically, our focus has been on the defense and aerospace sector. Due to extensive business development that has been made in the recent year, we expect that in year '24, the portion of civil sector, mainly high tech, will increase significantly.

RFID division. We have invested extensive managerial resources to expand our product offering organically by adding complementary technologies to increase the revenues per client. We also have added alternative brands for each product to increase the closing rate of deals. I believe that those developments will yield in the year '24.

The Robotics division is transitioning to sell and integrate off-the-shelf products rather than building custom-made machines. It will significantly reduce the risk of loss associated with it and shorten the sales hike. Meanwhile, we significantly reduced the operating cost of distribution.

Now I want to turn the call over to Mr. Ziv Dekel, our Chairman. Please, Ziv.

Thank you, Eyal. Our growth strategy is comprising of 2 reinforcing dimensions. Based on our core expertise on highly advanced proficiency and powering technologies for inventory efficiency, as Eyal has just mentioned and described, we have a twofold actually growth strategy.

First dimension is to continue developing our core activities of which it is focused on automated inventory, tracking inventory and managing inventory. The purpose of it will be -- the strategic purpose will be enhancement of our core capabilities, developing our expertise, know-how and skills.

Achievements to be achieved are steady, gradual strengthening of our market competitive position, client-base, thus, revenues and cash growth. In his speech, Eyal described the key activities that he leads with his management to execute these courses. It is not self-evidently yet by the capabilities that BOS is holding and constantly developing, I can see it realizing in the short and medium term.

The second dimension of our growth strategy is to do a step-up and boosting of our M&A activities, again, focus on inventory, technology management, domain expertise of ours. The purpose -- the strategic purpose will be significantly expanding our M&A growth opportunities, become a specialized domain expert company. Achieving results, achieving in past goal in our revenues and profits and significant enhancement in our competitive position. This course and what is a great potential for BOS, we are taking an extensive and comprehensive course of action, implementing it, implementing this endeavor. Thank you.

Yes, we are ready for questions. Please.

(Operator Instructions) The first question is from Todd Felte of Advisory Group Equity Services.

Congratulations on a fabulous quarter there. It's very impressive to see the growth in both the revenue and net income. My first question is regarding M&A activity. Do you expect any potential M&A activity to be in Israel? Or are you looking at other countries?

Ziv, would you like to answer the first question?

Yes, please. Our spectrum of opportunities is in Israel, but also in Europe and in the U.S. I think that when we are speaking about our special opportunities in Israel, in terms of it is quite wide in terms of all of our activities. Whereas in the U.S. and in Europe, where we need a much stronger competitive advantage, we'll be more sharp in the opportunities that we are looking for and contemplating.

Okay. And I may have missed it, but did you give an update on your order backlog?

No, we didn't. We didn't publish it, but we opened the year with a very strong backlog and it gives us confidence to -- it supports our outlook for this year. And the backlog remained high and we are working that it will remain high in the continuance of the year.

Okay. That's great to hear. And regarding just the current market environment, we've been in a high inflation environment. There's the war in Ukraine and there's been a supply chain crunch and I know all those factors have affected your business, a lot of it positively to where your margins and it seems like you've had some pricing power.

Do you expect the current market environment where you're able to grow revenues and earnings at such a high rate and have such higher margins than in previous years? Do you expect that to continue? And I know a lot of that is due to your hard work and improvement and efficiencies.

Yes. I think that the war in Ukraine support the growth of our Supply Chain division, which has a high correlation to the Israeli defense industry. Regarding -- and as long as the demands are growing to those kind of product of the Israeli defense industry, we're involved in a lot of projects. So it will impact our growth.

We provided an outlook to the market of $45 million, which reflect the growth over last year revenues and reflect the growth over a year before, which was like $35 million. It's a significant step. And we are working on year '24 that will go over the $45 million.

Okay. I know I read an article that said that Israeli military orders were up over 900%. I guess people can't buy arms from Russia or defense systems and the American defense systems are too expensive. And you had recently landed -- you're both doing supply chain work and robotic systems now to the Israeli military. Are most of those orders when you receive them, are they for the current year? Or are these -- do you expect this business to continue into 2024 and 2025 and going forward?

We have ongoing orders from the defense -- from the Israeli defense industry, mainly from the Israeli aircraft industry. We are in the middle of delivery of relatively big order of more than $3 million that we announced before. And as long as -- and we are working on a specific project which are very -- which has -- which have a high demand in the market. So as long as it continue, we will continue to grow and we are shaking hand with this industry.

In the Robotics division, we did a transition to the defense sector in Israel. And most of the projects that are on the line today on the floor are for the defense sector.

(Operator Instructions) There are no further questions at this time. I would like to turn the call over to Mr. Eyal Cohen, CEO, to make a concluding statement. Mr. Cohen, please go ahead.

I am pleased with the turnaround that has started in the second half of year '20 (sic) ['22]. We had a strong quarter, and we will probably meet our targets for year '23. However, our Chairman need us to work on year '24 results. Thank you for joining our call today, and I'm looking to meet you on our next earnings call scheduled for August. Till then, you are invited to contact me for any matter. Thank you, and have a great trading day. Thank you.

Thank you. 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. This concludes the BOS First Quarter 2023 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.