B.O.S. Better Online Solutions Ltd. (NASDAQ:BOSC) Q1 2023 Earnings Call Transcript

B.O.S. Better Online Solutions Ltd. (NASDAQ:BOSC) Q1 2023 Earnings Call Transcript May 30, 2023

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the BOS First Quarter 2023 Results Conference Call. All participants are at present in listen-only mode. Following managements’ formal presentation, instructions will be given for the question-and-answer session. [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.

Eyal Cohen: Hello and thank you for joining our call today. BOS empowers technologies for inventory efficiency through its RFID business division. The Robotic division develops customary Robotic sales and integrate off-the-shelf robot that automate to human activities in the production, assembly, parking and sorting of inventory. The RFID division integrated software and hardware for marking, tracking, advantaging inventory to 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.

Some recent development. Our Supply Chain division distributes electronic companies. 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 2024 and the portion of civil sector, mainly hybrid 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 2024. The Robotics division is transitioning to sell and integrate off-the-shelf robot rather than building custom-made machines.

It will significantly reduce the risk of test [ph] associated to it and shorten the sales side. 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.

Ziv Dekel: Thank you, Eyal. Our growth strategy is comprising of two reinforcing dimensions. Based on our core expertise on highly advanced proficiency empowering technologies for inventory efficiency, as Eyal has just mentioned and described, we have a two-fold 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, knowhow and skills. Achievements to be achieved are steady gradual strengthening of our market competitive position client-based thus revenues and cash growth. In his speech, Eyal describe the key activities that he leaves 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 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, becoming specialized domain expert company, achieving results, achieving in fast growth 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. Eyal?

Eyal Cohen: Yes. We are ready for questions. Please.

Ziv Dekel: Please.

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Q&A Session

Operator: Thank you. [Operator Instructions] The first question is from Todd Felte of Advisory Group Equity Services. Please go ahead.

Todd Felte: Hey. Congratulations on a fabulous quarter there. It’s very impressive to see the growth in both the revenue and net income and thank you for taking my questions. 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?

Eyal Cohen: Hey, Todd. Thank you for the question. Ziv, would you like to answer the third question?

Ziv Dekel: 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 will be more sharp in the opportunities that we are looking for in contemplating.

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

Eyal Cohen: No. 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.

Todd Felte: Okay. That’s great to hear. And regarding just the current market environment, we have 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 have had some pricing power. Do you expect the current market environment where you are 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 in efficiencies?

Eyal Cohen: Yeah. 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 are involved in a lot of projects, so it will impact our growth. We provided an outlook to the market of $45 million and which reflect the growth of last year revenues and reflect the growth of a year before, which was like $35 million. It is a significant step and we are working on year 2024 that will go over the $45 million.

Todd Felte: 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 are both doing Supply Chain work and Robotic systems now to Israeli military. Are most of those orders you have receive them, are they for the current year or these — do you expect this business to continue into 2024 and 2025 and going forward?