B.O.S. Better Online Solutions Q3 2023 Earnings Call Transcript

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November 30, 2023

There are 3 speakers on the call.

Operator

Welcome to the BOS conference call. All participants are at present in listen only mode. As a reminder, this conference call is being recorded and will be available on the BOS website as of tomorrow. Before I turn the call over to Mr.

Operator

Cohen, I would like to remind everyone that forward looking statements with respect to 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 and 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, CEO. Mr.

Operator

Cohen, please go ahead.

Speaker 1

Thank you. Thank you for joining our call. On the call with me today is Ziv Dekal in the Remote Site Chairman and Moshe Zeltzer, CFO. We are excited to meet you again at our quarterly video meeting. During this call, we will review our financial results, business trends and the growth strategy.

Speaker 1

And after that, we will have a Q and A session. So the financial results for the 1st 9 months of the year of year 'twenty three showed a significant improvement compared to the comparable 9 months of year 'twenty two. Revenues grew by 11%, EBITDA by 60%, net income by 128% and EPS was doubled. From a 3 years perspective, our trailing 12 months revenues grew by 38 percent to $44,600,000 compared to 32,200,000 dollars in year 2021. Our trailing 12 months as EBITDA increased by 3 12 percent to $3,300,000 compared to $800,000 in the year 2021.

Speaker 1

Our trailing 12 months as a net income amounted to $2,100,000 compared to $500,000 in year 2021. Our trailing 12 months as earning per share amounted to $0.37 compared to $0.09 only in year 2021. Our balance sheet has significantly strengthened over those years. Our shareholders' equity increased from $14,300,000 in December 2021 to $18,400,000 in September 2023. Our bank loans remain roughly the same around $2,000,000 And currently, most of it attributed to a long term loan underlying the real estate that we acquired for our internal years.

Speaker 1

Our working capital as of September 23 amounted to $10,200,000 and we believe that it is sufficient for our ongoing operation. Business trends. Our supply chain division faced intense demands from the Israeli defense market. And those demands are attributed to the military conflict in Europe and the Middle East. Our robotic division has shown consecutive improvements year by year and reached a breakeven point in the last two quarters.

Speaker 1

In addition, this division is in transitioning toward the Israeli defense market. And currently, and most of our projects in process are for the defense segment in Israel. Our RFID division has faced a decrease in revenues in the 1st 9 months of the year compared to the 1st 9 months of year 2022. In the past several years, intense investments in new logistics centers in Israel have positively affected the RFID division's financial results. However, this trend was adversely affected during the year 2023 by sharp increase in the interest rate and by the political tension underlying the Israeli government's attempt to pursue extensive reform to the Israeli Juticle assist.

Speaker 1

On October 7, 23, a war started between Israel and the terror organization Hamas. The work has not affected our workforce and production facilities. And there has been there has been no significant interruption to our operation. I'm very proud of our team that has come together to work through this situation. We operate through 3 business divisions, the supply chain division and the robotic divisions, which account for 70% of both revenues during the 1st 9 months of the year, a significant exposure to the Israeli defense industry.

Speaker 1

We therefore anticipate the growing demand for these their products and services due to the current situation in Israel. Navai Innovation operates mainly in logistics centers and later chains in Israel. Therefore, it has suffered from a slowdown in sales processes. This division might be entitled to compensation from the Israeli government. Our customers and suppliers are resilient and experienced in walking during challenging times and there are signs of getting back to routine.

Speaker 1

Regarding outlook, our outlook for year 2023. During the 1st 9 months of the year, we reached our annual target of net income. Still, because of the current external circumstances, we keep our outlook for year 'twenty three unchanged, which is revenues of over $40,000,000 and net income above $1,500,000 I want to turn the call to Mr. Zideckel, Chairman, who will elaborate on our growth strategy. Please Zvi.

Speaker 1

So we have a technical problem here to connect it from remote. So I will say give few words on the growth strategy. The growth we are facing is due to implementation of various operative changes and business development that the company is implementing, especially and mainly strengthening our competitiveness by adding more brands to our existing offering, developing new markets by expanding our offering with complementary technologies and merger and acquisition. Those efforts have not been fully reflected in the result of 2023, but they will gradually yield a true growth. So at this stage, gentlemen, we will take questions in just a moment.

Speaker 1

Okay. So at this time, we'll start the Q and A session. And if you have a question, please unmute and present yourself while all

Speaker 2

Hi, can you hear me?

Speaker 1

Yes, we hear you, Todd.

Speaker 2

Okay. I just had a question. I know in the past you've had several contracts with Israeli Defense Force regarding your supply chain division. Obviously, the IDF has been using a lot products and equipment. What is the standard lead time between them using some of the components and equipment you provide them between them giving you another order?

Speaker 1

It's a good question. Usually, the normal lead time could be a few months. But I think they are not waiting to the last minute and we feel that in this day that they are urging their orders to the supply chain division, a lot of bids. And because we are the corona issue with other logistic issues are behind us, I think there are no the lead time is shorter than we used than we had in previous years. So it could be a matter of months or 2 in the normal cases.

Speaker 1

Of course, there can be outstanding cases, but this is a normal. Okay.

Speaker 2

And do you anticipate announcing any significant orders that are received?

Speaker 1

As you can see, we are selling like $44,000,000 a year. So we can assume that we are getting significant orders from time to time. Actually, we don't use to announce on each significant order that we get unless there is something dramatic game changer in that order. For example, new component, new segment, new client, otherwise it's ongoing orders.

Speaker 2

Okay. And regarding the slowdown in the RFID division and possible compensation from the Israeli government, When do we expect to hear more on that? Is there laws or litigation through to be passed to approve maybe a stimulus or a boost to companies affected? Can you give us some more color on that?

Speaker 1

Yes. First, as I mentioned, October was a tough month. But in November, we are getting back to the time as we were before the war. Even the unit that count fashion retail stores come to return to work in full boost. So all the malls are back to normal and it's a good indication for the Israeli economy that 90.7% of the market of the retail market come back to normal.

Speaker 1

The regulation regarding the compensation were announced and we are checking the implementation, the implementation in our case. I don't think it will be a huge amount, but we will take as much as we allowed.

Speaker 2

Okay, that helps. And finally, historically, the Q4 has always been your strongest quarter. And I know you have already reached your net income guidance given for the year. Given the fact that you're not willing to boost that, are you anticipating any problems in Q4? Or are you expecting another strong quarter given that the 4th quarter is normally the quarter that has the most revenues and earnings per share?

Speaker 1

Yes. The Q4 usually is the strongest quarter in the year and also the Q1 of the year. We have not changed the outlook for now. We keep it on $1,500,000 because of the current circumstances in Israel. So I think it's better I think this is the best way to to keep the outlook.

Speaker 1

It's in the current circumstances, from legal point of aspect, it's not smart to do. Any further questions? If you have a problem to connect to the audio, you can use the chat receipt. Let's wait another few seconds. Thank you for being with us today, and we are looking forward to meeting you again on BOS Sport protocol, which will be on March 2024.

Speaker 1

On that call, we will also provide our outlook for year 2024. Thank you.

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Key Takeaways

  • 38% three-year revenue growth to $44.6M, with trailing EBITDA up 312% to $3.3M and net income up 320% to $2.1M.
  • EPS climbed from $0.09 to $0.37 over three years and doubled year-over-year in the first nine months of 2023.
  • Supply chain and robotic divisions (70% of revenue) benefit from heightened Israeli defense demand, with the robotics unit at breakeven in the last two quarters.
  • The RFID division faced a revenue dip in 2023 due to rising interest rates and political tensions but saw a rebound to 90.7% retail activity in November and may receive government compensation.
  • Management maintains its 2023 outlook of >$40M in revenue and >$1.5M in net income, underpinned by strengthened equity ($18.4M), ample working capital ($10.2M), and a growth plan of new brands, market expansion, and M&A.
AI Generated. May Contain Errors.
Earnings Conference Call
B.O.S. Better Online Solutions Q3 2023
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