B.O.S. Better Online Solutions Q1 2024 Earnings Report

B.O.S. Better Online Solutions EPS Results

• Actual EPS: $0.13
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

B.O.S. Better Online Solutions Revenue Results

• Actual Revenue: $11.29 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

B.O.S. Better Online Solutions Announcement Details

• Quarter: Q1 2024
• Date: 5/30/2024
• Time: N/A
• Conference Call Date: Thursday, May 30, 2024
• Conference Call Time: 9:00AM ET

B.O.S. Better Online Solutions (NASDAQ:BOSC) Ltd. provides intelligent robotics, radio frequency identification (RFID), and supply chain solutions for enterprises worldwide. The Intelligent Robotics Division provides custom-made machines for industrial automation and assembly of products and packing that offer technological solutions. The RFID Division provides hardware products, such as thermal and barcode printers; RFID and barcode scanners and readers; wireless, mobile, and forklift terminals; wireless infrastructure; active and passive RFID tags; ribbons, labels, and tags; and RFID systems for libraries. It also develops Warehouse Management System, a data collection solution for logistics management in logistic centers and warehouses; RFID-based systems for tracking inventory in a produce packing house; automatic systems for industrial packing lines; automatic systems to track the production line; and automatic systems to identify and track vehicles for transportation-related settings. In addition, this segment provides maintenance and repair services for data collection equipment, as well as warehouse and on-site service plans; on-site inventory count services in various fields; and asset tagging and counting services for corporate and governmental entities. The Supply Chain Division offers electro-mechanical components, electronics components, communications products, and components consolidation services to aerospace, defense, and other industries. This segment also provides inventory and quality control management of components entering production lines; and inventory management services for ongoing projects, including warehouse functions. The company markets its products through direct sales and sales agents, as well as through distributors. B.O.S. Better Online Solutions Ltd. was incorporated in 1990 and is headquartered in Rishon LeZion, Israel.

B.O.S. Better Online Solutions Q1 2024 Earnings Call Transcript

Key Takeaways

• Record Q1 performance: Reported net income of $740 K, trailing 12-month revenues of $43 M, EBITDA of $3 M, net income of $2.1 M and EPS of $0.36, on track for 2024 targets of $46 M revenue and $2.2 M net income.
• Robust balance sheet: Holds $34 M in assets with a 60% equity ratio and a €1.7 M net cash surplus, providing ample financial flexibility for growth initiatives.
• Undervalued market cap: Trades at a 7.7× trailing P/E and 5.3× P/EBITDA with a P/B of 0.82× despite 365% earnings growth since December 2021, and management is seeking broader analyst coverage to unlock value.
• Supply Chain expansion: Added new electronic manufacturing partners and strengthened its sales force, while rising Israeli Defense segment demand is expected to drive revenue growth in 2024 and beyond.
• Robotics division turnaround: Transitioned from losses to profitability and is shifting focus to automotive and electronics sectors, with a significant order backlog set to bolster revenues.

Presentation

[Eyal Cohen, CEO at BOS]

Thank you for joining our call. Mr. Ziv Dekel, Chairman, and Mr. Moshe Zeltzer, CFO, are all here with me today. We are excited to meet you again at our quarterly meeting with you. Today, we have a comprehensive agenda. We will start by reviewing our financial results, business trends, and growth strategy. After that, we'll have a Q&A session to address any questions or concerns you may have. Let's begin with the looking forward statement.

[Operator]

Ladies and gentlemen, thank you for standing by. 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. 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 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.

[Operator]

I would now like to turn the call over to Mr. Eyal Cohen, CEO. Mr. Cohen, please go ahead.

[Eyal Cohen, CEO at BOS]

Thank you. The first quarter reflects record net income of $740,000. We have achieved this goal gradually and consistently as a team, reflecting our collective effort and dedication. Our trailing twelve months revenues amounted to $43 million, EBITDA $3 million, net income of $2.1 million, and EPS in the trailing twelve months of $0.36. These results put us on track toward achieving our financial targets for 2024, which are revenues of $46 million and net income of $2.2 million. We have a relatively strong balance sheet, with $34 million assets, $20 million shareholders equity, which come to 60% of the assets, and surplus of cash net of loans of $1.7 million.

[Eyal Cohen, CEO at BOS]

Our business performance, combined with our healthy balance sheet, provide us with the right ecosystem for thinking, exploring, and developing engines for future growth. The following slide presents both current valuation ratios based on the trailing twelve months. The market cap ratio to net income is 7.7. The market cap ratio to projected net income for year 2024 is 7.3. Market cap ratio to EBITDA is 5.3, 5.3, and the market cap ratio to the shareholders' equity is only 82%. Despite our positive trends progress, our market cap remain, remains roughly unchanged, which was $15 million on December 2021, when we earned only $500,000 a year, and remain $15 million, $15 million today, when we earn more than $2 million, also 366.5%.

[Eyal Cohen, CEO at BOS]

I hope BOS will run analyst coverage this year to explore BOS value opportunity to more investors. Business trends. The Supply Chain Division has expanded the list of electronic manufacturers it represent and increased its sales force. Hence, we expect revenue growth from those products in 2024 and beyond. In addition, we are facing increased demand from the Israeli defense segment, and we anticipate it will positively affect the Supply Chain Division revenues this year. The Intelligent Robotic Division is successfully transitioning from the Israeli civilian sector to the Israeli defense sector, and we can promote its continued growth in 2024. This division revenues in the first quarter of the year do not reflect its potential revenues for year 2024, because a significant portion of the orders we receive are in the production. The RFID Division's sales are mainly to logistic centers in Israel.

[Eyal Cohen, CEO at BOS]

We have significantly expanded our offering for new segments and expect this will yield revenue growth in year 2024. I also have the co-founder, Mr. Zvi, in the future. Please. Thank you, Eyal. Good morning and afternoon, everybody. In reference to Eyal's review and within a broader framework, BOS's first quarter record net income is the primary effect of the comprehensive competencies build-up process that Eyal has been leading for the past years. When in fact, the meaning of it is rejuvenation of most, of course, core business, while bringing it to a consistent course of sound, organic sales and profit growth, as we see. Specifically, first quarter was characterized by the continued implementation of a significant steps to strengthen capabilities, improve activity, and expand organic source of income, as well as strengthening the organizational structure and the basic process in the activity.

[Eyal Cohen, CEO at BOS]

Looking ahead to the rest of the year and next year, combining our strong competencies with variable market dynamics in the Israeli defense and high tech segments, we are optimistic about the future. We plan to continue expanding the business lines of all of our division in the premium segments in Israel, which should lead to a further growth. In addition, we plan to expand the RF division footprint to the production floor and warehouse, to the retail stores. I trust BOS team, led by Eyal, to achieve these challenging goals. Our team's dedication, expertise, and hard work, and hard work have been instrumental in our success so far, and I am confident that they will continue to drive our growth and achieve our goals. Thank you for your attention. I will now hand over back presentation to Eyal. Thank you. Thank you, Zvi.

[Eyal Cohen, CEO at BOS]

At this time, we begin the Q&A session. If you have questions, please, unmute and present yourself, while the other participants remain mute. Thank you.

[Shuki, Analyst]

Eyal?

[Eyal Cohen, CEO at BOS]

Hi, Shuki.

[Shuki, Analyst]

Hi, how are you?

[Eyal Cohen, CEO at BOS]

Fine, thank you.

[Shuki, Analyst]

I would like to know why the revenue of the first quarter of this year was less than last year? And, is there any impact of the war that influence this quarter? And, what do you think about the gross margin? Do you think these levels are going to stay? Do you think they can improve? And, do you think that the second quarter could be better because of the war, or there's no impact? That's all for now.

[Eyal Cohen, CEO at BOS]

Okay. Regarding the decrease in revenue compared to the first quarter, it's not a sign to any effect. And because of that, we keep on our outlook for the year. We keep it as at a level of $4 million-$6 million. And regarding the gross. By the way, part of the decrease is related to deferred revenues of the Robotic Division, which had very low revenues in this quarter because most of the orders are in process, and we recognize the revenues upon delivery. And regarding the war, regarding the situation in Israel, about 75% of our business is linked to the Israeli defense segment, and we are trying to increase this portion. Absolutely, it will support our continued growth during this year, and I believe beyond.

[Shuki, Analyst]

Okay, so you see another space of improvement for the gross margin?

[Eyal Cohen, CEO at BOS]

I'm not sure regarding the gross margin, gross profit margin, but regarding the revenues, we will, we will bring $4 million-$6 million this year, and we believe we will continue the growth revenues next year as well.

[Shuki, Analyst]

Okay. Thank you.

[Eyal Cohen, CEO at BOS]

Thank you. Hi, Todd Felte. Todd Felte.

[Todd Felte, Analyst]

Hey, congratulations on the great quarter and the record earnings. It's nice to see that. I know you just mentioned that about 75% of your revenue is defense-related. What was this a year ago? How much has the defense business grown?

[Eyal Cohen, CEO at BOS]

I guess it was about 60%. And it will continue to grow because as long as the Robotic Division grows, I think that 90% of its revenue is attributed to the defense segment. And regarding the Supply Chain Division, we are seeking for more opportunities in the defense segment to expand our offering. So we will get more bids. For example, in the recent months, as we integrated a new line of product to the defense segment, which are wires. And those wires, in these wires, we represent American company, which is WireMasters. And we believe this line of product will increase the revenue from the defense.

[Todd Felte, Analyst]

Okay, that's great to hear. I know, I know the last caller had, you know, talked about the first quarter revenue being a little lower. During the last conference call, you had said that there was some business in Q4 that was being pushed back to Q1 and Q2. With everything that's happened, and given your projection of $46 million in revenue, can we expect a stronger Q2 and Q3 than last year?

[Eyal Cohen, CEO at BOS]

I think in the we don't provide the outlook based on quarters, but in general, year 2024 will be better than year 2023, by revenues and by the revenue.

[Todd Felte, Analyst]

Okay. And then finally, it was nice to see the profitability in the robotics line. If you had to estimate which one of your segments would have the greatest revenue growth, do you think the robotics is finally poised to have a significant revenue this year and maintain the profitability that you've now achieved?

[Eyal Cohen, CEO at BOS]

Yeah, I think, in the robotic division has a process from gross losses to gross profit, then after from operating loss to operating profit, and then after from breakeven to net, to, from breakeven to profit. So it's a process. It's a natural process, and we see that in the recent three or four quarters, it is breakeven, and then in fourth quarter last year, became profitable. And we are working very hard to continue this trend this year. And absolutely, I think that this year, the robotic division, we may, we have the highest growth rate, but we have to work very hard to deliver, to produce all the product, to install all the project that we are committed to the defense industry.

[Eyal Cohen, CEO at BOS]

Another aspect of that is that I think that in the Robotic Division, we have successfully built a relatively strong competitive position in the market, in the segments which we are focusing on. Meaning that you can, and everybody, you know, can trust that if we keep the total work that we're doing there, then revenues and profits will follow. Okay? Because the competitive is there, and the segments are poised to grow during market trends. Okay?

[Todd Felte, Analyst]

Okay. And then one quick follow-up. I really appreciated the slides showing how undervalued the company is. By my math, I now have your book value per share of over $3.40 a share based on this quarter. Is there any, you know, M&A activity, whether you acquiring some other companies, or has there been interest in possibly, you know, you being acquired? I just, I don't, I can't understand why your stock is so undervalued, and, you know, at this time, is there any M&A updates you can give us?

[Eyal Cohen, CEO at BOS]

Regarding the stock price, yeah, you're right. As reflected in my slide, the price is undervalued. The company is undervalued, the market. The step that I believe we need to do beyond the M&A, which is not for to increase the share price, but to for the long term to grow the company. So what I think, most of my efforts are to have an analyst coverage installed, which I believe will have immediate impact on our valuation. The process takes too long. I hope that it will be that today we have on the next report, but I will try to complete the work by during the second quarter. Regarding the M&A, we are seeking the opportunities for M&A, and for all the divisions. We have several processes that we are checking, and this is the status for now.

[Todd Felte, Analyst]

Thank you for taking my questions.

[Eyal Cohen, CEO at BOS]

Thank you. Any further questions? Okay. So, we appreciate your active participation and the valuation insight of Shuki and Toby. If you have any further question or concern, please feel free to reach out to us. Thank you for your time. Thank you, everyone. Thank you. Bye-bye.

Participants

Analysts

• Eyal Cohen, CEO at BOS
• Shuki, Analyst
• Todd Felte, Analyst