B.O.S. Better Online Solutions Ltd. (BOSC) on Q2 2022 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the BOS Second Quarter 2022 Results Conference Call. All participants are present in listen-only mode. Following managementâs formal presentation, instructions will be given for the question-and-answer session. 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 and product and technology development and the effect of the company's accounting policies, as well as 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. Mr. Cohen, please go ahead.
Eyal Cohen: CEO. Not Chairman, sorry. Thank you for joining our call today. We have progressed towards BOSâs long term growth during the first -- during the yearâs first half, and our revenues grew by 28% compared to the comparable period last year. The RFID division revenues grew by 22% in the yearâs 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 robotic division, we made some progress in increasing the portion of revenues from the sale of catalogue machines versus custom-made machines, which we believe will improve the profitability of this division. You are invited to review our catalogue machines on the BOS Robotics website. In addition, the Robotic division successfully developed and launched a new line of automatic sorter machines for logistic centers, which we believe has good sales potential. And we will distribute impressive videos soon. On the cost side, we are in challenging period characterized by increased operational cost. Hence recently, we purchased part of the facilities release. 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 obstacle. That complete my review. Thank you. Let me go to the Q&A session.
Operator: Thank you. The first question is from Todd Felte of AGES Financial Services. Please go ahead.
Todd Felte: Hey, guys. Congratulations on another strong quarter. I noticed that you have done over $21 million in revenue for the first six 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.
Eyal Cohen: Thank you, Todd. No, I think you are right. The second half of the year is strong -- is much stronger than the first half of the year, historically. But in the projection, we provided that we will exceed the $35 million. So I'm sure that it -- that we will exceed this number.
Todd Felte: 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?
Eyal Cohen: Yes. This is a plan and we did a lot of restructuring on this division, in addition to a change in the business strategy. And as I mentioned, we also relocated the factory to a new place in order to save a significant cost. So we are reducing the burn rate of this division and changing the business model of this division. And I think we will see the fruits in the next year.
Todd Felte: 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?
Eyal Cohen: It's a big challenge in two aspects: first, on the financial expenses, although we don't have a huge amount of loans. But if -- but we have loans and recently we acquired -- in the facilities, part of the facilities that we are working in Rishon Lezion, Israel, and we will consume, I think in the coming day, a loan of NIS4.5 million. So the interest have a -- will have an impact, but it's better to have these assets on our hand rather to continue to lease it, because the rent price are going dramatically up. Regarding inflation, there are two elements here. First, to build the mechanism that will be able to adjust the sales price to our client more frequently, not as we used in the past to do it once in a two year, three years or not at all. So we have to change. We are working to change our information system that will support it. And we complete -- I think we complete -- we are very close to complete this stage, and weâre also doing a round of a changing sales price to our client -- the client that we are in annual contract with them, and we are doing well on that aspect. On the other end, 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 headache, but this is part of the business for the coming year or two.
Todd Felte: 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 a -- 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?
Eyal Cohen: 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 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.
Todd Felte: Great to hear. Congratulations on a great quarter. And I know most shareholders should be very happy with it. Thank you.
Operator: 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?
Ziv Dekel: Thank you. Yes. So hello everybody. What Eyal has just described is the picture as well as the key elements of BOS strategic plan manifestation which we already are implementing. Of which, the full fruition of that is yet to come, we don't see it significantly. Improvement has been made, and I can see the springs of it partly from -- also from Todd asked before. Me, working closely with the company, I trust BOSâs management team led by Eyalâs vigorous leadership investing in all aspects and levels of the system an innovative, bold and imaginary thinking. I'm highly impressed by the team's commitment to the company, and to the target of improving shareholders value. Thank you for being with us today. Looking forward to meet again on BOS third quarter call. Thank you everybody.
Operator: This concludes BOS second quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
