Bos Better Online Solutions Ltd Q2 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the BOS Second Quarter 2020 Results Conference Call. All participants are present in listen-only mode. Following management’s 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 online today is Mr. Eyal Cohen, CEO. Before I turn the call over to Mr. Cohen, I would like to remind everyone that forward-looking statements for the respected 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, change in 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. Mr. Cohen, please go ahead.

Thank you. Dear shareholders, the press release describes in detail our challenges with the robotics business. A turnaround process of the robotics business is longer and deeper than initially anticipated. Despite the write-off of our investment in the robotics business during the second quarter, we have made significant progress in the business operations side. Still, we have challenges on the sell-side of the robotics business. I'm putting all my time and efforts into improving the robotic sales platform effectiveness worldwide, strengthening our competitive advantage, searching for strategic partnerships, and keeping the robotics business intact and even growing, and fill the back through itself. Revenues for the first six months of year '20 decreased to $15 million from $16.6 million in the first six months of year '19. The decrease was primarily attributed to the effect of COVID on sales of the RFID and supply chain conditions. We expect that we will make up for this shortfall in the second half of year '20 so that the year '20 revenues will remain the same as in year '19, meaning $34 million annual revenues. Despite the decrease in revenues, the RFID and supply chain division tripled their operational profit from $300,000 in the first six months of year '19 to $1 million in the first six months of year '20. Based on the strong relative performance of our supply chain and RFID division in the first half of the year, and the restructuring of the robotics business operations and the write-off we made, we further anticipate that both will return to net profit in the third quarter of this year. That completes my review and now I will take questions.

Thank you. Ladies and gentlemen at this time we will begin the question-and-answer session. The first question is from Todd Felte of RHK Capital. Please go ahead.

Good morning, Eyal. Just wanted to clarify a couple of things. There will be no more write-offs in the robotics going forward. Is that correct?

Yes, as I mentioned before, in this quarter, in the second quarter, we wrote off all the investment in the robotic business. The assets that we had in the robotic business were the intangible assets, the goodwill. We also wrote off a part of the inventories. So, we don't expect to further write off going forward.

Okay. And if I'm doing the math right, it looks like the RFID and supply chain earned about $0.19 a share in the first six months of the year. Do we expect that business to continue to be strong and hopefully the robotics won't pull this back further?

Yes. As I just said in my review, the RFID and the supply chain had a very good first quarter, despite the decrease in revenues. But the bottom line was better than in year '19. I don't see a reason why the second half of the year won't be the same. So together with the cost reductions that we made in the robotic business and the restructuring we did, I hope and I believe that in the second half of the year, we’ll have better news to share with you.

Okay. And on the robotics, when can we start expecting some sales in the U.S. or other countries? Can you give us some color on how the sales are proceeding?

Our initial plan was to start U.S. sales this year, and we opened a sales office at the beginning of the year. Unfortunately, that did not go as expected, as COVID made the penetration process more challenging. We are now implementing personnel changes in the U.S. office, and in addition to our efforts there, we are working to expand our global sales network by adding more distributors worldwide. Currently, we have just two distributors, and our goal is to triple that by the end of this year. We are putting significant effort into this channel as well. At the start of the year, we concentrated on the U.S. market; now our focus is spread across the U.S. market, Israel, and the rest of the world.

Okay, that sounds great. I appreciate you adding some color to that. Thank you.

There are no further questions at this time. Before I ask Mr. Cohen 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 website by tomorrow. Mr. Cohen, would you like to make your concluding statement?

Thank you for joining the call today. My team and I will strive to provide better news in our upcoming financial press release. We appreciate your participation.

This concludes BOS second quarter 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.