Bos Better Online Solutions Ltd Q3 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the BOS Third Quarter 2020 Results Conference Call. All participants are present in a 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 are Mr. Zev Dekel, Chairman; and Mr. Eyal Cohen, CEO. Before I turn the call over to Mr. Zev, 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.

Thank you. Hello, and thank you for joining our call today. Encouraged by the progress we have made so far, I would like to share with you my view from three different perspectives. From a quarter-to-quarter perspective, revenues grew and the operating profit and net income have turned around dramatically. From an annual perspective, all the divisions have made significant progress in sales, marketing, cost structure, efficiency and internal competitive capabilities. From a strategic perspective, the Company is now on a very well executed, consistent path of enhancing and fortifying its competitive position and growing its international business, global business with its specific challenges, risks and opportunities. So I would like to thank you and would like to turn the call to Eyal Cohen, our CEO.

Thank you, Zev. Hello, and thank you for joining our call today. I am pleased to meet our shareholders' expectations for a profitable third quarter and positive outlook for the fourth quarter this year and for the year 2021. Our supply chain and RFID division presented a strong performance in the third quarter and this first nine months of the year, despite the COVID pandemic that adversely affected its revenues. The supply chain continues to show record profitability and the turnaround in the RFID division is continuing in full force. We are investing in the robotic business to be the growth engine of BOS for the coming years. According to IFR Research, worldwide sales of industrial robots have compounded annual growth of 14%. We plan to realize this growth potential by expanding our North American presence, which we have targeted as a key market for our robotic division. At the beginning of the year, we opened a sales office in the U.S., but the COVID pandemic has made the penetration much more complicated than expected. We have adjusted our sales and marketing plan and made personnel changes to the U.S. sales team. I believe that with those changes, we are well positioned toward the year 2021. Accordingly, we expect revenues for year 2021 to exceed $33 million and a net profit of above $1 million.

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, Zev and Eyal. Congratulations on a great quarter there, and it was nice to see the turnaround. I appreciate you giving guidance for year 2021, and you had projected $33 million in revenues. What's your current backlog?

Hi, Todd, thank you for the question. Our backlog as of the end of the third quarter was $40 million. So, we still need to bring in new deals amounting to about $90 million to meet the target for year 2021. It is challenging, especially when we don't know the future effect of COVID on the economy and when the COVID restrictions will be lifted. In addition, we have the challenge of penetrating the U.S. market in the year 2021. So, we have lots of work and challenges ahead, and we embrace it, myself, the Board of Directors, the officers and all BOS employees.

I would like also to add that Eyal is currently leading us in terms of the sales, marketing and support infrastructure in the USA. It's a lot of effort, and you begin to see the buildup of this infrastructure, which I believe will bear fruit as we progress into next year and of course the years ahead.

Okay. Thank you. Also, along with the guidance of $33 million, you projected net income of over $1 million. And if I'm doing the math right, that's around $0.25 a share, which seems like your company is fairly undervalued. Are you planning any Investor Relations events or webinars? I know things are tough during COVID, but I was just wondering if you had any IR events on the schedule?

Currently, we don't have an IR event planned. However, I believe that next year, we will participate in investor conferences. I'm not sure whether we'll take on an IR frame, but I think with the good results, it should be reflected in the share price, but let's see.

Okay. And finally, reading through the financial statements, I see you have a tax loss carry-forward of around $70 million, and that's over $16 a share. Have you considered any options to utilize that tax loss carry-forward? Or would you be open to being acquired by another company that would want to utilize it?

I think it's a huge benefit. Other companies, in certain cases, record tax assets on the balance sheet and record tax income accordingly. By monetizing the tax asset of $70 million, we could potentially realize tax income of over $10 million. We don't use such accounting currently, but I'm sure that it could be utilized in the future. It presents great opportunities for other companies as well as our own public platform.

Okay. And now that you've forecasted consistent profitability, it may become more of an asset if anyone was looking to acquire you guys. Just finally, it's been a while since we've had any large contract announcements. Can you provide any color on the pipeline? What types of companies are you targeting? Do you expect any announcements in the near future or if you're close on any contracts?

Yes. I think that we will commence our sales activities in the U.S. in January. We decided to start it after the holidays in the U.S. I hope that in the first quarter of next year, we will be able to release announcements on contracts. This is the plan. Also, in the Israeli market, we are penetrating some strategic accounts here in Israel from the defense industry, the plastic industry, and logistics. Once we secure a strategic or significant order, we will absolutely release an announcement. For now, we are focusing all our efforts on building the operational and sales platforms for the future growth engine of BOS, which is the robotic business. I hope that news will come in 2021.

Okay. Well, I'll hop back in the queue. Congratulations again on completing the turnaround and for a great quarter. Thank you.

Thank you.

Thank you, Todd.

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's website, www.boscom.com by tomorrow. Mr. Cohen, would you like to make your concluding statement?

Yes. Thank you. Thank you for joining our call today, and I'm looking forward to meeting you again at our next conference call in March 2021. Thank you.

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