Bos Better Online Solutions Ltd Q2 FY2021 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the BOS Second Quarter 2021 Results Conference Call. All participants are 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 on the line today are 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 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, changing economic conditions, risks in 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. Cohen, go ahead.

Hello and thank you for joining our quarterly call. I am pleased with the significant growth in revenues in the first half of '21 compared with the first half of year '20. I'm also satisfied with the net income for the fourth consecutive quarter. For the recent 12 months, our revenues amounted to $35 million, net income of $700,000 and EBITDA of $1.3 million. Regarding year '21, our outlook, we expect revenues over $33 million and net profit of above $1 million. So that look is not changed. Our supply chain division and RFID division did very well in the first half of the year. And I hope that despite the global shortage in goods, they will continue to find innovative ways to meet our clients' demands and make our margin. Our Robotics division has not reached its sales target in the U.S. market. As a result, we are taking a step back and immediately stopped our investment in direct sales in the U.S. and turning into indirect sales through distributors or agents and keeping the division's operating expenses very tight. On the other hand, we have made progress with developing the new automation line, which is a sorter for logistics centers. We plan to launch it by the end of this year, and we anticipate it will positively contribute to our sales growth in year '22. In addition, our Robotics division recently got a second order from Flex, a global company that helps enterprises design and manufacture products. I'm happy to share with you that Flex also purchased an electronic component from our Supply Chain division in total value of $1.2 million in the recent eight months, great synergy. We focus our sales effort on clients with the same propelled Flex, meaning they have solid demand for automation, allocated budget for automation and expect to provide ongoing orders for machines. That completes my review, and now I will take your 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 Advisory Group Equity Services. Please go ahead.

Congratulations on a good quarter. I was just really wanting you to kind of comment on the Robotics division. I know it's been hard gaining traction there. And I didn't quite understand the comment. It sounded like you were kind of changing the strategy on the robotics rollout in the U.S. Can you kind of give us some color on that and let us know if we're competitive in any active bidding processes now? I know we have been hoping to have some contracts this summer. Thank you.

Yes. This is the second year we've been collaborating with the directors. At the start of this year, we made changes and replaced the team. We have not met our sales target, which has been costly for us. We will now focus on U.S. sales by assigning a sales representative who will work on a commission basis. This approach is similar to what we've done in South America, Mexico, and Australia, and it presents less risk for us. Regarding the legal situation in the U.S. market, we are in discussions with the largest plastic manufacturer in the country and are currently in the final decision stages with one of them. The timeline for this is still being determined. Once we secure such a project, we will make an announcement, but it will not affect our decision to implement the agent model for distribution instead of direct sales.

The next question is from an analyst at SHIG LLC. Please go ahead.

Congratulations on a good quarter. My question is, based on updated guidance, the Company has tripled net income in the second half of 2021, while no significant increase in revenues is anticipated. Can you describe the factors that were allowed to achieve that?

Yes. Thank you for the question. So in the aspect of revenues, there is no question. We made $16.5 million in the first half of the year. So it's achievable. The target is achievable. Regarding the net income, we achieved $264,000 in the first half of the year and the annual target is $1 million. There is no doubt that it's challenging, but the outlook is based on our expectation that the losses of the Robotics division will be lower in the second half of the year. We also assume that the supply chain will continue at full speed with a great performance in the first half of the year. So we expect the same in the second half of the year, and a relatively strong fourth quarter of the RFID. All of them together can bring us to the outlook to the target, but it's still challenging.

The next question is from David Dansby of Janney Montgomery Scott. Please go ahead.

Congrats on another profitable quarter.

Thank you very much.

I have a quick question regarding the global supply chain issues that have been widely discussed and reported. Could you elaborate on how this may affect your RFID and supply chain solutions? I'm assuming there will be some negative impacts, but it could also possibly lead to an increase in demand for some of your products. I would appreciate any insights you can provide on this.

Yes. As I mentioned, our supply chain in the RFID division did very well in the first half of the year. And I hope that despite the global shortage in goods, they will continue to find innovative ways to meet our client demand and make our margins. Naturally, this is the expertise of our Supply Chain division to provide components and use all the elements in an innovative way. And it did so very successfully in the first half of the year, and we hope that it will continue to do so. Regarding the RFID, it's more challenging, but we are buying stocks when we can, when it is available in order to meet our client demand, but it's still challenging.

Okay. Great. I noticed RFID, I know the year-over-year number was an easy comparable, but there was still a nice sequential growth in that division so far.

Yes, absolutely.

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 by tomorrow. Mr. Cohen, would you like to make your concluding statement?

Yes. Thank you. Thank you for joining our call, and I'm looking forward to meeting you on our next call, and you are welcome to contact me anytime by phone or by email. Thank you.

Thank you for joining our call. I look forward to meeting you on our next call. This concludes the BOS Second Quarter 2021 Results Conference Call. Thank you for your participation. You may now disconnect.