B.O.S. Better Online Solutions Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 31, 2025

There are 3 speakers on the call.

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.

Operator

Before I turn the call over to mister 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 risk 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. I would now like to turn the call over to mister Eyal Cohen, CEO. Mister Cohen, please go ahead.

Speaker 1

Good morning, everyone, and thank you for taking the time to join today's meeting. It is pleasure to connect with you again. Joining me as always, mister Moshe Zeltzer, our CFO. Let's move into the presentation. BOS integrate cutting edge technologies to streamline and enhance supply chain operation across three specialized divisions.

Speaker 1

The robotic division automates inventory process, replacing manual labor with robotic solutions. RFID did the vision optimize inventory management by tagging and tracking inventory throughout the supply chain and the supply chain division integrate our franchise electromechanical components directly into our client's report. Let's explore each division in more details. Our supply chain division is dedicated to integrating franchise electromechanical component into the product of leading defense and high-tech companies. Our engineering team works hand in hand with our customers R and D department to ensure seamless integration into innovative designs generating long term OEM revenues as product move into a production.

Speaker 1

The primary growth lever here is a number of components we embed into our clients' product. That's why expanding our integration capabilities is central to our strategy. Over the last two years, we have doubled our engineering team and tripled the number of manufacturers we represent, strengthening our market position and growth trajectory. We are proud to serve global defense leaders such as Israel Aerospace Industries, Elbit Systems and Rafael. Our network extends both directly to these companies and indirectly via their subcontractor across The USA, India and Europe.

Speaker 1

This network serves our launchpad for global expansion without the need for costly overseas sales offices. Our RFID division enhance inventory management across the supply chain by integrating proprietary software with cutting edge off the shelf equipment. We deploy rocketized solution for industrial logistics operations such as handheld computers, forklift mounted tablets, industrial scanners, thermal printers, RFID readers, and wireless system from top brands like Zebra and Honeywell. Our proprietary interfaces ensure that every on-site inventory transaction is instantly reported to the client ERP, WMS, or EMEA system in real time. As a value added service, our expert team performs inventory count for warehouses and stores using specialized hardware and software.

Speaker 1

Our business model is designed to generate recurring revenues, including a annual service contract from hardware and software, inventory count services, and ongoing demand for consumer bills like bulkhead labels, RFID tags, and rebots. We are proud to serve top tier enterprises across Israel like Supersal in the food retail, IKEA non food retail and Teva in the industrial sector. Our Our robotic division streamlines industrial logistics processes by automating labor intensive tasks. Our multi disciplinary team includes mechanical and control engineers, programmers and production crew specializing in mechanical assembly. Together, we deliver robotic cells that reduce the dependency on label, increase production capacity and improve accuracy all within three years ROI.

Speaker 1

We offer two main types of robotic solutions. First, our custom built robotic cells that are designed and built from ground up to meet each client unique needs. Second, we provide off the shelf robotic arms using top tier modules from Fanuc and EASKARA. We customize them with specialized gripper and programming, adapting them perfectly to our clients production and logistic processes. Today, 90% of our robotics projects serve the defense sector, where production is still heavily reliant on labor and facing increasing pressure for faster and higher quality output.

Speaker 1

This shift presents both challenge to the industry and a major opportunity for us. Our flagship client here is Elbit Systems with additional high-tech clients validating our capabilities in this space. Team and leadership, both is led by a skilled executive team of eight and four and board of four members. Given the importance of technology, we employ we employ two dedicated CTOs, one for the robotics and one for the RFID. Our total team include 80 professionals with 30% being engineers and technicians.

Speaker 1

Financial. Balance sheet as of December 24 shows total asset, $34,000,000 equity, $21,000,000 working capital, $14,000,000 cash, $3.3600000.0 dollar real estate of $2,100,000 and long term loans underlying their real estate in the amount of $1,400,000. Operational results and outlook. After a record setting in year twenty three with $44,000,000 in revenues, year twenty four is stabilized at $40,000,000 reflecting a return to normalized purchasing after post COVID restocking. We are optimistic about year '25, aiming for $44,000,000 in revenues and $2,500,000 in net income, a 10% increase year over year.

Speaker 1

This confidence is backed by a growing backlog, which rose by 35% to $27,000,000 at the end of year twenty four. A key driver of this growth is our exposure to the booming defense sector. Israel defense budget rose 73% year over year and Europe's defense budget rose 16% year over year. These trends directly impact our key client and in turn on us. Our growth strategy has two pillars, strengthening our proposition and expanding internationally.

Speaker 1

Strengthen our proposition, we will deepen relationship with a defense client by broadening our offer such as the recent addition of cable in line. Now if I did division will increase its sales force to capture the rebound in the Israeli civil market and will add to its portfolio off the shelf packing machines for logistics centers. Expand overseas, we will leverage our Israeli defense client base and align with their global subcontractors. This strategy already yield $4,000,000 in overseas sales in year '24 of our supply chain division. Our robotic division is preparing for first installation of robotic production line in Europe in the first half of this year.

Speaker 1

Now let's take a look at our valuation and position in the capital markets. As of today, our market capitalization is $23,000,000 When we factor our cash and debt, our enterprise value comes to $21,000,000 only. In terms of valuation multiples compared to the Russell two thousand, Our price to earning ratio is 10 while Russell sits at 18. Our price to book ratio is 1.1 compared to Russell's two point one. This clearly indicate that BOS is trading at a significant discount compared to the broader market.

Speaker 1

Investor relations. To our presence in The U. S. Capital market, we have partnered with The U. S.

Speaker 1

Based investor relations firm and significantly ramped up our outreach. Since September, I've been hosting weekly investor calls, actively sharing our story and engaging with the investment community. We have also participated in major events, including LDmicro conference in October and the Emerging Growth Conference in February. And the results speak for themselves. Our average daily trading volume has grown from 4,000 shares in last September to 58,000 shares this month.

Speaker 1

To conclude, BOS is a solid position for continued success. We have demonstrated consistent profitability with steady growth in net income year after year. Looking ahead, we are projecting 10% increase in both revenues and net income for year twenty five reinforcing our strong trajectory. Financially, we are in excellent shape with $21,000,000 in equity and zero bank debt. We have the flexibility to grow strategically.

Speaker 1

From a valuation standpoint, BOS is trading at just 10 times net income offering compelling opportunity compared to the broader market benchmark. We have also significantly expanded our Investor Relations effort, increasing our visibility and engagement with the investment community. And perhaps most importantly, we have a strong and growing presence in the global defense industry, a market that continues to accelerate. With our solid foundation, focused strategy and strong momentum, we believe BOS is well positioned to deliver long term value for our shareholders. Thank you for your attention and I'm happy to take your questions.

Speaker 1

Any question?

Speaker 2

Good morning, Al. Congratulations on a strong quarter. Just wanted to talk to you about, if you give some guidance. I know you said you had a new robotics line starting in Europe. Can you talk about your defense business in Europe and how that has been affected by the war in Ukraine?

Speaker 1

Yeah. Actually, we are we are we don't have indirect sales in Europe. We are aligning with our major client in Israel, Elbit System, Israel Aircraft Industry, and Rafael, which are exporter and global leaders in the defense segment. And usually when they have a contract overseas, we are getting into the picture because part of the production of the product sold must be produced locally in the customers in the customer side. And in that case, our supply chain division provide to the local subcontractor components and our robotics division provide automatic production line in case it needed, if it's a duplication of, for example, of a site in Israel.

Speaker 1

So this is the business model in Europe, overseas in general.

Speaker 2

Okay. Thank you. And also in your valuation, I know you didn't mention the tax loss carry forward. By looking at your financials, I believe you have over a $60,000,000 tax loss carry forward, which would equate to $10 a share. Is that correct, or am I missing something?

Speaker 1

Yes. After we have approximately $30,000,000 in carry forward tax losses, which could provide up to $6,000,000 in future tax saving, assuming 23% corporate tax rate. And as a conservative measure, we recognize only $1,000,000 of this potential benefit as an asset in the fourth quarter of of this year out of the $6,000,000 But on the other hand, this income didn't affect on the bottom line because we recorded an impairment charge of $1,200,000 related to goodwill. So this resulted in net impact on this quarter, on this year, near 24 of a $200,000 on a on the net income of year '20 '4 because of an increase of $1,200,000 in operating expenses due to the impairment of goodwill that offset by $1,000,000 in tax income related to the tax deferred assets of $1,000,000

Speaker 2

Okay. Thank you. And then just a last question. I noticed recently you had brought on the Head of Procurement from the IDF from 2017 to 'twenty three. Do you expect him to be able to bring in help bring in additional defense contracts for BOS?

Speaker 2

And if so, will you update your guidance during the year?

Speaker 1

Yeah. I think we as a strategic decision several years ago, we focused we have been focused on the defense segment and I think it will be a major element in helping us to capitalize the opportunities in this market, to guide us, to lead us in this market. And absolutely, if there will be any significant development during this year, so we will give an update.

Speaker 2

Thank you very much.

Speaker 1

Thank you,

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Earnings Conference Call
B.O.S. Better Online Solutions Q4 2024
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