BOS, a company specializing in supply chain, intelligent robotics, and RFID solutions, reported a record net income of $740,000 for the first quarter, setting the stage for achieving its 2024 financial targets. Despite the strong financial performance, BOS's market capitalization remains at $15 million, unchanged from December 2021, when the net income was significantly lower.
The company's leadership expressed optimism about future growth, particularly through expansion in the Israeli Defense segment and the transition of the Intelligent Robotics division from the civilian to the defense sector. BOS (the company ticker) anticipates continued revenue growth, aiming for $46 million in 2024.
Key Takeaways
- BOS achieved a record net income of $740,000 for the first quarter.
- The company maintains a strong balance sheet with $34 million in assets and $20 million in shareholder's equity.
- BOS's market cap ratio to net income is 7.7, with the market cap remaining at $15 million.
- Revenue growth is expected from the Supply Chain division and increased demand in the Israeli Defense segment.
- The Intelligent Robotics division is transitioning to the defense sector, promising continued growth.
- BOS aims to achieve 2024 financial targets, including $46 million in revenue and $2.2 million in net income.
Company Outlook
- BOS is on track to reach its 2024 revenue target of $46 million.
- The company plans to expand business lines in premium segments and increase its footprint from production floors and warehouses to retail stores.
- BOS is exploring analyst coverage to better reflect its value opportunity to investors.
Bearish Highlights
- The first quarter's revenue was lower than the previous year, but management does not see it as indicative of future performance.
- Gross margins are uncertain, but revenue growth is expected to continue.
Bullish Highlights
- BOS's Supply Chain division has expanded its representation and sales force.
- There is increased demand from the Israeli Defense segment, likely boosting revenues.
- The RFID division has expanded its offerings, anticipating revenue growth in 2024.
Misses
- The company's market capitalization has not increased in proportion to its net income growth.
Q&A Highlights
- The decrease in Q1 revenue is not seen as a long-term concern, with expectations to maintain a $46 million revenue outlook for the year.
- About 75% of BOS's business is linked to the Israeli Defense segment, a share that is expected to support continued growth.
- The Intelligent Robotics division is poised for the highest growth rate, transitioning from losses to profitability.
- Management is actively seeking analyst coverage to address the undervaluation in the stock market.
- BOS is exploring M&A opportunities to further develop the company.
InvestingPro Insights
BOS's recent financial achievements have painted a promising picture for investors, with notable developments in net income and strategic business shifts. Delving into the company's financial health and market performance, InvestingPro provides additional insights that may offer a broader understanding of BOS's investment potential.
According to InvestingPro Data, BOS is currently trading at a low P/E ratio of 8.29, suggesting that the stock might be undervalued relative to its earnings. This aligns with the company's reported record net income and could indicate a potential investment opportunity for those looking at earnings multiples. Additionally, the company has a healthy PEG Ratio of 0.17 for the last twelve months as of Q4 2023, which may appeal to investors looking for growth at a reasonable price.
An InvestingPro Tip highlights that BOS's valuation implies a strong free cash flow yield, which is a positive sign for investors seeking companies with the ability to generate cash. Moreover, with liquid assets exceeding short-term obligations, BOS appears to be in a solid financial position to meet its immediate liabilities.
Investors interested in further insights will find a comprehensive list of InvestingPro Tips available at https://www.investing.com/pro/BOSC. For those looking to deepen their analysis, there are currently 7 additional InvestingPro Tips that can be accessed, offering a more nuanced view of BOS's financial landscape.
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Full transcript - B.O.S. Better Onl (BOSC) Q1 2024:
Eyal Cohen: Thank you for joining our call. Mr. Ziv Dekel, Chairman; and Mr. Moshe Zeltzer, our CFO are on the call with me today. We are excited to meet here again at our quarterly video meeting. Today, we have a comprehensive agenda. We will start by reviewing our financial results, business trends and growth strategy. After that, we'll have a Q&A session to address any questions or concerns you may have. Let's begin with the looking forward statement.
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. 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 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, CEO. Mr. Cohen, please go ahead.
Eyal Cohen: Thank you. The first quarter reflects record net income of $740,000. We have achieved this goal gradually and consistently as a team, reflecting our collective effort and dedication. Our trailing 12 months revenue amounted to $43 million, EBITDA $3 million, net income of $2.5 million and EPS in the trailing 12 months of $0.36. These results put us on track toward achieving our financial targets for 2024 reach our revenues of $46 million, our net income of $2.2 million. We have a relatively strong balance sheet with $34 million of assets, $20 million of shareholders' equity, which accounted 60% of the assets, our surplus of cash net of loans of $1.7 million. Our business performance combined with our healthy balance sheet provide us with the right ecosystem for taking, exploring and developing agents for future growth. The following slide presents BOS current valuation ratios based on the trailing 12 months. The market cap ratio to net income is 7.7. The market cap ratio to projected net income for year '24 is 7.3. Market cap ratio to EBITDA is 5.3 and the market cap ratio to the shareholders' equity is only 82%. Despite our positive trends in progress, our market cap remains roughly unchanged, which was $15 million on December '21, when we earned only $0.5 million a year and remain $15 million today when we earned more than $2 million also 365%. I hope BOS we've had analyst coverage this year to explore BOS value opportunity to more investors. Business trends. The Supply Chain division has expanded the list of electronic manufacturers it represents and increased its sales force. Hence, we expect revenue growth from those products in 2024 and beyond. In addition, we are facing increased demand from Israeli Defense segment and we anticipate it will positively affect the Supply Chain division revenues this year. The Intelligent Robotics division is successfully transitioning from the Israeli Civilian sector to the Israeli Defense sector, which will promote its continued growth in '24. This division's revenues in the first quarter of the year will not reflect its potential revenues for year '24 because a significant portion of the orders we receive are in the production . The RFID division sales are mainly to logistic centers in Israel. We have significantly expanded our offering for new sales and expect this will yield revenues growth in year '24. I want to turn the call over to Mr. Ziv Dekel, our Chairman. Please.
Ziv Dekel: Thank you, Eyal. Good morning and afternoon to everybody. In reference to Eyal's review and within a broader framework, BOS' first quarter record net income are the primary effect of the comprehensive [indiscernible] build-up process that Eyal has been leading for the past years. Within effect the meaning of it is the rejuvenation of most, of course, core business while bringing it to a consistent course of sound organic sales and profit growth as we see. Specifically first quarter was characterized by the continued implementation of significant steps to strengthen capabilities with productivity and expand organic source of income as well as strengthening the organizational structure and the basic process in the activity. Looking ahead, to the rest of the year and next year, combining our strong competition with favorable market dynamics in the Defense and High-Tech segments. We are optimistic about the future. We plan to continue expanding the business lines of all of our divisions in the premium segments in Israel, which should lead to a further growth. In addition, we plan to expand the RFID division footprint to the production floor and warehouse to the retail store. I trust BOS' team led by Eyal to achieve these challenging goals. Our team's indication, expertise and hard work have been instrumental in our success so far and very confident that they will continue to drive our growth and achieve our goals. Thank you for your attention. I will now hand over back the presentation to Eyal. Thank you.
Eyal Cohen: Thank you, Ziv. At this time, we begin the Q&A session. If you have questions, please unmute and present yourself while all other participants remain on mute. Thank you.
Q - Unidentified Analyst: Hi, Eyal.
Eyal Cohen: Hi, [indiscernible].
Unidentified Analyst: Hi. How are you?
Eyal Cohen: Fine. Thank you.
Unidentified Analyst: I would like to know why the revenue of the first quarter of this year was less than last year. And is there any impact of the world that influenced this quarter? And what do you think about the gross margin? Do you think this level are going to stay? Do you think they can improve? And do you think that the second quarter could be better because of the war or there's no impact? That's all for now.
Eyal Cohen: Okay. Regarding the decrease in revenue compared to the first quarter. It's not a sign to any effect. And because of that we keep on our outlook for the year. If we keep it down at a level of $46 million and regardless, of course, by the way, part of the decrease is related to deferred revenues of the Robotic division, which are very low revenue this quarter because most of the all of that in process and we recognize revenue upon [indiscernible]. And regarding the war regarding the situation is Israel, about 75% of our business is linked to the Israeli Defense segment. And we are trying to increase this portion. They absolutely it will support our continued growth during this year and I believe beyond.
Unidentified Analyst: Okay. So you'll see another place space of improvement for the gross margin?
Eyal Cohen: I'm not sure regarding the gross margin, gross profit margin, but regarding the revenues, we will bring the $46 million this year. And we believe we will continue the growth of revenue next year as well.
Unidentified Analyst: Okay. Thank you.
Eyal Cohen: Thank you. Hi, Todd.
Todd Felte: Hey, congratulations on the great quarter and the record earnings. It's nice to see that. I know you just mentioned that about 75% of your revenue is Defense related. What was this a year ago? How much has the Defense business grown?
Eyal Cohen: I guess it was about 60% and it will continue to grow because as long as the Robotics division grows, I think, that 90% of its revenue is contributed to the Defense segment. And regarding the Supply Chain division, we are seeking for more opportunities in the Defense segment to extend our offering. So we're going to gain more bids, for example. And we, in the recent months, we integrated a new line of products to the Defense segment which is which are wires. And those wire -- in this wires represent American company, which is WireMasters. And we believe this line of product will increase the revenue for the Defense segment.
Todd Felte: Okay. That's great to hear. I know the last caller had talked about the first quarter revenue being a little lower. During the last conference call, you had said that there was some business in Q4 that was being pushed back to Q1 and Q2 with everything that's happened and given your projection of $46 million in revenue. Can we expect a stronger Q2 and Q3 than last year?
Eyal Cohen: I think we don't provide the outlook based on quarters, but in general, year 2024 will be better than year 2023 by revenues and by the revenues.
Todd Felte: Okay. And then finally, it was nice to see the profitability in the Robotics line if you had to estimate which one of your segments would have the greatest revenue growth? Do you think the Robotics is finally poised to have a significant revenue this year and maintain the profitability that you've now achieved?
Eyal Cohen: Yeah, I think, in the Robotic division has passed the process from gross losses to gross profit, then after from operating loss to operating profit, and then after from break even to, I mean, net to from break even to profit. So it's a process. It's a natural process and we see that the recent three or four quarters it is breakeven. And then in Q4 last year we came profitable and we are working very hard to continue this trend this year. And, absolutely, I think that this year, the Robotic division will have the highest growth rate, but we have to work very hard to deliver to produce all the product to install all the project that we are committed to the Defense industry.
Ziv Dekel: Another aspect of that is that I think that in the Robotic division, we have successfully built a relatively strong competitive position in the market, in the segments which we are focusing on meaning that you can and everybody can trust that if we keep the total work that we're doing there then revenues and profits will follow, okay, because the compatibility is there, and the segments are poised to grow during market trends, okay?
Todd Felte: Okay. And then one quick follow-up. I really appreciated the slides showing how undervalued the company is. By my math I now have your book value per share of over $3.40 a share based on this quarter. Is there any M&A activity, either you acquiring some other companies or has there been interest and possibly you being acquired. I just -- I don't I can't understand why your stock is so undervalued. And at this time, is there any M&A updates you can give us?
Eyal Cohen: Regarding the stock price, yeah, you're alright. That's reflected in my slide. Yeah. The price is undervalued. The company is undervalued. The market. The setup I believe we need to do beyond M&A, which is not for to increase the shelf life, but to for the long-term to develop a company. So what I think most of my effort are to have an analyst coverage, which is so which I believe will have immediate impact on our evaluation. The process takes too long. I hope that it will be. But today we have on the net report that I will try to complete more by doing the same project. Regarding the M&A, we are seeking the opportunities for M&A and for all the divisions. We have several processes that we are checking. And this will establish from now.
Todd Felte: Okay. Thank you for taking my questions.
Eyal Cohen: Thank you, Todd. Any further questions?
Eyal Cohen: Okay. So we appreciate your active participation and the valuation insight of [indiscernible] and Todd. If you have any further question or concern please feel free to reach out to us. Thank you for your time.
Ziv Dekel: Thank you, everybody,
Eyal Cohen: Thank you. Bye-bye.
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