In their latest earnings call, BOS reported annual revenues of $40 million, which did not meet the anticipated $46 million. However, the company remains confident in achieving its net income target of $2.2 million for the upcoming year. The backlog of orders has shown an increase, suggesting potential growth ahead. BOS operates in three divisions, with a significant focus on the defense sector. The company is strategically positioning itself to benefit from the increasing defense budgets globally and is exploring expansion and acquisition opportunities.
Key Takeaways
- BOS's annual revenue was $40 million, below the projected $46 million.
- Net income target for 2024 is maintained at $2.2 million.
- Backlog increased to $24 million, indicating potential growth.
- The company operates three divisions with a strong focus on defense.
- BOS is planning to expand internationally and is considering acquisitions.
Company Outlook
- BOS is leveraging Israeli defense relationships to boost international sales.
- A European production line is expected to be operational in the first half of 2025.
- The company is partnering with a U.S. Investor Relations firm to improve market visibility.
Bearish Highlights
- Revenue fell short of the target by $6 million.
Bullish Highlights
- Backlog growth suggests a positive outlook for future revenues.
- Defense sector focus aligns with increasing global defense spending.
- Strategic growth plans include international expansion and acquisitions.
Misses
- BOS's revenue miss could raise concerns among investors.
Q&A Highlights
- CEO Eyal Cohen emphasized the company's commitment to achieving the net income target despite revenue shortfall.
- Cohen discussed the impact of the recent prolonged conflict in Israel on military reserves and the subsequent demand for replenishment.
Financial Position
- Total (EPA:TTEF) assets stand at $32 million, with equity at $21 million.
- Net cash position after loans is approximately $1 million.
- Current valuation may indicate undervaluation when compared to the Russell 2000 index.
Defense Market Outlook
- Reduced foreign dependency and the need to replenish inventories are driving demand.
- Europe's growing defense budgets present opportunities for BOS.
- Ongoing conflicts increase the need for advanced defense technologies.
In conclusion, BOS (ticker not provided) is navigating through a revenue shortfall with strategic initiatives aimed at capitalizing on the robust defense market. With a maintained net income target and a growing backlog, the company is poised for potential growth. The focus on automating inventory processes, RFID optimization, and supply chain integration in defense and high-tech industries, combined with strategic expansion plans, positions BOS to potentially leverage the increasing defense spending on a global scale.
Full transcript - BOS Better Online Solutions (BOSC) Q3 2024:
Conference 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 mister Cohen, I would like to remind everyone that forward looking statements for respect to 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, CEO, BOS: Thank you for joining our quarterly video conference. It's pleasure to connect with you again. Joining me today, Mr. Moshe Zeltzer, our CFO. Unfortunately, our Chairman, Mr.
Ziv Dekal, is unwell and unable to participate in today's call. I will begin by presenting an overview of BOS Operations' financial performance and growth strategy. Following that, we will open the session for a Q and A discussion. Let's get started. BOS integrates cutting edge technologies to optimize and streamline and enhance supply chain operation across 3 specialized division.
The robotic division automates the inventory process by replacing handwork with robots. RFID division optimizes inventory management by making by marking and tracking inventory through the supply chain. And the supply chain division does integration of its franchise electromechanical components into our clients' products. Let's dive into each division by sharing authentic videos. The robotic division streamlines industrial and logistics inventory processes by automating routine labor activities.
The robotic division developed custom made robotic cells and integrate off the shelf robots using its proprietary mechanical, electrical and software. Our robotic cells for the civil segment are mainly machine tending for production lines, meaning robot serves a production machine instead of employee and palletizing robots for logistics centers. The goal of our robotic sales is to reduce dependency on the work force and increase capacities and accuracy in inventory production and logistics processes, all within ROI limitation of not more than 3 year. The robotic division has successfully transitioned to the defense sector with 90% of our project in process serving this rapidly growing market. The current production process in the defense industry relies heavily on labor and struggling to meet the increasing demands for larger quantities, higher quality, and shorter lead time.
This transition is a call to action for the industry to embrace robotics process as an opportunity for us to grow our business. The robotic division flagship client is Elbit. Client is Elbit System, a global leader in the defense industry. Additionally, we serve prominent clients from the Israeli high-tech sector, showcasing our expertise in developing advanced robotic sales tailored to industry needs. RFID division optimizes inventory management throughout the supply chain by integrating our proprietary software and cutting edge off the shelf equipment.
We integrate ruggedized equipment for industrial and logistic processes such as handheld computer, forklift tablet, industrial scanners, thermal printers, RFID readers and wireless access from leading manufacturers such as Zebra and Honeywell (NASDAQ:HON). Through our proprietary interfaces, each inventory transaction on-site is reported instantly to the client ERP or MAS, ensuring real time data update. We provide our warehouse management software. And as complementary service, we count our clients' inventory in warehouses stores mostly twice a year by our professional staff equipment and proprietary software. RFID division measure our client as Supersal with 300 stores in the food retail sector, IKEA in the non food retail sector and Teva in the industrial sector.
Our supply chain division is dedicated to integrate our franchise electromechanical component into the products of our clients from the defense and high-tech industries. Our team of engineers collaborate closely with the customers R and D engineer to seamlessly integrate our franchise components into their cutting edge products, ensuring ongoing OEM revenues. Our primary customers. We supply directly to them and also indirectly through their subcontractors worldwide, spanning the USA, India and several countries in Europe. Financials.
Our
Todd Felty, Analyst: I think you're on mute, Yale.
Eyal Cohen, CEO, BOS: Eyal. I'll start again in the revenues. Our 12 in 12 months' revenues amounted to $40,000,000 While we now anticipate falling let me see that it's open. Falling short of our projected $46,000,000 annual revenues target and expect to close year 'twenty four with approximately $40,000,000 in revenues. This shortfall is temporary.
The primary reason for this deviation is a delay in delivering certain customers' orders by year end. As boosting orders began in the second half of the year as was not evenly distributed throughout the year as initially anticipated. Just a moment. Sorry for a moment. Okay.
So for the technical issue here. Despite this temporary decline, we remain on track to achieve our net income target of $2,200,000 for year 2024, showcasing our ability to effectively manage cost and maintain profitability even in the face of fluctuating revenues. Looking ahead, we are optimistic about our growth prospect for year 'twenty five, supported by strong indicators of future performance. Our backlog increased by 15% to $23,000,000 as of the end of September this year compared to $20,000,000 at the end of year 'twenty three. Additionally, the $2,700,000 order from The Israeli defense budget drew by an impressive 73% between the years 'twenty three and 'twenty four, while the European defense budget increased by 16% between the years 'twenty two and 'twenty three.
These budget increases have a direct impact on our major clients, such as Israeli Aerospace Industry, Rafael and Elbit and subsequently on us. As defense spending continues to rise globally, we are well positioned to capitalize on these opportunities and drive future growth. Balance sheet. As of September 24, our company balance sheet shows total assets of $32,000,000 equity of $21,000,000 which is still higher than our current market cap and cash net of loans of about $1,000,000 BOS growth strategy is twofold based on expansion overseas and strengthening our proposition. Growth overseas.
We aim to expand our international sales by leveraging strong relationship with Israeli defense customers who operate globally. By aligning with their international activities and offering tailored solutions, we are well positioned to capitalize on new opportunities in the growing global defense market. This strategy has already borne fruit with $6,000,000 in overseas sales achieved in year 'twenty three and recent agreement finalized with subcontractors in India and in Greece. Furthermore, our robotic division is set to install a production line in Europe during the first half of year 'twenty five. Strengthen our proposition.
We will continue to strengthen our relationship with our strategic defense customer by broadening our offering and ensuring that we meet their involvement needs. The RFID division that engage in the civil market will grow through acquisitions of complementary business or competitors as we successfully did twice before. Our team. BOS team includes 4 board members, 3 of whom are independent and one of whom is me. BOS executive team include 8 members with various skills and extensive experience in sales, marketing, technology, operation and finance.
Because cutting edge technology is substantial foundation in our proposition, we engaged 2 CTOs, one for robotics division and one for the RFID division and supply chain. BOS has engaged 83 employees, of whom 30% are engineers and technicians. Valuation. There is a big gap between the valuation ratio of Russell 2,000 index and BOS. Russell price to earning ratio is 18 versus 9 for BOS.
Russian price to book value ratio is 2.1 versus less than 1 for BOS. Recently and for the first time, BOS was covered by the analyst report. According to the recent research report released by ThinkEquity, the target stock price for BOS is $5 which is higher by more than 40% than the current stock price. Increasing exposure to BOS will help to bridge this gap. This led me to the second item in the next item, which is the IR.
At BOS, creating value for our shareholders is driven by consistent improvement in our financial performance, particularly through increasing profitability and effectively sharing this achievement with a broader audience of public market investors. To achieve this, we plan to partner with the U. S.-based Investor Relations firms to enhance our visibility in the U. S. Capital markets.
These efforts are specifically aimed at attracting investors who actively trade in the public market. Thank you for your attention, and I'm ready to take your question.
Todd Felty, Analyst: Hey, good morning, Eyal. Good morning, Eyal.
Eyal Cohen, CEO, BOS: Good morning, Eyal.
Todd Felty, Analyst: Good morning, Yao. This is Todd Felty. Had a question about your backlog. You had mentioned it was $23,000,000 as of September 30th. Is there any update that you can give us on that backlog?
Eyal Cohen, CEO, BOS: Yes. I think the momentum of the indications the indicators for growing momentum is continue. As the backlog as of September increased by 15% as compared to December, We still now still see in this day that the backlog continued to grow to a level of approximately $24,000,000 which is 20% higher than the backlog of December last year. And it's clear indication that the current decrease in revenues as compared to the to our initial forecast is temporarily, let's say, technically, let's say, operate on the related to the operations side. And according to the backlog, we will close this gap next year.
Todd Felty, Analyst: Okay. And then kind of a broader question. I noticed a 60 day ceasefire was announced between Israel and Lebanon yesterday. How will that affect your defense business? And do you continue to see your defense business being strong over the next few years?
Eyal Cohen, CEO, BOS: Yes. First, I think that the ceasefire is great, but and there are 3 major factors that will positively affect the Israeli defense industry. First, that during the recent conflict, Israel faced embargoes on some countries, and it's highlighting the urgency of reducing dependency on foreign suppliers. And as a result, we anticipate and we feel that a surge in demand for local produced defense solution is starting to be done. We see new facilities in that start to work on new line of products.
So this is one effect. Additionally, the recent war in Israel was exceptionally long, lasting over 1 year, where the reserve level in military warehouses were initially planned for much shorter conflict. Consequently, the replenishment of these inventories will require restocking to level significantly higher than before the war. And it's going to anticipate that it will create substantial demand for munitions. And at the same time, we see what is happening in Europe.
The ongoing conflict between Russia and Ukraine continues to have a profound long term impact on the defense budget in Europe. As we saw before in the chart, it's growing. The defense budget is growing. And the Israeli defense industry, known for its advanced technology and innovation, plays critical role in fulfilling a substantial portion of the repaying defense demands. So we believe these factors position us in to capitalize on the growing global defense market and to grow our business in the long term.
Todd Felty, Analyst: Okay. That's very helpful. Do you know how many countries in Europe that you're currently shipping components to?
Eyal Cohen, CEO, BOS: We are currently selling to again, to which to BOS at all or to a specific division?
Todd Felty, Analyst: Overall.
Eyal Cohen, CEO, BOS: Overall to currently, we are selling to 3 countries in Europe, but it's in a growing trend. And we are sending also to the U. S. And to India. Okay.
There are no further questions at this time. Thank you all for joining us today and for your continued interest in BOS. We appreciate the opportunity to share our progress, financial results and growth strategy with you. Your support and trust are critical as we work toward delivering long term value to you to the shareholders. If you have any further question or need additional information, please feel free to reach out to me directly.
And we are looking forward to connecting with you again in our next update. Wishing you all a great day. Thank you.
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