BOS Better Online Solutions Ltd
NASDAQ:BOSC
Earnings Call Analysis
Q4-2023 Analysis
BOS Better Online Solutions Ltd
B.O.S has experienced significant growth since 2021, marking '23 as a record year. The company's revenue increased by over 31%, from $33.6 million in '21 to $44.2 million in '23. EBITDA and net income reflected this positive trend, growing from less than $1 million and $0.5 million in '21 to more than $3 million and $2 million in '23, respectively. Earnings per share followed suit, rising from $0.08 to $0.35 over the same period. Moreover, B.O.S strengthened its financial standing; total assets rose from $25 million to $32 million, and shareholders' equity jumped from $40 million to $90 million. Despite this, the company's market capitalization remained relatively stagnant, hovering between $50 million and $60 million—an aspect that may catch an investor's eye considering the growth in fundamentals.
The company's current market valuation ratios position B.O.S as undervalued. The ratio of market cap to '23 net income stands at 7.7, expected to narrow to 7.1 based on '24 projections. The market cap to EBITDA for '23 is a low 5.1, and perhaps most strikingly, the market cap to shareholder equity ratio is just 82%, suggesting the market is pricing the company at less than its net asset value. CEO Cohen expresses hope that analyst coverage in the coming year will bring more attention to B.O.S.'s compelling financial story.
The Supply Chain division is expected to grow after expanding its representation and increasing its sales force, coupled with heightened demand from the Israeli defense segment. While the RFID division faced a 10% revenue drop in '23, an expanded portfolio should reverse this trend in '24. The Intelligent Robotics division's shift towards defense promises growth as well. Taking these trends into account, B.O.S projects a revenue increase to $46 million in '24 with a 10% growth in net income, targeting $2.3 million.
Ziv Dekel, the Chairman, emphasizes the company's strategic growth based on enhancing capabilities and sound organic growth of sales and profit, particularly in the lucrative defense and high-tech Israeli market segments. Plans include broadening the RFID division's reach from production and warehouses to retail stores and persisting in M&A activities focusing on strategically aligned local businesses.
The Q&A session highlighted the Robotics division, which became profitable in the fourth quarter, showing promise as potentially the fastest-growing division in '24. The company expects deferred Q4 business, impacted by the outbreak of war in October, to boost Q1 and Q2 of '24, reinforcing their confident revenue outlook. One analyst suggested that B.O.S could benefit from providing comparative valuations with similar companies in its industry, a move that might further underline its undervaluation.
The earnings call closes with an affirmation of B.O.S.'s strong performance in '23 and optimism for continued growth in '24. Stakeholders can anticipate the first quarter call in May '24 for the next round of updates on the company's progress as B.O.S seeks broader recognition of its attractiveness as an investment opportunity.
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Ladies and gentlemen, thank you for standing by. Welcome to the B.O.S conference call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available on the B.O.S 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 respective 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.
Thank you for joining our call today. Mr. Ziv Dekel, Chairman and Moshe Zelter, CFO, are on the call with me today.
I am excited to meet here again at our quarterly video meeting. During this meeting, we will review our financial results and business trends and growth strategy. After that, we'll have a Q&A session. Year '23 reflects record result of B.O.S. We have achieved this goal gradually and consistently since year '21. During those years, our revenue grew from $33.6 million in year '21 to $44.2 million in year '23. EBITDA grew from a less than $1 million in year '21 to more than $3 million in year '23. Our net income grew from $0.5 million in year '21 to $2 million in year '23 and our EPS grew from $0.08 in year '21 to $0.35 in year '23.
During those years, we also strengthened our financial position. Our total assets grew from $25 million in year '21 to $32 million in year 2023. Our shareholders' equity increased from $40 million in year '21 to $90 million in year '23 and our cash, net of bank loans remained positive, standing at $1.2 million at the end of year '23. Despite all those positive trends and progresses that we have -- have been made during this period, our market cap remained roughly unchanged. It was $50 million on December '21 and remains $50 million -- $60 million today.
The following slide presents B.O.S. current valuation ratio. The market cap ratio to net income of year '23 is 7.7. Market cap ratio to projected net income for year '24 is 7.1. Market cap ratio to EBITDA of year '23 is [ 5.1 ] and market cap ratio to shareholders' equity is only -- is less than 1, it's 82%. I hope that B.O.S., we've had analyst coverage this year to expose our story to more investors.
Business trends. In year '23, the supply chain division expanded the list of electronic manufacturers it represents and increased its sales force. Hence, we expect revenue growth from those products in year '24 in full. In addition, the current situation in Israel has increased the demand for Israeli defense segment, and we anticipate that it will positively affect the Supply Chain division revenues, year '24. On the other hand, during year '23, this division benefited from high demand for electronic components because of the shortage in the market during the COVID period. We expect that in year 24, the market will return to standard demands.
The RFID division sales are mainly through logistics centers in Israel. Its revenues in year '23 decreased by 10%, affected by the slowdown in the Israeli civilian sector. During year '23, we significantly expanded our offering portfolio and we expect this will yield revenue growth in '24. The Intelligent Robotics division is successfully transitioning from the Israel civilian sector to the Israeli defense sector, which will promote its continued growth in year '24. According to this -- those business trends, we anticipate $46 million of revenues in year '24 and net income growing by 10% to [ $2.3 million ]. I want to turn the call over to Mr. Ziv Dekel, Chairman, who will elaborate on our growth strategy.
Thank you, Eyal and good morning and afternoon to everybody. In reference to Eyal's points and within a broader framework, versus 2023 record result, the primarily effect of a thorough, comprehensive, in-depth capabilities and organizational buildup and enhancement process that Eyal has been leading and conducting for the past years. Hence, revamping most of B.O.S.' core business, bringing it to a consistent course of capability base, sound organic growth of sales and profit. Combining this with favorable market dynamic trends in the Israeli defense and high-tech segments, we plan to continue expanding to these -- expanding the business lines of all our divisions within these segments. These segments are the premium segments in the Israeli market.
In addition, we plan to expand the RFID division footprint from the production floor and warehouse to the retail store. Also, we continue our M&A efforts focusing on local competitively and operatively synergetic companies. I trust B.O.S.' team led by Eyal to win these challenging processes on the broader perspective of all over the company's strategy. Thank you for your attention. I will now hand over the presentation back to Eyal.
Thank you, Ziv. At this time, we begin the Q&A session. [Operator Instructions]
All right. Todd?
I had a question regarding your Robotics division. It looks like it was the first time it was profitable. Is that correct, in the fourth quarter?
So in the second quarter of this year '23, it was breakeven also in the third quarter. And in the fourth quarter, it's profitable.
Okay. And do you expect that to be your fastest-growing division in 2024?
Yes, it will increase its revenue significantly in percentage, yes, in year '24, according to year '23. Yes.
Okay. And finally, the fourth quarter revenues were a little bit weaker due to the war that began in October. Do you expect a lot of that business, was it pushed to the first quarter? Or will you see that just come in throughout the year?
Yes, I believe that it was pushed in to the first and the second quarter. And it gave us comfort to provide the outlook for year '24 for growth.
Okay. And you had a really nice slide there kind of showing your market cap and some of your valuations, maybe in the future or if you could add to that, could -- maybe you could include some other companies in the similar industry as yours for a competitive standpoint. Obviously, just from straight valuations you look extremely undervalued. Is there any other Israeli companies in your industry or any other companies that maybe you could compare those numbers to.
Yes, it's good. I hope there will be analyst coverage during this year, I hope that by the first half of the year. And I'm sure that, on that [indiscernible] we will see this comparison analysis.
Congratulations on a really strong year and I look forward to 2024.
Any further question? Okay. There are no further other questions at this time. So thank you for joining our call today. We look forward to meeting you again on B.O.S. first quarter call, which will be in May '24. Thank you all.
Thank you all.