B.O.S. Better Online Solutions

Ladies and gentlemen, thank you for standing by. Welcome to the BOSS first quarter 2021 results conference call. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference call is being recorded and will be available on the BOSS website as of tomorrow. With us on the line today are Mr. Ziv Dekel, Chairman, and Mr. Eyal Cohen, CEO, and Mr. Moshe Zeltser, CFO. Before I turn the call over to Mr. Ziv, 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. Ziv Dekel, Chairman. Mr. Dekel, please go ahead.

Okay. Thank you for joining our earning call. I hope that everybody is well. I'm encouraged by the improvements in our financial results for the third consecutive quarter. Led by Eyal, the company continued its process of enhancing its capability and market competitiveness. Specifically, I would like to refer to the synergies we built between the robotics and the RFID division that already generated sales and future as we see it along. Looking forward, the management team works extensively to strengthen and develop the growth engines of our division by branching into new segments, penetrate to new territories, and expand products offering for existing and new clients. Now I would like to turn the call over to Eyal Cohen to elaborate about our growth plan. Eyal, please.

Thank you, Ziv, and thank you all for joining our call today. Regarding branching into new segments, currently most of the cells of the robotic division are to the industrial segment. By the end of this year, we plan to launch a new line of robotic systems for the logistics segment. This line will automatically sort products like clothes and boxes received in the logistics center and automatically sort them into shipping boxes. We already got an initial order at a pre-sale price of $430,000 from a fashion retailer for an automatic sorting system. This system will automatically sort and allocate clothes in the logistics center into shipping boxes for its 160 stores. This new line of system leverage the strong footnote of the RFID division in the logistics segment and the technological capabilities of the robotic division. We anticipate that the first installation of this automation line will kick the cells of this line and be a fundamental growth engine of the RFID and robotics divisions. Regarding penetrate new territories, at the beginning of this year, we reestablished the robotic division sales office in the US. We are working extensively to achieve our initial goal to close significant order in the first half of this year. Regarding expanding our product offering to our existing client, we are checking and considering various alternatives to significantly increase the number of franchises that we can offer to the supply chain division clients to support its growth. To conclude, we are making good progress in executing BOSS growth plan and we believe that it will gradually and consistently grow our business. Thank you. Now we'll go to the questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to decline from the polling process, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Todd Feite of Advisory Group Equity Services. Please go ahead.

Good morning, Yael. I was just hoping you could share with us some information on the status of the sales in the U.S. you know, the sales cycle is a few months, and we've got our new North American sales director at the beginning of this year. So I was kind of hoping that we could be close to landing some significant sales or contracts. Thank you.

Thank you, Todd. Thank you for participating in the call. I think this is your 20th call that you participate. Thank you. Regarding your question, Up to date, we generated the pipeline, meaning sales proposal of about $9 million. And the average of each bid was about $1 million, which is good, good indication of volume of transaction. The penetration to the U.S. during the COVID time was harsh, mainly because of the absence of the physical meetings. Now, when we're back to normal, it will make our mission much more achievable, so we are optimistic.

Okay. One other question here. As the world comes out of COVID and economies are roaring back, it seems to me that you're extremely well positioned in some of the sectors you do business. I mean, I know there's a strong demand for resistors, capacitors, discrete semis, and you supply those. You have supply chain solutions, and you also have robotics, it seems, would be in demand, considering in the U.S. we have trouble finding workers at $15 or $20 an hour. But I noticed that your inventory gapped up by a million dollars from $4.8 to a little over $5.8 over the last quarter. Are you experiencing some of these tailwinds, and can you kind of elaborate on the growth in that inventory? Sure.

Yes, Todd. There are several reasons for the increase in inventory. First, we anticipate an increase in Q2 revenues. So in order to cut the lead time, we increase the inventory level in advance during the first quarter. Second, due to the situation that you just described, Positronix, a major franchise of our supply chain division, demands from all its distributors to keep a higher level of inventory to reduce the lead time, so we did it. Third, we had to buy inventory in advance to back up prices of long-term frame orders. To conclude, the inventory increased. There is a business reason why it increased, and all this inventory is designated for a client.

Okay, that's helpful. And finally, I noticed during the quarter you got your first contract with the UAE, and I also read headlines of – of the United Arab Emirates doing significant investments of billions of dollars in Israel. Do you expect to receive further orders from that country and some of the other markets that are now opening up that would have been unavailable to Israel, let's say, 10, 15 years ago even?

Yeah, it's absolutely an opportunity for our supply chain division, maybe for the in the future for the other division as well. We got an initial order and we expect for continuing order. We just recently got another order from the same client, but it's not in a significant amount, but I believe that gradually we will increase the business with this territory. because we have a good source of components and we have experience with all the segments of aerospace and defense regarding our supply chain division. So it is a good opportunity for us.

Okay, thanks for answering my questions, and I'll hop back in the queue. Thank you. Thank you.

If there are any additional questions, please press star 1. If you wish to decline from polling process, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for more questions. There are no 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 www.bosscom.com by tomorrow. Mr. Cohen, would you like to make your concluding statement?

Yes, thank you. BOSS team is on board to accomplish its missions. When the war in Israel is ended and the The COVID is behind and life back to normal. It will make it easier. I hope to see you again in our next earning call in August. Thank you.

Thank you. This concludes the BOSS First Quarter 2021 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.