B.O.S. Reports Third Quarter 2019 Financial Results

RISHON LE ZION, Israel, Nov. 26, 2019 (GLOBE NEWSWIRE) -- B.O.S. Better Online Solutions Ltd. ("BOS" or the "Company") (NASDAQ: BOSC), a global provider of intelligent systems and services for production and logistics, reported its financial results for the third quarter and nine months ended September 30, 2019.

Revenues for the third quarter grew by 3% to $7.9 million from $7.7 million in the comparable quarter last year. Revenues for the first nine months of 2019 grew by 4% to $24.5 million from $23.6 million in the first nine months of 2018.

Supply Chain division revenues for the third quarter of 2019 decreased slightly to $4.65 million as compared to $4.75 million in the third quarter of 2018. Supply Chain division revenues for the first nine months of 2019 grew by 6% to $14.2 million from $13.5 million in the first nine months of 2018. 
Intelligent Robotics and RFID division revenues for the third quarter of 2019 grew by 9% to $3.3 million as compared to $3.0 million in the third quarter of 2018. Intelligent Robotics and RFID division revenues for the first nine months of 2019 were $10.3 million as compared to $10.2 million in the first nine months of 2018. The increase in revenues of the Intelligent Robotics and RFID division in the third quarter is attributed to the robotics line, which was acquired from Imdecol in June 2019. Currently, revenues attributed to the robotics line are recognized upon delivery.

Gross margin for the third quarter of 2019 was 17.3% as compared to 20.8% in the comparable quarter last year. Gross margin for the first nine months of 2019 was 19.5% as compared to 20.5% in the comparable period last year.

The Supply Chain division’s gross margin for the third quarter of 2019 was 17.1% as compared to 20.2% in the comparable quarter last year. However, the gross margin for the first nine months of 2019 increased to 19.4% as compared to 18.4% in the same period last year.

The Intelligent Robotics and RFID division’s gross margin for the third quarter of 2019 was 17.7% as compared to 21.4% in the comparable quarter last year. Gross margin for the first nine months of 2019 was 19.2% of revenues as compared to 23.1% in the comparable period last year. The decrease in gross margin is attributed mainly to the robotics line.
During the third quarter of 2019 the Company recorded a Goodwill write-off of $614,000 related to its robotics acquisition, which closed in June 2019. The Company expects to deduct the write-off amount from future earn-out payments, if any, that would otherwise have been payable to Imdecol for its robotics business.

Net loss for the third quarter of 2019 was $754,000 or ($0.18) per basic share as compared to net income of $216,000 or $0.06 per basic share in the third quarter of 2018. Net loss for the first nine months of 2019 was $578,000 or ($0.15) per basic share as compared to net income of $613,000 or $0.18 per basic share in the first nine months of 2018.

Non-GAAP net loss for the third quarter of 2019 was $55,000 or ($0.01) per basic share as compared to non-GAAP net income of $249,000 or $0.07 per basic share in the comparable period last year. Net income on a non-GAAP basis for the first nine months of 2019 was $452,000 or $0.11 per basic share as compared to non-GAAP net income of $702,000 or $0.20 per basic share in the comparable period last year. A reconciliation of Non-GAAP financial results for the three months and the nine months ending September 30, 2019 is presented along with the GAAP financials at the end of this document. 
  
Eyal Cohen, BOS’ Co-CEO and CFO, commented, “The performance of The Supply Chain division is currently surpassing our performance expectations. We believe it will continue to perform well as we move through the fourth quarter of 2019.
The performance of the Intelligent Robotics and RFID Division were below our expectations. Our financial results for the third quarter of 2019 were negatively impacted by the acquisition of Imdecol's Robotics business. While this development is disappointing, we are optimistic about the long-term benefits of the Robotics acquisition and believe that it will be the major growth engine for BOS in the coming years.. We are working extensively to improve the production efficiency of the Robotics business and are implementing a cost reduction plan to improve the profitability of our legacy RFID operations.

Yuval Viner, BOS’ Co-CEO, commented, “We view the U.S. market as the most attractive opportunity for our robotic businesses given the growing demand for increased automation in manufacturing and production settings.
Recently we received a $460,000 order for In Mold Label ("IML") robots from a Mexican plastic manufacturer that has several sites in North and South America, and earlier this year we received an $870,000 order for IML robots from a U.S. plastic manufacturer. With the addition of Imdecol, we acquired globally recognized IML robotic systems with  proven capability to successfully integrate with plastic injection machines to provide automated in mold decorating. We currently have more than 500 installations of Imdecol IML robots worldwide, and believe we are well-positioned to aggressively market our capabilities to U.S. manufacturers that we are targeting as our primary market for IML robots. With this in mind, we are establishing a Dallas sales office with a dedicated U.S. sales manager, so that we may more readily capitalize on new opportunities in U.S. to increase our market share and drive growth.” 

Outlook for the year 2019

  •      Year 2019 revenues are expected to be $33 million,
  •      Non-GAAP net income and earnings per basic share expected to be $550,000 or $0.14 per basic share.

"During the first quarter of 2020 we plan to provide guidance for the full year of 2020, as well as targets for the year 2021 that will reflect our expectations for effect of the strategic initiatives we are currently undertaking," Eyal Cohen concluded.  

Conference Call Details

BOS will host a conference call today, Tuesday, November 26, 2019 at 10:30 a.m. EDT - 5:30 p.m., Israel Time. A question-and-answer session will follow management’s presentation. To access the conference call, please dial one of the following numbers:

US: +1-888-281-1167, International: +972-3-9180644.

For those unable to listen to the live call, a replay of the call will be available the next day on the BOS website: http://www.boscorporate.com

About BOS

B.O.S is a global provider of intelligent systems and services for production and logistics.  BOS’ Robotics and RFID Division, offers intelligent robotics and RFID systems for industrial and logistics processes as well as for retail store management. BOS' Supply Chain Division provides electronic components, mainly for the aerospace, defense and other industries worldwide. Its services include the consolidation of components from a vast number of suppliers, long term scheduling and kitting.  For more information, please visit: www.boscorporate.com or contact:

Investor Relations Contact:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
(203) 972-9200
jnesbett@institutionalms.com
Company Contact:
Eyal Cohen, CO-CEO & CFO
B.O.S Better Online Solutions Ltd.
+972-542525925
eyalc@boscom.com

Use of Non-GAAP Financial Information
BOS reports financial results in accordance with U.S. GAAP and herein provides some non-GAAP measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. These non-GAAP measures are intended to supplement the Company’s presentation of its financial results that are prepared in accordance with GAAP. The Company uses the non-GAAP measures presented to evaluate and manage the Company’s operations internally. The Company is also providing this information to assist investors in performing additional financial analysis that is consistent with financial models developed by research analysts who follow the Company. The reconciliation set forth below is provided in accordance with Regulation G and reconciles the non-GAAP financial measures with the most directly comparable GAAP financial measures.

Safe Harbor Regarding Forward-Looking Statements
The forward-looking statements contained herein reflect management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those in the forward-looking statements, all of which are difficult to predict and many of which are beyond the control of BOS.  These risk factors and uncertainties include, amongst others, the dependency of sales being generated from one or few major customers, the uncertainty of BOS being able to maintain current gross profit margins, inability to keep up or ahead of technology and to succeed in a highly competitive industry, failure to successfully integrate and achieve the potential benefits of the acquisition of the business operations of Imdecol Ltd., inability to maintain marketing and distribution arrangements and to expand our overseas markets, uncertainty with respect to the prospects of legal claims against BOS, the effect of exchange rate fluctuations, general worldwide economic conditions and continued availability of financing for working capital purposes and to refinance outstanding indebtedness; and additional risks and uncertainties detailed in BOS' periodic reports and registration statements filed with the U.S. Securities and Exchange Commission. BOS undertakes no obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

 
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands
 
  Nine months ended
September 30,
 Three months ended
 September 30,
                 
     
   2019   2018   2019   2018 
                 
     
  (Unaudited) (Unaudited)
 
Revenues $  24,463  $  23,557  $  7,914  $  7,714 
 Cost of revenues  19,709   18,736   6,542   6,110 
Gross profit    4,754     4,821   1,372   1,604 
 
Operating costs and expenses:
  Sales and marketing  2,907   2,726   1,008   879 
  General and administrative  1,632   1,301   474   451 
  Impairment of Goodwill  614   -   614   - 
Total operating costs and expenses  5,153   4,027   2,096   1,330 
 
Operating income (loss)  (399)  794   (724)  274 
Financial expenses, net  (240)  (170)  (111)  (47)
Income (loss) before taxes on income  (639)  624   (835)  227 
Taxes on income (tax benefit)  (61)  11   (81)  11 
Net income (loss) $    (578) $  613  $  (754) $  216 
 
Basic and diluted net income (loss) per share $   (0.15 ) $  0.18   $   (0.18) $  0.06  
                 
Weighted average number of shares used in
  computing basic net income (loss) per share
    3,984     3,483      4,258     3,554 
                 
Weighted average number of shares used in
  computing diluted net income (loss) per share
    3,989     3,483      4,260     3,556 


 
CONSOLIDATED BALANCE SHEETS
 (U.S. dollars in thousands)
 
  September 30,
2019
 December 31,
2018
  (Unaudited)    (Audited)
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $  1,094 $  1,410
Restricted bank deposits  330  332
Trade receivables  9,615  8,624
Other accounts receivable and prepaid expenses  1,277  829
Inventories, net of advances  5,048  2,874
     
Total current assets  17,364  14,069
     
LONG-TERM ASSETS  153  177
     
PROPERTY AND EQUIPMENT, NET  1,292  1,108
     
OPERATING LEASE RIGHT-OF-USE ASSETS, NET  803  -
     
OTHER INTANGIBLE ASSETS, NET  982  81
     
GOODWILL  5,147  4,676
     
Total assets $  25,741 $  20,111


 
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
 
  September 30, 2019 December 31, 2018
  (Unaudited) (Audited)
 
  LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Short term bank loans and current maturities $  1,002 $   467
Operating lease liabilities, current  536  -
Trade payables  6,386  4,106
Employees and payroll accruals  812  778
Deferred revenues  696  768
Advances net of inventory in progress  262  -
Accrued expenses and other liabilities  326  313
 
Total current liabilities  10,020  6,432
 
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities  2,201  1,867
Operating lease liabilities, non-current  356  -
Accrued severance pay  279  301
 
Total long-term liabilities  2,836  2,168
 
 
SHAREHOLDERS' EQUITY  12,885  11,511
 
 
Total liabilities and shareholders' equity $    25,741 $   20,111


 
RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands)
 
  Nine months ended
September 30,
 Three months ended
 September 30,
   2019   2018  2019  2018
  (Unaudited) (Unaudited)
 
Net Income (loss) as reported $  (578) $  613 $  (754) $  216
 

Adjustments:
Impairment of Goodwill  614   -  614   -
Amortization of intangible assets  52   43  33   15
Stock based compensation  59   46  20   18
Cost associated with a special shareholders' meeting convened at the demand of an activist shareholder  88   -  -   -
Imdecol' acquisition expenses  128   -  -   -
Currency diff. due to operating lease liabilities *  89   -  32   -
Total Adjustments  1,030   89  699   33
Net Income (loss) on a Non-GAAP basis $     452  $  702 $     (55) $  249
 
 
Basic net income (loss) per share $0.11  $0.20 $(0.01 $0.07
 


*According to US GAAP, commencing January 1, 2019, operating lessees will no longer be provided with a source of off-balance-sheet financing and lessees must recognize lease assets and lease liabilities.  Since the Company's operating lease liabilities are linked to the NIS, the devaluation of the US $ against the NIS caused a currency differences cost of $89,000 in the first nine months of 2019.

 
CONDENSED CONSOLIDATED EBITDA
 (U.S. dollars in thousands)
 
  Nine months ended
 September 30,
 Three months ended
 September 30,
   2019   2018  2019  2018
 
 Operating income (loss) $  (399) $  794 $  (724) $  274
  Add:
Impairment of Goodwill  614   -  614   -
Amortization of intangible assets  52   43  33   15
Stock based compensation  59   46  20   18
Depreciation  205   167  71   61
EBITDA $   531  $  1,050 $     14  $  368
 


 
SEGMENT INFORMATION
(U.S. dollars in thousands)
 
  Intelligent
Robotics
and RFID
Division
 Supply
Chain
Solutions
 Intercompany Consolidated  Intelligent
Robotics
and RFID
Division
 Supply
Chain
Solutions
 Intercompany Consolidated
  Nine months ended September 30,
 2019
 Three months ended  September 30,
 2019
 
                  
                  
Revenues $10,316 $14,251 $  (104) $  24,463 $3,289 $  4,635 $  (10) $ 7,914 
                  
                  
Gross profit $  1,984 $  2,770 $  -   $  4,754 $  580 $  792 $  -   $ 7,914 
                  
   


  Intelligent
Robotics
and RFID
Division
 Supply
Chain
Solutions
 Intercompany Consolidated  Intelligent
Robotics
and RFID
Division
 Supply
Chain
Solutions
 Intercompany Consolidated
  Nine months ended September 30,
 2018
 Three months ended  September 30,
 2018
 
  
 
Revenues $10,159 $13,491 $  (93) $  23,557 $3,014 $  4,751 $  (51) $  7,714 
                  
                  
Gross profit $  2,342 $  2,479 $  -   $  4,821 $  646 $  958 $  -   $ 1,604 

 

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