Ladies and gentlemen, thank you for standing by. Welcome to the BOS Second Quarter 2019 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session.

[Operator Instructions] As a reminder, this conference call is being recorded and will be available on the BOS website as of tomorrow.I would now like to turn over the call to Mr. John Nesbett from IMS. Please go ahead..

Good morning, and thank you for calling in to review BOS's second quarter 2019 results. Management will provide an overview of the results followed by a question-and-answer session. I'll now take a brief moment to read the Safe Harbor statement.

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 a 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, and ability to maintain marketing and distribution arrangements to expand in oversea markets, uncertainty with respect to the prospect 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 risk and uncertainties detailed in BOS's periodic reports and registration statements filed with the US 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 may differ from those set forth in the forward-looking statements.On the call this morning, we have Eyal Cohen, Co-Chief Executive Officer.

I now turn the call over to Eyal. Please go ahead Eyal..

Thank you. And thank you all for joining us today.

Our second quarter included intensive activity around the completion of our acquisition of Imdecol Robotics business and our integration of those operations within both existing structure.Within the [indiscernible] we bought a privately held company with the state-of-the-art high technology, which adds value to our portfolio of solutions.

However, it also present some challenges with a weak operational structure and ineffective sales structure.As we move through the balance of the year, our priority is to enhance the Robotics business operational, an international service platform to take advantage of the tremendous long-term opportunity in the global industrial robotics market.

According to industry report, the global industrial robotics market0020is expected to grow at an annual rate of 11% and exceed $98 billion by year ‘24.We have begun to enhance our robotics operation and strengthen its competitive advantage by improving its production efficiency and capacity, as well as expanding its technological capabilities and customer service.

Our goal is to demonstrate significantly improved operation efficiency in our robotics operation by the end of this year.On the sales side, we are focused on building an international sales platform with straightforward guidelines as follows, focus on industrial robots for in-mode labeling for the plastic industry, which is an area of strength for us, target the US market as a major territory for expansion, open and sell in tech office in the US by the first quarter of year ’20, and maintain the existing sales revenue in other regions..We are starting the implementation right away and plan to make progress in measured cadence to ensure that we are efficient and accurate in driving business through investments.

There are many challenges ahead and we look forward to making progress as we execute our growth strategy.To conclude, the press release that we released this morning, along with our comments on this call, provide a clear view in our current position and our future growth plans.That completes my review. And now I will be happy to take your question.

Thank you..

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from Jennifer Wilfor [indiscernible] Partners. Please go ahead..

Thank you. Good morning.

Could you give us a little more detail around your decision to focus on the US market?.

How are you? Thank you. So the US market is huge. There are thousands of target customers, which are the plastic manufacturer and US market is friendly to Israeli technology. And the US plastic manufacturers are lagging behind the European and Chinese manufacturers in adopting in-mode label production.

So the in-mode label potential in the US market is big and this is the reason why you – we are focusing on the US market..

Thank you. And if I could just have a quick follow up to that.

Do you have any concerns around the trade war? Do you think that that will threaten any of your sales plans in the US?.

In the aspect of their robotics business, the robotics business, we think that the trade war is actually an excellent accelerator for the sales in the US market because the US government encourages and supports US manufacturers to invest in robotics machines to improve their production efficiency and the trade war puts a barriers for the competition from China and also the US plastic consumers such as Kimberly Clark [ph] look for a stable and heightened capability in production flow.

So we believe that the trade war will push those consumers to US- based plastic manufacturers, which are - actually our potential clients..

Okay, interesting. Thank you..

The next question is from Mike Hussey of Catamount Capital. Please go ahead..

Yes, hello.

Which additional territories do you have sales operations in?.

We have sales in - sales reps in Brazil, Mexico, Australia and New Zealand, and we will maintain these reps – sales reps, but our main near-term focus on resources will be in the US market development..

Okay.

Just one more question around that then when do you think your international sales plan will yield a significant level of global revenues?.

We plan to complete the first step of setting on the US sales and take office by the first quarter of year ‘20, as I mentioned before, and we accept that it will gradually and consistently increase our robotic backlog in year ‘20. And the increase in revenues will follow we believe in year ’22 - in year ’21, I'm sorry, a year after..

Okay. Thank you..

The next question is from [indiscernible] Portfolio Management. Please go ahead..

Yes, I wanted to ask, can you tell us how secured pipeline is?.

The secured pipeline - usually we don't announce on the pipeline, but I can give you the guideline that to we have two business divisions, the supply chain that traditionally have a long term pipeline because of the type of business, the long term order from an aircraft manufacturer.

So the pipeline of this division is over $10 million and the pipeline for the robotic and the RFID division usually is lower, but they are – we’re picking order from customers that we can see that - in that, let’s say 50% of the business is repeating orders. Still, we have to negotiate, but it's repeating orders.

So we can say that we have assurance for more than 50% of the revenues over the year when we start the year..

Is the pipeline thicker now than it was let's say, three or six months ago?.

Sorry, again..

Do you have more prospects or warmer prospects closer to closing the contract than you had three or six months ago?.

Yeah, the pipeline of the group is much more higher than it was in December, much more higher, especially in the supply chain division, in the intelligence, robotics and RFID. So we just acquired the robotic business and we are starting to build the pipeline. It started to accumulate just in June.

And - one of the decision to invest in lot of resources in the US market is to significantly increase the pipe - the backlog sorry, the backlog of the robotics business..

And the increase in pipeline is coming from new customers, from existing customers or how does it look?.

The pipeline, most of which form existing customers..

So existing customers are giving bigger orders?.

Yes..

That's good..

In both division..

That's good. Now, as far as profitability, I'm sure you'd like to see the numbers higher.

When do you think - what's your profitability target and when you think you might be able to reach that?.

As we mentioned in the PR, we provided outlook for the year and ‘19 for this year that we will reach to the $1.3 million net income among that in profit. And for the next year we will provide outlook later this year. And for the next year the outlook will be on a GAAP basis, not on a non-GAAP basis.

We provide a non-GAAP basis this year because of the acquisition, and I am sure that the next year, year ‘20 outlook will be as traditionally we are providing will be higher. We will have higher profit net income than in year ‘19..

You're optimistic about ’20?.

Absolutely. And I am optimistic, especially in regards with the sales to international market and in the Robotic business..

And you think the - the optimism will carry down to the bottom line?.

Absolutely, yes..

Last question for me, please. I see a jump in intangible assets from the first quarter.

Is that because of the acquisition?.

Absolutely, yes..

Okay. Thank you. And much luck..

Thank you very much..

[Operator Instructions] The next question is from Bob Jensen. Please go ahead..

Yeah.

Could you comment on your need for capital - additional capital going forward?.

As we mentioned before, three months ago, we don’t plan to raise additional equity and we are - all the resources for the acquisition and for working capital came from the equity that we raised at the beginning of year in '19, at the beginning of this year.

And we are increasing the credit line from the banks in order to finance working capital, in order to finance the investment that we need and that we plan to do in the international market..

Okay. Thank you..

There are no further questions at this time. Before I ask Mr. Cohen to go ahead with his closing statement, I would like to remind my participants that a replay of this call will be available on the company's website www.boscorporate.com by tomorrow. Mr. Cohen, would like to make your concluding statement..

Yes. Thank you. Thank you for joining the call today and for your questions. This is an exciting time for our company, and we are focused on making the long term investment that we believe will gradually yield consistent and sustained growth in BOS revenues. We look forward to your long term support. Thank you..

This concludes BOS second quarter 2019 results conference call. Thank you for your participation. You may go ahead and disconnect..