Bos Better Online Solutions Ltd Q4 FY2025 Earnings Call

So good morning, and thank you for making the time to join our full year 2025 results call. Joining me is Mr. Moshe Salzer, our Chief Financial Officer. And I'm pleased to report that '25 was an outstanding year for Bosch on multiple metrics, and I'm grateful to our team for the hard work and commitment in achieving these results. We delivered strong revenue growth throughout the year, setting multiple record quarters and increasing our outlook three times. Ultimately, we completed the year '25 growing 27% year-over-year to a record $51 million in revenues — and our net income grew year-over-year by 57% to a record $3.6 million, demonstrating our ability to drive profitable growth leverage in our model. Even with this growth, we exited the year with a substantial contracted backlog of $24 million, giving us good visibility into the year ahead. Looking forward, I want to share the key trends that will shape our trajectory in 2026. Demand in the defense sector remains robust and is expected to continue driving growth in our Supply Chain and Robotics division throughout the year. We maintain strong backlog visibility and healthy customer relationships across this segment. Alongside that, we are taking steps to extend our geographic reach. In March 2026, we appointed an Indian company to represent Bosch in the Indian market as India is emerging as a growing subcontracting hub for global defense programs. This is a meaningful step in our global expansion strategy. On the product side, our organic growth model is built around continuously broadening the portfolio of manufacturers we represent and embracing the new technologies they develop. Because our manufacturing partners invest heavily in next-generation solutions, we benefit from a self-replenishing flow of innovative products to bring our clients. Turning to our RFID division. The ongoing geopolitical tension in Israel since October '23 has continued to weigh on the Israeli commercial market, which represents the primary revenue base for this division. Therefore, we recorded goodwill impairment charges of $700,000 in 2024 and an additional $1.2 million in year '25. To reduce our exposure to the geopolitically sensitive Israeli civil market, our 2026 strategic plan focuses on growing our RFID business by entering the hospital segment, a more stable and higher-growth vertical within Israel. Successful penetration of this segment will require broadening our product offering, hiring personnel with relevant domain expertise and establishing new customer relationships. We expect to make this investment throughout 2026 with revenue contribution expected to begin in '27. On the currency front, the USD to Israeli shekel exchange rate opened 2026 at ILS 3.18 per dollar, reflecting an approximately 13% devaluation of the dollar against the Israeli shekel compared to the start of 2025. As a result, we expect our Israeli shekel-denominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. Another effect of the dollar's weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized this year, which arose from the revaluation of the Israeli shekel-denominated balance sheet items following the sharp dollar decline. The gain is not expected to repeat in 2026, assuming the rate remains at approximately ILS 3.18 per dollar. Combined, these two currency-related items represent approximately $1.4 million in headwinds going into 2026. Separately, the $1.2 million goodwill impairment charge taken in 2025 is not expected to recur in 2026, which partially offsets the headwinds, leaving a net year-over-year drag of approximately $200,000. Our financial foundation has never been stronger. Cash and equivalents have grown to $11.8 million, up from $3.6 million at year-end 2024. Shareholders' equity amounts to almost $29 million, up from $21 million at year-end 2024. We have positive working capital of more than $22 million and bank debt amounted to only $1.7 million. This strong balance sheet gives us the flexibility to capitalize on opportunities as they arise, supporting both organic growth and strategic acquisitions. We are actively evaluating a range of acquisition opportunities, each of which must meet our strict criteria, including a proven track record of profitability and high revenue visibility. Turning to our outlook. Consistent with our established policy of issuing conservative initial guidance with updates provided as the year progresses, we are projecting revenues of approximately $51 million and net income of approximately $3.6 million for 2026. We look forward to updating you as the year progresses and our momentum becomes clearer. On the Investor Relations front, in 2025, I conducted a non-deal roadshow comprising 44 one-on-one meetings with potential investors and presented at two investor summits. Our stock appreciated 42% during that year, year '25, yet a significant valuation gap remains related to our benchmark index, the Russell 2000. Over the past four years, we delivered compounded annual earnings per share growth of 60% compared to 12% for the Russell 2000 — five times the rate of the index. Despite this performance, we trade near book value, while the Russell 2000 trades at roughly 2.4x book value. And our price-to-earnings ratio stands at approximately 9x compared to 20x for the index. We attribute much of this discount to limited market awareness. To address this, we will shift our IR strategy toward digital marketing starting this April, engaging a communication and Investor Relations firm specializing in digital investor outreach. We believe this approach will meaningfully expand our investor reach and visibility in a significantly shorter time frame rather than the traditional IR method. With that, we are happy to take your questions.

Congratulations on a really good year. This is Todd Felty. I was wondering if you could talk about the current conditions over there and how you expect your business impacted if the war, let's say, lasts another 30 days compared to what happens if it drags on for another six months with your various divisions.

Yes. So thank you, Todd. First, most of our business is linked to the Defense segment. As you know, the supply chain, which is a primary growth driver for both the Supply Chain and Robotics divisions, has most of its business related to the defense segment and the Robotics division as well. So in that aspect, if the war continues, it will positively affect the growth of those two divisions. In regard to the RFID division, currently, it's very sensitive to the geopolitical tension. And if the war continues, it will negatively impact its business. But as I mentioned before, we are working to shift our sales resources and business development resources toward new segments which are less sensitive or even the opposite in such periods, like hospitals in Israel. We will focus on the hospital segment in Israel. In addition, as you know, if the war continues, we learned how to work with that. The economy will gradually return to its normal course of business despite several attacks a day. It's not new for us. We have been in this situation for three years, and still, we are doing well. But hopefully, it will be ended.

Okay. And there was a gentleman who asked a question in the chat, which I thought a good question. He spoke about the growth rate you've achieved and why there is no growth anticipated in the guidance. I think your guidance is for $51 million, and that's basically what you did last year. So can you kind of give us some insight on that?

Yes. First, we reached a record level of revenues, $51 million revenues, compared to $40 million revenues in the previous year, it's phenomenal. Our revenue growth depends on the consumption of our components by the different segments, mainly the Israeli aircraft industry; there are many subcontractors around the board. I believe that there is high potential for continuing growth because the warehouses are empty. But we currently have, at the end of year '25, a $24 million backlog, which covers 50% of our outlook for year '26. So we have to be — as we did all the time — conservative. We will update and I believe we will upgrade the outlook quarter-by-quarter according to the progress. And we have to remember that we are in a very sensitive period of geopolitical tension. Every day there are news items and we have to be a little bit conservative. And I think that still with $51 million revenues and the $3.6 million net income and all the ratios that I illustrated before compared to the Russell 2000 Index, there is no need for any growth to justify this current valuation. I think we are undervalued with the $51 million revenues and $3.6 million net income, and there is a great upside.

Okay. My last question is just on the M&A front. I see your cash position is up to $11.8 million, can you just kind of go over your M&A strategy? I believe in the past, you planned there would be no dilution on any M&A that you did and that any acquisitions you did would be immediately accretive to revenue and earnings. Is that still the case? And do you plan on investing some of that cash maybe in short-term notes or securities if there's no M&A on the immediate horizon?

Yes. So first, as we have the $11.8 million cash in hand, I think acquisition opportunities are increasing because we can acquire a larger company that can move the needle. So it's a great tool to have on hand, and we have several acquisitions that we are evaluating. Hopefully, we will close an acquisition during the year '26. Until then, we invest the cash on hand in short-term security funds that yield around 4% to 5% interest per year. So the money is working and waiting for utilization. Regarding dilution, it's not included in the plan. There is no plan for dilution with $11.8 million to do an acquisition — it should be a nice acquisition. And if we want to increase it, we can leverage it with bank loans, long-term bank loans together to reach a significant amount for an acquisition. It could be one or it could be two, so I don't expect any dilution in that aspect in M&A. By the way, in any other aspect as well.

I have two questions. This is Scott Weis. How are you?

Fine. Thank you, Scott.

Good. Thank you. Regarding India, can you comment on if you've seen revenue in India to date? And what kind of numbers are you expecting for 2026? We see flow of revenues from India. We saw flow of revenues in year '23, in year '24, and we opened the agency there in order to have more foot on the ground in India to increase this number. We didn't provide any outlook for how much revenue, but hopefully, it will increase significantly. During the year, it's not an investment for one year, it's a long-term investment, and we will expand our investment in India as it progresses. This is our addressable market overseas. Can you share one or two of the larger customers from the Indian markets?

Yes. Our clients include some of the top subcontractors for assembly of electronic systems. They are working with the Indian industry, they are working with Boeing, they are working with global organizations. Among the names are Cosmos, Vinas, DCX. I believe there is a long list of subcontractors that we have not reached yet. And this is a primary reason for having a foot on the ground in India in order to visit more manufacturers, more assembly companies and to start to do business with them. If we have a good offering for them, I believe we can increase our client base in India with the same offering.

My second question is regarding the RFID investment — what kind of investment spend are you expecting to add to enter the hospital market?

What kind of investment? According to the initial plan, I believe it won't be a very large amount in the size of the group, but it will be a significant amount for the RFID division. It could be around several hundred thousand dollars: in share, it could be like $300,000 in year '26. And then in year '27, this new segment will be in breakeven and in year '28 start to be profitable. But it is for the long term because every time there is geopolitical tension, this segment gets impacted directly and immediately. So we have to — because we don't believe that going forward there will be a long-term peace period — we have to be ready for that, and we have to do this move.

Do you have existing relationships in the hospital segment?

Currently, no. But we have several candidates that we can hire with the related connections. By the way, it could also be through M&A of companies that are already in that field, and to use our systems to support the sales and the sourcing of the product to this segment.

Okay. My last question is regarding the guidance. I realize you've been conservative, but the guidance suggests that you've seen a slowdown. And I just want you to flesh that out a little bit. Have you seen any changes from Q4 to Q1 to where we are today?

No. The opposite, I see that the backlog increased. The backlog of the group increased in the first quarter.

Thank you very much.

You are welcome and hope to see you soon in Israel, Scott.

Hello. This is Igor Oarletzo. Good afternoon and good morning for me. I have a question, and I think somebody else had the same question about your guidance. So you're projecting the same revenue and the same net income as you had this year. So I understand the revenue part; the net income was affected by two things this year, which I assume will not be going forward. Secondly, you paid no taxes and are going to pay taxes next year. Maybe you can just walk me through and say, on the EUR 51 million, how do you get exactly the same metric you had given these two significant items affecting it this year?

Yes. Thank you for your question. I think that Moshe described that we had two points that impacted year '25 results. Moshe can return on what you just said regarding the currency exchange, the weakness of the dollar and what was the impact in '25 and what we expect in year '26.

Yes. In financial income, in 2025, because of the currency movements in January, we expect our Israeli shekel-denominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. Another effect of the dollar weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized last year, which arose from the revaluation of the Israeli shekel-denominated balance sheet items following the sharp dollar decline. This gain is not expected to repeat in 2026. Regarding the impairment of the goodwill, that was a $1.2 million charge in 2025 that we do not expect to recur in 2026. So the goodwill impairment is a 2025-only item, but the currency items produce a net headwind going into 2026.

So I agree. In summary, there was a charge of $1.2 million of goodwill in 2025 that we don't expect to recur in '26. On the other hand, there were some currency benefits in year '25 because of the weakness of the dollar. Operational expenses in year '26 will be higher by $600,000 than they were in year '25 because we opened the year with the shekel stronger versus the dollar; we expect higher operational costs by $600,000. And another thing that we recorded in year '25 was financial income from currency of $800,000. As long as the currency exchange rate in '26 remains at approximately ILS 3.18 per dollar, we don't expect to record the same income. So the benefit in the currency exchanges in 2025 is offset by the goodwill impairment in 2025. When you compare years '25 and '26, these items largely offset and explain why guidance is conservative.

Okay. My other question is it's a little bit difficult to break down if you're paying any taxes. And I know you referred to that you have tax carryforwards. So could you tell me what you expect your taxes to be like this year and next year?

Yes. Taxes are a little bit tricky because we plan to utilize all the carryforward tax losses in both the parent company and the subsidiary by the end of year '26. All of it is recorded as an asset in the balance sheet. We see a level of tax assets and tax carryforward losses in the subsidiary division that we want to utilize, and we are considering different tax planning solutions to utilize them so that all the profit of the group will be offset by the carryforward tax losses of the relevant division. So we don't expect to have any significant tax expenses in year '26.

Okay. And for '27 is it a little bit too early? Or are you also saying that the tax carryforwards keep carrying into the next years?

Can you repeat, please, again?

For year '27 going forward, do you see that you're going to still have tax carryforwards in your divisions? Or will they probably expire?

No, there is no expiry date for those losses. If we execute the tax planning as we intend, I believe we won't have tax expenses in the several coming years.

Okay. And my last comment, when you cannot have to take us a question, you referred to buybacks in this call. I think there is no better way than to do a buyback or to have the executives buy some of your own stock because I think it would benefit everybody. So this is just a comment. And I don't know if you agree with this, but that would be, I think, many people's minds.

Yes. I think because we have just $11.8 million and we are a very small company, we have to invest this money by acquiring companies in order to support the growth of the company and not to do an artificial financial act to support the stock. Personally, I don't believe in buybacks; they seem more appropriate for very large companies with hundreds of millions in cash on hand. We don't have the space for it. We have worked very hard to gain this money and we have a lot of opportunities for acquisitions. I believe acquisition is the best thing to do for the company for the long term. Regarding officers buying stock, I can tell you the compensation package of those officers: they cannot afford to do buybacks personally. Their compensation includes options instead of large cash bonuses. I think it's a sign of support that the officers believe in the company.

I have a question. It's James in New York. You were talking about India, and I was a little unclear. You said that if I understood it, there were revenues in '23, '24 and '25 and you're expecting India to grow. But can you quantify how much of your revenue came from India in '23, '24 and '25?

Several million dollars. It's around $3 million on average during those years. And we expect — following the trends in the market and following our investment in India — to grow significantly and gradually during the coming years. Any further questions? Okay. So thank you all for your thoughtful questions today. They reflect exactly the kind of engaged dialogue we value with our investors. Let me close with a final thought: year '25 was a milestone for both record revenues, record net income and record cash on the balance sheet. We enter 2026 with a strong foundation, a clear strategic roadmap and a team that has demonstrated its ability to execute. We are committed to delivering long-term value for our shareholders. And I look forward to continuing that dialogue with you. Thank you again for your participation, and please feel free to reach out at any time. Have a great day. Thank you.