Bos Better Online Solutions Ltd (BOSC) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, welcome to BOSQ2 Investor Summit. Thank you for joining us today. Before we begin, a brief reminder that this call contains forward-looking statements relating to BOS's business, financial condition, and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such statements include, but are not limited to, matters relating to product demand, pricing, market acceptance, economic conditions, and technology development, as further detailed in the company's filings with the various securities authorities. Before I turn things over to management, I would like to give a brief recap of the results we just released. The growth momentum continued. Second quarter 2026 revenue grew 29% year-over-year, helping offset a softer first quarter of 2026, and bringing trailing 12-month revenue to the same level as our record 2025 revenue. We anticipate that full-year 2026 revenue will exceed full-year 2025 revenue. Our backlog remained at a record $31 million as of the end of the second quarter of 2026. Approximately $20 million of the backlog is scheduled for delivery by year end. Together with first-half revenue, this amount represents approximately 91% of our full-year 2025 revenue. Despite the increase in our operating expenses due to the dollar's devaluation, we believe we will offset this through revenue growth and improved gross profit margins, and as a result, we expect net income for full year 2026 to exceed $3.6 million we achieved in year 2025. Our balance sheet is solid. Shareholders' equity stands at $30.9 million, and cash stands at $10 million. That gives us the flexibility to capitalize on organic and M&A opportunities. BOS is a company with a growing backlog, accelerating revenues, a clean balance sheet, and exposure to some of the strongest structural trends in the global economy. defense spending, automation, and supply chain modernization. And yet, BOS currently has a market capitalization of approximately $31 million, and its enterprise value, market cap less cash, is approximately $21 million. For comparison, the Russell Microcap Index trades at approximately two times book value versus BOS trades one-time book value. Russell MicroCap index price-to-earnings ratio of roughly 16 times, compared to our roughly 9 times. Thank you for watching. Now I will turn the call over to Ayo Cohen, CEO.

Good morning. Great to see you again in our quarterly conference. Joining me today is Moshe. Our Chief Financial Officer. I am pleased to see the strong participation today, including many new names following the recent virtual conferences we participated in during May, June and July. Let me start by sharing a few thoughts on how the business is progressing. I am very pleased with our financial performance, financial position, management team, board members, and the growth opportunities in front of us. This has given us the confidence to grow year after year, and we remain focused on continuing that trend. I am pleased that the commercial market in Israel has recovered, as reflected in 17% growth in RFID revenue in the first half of the year as compared to the comparable period. Demand in the nutrient segment continues to be strong, as reflected in our record backlog, most of which relates to our supply chain petitions. The penetration of our robotics division into more factories in the defense segment is going very well. We are successfully implementing AI Rudeen bots for internal use to improve our operational efficiency, and in software development for commercial sales. I believe these steps will yield improved operation of the margins and support our revenue growth.

On the financial front, despite 30% growth in the total revenue between Q1 26 and Q2 26, cash remained roughly unchanged at $10 million. dollar. We grew without needing to burn cash, which is a strong indication of highly efficient cash management, with our vendors helping to finance our clients. We will deploy this cash to support our external growth through M&A. On the M&A front, we have several opportunities on the table that we have been evaluating carefully.

On the IOS side, in May we presented at the MicroCAP Club Virtual Summit and in June we participated in the iAccess Alpha Virtual Summit. In July we hosted our first investor webinar. We are going to participate in the CIDOTI conference scheduled for the end of September. In In September, we will also join an on-deal roadshow to ThinkEquity clients. During July and August, we released three announcements on a major contract. In recent months, we have become active online on Facebook, LinkedIn, X, and via email, and we plan to increase our investment in those channels. I will send you the link to our pages and you are welcome to follow and share. We are hopeful those activities will help close the gap in our valuation. With that, I want to thank you again for your continued confidence and support in BOSS as we carry this momentum into the second half of the year. Thank you for listening. We will now be happy to open the call for questions. Please unmute yourself if you want to ask questions.

Good morning, Yael. Good morning, Moshi. Congratulations on a fantastic quarter. Regarding one of your recent orders, it was in the semiconductor industry. Is that kind of a one-time order, or do you see more orders occurring from that industry?

We have to understand that once we announce on a contract that relates to the supply chain division, on the back of it there is a design work of embedding our components into the client's product that is in development process. Actually, we work on that order a year ago. So, once the products start the mass production, then we start to get the orders, so we expect as long as the product is alive, the orders will follow.

Okay, and can you kind of give an update on your progress in India? I know that's becoming a large part of your revenues, and where do you see that progressing over the next year?

Yeah, we are very pleased with the progress of our team in India. They are doing a very good job. They are reaching to a client that we have never been in contact with. And I am sure that it will yield to additional, it will support the growth of BORS in India in near 27.

Okay, and my final question is, referring to M&A, You still plan to make any M&A activity non-dilutive to shareholders and finance that with existing cash and bank loans. Is that correct?

That's correct, Todd. Actually, we are planning to do an M&A, but as you know, in the recent two or three years, we we didn't this we have not succeed to to to a to close the deal because it doesn't match to our criteria especially for the press criteria that it should be a very company with a solid history of profits and the positive outlook we have the several opportunities on the table we are checking it and we are in negotiations with the several companies hopefully one of them will be closed and of course we have the financial policy how how to finance we have the policy how to finance those deals as I mentioned before we have like 10 million dollar in the in the cash in hands so if we are buying a profitable company. There is no reason why the bank won't participate at 50% of the financing. So we actually can reach to maximum acquisition value of $20 million. So we are set.

Thank you. I'll hop back in the queue. Congratulations again on a great quarter. Thank you.

Thank you, sir. I'm looking forward to meeting you in Israel.

Thank you.

Good morning, Ayal. It's Scott Weiss.

How are you?

Fine, thank you.

How are you, Scott? Good, thanks. Nice quarter. My question is on the RFID division. It was up a nice 17.5% year-over-year. It bounced back. Was that a function of the easy comp year-over-year, or are you seeing some kind of a positive change there?

Yeah, we see a positive change. We actually, we expected, we were expecting for that. And it's happened a little bit silent here in Israel, and it's calm. There is a rebound in the market, you know, the demand starts very strong. We see a recovery. Hopefully, it will continue for a long time, after three years of, like, to be in a halt position. So, for year 26, it looks very – I'm bullish on year 26 for the RFID division.

And the same question for the supply chain segment. Revenues were down 6% or so. Is there any insight you can give us as to why it was down?

No, as you saw, the fluctuations in this division are significantly high, you know. As you remember, in the first quarter, we were below the comparable quarter last year and about, if I remember correctly, it was like 17% less. And then here in the second quarter, we succeed to close the gap. So, we know that our clients in the defense segment will buy our component, but we are not controlling on the rate of consumption. So, there could be fluctuation. Because of that, I am not given importance to the 5% decrease. More than this, we have a very strong backlog at $31 million, which is a record backlog. By the way, despite 30% growth in revenues from Q1 to Q2, the backlog still remains on the same level of $31 million as it was at the end of the first quarter. Yeah, consolidated. Sure. So, out of the $31 million, we have a $20 million for delivery by the year-end. So, we did the calculation, and based on that, we provided positive outlook that we will exceed the past $51 million in year 26.

Okay, great. Thank you.

Thank you, Scott.

You can go ahead in a second. who's going to be the first one yes please thank you hi hi this is Kevin I want to install partners thanks for taking our questions as a follow-up on M&A could you speak to what are the gating factors and it would be finding targets price expectations or the financing capacities I'm not sure I got your question can you repeat because the line is not so clear can you repeat this yeah sure as a follow-up to the earlier M&A question could you kind of speak to what are some of the gating factors on kind of closing a deal would that be finding targets price expectations are there are the financing capacity yes so the criteria are as I mentioned that the cap of acquisition of investment will be 20 million dollars.

The criteria that there should be a synergy to our core business and you know the synergy could be a range of synergy. How much is 50% synergy, 100% full synergy. So we have flexibility on that issue, on that criteria. Regarding the financial position, the financial performance or the performance of the company, so we are checking that in the recent three to five years the company presented consecutive profits and there is positive outlook going forward and regarding the The multiple, the valuation, we are – the thing that we have on the table, the multiple on the EBITDA is between five to six. This is the range of valuation we are talking about.

Got it. And then as a follow-up, you've announced about 4.7 million in new orders since late July on top of the 7.1 million from India and the U.S. through May. and your guidance has stayed pinned around the $3.6 million range, which is flat to last year. Could you walk me through that bridge? Is it incremental revenue being absorbed by Shackle and the mix? And then specifically what has to change? Would that be FX pricing or mix for this momentum to break through to the bottom line in 2027?

Yes, so in this PR, this press release, we just announced that we will exceed the $3.6 million, and usually we don't provide the exact percentage of growth. Usually we use that we will exceed, like we are doing in the revenue, that we will exceed the $51 million, and we will exceed the $3.6 million. dollar so but still there is a challenge we are facing with the devaluation of the u.s dollar as you saw in the first half of the year it increased our operational expenses by about 600 000 because it is yeah it increased the operational expenses by 600 000 so it's a And on an annual basis, it's like 1.2 million volts, so we have to find a way to compensate it in order to generate a profit that will be higher than the year 2025, higher than the $3.6 million. So we can work on internal efficiency, and we are doing it mainly with the assistance of the AI tools to improve our operational efficiency, but to improve our operational efficiency by $1.2 million a year, it will be very tough. So we are doing it by operational efficiency, by increasing the gross profit margin of our products in order to compensate, and we are increasing our revenues.

So if you you increase the revenues and you increase the you walk with all those points together this is a assumption for our a outlook for exceeding the 3.6 million dollars thanks a lot thank you kevin hi i am hello hi um james khan here um in a previous uh conference call You suggested that you were open to the possibility of a new name for your company because Better Online Solutions is awkward at best and a little inaccurate and a little bit silly. So I've been working on this and giving it some thought and consulting the people. And I believe the best solution is an organic one, something that you're already known by. So I suggest BASC, your symbol, as the name for the company.

I totally agree with you. I think. You know why BOSC? Because it's also BOSC coin, so it's, okay, it's great. Yeah, but I agree, all the investors know the name BOSC, they know the ticket. I certainly agree with you, and if I won't get any other recommendations from our shareholders that can send me emails and other suggestions, I think we will go for it. Thank you. Great idea. Thank you. Any further questions?

Hi, this is Igor Novgorodtsov and nice talking to you again, especially after a strong quarter. I want to touch upon the gross margins. So the gross margins, I don't have it really in front of me right now, but they seem to be kind of being a little bit flat while your revenue is growing. is gross margins affected by RFID versus supply chain mix maybe you can give us I know you don't disclose them exactly but maybe you can walk us a little bit through that or are they affected by FX do you think the gross margins can improve while your revenue is growing I think the gross margin we are working that the gross margin will improve because what I just mentioned before because we have to compensate on the effect of the devaluation of the US dollar.

So we are working extensively with our clients to increase the sales price. I have to tell you that since the beginning of the year, all the sales persons, all the sales team increased in prices in order to compensate it. I am following month by month, I am following, we are following month by month, so our expectations are that our gross profit margin go ahead, will increase but in certain cases, when we have there could be a huge transaction especially in the supply chain for a certain kind of product that the gross profit margin could be lower it's a price of it's a matter of negotiation with the client So, and I hope it won't decrease, it won't lower the average of our, it won't lower the average of the gross profit margin that we're expecting. So, in general, we are expecting higher gross profit margins.

Does it apply to just supply chain or it also equally applies to RFID?

Yes, so I mentioned the supply chain because in the supply chain there are huge transactions. There could be a transaction like of $2 million, $1.5 million, that can affect significantly on a specific quarter. In the RFID, the transactions are much lower, could be like $4 million, $100,000, $1.5 million maximum. So, because of that, I mentioned just the effect of certain transactions of the supply chain.

For FID division, apart from obviously the issues that Israel has been in various stages of war in the last few years, you had specific companies, I remember that last year, you were restructuring your FID division. Is this restructuring over, or do we expect some significant further improvements, or how much did it change from the last year?

Yeah, it wasn't fault. It's not a company under the RFID, it's a unit under the RFID. Right. And we have done, we have been doing great work there, and great progress. And it absolutely, the performance now are much better than we had in the parallel, in the comparable period last year. But still, we have work to do, but this unit will be profitable in year 26 as opposed to year 25. The certain unit in the RFID, the RFID in general is a profitable division. The certain specific unit that caused us some losses, decreased our net income in the RFID division, I think now the situation is much, much more better. is RFID more or less a function of if Israel is in a state of war or that is relative quiet because obviously RFID has done much better in EQ2 than in Q1 or there are other significant factors I think the RFID is 100% affected by the Israeli commercial market as I mentioned before we are in the process to to penetrate with the RFID to the defense segment and we hired a consulting company special for that mission and we also work into penetrative hospitals and which is a growing segment in Israel and very stable like in all other places in the world we are searching acquisition in that field it's very tough, we are not finding we don't even have the opportunity on the table. Another option is to set a team to build it from zero, from scratch, and by that to reduce the exposure of the RFID division to a geopolitical event that put on hold the commercial segment in Israel.

Okay, thank you very much.

I don't have any more questions thank you thank you next any other further questions okay thank you for your time and attention feel free to reach out if you would like to schedule with us in one-on-one session thank you very much it was a pleasure to see you again today thank you