B.O.S. Better Online Solutions Ltd. (BOSC) Earnings Call Transcript & Summary

Welcome, everyone, and thank you for joining BOSS' virtual investor event on strategy, execution and financial discipline. Today's conversation is designed to give you a concise and candid look at how BOSS is executing in 2026, converting their backlog into revenue, strengthening its supply chain platform and driving profitability across aerospace, defense and industrial and retail markets. We'll touch on the composition and quality of BOSS' backlog, recent order activity in key geographies and and how operational discipline in the Supply Chain division supports both growth and the margins. So before all of that, we're going to also look ahead to what investors should think about in the coming quarters. With that, I'm going to turn it over to our speakers to introduce themselves, starting with AAL, and then we'll go to the rest of you. So a, will you kick us off, please.

Thank you, Tony. Aaron, I joined the company 20 years ago and acting as the company's CEO in the recent years.

Hello. My name is Avianca Koski. I'm currently the President of the group. I'm also the CEO of the supply chain, which is about 20 years. Before that, the supply chain unit both companies, both of them, which now I mean in the industry for the last 30 years.

I am Mose else. I'm the CFO of the group, and I joined the company years ago.

Perfect. Eyal, we give us a brief introduction here before we get started and kick off the presentation.

Yes, sure. So thank you for -- first, thank you for joining both first Investor Summit. And before we start the presentation, I would like to give a brief on both and both integrated supply chain technologies for defense manufacturers and retailers. And both has delivered 21 consecutive profitable quarters with the $51 million in annual revenue, a $3.6 million in net incur and $4.6 million in EBITDA. A solid balance sheet with $30 million in equity, $10 million in cash and only $1 million in loans. So in a moment, we will play a 10-minute video presentation that we have carefully prepared for this summit. It covers what we are, what we do, our financial performance and where we see bossheading. Once the video concludes, we will be right here to answer any questions and have open discussions. So let's begin. [Presentation] by connecting warehouse operations directly to our clients, ERP, WMS and MES systems. Our integrated platform combines ruggedized industrial hardware from Tier manufacturers like Zebra and Honeywell with our own proprietary middleware software. Beyond tracking, we deploy complete turnkey automation, automatic sorters, carton packing machines, robotic palletizing and pallet wrapping, enabling fully integrated order fulfillment. Our business model is built for predictability and scale. Recurring revenue from annual service contracts, ongoing consumable sales and expansion revenue as clients grow to new facilities. We serve top-tier enterprises across Israel, including Supercell, IKEA and Teva. Our Robotics division designs and deploys custom automation solutions, replacing labor-intensive processes with precision robotics and automated machinery. Our engineers evaluate client production lines, identify automation opportunities and deliver a complete proposal from concept design and cost breakdown to ROI projections. Each robotic cell we build is fully integrated, robotic arms, custom grippers, proprietary peripheral machines and end-to-end electrical and software systems. Over the past 2 years, we've strategically focused on the defense industry, a sector that still relies heavily on manual labor yet faces growing pressure for speed and quality. That's a powerful tailwind for automation. Our flagship client is Elbit Systems, 1 of Israel's largest defense manufacturers. We've successfully developed and installed robotic production lines at Elbit Systems sites worldwide. Though due to confidentiality, we're unable to share footage of those systems. With this offering in mind, let's turn to the financials and where we see growth. When we talk about growth at BOS, we think about it in 2 ways: organic growth building on what we have and strategic acquisitions that expand our reach. Over the past 4 years, the story has been primarily organic, and the numbers speak for themselves. Revenue grew from $33.6 million in 2021 to $51 million in 2025, that is meaningful sustained growth, built on real demand from real clients and we believe that demand is only accelerating. Three tailwinds, in particular, give us confidence. The first is the global increase in defense budgets. This is not a short-term cycle. It is a structural long-term shift in how governments around the world are prioritizing security. Bus is well positioned to benefit from this trend for years to come. The second is closer to home. The replenishment and expansion of the Israeli Defense Forces inventory, driven by the conflict that began in October 2023, has created significant and ongoing demand that directly supports our business. The third is newer and very promising. India is rapidly emerging as a major subcontracting hub for global defense programs and the numbers are already telling that story. In the first quarter of 2026 alone, we received $3.3 million in orders from Indian customers compared to just $172,000 in the same quarter last year. To capture this momentum and build on it, we appointed an Indian representative company in March 2026 to establish a dedicated presence in that market. We are only at the beginning of what we believe is a significant long-term opportunity. Alongside organic growth, we are actively building our acquisition pipeline and we have the financial strength to act on it. Our balance sheet is solid. Shareholders' equity stands at $29 million, and we hold $9.5 million in cash net of loans. That gives us real flexibility. We are targeting companies valued at up to $20 million with 2 nonnegotiable criteria: first, financial strength, a proven track record of profitability and consistent growth; second, strategic fit, companies that deepen and expand what we can offer to our existing clients. On the financing side, approximately half of each acquisition will be funded through long-term bank loans with the remainder coming from our own resources. I want to be clear on 1 point. No shareholder dilution is expected. Let me now turn to where we stand heading into the rest of 2026, and the picture is an encouraging one. When we combine our backlog of $31 million as of March 31, 2026 with Q1 revenues, we are already at $42.4 million, 83% of our full year 2025 revenues. As a result, we expect to exceed year 2025 revenues that amounted to $51 million. The depreciation of the U.S. dollar against the new Israeli shekel is creating pressure on our profitability and as a result, we are maintaining our net income target of $3.6 million for the full year. 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 trades at book value. The Russell 2000 the index of small-cap companies we are measured against trades at approximately 2.4x book value, our price to earnings ratio stands at roughly 9x compared to 20x for the index. We believe this gap exists primarily because not enough investors know our story yet. That is what we are working to change and calls like this one are part of that effort.

All right. We're back. Let's go ahead and jump into some questions that I have, and then some questions that have come in through the chat. So let's start here. in 1 or 2 sentences, how would you describe what BOS does today for aerospace, defense, industrial and then retail customers?

So in 1 sentence, both leverage cutting-edge technologies to optimize supply chain operation through its 3 business division, the Supply Chain division, the robotics division and the RF division.

And then can you give us a sense of how these 3 divisions complement each other?

Yes, sure. So both integrates technology that improves the efficiency of inventory production and logistics. The initial point is when our supply chain division embeds our franchise component in the development process of our clients product. . It continues when our robotic divisions offer robotics for manufacturing the clients. Thereafter, our RD division marks and track the product through the production and logistic phases using RFID. And at the end of the line, it provides automatic packing and sorting machines.

Wonderful. And then Avi, this 1 might be for you, but how would you describe the Supply Chain division in 1 sentence and then the main problem that you solve for customers?

Well, generally, our customers come from the technology sector, mainly defense and aerospace, which we are in the last 45 years focus on. But not only we also supply to the high level, medical, industrial and other tech. What we do supply is components of various technologies, which include sensors, displays, electromechanical, GPS indication components and others. Our base is with engineers, which goes to the R&D engineering team in the tech industry and help them design the components in which we work closely with motors and distribution centers which includes huge companies such as Alfanar aerospace, all traded in the NASDAQ, Collins, Sensata, feature, and we distribute their products and help design sell their components. It varies from U.S. companies to European companies, to Asian companies. So we have a devaluation, which we go to customers and help them design their for.

Wonderful. And then taking a step back here, where is BOSS physically located?

We are located in 1 site in Israel, and we use 3,000 square meters to operate our business. In addition, we have 2 sales offices, 1 in India and 1 in the USA to serve the global operation of our Supply Chain division.

Great. So what portion of this business is defense-related?

Yes. That's a great question. Approximately 65% of our business serves the defense segment in general. So there is a varied exposure among our 3 division. And most of our supply chain and robotic division's revenues are associated with the defense segment while RFID division engages mainly with retailers. So we are in the process of transitioning a significant portion of the RFID vision to the Defense segment. For that purpose, we are very engaged a specialized consulting firm led by IDeterans, Israeli defense forces and veterans to expand the RFID division into the Israeli defense sector.

Got it. Got it. And I know some of these questions, some investors -- current investors might already know the answers. But I want to make sure that we answer all these questions for any potential investors who might be watching or anyone new to Boss' story. So let's go this direction here. What is kind of the revenue profile? And what portion of it is highly predictable.

I was taking more than 80% of our revenues are predictable. A major portion of our product is defined as a consumable for our clients versus CapEx, capital expenditure. For example, the electronic components that our supply chain division, the sales to our defense clients are embedded into munitions, which are concerns. Hence, the orders are highly repeated and highly predictable. In the RF division, the annual service contracts for equipment and software and the printed materials like carbon from industrial printers and RFID and Balcore are highly repeated and highly predictable. On the other hand, the robotic sales of our robotic divisions are capital expenditure for our clients, thus we have a very low visibility into the time frame of new orders from this decision from the robotic division.

And then Amidon, this 1 maybe for you here. So I know that you've doubled your engineering team and then tripled the number of manufacturers that you represent over the past 2 years. What would you say drove that decision? And then what does that mean for future revenue?

Well, the supply chain has a unique, I would say, solution to the customers, which makes our company unique in and elevating the industry. First, I would like to highlight both older and the supply chain, we have a very, very strong business development and sense where the technology will go. For example, in the corona, the medical innovation in Israel to solve medical issues that were wise in the corona and we immediately drove our engineering sales team to medical companies which develop medical system for that, and we have been worrying with that file. In the last years, if you look at what happens worldwide, the rands became the most important technology in the world, and this was a top #1 because there are 3 variations of technology of our defense. The Aroma, which intercepts balistics, you have the mid-1, which is the David say, and you have the short one, which is the iron dome, all of which met above 90% interception. Well, there's a huge demand due to the Russian-Ukraine war and also other tension of worldwide and for lease. So we already inside all these technologies with our components. This means a lot of need for sales engineering from my team, and we have doubled it because there's a big need for a lot of innovation. So you have a formula here, which in 1 hand, we are conservative because we don't use a huge amount of people in R&D because we don't develop. But on the other hand, if any success of any technology in the market we designed the components of our partners worldwide, and then we get the home business of their export and global sales. And then we sell profit, but we have less exposure to costs affiliated with R&D developed. So this is a unique pressure, and we want to be unique in 1 hand in business development and second, with higher level sales engineering.

Great. And then a follow-up question to that. I know that you serve global defense leaders like Elbit, IAI, Rafal and then their subcontractors in the U.S., India and then Europe. How does that network actually work as a launch pad for this global expansion?

Okay. So let's take India as an example. India became a very big pulp full contract manufacturers, and it's a huge country, which is run very fast, top worldwide. And Israel has a very deep connection to India. So we have been, in the last 15 years, took manufacture sites to India in some areas. The customers in India came to us because we supply to digitally oriented projects and they come and buy from us. We also, by the way, build up offices in India today. So we have office in India on the company that we serve the Indian market. So the companies in India and also in the U.S. and Europe very site and even in the U.S. Our contract manufactures the visual projects. Iron dome has been manufactured in the U.S., for example. So they buy the components from us because we can sign. Some of them are customized with our with the manufacturer. So we have the extra value that they don't supply the catalog item, they supply the customers. So we have an advantage there. So in that field, we have penetrated the global market aiding by the Israeli project, but not only Israeli projects they buy, they also buy some of their other projects locally outside develop. So they started to buy more and more components from us due to our service. We also agreed with some of our partnership forbid to sell overseas, not only in Israel because of our capabilities. You see the results in the last 6 months, we have been selling worldwide over $7 million in which the parallel, we've done 1.6 million. So that is an effect of this global motorization. We have a good future ahead of us to penetrate more into the Indian market and other markets.

Very helpful. there. Al, I think I'll actually kick it to you here for some questions about the robotics sector. So I know that defense automation is a key focus for robotics. Back to kind of this kind of line of questioning here, why defense specifically a sector that traditionally has been very conservative about adopting new technology.

Yes. So the defense segment is defined by us as a heavy consumer of automation, so we can expect that we can increase the visibility of revenues from this segment because it's heavy consumer of automation. The defense manufacturers have no choice. They are facing resilient demand, pressure for short lead times, shortage and shortage of employees in the production side. And so this segment is where we are focusing our resources.

Okay. And then Elbit Systems is your flagship robotics client. How dependent is the entire division on Elbit? And what is your strategy for broadening that customer base?

Yes, that's right. Elbit is a major client of our robotic division. But recently, we received an initial order from Lee, another leading defense manufacturer in Israel, and we are in initial sales processes with the Israel aircraft industry. Another leading the defense manufacturer. So I think by the end of this year, we will have a footprint with the key players in Israeli defensive men in addition to Elbit.

Great. Now let's pivot to everyone's favorite, let's talk about revenue. So revenue grew from $33.6 million in 2021 to $51 million in 2025. Can you walk us through a few things that drove that growth?

I think in 1 word, the defense. But let's go into detail. There have been 3 main pillars behind our growth. First, we have increased the number of manufacturers we present. Second, we have tripled the number of sales engineers or our sales engineers and third, we have benefited from the strong demand in the defense segment.

Great. And then do you think that these demands are sustainable?

Well, as I've said previously, we are working with the defense sector quite a bit as we work with the corona medical system. So we see now on the aerospace face a very strong, sustainable for the coming 2, 3 years, at least and why is that? If you look at the global tension, as I said before, now if you look at what's going on, there's wars coming Washerraine and Middle East. So we use all the warehouse munition and air defects. Just to give you a recall on this. If you look now at what I consider now today, you see a lot of launch missiles for Iran. But in the end, there's some intersection issues in some areas in the Middle East, including the Gulf countries because they don't have enough interceptors already which means the U.S. keep their intersectors what they last Israel has, but there's a big need and there's also a ucraine, not enough in the sector. So in order for them to have and money, it's not an issue for the golf country. By the way, also in the UAE, there was an Israeli early fan system to the arena. So what happens now is that we use all their money to buy as much interceptors as they can but there's a little bit of production ability yearly. So we build up more and more facilities to sustain the demand. Therefore, whatever you see now actually should be the beginning over the, what we call, a big word sale of are Defense, which Israeli is again a mobile. So that is something we see, of course, sustainable and also penetrate the Indian market in other areas more and more, we believe in this as well. Don't forget, we are very clear. So when there was corona, we went into more of the medical. We also sell to large names in the industry of the customers. For example, Biosense. We have see some components, we sell also to HP Israel. They were buying local companies and became HP and came by sensate by components. So we have a bit of what I'd say, segments that we can play if we see a lower demand in some areas, we would try to see the next future. This is 1 of our key advantages. So yes, as sustainable business from defense, but also a company DNA being years in Boseto together, we always start to see where we can make more money and make more opportunities. So we have the sustainability for the coming 2, 3 years.

Got it. Great. And then I'll kick it back over to you. I know that in the past, you've mentioned that you believe that you'll exceed last year's $51 million. Let's talk a little bit about that and really what gives you that confidence?

Yes, very simple because during the first quarter, we sold the $11 million. And our backlog at the end of the quarter amounted to $31 million. . So by the end of the first quarter, we had secured approximately $42 million in revenue. So it makes sense that we will exceed the $51 million in revenue in year '26.

Got it. And then, Moshe, to bring you back into the conversation here. Let's talk a little bit about the dollar depreciation against the shekel and pressures against profitability. How are you managing that? And what's your hedging strategy there?