B.O.S. Better Online Solutions Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 29, 2025

There are 5 speakers on the call.

Operator

Welcome to the BOS conference call. All participants are at present in listen only mode. As a reminder, this conference call is being recorded and will be available on the BOS website as of tomorrow. Before I turn the call over to mister Cohen, I would like to remind everyone that forward looking statements for the respective company's business, financial condition, and results of its operations are subject to risks and uncertainties, which could cause actual results to materially from those contemplated.

Operator

Such forward looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks and product and technology development, and the effect of the company's accounting

Speaker 1

policy is being recorded.

Operator

Certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. I would now like to turn the call over to mister Eyal Cohen, CEO. Mister Cohen, please go ahead.

Speaker 2

Good morning, everyone, and welcome to BOS first quarter twenty twenty five earning call. I am joined today by our CFO, mister Moshe Zeltzer. We delivered exceptional results this quarter with record revenues and record net income that underscore the strength of our defense focused strategy. The results reflect years of deliberate investment in product diversification and operational excellence positioning us to capitalize on the defense sector robust growth trajectory. With our strong q one performance and a healthy 22,000,000 backlog, we are raising our confidence in exceeding our full year 2025 targets of $44,000,000 in revenues and $2,500,000 in net income.

Speaker 2

Our outlook remains grounded in the organic opportunities we see today and maintaining our conservative approach. Our growth strategy rests on two foundational pillars. First, deep in client relationships. We are expanding our value proposition to our defense customer through complementary offering, exemplified by our successful launch of a new cabling line that leverages existing client relationships. Second, international expansion.

Speaker 2

We are strategically expanding overseas by partnering with our Israeli defense global subcontractors. This approach generated $4,000,000 in overseas sales in year twenty twenty four to our supply chain division. Our robotic division will install its first European production line this year, marking a significant milestone in our international growth. Both present a compelling investment opportunity built on four key strengths. We hold a strong and expanding position in the global defense industry during the period of accelerating market growth.

Speaker 2

The defense sector fundamentals continue to strengthen globally. Israel defense budget increased 73% year over year while Europe's rose 16%. This creates a sustained demand environment that directly benefits on our business. Second, we have demonstrated consistent profitability with steady net income growth year after year with a compounded annual growth of 49% through the years between the years '21 and '25. Third, our balance sheet provides flexibility for strategic growth with 23,000,000 in equity, zero bank debt, and $4,000,000 in cash.

Speaker 2

We have the financial foundation to execute our expansion plans while maintaining operational stability. Fourth, Bosses traded just at ten ten time on the on the net income and price to book value ratio of one. Our valuation offer attractive upside compared to broader market multiples. Thank you for your time and attention and attention. Moshe and I are now happy to take your question.

Speaker 3

Hey, guys. Congratulations on a great quarter. It was nice to see the margin improvement. Can you talk about margins moving forward as the company continues to grow and expand?

Speaker 2

Yeah. First, the gross margin represent the average margin that we that that we have and we had. We don't see any we don't see any change in the future. This is a market that we are in, but we expanding our offering to our client. And as our offering is wider, the the prices that we can take are higher and the margin as well.

Speaker 3

Thank you. And do you see the continued growth coming from the defense sector? I know you brought on the former procurement officer from the IDF, the Ivy Dudon? Do you think you'll see some larger contracts come from defense? And do you see your future growth as being a mix of organic and inorganic as in m and a activity, or do you just see organic growth?

Speaker 2

I think in the current market, in the defense market especially, our hands are full of work with organic growth. There are opportunities in the Israeli market and overseas as well, especially in India. And we have to, to put all our focus and effort to to capitalize those opportunities. In parallel, we are checking opportunities for acquisition of companies that of company that have a synergy to our business, whether it's for the civil market with our f a d division, whether it's for the defense market with the supply chain division.

Speaker 3

Okay. Thank you. I'll hop back in the queue. Congratulations on an outstanding quarter again.

Speaker 2

Oh, thank you, Todd.

Speaker 1

Hey, Al. Can you hear me?

Speaker 2

Yes.

Speaker 1

Congrats on the great quarter. Could you address the backlog, please?

Speaker 2

The backlog?

Speaker 1

The backlog dropped to 22,000,000?

Speaker 2

Yes. Yeah. We the the backlog was in the record number in the in December. It was on the amount of $27,000,000. And this is was part of the confidence that we had to to provide a positive outlook for year twenty five with a 10% growth.

Speaker 2

We are in a very, very hot market, and the demands are hot. And and sometimes, there are peaks like we had in this quarter.

Speaker 1

Okay. Thank you. Also, last question. Can you can you share with us if there was any specific defense program that drove the defense side of the business, or was it broad based?

Speaker 2

Sorry. Can can you repeat on the question? I am not sure I understand.

Speaker 1

Was there a specific defense program that drove that side of the business in this quarter, or was it broader based?

Speaker 2

Yes. Component to to one of the leading munition of of Israel. So we are our components are embedded inside.

Speaker 1

Okay. Thank you very much.

Speaker 2

You're welcome. Any further question?

Speaker 1

I have another question, Y'all. Are you guys gonna be in The United States anytime soon to do investor relations, conferences, anything like that?

Speaker 2

Yeah. First, we plan to to participate in a virtual con conference in the coming months. The our IR firm person named arrange it. And, of course, we plan a visit in in The US this year. Okay.

Speaker 1

And your $4,000,000 in cash, any plans for that?

Speaker 2

Yes. First, for, you know, the transaction in the defense market are relatively big, and we need a working capital to to to to execute it. And we use this this this cash to to do it. And and we also will use it for future m and a. Okay.

Speaker 2

Scott?

Speaker 1

Yep. Thank you.

Speaker 2

You're welcome.

Speaker 4

Hi. Yeah. Do you hear me?

Speaker 2

Yes. Shuki, how are you?

Speaker 4

I'm fine. How are you? I'm just asking about the backlog. The backlog is for nine months, six months, twelve months. So how how long is the backlog?

Speaker 4

And beside that, how do you see the second quarter, what you can say, which we are two third of it finished, so you have kind of visibility to conflate some words about it? Because it seems like your prospects prospect for the year is a bit conservative, and I want to add some comments about that if you can. But first about the backlog.

Speaker 2

Yeah. The backlog is is the backlog is for it will be spread along year '25. And $22,000,000 covers, like, 50% of our annual revenues, so it's relatively high. And I remember our call last last year when when some of the deals moved to year twenty five, if you remember. Yeah.

Speaker 2

And so you see the effect in this quarter. So it's a supply chain business, and the the timing of the purchase of the of the order effect on the time of the delivery and the billing and the revenue recognition. But we feel confidence with this level of backlog that we will exceed our our outlook for year twenty five of $44,000,000 revenues and $2,500,000 net income that already reflects a 10% growth.

Speaker 4

Okay. But you said that it's too early to predict now, so you would prefer to wait maybe one or two more quarters.

Speaker 2

Yeah. Yeah. I think that in the second quarter that will be released on on August, we will have much more information to give more accurate in outlook.

Speaker 4

Okay. And you can say any comment about the second quarter, or you prefer just to talk after the results?

Speaker 2

Yeah. Usually usually, we give an outlook for a year, not four quarters. So Okay. Yeah. But you can try.

Speaker 2

You try it every quarter. So try again next quarter to ask.

Speaker 4

Okay. Great with that. I hope it you will continue

Speaker 2

the

Speaker 4

same way because it is a magnificent quarter, so you have to repeat on it.

Speaker 2

We will try. Yeah. There are there are peaks. It's very hot market, and we are trying to do the to to do the best to capitalize all those opportunities that we have on the table with our a a different client that we have great relationship, and we we we are trying to do the best.

Speaker 4

Okay. Thank you very much. Yeah.

Speaker 2

Thank you. Thank you, Sheena. Any further question? Okay. So to conclude, BOS is strategically positioned for continued success.

Speaker 2

Our focused approach is strong execution and solid financial foundation create a platform for delivering sustained shareholder value in the years ahead. Thank you for joining us today. Please do not hesitate to reach out if you need additional information or would like to schedule a follow-up discussion. Have a great day. Thank you.

Speaker 2

Bye bye.

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Key Takeaways

  • Record Q1 results: BOS delivered record revenues and net income, prompting management to raise its full-year 2025 targets to $44 million in revenues and $2.5 million in net income.
  • Strong backlog of $22 million covers roughly half of the company’s annual revenue, underpinning confidence in meeting or exceeding guidance.
  • International expansion accelerated with the launch of a new cabling line leveraging existing defense clients and the first European production line for its robotics division, following $4 million in overseas sales.
  • Defense sector fundamentals remain robust, with Israel’s defense budget up 73% year-over-year and Europe’s up 16%, driving sustained demand for BOS’s products.
  • Healthy balance sheet with $23 million in equity, zero bank debt, and $4 million in cash provides financial flexibility for organic growth and potential M&A.
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Earnings Conference Call
B.O.S. Better Online Solutions Q1 2025
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