B.O.S. Better Online Solutions Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 21, 2025

Key Takeaways

  • Positive Sentiment: Revenue jumped 36% year-over-year to $11.5 million in Q2, driving net income up 53% to $765K (EPS $0.13) and boosting EBITDA to $900K.
  • Positive Sentiment: Raised full-year guidance to $45–48 million in revenue and $2.6–3.1 million in net income, reflecting roughly 16% organic growth.
  • Positive Sentiment: Contracted backlog climbed back to $24 million and cash reserves grew to $5.2 million, enhancing visibility into the second half and financial flexibility.
  • Negative Sentiment: RFID division gross margin slipped to 19.1% from 21.1%, triggering a $700K non-cash goodwill charge and restructuring efforts through Q4.
  • Positive Sentiment: Defense sales now exceed 60% of total revenue, with deepening partnerships with Rafael, Elbit and direct IDF bids, plus expansion initiatives in India and the U.S.
AI Generated. May Contain Errors.
Earnings Conference Call
B.O.S. Better Online Solutions Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. 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.

Operator

Before I turn the call over to Mr. 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 differ materially from those contemplated. 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 policies, as well as 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 Mr. Eyal Cohen, CEO.

Operator

Mr. Cohen, please go ahead.

Speaker 1

Good morning. Going to orientation? Good morning, everyone, and welcome to BOSS second quarter twenty twenty five earning call. I am joined today by our CFO, mister Moshe Zelze. On our previous call calls, I emphasized our focus on the defense sector while diversifying our customer base.

Speaker 1

That strategy is paying off. I'm excited to share what has been another exceptional quarter for BOSS as the momentum from our record setting first quarter continued in the second. We have delivered our strongest revenue growth in recent years with sales jumping 36% year over year to $11,500,000 this quarter. This growth is being driven primarily by the exceptional performance of our supply chain division, which increased revenues by 57% to 8,300,000 this quarter. While we are addressing some temporary challenges in our RFID division, the overall trajectory gives us confidence for the reminder reminder of 2025.

Speaker 1

Profitability. Our net income surged 53% to $765,000 compared to the same quarter last year. That is $13.13 cents of earning per share just in the second quarter. This outpaced our revenue growth, which tells which tells you we are not just chasing top line numbers, we are building a more efficient operation and leveraging our scale to drive profit efficiency. Our EBITDA increased to $900,000, up from about $800,000 in 2024.

Speaker 1

This gives us the operational cash flow we need to invest in growth while maintaining financial stability. Now let's talk about our contracted backlog and what it tells us about business momentum. We ended 2024 with a record $27,000,000 in contracted backlog. As expected, it declined to $22,000,000 by March as we executed on those contracts and converted backlog to revenue for a record first quarter result. Our backlog has grown back to $24,000,000 as of June year, giving us increasingly clear visibility into the back half of the year.

Speaker 1

Our financial foundation has never been stronger. Cash and equivalents grew five to $5,200,000, up from $3,600,000 at the year end. Combined with $24,000,000 in total equity, we have the resources to execute our expansion plans without compromising operational stability. We have the flexibility to capitalize on opportunities as they arise, whether that's supporting organic growth or pursuing strategic acquisitions. Based on that, we are seeing in our business and our contracted activity for the second half, we are raising our full year guidance.

Speaker 1

We now expect revenue between 45 and $48,000,000. That's up from our previous guidance of $44,000,000 At the midpoint, it's about 16% year over year, and that is entirely organic growth from our business initiatives before any additional benefit of possible strategic initiatives. More importantly, we are raising our net income guidance up from $2,500,000 to between 2.6 and $3,100,000. At the midpoint, it's about 24% year over year. This reflects not just stronger revenue expectations, but our confidence in our ability to convert that revenue into bottom line results, plus profit leverage as we scale the operating base of our business.

Speaker 1

Our guidance is based on concrete contracted activity with both existing and new customers, diligent execution, and commitment to deliver the best results for our stakeholders. With that, I will lay I would I will turn the call over to Moshe to cover the financials.

Speaker 2

Thank you, Eyal. I'd like to focus on some of the operational dynamics that are driving these results and address a few specific items deserve your attention. While we are thrilled with our revenue growth and our net income, we see additional opportunity in our margin performance. That is an area we are focused to improve and deliver even better bottom line performance in the future. Our overall gross profit margin was 23% compared to 26% in the same quarter last year.

Speaker 2

This quarter's margins were a little lower than target, while last year was higher than typical. We are aiming to achieve a balance in the middle where we can deliver sustained performance. Let me break this down by division so we can understand how we can drive even better performance down the road. Our RFID division saw gross profit margin temporarily decreased to 19.1% from 21.1%. This was primarily due to certain service line challenges that we are already identified and addressed.

Speaker 2

We've implemented restructuring initiatives and we expect this division to return to normalized performance levels by Q4 twenty twenty five. Our Supply Chain division deliver a 24% gross profit margin, which is within our expected parameters. The 28% margin in q two twenty twenty four benefited from a particularly favorable product mix that quarter. So the current level represent a more sustainable baseline. As part of the RFID restructuring, we recorded a non cash goodwill charge of 700,000 this quarter.

Speaker 2

This charge was largely offset by $696,000 in favorable currency fluctuation between the U. S. Dollar and the Israeli new shekel. Our cash position improvement to $5,200,000 reflects strong operational cash generation, supplemented by $400,000 from warrants and option exercises in the second quarter. We are managing working capital efficiently while supporting our growth trajectory.

Speaker 2

The increase in deferred revenue to $3,200,000 from $2,000,000 at year end indicates strong events booking and provides additional confidence in our near term revenue visibility. Thank you. And now let's open it up for your questions.

Speaker 1

Please unmute yourself if you want to ask a question.

Speaker 3

Good morning, guys. This is, Todd Felty from Stonix Wealth Management. Congratulations on a great quarter and raising the guidance and the strong outlook. Just had a couple of quick questions. What percent of your revenue is now defense based?

Speaker 1

It's more than 60% of our total, the consolidated revenues, and we anticipate that it will grow in '26 because of the growing demand, in this in this, defense segment.

Speaker 3

Okay. And is that defense business, is it mostly directly with the IDF, or is it through other companies like Rafael or Elbit?

Speaker 1

Yeah. It's mostly through Rafael, Elbit, and the Israeli aircraft industry. And, recently, we are bidding directly directly with with the IDF. As you know, our new director new new board member has a good record in the IDF, and he is helping us to to open the gate there.

Speaker 3

Okay. And your tax loss carry forward is still around 60,000,000, but only an Israeli based company could take advantage of that if they acquired you. Is that correct?

Speaker 1

I think even if a foreigner company will acquire the control and boss, still the company is registered in Israel. And if it's continued to generate a profit, it won't pay taxes regardless the holder of the company.

Speaker 3

Okay. I know you've talked about m and a activity, but, you know, help me understand why someone like an Elbit Systems, which is Israeli based and is you know, they're Nasdaq listed with a $450 stock price and a 20 plus billion dollar market cap. Why wouldn't they acquire you for onetime sales or $8 a share or $48,000,000 and then take advantage of the $60,000,000 tax loss carry forward? Is there antitrust laws or something that I'm missing there?

Speaker 1

No. I don't think there is any limitation to do that. I think it's maybe it's their strategic move, which company to acquire. Don't think there is any obstacle to do it.

Speaker 3

Okay. And on you guys acquiring other companies, have you made any progress, or are there any targets out there that you that you're willing to discuss at this point?

Speaker 1

Yeah. As I mentioned in previous quarters, we all the time have at least two opportunities on the tables on the table. We are checking. We are and we have all the tools to to go ahead once we we we we decided that the the the company is it is the one that we will acquire. But we are checking and negotiating, and once it will be once we see it's a good deal for our shareholders, we will do it.

Speaker 3

Okay. Thank you very much for taking my questions, and congratulations again on an outstanding quarter.

Speaker 1

Thank you too.

Speaker 4

Gentlemen, thank you. Is Scott White at SEMCO. Can I ask a question?

Speaker 1

Yes, please.

Speaker 4

Congrats on the great quarter, first of all. Can you highlight any new major customers in this quarter that you got, or did the bulk of the business come from your existing customer base?

Speaker 1

I think it's less new customers. We have new customer, but the more important is the are expanding the offering to the existing customer base. And we are doing very well with the new line of product of the wiring for our clients in Israel and especially to our clients in India, and it's going it's going very well. And it's one of the growth engine of of of the revenues in '25 and in '26 as well.

Speaker 4

Okay. And then secondly and lastly, despite the raise on the guidance, it sounds like the second half is gonna be down versus the first half of the year. Are there any seasonal headwinds? Can you flush that out, please?

Speaker 1

Yeah. I think we had a a exceptional first quarter. As you remember, with the record revenues, were exceptional. And this is the reason why the second half of the year will be in a lower revenue rate and profit as compared to the first half of the year. Second, we have to take some cautions because we have the backlog that they cover the year, the second half of the year, but we have to be cautious with the supply chain issue.

Speaker 1

Not all the time we'll be able to provide on time and to record the revenue on on time. As as we had the store in the at the '24 when some major orders were pushed to the '25, and the result we saw the result. So this is the reason why we gave some conservative estimation for the second half of the year with the range that we will be we will be in the in between.

Speaker 4

Perfect. Thank you very much. Thank you.

Speaker 1

Any further question, please?

Speaker 5

Yes. Hello. Hello. Oh, go ahead, please.

Speaker 1

Oh, I'm

Speaker 5

sorry. Congratulations on a great quarter. I was just wondering if you can shed a little bit more light on your robotics division and any new, you know, product road map that you may have?

Speaker 1

Yes. We are the the robotic division is strategically focused on on the defense client And the main client is Elbit system, which invest huge amount of budget in autumn in establishing new factories, and those factories supposed to work by robotic systems, and we try to be involved in many system as we can. The the backlog is of this division is about $3,000,000. Actually, we can deliver it by the second half of the year, but there are some delays from our client that their facility is not ready to install.

Speaker 1

But if they it will be ready in the second half of the year, so it will be a great year for the robotic division. Meanwhile, there is one system of robotic robotic line production line of LBIT system, which is on the road to to one country to a European country, and it will be the first installation of our line in in Europe through our client. And we hope that there will be more sites like that through Elbit around the world.

Speaker 5

Just a quick follow-up. So so so currently, it's just so concentrated on on on one customer. I'm just wondering if you have a feel for potentially repurposing this technology into other industries. And especially, I'm interested in The US. Is is or do you have any feelers for what you could do for The US market?

Speaker 1

We can do for The US market, but through our clients because they are doing the sell, and we are we provide the 10 k solution for the automation line. And I think it's more safety for us to work on that way. But in Israel, we also work in the civil market, especially in in logistic centers when we provide robotic cells for mainly for palletizing. But our major focus is the defense for for at least for the coming two or three years. I think we can increase the business significantly once we grab more more project from Elbit, And they are project.

Speaker 1

They are budget.

Speaker 5

Thank you.

Speaker 1

You.

Speaker 4

Hi. I'll add one follow-up. From an investor relations perspective, you guys had previously indicated you're gonna be in The United States doing some marketing. Have you firmed up those plans yet, and what dates and what cities will you be here?

Speaker 1

I think Matt is on the call, and I think next week, we will let you know to all the investors that are interesting to meet me. So we'll send the schedule. I believe it will be in October, And I will be happy to meet you, Scott.

Speaker 4

Thank you.

Speaker 1

Any further questions? It was a long and long clear view. She's not.

Speaker 6

Sorry. I'm not quite sure how to get on the queue. Could I ask a question now?

Speaker 1

We didn't. Sorry?

Speaker 6

Could I ask a question? I'm not sure how to properly get in the queue. I apologize.

Speaker 5

Yeah. Yeah.

Speaker 6

I have a question about a little bit about the defense spending, which is this year is, the major part of your revenue. What do you think is going to how much of it is cyclicality? Obviously, there was a war with Iran. There is a war in Gaza, unfortunately, still ongoing, and the budget is elevated. I understand that the defense budget in Israel is higher than the previous years and probably continue growing, but how much of your business is actually due to replenishing of, albeit, and Rafael of the exhaust stocks of, the defense after especially the, you know, war with Iran and also the operations in Gaza.

Speaker 6

What do you think would happen, like, one or two years down the road, if, the peace will prevail? How would it impact your revenue?

Speaker 1

I think that the the Israeli defense industry is strong industry industry even before the war. They are big exporter. They are they are leaders in the world defense industry, and they will continue to do so for many, many years, and we are trying to attach to them. And they are giant. We are small.

Speaker 1

So every piece of budget that we can grab, it's it has a a fantastic and significant influence on us. But regardless this point, we see we feel that in the coming two years, there will be extensive budget expansion due to the level of of ammunition in the in the warehouses and due to opening establishing new production lines. By the way, most of it due to the embargo in Israel, so the decision of Israel government was to establish a production line of ammunition that previously were bought from from Europe or from The US. So we believe that this situation will push the Israeli economic, and the the the defense industry will be the leaders in the Israeli economy. And, strategically, this is the place that we want to stick to.

Speaker 1

Oh,

Speaker 6

my other question that's also related to defense is about the international opportunities. So especially, obviously, encouraging sales to India. Do you see significant expanding of your opportunities given that, obviously, Israeli military, showcased itself to be superior, you know, during the recent events? How do you see the future expanding in other countries? And is it a direct work at these companies, or this is, basically through your subcontracting fees or file now beat in other Israeli companies?

Speaker 1

Yeah. I think the major country we are focusing on is is India because it's a world hub for assembly that serve the the defense industry. We see that I visited recently, and I saw buildings of one building serving the Israeli aircraft industry, other building service, Elbit, other building service, Boeing, etcetera. So it's hub. And this is a a a place that we want to expand our business regardless the business that we are doing with the subcontractor for and in India.

Speaker 1

But to do a direct business with the assembly industry in India, and we even consider to we consider to we are considering to open a local office in India to to grab more business opportunities over there. By the way, especially in the in the in in our line of cabling, wiring.

Speaker 6

Thank you very much. I do not have any more questions.

Speaker 1

Thank you, Igor. Igor. Any further question? Okay. So thank you.

Speaker 1

As we look ahead, I'm optimistic about several key factors. First, market positioning. Our focus on the difference industrial and retail sectors position us to in markets with sustained demand for our supply chain optimization and automation solutions. Second, technology technology integration. The converging the convergence of a a three division, the intelligent intelligent robotic, the RFID, the supply chain division is creating unique value proposition for customers who will need comprehensive solutions.

Speaker 1

Third, customer relationships. We we we are seeing deeper engagement with existing customers and successful expansion into new accounts. Our $24,000,000 backlog reflect this growing confidence in our capabilities. And let's close with this, that q two represent more than just strong quarterly results. It's it it demonstrates the effectiveness of our strategic focus, the strength of our market position, and the capabilities of our team.

Speaker 1

So we are building a sustainable, profitable growth while maintaining the financial flexibility to capitalize on future opportunities. And with our raised guidance for 2025, we are confident in our trajectory. So thank you for joining us today, and please don't hesitate to reach out if you need additional information or would like to schedule a follow-up discussion by phone or during my visit in in The US during October. So have a great day, and thank you again. Bye bye.

Speaker 1

Thank you. No worries. Okay. Change the call.

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