B.O.S. (BOSC) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 20, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Eyal Cohen
• Chief Financial Officer - Moshe Zeltzer

TAKEAWAYS

• Revenue -- $14.9 million in the second quarter, representing 29% year-over-year growth driven by recovery in the Israeli commercial market and sustained defense demand.
• Net Income -- $1.4 million in the second quarter, or $0.19 per diluted share, up from $0.8 million in the second quarter of 2025.
• Backlog -- $31 million as of June 30, 2026, with approximately $20 million scheduled for delivery by the end of the year.
• Full-Year Revenue Guidance -- Management expects to exceed $51 million for the year, reflecting momentum in the second half of the year.
• Full-Year Net Income Guidance -- The target was raised to exceed $3.6 million for the year, representing growth over fiscal 2025 results.
• Gross Profit -- $3.4 million in the second quarter, representing 23.0% of revenue compared to 22.8% in the prior-year period.
• Operating Income -- $1.1 million in the second quarter, compared to $0.1 million in the second quarter of 2025 which included a $700,000 impairment charge.
• EBITDA -- $1.3 million in the second quarter, an increase from $0.9 million in the same period last year.
• RFID Division Revenue -- $7.3 million for the first half of 2026, representing 17.5% year-over-year growth driven by a rebound in commercial demand in Israel.
• Supply Chain Division Revenue -- $18.6 million for the first half of 2026, a 5.8% decrease year over year that management attributed to customer consumption rate fluctuations.
• Intelligent Robotics Revenue -- $617,000 for the first half of 2026, compared to $868,000 in the first half of 2025.
• Cash and Cash Equivalents -- $10.4 million as of June 30, 2026, providing liquidity for organic expansion and potential acquisitions.
• Shareholders' Equity -- $30.9 million as of June 30, 2026, reflecting an increase from $28.7 million at the end of fiscal 2025.
• M&A Capacity -- $20 million in estimated acquisition capacity, which management plans to fund using $10.4 million in cash and 50% bank financing.
• H1 Currency Impact -- $600,000 increase in operating expenses during the first half of 2026, due to the devaluation of the U.S. dollar against the Israeli shekel.
• Diluted Share Count -- 7.2 million for the first half of 2026, an increase from 6.4 million in the prior-year period following the exercise of 970,000 warrants and options.
• Inventory -- $7.7 million as of June 30, 2026, reflecting an increase from $6.5 million at the end of fiscal 2025.
• Trade Receivables -- $17.7 million as of June 30, 2026, an increase from $15.6 million at the end of 2025.
• Current Liabilities -- $13.9 million as of June 30, 2026, compared to $13.2 million as of Dec. 31, 2025.
• Acquisition Valuation Multiples -- 5 to 6 times EBITDA, representing the target range management is considering for potential acquisitions.
• Recent Order Volume -- $4.7 million in new contracts announced since late July 2026, following $7.1 million in orders from India and the U.S. earlier in the year.
• Warrant Exercise Proceeds -- $2.9 million generated in the second half of 2025, which management plans to deploy toward accretive acquisitions.

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RISKS

• Zeltzer stated, "The depreciation of the U.S. dollar against the New Israeli Shekel increased our operating expenses by approximately $0.6 million in the first half of 2026, compared to the first half of 2025, creating pressure on our profitability."
• Eyal Cohen warned that the RFID division is "100% affected by the Israeli commercial market," noting that geopolitical events can put the commercial segment on hold.

SUMMARY

Management reported that second-quarter performance was driven by a recovery in the Israeli commercial market and sustained demand within the defense sector. The company indicated that its record backlog provides significant visibility for the remainder of the year, with a majority of those orders tied to the Supply Chain division. To mitigate the impact of currency fluctuations on operating expenses, the company is implementing artificial intelligence tools to improve internal efficiency and software development. Furthermore, the company stated it is actively evaluating acquisition targets within the robotics and RFID sectors to deploy its current cash reserves and expand its market presence.

• Eyal Cohen stated, "Demand in the Defense segment continues to be strong as reflected in our record backlog, most of which relates to our Supply Chain division."
• Management indicated that AI tools are being implemented for internal operational efficiency and for software development aimed at commercial sales.
• The company is targeting acquisition opportunities with consecutive profits over 3 to 5 years and valuation multiples ranging from 5 to 6 times EBITDA.
• Eyal Cohen noted that the RFID division is working to reduce exposure to geopolitical events by penetrating the defense segment and hospitals.
• Eyal Cohen reported that the team in India is reaching new clients, which management expects will support further growth in 2027.
• On the call, management mentioned the possibility of changing the corporate name to BOSC to align with the company's ticker symbol and investor recognition.

INDUSTRY GLOSSARY

• RFID: Radio Frequency Identification; a technology using radio waves to identify and track tags attached to objects.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's overall financial performance and an alternative to simple net income.
• Backlog: The total value of confirmed customer orders that have not yet been fulfilled or recognized as revenue.
• Supply Chain Management: The management of the flow of goods and services, including all processes that transform raw materials into final products.
• Intelligent Robotics: A division focused on designing and fabricating custom-engineered machinery for industrial automation.

Full Conference Call Transcript

Unknown Attendee: Ladies and gentlemen, welcome to B.O.S. Q2 Investor Summit. Thank you for joining us today. Before we begin, a brief reminder that this call contains forward-looking statements relating to B.O.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.

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. B.O.S. 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, B.O.S. 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 2x book value versus B.O.S. trades 1x book value. Russell Microcap Index price-to-earnings ratio of roughly 16x compared to our roughly 9x. Thank you for watching. Now I will turn the call over to Eyal Cohen, CEO.

Eyal Cohen: Good morning. Great to see you again in our quarterly conference. Joining me today is Moshe, our Chief Financial Officer. I'm pleased to see strong participation today, including many new names following the recent virtual conferences we participated during May, June and July. Let me start by sharing a few thoughts on how the business is progressing. I'm 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 a 17% growth in the RFID revenue in the first half of the year as compared to the comparable period. Demand in the Defense segment continues to be strong as reflected in our record backlog, most of which relates to our Supply Chain division. The penetration of our Robotics division into more factories in the Defense segment is going very well. We are successfully implementing AI good in B.O.S. for internal use to improve our operational efficiency and in software development for commercial use, commercial sale. I believe these steps will yield improved operational margins and support our revenue growth.

Moshe Zeltzer: On the financial front, despite 30% growth in the total revenue between Q1 '26 and Q2 '26, cash remained roughly unchanged at $10 million. 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 AI opportunities on the table that we have been evaluating carefully.

Eyal Cohen: On the IR side, in May, we presented at the MicroCapClub Virtual Summit. 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 Sidoti conference scheduled for the end of September. In September, we will also join a Non-Deal Roadshow to ThinkEquity clients. During July and August, we released 3 announcements on a major contract. In recent [ process ] we have became active online on Facebook, LinkedIn, X and via e-mail, 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 B.O.S. as we carry this momentum into the second half of the year. Thank you for listening. I will now -- we will now be happy to open the call for questions.

Unknown Analyst: Congratulations on a fantastic quarter. Regarding one of your recent orders, it was in the semiconductor industry. Is that kind of a onetime order? Or do you see more orders occurring from that industry?

Eyal Cohen: 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 on this 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.

Unknown Analyst: 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?

Eyal Cohen: Yes. 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. I am sure that it will yield to additional -- it will support the growth of B.O.S. in India in year '27.

Unknown Analyst: 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?

Eyal Cohen: That's correct. Actually, we are planning to do an M&A. But as you know, in the recent 2 or 3 years, we didn't -- we have not succeeded to close the deal because it doesn't match to our criteria, especially for the first criteria, that it should be a very -- a company with a solid history of profit and a positive outlook. We have several opportunities on the table. We are checking it. We are in negotiations with several companies. Hopefully, one of them will be closed. Of course, we have the financial policy, how to finance -- we have the policy how to finance those deals, as I mentioned before.

We have like $10 million in the cash in hand. If we are buying a profitable company, there is no reason why the bank won't participate at 50% of the financing. We actually can reach to maximum acquisition value of $20 million. So we are set.

Scott Weis: It's Scott Weis. 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?

Eyal Cohen: Yes. We see a positive change. Actually, we expected -- we were expecting for that, and it's happened a little bit silent here in Israel and it camps. There is a rebound in the market. The demand starts very strong. We see a recovery. Hopefully, it will continue for a long time after 3 years of like to be in a hold position. So for year '26, it looks very -- I'm bullish on year '26 for the RFID division.

Scott Weis: And the same question for the Supply Chain segment. Revenues were down 6% or so. Can you -- is there any insight you can give us as to why it was down?

Eyal Cohen: No. As you saw, the fluctuation in this division are significantly high. 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. We know that our clients in the defense segment will buy our component, but we are not controlling on the rate of consumption. There could be fluctuation because of that, I'm not giving importance to the 5% decrease. More than this, we have a very strong backlog that $31 million, which is a record backlog.

By the way, despite of 30% growth in revenues from Q1 to Q2, the backlog still remain on the same level of $31 million as it was at the end of the first quarter.

Moshe Zeltzer: Consolidated.

Eyal Cohen: Yes, consolidated. Out of the $31 million, we have $20 million for delivery by the year-end. We did the calculation. Based on that, we provided positive outlook that we will exceed the $51 million in year '26.

Kevin Pimental: This is Kevin from Alliance Global Partners. As a follow-up on M&A, could you speak to what are kind of the gating factors in it? Would it be finding targets, price expectations or the financing capacities?

Eyal Cohen: I'm not sure I got your question. Can you repeat because the line is not so clear. Can you repeat, please?

Kevin Pimental: Yes, 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 or the financing capacity?

Eyal Cohen: Yes. The criteria are, as I mentioned, that the cap of acquisition of investment will be $20 million. The criteria that there should be a synergy to our core business. You know the synergy could be a range of synergy, how much is 50% synergy, 100% full synergy. We have flexibility on that issue, on that criteria. Regarding the financial position, the financial performance or the performance of the company, we are checking that in the recent 3 to 5 years, the company presented consecutive profits. There is positive outlook going forward. Regarding the multiple, the valuation, we are -- the thing that we have on the table, the multiple on the EBITDA is between 5 to 6.

This is the range of valuation we are talking about.

Kevin Pimental: 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 that $3.6 million range, which is flat to last year. Could you walk me through that bridge? Is it incremental revenue being absorbed by shekel 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?

Eyal Cohen: Yes. In this year, this press release, we just announced that we will exceed the $3.6 million. Usually, we don't provide exact percentage of growth. Usually, we use that we will exceed like we did -- like we are doing in the revenue that we will exceed the $51 million, and we will exceed the $3.6 million. 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. Yes, it increased the operational expenses by $600,000. On an annual basis, it's like $1.2 million.

We have to find a way to compensate it in order not to be -- in order to generate profit that will be higher than year 2025, higher than the $3.6 million. 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. We are doing it by operational efficiency, by increasing the gross profit margin of our products in order to compensate. We are increasing our revenues.

If you increase the revenues and you increase -- you work with all those points together, this is the assumption for our outlook for exceeding the $3.6 million.

Unknown Analyst: James [ Chan ] here. In a previous 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 have 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 BOSC, your symbol as the name for the company.

Eyal Cohen: I totally agree with you. I think you know why? BOSC? because it's also BOScoin. So it's -- okay. It's great. Yes, but I agree, all the investors know the name BOSC, they know the ticket. I totally agree with you. If I won't get any other recommendation from our shareholders that can send me e-mails and other suggestion, I think we will go for it on it. Any further questions?

Unknown Analyst: This is [ Igor Nagorski ] and nice talking to you again, especially after a strong quarter. I want to touch upon 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? Or do you think your gross margins can improve while your revenue is growing?

Eyal Cohen: 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 U.S. dollar. 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 salesperson, all the sales team increasing prices in order to compensate it. I'm following, we are following month by month. 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. I hope it won't decrease -- it won't lower the average of the gross profit margin that we're expecting. In general, we are expecting higher gross profit margins.

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

Eyal Cohen: Yes. 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. It could be like $0.25 million, $100,000, $0.5 million maximum. Because of that, I mentioned just the effect of certain transactions of the supply chain.

Unknown Analyst: For RFID division, apart from obviously the issues that Israel has been in various stages of for the last few years, you had specific company issue. I remember that last year, you were restructuring your RFID division. Is this restructuring over or we expect some significant further improvements? Or how much did it change from the last year?

Eyal Cohen: Yes, it was improved. It's not a company under the RFID, it's a unit under the RFID. We have been doing the great work there and great progress. 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 such -- that caused us some losses decreased our net income in the RFID division, I think now the situation is much, much more better.

Unknown Analyst: Is RFID more or less a function of, if Israel in a state of war or that is relative quiet because obviously, RFID has done much better in Q2 than in Q1 or there are other significant factors?

Eyal Cohen: I think the RFID is 100% affected by the Israeli commercial market. As I mentioned before, we are in the process to penetrate with the RFID to the defense segment, and we hired a consulting company special for that mission. We're also working to penetrate to 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 opportunity on the table. The other option is to set a team to build it from 0 from scratch.

By that, you reduce the exposure of the RFID division to geopolitical events that put on hold the commercial segment in Israel. 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 a one-on-one session. Thank you very much. It was a pleasure to see you again today.

Moshe Zeltzer: Thank you. Have a good day.

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