BOS Better Online Solutions Ltd. Aktie

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2026. Our next presenting company is BOS. [Operator Instructions]

I'd now like to turn the floor over to today's host, first, Eyal Cohen, CEO of BOS, who has led the company's strategic direction for 7 years. And joining him is Moshe Zeltzer, BOS' Chief Financial Officer, who oversees the company's financial strategy. Please go ahead.

We are excited to participate in iAccess Alpha Investment Conference for the second time. Before we start the presentation, I would like to give a brief on BOS. BOS integrates supply chain technologies for defense manufacturers and retailers. BOS has delivered 21 consecutive profitable quarters with $51 million in revenue, $3.6 million in net income and $4.6 million in EBITDA in year 2025. With a solid balance sheet with $30 million in equity, $10 million in cash and less than $1 million in loans.

In a moment, we will play a 10-minute video presentation that we have carefully prepared for this event. It covers who we are, what we do, our financial performance and where we see BOS heading. Once the video concludes, we will be right here to answer any questions you may have, whether on strategy, financials, operations or anything else on your mind. So let's begin.

[Presentation]

Good afternoon, everyone. My name is Toni McLaughlin. I am the Director of Communications at Allele Communications. And I am going to run through these questions that came in through the chat to the BOS team here. So let's go ahead and get started with some questions that I see here.

Eyal, let's start with you. Could you please tell us a little bit about yourself, when you joined the company, in what role and what is your professional background?

Yes. Thank you. In my background, I am an Israeli and a U.S. CPA. I worked for several years at PwC. And since '97, I have played varied roles and financial roles in NASDAQ companies. I joined BOS in 2003. And since 2019, I have been serving BOS as both the CEO and member of the Board of Directors.

Amazing. All right, let's go to the next one. So can you give us a sense of how the 3 divisions: Robotics, RFID and Supply Chain complement each other.

All right. So BOS integrates technologies that improve the efficiency of inventory, production and logistics. So the initial point usually is when our Supply Chain division embeds our franchise components into the client's product during the development. It continues when our Robotic division offers robotic sales for manufacturing the client's product. And thereafter, our RFID division marks and tracks the product through the production and logistics phases using RFID. And at the end of the line, it provides automatic packing and sorting machines. So this is the exact cycle that you saw in the presentation.

Another one here. Where is the company physically located?

So first, we are located in Israel in one site. And we use like a 3,000 square meter to operate our business. In addition, we have 2 sales offices, one in India and one in the U.S.A. to serve the global operation of our Supply Chain division.

Wonderful. Which portion of your business is defense-related?

Yes. So approximately 65% of our business serves the defense segment. Most of our Supply Chain and Robotics divisions revenues are associated with the defense segment, while our RFID division engage mainly with retailers. So because of that, recently, we have engaged a specialized consulting firm led by IDF veterans to expand the RFID division into Israeli defense sector.

Great. So another one here. What is the profile of your revenues? And what portion of it is highly predictable?

Great question. More than 80%, more or less, of our revenues are predictable. A major portion of our products is defined as consumables for our clients versus CapEx, capital expenditure. For example, let's take an example, the electronic components that our Supply Chain division sells to our defense clients are embedded in munition, which are consumables. Hence, the orders are highly repeated and highly predictable.

On the other hand, the robotic sales of our Robotics division are defined as capital expenditure, CapEx. Thus, we have very low visibility into the time frame of new orders.

Here's a good one. So you've doubled your engineering team and tripled the number of manufacturers you represent over the past 2 years. What drove that decision? And what does that mean for future revenue?

Yes. So while our clients develop new products, our sales engineers offer the client our relevant franchise component. Once our component is approved by the client and the client's product goes live, we get orders according to our clients' production rate. So because of that, we tripled our engineering team over the past 2 years, and it played an instrumental role in our growth.

Okay. This one definitely knows what's going on here. So it says, you serve global defense leaders like Elbit, IAI and Rafael and their subcontractors in the U.S., India and Europe. How does that network actually work as a launch pad for global expansion?

Yes. So typically, our client in Israel, the defense manufacturer uses subcontractors for the assembly of the product. And those subcontractors have to buy our franchise components from us as they are part of the product bill of materials. And as a result, we received like $7 million in orders from subcontractors in India and the U.S. in the first 5 months of 2026. So this is the business model.

All right. This one, a good question here. It says, it seems like defense automation is a key focus for the Robotics division. Why defense specifically, a sector that is traditionally conservative about adopting new technology?

Sorry, can you repeat on the question, Toni?

Yes, absolutely. It says, it seems here like defense automation is a key focus for the Robotics division. Why defense specifically, a sector that is traditionally conservative about adopting new technology?

Yes. So the defense segment is defined by us as, in the strategic plan that we prepared, as a heavy consumer of automation. And actually, they don't -- they have no choice. They are facing resilient demand, short lead time and the shortage of employees. And this is exactly the segment where we will focus or should focus our resources.

So another question here. Elbit Systems is your flagship Robotics client. How dependent is the division on Elbit? And what is your strategy for broadening the customer base?

Yes. So Elbit is a major client of our Robotics division, and it's great. And recently, we received an initial order from Rafael, another leading defense manufacturer. And we are in initial sales processes with IAI within the Robotics division. And by the way, the IAI and Rafael also are the main clients of the Supply Chain division. So we think by the end of this year, we will have a footprint, the Robotics division will have a footprint with the key players in the Israeli defense segment.

All right. Another one here. It says, revenue grew from $33.6 million in 2021 to $51 million in 2025. Can you walk us through what drove that growth?

Yes, sure. There are 3 pillars behind our growth. First, increasing the number of manufacturers we represent. So it increased our product offering, solution offering. Second, tripling the number of our sales engineers in order to support all the manufacturers we represent. And third, the resilient demand in the defense segment. So those are the 3 pillars.

It seems like a follow-up to that question. It says, are those demands sustainable?

Great question. I believe that the strong demand will continue for several years for 3 reasons. First, after 3 years of intensive conflict, the Israeli defense forces have to replenish their empty warehouses. And second, the new perception in Europe driven by the conflict with Russia and the lack of confidence in NATO is pushing countries in Europe, especially Germany, to significantly increase their defense budget. And I believe the Israeli defense industry will gain a significant portion of those budgets.

All right. It seems another follow-up question here. It says, Eyal, you mentioned that you'll exceed last year's $51 million. What gives you that confidence?

Actually, it's simple because during the first quarter, we sold $11 million, about $11 million. And our backlog at the end of the first quarter amounted to $31 million. So by the end of the quarter, we have secured approximately $42 million in revenue. So it makes sense that we will exceed the $51 million in year 2026.

All right. Switching gears here. This question says, the dollar depreciation against the shekel is pressuring profitability. How are you managing that? And what's your hedging strategy?

Okay. I'll take that. Most of our sales are quoted in U.S. dollar. And we buy most of the products in U.S. dollar, but most of our operational expenses are in Israeli shekel. The devaluation of the U.S. dollar against the Israeli shekel increased our operational expenses and press our profit margin.

Since we believe that the dollar will stay weak over the long term, we are working through 2 channels to offset it.

First, increasing revenue on the existing operational platform. And the second, increasing our sales margin. In the first quarter, our gross profit margin increased by 1 point to 24.9% from 23.9% in the comparable quarter last year.

Wonderful. Thank you, Moshe. Another question here, coming back to something you mentioned earlier. It says, you cited rising global defense budgets as a structural tailwind. Which geographies or programs are you most focused on?

So our key territories are India, global territories are India and the U.S. In the first 5 months of '26, we got $7.1 million in orders from those territories as compared to only $1.5 million in the comparable period last year, which was a record year last year, year '25. So most of our programs are currently related to Israeli projects. But with the support of the office we launched in India a few months ago, I believe we will also secure programs in India that are not related to our Israeli clients.

Thank you, Eyal. Another one here, it says you're targeting acquisitions of up to $20 million with no shareholder dilution. Can you say more about what kinds of companies you're looking at and how advanced your pipeline is?

So the first and most important condition is profitable companies with a solid history of profits and a positive outlook. This is the first and most important condition.

The second condition is a synergy with our core business. So we currently have several opportunities on the table, and we will share with you once we sign.

And then a question here. Moshe, this one might be for you. It says, why use only half bank financing for acquisitions? Is that a policy? Or is it driven by current market conditions?

Our financial model is based on 3 principles. One, no dilution for the shareholders. And the second, leveraging the $10 million in cash we have on hand into $20 million in investments from bank loans. And the third, we can use the bank loans because the target company should be profitable, and it will allow us to finance 50% of the acquisition by bank loans.

Okay. Great. And then another question here. We'll get a few more and then we can wrap it up. It says, you trade at book value, while the Russell 2000 trades at 2.6x. What do you think is the single biggest reason for that discount and what will close it?

This is a big question. Great question. And the major point, I believe, is the exposure. There are thousands of companies listed on the NASDAQ, and we need to grab investor attention for our story. It's very challenging.

We hired -- for that, we hired an IR firm for the first time in year '25. And recently, we changed our IR strategy toward digital marketing as opposed to the legacy method. And for that purpose, we hired Allele Communications, which specializes in digital marketing for investors. So hopefully, it will yield a higher exposure.

Thank you very much. So let's go through these last few questions here. I'm seeing one that says, what is the floating number of shares?

We have about 7 million outstanding shares, all of which are floating.

Okay. Another one here. It says, do you have derivatives?

Yes. We have 430,000 option and warrants with an average exercise price of $3 and an average remaining life of 2 years.

Okay. And then do you have any research coverage?

Yes. Just recently, we have been covered by AGP, and I'm very pleased with that, yes.

All right. Great. And the last 2 questions here. First one being, what is the target price for BOS?

The target price according to AGP is $8, which is double than what we are currently trading.

Noted. And then let's wrap it up here with this final question that I see. I know that we're not getting to all the questions today, but let's end here with this one. It says, what is your message to investors who are hearing the BOS story for the first time today?

First, welcome. And the investment risk in BOS is relatively low, and the upside is relatively high. The risk is relatively low because we have been profitable for 21 quarters in a row, we have a strong balance sheet with $10 million in cash, less than $1 million in long-term loans, $30 million in equity, and most of our business is tied to the growing defense segment.

The upside is the valuation. We trade at book value. And if we take off cash on hand, our enterprise value is less than $20 million. So I believe that this is the exact definition of upside.

Wonderful. Eyal and Moshe, thank you so much for your time here today. I see that there are a few other questions that we can't get to, but we'll be sure to follow up. And if anyone joining is looking for more information, you can visit the company's website at boscom.com.

Thank you, everyone, so much for joining. I really appreciate your time and looking forward to keeping that conversation going.

All right. Thank you very much.

Thank you.

That concludes Better Online Solutions presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.

[AI Agent – Claude]

Ladies and gentlemen, thank you for joining us today. My name is Claude and I will be leading today's presentation. Following the prepared remarks, Eyal Cohen, Chief Executive Officer; and Moshe Zeltzer, Chief Financial Officer, will be available to take your questions.

Before we begin, a brief reminder that this call contains forward-looking statements relating to BOS 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.

With that said, let's get started. BOS is a company built around one idea: that supply chains can be smarter, faster and more efficient, and that the right technology makes that possible. We pursue that idea through 3 specialized divisions. Our Robotics division replaces manual labor with automated solutions, transforming how inventory is handled. Our RFID division brings precision to tracking and end-of-line automation, from sorting to packing across the supply chain. And our Supply Chain division works even closer to our clients, integrating our franchised electromechanical components directly into their products. Together, these 3 divisions give BOS a broad and complementary platform, one that allows us to serve clients across multiple touch points in their operations.

How we grow. Now 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. BOS 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 one 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 you 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 target after just 1 quarter. As a result, we now expect to exceed our previously announced annual revenue target of $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 at this stage.

We are responding on 2 fronts: accelerating revenue growth and actively working to improve our gross profit margins. Both of these efforts are already showing up in our Q1 results. Our gross profit margin reached 24.9%, up from 23.9% in the same quarter last year, and our backlog grew 29% during the first quarter from $24 million to $31 million. As we monitor the progress of these initiatives, we will reassess our net income outlook for the full year and update accordingly.

I want to close with something that we believe deserves your attention. 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 2.6x book value. Our price-to-earnings ratio stands at roughly 11x compared to 22x 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. Ladies and gentlemen, that concludes the prepared remarks.

We will now open the floor for questions. Eyal Cohen and Moshe Zeltzer are ready to take your questions. [Operator Instructions]

Okay. I hope you enjoyed our new presentation format. My only concern is that his English and his voice much better than my voice and English. And yours as well. So let's open the floor for discussion. Ready to take your questions.

This is Todd Felte. Just wanted to ask on the devaluation of the dollar with the NIS. Are you doing anything to hedge or compensate on that aspect?

Yes. We are -- I think the most efficient way to handle this long-term trend, I believe, of strong shekel is to increase the efficiency of the business. Because any hedging, any kind of hedging, has a limited period. Although we are doing hedging on the balance sheet, not on the P&L because we are doing hedging on the balance sheet, we see the fluctuation in the currency differences in the financial expenses or income.

But for the long term, we have to increase the efficiency of the business. And we are doing it based on 2 pillars. The first one is to increase the sales price, even though it's quoted in dollar, but to increase the gross profit margin to compensate our operational expenses, which are quoted in NIS. So this is in the first one. Second one is to grow our business. And as you saw, our backlog is in this trend, we saw a 30% growth in the first quarter in the backlog and also saw a growth in the gross profit margin by 1 point from 33.9% (sic) [ 23.9% ] to 24.9%. So we are in the right direction.

On top of that, we plan to -- we are working on acquisitions on good acquisition or as Trump says, beautiful acquisitions. So beautiful acquisition based on the criteria we just illustrated in the video, history of -- solid history of profit and high synergy. And this is the long-term solution for the devaluation of the dollar.

Okay. That's helpful. I know your components are used a lot in the aero and Iron Dome systems as well as missiles and fighter jets. Are any of your components used in drones, which seem to be kind of the weapon or defense tool of choice these days?

Not yet. We are on it. Hopefully, we will find the right manufacturers to represent his product to embed in our clients' product. Hopefully, it will come.

And my final question. In the past, you had spoke about the expansion of RFID to different sectors and that you were excited about the expansion of RFID to the health care sector. How is that progressing?

So first, we put a team in place with the defense to extend the RFID business to the defense. As we announced, we hired a company, external company to escort us through this very complicated process and to short the time line of the success. So we have team in place to penetrate to the defense -- to expand the business of the RFID to the defense.

In the hospitals, we are part of the team in place, not -- we have not signed yet. I have to gather together all the ingredients of the team. And once it will be ready, I will sign the contract and start the penetration. I know exactly what kind of person -- what -- how the team should look like, what is his experience. And once I will have it, we'll start the expansion. I believe it will be this year.

This is Kevin from AGP. So backlog increased 29% sequentially to $31 million. Can you break down which of these divisions -- which of your divisions contributed most to that growth?

The -- most of the backlog related to the Supply Chain division because it has a long-term orders. So this is a primarily a portion.

Okay. And then what do you attribute some of the early success in the Indian market to?

The success that we saw in the first quarter in regarding with the amount of orders?

Yes.

I think it's -- this is an initial yield of the work on the field of the work we did in the field, we have done in the field in India made by our Israeli team. And I believe once we have a local team in place in India, it will urge the process of participating in more bids with more clients to expand our client base there. So the result you saw in the first quarter was made by our local team in Israel.

This is [ Igor Nagorski ]. I would like to ask you questions now. So first, a comment. I think it's actually a very good quarter given all the circumstances. I think there was a lot of investor caution and you could see it in your stock price, given your prior comments. So I think everybody feels that this was a positive result.

My question is this, I'm looking at your RFID results, and I see that the profitability is still relatively low. Was it, first of all, impacted by the war and the situation business [indiscernible] Persian Gulf and so on in this quarter? Or was it something else? And how do you expect the RFID division to perform, hopefully, assuming that the situation remained relatively quiet for the remainder of the year? Or how do you model it?

Thank you for the question. Regarding the RFID, in the first quarter, during the month of March, the division was -- it worked partially. So it's damaged the gross profit margin. We had a fixed cost with low revenues during March. Another effect on the gross profit margin was the devaluation of the dollar because our cost of goods includes a lot of workforce, all the lab team, all the warehouse team. So it increased the labor cost in dollar.

But we are working -- as I mentioned before, we are working to increase the gross profit margin of the product we are selling. And I believe we will start to see this result in the second quarter of the year. So it will compensate on the devaluation of the dollar. And in the second quarter of the year, hopefully, until now, there is no resumption of the conflict of the war. So we are in -- it looks like we will be in a good shape in the second quarter related to the RFID division, and it will represent improved results.

My other question is, first of all, obviously, you have tremendous expansion in India and now it's a very meaningful revenue from there. Do you think you can repeat it in any other countries because obviously, Israeli defense sector now is highly valued and has customers in many other countries. And do you think you can have meaningful revenues abroad from other countries than India?

Yes. We have a connection with the 2 subcontractors in the U.S. and we got revenues from them during this year. I assume we announced during this year on 2 major contracts, and I believe that the revenue will continue to grow over there. And we are checking now additional area in the East where the local defense client here in Israel does business over there, not just in India. There are many places in the Far East that, for example, IAI and Elbit has business over there. So we are tracking -- we are following their tracks there. And hopefully, we can duplicate the business model that we have in India to other territories. So there is a potential, yes.

And my last sort of question or comment. Any thoughts of renaming your company? Because I think your name is rather now silly given what you do has nothing to do -- Better Online Solutions just really confuses a lot of people.

Yes, it's a good question. Do you think -- do you have a better name?

I can come up with a few. I'm sure ChatGPT can, but it's just -- it sounds like a late '90s Internet company.

Okay. I know we talked about it many times, but it's a lot of headache to change a name for a company. But I believe after several acquisitions that we'll do, we'll have to rebrand our business. So it will come.

Right. I think it would help to during the -- especially if you go to conference and doing presentations because I think a lot of people are dismiss of your business, they have no idea that you have anything to do with defense industry and looking at your name. So it might be a great idea.

Okay. Okay. But if you have a good recommendation, send me.

I'll set this up.

I think Scott is missing today. Any further questions? Okay. So on behalf of the Board of Directors and management team, thank you for participation in our Q1 2026 conference call in the new format. I hope you liked it. And if you need more details or would like to follow up, please feel free to reach out. Thank you. Have a great day.

So good morning, and thank you for making the time to join our Full Year 2025 results call. Joining me is Mr. Moshe Zeltzer, our Chief Financial Officer. And I'm pleased to report that '25 was an outstanding year for B.O.S. on multiple metrics, and I'm grateful to our team for the hard work and commitment in achieving these results.

We delivered strong revenue growth throughout the year, setting multiple record quarters and increasing our outlook 3x. Ultimately, we completed the year '25 growing 27% year-over-year to a record $51 million in revenues and our net income grew year-over-year by 57% to a record $3.6 million, demonstrating our ability to drive profitable growth leverage in our model.

Even with this growth, we exited the year with a substantial contracted backlog of $24 million, giving us good visibility into the year ahead. Looking forward, I want to share the key trends that I shape -- that will shape our trajectory in 2026. Demand in the defense sector remains robust and is expected to continue driving growth in our Supply Chain and Robotics division throughout the year. We maintain strong backlog visibility and healthy customer relationships across this segment.

Alongside that, we are taking steps to extend our geographic reach. In March 2026, we appointed an Indian company to represent B.O.S. in the Indian market as India is emerging as a growing subcontracting hub for global defense programs. This is a meaningful step in our global expansion strategy.

On the product side, our organic growth model is built around continuously broadening the portfolio of manufacturers we represent and embracing the new technologies they develop. Because our manufacturing partners invest heavily in next-generation solutions, we benefit from self-replenishing flow of innovative products to bring our clients.

Turning to our RFID division. The ongoing geopolitical tension in Israel since October '23 have continued to weigh on the Israeli commercial market, which represent the primary revenue base for this division. Therefore, we recorded goodwill impairment charges of $700,000 in 2024 and an additional $1.2 million in year '25. To reduce our exposure to geopolitically sensitive Israeli civil market, our 2026 strategic plan focuses on growing our business -- RFID business by entering the hospital segment, more stable and higher growth vertical within Israel.

Successful penetration of this segment will require broadening our product offering, hiring personnel with relevant domain expertise and establishing new customer relationships. We expect to make this investment throughout 2026 with revenue contribution expected to begin in '27.

On the currency front, the USD to Israeli shekel exchange rate opened 2026 at ILS 3.18 per dollar, reflecting an approximately 13% devaluation of the dollar against the Israeli shekel compared to start of 2025. As a result, we expect our Israeli shekel denominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025.

Another effect of the dollar's weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized this year, which arose from the revaluation of the Israeli shekel denominated balance sheet items following the sharp dollar decline. The gain is not expected to repeat in 2026, assuming the rate remains at approximately ILS 3.18 per dollar. Combined, these 2 currency-related items represent approximately $1.4 million in headwinds going into 2026.

Separately, the $1.2 million goodwill impairment charge taken in 2025 is not expected to recur in 2026, which partially offset the B.O.S. leaving a net year-over-year drag of approximately $200,000. Our financial foundation has never been stronger. Cash and equivalents have grown to $11.8 million, up from $3.6 million at year-end 2024. Shareholders' equity amount to almost $29 million, up from $21 million at year-end 2024. We have positive working capital of more than $22 million and bank debt amounted to only $1.7 million.

This strong balance sheet gives us the flexibility to capitalize on opportunities as they arise, supporting both organic growth and strategic acquisitions. We are actively evaluating a range of acquisition opportunities, each of which must meet our strict criteria, including a proven track record of profitability and high revenue visibility.

Turning to our outlook. Consistent with our established policy of issuing conservative initial guidance with updates provided as the year progresses, we are projecting revenues of approximately $51 million and net income of approximately $3.6 million for 2026. We look forward to updating you as the year progresses and our momentum becomes clearer.

On the Investor Relations front, in 2025, I conducted Non-Deal Roadshow comprising 44 one-on-one meetings with potential investors and presented at 2 investor summits. Our stock appreciated 42% during that year, year '25, yet a significant valuation gap remains related to our benchmark index Russell 2000.

Over the past 4 years, both delivered compounded annual earnings per share growth of 60% compared to 12% of the Russell 2000, 5x the rate of the index. Despite this performance, we trade near book value, while Russell 2000 trade at roughly 2.4x book value. And our price-to-earning ratio stands at approximately 9x compared to 20x for the index.

We attribute much of this discount to limited market awareness. To address this, we will shift our IR strategy toward digital marketing starting this April, engaging early communication and Investor Relations firm specializing in digital investor outreach. We believe this approach will meaningfully expand our investor reach and visibility in a significantly shorter time frame rather than the traditional IR method. With that, we are happy to take your questions, and if you have any questions, please unmute yourself.

Congratulations on a really good year. This is Todd Felte. I was wondering if you could talk about the current conditions over there and how you expect your business impacted if the war, let's say, last another 30 days compared to what happens if it drags on for another 6 months with your various divisions.

Yes. So thank you, Todd. First, most of our business linked to the Defense segment. As you know, the supply chain, which was -- which is a primary growth driver of B.O.S. Most of its business is related to the defense segment and the robotics division as well. So in that aspect, if the war will continue, it will positively affect the growth of those 2 divisions.

In regard with the RFID division, currently, it's very sensitive to the geopolitical tension. And if the war will continue, it will negatively impact its business. But as I mentioned before, we are working to shift our sales resources and business development resources towards the new segments, which are less sensitive or even the opposite are growing in such period like the hospitals in Israel, defense as well, but we will focus on the hospital segment in Israel. In addition, as you know, if the war will continue, we learn how to work with that. The economy will gradually return to its normal course of business despite several attacks a day. It's not new for us. We are in this situation for 3 years, and still, we are doing good. But hopefully, it will be ended.

Okay. And there was a gentleman who asked a question in the chat, which is I thought a good question. He spoke about the growth rate you've achieved and why there is no growth anticipated in the guidance. I think your guidance is for $51 million, and that's basically what you did last year. So can you kind of give us some insight on that?

Yes. First, we reached to a record level of revenues, $51 million revenues compared to $40 million revenues in the previous year. It's phenomenal. Our revenue growth depends on the consumption of our components by the different segments, mainly Rafael and the Israeli aircraft industry, and there are hundreds of subcontractors around the world.

I believe that there is high potential for continuing growth because the warehouses are empty. But we currently have and at the end of year '25, we have like $24 million backlog, which covers 50% of our outlook for year '26. So we have to be, as we did all the time to be conservative. And we will update -- I believe we will upgrade the outlook quarter-by-quarter according to the progresses.

And we have to remember that we are in a very sensitive period in geopolitical tension. Every day, there are news, and we have to be a little bit conservative. And I think that still with $51 million revenues and $3.6 million net income and all the ratios that I illustrated before -- that was illustrated before compared to the index -- to the Russell 2000 Index, there is no need for any growth to justify this current valuation. I think we are undervalued with the $51 million revenues and $3.6 million net income, and there is a great upside there.

Okay. My last question is just on the M&A front. I see your cash position is up to $11.8 million. Can you just kind of go over your M&A strategy? I believe in the past, you planned there would be no dilution on any M&A that you did and that any acquisitions you did would be immediately accretive to revenue and earnings. Is that still the case? And do you plan on investing some of that cash maybe in short-term notes or securities if there's no M&A on the immediate horizon?

Yes. So first, as we have the $12 million cash on hand, I think there are opportunities of M&A are increasing because we can acquire a larger company that can move the needle. So it's a great tool to have on hand, and we have several acquisitions that we are evaluating. Hopefully, we will close an acquisition during year '26. Until then, we invest the cash on hand on security funds, and that burn like 4% -- 4%, 5% interest per year, something like that. So the money is working and waiting for utilization.

Regarding the dilution, it's not included in the plan. There is no plan for dilution with $11 million to do an acquisition, it's nice acquisition. And if we want to increase it, we can leverage it with the -- if it's a profitable company, we can leverage it with the bank loans -- long-term bank loans and together to reach to a significant amount of acquisition. It could be one, it could be two. So I don't expect for any dilution in that aspect in M&A. And by the way, in any other aspect as well.

I have 2 questions. This is Scott Weiss. How are you?

Fine. Thank you, Scott. How are you?

Good. Thank you. Regarding India, can you comment on if you've seen revenue in India to date? And what kind of numbers are you expecting for 2026?

We see flow of revenues from India. We saw flow of revenues in year '23, in year '24, in year '25. And we opened the -- we established the office there, the agency there in order to urge it and to have more foot on the ground in India in order to increase this number. We didn't provide any outlook for how many revenues, but hopefully, it will increase significantly during the year. It's not investment for 1 year, it's for long-term investment, and we will expand our investment in India as its progress according to the progress. So this is our addressable market overseas.

Can you share 1 or 2 of the larger customers from the Indian markets?

Yes. We are working -- our clients are, I believe, are the biggest -- one of the biggest of the top 5 subcontractors of -- assembly subcontractors of electronic systems. They are working with the Rafael. They are working with the IAI, they are working with the Boeing, they are working with global organization. Among the names are SASMOS, [indiscernible] DCX.

And I believe there are -- there is a long list of subcontractor that we have not reached yet. And this is a primary reason for having foot on the ground in India in order to go to visit more manufacturers, more assembly company and to start to do business with them because if we have a good offering for one -- for their competitors, so I believe we can increase our sales -- we can increase our client base in India with the same offering.

Okay. My second question is regarding the RFID investment. What kind of investment spend are you expecting to enter the hospital market?

In amount or what kind of investment?

B.O.S.

Okay. To my -- according to the initial plan, I believe it won't be a significant amount in the size of B.O.S. but it will be a significant amount for the RFID. It could be around $800 to -- it could be in shekel, it could be like $300,000 in year '26. And then in year '27, this new segment will be in breakeven and in year '28, it start to be profitable. But it is for the long term because in the RFID division, every time there is a geopolitical tension, it got impacted directly and immediately. So we have to -- and because we don't believe that in year -- going forward, there will be a long-term peace period. So we have to be ready for that, and we have to do this move.

Do you have existing relationships in the hospital segment?

Currently, no. But we have several people -- several candidates that we can hire with the related connections. By the way, it could be also through M&A of companies that are already in that field and to use our system to support the sales and the sourcing of the product to this segment.

Okay. My last question is regarding the guidance. I realize how conservative you've historically been, but the guidance suggests that you've seen a slowdown. And I just wanted to flesh that out a little bit. Have you seen any changes from Q4 to Q1 to where we are today?

No. The opposite, I see that the backlog increased. The backlog of the group increased in the first quarter.

Thank you very much.

You are welcome and hope to see you soon in Israel, Scott.

This is [indiscernible] good afternoon and good morning for me. I have a question, and I think somebody else had the same question about your guidance. So you're projecting the same revenue and the same net income as you had this year. So I understand the revenue part.

The net income was affected by 2 things this year. One was the impairment charge, which I assume will not be going forward or maybe it will be. The second part, you paid no taxes. Are you going to pay the taxes next year. So maybe you can just walk me through and say, on the $51 million, how do you get to exactly the same net income when you had two significant items affecting it this year?

Yes. Thank you for your question. I think that Moshe described that we had two points that was impacted year '26 report. And maybe Moshe, can you return on what you just said regarding the currency exchange, the weakness of the dollar and what was the impact in year '26 -- '25 and what do we expect in year '26?

Yes. In the financial income in 2025, we cut off the -- we expected that our Israeli shekel dominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. Another effect of the dollar weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized last year, which arose from the revaluation of the Israeli shekel denominated balance sheet items following the sharp dollar decline. This gain is not expected to repeat in 2026. So about the impairment of the goodwill, it will offset by the impact of the Israeli shekel against the dollar, which is not supposed to impact in 2026 like it was in 2025. So...

So I agree. In summary, there was a charge of $1.2 million of goodwill in '25 that we don't expect -- you're right, we don't expect it to recur in '26, okay? But on the other hand, there were some benefits in year '25 that in the -- because of the weakness of the dollar, the operational expenses in year '25 -- in '26 will be higher by $600,000 than it was in year '25 because we opened the year '26 with a very low currency rate of ILS 3.18 per dollar as compared to something like ILS 3.5 per dollar at the beginning of year '25.

So we expect higher operational costs by $600,000 and another thing that we recorded in year '25 financial income because of the weakness of the dollar of $800,000. And as long -- as the currency exchange rate of '26 will remain at $3.18, we don't expect to record the same income. So the benefit in the currency exchanges in year '25 and offset by the goodwill impairment in year '25. So now you compare -- you can easily compare the years of '25 and '26, okay?

Okay. My other question is, it's a little bit difficult to break down if you are paying any taxes. And I know you referred to that you have a tax carryover a bit and unrealized losses. So could you tell me what you expect your taxes are going to be like this year and next year?

Yes. We have a plan to -- the taxes are a little bit tricky because the taxes are -- we are going to utilize all the carryforward taxes in B.O.S., the parent company by the end of year '26 and all of it recorded as an asset in the balance sheet. But we still have a lot of tax assets in -- tax carryforward losses in the subsidiary, the RFID division that we want to utilize, and we are considering different kind of solution -- tax solution for that in order to utilize it because -- so that all the profit of -- all the group will be offset by the carry taxes losses of the RFID division. So we don't expect to have any significant tax expenses in year '26.

Okay. And for your '27, is it a little bit too early? Or are you also saying that the taxes keep on carrying over into the next years?

Can you repeat, please, again?

For year '27 and going forward, do you see that you're going to still have tax carryovers in your divisions or it's probably going to expire?

No, no. There is no expiry date for those losses...

I mean, used up, sorry. Used up, I knew it will expire...

If you will -- Okay. If we will utilize -- if we will execute the tax planning as we wish, I believe we won't have tax expenses in the several coming years.

Okay. And my last sort of comment, you cannot have to take as a question. You referred to your stock being cheap, and I think everybody on this call agrees with this. I think there is no better way to demonstrate that your stock is cheap is to announce a small buyback or to have the executive buy some of your own stock because I think it would benefit everybody. So this is just a comment. And I don't know if you agree with this, but that would be, I think, in many people's minds.

Yes. I think because we have just $11 million, and we are a very small company, we have to invest this money by acquiring company in order to support the growth of the company and not to do an artificial financial act to support the stock. Personally, I don't believe in buy stock -- in buyback stock. It didn't improve itself according to what I read -- I have read during all the years. And we are very small to activate such plan.

Companies in big size that have hundreds of millions on cash in hand, they can do it. They can allocate part of it just for public relation. We don't have the space for it. We have to -- we work very hard to gain this money, and we have a lot of opportunities for acquisitions. And I believe this is the best thing to do for the company for the long term.

Regarding buying stocks by the officers of the company, I think -- I can tell you -- I know what are the compensation package of those officers, I think they cannot afford to do buyback. They are not -- they don't have a compensation -- huge compensation that they can allocate it. The part of their compensation, it's options instead of cash bonus. And I think it's a sign of support from the officer that they believe in the company.

I have a question. It's [indiscernible] in New York. You were talking about India, and I was a little unclear. You said that if I understood it, there were revenues in '23, '24 and '25 and you're expecting India to grow. But can you quantify how much of your revenue came from India in '23, '24 and '25?

It's several million dollars. It's around $3 million in average during that -- in those years. And we expect to -- following the trends in the market and following our investment in India to grow it significantly during -- gradually during the years.

Any further questions? Okay. So thank you all for your thoughtful questions today. They reflect exactly the kind of engaged dialogue we value with our investors. Let me close with a final thought. Year '25 was a milestone for both record revenues, record net income and record cash on the balance sheet. We entered 2026 with a strong foundation, a clear strategic road map and a team that has demonstrated its ability to execute. We are committed to delivering long-term value for our shareholders. And I look forward to continuing that dialogue with you throughout the year. Thank you again for your participation, and please feel free to reach out at any time. Have a great day.

Hello, everyone, and thank you for joining Better Online Solutions or B.O.S. for our presentation today. With me is Eyal Cohen, our Chief Executive Officer. And today, we will provide an overview of the presentation and then address questions from the audience.

You can submit those through the online platform. B.O.S. is a leading integrator of supply chain technologies, especially in the defense and aerospace industries. The company is traded on the NASDAQ under the symbol BOSC. Eyal, with that, I'll turn it over to you for the presentation.

Thank you, Matt. Good afternoon, and thank you for making the time to meet with me today. B.O.S. integrates cutting-edge technologies to streamline and enhance supply chain operation across 3 specialized divisions. Our robotic division automates inventory processes by replacing manual labor with robotic solutions. The RFID division covering inventory tracking and end-of-line automation, particularly off-the-shelf automated sorting and packing systems throughout the supply chain.

And the Supply Chain division integrates our franchise electromechanical components directly into our clients' product. Let's explore each division in more detail. Our supply chain division is dedicated to integrating franchise electromechanical components into the products of leading defense and high-tech companies.

Our engineering team works hand-in-hand with our customers' R&D department to ensure seamless integration of our franchise component into their innovative designs, generating for us long-term OEM revenues as client product with our embedded components move into production. The primary growth driver here is the number of components we embed into clients' products.

That's why expanding our integration capabilities is central to our strategy. Over the last 2 years, we have doubled our engineering team and tripled the number of manufacturers represent strengthening our market position and growth trajectory. We are proud to serve global defense leaders such as Israeli Aerospace Industries, Elbit Systems, Rafael and the hundreds of subcontractors around the world. Our network extends both directly to the clients in Israel and indirectly via their subcontractor across the U.S.A., India and Europe.

This network serves our launch for global expansion without the need for costly overseas sales offices. RFID division. It delivers end-to-end supply chain automation technologies for logistics centers. covering inventory tracking, automated sorting and automatic packing solutions.

We create real-time inventory visibility by connecting warehouse flow operation directly to the client ERP, WMS or MES systems. Our integrated platform combines ruggedized industrial hardware with our proprietary software. The ruggedized hardware includes handheld computer, forklift-mounted tablet, scanners, RFID readers and thermal printers from top-tier manufacturers like Zebra and Honeywell.

Beyond tracking, we deploy turnkey automation systems, including automatic sorters, carton packing machines, robotic palletizing and pallet tracking, enabling fully integrated order fulfillment workflows. For new warehouse project, we designed and installed complete wireless infrastructure position us as a major provider for connectivity and automation from the ground up.

The business model of the RFID division combined from recurrent revenues from annual service contract for hardware and software maintenance, ongoing sales of consumables like barcode labels, RFID tags and supplies and expansion revenue in case of existing clients expand to additional facilities.

This combination of recurrent revenue, consumables and expansion opportunities create a highly predictable and scalable business model. We're proud to serve top-tier enterprises across Israel like Supersal in the food retail, IKEA non-food retail and Teva in the industrial sector. Robotic division.

Our Robotic division designs and deploys custom-made automation solutions that streamline labor-intensive industrial and logistics processes through robotics and automated machinery -- custom automated machinery. Our engineering team works directly with the client that face labor shortage or high-cost manual processes.

We evaluate their production lines, determine which tasks can be fully or partly automated and deliver a comprehensive proposal, including concept design, cost breakdown and ROI projection. Our robotic sales consists of several integrated components, robotic arms purchased or developed in-house, custom design reapers, proprietary peripheral automation machine tailored to each client unique requirement and comprehensive electrical design and software development for the complete system.

Our team includes mechanical engineers, control engineers, software programmers and production crew specializing in mechanical assembly, enabling us to handle projects from concept through installation. Over the past 2 years, we have strategically transitioned our business focus to the defense industry.

Currently, 90% of our backlog is concentrated in this sector. The defense manufacturer sector remains heavily reliant on manual labor while facing increasing pressure for faster production cycles and higher quality standards. This creates significant tailwinds for automation adoption.

Our major defense client is Elbit Systems, one of the Israeli larger defense contractors. We have successfully developed and installed a robotic production line at their Israeli facilities. In Q1 '26, we will install a robotic production line at one of Elbit's European factories, marking our first international defense deployment.

This European expansion validates both our technology and our ability to scale beyond the domestic market. B.O.S. is led by a skilled executive team of 8 and a Board of 4 members. One Board member previously served as the Head of Procurement of Israeli Ministry of Defense. Given the importance of technology, we employ 2 dedicated CTOs, one for the robotics and one for the RFID. Our total team includes 80 professionals with 30% being engineers and technicians.

Competitive advantages. B.O.S. provide a comprehensive offering for industrial and logistic processes and each expansion step of our offering strengthen our competitive advantage. Breakdown our competitive advantage by division.

The Supply Chain division advantage is built on 4 fundamental pillars: specialization in electromechanical components, which connectors and cable, authorized representation of global industry leaders, strategic partnership with Indian assembly manufacturer and direct access to strategic client.

Robotic and RFID division, there is high synergy between our Robotics and RFID division, which creates a powerful competitive advantage. Together, they provide a comprehensive automation solution to improve productivity in industrial and logistic processes across 3 integrated phases.

Phase A, production automation through robotic sales, Phase B, inventory tagging and tracking via barcode RFID, connecting the production flow or warehouse to client ERP systems and Phase C, packing automation through robotic sales. Operational results and outlook. We delivered strong growth in the first 9 months of this year.

Revenue grew year-over-year by 28% to $38 million, continuing our record performance this year. We are strategically expanding overseas by partnering with international subcontractors of our Israeli defense clients. These markets are relatively untapped by B.O.S. and represent potential growth.

We see India as a major target market because it is a global hub for wire and connector assembly, where we have competitive advantages. Through this approach, our international revenue grew by 24% year-over-year, demonstrating the growth potential in international markets.

Our net income grew year-over-year by 54% to $2.8 million, while our revenue grew by 28%, showing our ability to convert revenue into bottom line results, plus profit leverage as we scale the operating base of the business. We demonstrated consistent profitability with steady net income growth, achieving a compound annual growth rate of 57% from year '21 through year '25.

Our financial foundation has never been stronger. Cash and equivalents grew to $7.3 million, up from $3.6 million at the year-end. Our shareholders' equity amounts to $25 million, which accounted for 66% of our balance sheet. We have positive working capital of $18 million and $1.1 million in long-term loans used to finance real estate we are using for our own operation.

This strong balance sheet gives us the flexibility to capitalize on opportunities as they arise, supporting organic growth and strategic acquisitions. The consistent growth in revenues and net income Strong financial position and $24 million backlog covering approximately 50% of our annual revenues underscores the strength of our defense focused strategy.

This reflects years of deliberate investment in product diversification and operational excellence that position us to capitalize on the defense sector's robust growth trajectory. Our financial outlook for year '25 has been upgraded for the third time this year. We now expect to meet the high end of our previous guidance range of $45 million to $48 million in revenue and $2.6 million to $3.1 million in net income.

We will provide our outlook for year '26 during the first quarter next year. There are several tailwinds that have accelerated our growth momentum, and we believe will support our long-term organic growth.

First, the global increase in defense budget, which seems like a long-term trend that will positively impact our growth in the coming years. Second, the replenishment and expansion of Israeli defense forces inventory.

Third, expanding our presence in India assembly subcontractor market. On top of it, the potential stabilization and improving geopolitical condition in the Middle East is a pivotal tailwind for the growth of the Israeli civil market and will positively impact the growth of our RFID division.

These drivers support our continued organic growth in conjunction with our outbound sales efforts. We continue to seek M&A opportunities to support our long-term growth. In this regard, we are targeting companies that meet 4 key criteria.

Strategic fit companies that extend our offering to core defense segment clients, geographic focus, Israeli-based companies, financial strength, solid history of profitability and consistent growth, management, strong and experienced management teams.

Size parameters, we are targeting acquisition valued up to $10 million and the financial financing strategies given the profitability of the target companies, 50% of the investment will be financed through long-term bank loans. Given our strong balance sheet, we will finance the rest of the investment by our internal resources.

Our valuation offers attractive upside compared to Russell 2000 Index multiples. Price to earnings of Russell is 20 versus B.O.S. at 9. Price to book value for Russell is 2.2 and B.O.S. 1.2 only.

Thank you for your time and attention, and we are ready to take your questions.

Excellent. Thank you, Eyal. So we had some questions sent to us in advance by some of our stockholders. They e-mailed me and you in advance. And we've also had a few questions coming in during the presentation. So we'll get those included as well.

And of course, the audience can submit through the screen with additional questions. But perhaps let's just start with one that we get quite often, which is how do we explain the gap between B.O.S. valuation and the Russell 2000 Index that you highlighted in that slide in the presentation.

Yes. Yes. As you saw in the presentation, both valuation ratio are approximately half of those of Russell 2000. I'm convinced that the primary driver of this gap is limited market exposure, which is precisely why I am here today.

Over the past year, we have made substantial progress on our Investor Relations strategy compared to virtually no activity in prior years. At the beginning of the year, we engaged Darrow, an IR firm that has been instrument in our efforts.

Thank you very much for that. And their work includes a weekly one-on-one investor meetings and participation in conference. This is our fourth event that we are participating in this year alone. And I have to tell you that we already see meaningful results.

Our average daily trading volume has increased to 130,000 shares, which is equivalent to approximately $600,000. I believe improved liquidity is critical foundation for minding the valuation gap over time.

Yes. Absolutely. And we had a couple of questions on financing the growth in the business, one on organic and one on acquisitions actually. So let's start organic. You discussed the financing model for M&A, but how do you plan to finance the company's organic growth, which has been very strong over the last couple of years as well?

Yes. As I mentioned, the M&A will be financed through a combination of long-term bank loans and cash on hand that we have $7 million. And in the fourth quarter, we will see increase in that level of cash. Organic growth, however, will be funded if needed through bank revolving credit facilities.

We currently have like $1.5 million unused bank revolving credit capacity for many years. If needed to support our organic growth initiatives, we can draw on this bank facility, and we are confident that we can expand it further with our banking partners if necessary.

Excellent. And then the other side of that, you mentioned for the M&A project opportunities, you have a balance sheet that allows you to do cash and debt for that. We get an additional question that was asking if you have an internal rate of return target or IRR target that you're looking for in the acquisitions that you're considering?

I think the minimum IRR should be around 15% to 16% minimum. I have to tell you one of the challenges that we have, of course, we are targeting profitable companies with a solid history of profits in the different segment, which is very tough because our valuation as a public company is very low, and it's very tough for me, hard for me to buy a private company in higher multiples.

So it's a kind of challenge, but we are trying to bring the best company for the long term to the company and which will give a high yield to the group, promote us to our long-term target of being $100 million revenues company. Profitable, focusing on the segment market. And we are working on that. And I hope that next year, we will be able to complete an acquisition, of course, with no dilution.

All the better. So speaking of the different divisions, we've got supply chain, RFID, robotics divisions that we report. Which segment do you think is going to contribute the most incremental growth going forward?

Yes. I think we see growth in all the divisions for year '26 but rather than pointing to a single segment, I see significant tailwinds across all the 3 divisions that will drive our long-term organic growth. Of course, the defense is the most robust -- has the most robust growth because of the global increase in the defense budget and the replenishment and expansion of the Israeli defense inventory that represent a long-term trend that will positively impact both our Supply Chain division and the Robotics division as well.

Because 90% of the business of the Robotic division currently is in the defense segment. But the potential stabilization and improving geopolitical condition in the Middle East provide a significant tailwind for the Israeli civil market, which will particularly benefit our RFID division.

So in short, we will -- we are well positioned for growth across our portfolio in year '26 with each segment capitalizing on distinct but complementary market dynamics.

Excellent. And one of the questions we also got following up on that was we previously talked about the RFID segment having some challenges that are being worked through and the performance improving. How should investors think about the turnaround in RFID?

And do you think that profits in that division could return to their 2024 levels from a couple of years ago?

As I mentioned, we are seeing potential stabilization and improving geopolitical condition in the Middle East, which is a significant tailwind for the civil market and for the RFID accordingly. We are now in the third month of Q4, and we are already experiencing this rebound firsthand.

And second, we are continuing to -- we have been aggressively expanding our RFID product offering with end of the light information solutions by our robotics division as well that includes off-the-shelf equipment such as sorter and various packing machines. This diversification strength our position and broadens our addressable market.

So we are optimistic that it will return to track on the fourth quarter of this year.

Excellent. And then another question we had come in, noting that foreign exchange headwinds have pressured our margins a bit this year. What pricing adjustments or operational changes are you implementing? And do you think those are enough to offset that pressure going into 2026?

Yes. And the U.S. dollar has depreciated approximately 11% against the Israeli Sheqel in the 6 months ended September, meaning the second quarter and the third quarter of this year. And since the majority of our operational expenses are in sheqel denominated, this creates roughly $0.5 million in additional cost pressure on operating income during that period.

We are proactively addressing this challenge that we see as a long-term trend. We don't see that the trend will be turned around. So we are addressing this challenge through 2 key measures, strategic sales price upgrade, which is not easy, but there is no other way to handle this kind of 11% depreciation.

And we initiated this process in Q4. And gradually, I believe we will see the result in Q4 and in year '26 as well. And of course, on the ongoing operational efficiency improvements, digitizing many operational activities using the AI also for internal users, using BI.

We believe this combined action will sustainably mitigate the foreign exchange impact going forward and position us well for year '26.

Okay. I think we have time for just maybe a couple more questions. We're getting some good ones on the inbound here. One of the questions kind of following up on the foreign exchange. Your gross margins have moved up nicely over the last several quarters, reaching nearly 25% last quarter. How are you raising the margins? And this ties into your answer is higher pricing, cost cutting.

Most importantly, where do you think the margins can get to in the next 12 months for your business?

I think we are -- we're supposed to be in the range of 25% to 30% since we are integrators, and this is, I think, the gross margin range of integrators. And there is fluctuating in between this point because of a different mix of products that we are selling between the quarters with different level of profitability.

So we are trying to improve our efficiency, but it won't move the needle significantly between the 25% and 30%. The mix of product has much more influence on the gross profit margin.

Excellent. And listen, we have just couple of minutes left here. Let's see this one. So you talked about in the presentation, the strong growth opportunities in Israel and now in India. But what about growth opportunities in the U.S. and European markets? Do you see opportunities in those large markets also?

Yes, absolutely. We see growth potential in B.O.S. in the U.S. and Europe by leveraging our relationship with the major clients like Elbit Rafael and IAI as they expand in those territories. As I mentioned earlier, once our supply chain division embeds its franchise component into this client and product, we supply those same components to their subcontractor worldwide and by that, creating a natural expansion pathway.

However, in India, our approach is a little bit different is proactive approach. We are actively pursuing direct sales to local defense and aerospace subcontractors. And we believe India is well positioned as a global hub for electronic assembly and with continuing strong demand from the defense clients, it represents significant growth potential that we intend to capitalize on during year '26.

Excellent. I think we're bumping right up on time. But of course, for anyone that's listening and wants to request a meeting, you can reach out to myself through my e-mails listed on all of our press releases. We're happy to set up calls, as Eyal mentioned. We do them every single week with investors. We'd be happy to do so and discuss the business or answer additional questions.

Any other closing comments for just 60 seconds, Eyal?

It was a pleasure to participate in that summit. And thank you for your time. And as you mentioned, if you need any more details or would like to follow up, please feel free to reach out.

Outstanding. Thank you so much, and thank you, everyone, for joining us.

Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to the BOS conference call. [Operator Instructions]

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 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. Mr. Cohen, please go ahead.

Good morning, and thank you for making the time to meet with us today. Joining me is Mr. Moshe Zeltzer, our Chief Financial Officer. BOS integrate cutting edge technologies to streamline and enhance [indiscernible] operation. We delivered strong growth in the first 9 months of this year. Revenue grew year-over-year by 28% to $38 million, continuing our record performance this year. .

We are strategically expanding overseas by partnering with international subcontractors of our Israeli defense clients. This market -- these markets are relatively untapped by BOS and represent potential growth for BOS. We see India as a major target market because it is a global hub for wire and connector assembly where we have a competitive advantage. Through this approach, our international revenues grew by 24% year-over-year, demonstrating the growth potential in international market.

Our net income grew year-over-year by 54% to $2.8 million, while our revenues grew by 28%, showing our ability to convert revenue into bottom line results plus profit leverage as we scale the operating base of the business. We have demonstrated consistent profitability with steady net income growth, achieving a compound annual growth rate of 51% from year '21 through the year 2025.

This results underscore the strength of our defense focused strategy, reflecting use of delivery investment in product diversification and operational excellence that position us to capitalize on the defense sector to robust growth trajectory. Given our strong execution and stable backlog exceeding $24 million, we are raising our full year 2025 financial guidance.

We now expect to meet the high end of our previous guidance range of $45 million to $48 million in revenue and $2.6 million to $3.1 million in net income. There are several tailwinds that have accelerated our growth momentum, and we believe will support our long-term organic growth. First, as you know, the global increase in defense budgets. A second replenishment and expansion of Israeli Defense Forces inventory and equipment and vehicles. Third, the potential stabilization and improving geopolitical conditions in the Middle East, which is a pivotal tailwind for the growth of the Israeli [indiscernible] market and will positively impact the growth of our RFID division.

These drivers support our continued organic growth in conjunction with our outbound sales efforts. We continue to look for opportunities to enhance our organic growth with strategic actions that fit our business and diligent pricing parameters. Through the combination of this effort, we intend to grow both over the coming years.

With that overview, I will turn the call over to Moshe Zeltzer, our CFO, to discuss our financial position. Please, Moshe.

Thank you, Eyal. Our financial consolidation has never been stronger. Cash and equivalents grew to $7.3 million, up from $3.6 million at year-end. Our shareholders' equity amount to $25 million, which account for 66% of our balance sheet. We have positive working capital of $18 million and $1.1 million in long-term loans secured by real estate we are using for our own operations.

This strong balance sheet gives the flexibility to capitalize on opportunities as they arise, supporting organic growth and strategic acquisitions. Our valuation offers attractive upside compared to Russell 2000 Index multiples. Price-to-earnings ratio Russell 2000 is 20 versus BOS at 11, price to book ratio Russell 2000 at 2.2% versus BOS at 1.7%. Thank you for your time and attention. We are happy to take your questions.

This is Scott White at CIMCO Capital. Great quarter. Terrific. I have a few questions and if it's okay, I'd like to ask them one at a time. In the press release, you highlighted that you're excited about your expanding opportunities with new and existing customers. Can you highlight a couple that you're particularly enthusiastic about and specifically new customers?

Yes. The main customer that we are joining to our portfolio mainly overseas clients, mainly from India. And I can tell you that in the recent week, there was a huge dedication here from -- in Israel from India, including ministers from Indira, and we were happy to meet with many, many companies from India and those are the major clients that we are joining our group.

Okay. When would you expect revenues to hit the bottom line to impact your P&L.

What do you mean?

When do you expect revenues from this new Indian customer to impact your P&L?

Yes, it already impacted the year -- these 9 months, we already see the growth in revenues from international market by 24% as compared to the comparable period last year, and this has mainly come from the Indian market. And it poses and gradually, we are taking -- we are increasing our market share in this territory. .

Okay. Second question, can you expand on the loss in the RFID division and exactly what you mean by logistics center slowdown in Israel?

Yes. The RFID division engagement in the civil market, not in the defense market segment. This segment had a very challenging time in the recent 2 years because of the conflict in the Middle East. And it adversely affect the business. And in the recent 2 quarters, we also saw the effect of the U.S. dollar devalued against the Israeli shekel that also adversely affected the business. But in the fourth quarter, because of some measure we took operationally and in the business model as well, and the change in the environment in Israel, especially in the geopolitical environment, we see a rebound in the demand, and we are optimistic about returning back to profit in the fourth quarter.

Okay. Great. And then that was my next question. Can you expand on the currency impact? And how much can you quantify the effect it had on your P&L? And do you hedge? And if not, you're going to start hedging?

Yes. So the U.S. dollar devaluate -- again, the Israeli shekel by about 11% in the 6 months has ended the September 30 this year, the second and the third quarter. And since most of our operational expenses are denominated in shekels accounts, while our revenues are primarily in dollars, this currency movement created approximately [indiscernible] additional cost pressure on operating income during this period or roughly about [ $40 million ] per quarter. So as I mentioned before, we are proactively addressing this headwind through strategic sales price adjustment initiated in the fourth quarter and operational efficiency improvements. .

And on the hedging, we are hedging the balance sheet exposure and forever hedging, each hedging has a mutation period. And we don't believe that -- it's temporary exchange rate. I think it will all be for the long term. So any kind of hedging on the dollar is temporary. And we are trying to find a solution for the long term. And because of that, we are in the process of a sub price adjustment and operational efficiency improvements.

One more question, and then I'll jump back in the queue. One of the potential concerns on your P&L and continued growth is the impact of the end of the war in Gaza. Can you address this? And how should we think about the end of the war and its impact?

I think there are 2 coins -- 2 sides for the coin. On one side, we are in the different segment, the supply chain provision, the biggest division in BOS 90% of its business is in the difference. And each customers are the major client in Israel. So there is a direct impact of the tension. On the other hand, we have the RFID division, which is in the steady market. The [indiscernible] market doesn't benefit from the war. But because the biggest -- we have the big exposure to the difference, because of that, we are growing in the top line and in the bottom line. .

Historically, have you grown faster on the defense side, in a time of war or time of peace.

All the years, the growth -- the main growth came from the supply chain because even in time of peace, those 3 clients are the biggest exporter in Israel. They're going year-by-year. And also, the defense budget of Israel is going year-by-year even before the war. So I'm not sure about the number, but I think the average growth rate of the defense market in Israel along the years were about 7%. So it's growing. Sometimes in so period in [indiscernible] in the recent 2 years, about 17% each year or more in normal years about 10%.

Congratulations on another great quarter. I see that you have a $7.3 million in cash and I assume that amount is rising in the current quarter. You've talked about M&A possibilities. Will you have to use raise equity? Or will you be able to use cash for any M&A activity?

Todd. Yes, our cash position was strong at the end of the third quarter with over $7 million and 0 bank debt. That's continued to grow in the fourth quarter. So for M&A, we are targeting profitable Israeli defense sector companies. We complementary products, serving our major clients and their subcontractors. So with acquisition targets of up to $10 million and bank financing typically available for approximately 50% because it's a profitable company, 50% of the purchase price we can execute this [ interaction ] using our existing cash on hand without acquiring equity raising, while maintaining sufficient working capital for operational organic growth.

That's great. Also, can you kind of give us some clarity on the amount of the percentage of your defense business, which is in Israel and the mouth that's in internationally and how that how you expect that to change. I've seen a lot of contracts from India and Europe, and I was hoping you could kind of quantify that for us.

Yes. As we saw in the chart like in the 9 months is the -- out of the $38 million, $3.6 million were sales overseas regarding -- related to the Supply Chain, related to the Defense. And we are taking measure to -- and reallocate resources to increase this number by being active with active approach, especially in India and they may be even to change our approach in how to operate the sales in India, and we see a lot of potential in this market.

So I believe that this number of $3.6 million that reflects 24% increase in sales oversea will continue. We will see this trend continue in the fourth quarter and in year '26 as well.

Okay. I know you talked about opening up kind of a branch office in India. I assume that's where a lot of the expansion is going to be? And is there any update to that office you're going to open over there?

Yes. We are checking various options on how to make it in the most efficient way. We are taking a very conservative measures how to allocate our financial resources overseas, now to do it in a very lean way. And I believe that in next year, we will see the actual results of our plan. .

Okay. Congratulations again on a great quarter.

Thank you.

My name is Igor. This is my second call. Congratulations on a strong quarter. So my question is Israel is expensive, everything in Israel is expensive any operations and now it's getting a bit more expensive stronger shekel. And now that you becoming more and more of an international company international sales, any thoughts of spreading the cost and moving some of the operations outside of Israel, given that it's so expensive to do anything in Israel?

It's a good idea, but maybe, maybe it's a good idea. We need to think about it. Actually, we don't -- I don't see any -- which units we can operate overseas. But one of the options, as I mentioned to Todd is to instead of doing the sales to India from Israel to do the sale to India from India. So this is the first example how we can reduce our cost, but the main approach to do sales in India were not to save cost but to increase sales, but we can get both of the things together, but it's a good idea.

I need to [indiscernible]. I need to think about it, and I will keep you updated in the next call.

My other question is -- so I know that the last years were sort of overshadowed by the Gaza war and Gaza people would refer to this. historically, like if you take many, many years, the company is a bit of a cyclical company. So some periods of times, there's more demand there is a little bit less demand. How do you intend to make a company a little bit less cyclical and more like a sustainable growth? Like what is your strategy like? What do you see the company like 5 years down the road?

I think by going overseas to increase our sales overseas, we saw in the number like out of $38 million adjusted, $3.6 million of international sales. So if you increase it, we can reduce the cycling. And the growing by acquisition and adding more increase in the portfolio, our offering. And by that, we can eliminate the exposure that you mentioned. But the structure of BOS is that we have the supply chain in the defense, and we have the RFID and we have the robotic in between. So we are already spread. But I have to be honest with you, the -- we are in the defense for many years, more than 10 years, and it's all the time growing. I don't remember a cycle of a slowdown in this segment. I'm sure that in 3 or 4 years, the demand will come back to normal after the situation in the Middle East and in Europe. But I believe it's the best segment to attach to.

Okay. And my last question about the potential for M&A. So obviously, you put $4.5 million at the market option now, and you have plenty of cash [indiscernible] for any cash. So do you have -- are you looking at any specific opportunities right now? Or you just put it just in case? Like what is your thought about M&A for the next year or 2 years?

I hope that in next year, we will close on M&A. This is the working plan. And my plan is to close one. And I hope that every 2 years, we will be able to close on the M&A. And by that, with the organic growth to reach to the $100 million. This is a target. But those are our plans, and we are working to -- according to those plans.

Just curious, I understand it might be opportunistic, but why don't you look to borrow to do an M&A and potentially looking at the equity component, given that your stock is not particularly high. So that would be maybe a little bit some optimal versus borrowing from a bank, given that you pretty solid company, this good cash flow and earnings.

I didn't understand your.

So it looks like you put a potential for M&A, you have an option of $4.5 million equity -- so obviously, I don't know now what the opportunity, the M&A opportunity is going to look like. But I would hope that you would first intent would be to borrow money from the bank to do an M&A versus issuing equity given that your equity is relatively low, given your valuation, So I think.

As I mentioned to Todd, we -- in case of doing acquisition, even $10 million , which is a frame of investment that we are targeting assuming 50% by bank loans because it will be a profitable target company. So for the rest, the $5 million, absolutely, we can -- we don't need to issue more stock. We have it on hand.

We have $7.5 million as of the end of September, and the cash continues to grow. And so I don't see any need to raise the equity to consume in M&A.

So you just have a just in case a big opportunity comes up that you have a $4.5 million offering at the market.

We see it. We have tools like every public company should have like the shelf perspective that we have, and we haven't used for 4 years. Like the ATM that we have, and we haven't used since the date was filed. And the asset in that unused credit line that we have in the bank are not used. So we are holding facilities which we have. And -- but actually, in order to consume $10 million M&A, we don't need to raise BOS tool except for the unused credit lines [indiscernible] credit lines. .

How much do you have available credit to us now approximately?

Sorry?

How much credit do you have unused as of now?

$1 million for the RFID.

No. unused. Unused, we have unused for ongoing years not for the acquisition we [indiscernible]

Oh, I see, okay. yes. So that's capital .

On $1.5 million to $2 million unused credit line for we've all been credited for organic growth. But when you already check with the banks in case of model of acquisition, a profitable company. And I believe we can get 50% financing from the bank to -- for the acquisition. .0's

From an Investor Relations perspective, have you finalized your dates as to when you're going to come to the U.S. to meet investors?

Yes. I think it will be April next year. In between, I will participate in the virtual summit, we will announce on it and they will continue to do ongoing one-on-one weekly meetings with the potential investors. Scott?

Yes, I got it.

Any follow-up question?

No, no follow-up from good although I'd like to meet you when you come to the U.S. for sure.

Yes. We can meet. So thank you, again, for your participation. And if you need more details or would like to follow up, please feel free to reach out to us. Thank you.

Thank you. Bye-bye.

Ladies and gentlemen, thank you for standing by. Welcome to the BOS conference call. [Operator Instructions]. 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 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. Mr. Cohen, please go ahead.

Good morning, everyone, and welcome to BOS Second Quarter 2025 Earnings Call. I am joined today by our CFO, Mr. Moshe Zeltzer. On our previous calls, I emphasized our focus on the defense sector while diversifying our customer base. That strategy is paying off. I'm excited to share what has been another exceptional quarter for BOS 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 $11.5 million this quarter. This growth is being driven primarily by the exceptional performance of our Supply Chain division, which increased revenues by 57% to $8.3 million this quarter.

While we are addressing some temporary challenges in our RFID division, the overall trajectory gives us confidence for the remainder of 2025. Profitability, our net income surged 53% to $765,000 compared to the same quarter last year. That is $0.13 of earnings per share just in the second quarter.

This outpaced our revenue growth, 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 second quarter of 2024. 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 million in contracted backlog. As expected, it declined to $22 million by March this year as we executed on those contracts and converted backlog to revenue for a record first quarter result. Our backlog has grown back to $24 million as of June 30 this year, giving us increasingly clear visibility into the back half of the year. Our financial foundation has never been stronger. Cash and equivalents grew to $5.2 million, up from $3.6 million at the year-end. Combined with $24 million 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. We now expect revenue between $45 million and $48 million. That's up from our previous guidance of $44 million. 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 $2.5 million to between $2.6 million and $3.1 million. 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. 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 turn the call over to Moshe to cover the financials.

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 that 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. 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 a gross profit margin temporarily decreased to 19.1% from 21.1%. This was primarily due to certain service line challenges that we have already identified and addressed. We have implemented restructuring initiatives, and we expect this division to return to normalized performance levels by Q4 2025. Our Supply Chain division delivered a 24% gross profit margin, which is within our expected parameters.

The 28% margin in Q2 2024 benefited from a particularly favorable product mix that quarter. So the current level represents a more sustainable baseline. As part of the RFID restructuring, we recorded a noncash goodwill charge of $700,000 this quarter. 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 $5.2 million reflects strong operational cash generation, supplemented by $400,000 from warrant and option exercises in the second quarter. We are managing working capital efficiently while supporting our growth trajectory. The increase in deferred revenue to $3.2 million from $2 million at year-end indicates strong advanced booking and provides additional confidence in our near-term revenue visibility.

Thank you. And now let's open it up for your questions.

This is Todd Felte from StoneX 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?

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

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

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

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

I think even if a foreign company will acquire the control on BOS, still the company is registered in Israel. And if it continue to generate profit, it won't pay taxes regardless the holder of the company.

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

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. I don't think there is any obstacle to do it.

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

Yes. As I mentioned in previous quarters, we all the time have at least 2 opportunities on the table. We are checking. We are -- and we have all the tools to go ahead once we decided that the company is -- it is the one that we will acquire. But we are checking, negotiating. And once it will be -- once we see it's a good deal for our shareholders, we will do it.

Congratulations again on an outstanding quarter.

This is Scott White at [ CIMCO ]. Can I ask a question?

Yes, please.

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?

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

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

Yes. I think we had an exceptional first quarter, as you remember, with record revenues, which 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. Not all the time, we will be able to provide on time and to record the revenue on time as we had a store at the fourth quarter of year '24 when some major orders were pushed to the first quarter of year '25, and we saw the results. 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 in between.

Any further questions, please?

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 product road map that you may have?

Yes. We are -- the Robotics division is strategically focused on the defense clients in Israel. And the main client is Elbit Systems, which invest a huge amount of budget in establishing new factories, and those factories supposed to work by robotic systems, and we try to be involved in many systems as we can. The backlog of this division is about $3 million. 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, but 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 line, production line of Elbit system, which is on the road to one country, to a European country, and it will be the first installation of our line in Europe through our client. And we hope that there will be more sites like that through Elbit around the world.

Just a quick follow-up. So currently, it's just so concentrated 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 U.S. Is -- do you have any feelers for what you could do for the U.S. market?

We can do for the U.S. market, but through our clients because they are doing the [ cell ], and we are -- we provide a [ turnkey ] 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 logistics centers when we provide robotic [ cells ] for -- mainly for palletizing. But our major focus is the defense for -- at least for the coming 2 or 3 years. I think we can increase the business significantly once we grab more projects from Elbit. And there are projects, there are budget.

I have one follow-up. From an Investor Relations perspective, you guys had previously indicated you're going to 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?

I think [indiscernible] 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 will send the schedule. I believe it will be in October. And I will be happy to meet you, Scott.

Any further questions?

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

Sorry?

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

Yes.

I have a question about -- a little bit about the defense spending, which is this year is obviously 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 Elbit and Rafael of the exhaust stocks of the defense after especially the war with Iran and also the operations in Gaza. What do you think would happen like 1 or 2 years down the road if hopefully the peace will prevail? How will it impact your revenue?

I think that the Israeli defense industry is strong industry even before the war. The big exposure -- they are leaders in the world defense industry, and they will continue to do so for many, many years, and we are trying to touch to them. They are giant. We are small. So every piece of budget that we can grab, it has a fantastic and significant influence on us. But regardless this point, we see -- we feel that in the coming 2 years, there will be extensive budget expansion due to the level of ammunition 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 production line of ammunition that previously were both from Europe and from the U.S. So we believe that this situation will push the Israeli economy and the defense industry will be the leaders in the Israeli economy. And strategically, this is the place that we want to stick to.

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 during the recent events? How do you see the future expanding in other countries? And is it a direct work with the companies or this is basically through your subcontracting with Rafael, Elbit and other Israeli companies?

Yes. I think the major country we are focusing on is India because it's a world hub for assembly that serve the defense industry. We see the -- I visited there recently, and I saw buildings of -- one building serving the Israeli aircraft industry, other building service Elbit, other building service, Boeing et cetera. So it's a hub. And this is a place that we want to expand our business regardless of the business that we are doing with the subcontractor of Rafael and Elbit in India. But to do a direct business, with the assembly industry in India. And we even consider -- we consider -- we are considering to open a local office in India to grab more business opportunities over there.

By the way, especially in the -- in our line of cabling, wiring.

Any further questions? Okay. So thank you. As we look ahead, I'm optimistic about several key factors.

First, market positioning. Our focus on the defense, industrial and retail sectors position us in markets with sustained demand for our supply chain optimization and automation solutions. Second, technology integration. The convergence of our 3 divisions, the Intelligent Robotics, the RFID, the Supply Chain division is creating a unique value proposition for customers who will need comprehensive solutions. Third, customer relationships. We are seeing deeper engagement with existing customers and successful expansion into new accounts. Our $24 million backlog reflects this growing confidence in our capabilities. And let's close with this that Q2 represents more than just strong quarterly results.

It demonstrates the effectiveness of our strategic focus, the strength of our market position and the capabilities of our team. 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 the U.S. during October.

So have a great day, and thank you again.

Bye-bye. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to the BOS conference call. [Operator Instructions] 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 Mr. Cohen, I would like to remind everyone that forward-looking statements for the respected 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. Mr. Cohen, please go ahead.

Good morning, everyone, and welcome to BOS First Quarter 2025 Earnings Call. I'm joined today by our CFO, Mr. 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 Q1 performance and a healthy $22 million backlog, we are raising our confidence in exceeding our full year 2025 targets of $44 million in revenues and $2.5 million in net income.

Our outlook remains grounded in the organic opportunities we see today and maintaining our conservative approach. Our growth strategy rests on 2 foundational pillars. First, deepening client relationships. We are extending 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. We are strategically expanding overseas by partnering with our Israeli defense clients global subcontractors. This approach generated $4 million in overseas sales in year 2024 through our Supply Chain division.

Our Robotics division will install its first European production line this year, marking a significant milestone in our international growth. BOS present a compelling investment opportunity built on 4 key strengths. First, we hold a strong and expanding position in the global defense industry during a period of accelerating market growth. The defense sector fundamentals continue to strengthen globally. Israel defense budget increased 73% year-over-year, while Europe 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 million in equity, 0 bank debt and $4 million in cash, we have the financial foundation to execute our expansion plans while maintaining operational stability. Fourth, BOS is traded just at 10x on net income and price book value ratio of 1. Our valuation offer attractive upside compared to broader market multiples.

Thank you for your time and attention. Moshe and I are now happy to take your questions.

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?

Yes. First, the gross margin represents the average margin that we have and we had, we don't see any change in the future. This is a market that we are in. But we're expanding our offering to our clients. And as our offering is wider, the prices that we can take are higher and the margin as well.

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 Avi Dadon. 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&A activity? Or do you just see organic growth?

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 put all our focus and effort 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 RFID division, whether it's for the defense market with the Supply Chain division.

Congrats on the great quarter. Could you address the backlog, please? The backlog dropped to $22 million.

Yes. Yes. We -- the backlog was in a record number in December last year. It was in the amount of $27 million. And this was part of the confidence that we had to provide a positive outlook for year '25 with a 10% growth. We are in a very, very hot market, and the demands are hot. And sometimes there are peaks like we had in this quarter.

Okay. Also, last question. 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?

Sorry, can you repeat on the question? I'm not sure I understand it.

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

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

I have another question, Eyal. Are you guys going to be in the United States anytime soon to do investor relations conferences, anything like that?

Yes. First, we plan to participate in a virtual conference in the coming months. Matt, our IR firm person arranged it. And of course, we plan to visit in the U.S. this year.

Okay. And your $4 million in cash, any plans for that?

Yes. First, for the transaction in the defense market are relatively big. And we need working capital to execute it. And we use this cash to do it. And we also will use it for M&A.

I want to ask about the backlog. The backlog is for 9 months, 6 months, 12 months, for how long is the backlog [indiscernible] how do you see the second quarter, what you can say, which we are 2/3 with finished. So you have kind of the ability to replace some more than [indiscernible] because it seems like your prospect for the year is a bit conservative, and I want to raise some comments about that if thank you can. But first of all, the backlog.

Yes. The backlog is the backlog is for -- it will be spread along year '25 and the $22 million covers like 50% of our annual revenues so it's relatively high. And I remember our call last year when some of the deals moved to year '25, if you remember. And so you see the effect in this quarter. So it's a Supply Chain business and the timing of the purchase of the order effect on the time of the delivery and the billing and the revenue recognition. But we feel confident with this level of backlog that we will exceed our outlook for '25 of $44 million revenues and $2.5 million of net income that already reflects a 10% growth.

Okay. But you said that it's too early to predict now. So you prefer to wait maybe 1 or 2 more quarters.

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

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

Yes, usually, we give an outlook for a year, not for a quarter. So -- but you can try. You try it every quarter. So try again next quarter to ask.

Okay. Great results. I hope you will continue the same way because it is a magnificent quarter. So you have to repeat it.

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

Any further questions? Okay. So to conclude, the BOS is strategically positioned for continued success. Our focused approach, 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 the discussion. Have a great day. Thank you. Bye-bye.