B.O.S. Better Online Solutions Ltd. Q3 FY2025 earnings call

• Revenue grew 28% to $38 million in the first nine months, with international revenues up 24%.
• Net income grew 54% to $2.8 million, demonstrating profit leverage as the business scales.
• Strategically expanding overseas, particularly in India, which is a global hub for wire and connector assembly.
• Strong balance sheet with cash and equivalents at $7.3 million, positive working capital of $18 million, and shareholders' equity at $25 million.
• Valuation offers attractive upside compared to Russell 2000 index multiples.

For the first nine months of the year, B.O.S. Better Online Solutions Ltd. saw revenue grow year-over-year by 28% to $38 million. International revenues grew by 24% year-over-year, contributing $3.6 million to the total revenue. Net income grew by 54% to $2.8 million. The company has a supply chain division that is 90% focused on defense, and an RFID division in the civil market. The defense-focused supply chain is a key growth driver.

• Raised full-year 2025 financial guidance, expecting revenue to hit the high end of the previous range of $45 to $48 million and net income to be between $2.6 million and $3.1 million.
• Tailwinds include global increase in defense budgets, replenishment and expansion of Israeli Defense Forces inventory, and potential stabilization in The Middle East benefiting the civil market and RFID division.

• Currency impact: US dollar devalued against Israeli shekel by ~11% in six months, creating approximately $500k in additional cost pressure on operating income.
• RFID division affected by Middle East conflict in recent years and currency movements.
• Potential cyclicality in the defense segment, though the defense budget has historically grown and is expected to rebound.

Q: Can you highlight a couple of new customers, particularly in India?

A: The main new customers are overseas clients, mainly from India, with a recent delegation from India including ministers. Growth in international revenues from the Indian market has already impacted the P&L.

Q: When would revenues from new Indian customers impact the P&L?

A: Revenues from Indian customers already impacted the P&L in the first nine months, with international revenues growing 24% due to this market.

Q: Expand on the loss in the RFID division and logistics center slowdown in Israel?

A: RFID division was affected by Middle East conflict and US dollar devaluation, but seeing a rebound in demand in Q4 with measures taken, optimistic about returning to profit in Q4.

Q: Quantify currency impact and hedging?

A: US dollar devaluation created ~$500k in cost pressure, hedging balance sheet exposure, and addressing via price adjustments and operational efficiency improvements.

Q: Impact of end of war in Gaza?

A: Defense segment has direct impact from tension, but RFID division in civil market doesn't benefit from war; defense segment grows regardless.

Q: Cash position and M&A plans?

A: Cash at $7.3 million, targeting profitable Israeli defense sector companies with complementary products, using existing cash for M&A without equity raise.

Q: Defense business breakdown by Israel and international?

A: $3.6 million of $38 million revenues were international defense sales, expecting this to grow with active approach in India.

Q: Cost in Israel and moving operations?

A: Considering sales in India from India to reduce costs, but no immediate plans to move other operations.

Q: Making company less cyclical?

A: Growing overseas sales, M&A, and expanding product portfolio to reduce cyclicality.

Q: M&A opportunities?

A: Targeting $10 million acquisition targets, using existing cash, and 50% bank financing available for profitable companies.