BOS Better Online Solutions Ltd (BOSC) 2025 Q1 法說會逐字稿

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 two 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 four 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 10 times 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.

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

Yeah, 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.

Thank you. And do you see the continued growth coming from the defense sector? I know you brought on the former procurement officer from the IDF, the 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.

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

Oh, thank you, dude.

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

In the backlog.

The backlog dropped to $22 million.

Yeah, 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, thank you. 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.

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.

Okay. Thank you very much.

You're welcome. Any further questionS?

I have another question and y'all. Are you guys going to be in the United States anytime soon to do industrial relations conferences, anything like that?

Yeah, first, we plan to participate in a virtual con conference in the coming months. Matt the, our IR firm person named arrange it and, of course, we plan a visit in the US 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 future M&A.

Yeah, thank you.

You're welcome.

Hi, yeah, do you hear me?

Yes, Suki, how are you?

I'm fine. How are you? Hey? I want to ask about the backlog. The backlog is for 9 months, 6 months, 12 months, for how long is the backlog, and besides how do you see the second quarter, what you can say, which we are two-third 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.

Yeah, 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're prepared to wait maybe one or two more quarters.

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

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

Yeah, usually we get an outlook for a year, not for a quarters, so.

Okay.

Yeah. But you can try, you try it every quarter, so try again next quarter to ask.

Okay, great with that. I hope you will continue the same way because it is a magnificent quarter, so you have to repeat on it.

We will try, yeah, there are peaks. It's very hot market.

And we are trying to do the, to do the best to capitalize all those opportunities that we have on the table with our, a different client that we have great relationship and we are trying to do the best.

Okay. And thank you very much.

Thank you. 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.