B.O.S. Better Online Solutions

Ladies and gentlemen, welcome to BOSQ2 Investor Summit. Thank you for joining us today. Before we begin, a brief reminder that this call contains forward-looking statements relating to BOS's business, financial condition, and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such statements include, but are not limited to, matters relating to product demand, pricing, market acceptance, economic conditions, and technology development, as further detailed in the company's filings with the various securities authorities. Before I turn things over to management, I would like to give a brief recap of the results we just released. The growth momentum continued. Second quarter 2026 revenue grew 29% year over year, helping offset a softer first quarter of 2026 and bringing trailing 12-month revenue to the same level as our record 2025 revenue. We anticipate that full year 2026 revenue will exceed full year 2025 revenue. Our backlog remained at a record $31 million as of the end of the second quarter of 2026. Approximately $20 million of the backlog is scheduled for delivery by year end. Together with first half revenue, this amount represents approximately 91% of our full year 2025 revenue. Despite the increase in our operating expenses due to the dollar's devaluation, We believe we will offset this through revenue growth and improved gross profit margins, and as a result, we expect net income for full year 2026 to exceed $3.6 million we achieved in year 2025. Our balance sheet is solid. Shareholders' equity stands at $30.9 million, That gives us the flexibility to capitalize on organic and M&A opportunities. B.O.S. is a company with a growing backlog, accelerating revenues, a clean balance sheet, and exposure to some of the strongest structural trends in the global economy. Defense spending, automation, and supply chain modernization. And yet, B.O.S. currently has a market capitalization Thank you for watching. Now I will turn the call over to Eyal Cohen

Good morning, great to see you again in our quarterly conference. Joining me today is Moshe, our Chief Financial Officer. I am pleased to see strong participation today, including many new names following the recent virtual conferences we participated in during May, June and July. Let me start by sharing a few thoughts on how the business is progressing. I am very pleased with our financial performance, financial position, management team, board members, and the growth opportunities in front of us. This has given us the confidence to grow year after year, and we remain focused on continuing that trend. I am pleased that the commercial market in Israel has recovered, as reflected in 17% growth in the RFID revenue in the first half of the year, as compared to the comparable period. Demand in the defense segment continues to be strong, as reflected in our record backlog, most of which relates to our supply chain petitions. The penetration of our robotics division into more factories in the defense segment is going very well. We are successfully implementing AI RubinBot for internal use to improve our operational efficiency and in software development for commercial use, commercial sale. I believe these steps will yield improved operational margins

On the financial front, despite 30% growth in the total revenue between Q1-26 and Q2-26, cash remained roughly unchanged at $10 million. We grew without needing to burn cash, which is a strong indication of highly efficient cash management, with our vendors helping to finance our clients. We will deploy this cache to support our external growth through M&A. On the M&A front, we have several opportunities on the table that we have been evaluating carefully.

On the IOS side, in May, we presented at the MicroCAD Club Virtual Summit, and in June, we participated in the iAccess Alpha Virtual Summit. In July, We hosted our first investor webinar. We are going to participate in the CDOTI conference scheduled for the end of September. In September, we will also join a non-deal roadshow to Think Equity clients. During July and August, we released three announcements on a major contract. In recent months, we have become active online, on Facebook, LinkedIn, X and via email. And we plan to increase our investment in those channels. I will send you the link to our pages and you are welcome to follow and share. We are hopeful those activities will help close the gap in our valuation. With that, I want to thank you again for your continued confidence and support in both As we carry this momentum into the second half of the year. Thank you for listening. We will now be happy to open the call for questions. Please unmute yourself if you want to ask a question.

Good morning, Eyal. Good morning, Moshe. Congratulations on a fantastic quarter. Regarding one of your recent orders, it was in the semiconductor industry. Is that kind of a one-time order, or do you see more orders occurring from that industry?

We have to understand that once we announce on the contract that relates to the supply chain division, on the back of it, there is a design work of embedding our components into the client's Thank you very much. We are very pleased with the progress of our team in India. They are doing a very good job. They are reaching to a client that we have never been in contact with. And I am sure that it will yield to additional, it will support the growth of BOSS in India in year 2017.

Okay, and my final question is, referring to M&A, you still plan to make any M&A activity non-dilutive to shareholders and finance that with existing cash and bank loans, is that correct?

That's correct, Todd. Actually, we are planning to do an M&A, but as you know, in the recent two or three years, we have not succeeded to To close the deal because it doesn't match to our criteria, especially for the first criteria that it should be a company with a solid history of profits and a positive outlook. We have several opportunities on the table. We are checking it. And we are in negotiations with several companies. hopefully one of them will be closed and of course we have the financial policy how to finance we have the policy how to finance those divs as I mentioned before we have like 10 million dollars in the cash in hands so if we are buying a profitable company there is no reason why the bank won't participate at 50% of the financing so we actually can reach to Maximum acquisition value of $20 million. So we are set.

Thank you. I'll hop back in the queue. Congratulations again on a great quarter. Thank you.

Thank you, sir. I'm looking forward to meet you in Israel.

Thank you.

Good morning, Eyal. It's Scott Weiss. How are you? Fine, thank you. How are you, Scott? Good, thanks. Nice quarter. My question is on the RFID division. It was up a nice 17.5% year-over-year. It bounced back. Was that a function of the easy comp year-over-year, or are you seeing some kind of a positive change there?

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

And the same question for the supply chains segment. Revenues were down 6% or so. Is there any insight you can give us as to why it was down?

No, as you saw, the fluctuation in this division was significantly high. As you remember, in the first quarter, we were... Below the comparable quarter last year in about, if I remember correctly, it was like 17% less. And then here in the second quarter, we succeeded to close the gap. So we know that our clients in the defense segment will buy our components, but we are not controlling on the rate of consumption. So there could be fluctuations. Because of that, I am not giving importance to the 5% decrease. More than this, we have a very strong backlog, that $31 million, which is a record backlog. By the way, despite 30% growth in revenues from Q1 to Q2, the backlog still remains. On the same level of $31 million, it was at the end of the first quarter. Consolidated. Yeah, consolidated, sure. So out of the $31 million, we have $20 million for delivery by the year end. So we did the calculation, and based on that, we provided positive outlooks that we will exceed the $51 million in year 26.

Okay, great. Thank you.

Thank you, Scott. Hi. Hi. You can go ahead. It's okay. Okay.

It's going to be the first one. Yes, please. Hi.

Hi, this is Kevin from Online School Partners. Thanks for taking our questions. As a follow-up on M&A, could you speak to... What are the gating factors, and it would be finding targets, price expectations, or the financing capacities?

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

Yeah, sure. As a follow-up to the earlier M&A question, Could you kind of speak to what are some of the gating factors on kind of closing a deal? Would that be finding targets, price expectations, or the financing capacity?

Yes, so the criteria are, as I mentioned, that the cap of acquisition of investment will be $20 million. The criteria that there should be a synergy to our core business and you know the synergy could be a range of synergy, how much is 50% synergy, 100% full synergy, so we have flexibility on that issue, on that criteria. Regarding the financial position, the financial performance or the performance of the company, so we are checking that in the Eyal Cohen, Avidan Zelicovsky, Moshe Zeltzer, Danny Lavi, Hagit Shamir The thing that we have on the table, the multiple on the EBITDA is between 5 to 6. This is the range of valuation we are talking about.

Got it. Thanks. And then as a follow-up, you've announced about 4.7 million in new orders since late July on top of the 7.1 million from India and the U.S. through May. and your guidance has stayed pinned around that 3.6 million range, which is flat to last year. Could you walk me through that bridge? Is it incremental revenue being absorbed by Sheckle and the Knicks? And then specifically, what has to change? Would that be FX pricing or Knicks for this momentum to break through to the bottom line in 2027?

Yes, so in this PR, this press release, we just announced that we will exceed the $3.6 million, and usually we don't provide exact percentage of growth. Usually we use that we will exceed, like we are doing in the revenue, that we will exceed the $51 million, and we will exceed the $3.6 million. But still, there is a challenge We are facing with the devaluation of the U.S. dollar. As you saw in the first half of the year, it increased our operational expenses by about $600,000. Yeah, it increased the operational expenses by $600,000. So on an annual basis, it's like $1.2 million. So we have to find a way to compensate it in order to... generate profits that will be higher than year 2025, higher than the $3.6 million. So we can work on internal efficiency and we are doing it mainly with the assistance of AI tools to improve our professional efficiency, but to improve our professional efficiency by $1.2 million a year, it will be very tough. So we are doing it by Operational Efficiency by increasing the gross profit margin of our products in order to compensate and we are increasing our revenues. So if you increase the revenues and you walk with all those points together, this is an assumption for our outlook for exceeding the $3.6 million.

Got it. Thanks a lot.

Thank you, Kevin.

Hi, Eyal. Hello. Hi. James Cahn here. In a previous conference call, you suggested that you were open to the possibility of a new name for your company because Better Online Solutions is awkward at best and a little inaccurate and a little bit silly. So I've been working on this and giving it some thought and consulting the people. And I believe the best solution is an organic one, something that you're already known by. So I suggest BOSK, your symbol, as the name for the company.

I totally agree with you, I think. You know why BOSK? Because it's also BOSCOIN. So it's okay. It's great. Yeah, but I agree. All the investors know the name Bossy. They know the ticket. I certainly agree with you. And if I won't get any other recommendations from our shareholders that can send me emails and other suggestions, I think we will go for it only.

Thank you.

Great idea. Thank you. Any further questions?

Hi, this is Igor Novgorodkov, and nice talking to you again, especially after a strong quarter. I want to touch upon gross margins. So the gross margins, I don't have it really in front of me right now, but they seem to be kind of being a little bit flat while your revenue is growing. Is gross margins affected by FID versus supply chain mix? Maybe you can give us, I know you don't disclose them exactly, but maybe you can walk us a little bit through that. Or are they affected by FACTS? Do you think the gross margins can improve while your revenue is growing?

I think the gross margin, we are hoping that the gross margin will improve because what I just mentioned before, because we have to compensate on the devaluation, the effect of the devaluation of the US dollar. So we are working extensively with our clients to increase the sales price. I have to tell you that since the beginning of the year, all the sales person, all the sales team increasing prices in order to compensate it. and I am following month by month, we are following month by month. So, our expectations are that our gross profit margin, go ahead, will increase. But, in certain cases, when we have, there could be a huge transaction, especially in the supply chain, for a certain kind of product that the gross profit margin could be lower. It's a price of, it's a matter of negotiation with a client. So, and I hope it won't, it won't decrease, it won't lower the average of our, it won't lower the average of the gross profit margin that we're expecting. So in general, we're expecting higher gross profit margins.

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

So, I mentioned the supply chain because in the supply chain there are huge transactions. There could be a transaction like of $2 million, $1.5 million that can affect significantly on a specific quarter. In the RFID, the transactions are much lower. It could be like $1.25 million, $100,000, $1.5 million maximum. So, because of that, I mentioned just the effect of certain transactions of the supply chain.

For RFID division, apart from obviously the issues that Israel has been in various stages of war in the last few years, you had specific companies, I remember that last year you were restructuring the RFID division. Is this restructuring over, or do you expect some significant further improvements, or how much did it change from the last year?

Yeah, it was important. It's not a company under the RFID, it's a unit under the RFID. We have been doing a great work there and a great progress and absolutely the performance now are much better than we had in the comparable period last year. But still we have work to do. But this unit will be profitable in year 26 as opposed to year 25. The certain unit in the RFID, the RFID in general is a profitable unit, is a profitable division. The certain specific unit that caused us some losses, decreased our net income in the RFID division, I think now the situation is much, much more better.

Is RFID more or less a function of if Israel is in a state of war or if Israel is quiet because the RFID has done much better in Q2 than in Q1? Or there are other significant factors?

I think the RFID is 100% affected by the Israeli commercial market. As I mentioned before, we are in the process to to penetrate with RFID to the defense segment. And we hired a consulting company special for that mission. And we also walk into penetrative hospitals, which is a growing segment in Israel and very stable, like in all other places in the world. We are searching acquisition in that field. It's very tough. We are not finding. We don't even have the opportunity on the table. Another option is to set a team to build it from zero, from sketch. And by that, reduce the exposure of the RFID division to geopolitical events that put on hold the commercial segment in Israel.

Okay, thank you very much. I don't have any more questions.

Thank you, Igor.

Thank you.

Next. Any other further questions? Okay. Thank you for your time and attention. Feel free to reach out if you would like to schedule with us a one-on-one session. Thank you very much. It was a pleasure to see you again today.

Thank you. Have a good day.