BOS Better Online Solutions Ltd. Q4 FY2024 earnings call

• BOS has three divisions: Robotic (automates inventory), RFID (optimizes inventory management), and Supply Chain (integrates components).
• Supply Chain division grows by expanding integration capabilities, doubled engineering team, tripled represented manufacturers, serves global defense leaders.
• RFID division provides inventory management solutions with recurrent revenues from service contracts and consumables, serves top-tier enterprises in Israel.
• Robotic division offers custom and off-the-shelf robotic solutions, 90% of projects in defense sector, preparing first robotic production line in Europe.
• Financials: As of Dec '24, total assets $34M, equity $21M, cash $3.6M.
• Operational results: Year '24 at $40M, aiming for $44M and $2.5M net income in 2025, 10% growth.
• Growth strategy: Strengthen proposition (broaden defense offerings, expand RFID salesforce) and expand overseas (leverage defense client base, $4M overseas sales in 2024).
• Valuation: Market cap $23M, enterprise value $21M, trading at discount vs broader market.
• Investor relations: Partnered with US IR firm, increased outreach, daily trading volume up from 4,000 to 58,000 shares.

BOS operates across three divisions: Supply Chain, RFID, and Robotic. The Supply Chain division integrates franchise electromechanical components into defense and high-tech companies' products, with growth driven by expanding integration capabilities and serving global defense leaders like Israel Aerospace Industries, Elbit Systems, and Rafael. The RFID division enhances inventory management with proprietary software and off-the-shelf equipment, generating recurrent revenues from service contracts and consumables. The Robotic division automates labor-intensive tasks, with 90% of robotics projects serving the defense sector, and has a flagship client in Elbit Systems. Revenue details: Year '23 had $44M, year '24 stabilized at $40M, aiming for $44M in 2025. Revenue contributions: Specific percentages not explicitly stated but each division has distinct roles.

• Aiming for $44 million in revenues and $2.5 million in net income for 2025, a 10% year-over-year increase.
• Backlog rose 35% to $27 million at end of 2024.
• Robotic division preparing first installation of robotic production line in Europe in first half of 2025.
• Growth driven by exposure to booming defense sector, with Israel defense budget up 73% and Europe's up 16% year-over-year.

• Forward-looking statements subject to risks and uncertainties including product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and effect of accounting policies.

Q: Good morning, Eyal. Congratulations on a strong quarter. Just wanted to talk to you about if you could give some guidance. I know you said you had a new robotics line starting in Europe. Can you talk about your defense business in Europe and how that has been affected by the war in Ukraine?

A: Yeah. Actually, we don't have direct sales in Europe. We are aligning with our major client in Israel, Elbit System, Israel Aircraft Industry and Rafael which are exporter and the global leaders in the defense segment. And usually when they have a contract overseas, we are getting into the picture because part of the production of the product sold must be produced locally in the customer site. And in that case our supply chain division provide to the local subcontractor components and our robotic division provide automatic production line in case it needed if it's a duplication of for example of a site in Israel. So, this is the business model in Europe, overseas in general.

Q: Okay. Thank you. And also in your valuation, I know you didn't mention the tax loss carry forward. By looking at your financials, I believe you have over a $60 million tax loss carry forward which would equate to $10 a share. Is that correct, or am I missing something?

A: Yeah. We have approximately $30 million in carry forward tax losses which could provide up to $6 million in future tax saving assuming a 23% tax rate. And as a conservative measure, we recognize only $1 million of this potential benefit as an asset in the fourth quarter of the year -- of this year out of the $6 million. But on the other hand, this income didn't affect on the bottom line because we recorded an impairment charge of $1.2 million related to goodwill. So, this resulted in net impact on this quarter on this year in year '24 of $200,000 on the net income of year '24, because of an increase of $1.2 million in operating expenses due to the impairment of goodwill that offset by $1 million in tax income related to the tax deferred assets of $1 million.

Q: Okay. Thank you. And then just a last question. I noticed recently you had brought on the head of procurement from the IDF from 2017 to '23. Do you expect him to be able to bring in -- help bring in additional defense contracts for BOS? And if so, will you update your guidance during the year?

A: Yeah. I think we as a strategic decision several years ago, we focused -- we have been focused on the Defense segment. And I think it will be a major element in helping us to capitalize the opportunities in this market, to guide us to lead us in this market. And absolutely, if there will be any significant development during this year. So, we will give an update.