B.O.S. Better Online Solutions (NASDAQ:BOSC) said on its Q1 2026 conference call that accelerating demand tied to defense spending, supply chain automation and international expansion is supporting a stronger revenue outlook for the year, even as currency pressure is weighing on profitability.
In prepared remarks led by Claude, the company described B.O.S. as operating through three divisions: robotics, RFID and supply chain. The robotics division focuses on replacing manual labor with automated inventory-handling solutions, while the RFID division supports tracking and end-of-line automation, including sorting and packing. The supply chain division integrates franchised electromechanical components into customers’ products.
Backlog and Orders Support Higher Revenue Expectations
The company said its backlog stood at ILS 31 million as of March 31, 2026. Combined with first-quarter revenue, management said B.O.S. had reached ILS 42.4 million, or 83% of its full-year revenue target, after the first quarter. As a result, the company now expects to exceed its previously announced annual revenue target of ILS 51 million.
Despite the stronger revenue outlook, B.O.S. maintained its full-year net income target of $3.6 million. Management cited the depreciation of the U.S. dollar against the Israeli shekel as a pressure point on profitability.
The company said it is responding by accelerating revenue growth and working to improve gross profit margins. B.O.S. reported that its gross profit margin rose to 24.9% in the first quarter from 23.9% in the prior-year period. Management also said backlog increased 29% during the first quarter, from $24 million to $31 million.
Defense Demand and India Expansion Highlight Growth Drivers
B.O.S. identified three major tailwinds supporting demand. The first was the global increase in defense budgets, which the company described as a long-term structural shift. The second was replenishment and expansion of Israel Defense Forces inventory following the conflict that began in October 2023. The third was India’s emergence as a subcontracting hub for global defense programs.
Management said the India opportunity is beginning to produce meaningful orders. In the first quarter of 2026, B.O.S. received $3.3 million in orders from Indian customers, compared with $172,000 in the same quarter last year. The company appointed an Indian representative company in March 2026 to establish a dedicated local presence.
During the question-and-answer session, an analyst asked what was driving the early success in India. Management said the first-quarter orders reflected work done in the field by the company’s Israeli team. The company said it expects a local team in India to help accelerate participation in bids and broaden the customer base.
Asked whether B.O.S. could replicate the India model in other countries, management said it has connections with two subcontractors in the United States and has received revenue from them this year. The company also said it is examining additional opportunities in the Far East, particularly in locations where Israeli defense companies such as IAI and Elbit are active.
Acquisition Strategy Emphasizes Profitability and Fit
B.O.S. said it is building an acquisition pipeline and has the financial flexibility to pursue deals. The company reported shareholders’ equity of $29 million and $9.5 million in cash net of loans.
Management said it is targeting companies valued at up to $20 million. The company identified two key acquisition criteria: a proven record of profitability and consistent growth, and a strategic fit that deepens or expands B.O.S.’ offerings to existing customers.
On financing, B.O.S. said approximately half of each acquisition would be funded through long-term bank loans, with the remainder coming from company resources. Management said it does not expect shareholder dilution.
Currency Pressure and Margin Efforts
In response to a question about the weaker U.S. dollar versus the Israeli shekel, management said B.O.S. is using hedging on the balance sheet but not on the profit-and-loss statement. The company said long-term currency pressure is best addressed through greater business efficiency.
Management said that approach rests on two pillars: increasing sales prices and gross profit margins, and growing the business. The company pointed to first-quarter backlog growth and margin improvement as signs of progress.
Asked about drone-related defense applications, management said B.O.S. components are not yet used in drones. The company said it is working to identify manufacturers whose products could be represented and embedded in customers’ products.
RFID Expansion Remains a Focus
Analysts also asked about the RFID division, including its profitability and expansion into healthcare and defense. Management said the RFID division worked only partially during March, which hurt gross profit margin because fixed costs remained while revenue was lower. The company also said the dollar’s depreciation increased labor costs because the cost of goods includes significant workforce expenses, including lab and warehouse teams.
B.O.S. said it expects to begin seeing the impact of gross margin improvement efforts in the second quarter, assuming no renewed escalation in the conflict. Management said the RFID division should show improved results in the second quarter.
On expansion, management said B.O.S. has put a team in place to expand RFID into defense and hired an outside company to help navigate the process and shorten the timeline. For hospitals, management said the company has not yet signed a contract but is assembling the necessary team and expects to begin expansion this year.
Management also addressed investor awareness and valuation in the prepared remarks, saying B.O.S. trades at book value while the Russell 2000 trades at approximately 2.6 times book value. The company said its price-to-earnings ratio is roughly 11 times, compared with 22 times for the index. Management said it believes the gap exists largely because not enough investors know the company’s story.
About B.O.S. Better Online Solutions (NASDAQ:BOSC)
B.O.S. Better Online Solutions Ltd. provides intelligent robotics, radio frequency identification (RFID), and supply chain solutions for enterprises worldwide. The Intelligent Robotics Division provides custom-made machines for industrial automation and assembly of products and packing that offer technological solutions. The RFID Division provides hardware products, such as thermal and barcode printers; RFID and barcode scanners and readers; wireless, mobile, and forklift terminals; wireless infrastructure; active and passive RFID tags; ribbons, labels, and tags; and RFID systems for libraries.
