Executive Summary / Key Takeaways

• B.O.S. Better Online Solutions Ltd. (NASDAQ: BOSC) has successfully pivoted its strategic focus towards the booming global defense sector, now accounting for over 60% of its consolidated revenues, driving significant organic growth and profitability.
• The company's three specialized divisions—Intelligent Robotics, RFID, and Supply Chain Solutions—offer technologically differentiated solutions that enhance supply chain operations, with a strong emphasis on custom-built automation and real-time inventory management for defense and high-tech clients.
• BOSC delivered exceptional financial performance in the first half of 2025, with Q2 revenues surging 36% year-over-year to $11.5 million and net income increasing 53% to $765,000, leading to a raised full-year 2025 guidance of $45 million to $48 million in revenue and $2.6 million to $3.1 million in net income.
• Despite strong growth and a healthy balance sheet with $5.2 million in cash and $24 million in equity, BOSC trades at a significant discount compared to broader market multiples and its industry peers, presenting an attractive valuation opportunity.
• Strategic international expansion, particularly in India with a 182% increase in orders from the region, and the first European robotics installation, alongside a growing backlog of $24 million, underpin confidence in sustained future growth, though potential supply chain delays and client-side readiness for robotics installations remain watch factors.

A Strategic Pivot Towards Defense and Automation

B.O.S. Better Online Solutions Ltd., established in 1990 and headquartered in Rishon LeZion, Israel, has evolved into a specialized provider of supply chain optimization and automation solutions. The company operates through three distinct yet synergistic divisions: Intelligent Robotics, RFID, and Supply Chain Solutions. This integrated approach leverages cutting-edge technologies to streamline and enhance complex operational processes for its global clientele. Over the past few years, BOSC has strategically intensified its focus on the defense sector, a decision that is now demonstrably paying off and shaping its growth trajectory.

The global defense industry is experiencing a period of accelerated expansion, driven by geopolitical dynamics and increased national security spending. Israel's defense budget, for instance, surged by an impressive 73% year-over-year, while Europe's defense spending rose by 16%. These trends create a sustained demand environment that directly benefits BOSC's business, particularly through its deep relationships with major Israeli defense contractors like Israel Aerospace Industries, Elbit Systems , and Rafael. The company's strategy involves not only deepening client relationships through complementary offerings but also expanding internationally by partnering with its Israeli defense clients' global subcontractors. This approach generated $4 million in overseas sales in 2024 through the Supply Chain division alone.

Technological Edge: Powering Efficiency and Precision

BOSC's competitive advantage is rooted in its differentiated technological offerings across its three divisions, each designed to deliver tangible benefits in efficiency, accuracy, and cost reduction.

The Intelligent Robotics division develops custom-built robotic cells and integrates off-the-shelf robotic arms from leading brands like Fanuc (FANUY) and Yaskawa (YASKY). These are customized with proprietary mechanical, electrical, and software solutions to automate labor-intensive tasks such as machine tending for production lines and palletizing in logistics centers. This technology directly addresses the defense sector's increasing pressure for faster, higher-quality output, where production often heavily relies on manual labor. The tangible benefits include reduced dependency on human workforce, increased production capacity, and improved accuracy, typically achieving a return on investment within three years.

The RFID division optimizes inventory management by integrating proprietary software with ruggedized, off-the-shelf equipment from manufacturers like Zebra and Honeywell . This system enables real-time reporting of on-site inventory transactions directly to client ERP, WMS, or MES systems. The core benefit is real-time data updates and optimized inventory management, which translates into enhanced operational visibility and control. This division generates recurrent revenues from annual service contracts for hardware and software, inventory counting services, and ongoing demand for consumables like barcode labels and RFID tags. While facing temporary gross margin challenges in Q2 2025, restructuring initiatives are underway, with a return to normalized performance expected by Q4 2025.

The Supply Chain Solutions division integrates franchised electromechanical components into the products of defense and high-tech companies. Its engineering team collaborates closely with customer R&D departments, ensuring seamless integration into innovative designs and generating long-term OEM revenues. A key development is the successful launch of a new cabling and wiring line, which leverages existing client relationships and is proving to be a significant growth engine for revenues in 2025 and 2026, particularly in the burgeoning Indian market. This expansion of offerings allows BOSC to command higher prices and margins, enhancing its overall profitability.

Financial Momentum and Strategic Expansion

BOSC's strategic pivot has translated into robust financial performance. After a record-setting 2023 with $44 million in revenues, 2024 saw revenues stabilize at $40 million, reflecting a return to normalized purchasing patterns post-COVID. Despite this temporary dip, the company maintained its net income target of $2.2 million for 2024, demonstrating effective cost management. The year concluded with a strong backlog of $27 million, providing solid revenue visibility.

The momentum accelerated significantly in 2025. The first quarter marked record revenues of $15.0 million, a 33.1% increase from Q1 2024, and record net income of $1.35 million, surging 82.3%. This exceptional performance continued into the second quarter of 2025, with sales jumping 36% year-over-year to $11.5 million. The Supply Chain division was a primary driver, increasing its revenues by 57% to $8.3 million in Q2 2025. Net income for Q2 2025 surged 53% to $765,000, or $0.13 per share, outpacing revenue growth and indicating improved operational efficiency. EBITDA also increased to $900,000 in Q2 2025, up from $800,000 in the prior year quarter, providing essential operational cash flow.

As of Q2 2025, BOSC's financial foundation appears strong, with cash and equivalents growing to $5.2 million, up from $3.6 million at year-end 2024. This improvement reflects strong operational cash generation, supplemented by $400,000 from warrant and option exercises. The company also boasts $24 million in total equity and zero bank debt, providing significant flexibility for expansion. An increase in deferred revenue to $3.2 million from $2 million at year-end 2024 further signals strong advanced bookings and near-term revenue visibility.

Based on this strong performance and contracted activity, BOSC raised its full-year 2025 guidance. The company now expects revenues between $45 million and $48 million, an increase from its previous guidance of $44 million, representing approximately 16% year-over-year organic growth at the midpoint. Net income guidance was also raised from $2.5 million to between $2.6 million and $3.1 million, reflecting a projected 24% year-over-year increase at the midpoint. This revised outlook is grounded in concrete contracted activity and confidence in converting revenue into bottom-line results through profit leverage.

Competitive Landscape and Strategic Positioning

BOSC operates as a specialized player within the broader industrial technology market, focusing on niche segments where its customized solutions and direct customer engagement provide a competitive edge. While larger, more diversified competitors like Zebra Technologies Corporation (ZBRA) in RFID, Rockwell Automation (ROK) in industrial automation and robotics, and Honeywell International (HON) in broader industrial tech and supply chain solutions possess greater scale and broader ecosystems, BOSC differentiates itself through tailored offerings and deep client relationships.

For instance, in RFID, BOSC's proprietary software and customized integration for real-time inventory management offer a unique value proposition, particularly for complex industrial and defense applications. Against Zebra, which has a strong brand in global retail, BOSC's focus on direct sales and specialized services can lead to stronger customer loyalty in its target segments. In robotics, BOSC's custom-built cells, designed to meet unique client needs and integrate with specific production processes, contrast with Rockwell's broader automation platforms. While Rockwell may lead in technological depth and scalability for large-scale deployments, BOSC's adaptability for specific industrial applications, often integrating RFID for tracking, provides a distinct advantage. Similarly, in supply chain solutions, BOSC's components consolidation and specialized RFID-based systems offer greater efficiency in warehouse settings compared to Honeywell's more diversified industrial offerings.

Financially, BOSC trades at a significant discount compared to its larger peers. Its trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio is 8.88, substantially lower than Zebra's 29.14, Rockwell's 39.82, and Honeywell's 23.53. Similarly, BOSC's TTM Price-to-Book (P/B) ratio of 1.16 is considerably below Zebra's 4.42, Rockwell's 11.16, and Honeywell's 8.36. This valuation gap suggests an attractive upside potential, as highlighted by an analyst report from ThinkEquity setting a target stock price of $5, more than 40% higher than recent trading levels.

BOSC's competitive advantages, or "moats," include its proprietary technology in RFID systems and custom robotics, which translate into tangible benefits like improved accuracy and efficiency for clients, fostering stronger customer loyalty and recurring revenues. Its unique distribution channels, leveraging Israeli defense clients for global expansion, allow it to penetrate international markets without costly overseas sales offices. The company's focus on the defense sector, where production is heavily reliant on labor and demands are increasing, presents a major opportunity for its robotics division.

Outlook, Risks, and the Path Forward

BOSC's outlook for 2025 is optimistic, underpinned by its raised guidance and a growing backlog of $24 million as of June 30, 2025. The company anticipates continued organic growth, particularly from its expanded wiring product line in India, where orders have increased by 182% year-over-year, and the potential establishment of a local office. The Robotics division is also poised for a "great year," with a $3 million backlog expected to be delivered in the second half of 2025, including its first European production line installation through Elbit Systems (ESLT).

However, potential risks warrant attention. The RFID division experienced a temporary decrease in gross profit margin in Q2 2025 due to service line challenges, though restructuring initiatives are expected to restore normalized performance by Q4 2025. Supply chain issues remain a concern, potentially delaying on-time delivery and revenue recognition, as experienced in late 2024. Furthermore, the Robotics division faces some client-side delays, where facilities are not yet ready for installation, which could push revenue recognition. The company's reliance on the defense sector, while currently a tailwind, could expose it to cyclicality if geopolitical conditions shift. Additionally, BOSC recently entered into an at-the-market offering agreement to sell up to $4 million in ordinary shares, which could lead to some dilution for existing shareholders.

BOSC's management is actively exploring M&A opportunities to acquire companies with synergies to its existing businesses, whether in the civil market for RFID or the defense market for Supply Chain. The company's strong balance sheet, with ample cash and zero bank debt, provides the financial flexibility to pursue such strategic initiatives.

Conclusion

B.O.S. Better Online Solutions Ltd. is strategically positioned at the nexus of defense spending, industrial automation, and supply chain optimization. Its focused pivot to the defense sector, coupled with technologically differentiated solutions in robotics, RFID, and supply chain components, is driving robust organic growth and profitability. The company's exceptional financial performance in the first half of 2025, reflected in its raised full-year guidance, underscores the effectiveness of its strategy and operational execution.

Despite its strong fundamentals, healthy balance sheet, and clear growth trajectory, BOSC trades at a compelling valuation discount compared to its industry peers. While potential risks such as supply chain disruptions and client-side delays exist, the company's growing backlog, strategic international expansion, and commitment to technological leadership provide a solid foundation for sustained value creation. For discerning investors seeking exposure to a specialized, profitable, and undervalued player in the expanding defense and industrial technology sectors, BOSC presents a compelling investment thesis.