B.O.S. Better Online Solutions(BOSC -0.20%) reported second quarter 2025 results on August 21, 2025, with revenue up 36% year over year to $11.5 million and net income rising 53% to $765,000. The company raised full-year revenue guidance to $45 million-$48 million and net income guidance to $2.6 million-$3.1 million, reflecting strong supply chain division growth and robust defense sector demand. The following highlights provide insight into customer concentration, backlog strength, and margin dynamics based on management’s commentary.

Defense sector drives B.O.S. Better Online Solutions growth

The supply chain division delivered a 57% year-over-year revenue increase to $8.3 million, with over 60% of consolidated revenue now coming from defense industry customers such as Rafael, Elbit, and Israeli Aircraft Industry. This concentration is expected to increase further in 2026 as geopolitical factors and military investment sustain demand.

"It's more than 60% of our total consolidated revenues. And we anticipate that it will grow in 2026 because of the growing demand in this defense segment."
-- Eyal Cohen, CEO

This reliance on defense customers provides strong revenue visibility but also exposes the company to fluctuations in Israeli defense spending and contract renewals, increasing both opportunity and risk for future results.

Backlog and liquidity position strengthen outlook for BOSC

Contracted backlog rebounded to $24 million as of June 30, 2025, after a temporary decline to $22 million at March 31, 2025, following a record-setting first quarter. Cash and equivalents rose to $5.2 million from $3.6 million at year-end, and total equity reached $24 million, supporting both organic and inorganic growth initiatives.

"Our backlog has grown back to $24 million as of June 30, this year, giving us increasingly clear visibility into the back half of the year. Our financial foundation has never been stronger. Cash and equivalents grew to $5.2 million, up from $3.6 million at the year-end. Combined with $24 million in total equity, we have the resources to execute our expansion plans without compromising operational stability."
-- Eyal Cohen, CEO

The improved backlog and balance sheet enhance medium-term earnings visibility and provide flexibility for acquisitions or accelerated internal investment without increasing leverage risk.

Gross margin and RFID division challenges impact profitability

Gross profit margin narrowed to 23% from 26% in the same quarter last year, with the RFID division’s margin falling to 19.1% from 21.1% due to service line issues and a $700,000 non-cash goodwill impairment, partially offset by currency gains. Supply chain division margins normalized to 24% versus 28% in the second quarter of 2024, as the prior year benefited from an unusually favorable product mix.

"Our overall gross profit margin was 23%, compared to 26% in the same quarter last year. This quarter's margins were a little lower than target, while last year was higher than typical. We are aiming to achieve a balance in the middle where we can deliver sustained performance. Let me break this down by division so we can understand how we can drive even better performance down the road. Our RFID division saw a gross profit margin temporarily decrease to 19.1% from 21.1%. This was primarily due to certain service line challenges that we have already identified and addressed. We've implemented restructuring initiatives, and we expect this division to return to normalized performance levels by Q4 2025."
-- Moshe Zeltzer, CFO

While short-term margin contraction and remediation costs weigh on profitability, management’s corrective actions and normalization targets for the RFID division suggest potential for long-term margin recovery and improved operating leverage.

Looking Ahead

Management raised full-year 2025 revenue guidance to $45 million-$48 million and net income guidance to $2.6 million-$3.1 million, representing anticipated 16% and 24% year-over-year growth at respective midpoints compared to fiscal 2024 (ended December 31, 2024). The outlook is supported by a $24 million contracted backlog, strong defense demand, and expected margin recovery in the RFID division by late 2025. No new quantifiable targets for international expansion or M&A were provided, though direct entry into the India market remains under evaluation.