Astigi: VMI, customer concentration and whether revenue really becomes cash

The main Astigi article focused on how to read 2025 after the manufacturing step-up and the weaker second half. This follow-up isolates the place where distribution still determines the quality of the result: the VMI model, customer concentration, and whether revenue really turns into cash or simply sits longer on the balance sheet.

This is the crux. Astigi is not just brokering between supplier and customer. In stock sales in general, and under VMI in particular, it buys components into its own inventory, sells them to the customer at a fixed spread, and gives that customer both commercial flexibility and credit. Revenue can therefore look clean in the income statement while the underlying economics remain much heavier: inventory can get stuck, and customer credit still has to be financed.

The good news is that 2025 did produce cash. Net receivables fell to ILS 41.7 million from ILS 53.6 million, average receivable age tightened to 89 days from 104 days, and operating cash flow reached ILS 32.4 million against net income of ILS 13.0 million. The less comfortable part is that the risk allocation did not change. Inventory rose to ILS 47.1 million, the company still gives customers 96 average credit days versus only 47 days from suppliers, and the top two customers already account for 32% of sales versus 18% a year earlier.

VMI does not take risk off the balance sheet

VMI is a deeper version of stock sales. The company defines it as an extension of the inventory-sale model in which three parties are tied together: Astigi, its main customer and its material supplier. Commercially, it is a convenient structure. The supplier provides delivery flexibility, Astigi buys at prices set between the supplier and the global corporation to which the main customer belongs, and that main customer gets local supply from Astigi's inventory at a pre-agreed fixed spread.

But that is exactly where the economic burden sits. Astigi can bring forward, delay, change or cancel items in the purchase order placed with the supplier, which is a meaningful safety valve before components are shipped. Once the parts leave the supplier's warehouses, the risk is already Astigi's. The items are its property, and if the customer ultimately does not buy items that had entered its forecasts, the inventory remains fully owned by Astigi. Credit risk does not disappear either. The company explicitly says that under VMI it bears the credit risk on the main customer just as it does in regular inventory sales.

That matters because the model sells three things at once: availability, flexibility and credit. In inventory sales, customers benefit from shorter lead times, the ability to buy smaller quantities, payment in shekels and more flexible payment terms. Astigi is the one financing that convenience.

The gap improved in 2025, but it did not disappear. The company grants customer credit that is common in its market, current plus 30 to 120 days, while it receives only 30 to 60 days from suppliers. In practice, average customer credit days fell to 96 from 106, but average supplier credit days also fell, to 47 from 50. Astigi is still financing roughly a month and a half of working-capital gap. That credit is neither collateralized nor insured: customers do not provide security, and the credit is not covered by trade-credit insurance.

2025 did generate cash, but through receivable release

Looking only at net income misses what happened on the balance sheet. The company finished the year with ILS 13.0 million of net income, but operating cash flow reached ILS 32.4 million. The main reason was not a sharp drop in inventory, but a ILS 12.0 million decrease in customers and other receivables. Inventory actually increased by ILS 2.2 million, while payables and accrued expenses added only ILS 0.5 million. So 2025 gave a partially positive answer to the cash-conversion question: the cash did come in, but mainly because the company released customer credit.

The full cash picture also looks better than it seems if one looks only at the dividend. On an all-in cash flexibility basis, ILS 32.4 million of operating cash flow covered ILS 2.8 million of reported investment outflows, ILS 4.1 million of loan repayments, ILS 1.0 million of lease principal and a ILS 15.0 million dividend, and still left roughly ILS 9.5 million before the company's share issuance.

This point matters because it blocks an overly simple conclusion. It would be wrong to say that under VMI revenue does not become cash. In 2025 it clearly did. But it would be just as wrong to say that the question is now settled. The conversion depended on tighter collection discipline, not on the model becoming lighter in working capital.

The liquidity cushion is also real. At the end of 2025 the company held ILS 75.3 million of cash and cash equivalents, and about ILS 85 million when marketable securities are included. Working capital stood at ILS 137.1 million. That means the company can carry the model without immediate liquidity stress. It does not mean the model has stopped being balance-sheet heavy. Those are two different things.

Customer concentration makes the cash question sharper

This is where the second variable comes in, and it may be the more important one for readers trying to judge revenue quality. In 2025 Astigi's top two customers already represented 32% of sales, versus only 18% in 2024. Customer A alone represented 22% of sales, customer B 10%, and customer C another 9%. At the same time, year-end receivables included two customers with more than 10% each of the receivables balance, at ILS 8.0 million and ILS 4.3 million. The company does not say whether these are the same customers shown in the revenue table, so the two disclosures cannot be fused into a stronger claim. Even without that fusion, the message is clear: the exposure is no longer truly diversified.

That concentration does not automatically mean there is an immediate collection problem. In fact, the 2025 receivables book looks cleaner: ILS 37.3 million of trade receivables by aging were not past due, and the expected credit-loss allowance stood at only ILS 496 thousand. But customer concentration changes the quality of working capital even when nothing is written off. When revenue depends more heavily on a small set of customers, cash conversion becomes less diversified and less resilient to forecast errors, delayed inventory pulls or changes in purchasing behavior.

The same logic applies to backlog. Inventory backlog at the end of 2025 fell to ILS 69.0 million from ILS 89.5 million a year earlier, although by the time of the report publication it had already reached ILS 94.9 million. That supports short-term visibility, but it does not cancel the risk structure. Thirteen percent of year-end backlog includes customer orders with discretionary cancellation rights. The company stresses that actual use of those cancellation rights has historically been negligible. That is reassuring, but it still means that part of the demand investors are looking at is not fully hard.

Bottom line

The question of whether revenue really becomes cash got a positive answer in 2025, but not a complete one. Astigi released customer credit, shortened receivables age and produced operating cash flow that comfortably exceeded net income. In that sense, 2025 was proof that the model can work.

But it was not proof that the model became light. VMI still leaves inventory and credit risk with Astigi, the credit-day gap is still mostly financed by its balance sheet, and two customers already represent almost a third of sales. Over the next few quarters the market will not need to see just more backlog. It will need to see that this backlog turns into revenue without trade receivables climbing back up and without inventory weighing more heavily on the balance sheet. That is where the quality of Astigi's growth will be judged, much more than on the revenue line alone.