Lodan 2025: The Israeli MEP backlog looks large, but how much of it is actually close to revenue and collections

What This Follow-Up Is Isolating

The main article made a simple point: Europe is carrying the earnings, while Israel is carrying the backlog. This follow-up isolates one question only: how close the Israeli backlog, and especially the MEP backlog, really is to revenue and collections, rather than simply looking large because a meaningful share of it sits far out in time.

The good news is that this is real backlog. Management also says the customer's right to terminate work early has not been exercised in recent years in this activity, and that any future cancellation rate is expected to be negligible. The less comfortable part is that backlog is not automatically the same thing as near-term revenue, and certainly not the same thing as near-term profitability. Once the timing, payment mechanics, and segment economics are broken apart, the picture becomes more restrained.

Three points matter right away:

• The near-publication backlog update adds very little new commercial information. The backlog fell from ILS 235.7 million to ILS 211.8 million, but the entire decline is exactly the Q1 2026 bucket, while the rest of the schedule stayed unchanged.
• Most of the backlog sits beyond 2026. At year-end 2025, around ILS 149.1 million, about 63% of the backlog, was assigned to 2027 and beyond. Near publication, that exact component remained unchanged.
• This backlog sits on top of a weaker segment. Israeli engineering revenue fell from ILS 181.3 million in 2023 to ILS 153.2 million in 2025, while operating profit fell from ILS 12.4 million to ILS 5.0 million.

The Backlog Is Large, But Most Of It Sits Far Out

The headline number is ILS 235.7 million of Israeli engineering backlog at the end of 2025. But once the timing buckets are examined, only ILS 86.5 million of that amount was scheduled for all of 2026, and only ILS 23.9 million of that was assigned to the first quarter. The remaining ILS 149.1 million, by far the largest bucket, was already pushed into 2027 and beyond.

That matters, because the near-publication update can sound like a fresh demand check. That would be too generous a reading. In practice, the near-publication backlog stands at ILS 211.8 million, and the remaining schedule is exactly the same as the year-end schedule from Q2 2026 onward: ILS 23.4 million in Q2, ILS 19.9 million in Q3, ILS 19.3 million in Q4, and ILS 149.1 million after 2026. Management explicitly says there were no material changes in the backlog relative to year-end 2025.

In other words, the near-publication update mainly shows that Q1 moved out of the backlog table and into the execution year. It does not show a fresh wave of orders, and it does not improve the timing quality of what remains.

The most important sentence in this section is that the portion scheduled for the period after the end of 2026 is mainly attributed to MEP projects, which are characterized as long-term projects. That turns the issue from one of sheer size into one of backlog quality. Backlog concentrated in 2027 and beyond gives visibility, but it is less helpful if the question is near-term revenue conversion, collections, or margin recovery.

One more caveat matters here. In these contracts, the client is generally allowed to instruct a stop to the work, and in most cases the company is entitled only to payment for services already performed up to that point, without compensation for lost future profit on the unperformed portion. Management says this right was not exercised in recent years and that cancellations should remain negligible. That is positive, but it also means the backlog is not a hard revenue lock. It still depends on continued execution and continued project progress.

In MEP, Most Of The Money Arrives Before The End, But There Is Still A Cash Tail

This is the most delicate part of the thesis. It is easy to look at long-cycle MEP projects and assume that if the projects sit far out on the schedule, cash must sit just as far out. That is not quite right. The standard payment terms in MEP are milestone-based, and in most cases 80% to 90% of the consideration is paid by the completion of detailed design. Only the remaining 10% to 20% is paid after the building or facility has been completed, when the MEP activity is providing upper-level supervision.

That cuts both ways.

On one hand, it reduces the fear. Not all MEP backlog waits until final delivery to become cash. A large part of the consideration is supposed to arrive earlier, during the design phase. So it would be wrong to say that the entire long-dated backlog is not collectible over the coming years.

On the other hand, the tail still matters, especially when most of the post-2026 backlog is attributed to MEP. If a project is delayed, frozen, or simply progresses more slowly in the field, the last 10% to 20% moves with it. That means that even if the design work itself is progressing well, part of the final collection depends on the customer's construction pace and the contractors' execution pace, not only on Lodan's own work.

Elsewhere in the same section, management says average customer credit in Israeli engineering stood at about 75 days in 2025, versus about 78 days in 2024. That is a small but important detail: there is no evidence here of a broad collapse in collection discipline. If anything, the average credit profile improved slightly. So the real pressure point is not a widespread receivables problem. It is the contractual structure of MEP projects and the fact that a large share of the backlog sits farther out in time.

The precise formulation of the issue is this: the Israeli backlog looks large, but its proximity to recurring revenue and immediate cash is weaker than the headline figure suggests. Not because all the consideration is deferred to project completion, but because a large share of the projects themselves sits far out in time, while the final slice of each project also depends on physical execution progress.

The Backlog Does Not Prove Quality While The Segment Itself Is Weakening

If this long-dated backlog sat on top of a segment showing clear profitability improvement, it could be read differently. It could suggest that better margins are still ahead. But that is not what the Israeli segment numbers show.

In 2023, Israeli engineering generated ILS 181.3 million of revenue and ILS 12.4 million of operating profit. In 2024, revenue fell to ILS 172.7 million and operating profit to ILS 10.5 million. In 2025, revenue fell again to ILS 153.2 million and operating profit dropped to just ILS 5.0 million. In other words, over two years the segment lost about ILS 28.1 million of revenue and about ILS 7.4 million of operating profit.

The problem is not only the top line. Fixed costs attributed to the segment rose from ILS 18.7 million in 2023 to ILS 21.8 million in 2024 and ILS 24.4 million in 2025, even as revenue moved lower. The result is uncomfortable: even if backlog provides visibility, that visibility has not yet proved that it rests on pricing power, healthy utilization, or strong overhead absorption.

The filing gives a direct explanation for the revenue weakness: the decline from 2024 to 2025 was mainly attributed to lower revenue in the semiconductor market. But this follow-up is asking a different question. Has the MEP backlog, which is supposed to broaden the company into civil engineering activity and offset volatility elsewhere, already started to show up in the numbers as a better profit base. For now, the answer is still no.

That is why backlog on its own is not enough. Backlog can support a growth thesis, but it cannot by itself prove economic quality. For the Israeli MEP backlog to deserve a higher-quality reading, it has to show three things at once: progress forward in timing, conversion into nearer-term revenue, and that this conversion is happening at a better operating margin than the one seen in 2025.

What Has To Happen Next For This Backlog To Earn A Quality Label

Over the next 2 to 4 quarters, the test is fairly straightforward.

The first test is timing. Out of the near-publication backlog, only ILS 62.6 million sits in Q2 through Q4 of 2026. If that amount does not start converting into reported revenue at a reasonable pace, the market will be left with the same familiar story: Israel is still carrying a large backlog, but it is distant.

The second test is margin. Even if Israeli revenue stabilizes, that will not be enough if the segment keeps earning around the 2025 operating-profit level. Backlog that arrives at weak profitability is not a real answer to the deterioration already recorded in the segment.

The third test is collections. Here the focus should be less on the absolute backlog number and more on the quality of project progression inside MEP: how many projects are crossing design milestones that allow collection of 80% to 90% of the consideration, and how many are getting stuck in the final tail that waits for other parties' execution.

The fourth test is mix. If the 2027-and-beyond bucket is still the dominant part of the backlog a few quarters from now, it will be hard to argue that MEP has already turned from a visibility engine into a results engine.

Conclusion

The follow-up thesis is simple: Lodan's Israeli backlog, and especially its MEP backlog, looks impressive in the headline, but its quality is still only partial. It does provide visibility. It does sit on long-cycle projects. It even benefits from a payment structure in which most of the consideration arrives before the full life of the project is over. But as of year-end 2025 and the near-publication update, it still sits too far out in time and on top of a segment whose economics weakened.

So the right question is not whether backlog exists. It clearly does. The right question is how much of that backlog is actually close to the income statement, how much of it is close to the cash balance, and how much of it remains, for now, a long-dated promise. Right now, the numbers say that distance is still larger than the headline implies.