Nextcom in 2025: A NIS 903 Million Backlog, but the Test Is Conversion Into Margin and Cash

Getting To Know The Company

At first glance, Nextcom looks like a classic backlog stock. It has two attractive-sounding engines, communications infrastructure and renewable energy, a NIS 903 million backlog, and a market cap of only about NIS 116.1 million in early April 2026. That is too shallow a read. In 2025 the company was not blocked by a shortage of work. It was blocked by a shortage of conversion. Revenue fell only 2.2%, but gross profit dropped 21.2%, operating profit fell 46%, and equity-method losses pushed the bottom line to a NIS 5.9 million net loss.

What is working now is clear enough. The energy engine is still bringing in work. During 2025, and after the balance-sheet date, the company added or advanced major EPC and storage projects with EDF, Doral, Prime, Mashk Energy, and later PowerGen. At the same time, it remains comfortably within bank and bond covenants and still posted positive operating cash flow of NIS 10.2 million.

What is not clean? The active bottleneck is not backlog size. It is the conversion of backlog into margin and cash. This is a project-execution business built on working capital, guarantees, and cost-to-complete estimates. A contract headline is not enough. The real test is whether signed work actually starts on time, whether margins hold, and whether cash generation is not swallowed by inventory, prepayments, guarantees, and financing layers.

The story gets more complicated below operating profit. In 2025 profit after finance expense still stood at NIS 5.7 million, but the company’s share of losses from equity-accounted investees reached NIS 10.0 million. In other words, even if the core Israeli EPC business stays profitable, not every asset inside the group translates into clean economics for ordinary shareholders.

This matters now for a practical reason too. Daily trading value in early April 2026 was only about NIS 15.6 thousand. This is a small, illiquid stock, so changes in market interpretation will depend much more on a handful of operating and financing proof points than on a broad narrative alone.

Nextcom itself is mainly an Israeli execution company, controlled by Guy Israeli, who holds about 61.09% of the shares and serves as CEO. The group ended 2025 with 334 employees. Annual revenue worked out to roughly NIS 1.31 million per employee, but this is not a clean software-style productivity story. It is an execution, integration, and project company that also depends on subcontractors, guarantees, and field work.

This is Nextcom’s economic map in 2025:

Four points do not jump off the first page, but they are the heart of the thesis:

• The 2025 problem was not demand. It was economic quality. Revenue fell 2.2%, but gross profit fell 21.2%.
• Positive cash flow does not tell as clean a story as the headline suggests. Operating cash flow was positive, but it leaned heavily on lower receivables rather than on a sharp rise in business margin.
• Backlog is impressive, but part of it sits beyond the near term. NIS 349 million of backlog is scheduled for 2027 and later.
• Weakness no longer sits in only one layer. Communications weakened operationally, and CRA, Cressence, and Fusion dragged on earnings below the operating line.

Events And Triggers

The Energy Engine Filled Up, But Not All Of It Sits On 2026

During 2025, and after the balance-sheet date, Nextcom built a meaningful energy project layer. This is not just a list of immediate reports. It is the main reason the market is still willing to look through a weak year in profitability.

The good news is obvious. The energy stack is getting larger, more diversified, and more exposed to both classic solar EPC and storage. The less comfortable point matters just as much. Part of the largest work, especially Dimona and Prime, is not meant to generate most of its revenue tomorrow morning. In addition, the company itself presents the timing and profitability assumptions for parts of that stack as forward-looking information.

The Storage Option Is Real, But Not Yet Mature

The positive trigger: In February 2025 EVA signed an MOU with Trina under which EVA is expected to become Trina’s representative in Israel for storage-equipment marketing and sales, as well as support and operating services. The MOU was extended in March 2026 for another year. In addition, the Mashk Energy storage project is the first one in which EVA is supplying Trina storage equipment.

The friction that remains: This is still not a mature engine. The MOU remains subject to a full binding agreement, and each side can cancel it with six months’ notice. The right read, then, is that storage is becoming a real operating and commercial option, not that Nextcom has already built a deep and proven high-margin distribution channel.

Communications Is Not Dead, But It Is Not Clean Either

Two forces are moving in opposite directions in communications. On one side, in August 2025 the Ministry of Defense committee allowed the company to return as a recognized supplier, and in January 2026 the group’s HOT-facing activity was shifted into HOT Telecom and HOT Tashit as part of a structural change inside HOT. On the other side, the company is still materially dependent on HOT, which contributed NIS 92.7 million in 2025, or 21% of group revenue, and the electricity-meter reading activity generated a loss of about NIS 5.1 million, with the current tender expected to end in June 2026.

So communications still carries a large part of revenue, but it enters 2026 from a weaker base: lower profitability, less support from the meter-reading activity, and customer dependence that has not gone away.

The Year-End Was Soft, And That Filters Out Some Of The Hype

The annual report did not finish on momentum. In Q4 2025 revenue was NIS 108.9 million, operating profit was only NIS 1.4 million, and the company posted a NIS 1.7 million net loss. That matters because a reader looking only at the expanding energy backlog could miss that the year itself ended on a soft operating cadence.

Efficiency, Profitability, And Competition

Revenue Barely Moved, But The Economics Worsened

Revenue of NIS 437.3 million versus NIS 447.2 million a year earlier does not look dramatic on its own. What matters is what happened underneath it. Cost of revenue still rose to NIS 399.5 million, so gross profit fell to NIS 37.8 million and gross margin compressed to 8.6%, down from 10.7% in 2024 and 12.2% in 2023. After NIS 11.4 million of selling expenses and NIS 15.6 million of G&A, operating profit fell to only NIS 10.8 million.

That is the central point. 2025 was not a year of sales collapse. It was a year of deterioration in execution economics. In EPC and infrastructure work, that cannot be dismissed as a simple timing issue.

Energy And Communications Weakened In Different Ways

In renewable energy, revenue fell to NIS 191.2 million from NIS 202.2 million, while segment profit fell to NIS 16.6 million from NIS 19.3 million. Management attributes the weakness mainly to lower revenue from ground-mounted solar farms, together with lower profitability in rooftop and reservoir solar projects and lower profitability in natural-gas projects.

In communications, revenue fell more moderately, to NIS 240.3 million from NIS 244.3 million, but segment profit also dropped, to NIS 25.9 million from NIS 28.6 million. The operating explanation includes lower multi-channel TV installations, lower cellular activity, lower communications installations in settlement projects after one project ended, and weaker profitability in fiber-laying work.

The key point is that the two segments did not weaken for the same reason. In energy, the issue was mix and project profitability. In communications, the issue was both lower activity and weaker profitability. That matters because it means there is no single weak segment while the other one easily offsets it.

The Report Itself Signals That Backlog-To-Profit Conversion Is Not Mechanical

The auditors flagged future cost estimates for completing contracts as a key audit matter. That is not a footnote. In execution businesses, profit comes not only from the size of the order book but also from the ability to estimate costs, timing, change orders, and overruns correctly. At the same time the company presents a long list of newly signed projects and often says expected profitability is “similar” to comparable projects. That estimate already sits inside a real accounting and operating friction point.

Competition Is Real, And Large Customers Know It

The company estimates that its share of activity in Israel in each of its two core areas is about 20%. That means Nextcom is a meaningful player, not a niche one. But that does not create margin immunity. In both energy and communications, these are execution-heavy and competitive markets where customer power, contract terms, guarantees, and milestone timing directly affect earnings quality.

The exposure to key customers shows this clearly. HOT contributed NIS 92.7 million in 2025, while Doral contributed NIS 51.0 million. Together they accounted for roughly 32.9% of group revenue. That is not extreme one-customer concentration at the consolidated level, but it is more than enough to show that margin durability also depends on negotiating power against a few large names.

Cash Flow, Debt, And Capital Structure

Operating Cash Flow Was Positive, But It Is Not A Clean Picture Of Cash-Generation Power

Nextcom produced NIS 10.2 million of cash flow from operations in 2025 despite a NIS 5.9 million net loss. That matters, but it needs the right frame. This is not an all-in cash flexibility picture. It is also not proof that the business suddenly became a strong cash machine.

The bridge explains why. Non-cash adjustments added NIS 16.2 million, with a large contribution from equity-accounting and other accounting items. Inside working capital, the biggest positive was a NIS 16.0 million decline in receivables, partly offset by a NIS 14.8 million increase in inventory and a NIS 3.8 million increase in other receivables. So operating cash flow was positive largely because the company collected better and because the customer line came down, not because business margin suddenly became strong again.

To understand the full picture you have to move to all-in cash flexibility. That picture is less clean. Financing cash flow was positive NIS 3.3 million, but it leaned on a net NIS 29.9 million bond issuance, against NIS 14.25 million of bond repayment, NIS 4.4 million of interest paid, and NIS 3.5 million of dividends. In other words, the rise in cash during the year did not come only from the business. It also came from a larger financing layer.

The Balance Sheet Is Not Stressed, But It Is Not “Surplus Cash” Either

At year-end 2025 cash and equivalents stood at NIS 79.0 million, alongside NIS 22.4 million of other financial assets. Against that, the company carried NIS 39.2 million of bank and other borrowing and NIS 72.9 million of bonds. Even before leases, this is not a net-cash balance sheet. In addition, about NIS 12.6 million of current financial assets were pledged in support of guarantees.

Covenants Are Comfortable, So The Debate Has Shifted From Credit To Quality

The good news is that there is no immediate covenant pressure here. Against the banks, the company is required to maintain tangible equity of at least 15% of the balance sheet and at least NIS 20 million, together with a current ratio of 1.1. In practice, at the end of 2025 tangible equity stood at NIS 112.6 million, the tangible-equity-to-balance-sheet ratio was 31.02%, and the current ratio was 1.80.

The bond picture is also comfortable. Equity-to-balance-sheet stood at 33.8% against a 20% threshold, equity was about NIS 128 million against a NIS 34 million floor, and the current ratio was 1.80 against a 1.1 threshold. Even the coupon step-up triggers, which kick in if equity falls below NIS 50 million or if the equity ratio falls below 23%, are still far away.

That is analytically important. Once covenant stress is not the main question, the company is no longer judged mainly on whether it can carry the debt. It is judged on whether the backlog, guarantee load, and working-capital intensity actually create value for shareholders.

Forecast And Forward View

Before looking at 2026, four points need to stay in view:

• The backlog is already here, but the margin is not. NIS 903 million of backlog did not prevent gross margin from falling to 8.6%.
• The end of 2025 did not look like a breakout year. Q4 ended with only NIS 1.4 million of operating profit and a NIS 1.7 million net loss.
• A meaningful part of the energy stack sits beyond the immediate horizon. NIS 349 million of backlog is scheduled for 2027 and later.
• The bottom line already depends on exposures beneath the core operating layer. Equity-method losses almost erased profit after finance expense.

2026 Is A Proof Year, Not An Automatic Breakout Year

The right label for 2026 is a proof year. Not because there is not enough work, but because too much of the work still has to prove itself in the income statement and in cash flow. Dimona, Prime, PowerGen, Mashk Energy, and Ashalim can make Nextcom a much more meaningful energy player. But for that to translate into a better market reading, three things have to happen together: actual starts, preserved profitability, and working-capital control.

What Needs To Happen In Energy

In renewable energy, the first test is execution. Doral is meant to finish in Q1 2026, PowerGen should start in Q2 and finish in Q4, Ashalim is due to start in January 2026, and the Mashk Energy storage project should finish in Q3. Those are near-term checkpoints. By contrast, Prime and Dimona matter enormously to the thesis, but they are not necessarily the projects that will color the very next report.

The implication is clear. Anyone looking only at total backlog will miss the timing layer. Over the next 2 to 4 quarters the market mainly needs evidence that the shorter-cycle projects are moving into execution cleanly, while the larger projects are progressing from agreement stage into operational reality.

What Needs To Happen In Communications

The communications segment does not need to become a growth engine again for the thesis to improve. It does need to stop dragging. After a NIS 5.1 million loss in electricity meter-reading and with HOT dependence still in place, Nextcom needs to show that 2026 looks more like a stabilization year and less like another year of erosion. The return to recognized-supplier status with the Ministry of Defense can help, but until actual orders show up it cannot be called a proven engine.

The CRA, Cressence, And Fusion Exposure Is No Longer Small

One of the genuinely important 2025 findings is that the Nextcom story no longer sits only in Israel. Through CRA and the Cressence partnership, the company is exposed to Fusion, which develops solar farms in the US. In 2025 Cressence had an impact of about NIS 6.7 million, of which about NIS 6.4 million came from marking the Fusion investment to fair value based on estimated future cash flow from the sale of the solar farms. Two Vermont farms were completed and connected in September 2025, but one of them suffered severe weather damage and is expected to reconnect in 2026.

That is an important reminder. Even if the Israeli EPC business improves, shareholders are still exposed to a volatility layer that does not come from fiber deployment or solar construction in the Negev. So 2026 will be judged not only by the progress of the core projects, but also by whether the line below operating profit stops eating into the result.

What Could Change The Market Interpretation

In the short term the market may focus on two opposite things at the same time. On one side, there is a large backlog versus a small market cap, comfortable covenants, and a new energy project stack. On the other side, there is a weak Q4, a compressed gross margin, and equity-method losses that absorbed profit after finance expense.

What would strengthen the constructive read? A run of reports in which energy revenue starts to grow without another leg down in gross margin, operating cash flow stays positive without another large release in receivables doing all the work, and the loss layer from Fusion and Cressence settles down.

What would weaken it? A setup in which backlog keeps growing on paper, but actual revenue recognition slips, inventory and guarantees keep swelling, and the equity-method line keeps eating into operating profit.

Risks

Large Backlog Is Not Simple Backlog

The first risk is backlog conversion quality. Some of the larger projects depend on milestones, work orders, multi-year timing, and profitability assumptions that the company itself classifies as forward-looking information. At the same time the auditors flagged future cost estimates for contracts as a key audit matter. That means conversion risk is not peripheral here. It sits at the core of the story.

Key Customers Still Sit At The Center Of The Economics

HOT remains a material customer in communications, and the company says losing that relationship could materially hurt the segment. Doral is a material customer in renewable energy. That does not mean the whole group depends on only one customer, but it does mean the company is less diversified than a many-hundreds-of-millions backlog number can imply.

Capital Is Not Distressed, But It Is Not Free Either

The company is comfortable on covenants, but its capital is still needed for guarantees, bridge financing, and working capital. Guarantees of NIS 105.9 million, pledged financial assets, inventory approaching NIS 29.8 million, and both bank debt and public bonds all point in the same direction. This is not a light-asset services company where every incremental shekel of revenue drops quickly into cash.

CRA, Cressence, And Fusion Are A Real Economic Exposure, Not Accounting Noise

The US exposure through Cressence and Fusion depends on solar-farm sales, US bank financing, repair and reconnection work on a weather-damaged project, and the conversion of estimated future cash flow into realizable value. As long as that layer keeps producing equity-method losses, it complicates any attempt to read Nextcom only through the core Israeli EPC business.

The External Environment Remains Fragile

The company explicitly says it cannot reliably estimate the possible impact of the security events that followed the start of the “Roaring Lion” operation in February 2026. In addition, the wind project signed with EDF in 2023 still has no progress because, according to EDF, it has not been possible to advance with the turbine manufacturer under the war conditions of the past two and a half years. That is an important warning signal. Not every signed project automatically moves into execution, especially where third parties matter.

Legal Proceedings Are Not The Core Risk, But They Are Not Zero Either

Beyond ordinary claims of about NIS 1.2 million for which provisions were booked, there are two class-action motions with alleged aggregate damages of NIS 10.8 million and NIS 18.8 million, together with another class-action request over worker classification. The company says the likelihood of certification is low. For now this is not the main risk, but it is also not a layer that should be treated as irrelevant.

Conclusions

Nextcom exits 2025 as a company with more operating opportunity than the net-income line suggests, but also more economic friction than the backlog headline suggests. The energy engine is expanding, the debt layer is controlled, and covenant headroom is comfortable. At the same time, margins compressed, the year ended softly, and the equity-method losses show that not all value created inside the group is cleanly accessible to shareholders.

Current thesis: Nextcom already has enough backlog to look like a meaningful execution platform in energy and infrastructure, but 2026 will stand or fall on whether that backlog turns into margin, cash, and clean shareholder economics before it turns into more inventory, guarantees, and equity-method drag.

What changed versus the older read: the debate has shifted from backlog size to backlog conversion quality, while the CRA, Cressence, and Fusion exposure has become too important to keep outside the main reading.

Counter-thesis: One can argue that the caution here is excessive because the company sits comfortably within covenants, holds backlog far larger than its market cap, is building a meaningful energy and storage platform, and regained recognized-supplier status with the Ministry of Defense, so 2025 may look in hindsight like a transition year before a sharper improvement.

What could change the market interpretation over the short to medium term: actual starts and revenue recognition in the shorter 2026 projects, a halt in gross-margin erosion, and a reduction in volatility from the equity-method line.

Why this matters: In Nextcom’s case the real question is no longer whether there is enough work. The question is who funds that work, how much of it survives in the profit line, and how much of that value actually reaches ordinary shareholders.

Over the next 2 to 4 quarters Nextcom needs to show four things: that the shorter energy projects actually move into execution and delivery, that gross margin stops eroding, that communications stops diluting quality after the meter-reading loss, and that the equity-method line stops wiping out profit after finance expense. What would strengthen the thesis is a run of reports in which backlog visibly starts turning into revenue and profit without new working-capital strain. What would weaken it is a setup in which the orders still look good on paper while the project economics remain heavy.