Togeder 2025: The Improvement Is in the Numbers, but Israel and Financing Still Write the Story

Getting to Know the Company

Togeder is no longer just a vague medical cannabis concept, but it is not yet the clean global export platform that a superficial read might suggest. In 2025 it is an integrated operator across the value chain, from propagation and cultivation through manufacturing, storage, marketing and distribution, with operations in Israel and an Ugandan arm that is supposed to support export growth. On paper that sounds broad. In the actual economics of the year, the picture is much narrower: the business still lives mainly on selling dried medical cannabis in Israel, mostly through the pharmacy channel.

What is working now is meaningful. Revenue rose 14.1% to ILS 109.6 million, gross profit before biological fair value effects rose 32.1% to ILS 34.5 million, operating profit climbed to ILS 15.2 million from ILS 3.3 million in 2024, and the company moved to net profit of ILS 1.9 million after a net loss of ILS 1.6 million a year earlier. Operating cash flow also turned positive at ILS 6.6 million. This is not just presentation noise. The operating core really did improve.

The easy mistake is to overread the international story. A reader who focuses on Uganda, Germany and Europe could conclude that Togeder is already becoming an export-led platform. That would be wrong. Out of ILS 109.6 million of revenue in 2025, Israel contributed ILS 104.3 million, Europe only ILS 1.1 million, and Uganda ILS 4.3 million. The product and channel mix are just as concentrated: dried flower generated ILS 99.6 million, about 91% of revenue, while the pharmacy channel generated ILS 96.6 million, about 88% of revenue. Even after a good year, this is still mainly an Israeli flower and distribution business.

The active bottleneck is not immediate demand and not the lack of licenses. It is not even a question of whether the company knows how to grow and process cannabis. The bottleneck is cash conversion quality. Current assets stood at ILS 94.0 million against current liabilities of ILS 71.3 million, but ILS 56.3 million of those current assets were inventory and only ILS 12.2 million were cash and cash equivalents. On top of that, the company carries ILS 11.5 million of financing backed by trade receivables while keeping the credit risk on its own books. So the real question in 2025 is not whether activity improved, but whether that improvement is already clean enough for shareholders.

There is also a practical equity-market constraint to keep in mind. Market value is about ILS 48.5 million, and the latest trading turnover was only ILS 2,516. That is extremely illiquid. Even if the thesis improves, the market may not absorb it smoothly.

A compact economic map for Togeder in 2025 looks like this:

Events and Triggers

The 2025 story is not just about growth. It is driven by three material changes that affect how the whole report should be read.

The capital layer changed

The first trigger: in June 2025, part of the 2021 convertible loan, ILS 12 million, was converted into 3,532,216 ordinary shares במסגרת the D’mari-related investment transaction. That matters because it did more than dress up equity. It removed part of the financial liability, improved the capital structure and reduced some funding pressure. In other words, 2025 looks better not only because Togeder sold more, but also because it changed part of its liability base.

The second trigger: in December 2025, the company expanded its bank funding again. It signed another ILS 12 million loan at prime plus 2.5%, repayable over 60 monthly installments starting in January 2026, while also increasing the receivables-financing credit line to ILS 10 million until September 2026. Management frames this as stronger liquidity, longer duration and lower financing cost. That is partly true. It also reminds the reader that the business is still not at a point where operations fund themselves comfortably.

Uganda became more central, but not yet more profitable

The third trigger: in May 2025, additional shares in the Ugandan subsidiary were acquired, lifting ownership from 61% to 80.5%. Strategically, this is important. It increases control over the asset that management sees as the base for export growth and cost advantage. In the actual 2025 numbers, though, the Ugandan subsidiary still did not justify a mature growth-engine reading: it generated ILS 13.4 million of revenue, a net loss of ILS 2.0 million, and only ILS 45 thousand of operating cash flow. Ownership increased, but the engine itself is still not proving clean group economics.

Regulation kept moving

The fourth trigger: 2025 was a real transition year for the industry. From April 2025, products under the old category structure could no longer be marketed, and the company had to adjust inventory and production to the new category framework. At the same time, Israel now has about 135 thousand license holders and prescription users for medical cannabis. That is a bigger market than before, but it is also a regulated and competitive one, sensitive to category and product changes. So the revenue growth of 2025 did not happen in a normal static year.

There is also a quieter trigger inside the year itself. The half-year summary shows that the second half was weaker than the first: revenue fell from ILS 63.6 million in the first half to ILS 46.1 million in the second, operating profit fell from ILS 9.5 million to ILS 5.7 million, and net profit dropped from ILS 1.75 million to only ILS 164 thousand. That does not erase the annual improvement, but it does mean the year did not end with the same strength with which it started.

Efficiency, Profitability and Competition

The main point in 2025 is that profitability improved for real, but it is still not clean all the way through.

The operating core genuinely improved

The most important figure in the report is not net profit. It is gross profit before biological fair value effects. That number rose from ILS 26.1 million to ILS 34.5 million, and the margin improved from 27.2% to 31.5% of revenue. So even before agricultural accounting effects, Togeder sold better, produced better, or did some combination of both.

After fair value effects on biological assets, gross profit rose from ILS 18.1 million to ILS 32.0 million, and operating profit jumped to ILS 15.2 million. Operating margin rose from 3.4% to 13.9%. Any reading that says the whole improvement is merely accounting does not hold up well against the numbers.

But there is a second side. Net finance expense rose to ILS 10.4 million from ILS 5.5 million in 2024. So the operating layer looks better, while the funding layer is still heavy relative to operating profit. That is exactly the difference between business improvement and improvement that has fully reached shareholders.

Growth came from a fairly narrow place

When a company grows, the key question is where that growth came from. In Togeder’s case, the engine is quite simple: dried flower and pharmacies. Dried medical cannabis revenue rose from ILS 86.0 million to ILS 99.6 million, while manufacturing, processing and packaging services fell from ILS 10.0 million to ILS 8.7 million. By channel, pharmacies rose from ILS 81.3 million to ILS 96.6 million, while the cultivation and manufacturing contracting channels together fell from ILS 14.7 million to ILS 13.0 million.

That means the improvement did not come from a more diversified operating structure. It came from deepening the existing core. That is not necessarily negative. It does mean, however, that the company still has not built two or three independent earnings engines. It simply did a better job in the activity it already had.

Customer concentration is higher than the narrative suggests

This is one of the more important findings in the report. Management says it has no dependency on any particular customer. Yet the table of major customers shows three customers that together account for about 64.7% of 2025 revenue. The first customer, explicitly identified as Kamipal, accounted for ILS 22.2 million, about 20% of revenue. The next two added ILS 28.3 million and ILS 20.4 million.

This is not only commercial concentration. It is also credit concentration. The risk-management note says most group sales were made to a limited number of customers in Israel, and that trade receivables therefore represent a concentration of credit risk. That is a real contradiction. The company may not be dependent on one single customer, but it is clearly dependent on a very small number of large distributors and customers.

Competition has not eased, and export is not automatically a margin story

The company continues to frame Germany and Europe as future growth engines, but the same report also states that cannabis prices in Germany fell from levels of EUR 20 to EUR 25 per gram to only EUR 5 to EUR 8 per gram in 2025. So even if Europe grows, it does not automatically mean a clean high-margin export market. At the same time, the Israeli market remains competitive, regulated and subject to category changes. The combination matters: Togeder is not growing into an easier market structure. It is growing into tougher ones.

Cash Flow, Debt and Capital Structure

The cash-flow picture in 2025 is better than in 2024, but still not strong enough to remove funding from the thesis.

The all-in cash picture

The right frame here is the all-in cash picture, not a simplified normalized measure. Operating cash flow was positive at ILS 6.6 million. But investing activity used ILS 6.9 million, and lease principal repayment added another ILS 1.1 million of cash outflow. In other words, even before additional repayments and the more complex funding structures, internally generated cash did not fully cover the company’s annual operating and investment needs. Once another ILS 1.9 million payment on the investment-protection mechanism and ILS 1.0 million repayment on other debt are added, it is obvious why cash increased only because funding was recycled and expanded.

Put simply, the year ended with a cash increase of ILS 3.8 million, but that increase rested on ILS 117.0 million of new borrowings and other financing against ILS 108.9 million of repayments. That is not a distress signal, but it is also not clean financial flexibility.

Working capital looks positive, but it is heavy with inventory

The balance sheet carries ILS 56.3 million of inventory inside a working-capital structure that still needs funding. The composition matters. Raw dried-flower material fell from ILS 32.6 million to ILS 19.5 million, but work in process jumped from ILS 8.7 million to ILS 26.3 million. On top of that, inventory includes ILS 6.9 million held on consignment with distributors and ILS 5.9 million stored in Ugandan warehouses.

That means working capital is not only large, but also less liquid than the headline suggests. A meaningful part of it still needs to move through sale, collection and cash conversion.

Liquidity quality depends in part on receivables financing

A point that is easy to miss is that the company uses non-bank financing backed by trade receivables, while the receivables themselves remain on balance sheet because the credit risk stays with the group. At the end of 2025, this liability stood at ILS 11.5 million. So the company did not really transfer customer risk away. It used receivables as collateral to pull forward liquidity.

That matters because it changes how operating cash improvement should be read. When receivables themselves function as a funding tool, it is harder to say that operating cash flow has already become fully self-sustaining.

Debt improved in one form, but remains in others

The company has ILS 29.0 million of bank debt, including ILS 16.8 million current and the rest due between 2027 and 2030. It met all of its bank covenants at year-end 2025, which is a real positive. There is also ILS 7.0 million of remaining D’mari debt, split between ILS 4.0 million current and ILS 3.0 million long-term.

But a reader who looks only at bank debt misses the rest of the liability stack: ILS 10.1 million under the return-guarantee mechanism, ILS 3.9 million under the investment-protection mechanism, ILS 12.2 million of lease liabilities, and variable-rate exposure on bank credit and borrowings of ILS 40.5 million. That is exactly why 2025 looks like real improvement, but not yet like a balance sheet that has fully left the proving ground.

Forecasts and Looking Ahead

Before looking forward, five non-obvious points need to be locked in:

1. The 2025 improvement is real even without biological fair value gains.
2. The international story is still tiny in the consolidated numbers.
3. Positive working capital is heavily inventory-based, not cash-based.
4. Customer and credit concentration are materially higher than the official tone suggests.
5. The second half was already weaker, so 2025 cannot be read as a straight line of improvement.

What kind of year comes next

2026 looks like a proof year, not a breakout year. The reason is simple. The company has already proved it can generate better operating results, but it has not yet proved that those results translate into a cleaner earnings and cash structure with less dependence on funding, heavy inventory and a still-small international layer.

In sharper terms, 2025 is the year in which Togeder moved from "is there even a business here?" to "is this business already clean enough?" That is a much better question, but it is still an open one.

What must happen over the next 2 to 4 quarters

First, 2025 margins need to hold without the help of unusually favorable timing or temporary support. The company cannot afford a return to 2024-style operating margins while finance costs stay at 2025 levels.

Second, working capital needs to release. If ILS 56.3 million of inventory, consignment stock and receivables-backed financing keep growing, the operating improvement will remain only partial. This is the simplest test of growth quality.

Third, the international story needs to start appearing in the consolidated numbers. If Europe and Uganda remain together at less than 5% of revenue, it will be hard to argue that export has already changed Togeder.

Fourth, the funding layer needs to become genuinely easier. That does not require debt to disappear, but it does require a structure in which the company is not repeatedly dependent on larger credit lines, guarantees or expensive bridge-like solutions just to hold the operating model together.

What could change the market reading

A positive surprise would come if 2026 reports show two things at once: sustained operating profitability and a real decline in inventory and receivables-backed financing. In that case, the market could start believing that the 2025 improvement is not a one-year event.

A negative surprise would come if revenue stays high while the bottom line weakens again because of financing, and working capital keeps inflating. In that case, the market could start rereading 2025 not as the start of a better structure, but as a relatively good year inside a still-heavy operating model.

Risks

Customer and credit concentration

The first risk is concentration. The top three customers account for about 65% of sales, and Kamipal is the main distributor through which the company reaches pharmacies in Israel. That creates both commercial dependence and credit concentration. Once distribution and collection sit on very few shoulders, even a small disruption matters.

Funding and interest-rate risk

The second risk is that the funding structure is still relatively tight. There is meaningful current bank debt, remaining D’mari debt, liabilities under the return-guarantee and investment-protection mechanisms, and material exposure to variable rates. The company met its covenants, which matters, but it still operates inside a framework that reacts to rates, banks and external credit availability.

Inventory quality and valuation assumptions

The third risk is the quality of biological assets and inventory. The auditors themselves highlighted the accounting treatment of biological assets and inventory as a key audit matter. At year-end 2025 this included ILS 6.95 million of biological assets and ILS 56.3 million of inventory. The point is not that the numbers are wrong. The point is that this balance-sheet layer is important enough to remain under close scrutiny.

Uganda and export risk

The fourth risk is that the company keeps investing ahead of proof in Uganda. Management is already planning and constructing additional greenhouses there, yet the Ugandan subsidiary is still loss-making, and there is no tax treaty between Israel and Uganda. That does not remove the long-term option. It does mean the path from strategic asset to accessible shareholder value is still long.

Trading liquidity

The fifth risk is actionability. A stock that trades only a few thousand shekels a day does not enjoy the same price-discovery mechanism as a liquid name. Even a good report may not be priced efficiently, and a weak report can create an outsized move.

Conclusions

Togeder leaves 2025 in better shape than it entered it. This is no longer just a company trying to survive. There is a real improvement in revenue, margins and operating profit, and the company moved back to net profit. But it is still not a clean story. Most of the economics still rest on Israel, dried flower and a very small number of large customers, while funding and working capital continue to dictate how much of the reported improvement really belongs to shareholders.

The bottom line is straightforward: Togeder has proved that operations improved, but it has not yet proved that the improvement is clean, diversified and liquid enough.

Current thesis: Togeder in 2025 is a medical cannabis business that made a real operating jump, but it still has not built a revenue and cash model that is diversified and clean enough to free the equity from the effects of funding, inventory and customer concentration.

What changed versus the simplistic read is that the improvement is no longer just a story. In 2025 there is better gross profit even before fair value effects, meaningfully higher operating profit, and positive operating cash flow. What has not changed enough is the structure: Israel still dominates the story, international revenue is still small, and cash still needs help from external funding.

The strongest counter-thesis is that the worst may already be behind the company. If the D’mari conversion, the expanded credit lines and the increase to 80.5% ownership in Uganda create a more workable capital structure, and if Israeli sales keep growing while Europe scales slowly but steadily, then the market may be looking at Togeder through an overly cautious lens.

What could change the market’s interpretation over the short to medium term is a combination of three datapoints: a real decline in inventory, further operating cash improvement without a matching jump in financing, and a more meaningful contribution from revenue outside Israel. If all three begin moving together, the story will read differently.

Why does this matter? Because Togeder is no longer judged only on whether it can sell medical cannabis. It is now judged on whether it can turn a chain of production, export and branding into a business structure that produces accessible cash rather than only accounting growth.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen is continued operating profitability, working-capital release and a somewhat more tangible international layer in the numbers. What would weaken it is a return to dependence on funding and inventory without proof that higher-quality sales really expanded.