Pomvom 2025: The Report Stabilized, Now It Has to Replace Merlin Profitably

Getting To Know The Company

Pomvom is not a classic software company, and it is not just a park photo-operations business either. Its real economics sit between those two worlds: on one side a digital platform that captures, processes, distributes and sells experiential content, and on the other a heavy operating layer of equipment, labor, sales points and commercial partnerships with park operators. That is the right lens for reading 2025.

What is actually working now? The company clearly managed to cut costs fast. Revenue fell to ILS 220.9 million, yet operating loss narrowed to just ILS 8.0 million from ILS 23.3 million a year earlier. Operating cash flow also turned positive at ILS 1.8 million, and working capital swung from a negative ILS 5.4 million to a positive ILS 8.1 million. That is real progress.

What can mislead on first read? The cash balance looks better and the report really is cleaner. But a meaningful part of that improvement came from a ILS 19.3 million equity raise, from pushed-out bank principal payments, and from deep cost cuts. This is stabilization, not proof that commercial demand has recovered. Revenue still fell, the fourth quarter still looked weak, and the core issue now sits in 2026: Merlin, a highly material partner, is leaving.

That is the center of the story. In 2025, Merlin represented about 41% of revenue and 40% of gross profit. The company has signed new agreements, some of them in a non staffed model, and that direction makes economic sense. But for now this is still a partial replacement story, not a proven one. That makes 2026 a proof year: not a breakout year, not a clean stabilization year, but a year in which Pomvom has to show that a better contract mix can really fill the hole Merlin leaves behind.

There is also a practical screen that matters early. At the latest closing price of 76.8 agorot and roughly 28.9 million shares outstanding, the equity value is around ILS 22 million. With just about ILS 472 thousand in turnover on the latest trading day, this is a very small and illiquid stock. Even if the thesis improves, the gap between theoretical value and actionable value remains large.

The Economic Map In One View

The message is simple: Pomvom is still a concentrated business, dependent on partners and visitor traffic, but it is trying to move toward a leaner, more digital, less labor-dependent model. The direction is right. The question is the pace of proof.

This mix chart highlights an important point: the shift toward digital is still modest. Digital products rose only to 43.1% of revenue from 42.8%, and online to 13.5% from 13.0%. That is progress, but not enough on its own to tell a fully new story.

Events And Triggers

The first trigger: Merlin is leaving. This is not a side issue. After a transition period through the second quarter of 2026, Pomvom will stop operating at 15 Merlin sites across the UK, Europe and the US. When one partner accounts for ILS 90.7 million of revenue and around 40% of gross profit, every other question becomes secondary.

The second trigger: part of the 2025 improvement also came from better commercial terms, not just efficiency. At Six Flags, the revenue-share structure was improved from March 3, 2025. At the Harry Potter flagship store in New York, Pomvom benefited from a better split retroactive to July 1, 2025 through December 31, 2025, after which terms reverted on January 1, 2026. That matters because not all of 2025's tailwind rolls forward cleanly into 2026.

The third trigger: the company is building a replacement layer. During 2025, Pomvom launched full commercial activity at four Park and Resorts Scandinavia parks in Sweden in a non staffed model. It also signed agreements in Las Vegas with Universal Horror Unleashed, in five sites of a European operator across Belgium, Germany and the Netherlands, in three Majaland sites in Poland, and in a new resort and theme park in Texas. Management estimates full-year gross revenue from the four new agreements at ILS 14 million to ILS 20 million before partner sharing.

The fourth trigger: some of the revenue being lost is revenue the company no longer wants to keep. Port Aventura in Spain, from which Pomvom exited at the end of January 2026, generated about ILS 8.4 million in 2025, operated without Pomvom staff, was print only, and did not include digital products. Management explicitly says the site did not fit its profitability-focused strategy. That tells you the company is not only losing revenue, it is also pruning low-quality revenue.

The Contract Map That Will Define 2026

That chart sharpens what a superficial read may miss. The 2026 story is first a concentration story. Before discussing AI, automation or the online channel, the key question is whether Pomvom is becoming less dependent on two very large partners. In 2025, the answer is still no.

Efficiency, Profitability And Competition

The central 2025 story is a much better set of numbers without matching demand recovery. Revenue fell 7.3%, gross profit fell 7.7%, and the fourth quarter was even weaker with revenue down 15% and gross profit down 21%. Yet operating expenses fell 29%, and operating loss was cut by almost two thirds. That shows a company that took its cost structure seriously.

The chart says something important: the report improved despite the top line, not because of it. That is a critical distinction. A company cutting losses because demand comes back looks very different from one cutting losses because it tightens the body.

What Actually Improved Profitability

On the cost side, several levers worked at once. R&D expense fell to ILS 9.9 million from ILS 11.8 million, helped by lower headcount, more subcontracting, and the use of AI tools to improve development productivity. Sales and marketing expense fell 18% to ILS 10.2 million. G&A fell 35% to ILS 23.9 million, helped both by the prior cost program and by the fact that 2024 included one-off merger-related expense, while 2025 included insurance reimbursements tied to the 2024 cyber event.

The more interesting point is that gross profit did not suddenly break higher. Gross margin stayed at 16.9%, exactly where it was in 2024. In other words, efficiency prevented margin erosion, but did not yet create a deeper profitability engine. Put differently, the company bought time. It has not yet proven a structural improvement in unit economics.

There is another layer here. Some sites benefited from better commercial terms, and that helped. But that is not the same quality of improvement as organic demand recovery or a consistent jump in digital mix penetration. Part of the Harry Potter NYC benefit was explicitly temporary, and another part depends on Pomvom's ability to hold improved terms with large partners.

This quarter-level view matters because annual reports can hide the exit rate. In Q4, commercial pressure was still visible. The company improved costs, but it did not close the gap created by weaker demand and fewer visitors.

Where The Strategy Shows Up, And Where It Still Does Not

Pomvom does present a coherent strategic story: more digital products, more online sales, and a move toward non staffed contracts that should carry better gross profitability. Directionally, that makes sense. On proof, 2025 still looks like year one of the shift, not the year in which results already accelerated.

Digital-product revenue declined to ILS 95.1 million from ILS 102.1 million, but rose slightly as a share of revenue to 43.1%. Online revenue edged down to ILS 29.8 million from ILS 30.9 million, yet its mix improved to 13.5%. That is movement in the right direction, but at a slow pace. If the company wants to prove the model is becoming less exposed to visitor traffic, 2026 needs to show a much steeper climb in these metrics.

The geographic split adds another layer. Europe held up relatively well, supported by a better average transaction value. The US weakened more sharply, not only because visitor traffic fell but also because conversion declined. In Japan, the issue was mainly fewer visitors, while operational KPIs stayed stable. So if one is looking for the weak link, it is not purely technological. It is commercial: the ability to convert traffic into revenue, especially in the US.

That is why Pomvom still should not be read like a pure software platform. Anyone focusing only on API, SDK, AI and Self-Service misses how dependent the company still is on on-site execution, visitor traffic and negotiated commercial terms with park operators.

Cash Flow, Debt And Capital Structure

Precision matters here. I am using an all-in cash flexibility frame, meaning how much cash is actually left after the year's real cash uses, not just how much operating cash flow the business produced. That is the right frame for Pomvom because the core thesis is about financing room and about whether 2026 can be crossed without returning to the market again.

The Real Cash Picture

At the headline level, the company ended 2025 with ILS 23.1 million of cash and cash equivalents, up from ILS 15.4 million at the end of 2024. Including restricted deposits, total cash and deposits stood at roughly ILS 27.0 million. But that improvement did not come from the core business alone.

Operating cash flow was positive at ILS 1.8 million. That is real improvement. But then came ILS 3.3 million of capex, ILS 7.0 million of long-term debt repayment, ILS 2.2 million of interest paid, and ILS 0.4 million of lease payments. In plain terms, before the ILS 19.3 million equity raise, the business still did not fund all of the year's real uses by itself.

This is the chart that matters most. It says the cash balance rose, but the bridge ran through shareholders and through pushed-out maturities, not just through the operating model.

Debt Is Less Pressing Than In 2024, But It Is Still Expensive

The company has an ILS-equivalent bank loan of USD 8 million that was originated in February 2024. By year-end 2025, principal had been reduced to USD 4.8 million, and current maturities had fallen to just ILS 3.0 million after the May 2025 amendment. Principal will now amortize in 37 equal monthly payments from June 2026 through June 2029.

That is a meaningful improvement in immediate pressure. But the price still matters. The nominal rate is SOFR plus 7%, which stood at about 10.65% at year-end 2025. The effective yield of the loan was already around 18.26%, helped by fees and the warrant package granted to the bank. So the company bought time, but at expensive capital.

The collateral package is wide: charges over company assets, goodwill, receivables, intellectual property and holdings in subsidiaries. On top of that, the company has to maintain a deposit equal to 25% of the outstanding principal. That is why not all of the year-end cash is truly free cash.

On the other hand, the actual covenant headroom is not the near-term bottleneck. The required ratio of cash and receivables to current loan maturities is above 200%, while at the end of 2025 the ratio stood at 1281%. So Pomvom's immediate problem is not a covenant wall. The problem is whether 2026 revenue and gross profit will be good enough to preserve that room.

The External Signal That Should Be Taken Seriously

The auditor included an emphasis-of-matter paragraph on liquidity following the Merlin termination. That is not a going-concern qualification, but it is also not a throwaway line. It means the market should not focus only on whether there is enough cash today, but on whether management's plan is actually enough for the coming year.

A second external signal is the ILS 1.257 million goodwill impairment in the US cash-generating unit. The amount is not huge, but it does show that both the company and the outside valuer are already acknowledging that prior booked value does not fully sit on the new economics of the business.

Outlook And Forward View

Finding one: 2026 does not need to replace Merlin only in gross revenue. It needs to replace Merlin in gross profit and in cash. That is the right test.

Finding two: the expected full-year revenue from the four new agreements, ILS 14 million to ILS 20 million gross, is still far below the ILS 90.7 million Merlin generated in 2025. So any claim that the hole is already closed runs ahead of the facts.

Finding three: two of those four new agreements are in non staffed models, and the company explicitly says those tend to carry higher gross profitability. So the economic replacement could be better than the top line alone implies. But the filing still does not provide a quantitative bridge proving that it is enough.

Finding four: 2025 benefited from both better commercial terms and cost cuts. Some of that carries into 2026, and some of it does not. That makes the 2026 comparison base less comfortable than the sharp 2025 loss reduction might suggest.

Finding five: management expects ILS 7 million to ILS 8 million of cost savings in 2026. That is material for a company this size, but it comes with a real risk: cutting too deep into sales, implementation or development capacity.

2026 Is A Proof Year, Not A Breakout Year

Management's plan is logical: diversify the customer base, expand contracts, move to leaner models, and reset the cost base. The problem is timing. Merlin exits in the second quarter. Majaland only starts in the second half of 2026. The European five-site agreement ramps during the first half. Texas is expected to open in June 2026. So even if everything signed performs as expected, 2026 still carries an interim period.

That means the next few reports will not be judged simply on whether more sites were added. They will be judged on whether the pace of expense reduction outruns the revenue and gross-profit loss from Merlin. If the company shows a meaningful reduction in G&A, sales and operating expense during the first half while holding gross profit relatively steady, the market read can improve. If savings slip, or new sites ramp more slowly than expected, the report will again look like one that bought time without actually solving the problem.

What The Market Is Likely To Measure Over The Next 2 To 4 Quarters

The first measure is the pace of Merlin runoff, not in management language but in actual reported revenue and gross profit.

The second is whether the ILS 7 million to ILS 8 million cost program really shows up in the expense lines, rather than remaining a narrative item.

The third is the quality of new revenue. If the non staffed contracts really are better economics, that needs to show up in margin, even if their reported revenue base is smaller.

The fourth is mix acceleration. In 2025, digital and online progress was too small to change the thesis. In 2026, that needs to speed up.

What Management Is Signaling Without Saying It Directly

The filing is signaling a change in identity. Pomvom wants to be less of a broad on-site operator with heavy labor and sales points, and more of a digital content provider working through partners, online channels and automation. The exit from Port Aventura, the emphasis on non staffed structures, the investment in API, SDK and Self-Service, all alongside a leaner overhead base, point in the same direction.

The problem is that this is still strategic direction, not fully proven output. In 2025, online revenue still declined in absolute terms, and only mix improved modestly. Anyone reading the company as a mature platform story already today is moving too fast. More proof is still required.

Risks

The first risk is customer concentration. Even after all the talk about diversification, Merlin and Warner together still represented 71% of 2025 revenue. Merlin is already on the way out. If Warner at some point also presses for better terms or changes its operating model, the company's room to maneuver remains limited.

The second risk is execution. Some new sites have not yet completed a full year of activity, and some only begin later in 2026. That means the company has to cut costs, ramp new sites and maintain service levels at core sites all at once. For a company this small, that is a meaningful execution burden.

The third risk is financing. Yes, the end of 2025 looks calmer. But this is still a company with expensive debt, restricted cash, and an illiquid microcap equity. If 2026 does not produce operating stability, the capital markets may again become the main funding bridge, and that is a much less comfortable place to be after a large private placement in February 2025.

The fourth risk is FX. The company operates through subsidiaries in the US, UK, Spain and Japan. In 2025 it recorded a negative translation adjustment of ILS 2.595 million, though it also says FX is not materially affecting profitability because revenues and costs at the subsidiaries are largely matched in local currency. This is not the core thesis, but it does blur top-line comparability in shekel terms.

The fifth risk is overcutting. If Pomvom cuts too deep, especially in sales, implementation and development, it may protect cash in the short term while damaging its ability to build 2027. That is a classic transition-year risk.

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Conclusions

Pomvom exits 2025 with a far cleaner report than one might have expected from a company that lost demand, posted lower revenue, and is heading into the exit of a major partner. The cost reset worked, working capital improved, and the balance sheet got air. But this is still not a report proving that the new growth engine already works. It is a report proving that management managed to buy time.

Current thesis in one line: Pomvom stabilized the report through cost cuts and capital-structure repair, but 2026 will decide whether better-quality contracts can really replace Merlin without reopening the cash question.

What changed versus the earlier read: the story is no longer only "demand is weak." It is now "the operating structure is leaner, but the revenue base has to be rebuilt."

Strongest counter-thesis: most of the 2025 improvement came from an equity raise, heavy cuts and pushed-out maturities, while the new commercial engine is still too small and too slow to fill the Merlin hole.

What could change the market read in the short to medium term: the speed of Merlin runoff, the delivery of the ILS 7 million to ILS 8 million savings plan, and whether non staffed contracts actually lift gross profitability.

Why this matters: if the shift to a leaner model is real, Pomvom can emerge from its labor-heavy operating phase with a better-quality business. If not, 2025 will look in hindsight like a shareholder-funded bridge year.

Over the next 2 to 4 quarters, one simple but difficult thing has to happen: expense reduction must appear faster than Merlin-related revenue loss, and the new contracts must start contributing real gross profit rather than headlines. If that happens, the read on the company improves. If it does not, the yellow flag quickly returns to financing rather than only commercial execution.