Medtechnica's Proton Project: How Much of the Backlog Really Becomes Cash and Profit

The main article argued that the proton backlog changes how Medtechnica's 2025 should be read. This follow-up isolates a narrower question: how much of that backlog is real economic visibility, and how much of it is still a long execution obligation that has to pass through working capital, guarantees, and a long timetable.

The short answer is that the backlog is real, but it runs on three different clocks. One clock is accounting backlog. A second clock is cash that has already been collected, used, or passed on to the supplier. A third clock is profit, which will only arrive if project recognition continues to track milestones without eroding Medtechnica's margins. Those three clocks do not move together.

That is the heart of the issue. At year-end 2025, Medtechnica's product and service backlog tied to the proton project stood at NIS 351.9 million. By the report date it had already declined to NIS 314.7 million. That is a large number, but it does not mean NIS 314.7 million still has to enter the cash account, and it does not mean the same amount will become profit at the pace a headline reader may assume.

What Actually Sits Inside the Backlog

The year-end backlog consists of two very different layers. Product backlog stood at NIS 200.6 million, while services stood at NIS 151.3 million. By the report date, product backlog had fallen to NIS 173.8 million and services to NIS 141.0 million. Another important point: as of December 31, 2025, the filing reported no material cancellations or changes in either the product backlog or the service backlog.

But backlog quality is shaped by timing, not only by size. Of the year-end product backlog, NIS 103.1 million is scheduled for recognition during 2026, while another NIS 97.5 million is pushed into 2027 and 2028. Services are much longer dated. NIS 52.7 million is expected in 2026, NIS 15.4 million in 2027 and 2028, NIS 1.1 million in 2029, and another NIS 82.2 million only in 2030 and beyond.

The first conclusion is straightforward. This backlog will not unwind quickly. Even if execution stays on plan, more than half of the year-end service layer sits beyond 2029. Anyone reading the headline backlog number as if it were near-term revenue is missing the time structure of the contract.

The Cash Has Already Moved, and Much of It Has Already Moved On

This is the easiest part to miss. Note 19 makes clear that Medtechnica received customer advances from Ichilov during 2023 through 2025. Those advances were recorded as contract liabilities, used in part to pay the system supplier, and the remaining balance was placed in a designated deposit that was redeemed in the fourth quarter of 2025 and paid to the manufacturer shortly afterward.

In other words, part of the cash has already completed its journey before installation has even begun. That materially changes how the backlog should be read. It is no longer sitting on the same advance-payment cushion it had earlier in the project. It is now moving deeper into the execution phase.

The balance sheet and the board report show that transition clearly:

That table says the project has moved, at least on the accounting and balance-sheet level, from a phase of receiving advances and holding a designated deposit into a phase where cash is progressing through the supply chain and Medtechnica's own balance sheet is carrying more of the burden. The bank guarantees tell the same story. By year-end 2025, the group had provided roughly NIS 106.9 million of bank guarantees to customers, and the filing says most of that amount comes from the proton agreement.

The consolidated cash-flow statement points in the same direction. Operating cash flow fell to NIS 72.9 million from NIS 81.6 million, and the board attributes the decline mainly to the drop in contract liabilities, primarily payments made to Medtechnica under the proton transaction. That matters because it shows that the backlog has already generated cash, but not all of that cash remained on the balance sheet.

The analytical implication: the proton backlog is no longer just a story of a customer paying in advance and reducing cash risk. Part of that customer funding has already been used. What remains now is mostly execution, guarantees, inventory, and timing.

Not All Backlog Is Profit, and Certainly Not on the Same Schedule

To understand the profit layer, two facts have to be held together. First, the company states that revenue from the proton project was already recognized in 2025. Second, installation at Ichilov is only expected to begin in the first quarter of 2027 and continue through the second quarter of 2028. That means project earnings do not wait for final physical delivery.

The reason sits in the revenue-recognition policy. When Medtechnica provides complex medical equipment that is significantly integrated with other promised services, it treats the combined project as a single performance obligation recognized over time, because the asset has no alternative use and the company has an enforceable right to payment for work completed to date. Taken together with the fact that revenue was already recognized in 2025, years before installation begins, the filing makes clear that this backlog does not unwind under a simple deliver-at-the-end model.

That is positive on one level, because it gives earlier accounting visibility. But it also means that any investor reading the NIS 351.9 million backlog as if it were a pool of future profit waiting untouched at the end of the road is simplifying the story too much. Part of the recognition has already begun, part of the cash has already been collected and moved on, and a large share of the service layer sits far out in later years.

The problem is that the filing does not provide the one number that would really close the loop. It does not disclose a stand-alone margin for the proton project, it does not separate how much of the year-end contract-liability balance belongs specifically to this project, and it does not give a full bridge between the customer milestones from Ichilov and the supplier milestone payments to IBA. So it is possible to speak confidently about visibility and timing quality, but not to translate the backlog directly into a known profit pool.

What is known is that the backlog has not yet repaired Medtechnica's overall margin profile. In 2025, medical-equipment revenue rose 4.2% to NIS 488.0 million, mainly because of revenue recognition from the proton project, but segment gross profit fell 1.7% to NIS 90.4 million, gross margin declined to 18.5% from 19.7%, and profit from ordinary operations before other income fell 19.8% to NIS 14.9 million.

That does not prove the proton project itself carries weak margins. It does prove that revenue already recognized from the project was still not enough to prevent margin erosion at the segment level. The right headline for the backlog is therefore visibility, not proven profitability.

So How Much of the Backlog Really Becomes Cash and Profit

The careful answer is this:

• Part of the backlog has already proven it can become revenue, because 2025 already included project recognition.
• Part of the backlog has already proven it can bring in cash, because customer advances were actually received during 2023 to 2025.
• But part of that cash has already been consumed for supplier payments, the designated deposit has already disappeared from the balance sheet, and the remaining contract-liability balances are far smaller than they were a year earlier.
• And the future profit pool is still partly open, because the filing does not disclose a separate project margin or the service-margin structure of the long tail.

That is why the right reading of the project is not "NIS 351.9 million that still has to enter the cash account," and not "NIS 351.9 million waiting to land in earnings." The right reading is a long bridge between backlog, customer advances, guarantees, and accounting recognition that still has to pass the execution test.

That also defines what investors need to watch over the next 2 to 4 quarters: whether contract-liability balances keep falling without a profitability offset, whether inventory and supplier balances keep climbing, whether additional cash milestones are received before installation begins, and whether Medtechnica can show that its large backlog improves not only visibility but earnings quality.