Follow-up to Malam Team: stable profit, but working capital still absorbs cash

The main article already treated cash as the open proof point for Q1 2026, but this follow-up isolates the issue more narrowly: at Malam Team, profit did not break, cash conversion did. The company reported net profit of ₪31.6 million and EBITDA of ₪87.4 million, almost unchanged from the comparable quarter, so an income-statement read looks calm. The all-in cash picture is different: operating cash flow was negative by ₪48.7 million, investing cash flow was negative by ₪32.8 million, and a small financing outflow left cash down by ₪82.8 million for the quarter. This does not look like liquidity stress, because net financial debt to EBITDA is still 1.01 and equity is 29.4% of the balance sheet. It does look like a quality-of-earnings warning: receivables and other debtors grew faster than the quarter converted into cash. Over the next quarters, the focus should move from another similar net profit number to collection, customer credit, and the ability to stop funding growth through debt.

Profit stayed in place, cash left

The comfortable headline for the quarter is stability. Revenue was about ₪1.01 billion, operating profit was ₪60.3 million, EBITDA was ₪87.4 million, and net profit was ₪31.6 million. Even against a comparable quarter with net profit of ₪30.9 million, there is no operating deterioration that explains unusual pressure.

That is exactly why the cash flow matters. Operating cash flow was negative by ₪48.7 million, compared with negative ₪107.1 million in the comparable quarter. In other words, the position improved versus a particularly weak first quarter in 2025, but it has not crossed to the right side. Positive net profit that does not cover working capital in a quarter that also carries debt and lease repayments is not a side note. It is a quality check.

The narrow free cash flow picture, before acquisitions and other financial investments, was still negative: negative operating cash flow of ₪48.7 million, against ₪4.9 million invested in property and equipment and ₪10.8 million invested in intangible assets. This is not a maintenance-CAPEX estimate. It is the reported cash use in the quarter. Part of the investment may support growth or development, and still the interim-period cash goes out before profit turns into collection.

The cash is caught in receivables and debtors

The cash-flow breakdown explains why profit was not enough. The starting point was net profit of ₪31.6 million, but the change in trade receivables absorbed ₪90.4 million, the change in other operating receivables absorbed another ₪28.8 million, and the change in trade payables absorbed ₪22.5 million. Inventory contributed ₪14.3 million and other operating payables added ₪17.9 million. After all adjustments, operating cash flow ended at negative ₪48.7 million.

The balance sheet tells the same story. Trade receivables rose from ₪803.5 million at year-end 2025 to ₪900.3 million at the end of March 2026. Other current receivables rose from ₪199.6 million to ₪235.9 million. Cash fell from ₪489.6 million to ₪406.8 million. This is close to the classic picture of an IT services and infrastructure company that keeps working, selling, and earning, but leaves a large part of the progress with customers until collection arrives.

The point is not that the company cannot collect. The quarterly disclosure does not provide enough detail by credit days, major customers, or payment terms to distinguish between an unusual delay, first-quarter seasonality, or a burden tied to projects and orders. It is enough, however, to say that the accounting improvement has not yet solved the cash test. Continued growth in infrastructure backlog and demand for computing equipment without better collection would leave profit real in accounting terms but less convincing in cash terms.

Debt is still moderate, but it is already funding the gap

The balance sheet gives the company time, not an exemption from the test. Net financial debt, defined as short- and long-term bank credit less cash and cash equivalents, rose to ₪299.6 million at the end of March 2026, compared with ₪195.0 million at year-end 2025. The net-debt-to-EBITDA ratio was 1.01, compared with 1.18 at year-end 2025, so leverage is still moderate. A current ratio of 1.14 and equity of ₪789.1 million also do not point to immediate pressure.

Still, the quarter already shows how the cash gap is funded. Short-term bank credit and current maturities rose by about ₪65 million, while long-term bank loans declined by about ₪43 million. The cash-flow statement includes ₪22.0 million of new long-term borrowings, ₪86.3 million of long-term debt repayments, a net ₪80.0 million increase in short-term credit, and ₪16.0 million of lease-principal repayment. This is the all-in cash picture: profit does not fund all working capital, investment, and debt use, so the balance sheet absorbs the difference.

That is why the follow-up check should stay short and practical. A decline in receivables and other debtors, or positive operating cash flow without a parallel rise in short-term credit, would make Q1 look like seasonality and working-capital management. Without that improvement, the market will be left with a company that reports stable profit but gets cash late, and that is lower-quality profit even while leverage is still far from a problem.

Conclusion

The current read is cautious, not negative: the quarter does not undermine the company's operations, but it leaves profit quality unproven. Working capital is the right lens for this continuation because it connects what worked in the quarter with what still did not enter the cash balance. The next proof point is clear: positive operating cash flow and a decline in receivables and other debtors, or at least evidence that order growth does not require another layer of customer credit and short-term bank credit.