G1 in the first quarter: Pal reached the balance sheet before the earnings arrived
G1 opened 2026 with modest revenue and consolidated profit growth, but the Pal deal has already increased investment and debt while barely showing up in earnings after purchase-accounting amortization. At the same time, the monitoring-centers segment confirms that the year after the electronic-monitoring activity starts from a lower profit base, and cash flexibility remains narrow.
G1 opened 2026 with headline numbers that look too calm relative to what changed underneath: revenue rose 4.8% to NIS 256.4 million and consolidated net profit rose 4.0% to NIS 11.8 million, but profit attributable to shareholders fell to NIS 10.9 million and adjusted EBITDA slipped slightly to NIS 24.1 million. This quarter does not prove a breakdown, but it does prove that 2026 is a proof year, not a breakout year. Pal is already on the balance sheet through a roughly NIS 125.6 million investment and higher bank debt, yet after the company's share of profit and excess-cost amortization it barely contributed to quarterly earnings. At the same time, the monitoring-centers segment is now showing what a year without the electronic-monitoring activity looks like: lower revenue, lower segment profit and lower EBITDA. The group is currently held up by growth in security solutions and some improvement in technologies, but those are not yet enough to turn the Pal acquisition into a clear profit engine or solve the cash test. The next proof points are straightforward: a fuller contribution from Pal, stabilization in monitoring centers, better customer collection, and a distribution policy that does not run ahead of cash generation.
Company Setup
G1 is a security, services and security-technologies company. Its three engines are economically different: security solutions are labor-intensive, high-revenue and low-margin; monitoring centers are a service and subscription activity that should carry stronger profitability; and technologies are the integration and project layer that is supposed to improve the quality of growth.
The right screen for this quarter is not "another company with rising revenue." The March 2026 annual analysis left three questions open: whether technologies and Pal would begin to improve profit and cash flow, whether monitoring centers would stabilize after the electronic-monitoring activity stopped, and whether shareholder distributions would remain disciplined against funding needs. The first quarter gives only a partial answer. It shows that the operating base still holds, but the center of gravity has moved from growth figures to the question of who funds the transition.
The debate around the company is not unusual market pressure. It is earnings quality, debt and cash conversion. Investors should get a better answer from three lines in the next reports: how much Pal actually contributes, how much the monitoring-centers segment loses in a full year without the electronic-monitoring activity, and how much of the revenue growth stays in cash after receivables, inventory, leases and interest.
Pal Reached The Balance Sheet Before Earnings
The major event in the quarter was the completion of the acquisition of 50% of Pal Electronics Systems on January 28, 2026, for roughly NIS 125.6 million. It has already changed the balance sheet: investments in equity-method companies jumped to NIS 144.3 million, short-term bank credit rose to NIS 109.0 million, and long-term bank loans reached NIS 50.0 million.
But earnings have not received the same jump. Pal generated NIS 1.1 million of net profit from February through March. G1's share was NIS 0.6 million, offset by NIS 0.6 million of excess-cost amortization. In quarterly accounting terms, Pal was barely a profit engine. That does not make the deal poor, but it does mean the first quarter still does not provide economic proof for the price paid.
| Layer | Quarterly figure | Meaning |
|---|---|---|
| Consideration for 50% of Pal | NIS 125.6 million | The investment is already visible in the balance sheet and investing cash flow |
| Pal net profit from February to March | NIS 1.1 million | Only an initial base, not a full G1 quarter |
| G1's share of Pal profit | NIS 0.6 million | Before excess-cost amortization |
| Excess-cost amortization | NIS 0.6 million | Almost eliminates the quarterly earnings contribution |
This is the quarter's main added insight: the deal already requires capital and funding, but it still does not prove accessible profit or cash for shareholders. The loans signed on March 29, 2026, for NIS 60 million at prime minus 0.2%, improve the maturity profile because they replace short-term credit with six-year loans. Still, after the loans were provided, about NIS 180 million was utilized out of roughly NIS 460 million of total credit facilities. That is available funding room, not evidence that the deal already produces the cash to carry itself.
Monitoring Centers Lost Profit While Security And Tech Offset Part Of The Hit
The clearest operating drag comes from monitoring centers. Segment revenue fell to NIS 46.7 million from NIS 50.8 million in the comparable quarter, and segment profit fell to NIS 4.4 million from NIS 7.5 million. Adjusted EBITDA tells the same story: NIS 8.0 million versus NIS 11.3 million. The end of the electronic-monitoring activity is no longer background context. It is a number that lowers the segment's profitability.
Security solutions offset part of the hit. Revenue in that segment rose 10.3% to NIS 148.8 million, mainly from new customers and the minimum-wage update, and segment profit rose to NIS 5.1 million. This activity supports scale and reduces volatility, but it remains labor-intensive. Revenue growth there is therefore less valuable than growth from a product or service with stronger pricing power.
Technologies are where the market will look for a higher-quality change. Segment revenue rose to NIS 60.9 million and segment profit rose to NIS 5.7 million, mainly from growth at G1 Mizug Plus and Hotelo Computerized Systems, including an improvement in cost of sales. That is positive, but not enough to change the full thesis. Pal is not consolidated into revenue, and its first-quarter contribution barely reached earnings. The technology layer still has to prove pace, not only direction.
Cash Improved, But The Quarter Still Calls For Caution
Operating cash flow improved to NIS 7.7 million from NIS 0.7 million, mainly because the working-capital drag was smaller. Still, cash flexibility remained narrow: customers and accrued income rose by NIS 18.3 million, partly because average credit days increased to roughly 85 days and collection was delayed by the security situation, while inventory rose by NIS 2.5 million for technology projects.
After actual cash uses, the picture is tighter. During the quarter, the company paid NIS 6.4 million of lease principal, NIS 1.0 million of lease interest, NIS 1.7 million of other interest, and bought property, equipment and intangible assets for roughly NIS 2.6 million. Even before the March and May dividends, operating cash flow did not leave wide cash freedom.
The working-capital deficit rose to roughly NIS 49.8 million, compared with positive working capital at the end of 2025. The company states that it has sufficient credit facilities to repay its liabilities, so this is not an immediate distress story. It is a 2026 proof test: as the company distributes cash, funds Pal and carries technology projects, new debt has to buy profit and cash flow, not only time.
The current conclusion is that G1 is still between two stories. Security solutions and legacy technology activities are holding the group together, but monitoring centers stepped down and Pal has not yet proved a shareholder-level contribution. The next quarters need better collection, a positive Pal contribution after excess-cost amortization, and stable monitoring-center profitability. Those proof points can change the market read faster than another modest increase in revenue.
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