Rimon in the First Quarter: Cash Flow Turned Positive, but the Project Backlog Still Needs Interim Funding

Rimon gave the first answer in Q1 2026 to the main question left open after 2025: whether the large growth wave can start turning into cash. The answer is positive, but incomplete. Revenue rose to NIS 383.6 million, operating profit rose to NIS 39.0 million, and operating cash flow turned positive at NIS 37.7 million after full-year 2025 operating cash flow was negative NIS 112.8 million. That is real progress versus the previous annual analysis, because the company is no longer showing only backlog and accounting profit, but actual cash release during the quarter. Still, the quarter does not fully clean up the story: customers and contract receivables kept rising, current bank credit increased, and much of the working-capital support came from customer advances in the Rimon Global Solutions segment. At the same time, India, Chile, biogas, a possible communication-infrastructure acquisition and a U.S. data-center letter of intent show that the company is still opening new growth fronts. For now, 2026 looks like a better proof year than feared, but not yet like a year in which the interim funding problem has been solved.

Company Overview

Rimon is an infrastructure, water, energy and global solutions group. Its model is not plain contracting: it initiates, designs, finances, builds and sometimes operates projects, with part of the activity conducted through partnerships and investees. That creates a clear advantage when the company can win large projects and connect engineering, procurement, execution and financing. It also creates a recurring pressure point: between winning a project and collecting cash, the company has to finance equipment, employees, subcontractors, guarantees and sometimes customer timing.

Sector-wise, Rimon is both a project growth company and a working-capital company. A large backlog is necessary, but not enough. Business quality is determined by the pace at which backlog becomes revenue, revenue becomes profit, and profit becomes cash left after investments, leases, dividends to minorities and debt repayments. That makes positive Q1 operating cash flow important, but only if it marks the start of a new pattern rather than a quarter helped by advance timing.

The quarter's economic map is clear: infrastructure execution still carries the revenue base, while Rimon Global Solutions carries the change in the story. Infrastructure execution revenue was NIS 222.3 million, up 24% from the comparable quarter. Rimon Global Solutions jumped to NIS 120.5 million from NIS 34.5 million, mainly because of the first-time consolidation of Pah Taash and progress on project milestones. These two segments hold almost the entire analytical question: whether growth comes with a higher margin and reasonable working capital, or mainly increases the group's funding need.

Cash Flow Improved, but Not All the Improvement Came From the Business Itself

The first quarter closed the most urgent issue from the prior year: operating cash flow turned positive. After negative NIS 30.3 million in the comparable quarter and negative NIS 112.8 million for all of 2025, the company reported positive operating cash flow of NIS 37.7 million. This is not cosmetic. It means the group has started moving part of its expanding activity through cash, not only through the income statement.

But the quality of that cash flow is less clean than the headline. Customers and contract receivables rose to NIS 598.9 million from NIS 573.8 million at year-end 2025. The increase came mainly from progress on milestones in projects within Rimon Global Solutions. In other words, even in a quarter with positive operating cash flow, part of growth was still stuck with customers or in revenue not yet collected. On the other side, other payables rose to NIS 208.2 million from NIS 152.6 million, mainly due to customer advances in Global Solutions. That helps liquidity, but it also means large projects finance themselves only if customers keep advancing cash fast enough.

All-in cash flexibility after actual cash uses was positive, but narrow relative to the scale of the project base. Operating cash flow of NIS 37.7 million, less investing cash outflow of NIS 14.5 million, lease principal repayment of NIS 5.1 million, a NIS 5.0 million dividend to minority shareholders and NIS 4.5 million of long-term loan repayments, leaves about NIS 8.6 million before new borrowings. That is much better than 2025, but not enough to say the company financed expansion without banks. In practice, the quarter included NIS 36.5 million of net short-term borrowing and NIS 16.2 million of new long-term bank debt.

Funding is not a stress point yet, but it remains a metric to watch. Current bank credit rose to NIS 332.2 million from NIS 296.0 million at year-end 2025, explained by current credit needs and financing large projects until payment milestones are reached. The bond covenant picture is much more comfortable: equity for covenant purposes was about NIS 631 million versus a NIS 180 million minimum, and the equity-to-net-balance-sheet ratio was about 36% versus a 20% minimum. So this is not a covenant story. It is an execution funding story: how much bank credit, supplier credit and customer advances are needed before backlog becomes cash.

Global Solutions Is No Longer a Small Add-On

The operating business is stronger than the shareholder-level bottom line alone suggests. Revenue rose 55% from the comparable quarter, gross profit rose 74%, and gross margin rose to 18.6% from 16.5%. Operating profit rose to NIS 39.0 million, up 76%. This quarter shows that Rimon is not only growing revenue, but growing gross profit faster than revenue.

The important shift sits in the segments. Infrastructure execution revenue grew, but its gross margin slipped slightly to 16.3% from 16.9%. That is not dramatic, but it shows the largest segment is not the source of the margin step-up. Rimon Global Solutions changed the quarter: NIS 120.5 million of revenue, NIS 30.8 million of gross profit and a gross margin of 25.6%. That is already about 42% of segment gross profit before adjustments, far beyond the weight the segment had before the Pah Taash acquisition.

This improvement is not free. General and administrative expenses rose to NIS 35.8 million from NIS 17.1 million, mainly due to the first-time consolidation of Pah Taash, expansion in Israel and abroad, and the buildout of support functions for projects. Financing expenses rose to NIS 18.9 million from NIS 11.2 million, and net financing moved to a NIS 11.4 million expense from NIS 2.1 million of net financing income in the comparable quarter. Profit attributable to non-controlling interests was NIS 3.2 million, compared with only NIS 0.2 million in the comparable quarter. As a result, profit attributable to shareholders rose only to NIS 19.6 million from NIS 18.0 million, much less than the operating-profit increase.

There was also a one-off item that softens the read. Other income net was NIS 5.0 million, mainly after an arbitration award in which the company was awarded about NIS 4.1 million plus linkage and interest. Operating profit would still have improved without that item, but the gap between operating profit and profit attributable to shareholders would have been sharper. That is why Rimon needs to be tracked through three layers together: segment gross profit, support and financing expenses, and finally the profit attributable to the public company's shareholders.

Backlog Is Still Large, and New Events Raise the Execution Burden

Backlog near the report publication date was about NIS 2.95 billion, very close to year-end 2025. Infrastructure execution accounted for about NIS 1.79 billion and Rimon Global Solutions for about NIS 968 million. The backlog excludes entrepreneurship and operating revenue, and includes the group's share in backlog from equity-method investees. It provides visibility, but it does not by itself say how much cash will be collected, at what margin, and how quickly.

India is no longer a paper option. In March, the conditions were met, a framework agreement was signed, and work orders were issued to Trico for the semiconductor-fab project. Total consideration is about $93 million, of which about $46 million relates to the works and about $47 million to the additional works, and Rimon's direct and indirect share, including through its 50% holding in Pah Taash, is about 60% of the total consideration. About 68% of the consideration will be paid in U.S. dollars and 32% in Indian rupees, and completion is set for March 30, 2027. This is important progress versus the India analysis, but it also puts the company into an execution year with currency, milestones and working-capital demands.

In Chile, a detailed agreement was signed for pipe-jacking works for urban flowing infrastructure in Antofagasta, for about $39 million over 19 months from written work order and advance payment. This is a clearer contract than a general growth idea, but it still depends on order timing, advance payment and execution. In Merom HaGalil, by contrast, the biogas project with nominal capacity of about 5 MW has not yet become effective because the conditions precedent have not been met, including the customer's financing agreement and required regulatory approvals. The fixed consideration for construction and initial operation is about NIS 152.8 million, but as of the report date there is a valid bid, not an active revenue-generating contract.

Two post-balance-sheet threads sharpen the same issue. The letter of intent to invest in a U.S. data-center company could open a route for Rimon into data centers, with a possible investment of up to $35 million for up to 30% of the target and a right to serve as EPC contractor in its projects. But the investment instrument, valuation mechanisms and funding method have not yet been agreed. The memorandum of understanding to acquire 51% of an Israeli communication, lighting and electrical-control infrastructure company, at an expected price of about NIS 14 million before adjustments and a NIS 1 million contingent consideration, is also still subject to due diligence, a detailed agreement and approvals. These may become growth steps, but each needs management capacity and funding before it proves contribution.

Conclusion

The first quarter of 2026 improves the read on Rimon, but does not remove the need for close tracking. The positive side is clear: higher revenue, better gross margin, operating cash flow back in positive territory, and Global Solutions becoming a meaningful profit engine. The less comfortable side is that profit attributable to shareholders grew much more slowly than operating profit, while working capital still depends on advances, milestones and bank credit.

The current conclusion is that the quarter strengthens the possibility that 2025 was a heavy transition year rather than structural damage, but the proof is still incomplete. The positive counter-thesis is that with India signed, Chile signed, Pah Taash consolidated and cash flow positive, Rimon is already entering a higher-quality growth year. The more cautious read, which still looks more accurate after Q1, is that the company needs another 2 to 4 quarters in which customers and contract receivables do not keep rising too fast, customer advances are not only pulling forward future pressure, and current bank credit does not climb with every backlog step-up. Short interest is not an extreme warning signal: short float was 1.19% on May 20 versus a sector average of 0.66%, but it does show the market already wants more proof. The next quarters will be driven less by the size of project wins and more by collection, Global Solutions margins, credit usage and whether the new event pipeline matures into binding agreements with clear funding.