Smart Shooter in the First Quarter: Backlog Jumps, Inventory and the Defense Ministry Set the Profit Test

Smart Shooter gives an important first-quarter proof point that the 2025 breakout was not a one-off, but it also moves the discussion to a less comfortable place: conversion quality. New orders in the quarter totaled about $17.65 million, and by May 20 they had already reached about $33 million year to date, so demand is not the weak point. Current backlog of about $49 million, of which at least $40 million is planned for delivery and revenue recognition during 2026, gives the company a stronger operating base than it had when it became public. Still, the quarter itself does not yet show clean profit or clean cash generation: the reported loss jumped because of an approximately $5.3 million liability to the Israeli Ministry of Defense, and positive operating cash flow also reflects payables movement and lower customer balances while inventory keeps rising ahead of deliveries. The return of SMASH HOPPER orders is a positive signal for the remote-controlled weapon-station line, but it is still orders rather than recurring revenue at a level that proves a second engine. That makes 2026 less a demand-proof year and more a delivery year: whether backlog becomes revenue, whether gross margin holds, and whether the IPO cash remains a competitive advantage rather than simply funding inventory, liabilities and margin volatility.

Backlog Has Moved Faster Than Revenue

The company is a defense-technology hardware business that develops, manufactures and sells electro-optical fire-control systems for small arms and lightweight remote-controlled weapon stations. Its economics are not software-style recurring revenue. They are defense hardware economics: government orders, export licenses, inventory, delivery timing, large customers and uneven procurement cycles. That makes the key question not just first-quarter revenue, but how much of backlog is binding, when it is delivered, and what remains after inventory, suppliers, the Defense Ministry and the new public-company cost base.

The company reports one operating segment, but there are two proof paths. The first is the soldier-borne systems line, which drove most of the 2025 growth and still leads in 2026. The second is the remote-controlled station line, mainly SMASH HOPPER, which weakened sharply in 2025 and was one of the core open questions in the previous annual analysis. The first quarter does not close that question, but it does provide a better signal: an approximately $3.2 million order from a customer in Asia during the quarter, and a post-period order from the Israeli Ministry of Defense for about $2.3 million, with an option for another roughly $2.7 million.

The move into the public market also changes the screening layer. At the end of March the company had about $43.7 million of cash and another $38.1 million of short-term deposits, with no bank credit being used. For a defense-hardware company that became public in March 2026, that is a highly supportive balance sheet. It does not eliminate the execution test. It has to fund inventory, delivery capability, public-company costs and the Defense Ministry liability triggered by the IPO.

The important number in the quarter is not the 26% revenue growth, but the gap between what has been recognized and what has already been signed. Revenue totaled about $6.6 million, while new orders in the quarter were almost 2.7 times revenue, and backlog at quarter-end reached about $36 million versus about $21.5 million in the comparable period. By May 20 backlog had already increased to about $49 million.

The gap between about $6.6 million of revenue and about $17.65 million of new orders in the quarter defines the proof timing. From the start of the year to May 20, binding contracts totaled about $33 million, and at least $40 million of current backlog is planned for delivery and revenue recognition in 2026. That figure is already above all of 2025 revenue, but it still has to become delivery, recognition and collection.

The geographic split of revenue still does not tell the same story as backlog. In the first quarter Europe and Israel represented most revenue, while in current backlog the US already accounts for about 33% and Asia-Pacific for about 20%. That is not only a geographic change. It means the next quarters will test whether US and Asia-Pacific orders move on time from contract wins into deliveries, and whether profitability holds as the customer and country mix changes.

The useful signal is that backlog is not only the same product repeating. During the first quarter the company received two large SMASH 3000 orders from Europe and Asia, a US order for SMASH3000SA, and a HOPPER order from Asia. After the balance-sheet date it added a roughly $10.7 million US order for the US Army and an Israeli HOPPER order. That improves the read on the remote-controlled station line, but does not yet make it a proven second growth engine. The proof arrives only if those orders appear as revenue, gross margin and cash flow, not merely as an impressive backlog line.

Reported Profit Is Weak, Adjusted Profit Is Still Not Strong Enough

Profitability in the quarter has to be separated between the operating business and the accounting effect of the IPO. The company reported an operating loss of about $1.1 million and a net loss of about $6.6 million. The net number looks severe, but most of it is tied to the liability created for the Defense Ministry when the IPO was completed. About $85 thousand reduced revenue, and the remaining consideration, about $5.3 million, was recorded mainly as finance expense.

This is not only an accounting issue. In the follow-up analysis on the Defense Ministry economics, the key point was that the IPO is not only cash entering the company. It is also an event that activates the Ministry's economic participation mechanism. The first quarter turns that principle into accounting execution: the liability is now inside other payables, sharpening the difference between a company that is growing well and a company where all operating value is immediately accessible to shareholders without friction layers.

Even after neutralizing that liability, the picture is not a celebration. Gross margin improved versus the comparable quarter, partly because the sales mix tilted more toward exports, but R&D, sales and marketing, and G&A costs all rose. Part of the increase came from one-time IPO bonuses and from the shekel strengthening against the dollar by an average of about 16% versus the comparable quarter, which lifted shekel expenses in dollar terms. Still, a company asking to be evaluated as a defense growth platform has to show that backlog growth creates operating leverage, not only enough volume to cover a new public-company cost base.

The IPO Removed Debt Pressure, but Execution and Working Capital Still Matter

Liquidity changed dramatically. The IPO brought in about $62.4 million net, and preferred C option exercises before the IPO added about $3.7 million of cash. At the end of March the company had about $81.8 million in cash and short-term deposits, and it was not using bank credit. For funding inventory, shortening delivery times and serving large government customers, that is a clear advantage.

But first-quarter operating cash flow is not enough to conclude that the business is already generating clean cash at the pace implied by backlog. Operating cash flow was about $0.8 million, versus about $3.0 million in the comparable quarter. It was supported by a roughly $3.6 million decline in customers and accrued income balances and a roughly $5.9 million increase in suppliers, payables and other credit balances. At the same time, inventory rose by about $1.8 million from year-end 2025 because of procurement for expected deliveries and shelf inventory intended to shorten delivery times.

The cash bridge is still mixed. Cash and short-term deposits stood at about $81.8 million at the end of March, inventory increased by about $1.8 million from year-end, operating cash flow was about $0.8 million, and other payables and credit balances reached about $12.8 million, including the Defense Ministry liability and higher IPO and operating-related accruals. The company is not currently using bank credit, so immediate funding pressure is low, but backlog still consumes cash before delivery.

All-in cash flexibility after actual cash uses in the quarter remains very strong because of the IPO. After about $0.1 million of capital expenditure, roughly $0.1 million of lease payments and the placement of part of the IPO proceeds in deposits, the company ended March with a balance sheet that allows it to operate without credit pressure. That is not yet proof of mature operating cash generation. For the balance sheet to remain an advantage rather than interim funding, inventory procurement has to become deliveries, invoices and collections.

There is also a commercial risk that does not appear in revenue. In the US, some government contracts may qualify for a duty-free waiver for products made in Israel, and in the vast majority of the relevant engagements so far, customers have obtained the waiver. If the waiver is not granted, the contract price will include tariff costs imposed on the US subsidiary. Since current backlog now includes meaningful US exposure, this point matters more than it would if the US were still only a small part of quarterly revenue.

Conclusion

The first quarter strengthens the read that demand for the company's products is real and expanding, but it does not close the questions left open after 2025. Backlog grew, orders from the US and Asia-Pacific became more important, and HOPPER orders revived the possibility of a second product line. Against that, reported profit was hit by the Defense Ministry liability, operating cash flow still reflects working-capital and payables timing, and inventory rose before backlog turned into revenue.

The number that will determine the next read is straightforward: whether at least $40 million of current backlog planned for delivery in 2026 becomes revenue with stable gross margin and reasonable collections. If it does, the IPO will look like a funding event that strengthened a company already capable of turning demand into results. If revenue lags, inventory keeps rising faster than deliveries, or HOPPER remains a set of isolated orders, the market will see a company with a lot of cash and backlog, but still only partial proof of growth quality.