Michshuv Yashir in the First Quarter: One's Growth Comes With a Margin and Cash-Conversion Cost

Michshuv Yashir opened 2026 with the quarter that had to answer the question left after 2025: whether One Technologies' growth is converting into margin and cash, or mainly into a larger revenue base. The first answer is mixed. Consolidated revenue rose 17.5% and operating profit rose 11.6%, but gross margin fell from 14.6% to 13.3%, and operating cash flow fell 39.3% even though net profit increased. BPO gives the clearest example: segment revenue jumped by more than 60%, partly because One Line is already consolidated in this quarter, but the segment margin fell by about 2.7 percentage points. This is not a quarter that weakens the One story. It confirms demand, scale and a comfortable balance sheet. The yellow flag is conversion quality: how much of the growth remains in profit that reaches Michshuv Yashir shareholders, how much is absorbed by working capital, and whether dividends from One keep moving value upward before One's buyback program starts to matter.

Company Overview

Michshuv Yashir is mainly a public holding layer above One Technologies, not a direct way to capture every shekel that One earns. It holds 34.88% of One's issued share capital. That holding is carried at about NIS 361 million, including NIS 5.8 million of goodwill that has not yet been amortized. The market value of the One stake at the balance-sheet date was about NIS 1.51 billion, while Michshuv Yashir's market cap on May 28 was about NIS 1.13 billion. That gap matters, but it is not a conclusion on its own: there is a holding-company layer, minority interests, tax, relatively low liquidity and dependence on distributions from One.

The operating business is almost entirely inside One. In the first quarter, the technology solutions and services segment generated NIS 813.7 million of revenue, infrastructure and computing generated NIS 368.3 million, and BPO and support centers generated NIS 149.9 million. Teklis and other activities are small compared with the main engine. The real question is therefore not whether Michshuv Yashir grows in the consolidated statements, but whether One Technologies is expanding in a way that creates high-quality profit and enough cash to reach the majority-shareholder layer.

The continuity from prior coverage is direct. After the 2025 report, we wrote that Michshuv Yashir entered 2026 with a stronger One, but still had to prove that BPO and solutions growth was not only volume. The follow-up analysis on BPO backlog quality sharpened the point that the market should track conversion into revenue and margin, not only the backlog headline. The first quarter gives a partial answer: the revenue arrived, but the margin has not yet provided a full proof point.

Segment Growth Arrived With Margin Pressure

The positive headline is strong revenue growth. Consolidated revenue reached NIS 1.328 billion, compared with NIS 1.130 billion in the parallel quarter. At One itself, revenue reached NIS 1.327 billion, and net profit attributable to One shareholders rose 13.6% to NIS 69.0 million. One's EBITDA also rose 10.9% to NIS 127.6 million.

But that increase did not flow through at the same pace to margin. Group gross profit rose only 6.8%, and gross margin fell from 14.6% to 13.3%. Operating profit rose 11.6%, but the operating margin fell from 7.5% to 7.1%. Relative discipline in selling, marketing, general and administrative expenses helped keep operating profit rising, but it did not offset the pressure at the gross-profit layer.

The segment breakdown shows who paid the price. Based on segment revenue before adjustments, BPO was the fastest-growing engine, but also the place where margin compressed the most.

That sharpens the quality-of-growth issue. In solutions, revenue rose 24.0%, but the segment result rose only 11.4%. In BPO, revenue rose 63.3%, while the segment result rose only 20.6%. Part of the increase has an easier comparison base, because One Line was consolidated in 2025 only from the second quarter, so the parallel quarter did not include it. Management also attributes revenue growth to organic growth in technology solutions and services and to the consolidation of One Line, while noting a negative low-single-digit effect from dollar depreciation on revenue.

The point is not that growth is weak. The point is that the first quarter still does not prove clean operating leverage. One Technologies is selling more and operating at a larger scale, but each new revenue shekel leaves less gross profit than in the parallel quarter. For the market to read 2026 as a BPO stabilization year rather than just a scale-up year, margins in the growing segments need to stabilize.

Cash Still Depends on Working Capital and One Dividends

The cash-flow gap is the less comfortable part of the quarter. Consolidated net profit rose to NIS 72.1 million, but operating cash flow fell to NIS 87.5 million from NIS 144.0 million in the parallel quarter. That is still positive cash flow, and the group still increased cash by NIS 46.9 million before currency effects. This is not an immediate liquidity problem. It is a different question: how much cash is actually released from growth after working capital, leases, investments and debt.

On an all-in cash-flexibility basis after actual cash uses during the quarter, the picture remains positive. Operating activities generated NIS 87.5 million. Investing activities used NIS 8.3 million, mainly fixed assets, business acquisitions and a loan to another party, partly offset by net realization of a financial instrument. Financing activities used NIS 32.3 million, mainly NIS 24.0 million of lease liability repayments, NIS 5.5 million of long-term debt repayments and NIS 9.8 million of dividends to non-controlling interests, partly offset by a NIS 10.4 million increase in short-term bank credit.

Working capital explains why cash flow declined. Customer balances increased by NIS 53.1 million versus the end of 2025, inventory rose by NIS 26.6 million, and receivables and other debit balances rose by NIS 19.5 million. Suppliers increased by NIS 107.7 million and provided important operating financing, but payables and other credit balances reduced operating cash flow by NIS 31.2 million. The accounting note adds another layer: One transferred about NIS 120 million of customer balances to an unrelated entity and derecognized them from the balance sheet, compared with about NIS 92 million in the parallel quarter. In other words, even after a larger sale of receivables, the customer balance still increased. That suggests the growth still requires balance-sheet support, even if it does not currently threaten liquidity.

At the Michshuv Yashir shareholder layer, distributions remain the main channel for moving value up from One. On March 15, One Technologies approved a NIS 42.3 million dividend, with Michshuv Yashir's share at NIS 14.8 million. On March 30, Michshuv Yashir approved a NIS 15.1 million dividend, paid after quarter-end. After the balance-sheet date, One Technologies approved another NIS 45.5 million dividend, with NIS 15.9 million going to Michshuv Yashir, and on the same date Michshuv Yashir approved another dividend of about NIS 15.1 million. The pattern matters: accessible value for Michshuv Yashir shareholders depends less on consolidated profit and more on One's ability to keep distributing.

One's buyback program, up to NIS 50 million, has not yet contributed to that value layer. It was approved in March, but no purchases had been made under the program by the report date. The next few quarters therefore have two separate proof paths: recurring distributions that move up to the parent, and actual execution of One's buyback program, which can improve capital allocation but has not yet appeared in the numbers.

Conclusions

The first quarter strengthens Michshuv Yashir as exposure to a large Israeli IT player with a strong balance sheet, high liquidity and an active distribution pattern. It does not strengthen the operating-leverage claim to the same degree. Revenue grew quickly, but gross margin declined, operating margin slipped slightly, and a large part of the BPO growth came with sharper segment-margin compression. Profit attributable to majority shareholders rose only 8.8%, compared with 15.4% growth in consolidated net profit, reminding investors again that the consolidated number is not the same as cash or profit accessible to Michshuv Yashir shareholders.

The next quarters need to show whether BPO and solutions can keep growing without further margin erosion, whether operating cash flow remains strong after customers, inventory and receivables sales, and whether One dividends and the buyback program move value upward without reducing balance-sheet quality. The acquisition of 70% of Strauss Strategy Consulting and Systems for NIS 28 million adds another activity to the services layer, but its contribution still has to show up in the numbers. The counter-thesis is strong enough: One Technologies is still growing, net finance costs fell, One's net debt coverage ratio is negative, its equity is far above the covenant threshold, and short interest in Michshuv Yashir is only 0.22% of the float. If margins stabilize and BPO starts showing better profitability after the first full consolidation year of One Line, the first quarter will look like a transition stage. Until then, growth exists and the value in One is clear, but the key 2026 proof point is how much of that volume ultimately reaches profit, cash and Michshuv Yashir shareholders.