Accel in the First Quarter: Customer Collections Restored Cash, Acquisitions Added Debt

Accel is showing a first quarter that starts to close the 2025 cash gap through stronger customer collections and newly consolidated acquisitions, not through a clean breakthrough in profit attributable to shareholders. Operating cash flow reached NIS 34.1 million, mainly because customer receivables fell by NIS 34.9 million during the quarter. At the same time, net profit turned into a NIS 2.3 million loss, because financing, amortization, and transaction costs are already sitting inside the income statement. Starlight and NextWave provide an early positive signal, with NIS 8.7 million of revenue and NIS 4.6 million of consolidated net profit since closing, while Synel still generated a pre-tax loss in the employee activity management segment. The quarter therefore improves the key checkpoint from the prior annual coverage, cash conversion, but replaces it with two harder tests: whether customer collections can stay strong while activity keeps growing, and whether the acquired businesses can cover the debt, contingent consideration, and amortization that arrived with them. Over the next few quarters, the market is likely to read the company less through headline growth and more through three lines: customer receivables, finance expenses, and the full-quarter contribution of Starlight, NextWave, and Synel to pre-tax profit.

Company Overview

Accel is no longer only an importer and distributor of communications equipment. It is building a technology group through acquisitions, cyber services, integration, cloud activity, software, and Synel in employee activity management. Its economic model combines two different engines: distribution and services activity that requires customer credit, and an acquisition machine that adds capabilities, revenue, and potential cash flow, but also debt, contingent consideration, and amortization.

The segment split explains why a revenue-only read misses the main point. The communications equipment, information security, and software segment remains the largest segment and the biggest pre-tax profit contributor. The cyber segment remains profitable, but its pre-tax margin is lower than in the parallel quarter. Synel is now visible as a third segment with meaningful revenue, but still with a pre-tax loss.

The result is that Accel sits between two states. At the operating level, it is broader, gross profit is higher, and recurring revenue is still close to 40% of sales. At the shareholder level, that activity must be connected to financing, amortization, and cash that comes after collection, not before.

Operating Profit Improved Before Net Profit Returned

Quarterly revenue rose to NIS 115.3 million, compared with NIS 103.1 million in the parallel quarter, an increase of roughly 12%. Management attributes the increase mainly to the first-time consolidation of Synel in the fourth quarter of 2025 and Starlight and NextWave during the current quarter. Two external pressures offset part of the growth: the decline in the dollar against the shekel, which management estimates reduced revenue by about NIS 12 million, and Operation Shaagat HaAri, which delayed air shipments and orders by at least NIS 5 million.

The stronger number is gross profit. Gross profit rose to NIS 36.2 million, and gross margin jumped to 31.4% from 22.1%. That is an unusual move for a company that also includes import, distribution, and integration activity, and it is not explained only by price or demand. The company attributes the improvement to the consolidation of higher-margin companies and to a change in product and sales mix. In business terms, the acquisitions did not only increase sales. They changed the group's gross profit structure.

The problem starts below gross profit. Selling and marketing, general and administrative, and research and development expenses rose faster than revenue, mainly because of first-time consolidation, amortization of purchase price allocation, new activities, share-based compensation, and transaction expenses. Operating profit declined to NIS 4.0 million from NIS 4.5 million, despite the gross profit jump.

The financing layer turned the operating improvement into a loss. Net finance expenses rose to NIS 5.5 million, compared with NIS 1.0 million in the parallel quarter, mainly because of the dollar decline, with an estimated NIS 2.5 million effect, financing costs on loans and bonds, first-time consolidation of companies, and revaluation of contingent consideration. Pre-tax profit therefore moved from NIS 3.6 million of profit to a NIS 1.5 million loss, and net profit moved from NIS 2.6 million of profit to a NIS 2.3 million loss.

Adjusted EBITDA, a management metric that is neither audited nor reviewed, increased to NIS 13.1 million from NIS 8.6 million. It is a useful figure only if it is immediately filtered through two questions: how much is absorbed by amortization and financing, and how much turns into cash after customers, suppliers, and acquisitions. In this quarter, the first answer is still weak, and the second improved sharply.

Customer Collections Restored Cash for One Quarter

The key checkpoint in the prior annual analysis was the gap between EBITDA and cash. The first quarter provides a better first answer: operating cash flow reached NIS 34.1 million, compared with negative NIS 3.1 million in the parallel quarter and negative NIS 5.5 million for all of 2025. This did not come from net profit, because the quarter ended with a loss. It came from balance-sheet movement, mainly collection.

The line that moved cash is customer receivables. A decline in customer receivables contributed NIS 34.9 million to cash flow, while a decline in inventory added NIS 3.4 million and an increase in suppliers added NIS 2.8 million. A decline in payables and other credit balances reduced cash flow by NIS 8.9 million, and a decline in tax institutions reduced it by NIS 2.5 million. That is how positive operating cash flow was built despite a net loss.

The interpretation should not move too quickly. Customer receivables fell to NIS 160.4 million from NIS 188.7 million at the end of 2025, a clear improvement. They are still above NIS 151.6 million at the end of the parallel quarter. The weighted average customer credit balance in the period, about NIS 152.0 million, also remains far above the weighted average supplier credit balance, about NIS 62.6 million. The business is still financing customers at a large scale, even after a strong collection quarter.

The full cash picture is less clean than operating cash flow alone. After positive operating cash flow of NIS 34.1 million, the company used NIS 36.9 million in investing activity, mainly NIS 34.7 million for businesses that were consolidated for the first time. Financing activity added NIS 30.8 million, mainly the NIS 56.2 million bond and warrant issuance, offset by NIS 22.1 million of net bank credit repayment and NIS 1.9 million of lease repayments. On an all-in cash flexibility basis, after actual cash uses, the quarter ended with more cash because the company collected from customers and raised debt, not because the operating business alone funded the entire acquisition stage.

The Acquisitions Already Create Activity and Raise the Proof Bar

Starlight and NextWave are the best reason not to dismiss the quarter because of the net loss. The transaction closed on February 3, 2026, and from the acquisition date through the end of March the companies contributed NIS 8.7 million of revenue and NIS 4.6 million of consolidated net profit. After quarter-end, the companies reported new orders in February and March that, according to the company, reflect roughly 50% growth in revenue and gross profit compared with their average 2025 level.

The other side of the same transaction sits on the balance sheet. The total business combination cost for Starlight and NextWave was estimated at NIS 81.3 million, including NIS 49.2 million in cash and contingent consideration with a fair value of NIS 32.1 million at closing, which rose to NIS 32.4 million by the end of March. The purchase price allocation recognized NIS 43.3 million of intangible assets and NIS 43.1 million of goodwill. The initial contribution is positive, but the income statement now carries debt, contingent consideration, and amortization that require recurring profitability, not only orders.

Synel is the reminder that an acquisition does not end on closing day. The settlement agreement signed in March 2026 changed the consideration structure in the Synel transaction: a vendor loan of about NIS 10.3 million in 12 quarterly payments, and two contingent consideration tranches of NIS 5 million each, based on profit thresholds of NIS 8.3 million and NIS 11 million in one of the years 2026 through 2028. The fair value of Synel-related contingent consideration was about NIS 7.4 million at the end of March.

Against that structure, Synel still does not provide a clean profit answer. The employee activity management segment contributed NIS 16.9 million of revenue, adjusted EBITDA of NIS 1.5 million, but also an operating loss of NIS 1.8 million and a pre-tax loss of NIS 3.2 million. This becomes an improvement from the weak 2025 starting point only if the next quarters show that the segment loss is shrinking and that the customer base is stabilizing. The first quarter does not yet provide enough proof.

The debt layer does not look immediately stressed, but it changes the discussion. Series A bonds carry a 5% annual coupon, the effective interest rate is about 6.3%, and principal repayment starts in March 2028. The covenants are comfortable for now: equity attributable to shareholders stood at about NIS 191 million, and equity to net balance sheet stood at about 44.6%, well above the 20% threshold. The near-term risk is therefore not a covenant breach. The risk is that operating profitability now has to carry a larger layer of financing, amortization, and contingent consideration.

The parent-company standalone figures sharpen that point. On a standalone basis, operating cash flow was negative by about NIS 4.0 million, and the company transferred net investments and loans to subsidiaries of NIS 51.4 million. Financing activity at the parent-company level was NIS 55.4 million, mainly from the bond and warrant issuance. The operating value sits in the subsidiaries, but the current expansion stage still runs through parent-level financing.

Conclusions

Accel's first quarter is more positive on cash and more mixed on earnings quality. The 2025 checkpoint, whether EBITDA would start converting into cash, received a first positive answer through lower customer receivables and strong operating cash flow. This is still not full proof of a self-funding model, because the same period also includes acquisition cash uses, a bond issuance, a sharp increase in contingent consideration, and a net loss attributable to shareholders.

The company is moving from a platform that only grows to a platform that starts to show collection, but it still needs to prove that its acquisitions produce profit after financing and amortization. The strongest counter-thesis is that the first quarter already includes the beginning of the repair: the dollar and the security operation hurt revenue, Starlight and NextWave contributed profit quickly, and customer collections changed cash flow. The thesis strengthens over the next few quarters if operating cash flow remains positive without another large one-time decline in receivables, if Synel's pre-tax loss narrows, and if Starlight and NextWave keep contributing after a full quarter. It weakens if customer credit rises again, if finance expenses keep growing, or if new orders fail to close into net profit after amortization and contingent consideration.