This article first appeared on GuruFocus .
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Revenue Growth (Q2 2026):29% year-over-year increase.
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Backlog:Record $31 million as of end of Q2 2026, with approximately $20 million scheduled for delivery by year-end.
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Full-Year 2026 Net Income Guidance:Expected to exceed $3.6 million achieved in 2025.
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Shareholders' Equity:$30.9 million.
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Cash Position:$10 million, roughly unchanged despite 30% revenue growth between Q1 and Q2 2026.
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RFID Revenue Growth (H1 2026):17% increase compared to the same period last year.
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Valuation Metrics:Market capitalization of approximately $31 million; enterprise value (market cap less cash) of approximately $21 million; price-to-book ratio of roughly 1x; price-to-earnings ratio of roughly 9x.
Release Date: August 20, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Second quarter 2026 revenue grew 29% year-over-year, with full-year 2026 revenue expected to exceed 2025's record.
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Record backlog of $31 million, with $20 million scheduled for delivery by year-end, providing strong revenue visibility.
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RFID division revenue grew 17% in the first half of 2026, indicating a recovery in the Israeli commercial market.
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Strong balance sheet with $30.9 million in shareholders' equity and $10 million in cash, enabling M&A opportunities.
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Company trades at a discount to market (9x P/E vs. 16x Russell Microcap), with plans to close the valuation gap through increased IR activities.
Negative Points
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Operating expenses increased by $600,000 in the first half due to US dollar devaluation, posing a challenge to net income growth.
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Supply Chain segment revenue decreased 6% in Q2, with fluctuations in client consumption rates causing unpredictability.
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M&A efforts have not closed a deal in the past 2-3 years due to strict criteria, limiting external growth.
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RFID division remains exposed to geopolitical events in Israel, with a specific unit still undergoing restructuring.
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Gross margins are under pressure from FX and potential large low-margin transactions in the Supply Chain segment.
Q & A Highlights
Q: Can you walk me through the bridge between the announced new orders and the guidance of exceeding $3.6 million in net income, which is flat to last year? Is incremental revenue being absorbed by mix, and what has to change for this momentum to break through to the bottom line? A: Eyal Cohen (CEO): We announced we will exceed the $3.6 million figure, but we face a challenge with the devaluation of the US dollar. In the first half of the year, it increased our operational expenses by about $600,000, which is roughly $1.2 million on an annual basis. To compensate, we are working on internal efficiency, mainly with AI tools, but improving efficiency by $1.2 million a year is tough. We are also increasing our gross profit margins and growing revenues. The combination of these factors supports our outlook for exceeding the $3.6 million net income.
Q: Regarding one of your recent orders in the semiconductor industry, is that a one-time order, or do you see more orders coming from that industry? A: Eyal Cohen (CEO): The announced contract relates to our Supply Chain division. Behind it is design work to embed our component into the client's product, which we worked on a year ago. Once the product starts mass production, we begin receiving orders. As long as the product is alive, we expect recurring orders, not a one-time event.
Q: Can you give an update on your progress in India and where you see that progressing over the next year? A: Eyal Cohen (CEO): We are very pleased with the progress of our team in India. They are reaching clients we have never been in contact with before, and I am sure this will support the growth of our business in India in 2026.
Q: Do you still plan to make any M&A activity non-dilutive to shareholders, financed with existing cash and bank loans? A: Eyal Cohen (CEO): That is correct. We are planning M&A, but in the last 2-3 years, we haven't closed a deal because targets didn't match our criteria, which require a solid history of profits and a positive outlook. We have several opportunities on the table and are in negotiations. We have about $10 million in cash, and if we buy a profitable company, banks should participate in 50% of the financing, allowing us to reach a maximum acquisition value of $20 million.
Q: The RFID division was up 17.5% year-over-year. Was that a function of an easy comp, or are you seeing a positive change? A: Eyal Cohen (CEO): We see a positive change. We expected this rebound in the Israeli market, and demand is starting very strong. After three years of being on hold, we see a recovery, and I am bullish on 2026 for the RFID division.
Q: Supply Chain segment revenues were down about 6%. Can you provide insight into why? A: Eyal Cohen (CEO): Fluctuations in this division are significantly high. In Q1, we were below the comparable quarter by about 17%, but in Q2, we succeeded in closing the gap. Our clients in the defense segment will buy our components, but we don't control the rate of consumption, so fluctuations occur. I don't give importance to the 5% decrease. We have a record backlog of $31 million, with $20 million scheduled for delivery by year-end, supporting our outlook to exceed $51 million in revenue for 2026.
Q: As a follow-up on M&A, what are the gating factors for closing a dealfinding targets, price expectations, or financing capacity? A: Eyal Cohen (CEO): The cap for acquisition investment is $20 million. The target must have synergy with our core business, and we have flexibility on the range of synergy. We check that the company has presented consecutive profits over the last 3-5 years with a positive outlook. Regarding valuation, the multiples on the table are between 5x to 6x EBITDA.
Q: Gross margins seem flat while revenue is growing. Are they affected by the RFID versus Supply Chain mix, FX, or can they improve? A: Eyal Cohen (CEO): We are working to improve gross margins to compensate for the devaluation of the US dollar. Since the beginning of the year, our sales team has been increasing prices, and we follow this month by month. Our expectation is that gross profit margins will increase. However, in certain cases, a huge transaction in the supply chain could have a lower margin due to negotiation, but we hope it won't lower the average. In general, we expect higher gross profit margins.
Q: Regarding the RFID division, is the restructuring of the specific unit over, or should we expect further improvements? A: Eyal Cohen (CEO): We have done great work and made great progress in that unit. Its performance is much better than in the comparable period last year, but we still have work to do. This unit will be profitable in 2026, as opposed to 2025. The RFID division in general is profitable, and the situation is much better now.
Q: Is RFID performance a function of Israel being in a state of war, or are there other significant factors? A: Eyal Cohen (CEO): RFID is 100% affected by the Israeli commercial market. We are in the process of penetrating the Defense segment with RFID and hired a consulting company for that mission. We are also working to penetrate hospitals, a growing and stable segment. We are searching for acquisitions in that field, but it's tough. Another option is to build a team from scratch to reduce the RFID division's exposure to geopolitical events that put the commercial segment on hold.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
