M.T.I Wireless Edge Ltd. ($MWE)

Okay. So thanks, everyone joined so far. We'll just get started and a few more people will be joining as it goes on. So thank you for joining this morning for this webinar with MTI Group, and it's a 2025 results presentation. And joining us are Moni Borovitz, the CEO; and Eran Shmulinson, the General Manager of the Antenna Division. So without further ado, I'll pass over to you guys. And then, yes, there will be some time for Q&A. And so please feel free to submit questions via the chat function, and I'll make a post there now. There'll also be a poll at the time of the Q&A. So please do submit your responses to the poll when you get a chance. So yes, thank you, and over to you, Moni.

Thank you, Fintan. Good morning, everybody. Today, I'm joined by Eran Shmulinson, the General Manager of our Antenna division. So we can give you some more details about our Antennas activity. I'll start with describing the markets that we operate in. And the first one is, of course, defense. As you are all aware, since the Russia-Ukraine war about 4 years ago, we see increased budgets going worldwide, especially in Europe, towards the defense. And we in MTI now see more and more demand in this area both in our Antenna division and in the representation in Special Consulting divisions. I think that everybody is aware today that the new war is electronic war. It means that you have a lot of flying objects, whether missiles or drones, they are all guided with electronic communication. And on the other hand, you have the system that are trying to block them, whether electronically or with the interception missiles. And this is where MTI is specializing, both on the flying object and on the interception and the electronic devices. If I'll move to the commercial part of our business. So first of all, we have the wireless water management solutions. As you are all aware, the water is a resource that is vanishing from the world, sweet water, and it is becoming more and more required to see smart water management. And the third business of ours is the 5G backhaul antennas where we entered only into the 5G, because before we didn't have any unique antenna solution for that. And Eran will cover this thoroughly as we go ahead. The key events in 2025. So first of all, although it was a very difficult year here in Israel with all the war that we had, and we now have it again, we had a record revenue. It's the first time that we passed the $50 million mark with increasing profits all the way to the earnings per share. And I'm always telling everybody that is listening to me on the business model is that we need to convert about 80% to 85% of our operational profit into cash flow. Because at the end of the day, we are looking to increase profitability and cash flow. So this year, it was even stronger. So we ended the year with a strong cash balance. In terms of the businesses themselves, so as I mentioned, the business in defense is growing very strong. And right now, we see a very high level of business opportunities, and we will cover that. We introduced our new controller. Until now, we use mainly the Motorola hardware, but now we have also our own controller and I'll talk about it. In the 5G backhaul, we had a slow setback because of the Indian market, and Eran will cover that. But at the same time, we are seeing very nice demand for our antenna beam steering antenna solution. For people that hear me for the first time, I'll just repeat what it does. It allows an auto alignment because the beam is very narrow and sometimes the winds move the antennas on the tower, and we'll do an auto alignment to make sure that the link is back in place. And we also added beam forming technologies in our Antenna business, and Eran will give some more details about it. So speaking on each of the division, I will start with the Water Management, which is the biggest division for now. So as I mentioned, we work with Motorola for many years. They bring the hardware and we distribute it worldwide. And the IP is -- our IP is the software that manages those controllers. It is for a large application, it's not for home use. It's for either managing full cities, the entire park and pool landscape irrigation in the city or for big agricultural farms. And at the end of the day, what's important is that we save water. We are saving at least 35% of the water usage. When we are talking in agriculture, it gives also the benefit that you have more crops and in better quality. So you also increase your revenue. The system are very sophisticated. As you can see, we can combine different types of communication technology, and we work worldwide. One thing that I really love about this business is that we have a recurring revenue model and about 20%, 25% of this business is with recurring revenue from service and maintenance. This is provided mainly in Israel, in Australia and South Africa, where we have our fully owned subsidiaries. Looking at what we did in '25 in this business. So, first of all, as I mentioned, we launched our own controller. Today, we use four controllers -- four families of controllers for Motorola. And this family of Elite Pro can replace up to two of them to a high level that we still meet Motorola. It allows us to get into a lower end market, I would say, because the price is -- it's less expensive for us, this controller, of course. And as I mentioned, we have recurring revenue model that is mainly to the municipalities market, and we are able to both increase the prices of those services. And also once the controllers are out of warranty, usually 2 to 3 years after the running operation, they get added to the services, and this is how we create more revenue from services. And we have a niche market here, which is fountain controls, and this is right now operating only in Israel, but we will take it elsewhere. The idea is that if a municipality has 30 or 40 fountains around this town, they don't really know what is going unless they go and test it one by one. We are not taking responsibility for the water works or the music or the lights. We can do it. But the key idea is that we know how to control remotely to understand what is the level of the water, if they are good, if they are sufficient. In Israel, at least you need to treat some of them like a public swimming pool, because kids can run in and out in the summer. So we completed two projects in two municipalities already for about 60 systems. An additional 10 systems were installed in two other municipalities that we will complete them during 2026. These are high-priced project. And again, after years ago again to the service revenue. And I think that once we do four or five cities in Israel, it will be easy for us to exactly understand how we want to price it going forward, and then we can take it elsewhere in the world. Overall, Mottech is operating globally. We have value-added resellers all around the world. One of the key strongest market for us is the U.S., Canada, and also Italy is progressing very well for us, and we saw good growth there in 2025. This entire division grew 10% year-on-year. And also, we see very good demand coming from the Arabian Gulf, especially in Saudi Arabia and Qatar. We have very strong relations there with local value-added resellers. And they are now getting also into agriculture, which is, I think, is where we add the most of the value. Moving into the Antenna business, I will let Eran take you through it.

Okay. Hello, everybody. So in the Antenna business, we've been operating for a long time for over 60 years. We have deployments worldwide. And the markets basically diverge into three main markets. It's the defense market. And in the commercial market, we split between the 5G backhaul market, the fixed broadband wireless access and the RFID market. Okay. So the main growth that we had in the past 2 years was as a result of two markets. The military market grew a lot from the -- it started from the Russian-Ukrainian war, and then also based on the work that we have here in Israel. And we have a lot of much more sophisticated defense applications. We also received build-to-print projects from customers that even if it's not our antennas or our design, we have the sophistication and the means to build the project and to test the antenna. So we're getting a lot of projects just a build-to-print project. We're also very competitive, especially in the European international market where we compete with European companies. So we are much more competitive in terms of price. And we've had a lot of success there in the past years with companies from France, the U.K., Spain, Germany, Italy and Sweden. As you know, the defense budget in Europe is -- has been growing, and we see the benefits of that, and we received a lot of new orders from customers there. In the 5G backhaul, we've had a lot of success in the Indian market, where we have a production plant in India that is owned by us. So we are like a local entity there, and we provide 5G backhauls to the biggest cellular operators there. So we had a very big boost in the past 2 years. There's been a slight stop due to the fact that they've stopped building the networks as fast as they did in the beginning. But I believe that this will come back in 2026. And we have specific special antennas, which is our ABS Antenna solution, which we are the only one in the market. We're working with all the Tier 1 radio manufacturers outside of China, in the U.S. and in Europe and in Israel as well. We started the NPI last year. And this year, we're going into mass production. I believe this year, we'll do at least 4x as much as last year with this Antenna. And so we're having a big growth on the 5G backhaul as well.

Thank you, Eran. Moving to the third division, the distribution and special consulting services. So here, we represent about 40 companies in wireless and microwave, bringing their technology into the Israeli market. It is mostly based on the defense market. And you need to understand that currently, the defense companies in Israel are exploded with work. It's not only for the local market, but because we have shown in the last 2.5 years, the capability of the interception solution. There is a big demand from all over Europe mainly to the system. And I believe that it will grow also into the Arabian Gulf at the moment. So we sell a lot of components into these systems. The idea here is to compete at the development stage of the customer. So when they start development, we bring the piece parts into the solution. And if we win it, we call it a design win and then we need to wait for usually 2 to 3 years until the product matures and then we start to see a streaming revenue. We have done a lot of design wins in the past that we now start to see the revenue, and we continue to do that. One of the key strengths of MTI in this area is that we are the largest one in Israel in this segment of the business in RF and Microwave. And it means that an engineer when he wants to develop a new solution you will contact our technical sales team because he knows that we can offer him everything. On top of this, we have a subdivision called PSK. It's a company we acquired 3 years ago. And they do the shelter buildup that you can see on the bottom right of the slide. And this is a control and command room that is both for testing and in the combat field. There is a very big demand worldwide currently for such shelters. And we know it because we also represent in Israel, a German company that is doing those shelters and they told us they cannot answer any quotation for the next 6 months because they are so overcapacity. And we see here a big opportunity for PSK. PSK was making loss until the first quarter of '25. We were able to turn it and they made profit for the full year of '25. They have a very strong backlog for '26, which is right now higher as in the entire revenue that we had in '25. So it looks very promising. What we see today in the defense companies here in Israel, as I mentioned, is that they are looking to outsource manufacturing as much as they can because they don't have the capacity. And this is what part of what Eran explained in the build-to-print that they give us their products to produce. I believe it's a one-way ticket because we are much faster and much more efficient than they are, because we don't have the bureaucracy of those huge companies. It's like the Cobham and Smiths of the world. And we see this coming to all the segments of the business. MTI for the long term is focused on innovation. We really try to find where we can add value with something new and not only compete on price, although we know how to compete the price. And when you look into our P&L, you can assume that there is not a lot of research and development, although we expense everything. We never capitalize R&D. And the secret is that we have some of the R&D being paid off as part of military project. In many projects, we do development for the customer as part of the solution. And we never give up the IP. The IP always remains with us. And at the same time, we use the principles, the company that we represent in the representation business to develop new innovative technology based on customer demand, same as with the Motorola case. And this is how we bring a lot of technology into the market and sell innovative solutions. One key benefit that we have out of it today is, first, the automatic beam steering antenna solution for 5G which is patented. In terms of ESG and culture of the company. So we are focusing for many years on the same two points that we believe that we have an Edge. The first two that I will discuss are following with the water management solution. It's, of course, water for all and irrigating hunger. As I mentioned before, when you -- when we use smart irrigation solution for agriculture, you get more for less. You get more quantity of what you grow, higher quality and you spend less water. Agriculture is responsible for about 70% of the freshwater usage worldwide. And this is a key area that we have an advantage. We also are focusing on, as you know, combining or communicating the rural areas of the world. This is saving a lot of pollution as we now do a Zoom instead of flying over. This case was also because of the problems here. But this is, again, the communication and something that helps bring the rural areas of the world into the center. On gender equality, so we have two ladies out of seven on the board and also a chair. And for me, more important is the surge age. We start to see that with longevity of life, people want to work longer. And as you can see, nearly 1/3 of our employees are over 55. It means that we have a lot of gray hair in the company, but a lot of know-how. And I especially believe that this generation is less jumpy than the younger generation. They stay for long with companies. They contribute. They are being more, I would say, professional and it gives us a lot of advantages. We invest quite a lot in our employees. I can say that it was very difficult over the last few years because many of the people were called up for military service, some of them even for 400 and 500 days. And that meant that the other employees that were not called were covering up for them and helping to grow the business. But at the same time, we are keeping -- making sure that they all develop, they all go through courses, either internal or external. And just as an example, we are just now doing an AI course for many of the employees to see how we can get them use this in a safe way, in a better way that contributes to the company. Although we have a very strong internal growth engine in the three markets that I mentioned, we are also a strong believer in M&As. And I think that the main two points when we discuss M&A is the slogan that I have of a better-safe-than-sorry. So, we look very thoroughly and what we are trying to acquire. And if we talk in 2 years and we did no M&A, it's not because we were lazy, it's because we didn't find something that was suitable enough. And the second one is that we are always looking for a profit-enhancing acquisition. We wanted to help us make profit from day 1. As I told you, we are very much focused on profit, not only on revenues. And the idea is that we are looking for good businesses that the combination can accelerate the profitability. In 2025, we bought another 10% in PSK, and we have the option to acquire the remainder of the share in 2027. And just now in the beginning of 2026, we acquired the remaining 50% of our partner in Mottech in Australia. And the idea is to push this market stronger. In terms of key financials. So as you can see, although Mottech, which is 36% of our revenue is totally not in the defense business, the overall defense grew so fast and it moved the company from 42% to 49% in defense. We love the fact that all the division of the company are growing and making profits. Of course, we like the diversification because we are diverted in many different, I would say, vertical market and also globally. As you can see, Israel is pretty dominant in the pipe. But at least 1/3 of what we do in Israel does not end in Israel and goes indirect export. This is usually via the defense companies in Israel. MTI is very well known for its good service and quality, and this is why we have such a loyal customer base. And at the end of the day, we are very much focused on growth. And as you can see, the earnings per share is a key target for us, and it's been growing very nicely over the last 10 years. The financials are for me, amazing for this year with very nice growth, double digit all the way down to earnings per share. And I think that the key message here is the business model is working. We are, for many years saying that on the incremental dollar revenue that we make, we should make around 20% operational profit. And this is the case this year, if you look at the revenue growth, it was about $6 million. The operational profit $1.3 million. So it's over 20%. And I think this is where we want to work. We want to make sure that on any additional incremental dollar of revenue, we make at least 20% operational. This year, and you can see a little bit fall between the operation and the net, it's mostly the exchange currencies because we operate in Israel and the shekel is very strong against the dollar right now. It impacted a little bit of revenue, but this is something that is beyond our control. We are also very much focused on the shareholders return. My family owns about 1/3 of the company. So we have alignment of interest with all shareholders. When we first came to AIM, it was in 2006, our -- the U.K. director we had at that time told me real businesses pay dividends. And since then, we pay dividends. The only year we did not pay was in 2009, and this was just after the market collapse of 2008. So we are strongly believer that the companies that make money should pay dividend, and you see that we increased it year-over-year. At the same time, we launched, 7 years ago, a buyback plan for treasury. It is for the purpose of increasing the liquidity. It did help. Right now, we have already invested more than GBP 1 million in this buyback scheme. And we have about 2.3 million shares and we will continue with this until March '27 at least. We recently started to use InvestorHub as you are all witnessing today. And I am sure that this will help also to create close relationships with the investor, understand what you don't understand on our business, what you dislike or like on the business so we can have a very open communication and you can understand our business better. With this, I would like to summarize. I think we have a very strong position right now in three very exciting growing markets, whether it's the defense, the 5G backhaul or the water scarcity, that the world is looking for solution. We are very conservative. So the balance is conservative with net cash. It will allow us to look for the M&A, as I mentioned, on the better-safe-than-sorry. We started the year very well, not only the backlog, but more of it is the pipeline of opportunities that we currently see, mainly in the defense business and across all the divisions. And with that, I'd like to thank you again for coming for this presentation. I'll be happy to answer any questions you may have.

Thanks very much, Moni and Eran. That was a really helpful presentation. So just moving to some of the questions that were submitted in advance from Lewis. Could you please give some more detail on your approach to inorganic growth?

So I think this was covered in the M&A that I have just spoke about. And again, it's the better-safe-than-sorry and profit-enhancing acquisitions.

Thanks, Moni. How are you actively building a positive culture at MTI? I know you touched on some of the employee benefits, but do you have anything else to add?

I think that our employees are with very high morale. I would say this is true to most Israelis as part of, I think, is the education that we get of solidarity in the Army. But we invest a lot, as I mentioned, in education, in tutorials, in listening to them. At the end of the day, the employees here in Israel feels like it's one big family. They can approach us. We help them and we try to see that everybody is working with the right models.

Thank you very much. Where do you think this business could be in 5 to 10 years' time? And how will you drive shareholder value over that time frame?

So it's a difficult question to ask. I think as I mentioned, we are in a very nice growing market. I believe that if we can continue and grow the business, let's say, 7%, 10% year-on-year revenue wise, the profit will grow much faster, as I mentioned on our business model. And this will allow us to really increase the profitability and the value. At the same time, we are continuing to pay dividends, which I think is driving shareholder value. And those have increased year-on-year in the last several years. So I think this is helping investors as well.

Thank you. And now I take some of the questions that have come in the chat function. And please, everyone, feel free to keep submitting your questions as well as maybe answer the poll that is just should have popped up for you. How much headroom do you have for acquisitions? And would you take on borrowing for a larger acquisition?

Yes. We are not afraid from taking loans if we need to. But our preference is always to make sure that the company that we buy can be on a stand-alone. So the idea would be that we'll use probably 50% of our own funds, 50% loan when we do an acquisition. If it's a bigger one, and then we want to see that the acquired business can return this loan. So we leave the core business side. And this one is the one that we will pay for this loan.

A second question from Adrian. Shore Capital's forecast seemed conservative with actually slightly reduced EPS and little EBITDA growth this year despite forecast 6% revenue growth. What are your thoughts on this?

So first of all, I think that this year, 2025, was amazing. And we were able to beat the expectation of '26 and '27 that they had in the market. And therefore, they increased their forecast. I rather always beat the forecast and go and issue a trading warning. As I mentioned, the key aspect of profitability this year that is beyond our control currently is the strong local currency, the shekel. And this is why I think that they took a conservative approach.

Thank you. You haven't bought any shares back for over a year. Why is that if the outlook seems so promising?

So we don't have a lot of place to buy shares in the buyback. Right now, the fund has another GBP 100,000 more or less. And as we see the liquidity running very smooth, we don't interfere. But it doesn't mean that we will not use it.

Okay. Very good. And the final question that I can see at the moment, unless anyone else would like to submit further questions. Would you be open to employees buying into shares through a salary sacrifice scheme?

So first of all, we have an ESOP in place. We have some ESOP in place for key employees. Only part of it is now being fully vested. Part of it is going to be vested next year and in the year after. So we do, from time to time, employee stock option plans, and this is, of course, as part of their benefits.

Okay. Well, that, I believe, is all of the questions. So just to thank you both again for the presentation. It's really helpful. A recording of this presentation will be made available on MTI's InvestorHub, which Moni mentioned, and yes, you'll be able to submit follow-up questions and any other further feedback you have on this format. And yes, we look forward to welcoming you to further webinars down the line with the MTI Group. But yes, thank you very much to both our speakers and everyone who attended today.

Thank you.