M.T.I Wireless Edge Ltd. (MWE) Earnings Call Transcript & Summary

And good morning, and thank you all for joining us for NCI Wireless Edge's 2026 Interim Results Webinar. The company might not be a position to answer every question submitted today. However, we will review all questions and where appropriate, share responses following today's webinar. The webinar today is also being recorded and will be published on the M.T.I website after today or later this afternoon. I'd now like to hand you over to M.T.I Group CEO, MONI Borovitz; and CEO of Mottech, David Sany.

Thank you, Poly. Good morning, everyone, and thank you for joining our call today. Poly, can you jump to the next 2 slides One more, please. So we'll start with the results. We are very delighted with those results, showing double-digit growth both in '25 and in the first half of '26 from revenue all the way down to the earnings per share. I would like to emphasize the operational cash flow that we had in the first half of this year. If people heard me before, they know that we are trying to convert about 70% to 80% of the EBIT into operational cash flow, and this was the case in the first half. So we are very happy with that. Can you move to the next slide, please? So what pushes our business? First of all, of course, it's the defense market. As everybody is well aware, the conflicts are continuing around the world and nothing seems to be solved yet. In Europe, a lot of funds were directed into defense after many years that not enough funds were spent on defense. And it's not only that what we see today is that the war is becoming much more electronic warfare. And this means that everything is controlled and managed remotely. It's all about electronics. And this is where M.T.I is getting into the picture with many solutions regarding communication, communication journey telemetry to control as indicated below, you see that in the last couple of months, we received some very nice significant orders that we announced about, but many more smaller orders came in that are smaller to announce. And overall, the backlog and the order of pipeline opportunity. Next one, please? Looking at the commercial market. So I think that after this summer, everybody in Europe understand what global warming is all about -- and we start to see more interest coming from certain areas of the world regarding water management. We just recently had a visit from an Eastern European country, but David will talk about it later on. So no doubt that preserving water is a big issue for all of us. In the other segment of the commercial business is the 5G backhaul market. We all consume much more data. The problem is the capacity in the network, and we have some very nice solution for that, and we are very optimistic about where it is headed. If you go to the next slide, please. So the growth driver, of course, is with defense. As I mentioned, lots of new orders. The pipeline is growing. The backlog is big, and we look very optimistic on the second half towards '27 because some of the orders are already for '27. In the 5G backhaul market, I would like to remind about our antenna streaming solution. The idea is in the high end of the backhaul, you use higher frequencies, the is narrow and then you need to make sure that you adjust the movements of the towers with the antenna, and we invented a solution that we only the feed, which is the electronics in the and not the entire [indiscernible] Patented technology is being very well accepted, and I will elaborate about it later on. And of course, the star of the first half was Mottech, with excellent results. David will elaborate about it, but part of it is the new hardware that we develop by ourselves. And all of this together all the new that we bring and we are growing both on revenue and profit. can you move to the next slide and David will take it.

Good morning, everybody. Let me start with the foundation of Mottech business. We have been working in Water and Irrigation control for them more than 33 years, excluding our long relationship partnership with Motorola. Today, we are active in five content with more than 150,000 control units in the field. Different instillation is store-based is very important for us. This creates an opportunity for additional assets, system expansion and upgrade and of course, growing our recurring revenue. And when I'm speaking about recurring revenue, we're speaking about recurring service and management revenue. We have seen in different countries, markets and market segments give us a lot of flexibility. So if one market is affected by economy or other change, we have other markets where we can continue to grow, and this has happened already. So we are geographic separate is -- sorry -- and it gives us a good level of stability and the business. About Water and savings over the year, we have a program in many projects the savings reached up to 40% in some cases of the amount of the water compared to the amount used in the past. When we're speaking about [indiscernible] product life, it's important adventures and is very important for our customer. Whether municipalities, the culture companies or water utilities, they are also want to know that the system can continue to grow and develop with the earnings. We have demonstrated that we can support several generation of feed unit. In some cases, it's more than four generation in one place. There are hundreds of customers around the world with a system conveyance, several generation of products up to fourth generation in some places. This gives our customer confidence and protected the value the investment of the long term. And on top of this strong foundation over the last two years, we have significantly expanded our technology and product offering. Motorola, of course, remains an important part of our offering and strong assets for us. But at the same time, we have added our own multi-player products, including the Elite range, decoder, sensor and software application. This gives us much more flexibility in the market, of course. Customers do not all need the same solution, some need very advance system, while other need simpler and more cost-effective solution. Our broader product range allows us to offer a solution that is better suit to customer needs, fit their condition and budget, of course. So we're not replacing one technology with another. We are adding capability and giving our customers more choice. To the next slide, please. Market of [indiscernible] Water, of course, becoming a more limited and more valuable research and customers are under increasing pressure to use water more efficiently. This is driving the adoption to smart irrigation and Water Management Solution. The market forecast show is very strong. But for the more important point is that the need is real need, we can tap it. We are densely Europe opportunities with the actual transaction in a region where we have not previous operations in the past, such in Eastern Europe, CIS, Czech Republic, Germany and more places. Next slide. One very good example is our Elite Products range. Elite has been well received and give us another strong solution in the market. It allows us to be more competitive, especially in markets where both price and the performance is important. It's also open an opportunity with that were more difficult for us to address in the past. South Africa is a very good example. After several [indiscernible] Yields this region, the business has returned to growth. The broad product portfolio and especially Elite has helped us become more competitive and more competitive. We are also using the [indiscernible] Portfolio to enter areas where we had very limited presence before, such as Gulf Course landscape. So this is regarding the South Africa. Italy also is another important example. We saw Italy not simply as a new country because we are actively [indiscernible] More than 25 years, but there is a platform to develop the [indiscernible] Western European market and, of course, expand our share of the Italian market. At the same time, we want to build an installed base. This can support regarding service learning. We already have a big experience with this model in markets such as Israel, Australia. For example, over 40% of the revenue in Israel coming from recurring revenue, and we expect to sign the first two is in Q3 service agreement in Italy during this year. So Italy gives us two opportunities. Products role and recurring service revenue. So when we look at more today, several things are happening at the same time. We have a large installed base, strong international diversification and long-term customer relationship. We have expanded our technology and product offering. The market for smart water irrigation is growing. We are entering new applications and stating our existing markets. And we have built recurring revenue like service and management revenue. Thank you.

Thank you, David. Colin, can we jump to next one?. So moving to the second division, the Antenna division, and before jumping into 5G military and telling you all about that, I'd just remind you that we have [indiscernible] commercial market, one is fixed broadband wireless access, which is more or less flat, and we have the RFID, radio frequency identification with continue to grow for us. We do the antennas for Asset Management and to load application. So let's go to the next slide, discuss the growth that we see in military. And no doubt, the '25 was a great year for the Military Antenna business, and we started the '26 quite slow but we are catching that. And I have no doubt that the second half of the year is going to be much stronger than the first one. We secured a lot of orders, but we continue to see a lot of tenders and a lot of opportunities. Some of it are based on the technologies that we are bringing in the market. I spoke in the past about the bid to bring the process that we are doing with some of the defense company here in Israel. And just as a reminder, it's getting a production file from the customer and produce it to them because they do not have the capacity. So it turned down, it's a bit slower than we anticipated, but it has a lot of advantages because they wanted to change some of the product process and sometimes the yields are not good enough. So we are doing changes and it just makes us for involved and more tied to the customer. And I have no doubt that this will be for the long term, another growth engine for M.T.I. In the international market, we are seeing a lot of demand at the moment, some new orders from some new customers, mostly coming from Europe. So we are very excited about the prospects of the Military Antenna business. And let's move to the next slide, please. In the 5G Vehicle, so the ABS is where we see a lot of traction at the moment. We are the only one today with an ABS solution in the western part of the world. I'm happy to say that we are now working. We just closed an agreement with another Tier 1 vendor. It's the radio manufacturer. And we are working with the vast majority of the radio manufacturer in the Western [indiscernible] And when I talking Western Bank, I exclude China. You can see here in the picture, our antenna with its logo on it, and this is an ABS Antenna solution already installed in field. I can say that we are moving very well, both in production and receiving, as I said, another customer. We were even ahead of our internal plan and started to manufacture those in India as well in our facility in India. So we now manufacture the [indiscernible] In India and we are looking for the growth that we started to see this year in this area. We are still very much tied to the Indian market. Unfortunately, this is still on hold. You can see below here, the percent of penetration in the Indian market is very, very low. We expect it to build up, and we will build them when it is ready. But now what we see is that the ABS is pushing us forward. And let's move to the next slide to our third division, it's the distribution and special consulting services. So here, as a reminder, we first do represent about 30 companies, 40 companies outside of Israel, bringing their technology into the Israeli market, mostly the defense companies in Israel. It's about 80% defensive. And on top of it, we have this scale, which has done the integration and the buildup of shelter solution that it's purely military. So it is where we really feel the demand growing in the defense market in Israel. And we shift to the next slide, so I'll give some examples. You can see the picture to divide many different type of components and subsystems that we sell here into the market. The backlog here is very, very big. We made a lot of design wins. Some of the backlog is not strong because we are waiting for the customer to finish the development and going into production and some field in [indiscernible] We have the strongest backlog since we acquired it and the pipeline of opportunities is very, very big. We are in a very good spot at the moment that we can do a cherry picking of project for PSK. So we take some big projects, I would say, with less risk and probably lower margin. At the same time, we can take some other projects that are with more risk, more technology, more margin. And so we are building it up the demand for shelter building and integration is huge. We are considering how to handle it and how to even expand more but we are very happy with where position and we [indiscernible] This year. And let's go to the next slide. So I think that overall, the big message here is that we are trying to build an integrated innovation whether it's the new controllers from Mottech, the ABS Antenna or other type of antennas that we develop. We are trying not to fight on the cheapest solution in price but we are investing a lot in order to being value-added solutions to the market. You will see that our R&D is not big. We extend everything, but it's not big because some of the R&D is paid by others, especially in the military market, but we keep the IP for ourselves. Some collaboration with the companies that we represent. And this is how we are bringing value-added solutions to the market and improve our margin. Let's continue to the next slide. Although we have a very strong [indiscernible] Engine, we are always looking to expand either by acquiring other companies or by expanding, especially in Mottech worldwide. We've been quite active this year with acquiring 50% remaining in [indiscernible] Australia to push it stronger. Now is the opening of the Italian office because we believe there is a lot what to do there. And when it's under our management, we are more aggressive in marketing and chasing the recurrent revenue. And as David mentioned, we expected to see on costs already in Italy this year. When we are looking at acquisition, I always say I have two criteria. One is better station [indiscernible] . So we learned very thoroughly before we do the investment. And secondly is that we are looking for profit enhancing from day 1. And we are not looking for turnaround. We are not looking towards science or technology that we don't to understand yet. So we are trying to expand with what we want. And I hope that before this year-end, we will have another news for you on that, but when times come in the [indiscernible]. Let's continue to the next slide, please. So a little bit more color on the revenues and the profits this year. So as I said, Military started a little bit slow. So it went down a little to 40% -- 47% of our revenue. But I have no doubt that we will end this year with above 50%. And it's not because I expect Mottech to the commercial market to grow slower. We just know what we have in the pipeline, the military side. I love the diversity, as I mentioned, multiple discount of the first half. So having three good legs in different markets, different geographies, it's always benefiting in my eyes. As you can see, Europe or remain grew quite dramatically this year over rest Asia and the Americas. [indiscernible] business. I remind you that in Israel, what we do about 1/3 is ending indirect export. We have a loyal customer base, they remain loyal because we give the value-added and the services. And of course, we are always focused on the earning per share. So I'm happy to show that we continue with the double-digit growth in that. Moving to the next slide. This is one of the best slides I can show. I think every CEO would love to show this slide. Everything double-digit growth, both last year and in the first half, margin expanding. But for me, it's important to remind our business model going forward. I always claim that on the additional dollar revenue that we will generate, we should make 20% of the [indiscernible] Profit. And so if you look at last year, we grew by [ 6 million ] more or less in revenue and operational profit grew by [ 1.3 million ], same growth in the first half of this year, [ 2.5 million ] growth in revenue, about [ 0.5 million ] growth in operational profit. So the business model is working very well for us. And this means that as long as we can drive the growth in revenue, the profit will grow much faster. Let's move to the next slide, please. We have a very strong shareholder base. my family owns about 1/3 of the company. So full alignment with all the shareholders of the company. This is, of course, one of the reasons that we pay dividends. And the real fact is that the first U.K. on exact rental that we had told me that the real business pay dividends. And since since we do pay dividend, we paid once in April. And as long as we can generate and continue to make profits will be paid the dividend. Let's continue to the next slide, please. We are very much focused on increasing the trading in the share of the company. I think it's important to everyone. And I think that's part of what we are doing here and connecting with investor [indiscernible] Is to gets more and closer to the shareholder base. So I would like to invite you to join our investor hub. If you haven't done so, it will allow you to communicate with us directly very easily. So this is one part of the increased trading that we are looking for in the year. If we jump to the next slide, please, I will summarize. So I think we are in a great position in growing markets. We have a proven track record of managing this growth and penetrating in this market and seeing that growth compare into cash. We are paying dividend. We have a nice cash balance to continue [indiscernible] the M&A on a better sales and so more as I mentioned. And we are very excited on the prospects going forward. I hope you are, too. And with this, we will be happy to take any questions you may have.

Great. Thank you, Moni, and for David, for your presentation today. We'll now share some of the investor questions that have been submitted. [Operator Inructions] And so the first question that's come through is what scope is there for Mottech to create a solution to address wildfires?

Do you want it?

It's a different segment. So we are not active in this segment. but control the control is always on to fixed service consults, therefore, there is a possibility that our control system will be also integrated into this kind of solution in the future. There is one place, only one place in Greece in the [indiscernible] , where our control system has already been integrated into this kind of solution. Mostly, the idea is to be sure the irrigation system are close. So the pressure is -- all the pressure, the water pressure is directly for fire assistance..

Great. Thank you, David. And the nature of warfare has changed with far greater emphasis on technology, how valuable this shift for M.T.I, can you quantify?

It's very difficult to quantify. The size of the market is, of course, but I can say that the technologies that we have developed in the last few years, we see them on more getting into the market. One very good example is that we developed an antigen GPS type of a solution for an airborne application. It was for a European government at the time and we suddenly see it coming from many, many other European countries that everybody is doing for this exact same solution. So I have no doubt that our capabilities, [indiscernible] Are really aligning into what the market is looking for. And of course, here in the local market, we are very strong in everything that relates to missile identification and then the perception markets we are in all of these markets.