The information contained in this Board of Directors’ Report published by the Company constitutes a convenience translation of the Board of Directors' Report published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.

Matrix IT Ltd., together with its subsidiaries, is a company operating in the fields of information technology (IT) solutions and services, consulting, and management in Israel and overseas.

The Matrix Group employs approximately 12,000 software, hardware, engineering, integration, and training personnel, who provide services in advanced fields of information and management technology to hundreds of customers in the Israeli market as well as customers in the U.S. market. The Group also engages in the sales and marketing of software and hardware products from a wide range of manufacturers from Israel and overseas, as well as the provision of consulting, project management and multidisciplinary engineering consulting services.

The Company has four¹ areas of activity - (1) Information Technology Solutions and Services (“IT”) Consulting and Management in Israel; (2) IT Solutions and Services in the USA; (3) Marketing and Support of Software Products; and (4) Cloud and Computing Infrastructures. The Company provide solutions, services, and products to thousands of customers in the following main sectors ("sectors"): banking and finance, high-tech and startups, government and the public sector, defense, transportation, health, industry, retail and trade, education and academia. Unique divisions operate in each one of these sectors, specializing in providing specific solutions to the particular sector in which they operate, as well as managing and carrying out projects for the Company’s lateral entities.
The specialization in the various sectors is reflected in the applicative, professional, and marketing facets of that sectors. Accordingly, a professional and marketing infrastructure is developed in each sector which is required to support such sector.

The business environment in which the Company operates is directly affected by global and local trends and events, the most significant of which will be presented below. For additional details regarding the Company’s business environment, see Section 1.1.2 of the Board of Directors' Report as of 31.12.2024, and Section 6 of the chapter on the Description of the Corporation’s Affairs, in the 2024 Periodic Report.

¹ As of the 2024 financial statements, the Company presents the training and implementation activity, which was previously presented as a separate operating segment, as part of the IT, Consulting, and Management Solutions in Israel segment. For further details, see Note 24 to the Consolidated Financial Statements.

As of the date of this report, in general, the global economy has continued to stabilize after facing the effects of the increase in inflation rates in recent years, which was followed by rising interest rates during the course of the post-COVID-19 period.

In the U.S. market, the downward trend in inflation has stabilized, and is currently approximately 3% (September 2025, annual terms, based on the last 12 months – LTM). As a result, in October 2025, the U.S. Federal Reserve reduced the interest rate to 4%.

In the Eurozone, the downward trend in inflation continues at a more moderate pace and is approximately 2.1% (October 2025 – LTM). The European Central Bank’s interest rate, as of the reporting date, is 2.15%, following several interest rate reductions by the European Central Bank (the most recent of which was in June 2025).

As of April 2025, the US administration has been implementing a plan to increase tariffs on imports into the US from countries with significant trade surpluses with the US. As a result, several new trade agreements have been signed between the US and various countries around the world. The tariff imposed on imports to the US from Israel stands at 15% (compared to an almost zero tariff on goods imported from the US in the past). In the Company's assessment, the above tariffs are not expected to have a direct impact on the Company's activities.

Despite the downward trend in global inflation in recent years, there are still concerns of further inflationary outbursts and price increases. This is due, among other things, to the imposition of tariffs by the US government and the possibility of the development and/or worsening of geopolitical conflicts.

The main global economic trends described above are reflected, to a large extent, in the Israeli economy as well.  At the same time, the Israeli economy was impacted in the past two years primarily by unique and complex local events that had a substantial impact, primarily the Iron Swords War and its consequences.  

As of the reporting date, the “Iron Swords” war (including related combat operations in other areas) continues to impact Israel’s geopolitical and economic environment. The war erupted on October 7, 2023 following a large-scale Hamas terror attack in southern Israel. Since then, Israel has conducted military operations against Iran-backed terrorist organizations in the Gaza Strip, Lebanon, Syria, and Yemen. During 2025, a short and direct round of confrontation took place between Israel and Iran (“Operation Rising Lion”), during which both sides exchanged missile and UAV strikes. The operation concluded on June 24, 2025.

In the northern arena, a ceasefire between Israel and Lebanon/Hezbollah has been in effect since November 27, 2024, significantly limiting open hostilities along the border.

In the Gaza arena, on October 9, 2025, the Government of Israel approved a U.S.-brokered ceasefire agreement, which includes the withdrawal of Israeli forces from parts of the Gaza Strip and the release of Israeli hostages in exchange for the release of Palestinian prisoners. It is noted that significant uncertainty remains regarding the stability of the agreements and the risk of renewed escalations on any of the fronts.

The heightened geopolitical risk environment has led to rating downgrades and negative outlooks. Moody’s downgraded the State of Israel’s credit rating to Baa1 in September 2024 and maintained a negative outlook. In July 2025, Moody’s reaffirmed the Baa1 rating with a negative outlook.  S&P downgraded Israel’s credit rating to A on October 1, 2024 and reaffirmed the rating with a negative outlook on May 9, 2025. On November 7, 2025, S&P announced its decision to revise the rating outlook to stable, while affirming Israel’s credit rating at A.

Nevertheless, as of the second half of 2024 and as a result of Israel's military successes, signs of improvement in economic indicators have been observed. Thus, despite the many difficulties and challenges facing the business environment, the Israeli economy has demonstrated robustness and resilience.

Capital and foreign exchange markets – around the period of the direct confrontation with Iran (June 2025) and following the end of the hostilities, the shekel strengthened sharply and the Tel Aviv Stock Exchange recorded significant gains. Government bonds also reflected a decline in the risk premium compared with the initial days of the escalation.

In view of the uncertainty and security developments, the Bank of Israel left the interest rate unchanged in the third quarter of 2025 (4.5%).

Alongside the positive signals in the financial markets, estimates of the direct and indirect damages from the confrontation with Iran and the continuation of the overall campaign range in the tens of billions of shekels, mainly due to the cost of repairing the damage and destruction caused during the fighting and the high defense expenditures.

It should be noted that even before the outbreak of the war, the Israeli economy faced high inflation and rising interest rates. These trends slowed in late 2023 and the first half of 2024. Further to this, in January 2024, the Bank of Israel lowered the interest rate to 4.5% and this rate remains unchanged as at the reporting date. The CPI increased (June index - LTM) by 2.5%.

The Company estimates that the inflationary impact on the results of its operations is immaterial, among other things, because the Company's financial debt is not linked to the CPI. On the other hand, any rise in interest rates may negatively affect the results of the Company's operations by increasing financial costs for variable-interest loans (commercial securities and short-term bank loans), as well as for new fixed-interest loans that will replace loans that come due. Conversely, the opposite is true in the case of interest rate reductions. In this context, it should also be noted that the main component of the Company's expenses is wages (about 55% of the Company's operating expenses), which, in the Company's assessment, are impacted mainly by trends in supply and demand of technological staffing, and inflation is expected to have a limited effect on them.

Gross domestic product (GDP) grew by approximately 0.9% in 2024, and according to the Bank of Israel’s forecast², assuming the fighting in Gaza ends in the first quarter of 2026, GDP is expected to grow by about 2.5% in 2025 and by approximately 4.7% in 2026.
Heavy war-related spending has led to an increase in Israel’s trade deficit, which was 4.7% of GDP in June 2025. In addition, the unemployment rate currently stands at approximately 3%, reflecting a tight labor market.

Changes in the U.S. dollar exchange rate (and to a lesser extent, the euro), along with its volatility, affect the Company’s results. This is especially true for the Cloud and Computing Infrastructures segment and the Marketing, and Support of Software Products segment (including cloud, hardware, and software products transactions, some of which are denominated in US dollars), as well as the shekel-denominated results of the IT Solutions segment in the US. The exchange rate also affects translation adjustments of the financial statements of US subsidiaries (which are recorded under the foreign currency translation reserve). In general, an increase in the US dollar exchange rate during a given period has a positive effect on the Company’s results, and the opposite is true when the dollar exchange rate falls. The Company regularly hedges against foreign currency transactions.

During the third quarter, the downward trend in the U.S. dollar exchange rate against the shekel continued, decreasing by approximately 2% during the quarter and by about 9.4% over the first three-quarters of the year, respectively.

As explained above, the appreciation of the shekel has an offsetting negative effect on the Company’s continued growth trend in revenues and profits (that is, absent this effect, the Company would have recorded even higher growth). In addition, following the appreciation of the shekel against the U.S. dollar (and the euro), the Company recorded in the quarter and in the period financial expenses from exchange rate differences (net of gains recorded from hedging transactions) of approximately NIS 6 million and approximately NIS 16.4 million, respectively. In addition, movements in the foreign currency translation reserve (net of the impact of hedging activities recorded in the capital reserve) of approximately NIS 8.5 million and approximately NIS 34.1 million, respectively, which were recorded under other comprehensive income.

² https://www.boi.org.il/publications/pressreleases/29-9-25a/

As a provider of IT solutions, products, and services, the Company competes with other companies in the high-tech industry for quality personnel.  In addition, a significant part of the Company's revenues (approximately 16% in 2024) derive from companies in the high-tech sector. The past two years have been challenging for the Israeli high-tech sector. This is reflected, among other things, in a decline in the number of startups and a decrease in demand for technological staffing (with an emphasis on inexperienced employees – juniors).

A report by the Israel Innovation Authority from September 2025³ indicates continued stagnation in the number of employees in Israel’s high-tech industry.

In the Company's assessment, the reduction trend in the demand for staffing high-tech companies may make it easier for the Company to recruit and retain employees, and to mitigate the pressure for wage increases on the part of the employees. On the other hand, the uncertainty in the high-tech industry could lead to a decrease in demand and even harm some of the Company's customers in this operating sector and consequently, harm the Company's operating results.

As of the date of the financial statements and the reporting date, approximately 160 of the Company’s employees are on active reserve duty. Notwithstanding the above, as detailed below, the Company’s operations in the third quarter and the first nine months of 2025, as well as throughout the entire period of the war, were characterized by continued growth in the volume of its operations and in its operating results.

The information mentioned above in this section concerning the Company's assessments as to the impact on the war on its operations, a war whose full effects and implications have not yet been ascertained, the Company’s economic environment, and developments in the high-tech industry, constitutes forward-looking information, as defined in the Securities Law, 1968 (the "Securities Law"). It is based on management's assessments and business experience, as well as assumptions, various scenarios, analyses, and public information, along with the assessments of research companies and analysts as of the report date. The information may not materialize, in whole or in part, or may materialize differently, including in a manner that is materially different than expected, among other things, as a result of high uncertainty, economic instability, and developments that cannot be assessed at this stage in connection with the war and its effects, as a result of market competition, economic slowdown or instability in the economy, and as a result of the realization of all or part of the risk factors appearing in Section 19 of the Company’s Periodic Report.

³ https://innovationisrael.org.il/wp-content/uploads/2025/09/Annual-Report-The-State-of-High-Tech-hebrew.pdf

Further to the Company’s memorandum of understanding dated March 10, 2025 with Magic Software Enterprises Ltd. (“Magic”) to negotiate the terms of a binding merger agreement, under which the Company would acquire all of Magic’s issued and outstanding share capital by way of a reverse triangular merger [for further details, see Immediate Report dated March 11, 2025 (ref. 2025-01-015939)], the Company entered into a merger agreement (the “Merger Agreement”), which was signed on November 3, 2025. For further details, see Immediate Report dated November 3, 2025 (ref. 2025-01-083233) (the “transaction report”).

Under the merger agreement, and subject to the fulfillment of the conditions precedent as detailed in the immediate report, upon completion of the transaction the Company will acquire all of Magic’s issued and outstanding share capital. Upon completion of the merger, Magic will become a private company wholly owned by Matrix (100%). Magic’s shares will be delisted from trading on NASDAQ and the TASE, and the company will transition from a public company to a private one. For a description of the principal terms of the merger agreement, see the transaction report.

As Formula Systems (1985) Ltd. is the controlling shareholder in both the Company and Magic, and in light of the materiality of the transaction, in August 2023 the Company’s Board of Directors appointed an independent committee composed solely of directors of the Company who are external and independent directors (the “special committee”). The special committee served in its role from the date of its establishment until the date of approval of the merger transaction by the Company’s Board of Directors and the signing of the merger agreement on November 3, 2025. For further details, see the transaction report.

Completion and execution of the merger are subject to the fulfillment of a number of conditions precedent, as detailed in the transaction report, including approval of the merger transaction by the special general meetings of shareholders of the Company and of Magic, which have been convened for December 10, 2025.

Pursuant to generally accepted accounting principles, the transaction will be accounted for using the as-pooling method rather than the purchase method. Meaning, the Company will consolidate Magic’s assets and liabilities in its financial statements at the values recorded in the controlling shareholder’s books. (No intangible assets, net will be created in the acquisition, and accordingly, no amortization of intangible assets, net will be recorded thereafter.)

In addition, since the transaction is being executed as a merger, its implementation will not involve any financial expenses for the Company.

The merger agreement provides that during the period from the date of signing the merger agreement until the completion date or the date of termination of the agreement in accordance with its terms (whichever is earlier) (the “interim period”), and subject to applicable law, the business of the companies shall be conducted in the ordinary course of business, such that no changes shall occur outside the ordinary course of business, and no actions or undertakings shall be made that could materially adversely affect the assets, business, financial condition of the companies, or the ability to complete the transaction.

In addition, pursuant to the provisions of the merger agreement, during the interim period, the Company and Magic may make distributions (as the term “distribution” is defined in the Companies Law) only in accordance with their respective dividend distribution policies as in effect on the date of signing the agreement (and for the avoidance of doubt, neither shall distribute more than 75% of their respective net income attributable to shareholders). Such a distribution will not affect or change the exchange ratio or the merger consideration.

The Company’s assessments regarding the transaction, its consummation, its closing, and the timelines set forth above constitute forward-looking statements, as defined in the Israeli Securities Law, 1968. This information may not materialize or may materialize in a manner or at times differing from the Company's assessments, including non-consummation of the merger, among other things, as a result of factors that are outside of the Company's control, including nonfulfillment of the conditions precedent for the completion of the transaction, or the failure to obtain the approvals required to complete the transaction, and/or changes in the state of the capital markets and the markets in which the Company and Magic operate, or as a result of the materialization of one or more of the risk factors set forth in the Company’s 2024 annual report.

On February 4, 2025, the Company, through its subsidiary Matrix IT Systems Ltd., completed the acquisition of 70% of the share capital of Gav Systems Ltd. and Gav Expert Ltd. for a total of approximately NIS 45.5 million.
In addition, the sellers were paid a dividend for the accrued earnings up until 31.12.23 in the amount of approximately NIS 29 million. Pursuant to the agreement, the Company and the seller have a mutual option to sell and purchase the seller's remaining shares to the Company. Gav Systems provides professional services, primarily in the fields of computing and software development. Gav Systems’ operating results are consolidated in the Company’s financial statements (in the IT, Consulting, and Management Solutions in Israel segment) as of the beginning of the first quarter of 2025.

During the first quarter, the Company entered into a mutual put/call options renewal agreement with minority holders in a subsidiary for the sale and acquisition of the minority holder's remaining shares of that subsidiary. The transaction was accounted for directly to equity.

In the third quarter, the number of working hours was approximately 3.9% lower compared with the corresponding quarter. This was due to the timing of the Tishrei holidays, which in 2025 fell in the third and fourth quarters, whereas in the corresponding period they fell in the fourth quarter only (for details, see also Section 9 of the “Description of the Corporation’s Business” chapter as of December 31, 2024, under “Seasonality”). In the first three quarters of the year, the number of working hours was similar to that of the corresponding period. Most of the seasonality effect, as noted above, is in the IT Solutions and Services, Consulting, and Management in Israel segment.

The Company’s revenues for the quarter reached a record of approximately NIS 1,641.6 million, compared with approximately NIS 1,418.8 million in the corresponding quarter, an increase of about 15.7%. The growth rate in revenues, adjusted for the increase in revenues accounted for on a net basis, was approximately 20.7% (see Section E below for details).

The Company’s revenues for the period totaled NIS 4,639.2 million, compared to NIS 4,205.2 million in the corresponding period, an increase of about 10.3%. The growth rate in revenues, adjusted for the increase in volume of revenues accounted for on a net basis, is about 15.1% (see Section E below for details).

The increase in revenues during the quarter derived from growth in the volume of activity across all segments. The increase in revenues during the period derived from growth in the volume of activity across all segments, except for an immaterial decrease in the IT Solutions and Services in the USA segment (in NIS terms, compared with an increase in revenues in USD terms).

The increase in the volume of revenues during the quarter and during the period was impacted by the first time consolidation of the operating results of companies acquired by the Company - Gav Systems (starting as of the first quarter 2025), Ortec (starting December 2024), and Alacer (starting as of the fourth quarter 2024). Net of the effect of the consolidation of these companies for the first time, the Company recorded organic growth in revenues of approximately 10.6% and 5.5% during the quarter and during the period, respectively.
Organic growth in revenues, after neutralizing the effect of the increase in revenues recorded on a net basis came to 15.6% and 10.2% during the quarter and during the period, respectively.

Gross profit in the quarter amounted to a record of approximately NIS 241.5 million (approximately 14.7% of revenues), compared with approximately NIS 205 million in the corresponding quarter (approximately 14.5% of revenues), an increase of approximately 17.8%.

Gross profit during the period amounted to a record of approximately NIS 691.3 million (approximately 14.9% of revenues), compared with approximately NIS 614 million in the corresponding period (approximately 14.6% of revenues), an increase of approximately 12.6%.

The increase in gross profit and its margin of total revenues during the quarter and during the period is driven primarily by an increase in the Company’s volume of activity and by operational efficiency measures carried out by the Company.

The significant growth in gross profit and gross profit margin in the quarter was achieved despite the offsetting effect of a decrease in working hours compared with the corresponding quarter (see details in Section 1.2.1 above).

The impressive growth in gross profit and gross profit margin during the period was achieved despite a one-time gain recorded in the corresponding period (which reduced the cost of revenues in that period). This gain was from retroactive compensation received from the National Insurance Institute for the social benefits component in the salaries of Company employees called up for reserve duty (about NIS 6 million paid in the second quarter of 2024 for 2023).

SG&A expenses in the quarter amounted to approximately NIS 110.1 million (approximately 6.7% of revenues), compared to approximately NIS 96.9 million in the corresponding quarter (approximately 6.8% of total revenues). SG&A expenses during the period amounted to NIS 307.1 million (approximately 6.6% of revenues), compared to NIS 283.9 million in the corresponding period (approximately 6.8% of total revenues).

Most of the increase in SG&A expenses during the quarter and during the period derived from an increase in the volume of activities (including first-time consolidation of subsidiaries during the period), while their margin of total revenues decreased.

It should be noted that selling expenses include amortization of intangible assets arising from business combinations in the amounts of approximately NIS 7 million and NIS 21.6 million during the quarter and during the period, respectively (compared with approximately NIS 5.4 million and NIS 16.3 million in the corresponding periods). The increase in the amortization of intangible assets derives from the first-time consolidation of subsidiaries in the fourth quarter of 2024 and the first quarter of 2025, as detailed above.

General and administrative expenses include an amount of approximately NIS 1.9 million and NIS 6.3 million during the quarter and during the period, respectively (compared with approximately NIS 4.5 million and NIS 13.5 million in the corresponding periods for share-based payment expenses for officers and senior executives.

Operating income in the quarter amounted to a record of approximately NIS 131.5 million (approximately 8% of revenues), compared with approximately NIS 108.2 million in the corresponding quarter (approximately 7.6% of revenues), an increase of approximately 21.5%.

Operating income during the period amounted to a record of approximately NIS 384.2 million (approximately 8.3% of revenues), compared with approximately NIS 330.1 million in the corresponding period (approximately 7.9% of revenues), an increase of approximately 16.4%.

The increase in operating income during the quarter and during the period, and in its margin of total revenues, compared with the corresponding periods, is attributed to growth in profit across all segments.

Further to the details provided in the revenues section above, net of the effect of the first-time consolidation of Gav, Ortec, and Alacer, the Company recorded organic growth in operating income of approximately 15.2% and 11.5% during the quarter and during the period, respectively.

For the impact of the increase revenues from transactions whose accounted for on a net basis on the operating income margin, see Section E below.

During the third quarter and during the period, the trend from previous periods continued, with an increase in revenues that, according to IFRS, must be recognized on a net basis. This affects the Company's revenues, revenue growth rate, and profit margin.

Financial expenses (net) in the quarter amounted to NIS 19.8 million, compared with financial expenses (net) in the amount of NIS 16.2 million in the corresponding quarter.

Financial expenses (net) in the period amounted to NIS 64.6 million, compared with financial expenses (net) in the amount of NIS 47.6 million in the corresponding period.

The following is a breakdown of financial expenses (net) (NIS thousands):

* Mainly financial expenses in respect of leases, adjustments for put options for non-controlling interests in subsidiaries, and changes in the fair value of investments measured at fair value.  

As set forth above, the increase in financial expenses in the third quarter and during the period, compared with the corresponding periods, is primarily due to an increase in accounting financial expenses, mainly resulting from increased profitability in subsidiaries on the revaluation of existing put options to minority shareholders derived from the increased profitability in these subsidiaries (including subsidiaries consolidated for the first time), and from exchange rate differences resulting from the depreciation of the U.S. dollar against the shekel by approximately 2% and 9.4% during the quarter and during the period, respectively. (For further details, see Section 1.1.2 of this report.)

Tax expenses in the quarter amounted to NIS 27.3 million (approximately 24.5% of profit before tax), compared with NIS 22.3 million in the corresponding quarter (approximately 24.2% of profit before tax).

Tax expenses in the period amounted to NIS 78.4 million (approximately 24.5% of income before tax), compared with NIS 68.3 million in the corresponding period (approximately 24.2% of income before tax).

The increase in tax expenses reflects the increase in profit. The increase in the Company’s effective tax rate during the quarter and during the period, compared with the corresponding periods, is mainly due to an increase in non-tax-deductible expenses and to tax income for prior years that was recognized in the corresponding period.

Net income in the quarter amounted to NIS 84.3 million (approximately 5.1% of revenues), compared with NIS 69.7 million (approximately 4.9% of revenues) in the corresponding quarter, an increase of approximately 21%.

Net income in the period amounted to NIS 241.2 million (approximately 5.2% of revenues), compared with NIS 214.2 million (approximately 5.1% of revenues) in the corresponding period, an increase of approximately 12.6%.

The net income attributable to equity holders of the Company in the quarter amounted to NIS 78 million (approximately 4.7% of revenues), compared to NIS 64.4 million (approximately 4.5% of revenues) in the corresponding quarter. The net income attributable to equity holders of the Company in the period amounted to NIS 226.5 million (approximately 4.9% of revenues), compared to NIS 202.5 million (approximately 4.8% of revenues) in the corresponding period.

Total Comprehensive income (NIS thousands)  

As noted above, during the third quarter and during the period, the Company recorded other comprehensive loss from the translation of financial statements of foreign operations (primarily U.S. subsidiaries), net of hedging activities recorded in the equity reserve, amounting to approximately NIS 8.5 million and NIS 34.1 million, respectively. This was due to the depreciation of the U.S. dollar against the shekel by approximately 2% and 9.4% during the quarter and during the period, respectively. (For additional details, see Section 1.1.2 of this report – Business Environment).

EBITDA figure is presented as it is a widely accepted indicator for measuring performance in comparable companies, and it represents an approximation of cash flows from operating activities, which excludes non-cash operating income and expenses, such as depreciation and amortization, including of intangible assets acquired in business combinations.

Below are the EBITDA and adjusted EBITDA, net of IFRS 16:

⁴ Pursuant to IFRS 16 – Leases, lease payments are recognized as depreciation and financial expenses rather than as rental expenses.

⁵ As of the 2024 financial statements, the Company presents the training and implementation activity, which was presented in the past as a separate operating segment, as part of the IT, Consulting, and Management Solutions in Israel segment. The comparison numbers were adjusted retroactively.

Revenues

Segmental revenues for the quarter amounted to NIS 979.4 million, compared to NIS 863.2 million in the corresponding quarter, an increase of approximately 13.5%.

The segmental revenues for the period totaled NIS 2,829.4 million, compared to NIS 2,518.5 million in the corresponding period, an increase of about 12.3%.

Operating income

The operating income in this segment in the quarter amounted to NIS 72.9 million (approximately 7.4% of segmental revenues), compared with NIS 56.2 million in the corresponding quarter (approximately 6.5% of segmental revenues), an increase of 29.8%.

The segment's operating income in this period amounted to NIS 217.9 million (approximately 7.7% of the segmental revenues), compared to NIS 184.7 million (approximately 7.3% of the segmental revenues) for the corresponding period, an increase of 18%.

The increase in revenues and operating income (both in absolute amount and margin) during the quarter and during of period, compared with the corresponding periods, resulted from the growth in the scale of operations and profitability in the segment’s business lines, with an emphasis on data and analytics, digital operations, core systems, the defense sector, and the financial sector, as well as from the first-time consolidation of Gav Systems (as of Q1 2025).

The significant growth in operating income in the quarter (both in absolute amount and margin) was achieved despite a decrease of approximately 3.9% in working hours in the third quarter compared with the corresponding quarter.
The impressive growth in revenues and operating income during the period was achieved despite a one-time gain recorded in the corresponding period, from retroactive compensation received from the National Insurance Institute for the social benefits component in the salaries of Company employees called up for reserve duty, most of which is attributed to this segment. (See additional details in the explanations regarding gross profit above.)

The sharp increase in the operating income margin is due, among other factors, to activity in the IBM Mainframe field within this segment, which began this year and for which revenues are presented on a net basis.

Segmental results (USD millions)  

In order to offset the external effects of fluctuating exchange rates, see an analysis of the segment results is presented below in US dollars (USD millions):

The increase in revenues and operating income in US dollars, and the improvement in the segment’s operating margin during the quarter and of the period, compared with the corresponding periods, resulted from continued growth in the segment’s volume of activity and the gradual delivery of new projects secured by the Company at the end of 2024 and during 2025, together with improved resource utilization. The impact of consolidating Alacer’s results for the first time was positive but immaterial.

Segmental results (NIS millions) The improvement in the segment’s operating income was partially offset by the depreciation of the US dollar against the shekel, with the average USD/NIS exchange rate decreasing by approximately 9.5% and 4.9% during the quarter and during of period, respectively, as detailed below.

Revenues

Segmental revenues for the quarter amounted to NIS 119 million, compared to NIS 111.1 million in the corresponding quarter, an increase of approximately 7.1%.

Segmental revenues in this period amounted to NIS 341.9 million, compared to NIS 348.6 million in the corresponding period, a decrease of 1.9%.

Operating income

The operating income in this segment in the quarter amounted to NIS 19 million (approximately 16% of segmental revenues), compared with NIS 16.5 million in the corresponding quarter (approximately 14.9% of segmental revenues), an increase of approximately 15.1%.

The segment’s operating income during the period amounted to NIS 53.2 million (approximately 15.6% of segmental revenues), compared with NIS 50.4 million in the corresponding period (approximately 14.5% of segmental revenues), an increase of approximately 5.6%.

Revenues

Segmental revenues for the quarter amounted to NIS 174.3 million, compared to NIS 118.6 million in the corresponding quarter, an increase of approximately 46.9%.

Segmental revenues in this period amounted to NIS 355.5 million, compared to NIS 337.9 million in the corresponding period, an increase of 5.2%.  

Operating income

The operating income in this segment in the quarter amounted to NIS 11.7 million (approximately 6.7% of segmental revenues), compared with NIS 9.1 million in the corresponding quarter (approximately 7.6% of segmental revenues), an increase of 28.8%.

The segment's operating income for the period amounted to NIS 30.2 million (approximately 8.5% of the segmental revenues), compared to NIS 25.4 million (approximately 7.5% of the segmental revenues) for the corresponding period, an increase of 19.2%.

The increase in revenues and operating income during the quarter and of the period, compared with the corresponding periods, resulted from organic growth in the segment’s volume of activity.

The changes in the segment’s profit margin between the periods (a decrease in the quarterly profit margin compared with the corresponding quarter, and an increase in the profit margin for the period compared with the corresponding period) result from changes in the mix of transactions in each period. In general, distribution transactions entered into by the Company (such as the Company’s activity in the distribution of software products and communications equipment in the AI field) have high revenue volumes but lower profit margins compared with reseller transactions, which generally have higher profit margins. Accordingly, this segment shows relative volatility between reporting periods in both revenues and profit margins, depending on the share and timing of distribution transactions within the segment’s overall revenue mix.

Revenues

Segmental revenues for the quarter amounted to NIS 410.3 million, compared to NIS 368 million in the corresponding quarter, an increase of approximately 11.5%.

Segmental revenues in this period amounted to NIS 1,225.5 million, compared to NIS 1,130 million in the corresponding period, an increase of 8.4%.

Operating income

The operating income in this segment in the quarter amounted to NIS 32.7 million (approximately 8% of segmental revenues), compared with NIS 28 million in the corresponding quarter (approximately 7.6% of segmental revenues), an increase of approximately 17%.

The segment’s operating income for the period amounted to NIS 93.9 million (approximately 7.7% of segmental revenues), compared to NIS 78.4 million (approximately 6.9% of segmental revenues) in the corresponding period, an increase of approximately 19.7%.

The increase in revenues and operating income during the quarter and the period, compared to the corresponding periods is due to an increase in the volumes of operations in the segment, with an emphasis on sales, marketing, and integration of computing systems, and marketing, installation, and support of advanced technology solutions (the subsidiaries RDT and Ortec).

The increase in the operating margin is partly due to the continued rise in EDP cloud transactions, whose revenues are accounted for on a net basis, and to the transaction mix in the segment (transactions with higher profit margins compared with the corresponding periods).

The Company's dividend policy is a distribution of up to 75% of the net annual income attributable to shareholders. The dividend will be distributed once per quarter subject to the distribution requirements set by applicable law, which are examined by the Board of Directors at any relevant time.

On March 24, 2025, Midroog confirmed an Aa3 issuer and debenture credit rating with a stable outlook and an Aa3 rating with a stable outlook for the Company’s (Series B) Debentures and a rating of P-1.il for commercial securities.

On December 29, 2025, the Company’s Compensation Committee approved the renewal of the Company’s directors’ and officers’ (D&O) liability insurance policy (including for the CEO) and for the Company’s subsidiaries and affiliates, as they may exist from time to time, including a SIDE A DIC D&O policy, effective as of October 1, 2025. The Committee confirmed that the renewal meets the criteria established at the Company’s general meeting held in December 2024. (For further details on the general meeting, see the immediate report dated December 23, 2024, reference number 2024-01-626578.)

The insurance coverage is for liability limits of USD 35 million per claim and in the aggregate, and the coverage under the SIDE A DIC D&O policy is for liability limits of USD 10 million.

Under the policy, all officers of the Company and its subsidiaries and affiliates, including directors, are insured on identical terms, whether serving currently or in the past. None of the Company’s officers is a controlling shareholder.

The decrease in total assets was affected by a decline in cash and cash equivalents (primarily payments to suppliers, the acquisition of Gav, and the payment of a dividend) and a reduction in inventory, which was partially offset by an increase in trade receivables (presented above under “All others”).

The decrease in total liabilities was mainly by a reduction in trade payables, continued net repayment of financial liabilities, and a decrease in accrued expenses (presented above under “All others”). This was offset in part by an increase in deferred revenues (mainly advanced payments from customers for software products transactions, that were not delivered).

Cash flows from operating activities

During the quarter, the Company recorded positive cash flow from operating activities amounting to NIS 131.6 million, compared with positive cash flow from operating activities amounting to NIS 190.4 million in the corresponding quarter. During the period, the Company recorded positive cash flow from operating activities amounting to NIS 268.7 million, compared with positive cash flow from operating activities amounting to NIS 284.2 million in the corresponding period. The decrease during the quarter and during the period was mainly due to changes in working capital.

The Company’s cash flow from operating activities over the last 12 months (LTM) amounted to NIS 603.8 million, compared with LTM cash flow from operating activities of NIS 617.1 million in the corresponding period.

Cash flows used in investment activities

The cash flow used for investment activities during the quarter and during the period amounted to NIS 9.5 million and NIS 89.4 million, respectively. This is compared with cash flow used in investing activities amounting to NIS 18.1 million and NIS 32.3 million in the corresponding quarter and period.

Most of the difference during the period is attributed to the sum of NIS 65.4 million paid in the period for the acquisition of Gav Systems.

Cash flows used in financing activities

Cash flow used in financing activities during the third quarter and during the period amounted to NIS 166.4 million and NIS 328.2 million, respectively, compared with NIS 149.8 million and NIS 378.9 million in the corresponding periods.

* Quarterly average of the last 12 months as at the report date

The Company finances its ongoing operations (including the gap between average customer credit and average supplier credit) using cashflow from operating activities, credit facilities, shareholder’s equity, and from outstanding financial liabilities.

As of September 30, 2025, the Company's standalone statements (Solo financial statements) present a negative working capital. In view of this, the Company’s Board of Directors has reviewed the Company's financial indicators, its financial covenants, and the Company's existing and expected cash sources and requirements. Further to said review, the Company’s Board of Directors determined that it does not indicate a liquidity problem. In light of the above, the Company is not required to publish a statement of cash flow forecast.

Goodwill

The goodwill, as included in the Company's financial statements, is material to the Company's total assets. The goodwill represents the surplus cost of the investment over the total balance sheet value in subsidiaries that have been acquired by the Group.

In accordance with generally accepted accounting principles, the Company annually examines the need for impairment. In addition to the annual examination of the need for impairment, during the year, the Company also assesses whether there are indications of impairment.

November 11, 2025

Appendix A – Details regarding the Series B Debentures issued by the Company and held by the public at the report date

The table below sets forth the various covenants that the Company undertook with respect to debenture holders and the calculation of their results as of September 30, 2025, as follows:

CHAPTER B   Interim Consolidated Financial Statements as of September 30, 2025 Unaudited

The information contained in these Financial Statements published by the Company constitutes a convenience translation of the Financial Statements published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.

To

The Shareholders of

Matrix IT Ltd.

Ladies and gentlemen,

Review Report of the Independent Auditor to the Shareholders of Matrix IT Ltd.

Introduction

We have reviewed the accompanying interim financial information of Matrix IT Ltd. and its subsidiaries (the "Group"), that includes the condensed interim consolidated statement of financial position as at September 30, 2025, and the related condensed interim consolidated statements of profit and loss and other comprehensive income, changes in equity, and cash flows for the nine and three month periods then ended.  The Board of Directors and management are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 "Interim Financial Reporting" and they are also responsible for the preparation of this interim financial information in accordance with Chapter D of Securities Regulations (Periodic and Immediate Reports) - 1970. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with Review Standard (Israel) 2410 of the Institute of Certified Public Accountants in Israel “Review of Interim Financial Information Performed by the Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially smaller in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.  

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the abovementioned financial information is not prepared, in all material respects, in accordance with IAS 34.

In addition to the statements in the previous paragraph, based on our review, nothing has come to our attention that causes us to believe that the abovementioned financial information does not comply, in all material respects, with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports) - 1970.

Consolidated Statements of Financial Position
(NIS thousands)

The accompanying notes constitute an integral part of the interim consolidated financial statements.

Consolidated Statements of Financial Position
(NIS thousands)

The accompanying notes constitute an integral part of the interim consolidated financial statements.

Consolidated Statements of Profit and Loss and Other Comprehensive Income
(NIS thousands)

The accompanying notes constitute an integral part of the interim consolidated financial statements.

Consolidated Statements of Changes in Equity

Unaudited (NIS thousands)

The accompanying notes constitute an integral part of the interim consolidated financial statements.

Consolidated Statements of Changes in Equity
Unaudited (NIS thousands)