AZ

• Commercial Execution: The company delivered 950 smart cards in Q2 2026, nearly doubling sequential shipments from Q1's 500 units, bringing cumulative total deliveries to 3,350 units as of quarter-end. Key commercial wins include adding new customer Hastok (a 50-store Israeli home goods retail chain) and expanding the existing partnership with Super Sapir (a 70+ store Israeli supermarket chain), which placed a follow-on order for 4,000 additional units bringing its total commitment to 7,000 units. The company is also scheduled to deliver to two additional Israeli retail chains, Toys R Us and Red Pirate, in H2 2026. No deliveries to customers outside of Israel have been completed as of quarter-end. The next-generation connected in-store commerce platform was launched, enabling the restart of deliveries to largest customer Yohananov under its 5,000-unit agreement. The new platform includes improved hardware, ergonomic design, proprietary fraud detection, and an enhanced shopper interface. A $30 million line of credit was secured with Bank Luomi, providing growth capital and representing external validation of the company's business model. As of quarter-end, only $2.2 million of the credit line has been drawn. A 10% net headcount reduction and organizational realignment is underway to shift spending focus to deployment, sales and marketing; the company is internalizing previously outsourced functions and reducing reliance on external consultants, with expected annual cost savings of $7 million once fully completed in Q4 2026. The company continues opportunistic share repurchases under its existing $20 million program; as of mid-July 2026, 1.07 million shares have been repurchased for $5.8 million and subsequently cancelled. A dedicated in-house manufacturing facility in China came online in Q2 2026, increasing delivery capacity, shortening lead times, and lowering per-unit production costs. The company notes it now has sufficient capacity to fulfill all current and projected future orders. Operational hubs in Panama and Bulgaria continue to be developed to support regional customer deployment and service. The company hired a new CFO, Gadi Levine, who brings 25+ years of executive financial experience at public companies, and engaged a New York-based IR firm to expand US investor accessibility.

• Delivery guidance is maintained at 10,000 total smart cards delivered by the end of 2026, and at least 19,000 total delivered by the end of 2027; the 19,000 2027 guidance is based only on current orders and excludes potential new orders or existing customer order increases. Revenue guidance for H2 2026 is for at least $25 million in revenue from smart card deliveries alone, with retail media revenue expected to be incremental to this target. Delivery growth is expected to be sequential in Q3 and Q4 2026, with the majority of H2 2026 deliveries weighted to Q4 due to the seasonally slow September period in Israel driven by local holiday calendars. Management expects to complete deliveries to at least two customers outside of Israel within the next six months, across North America, Latin America, and Europe. The organizational realignment will generate $7 million in annual operating expense savings once fully completed in Q4 2026. Gross margin is expected to continue improving as production scales at the new Chinese manufacturing facility, driven by ongoing economies of scale. Management expects retail media revenue to grow substantially over time as the installed base of smart cards increases, with more deployed carts creating larger, more valuable advertising inventory. The company does not currently see any need for additional external capital to fund its planned growth.

A2Z Cust2Mate operates two core revenue-generating segments: smart card (smart cart) hardware/solutions and retail media. In Q2 2026, total company revenue was $5.9 million, up 78.8% sequentially from Q1 2026's $3.3 million. Smart card segment revenue was $4.4 million, accounting for 74.6% of total Q2 revenue, rising 76% sequentially from Q1 2026's $2.5 million. Retail media revenue is in early ramp-up and contributed a small minority share of total revenue in the quarter. Gross profit for the company was $2.5 million in Q2 2026, with a gross margin of 42.6%, compared to $100,000 gross profit (4.2% margin) in Q1 2026. Operating loss was $7.6 million in Q2 2026, narrowing sequentially from Q1 2026's $8 million operating loss. Net loss was $7.3 million ($0.16 per diluted share) in Q2 2026, compared to a $8.3 million net loss ($0.18 per diluted share) in Q1 2026.

Forward-looking statements (including delivery and revenue targets, expansion plans, and free cash flow projections) are subject to unknown risks and uncertainties that could cause actual results to differ materially from projections, as detailed in the company's SEC filings. Actual delivery and revenue results for 2027 may exceed the current guided minimum of 19,000 units if new orders or existing customer order increases are received before year-end 2027, but this upside is not included in current guidance, representing uncertainty around future growth. The company's international expansion plans (including expansion outside of Israel) carry execution risk, as negotiations with prospective international customers are still ongoing and there is no guarantee these prospects will convert to signed orders. Scaling production at the new Chinese manufacturing facility could face unanticipated operational or supply chain challenges that impact the ability to meet delivery targets. The company's expected timing for reaching free cash flow positivity depends on the pace of retail media revenue growth, which is uncertain and may be slower than currently projected.

Q: What is the expected delivery and revenue cadence for Q3 versus Q4 2026, and how much of the $25 million H2 revenue target will come from retail media? / A: The majority of H2 2026 deliveries and revenue will be weighted to Q4, due to the seasonal slowdown in September tied to Israeli holidays. Management confirmed full confidence in hitting the full-year 10,000 delivery target, and noted that the $25 million H2 revenue projection already accounts for only smart card revenue, with retail media revenue expected to be incremental. Retail media revenue will grow as more carts are deployed, because larger installed bases create more valuable, higher-conversion advertising inventory, but it will remain a small minority of total revenue in the near term. / Q: What factors have driven the recent acceleration in customer adoption, and what improvements does the new next-generation platform bring? / A: Acceleration comes from two core factors: the launch of the updated platform, and the new Chinese manufacturing facility that enables scalable production at lower unit costs. The new platform includes improved, aesthetically pleasing hardware, efficient charging infrastructure, ergonomic design, proprietary fraud detection, and an enhanced shopper interface that delivers more value to both retailers and consumers. The company also pre-built inventory ahead of scaling, giving it the ability to meet growing delivery demand immediately. / Q: What is the current outlook for new customer growth, particularly for expansion outside of Israel? / A: Management is in advanced negotiations with multiple prospective international clients, and confirms the expectation to deliver to at least two customers outside of Israel within the next six months, including clients in the Americas and Europe. Existing Israeli customers are also expected to increase their order sizes as they see proven value from the solution, as demonstrated by Super Sapir's recent follow-on order that expanded its total commitment from 3,000 to 7,000 units. / Q: What is the company's current capital position, what are its capital needs going forward, and when does it expect to reach free cash flow positivity? / A: As of quarter-end, the company has $43 million in cash/treasury, plus $27.8 million in undrawn capacity on its $30 million Bank Luomi credit line, giving it a strong, healthy balance sheet. Combined with the $7 million in annual cost savings from the ongoing organizational realignment, management sees no need for any additional external capital to fund current growth plans. The credit facility model is scalable, and the company expects to be able to secure additional bank financing as needed for future growth. The timing of free cash flow positivity will move earlier as retail media revenue ramps, but management did not provide a specific target date.