Eltek (ELTK) Q1 2025 Earnings Call May 20, 2025 08:30 AM ET Company Participants Eli Yaffe - Chief Executive OfficerRon Freund - Chief Financial OfficerEthan Etzioni - CEO Conference Call Participants None - Analyst Operator Ladies and gentlemen, thank you for standing by. Welcome to the Eltec Ltd. Twenty twenty five First Quarter Financial Results Conference Call. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question and an ...

Financial Data and Key Metrics Changes - Revenues for Q1 2025 totaled $12.8 million, an increase from $11.8 million in Q1 2024 [15] - Gross profit decreased to $2.2 million from $3.3 million in the same period last year, primarily due to higher labor costs and lower yields [16] - Operating profit for the quarter was $700,000 compared to $1.7 million in the prior year [16] - Net income for the quarter was $1 million or $0.15 per share, down from $1.7 million or $0.27 per share in Q1 2024 [17] - EBITDA for the quarter was $1.2 million compared to $2.1 million in the prior year [17] - Cash flow from operating activities totaled $100,000, with $15.7 million in cash and equivalents as of March 31, 2025, and no outstanding debt [17] Business Line Data and Key Metrics Changes - The company faced challenges in optimizing machine performance and achieving precise technical adjustments due to the installation of new equipment, leading to lower production yield [6] - Production has resumed at a stable pace since May, with efficiency levels returning to pre-transition levels [6] Market Data and Key Metrics Changes - Strong demand for products across all segments has led to increased lead times for customer delivery [8] - The company anticipates that the competitive position in the U.S. market may benefit from higher tariffs on products from other exporting countries [9] - There is uncertainty regarding the tariff rate that may apply to products from Israel under the new U.S. tariff policy [8] Company Strategy and Development Direction - The company is working to diversify its supply base in the Far East to support commercial activity expansion [11] - A company-wide process to replace the core information system is underway, expected to take approximately 18 months [12] - The company aims to optimize internal workflow and implement efficient methodologies through this IT transformation [12] Management's Comments on Operating Environment and Future Outlook - Management noted that operational difficulties in Q1 were due to reduced yield affecting gross margin, but local engineers have helped overcome some challenges [28] - The company expects to increase capacity and efficiency with the arrival of new plating lines by the end of 2025 [31] - There is confidence in the demand to support increased capacity [34] Other Important Information - The company is continuing construction work on the basement floor for new plating lines, with delays in equipment delivery from European suppliers [7] - The Israeli labor market remains challenging for attracting qualified candidates, impacting hiring efforts [7] Q&A Session Summary Question: Will the new line impact profitability? - Management confirmed that the new line, expected to be operational by mid-2026, will positively impact profitability by significantly increasing production [21] Question: Will the new line interfere with current production? - Management clarified that the new line will not interfere with existing production [23] Question: How do operational difficulties affect sales? - Management indicated that reduced yield in Q1 affected gross margin, but local support has helped mitigate some issues [28] Question: What is the timeline for new plating lines? - The first plating line is expected to arrive by August, with installation taking several months, aiming for stability by the end of 2025 [31] Question: Will new lines help in increased revenues? - Management stated that the new lines will significantly increase capacity, quality, and efficiency, supporting revenue growth [33]

PETACH TIKVA, Israel, May 20, 2025 /PRNewswire/ -- Eltek Ltd. (NASDAQ: ELTK), a global manufacturer and supplier of technologically advanced solutions in the field of printed circuit boards (PCBs), today announced its financial results for the quarter ended March 31, 2025. First Quarter 2025 Highlights "We ended the first quarter of 2025 with revenues of $12.8 million, an increase of approximately 8% compared to Q1 2024, and 18.5% higher than Q4 2024. Net income totalled $1.0 million. Our gross margin was i ...

Financial Position - As of December 31, 2024, the company had $17.2 million in cash and cash equivalents and working capital of $25.8 million[32]. - The company raised $10 million in a public offering in February 2024, which is being used to expand production capabilities and for general corporate purposes[206]. - As of December 31, 2024, the company had no outstanding bank debt and $2.4 million in unused revolving lines of credit[207][208]. - Net cash provided by operating activities was $4.5 million in 2024, down from $8.9 million in 2023, primarily due to a decrease in pre-tax income[212][213]. - Net cash used in investing activities rose significantly to $15.9 million in 2024 from $3.0 million in both 2023 and 2022, mainly for fixed asset purchases[215]. - Capital expenditures were approximately $9.5 million in 2024, compared to $2.4 million in 2023, reflecting increased investment in production equipment[218]. - The company expects to finance its 2025 operations through cash flow from operations and cash balances, although liquidity may be affected by external factors such as geopolitical tensions[219]. Revenue and Sales - Revenues decreased by 0.4% to $46.5 million in the year ended December 31, 2024, from $46.7 million in 2023, primarily due to operational challenges associated with new equipment installation[188]. - The company generated $15.8 million in sales to non-Israeli customers in 2024, accounting for 34% of total revenues, compared to $20 million (42.7%) in 2023 and $17.7 million (44.6%) in 2022[162]. - Defense and aerospace equipment accounted for 65% of the company's PCB production in 2024, up from 50.7% in 2023 and 48.7% in 2022[161]. - The backlog at December 31, 2024, was approximately $23.1 million, up from $18.1 million at December 31, 2023, with expectations to deliver most of this backlog in 2025[171]. Costs and Expenses - Cost of revenues increased by 7.7% to $36.2 million for the year ended December 31, 2024, from $33.6 million in 2023, mainly due to higher employee compensation costs[189]. - Gross profit decreased by 21% to $10.3 million for the year ended December 31, 2024, with gross profit margin dropping to 22.2% from 28.1% in 2023, attributed to increased manufacturing costs and a shift in product mix[190]. - Operating profit fell to $4.4 million in 2024 from $7.3 million in 2023, primarily due to the decrease in gross profit[191]. - Selling, general and administrative expenses were $5.8 million in 2024, slightly up from $5.7 million in 2023, maintaining a stable expense ratio[191]. - Research and development expenses were 0.4% of revenues in 2024, up from 0.2% in 2023, reflecting increased investment in innovation[186]. Market and Competition - Competition in the PCB market is intense, with significant pressure from manufacturers in Southeast Asia, which have lower production costs[40]. - The company competes with PCB manufacturers in Asia that have lower production costs, which could limit pricing power and affect financial results[88]. - Rapid changes in the electronics industry and recessionary pressures may lead to intensified price competition and reduced margins, adversely affecting financial results[65]. - The company has a strategy to focus on high-end PCB markets, particularly flex-rigid PCBs, which offer better margins[164]. Risks and Challenges - The company may require additional capital in the future, which may not be available, potentially affecting competitiveness and expansion plans[32]. - The company is dependent on unique machinery that may malfunction, affecting manufacturing activities and financial results[34]. - The company does not currently engage in hedging transactions, exposing it to risks from currency fluctuations[44]. - Political and military instability in Israel may disrupt operations and negatively affect business conditions and share price[41]. - The ongoing Israel-Hamas war may disrupt operations, delay shipments, and harm sales, potentially leading to a material adverse effect on the company's financial results[45]. - Travel advisories and restrictions could impact the ability to receive supplies and materials, adversely affecting timely product manufacturing[46]. - Unfavorable national and global economic conditions may reduce customer demand, leading to longer sales cycles and increased price competition[47]. - The company may face increased costs and resource expenditure due to new tariffs and trade policy uncertainties, particularly with countries like China and Canada[49]. - The Russian invasion of Ukraine has led to sanctions and geopolitical instability, which could disrupt operations and adversely affect financial condition[50]. - Cybersecurity breaches and natural disasters pose significant risks that could disrupt operations and lead to financial losses, with potential impacts on market share[70]. - International operations are subject to regulatory restrictions and economic instability, which may adversely affect sales and profitability[71]. - The company may face significant costs related to potential infringement claims on intellectual property, which could adversely affect its financial condition[94]. - The company relies on trade secrets and non-disclosure agreements for intellectual property protection, as it does not hold any patents[92]. - The company is affected by rising labor costs due to high demand for high-tech personnel in Israel[97]. - The company may be classified as a passive foreign investment company (PFIC), which could impose adverse tax implications for U.S. investors[109]. - The company has faced challenges in obtaining directors' and officers' insurance on reasonable terms, which may impact its ability to retain key personnel[103]. - The company is subject to the Israeli Companies Law, which limits dividend distributions based on profitability and solvency thresholds[112]. - The obligation of personnel to perform military reserve service could disrupt operations if a significant number of employees are called up[124]. - The company has been affected by restrictions on travel and business operations due to heightened unrest, impacting agreements with partners[120]. - Tax benefits provided by the Israeli government may be reduced or eliminated, adversely affecting operating costs and financial results[131]. Investments and Development - The company has received a 40% royalty-bearing participation grant from the Israel Innovation Authority for an $800,000 R&D program aimed at improving production rates, extended until September 2025[64]. - The company invested approximately $15 million in new equipment and facility expansion over the three years ending December 31, 2024, and plans to invest an additional $10 million in capital expenditures in 2025[140]. - The company has received ITAR registration to penetrate the U.S. defense market, enhancing its position in the aerospace sector[164]. - The company has ongoing programs to upgrade processes through high-quality standards and employee training[166]. - The company invested in new machinery and equipment in 2024, including a new solder mask application department and various drilling machines[155]. Shareholder Returns - The company declared a cash dividend of $0.22 per share in November 2023, totaling approximately $1.3 million, paid on December 21, 2023[110]. - The company has experienced significant fluctuations in its ordinary shares' market price and volume, influenced by various external factors[106].

Company Overview - Eltek Ltd. is a global manufacturer and supplier of technologically advanced solutions in the field of printed circuit boards (PCBs) [3] - The company specializes in complex and high-quality PCBs, including HDI, multilayered, and flex-rigid boards for the high-end market [3] - Eltek is ITAR compliant and holds AS-9100 and NADCAP Electronics certifications, serving customers in defense, aerospace, and medical industries across Israel, the United States, Europe, and Asia [3] Financial Reporting - Eltek filed its annual report containing audited consolidated financial statements for the year ended December 31, 2024, with the U.S. Securities and Exchange Commission [1] - The annual report is accessible on the company's website, and shareholders can request a hard copy free of charge [2] Company History and Operations - Founded in 1970, Eltek's headquarters, R&D, production, and marketing center are located in Israel [4] - The company operates through a subsidiary in North America and utilizes agents and distributors in Europe, India, South Africa, and South America [4]

Financial Performance - Revenues for 2024 were $46.5 million, a slight decline of 0.4% compared to $46.7 million in 2023[6]. - Net income for 2024 was $4.2 million, down 34.4% from $6.4 million in 2023, with diluted EPS at $0.63 compared to $1.07 in 2023[6][14]. - Q4 2024 revenues were $10.8 million, a decrease of 12.2% from $12.3 million in Q4 2023, with net income at $0 million compared to $1.3 million in Q4 2023[6][17]. - Gross profit for 2024 was $10.3 million, representing 22% of revenues, down from $13.1 million or 28% of revenues in 2023[12]. - EBITDA for 2024 was $5.9 million, accounting for 13% of revenues, compared to $8.6 million or 18% of revenues in 2023[15]. Strategic Initiatives - The company is undergoing a strategic transition with a $15 million investment plan aimed at enhancing manufacturing capabilities and increasing annual production capacity to $55 million to $65 million[3][4]. - Eltek is positioned to leverage market opportunities by enhancing manufacturing capabilities and strengthening supply chain resilience[9]. - The company anticipates improved operational performance as the investment program progresses, despite short-term fluctuations in profitability[5][10]. Asset and Equity Changes - Total assets increased to $60.2 million in 2024 from $47.2 million in 2023, with total shareholders' equity rising to $41.2 million from $26.9 million[31]. Cash Flow and Investments - Net cash provided by operating activities for the twelve months ended December 31, 2024, was $4,540 million, down from $8,862 million in 2023, reflecting a decline of approximately 48.5%[35]. - Cash flows from investing activities showed a net cash outflow of $15,871 million for the twelve months ended December 31, 2024, compared to $2,959 million in 2023, indicating a substantial increase in investment expenditures[35]. - The company reported a purchase of fixed assets totaling $9,506 million for the twelve months ended December 31, 2024, compared to $2,432 million in 2023, indicating a significant increase in capital expenditures[35]. - The exercise of options generated $296 million in cash for the twelve months ended December 31, 2024, compared to $863 million in 2023, reflecting a decrease in option exercises[35]. Inventory and Receivables Management - The company reported a decrease in inventories of $3,532 million for the twelve months ended December 31, 2024, compared to a decrease of $1,139 million in 2023, suggesting a significant reduction in stock levels[35]. - The company reported a decrease in trade receivables of $988 million for the twelve months ended December 31, 2024, compared to a decrease of $1,010 million in 2023, indicating a slight improvement in receivables management[35]. Cash and Dividends - Cash and cash equivalents at the end of the period were $7,575 million as of December 31, 2024, down from $9,278 million at the end of the same period in 2023[35]. - The company did not distribute dividends in the three months ended December 31, 2024, compared to a distribution of $1,321 million in the same period of 2023[35]. Market Trends - The global PCB industry is experiencing shifts due to geopolitical factors, with increased demand for defense-related PCBs driven by rising defense budgets worldwide[7][8].

Group 1: Dividend Announcement - Eltek Ltd. has declared a cash dividend of US$0.19 per share, totaling approximately US$1.3 million, payable on April 29, 2025, to shareholders of record as of April 22, 2025 [1][2] - The dividend payment exceeds the Company's established dividend policy, reflecting appreciation for shareholder support and confidence in future growth [2] Group 2: Company Overview - Eltek is a global manufacturer and supplier of advanced solutions in printed circuit boards (PCBs), specializing in complex, high-quality PCBs for high-end markets [3] - The company is ITAR compliant and holds AS-9100 and NADCAP Electronics certifications, serving customers in defense, aerospace, and medical industries across multiple regions [3][4] - Founded in 1970, Eltek's headquarters, R&D, production, and marketing center are located in Israel, with operations in North America and various international markets [4]

Financial Data and Key Metrics Changes - In 2024, the company generated revenue of $46.5 million, consistent with 2023 levels but below expectations [6][20] - Gross profit for 2024 was $10.3 million, down from $13.1 million in 2023, resulting in a gross margin decrease from 28% to 22% [20][21] - Net profit for 2024 was $4.2 million, or $0.63 per share, compared to $6.4 million, or $1.07 per share in 2023 [22] - EBITDA decreased to $5.9 million in 2024 from $8.6 million in 2023 [22] - Cash and cash equivalents totaled $17.2 million as of December 31, 2024 [23] Business Line Data and Key Metrics Changes - The company faced operational challenges that constrained revenue growth, particularly in the construction and installation of new equipment [7][15] - Despite strong demand, there was no significant increase in backlog or pricing levels [10] Market Data and Key Metrics Changes - The company observed a slight uptick in activity in the industrial sectors over the past two months [8] - Growing tensions between the U.S. and Europe have led to increased defense budgets in several European nations, presenting growth opportunities in the defense sector [9] Company Strategy and Development Direction - The strategic focus remains on maintaining a balanced portfolio across defense, medical, and high-end industrial segments [9] - The company is working to secure large-scale production orders to enhance operational efficiency and production stability [11][12] - An emphasis on expanding commercial activities is aimed at increasing sales volume while leveraging high-end manufacturing capabilities [12] Management's Comments on Operating Environment and Future Outlook - Management indicated that operational challenges, rather than demand issues, are the primary concern for the next year or two [39] - The company is optimistic about overcoming technical support challenges as travel restrictions have eased [34] - There is a belief that competition from European firms in the Israeli market is limited and that aggressive pricing strategies may not be sustainable long-term [36][37] Other Important Information - Capital expenditures in 2024 were approximately $10 million, with similar levels anticipated for 2025 [13] - The company is actively recruiting additional employees to support expansion efforts amid labor market challenges [17][44] Q&A Session Summary Question: Are travel difficulties for technical support resolved? - Most travel restrictions have been lifted, and technicians are now able to provide support, although some equipment still requires online assistance [34][35] Question: Where is the competition coming from? - Competition is primarily from European companies entering the Israeli market with aggressive pricing, but this is expected to change as defense budgets in Europe increase [36][37] Question: Are operational challenges the main issue? - Yes, operational issues are the primary concern, not demand [39] Question: Is there a plan for a new facility in northern Israel? - There are no current plans for a new facility, but future investment plans will be considered after the current investment plan is completed [41] Question: How is the hiring process going? - Recruiting efforts are ongoing, and while salary increases have helped retain and attract employees, the labor market remains challenging [44]

Financial Data and Key Metrics Changes - In 2024, the company generated revenue of $46.5 million, consistent with 2023 levels but below expectations [6][20] - Gross profit for 2024 was $10.3 million, down from $13.1 million in 2023, resulting in a gross margin decrease from 28% to 22% [20][21] - Net profit for 2024 was $4.2 million, or $0.63 per share, compared to $6.4 million, or $1.07 per share in 2023 [22] - EBITDA decreased to $5.9 million in 2024 from $8.6 million in 2023 [22] - Cash flow from operating activities was $4.5 million in 2024, down from $8.9 million in 2023 [22] Business Line Data and Key Metrics Changes - The company faced operational challenges that constrained revenue growth despite strong demand, particularly in the defense sector [7][9] - The operational difficulties included delays in equipment installation and increased defect rates due to production stoppages [15][17] Market Data and Key Metrics Changes - The company observed a slight uptick in activity in the industrial sectors over the past two months, indicating a positive market environment [8] - Competition from European firms entering the Israeli market was noted, although it is believed to be limited and unsustainable in the long term [10][37] Company Strategy and Development Direction - The strategic focus remains on a balanced portfolio across defense, medical, and high-end industrial segments [9] - The company is actively pursuing large-scale production orders and enhancing commercial activities to increase sales volume [12] - Future investments are planned post-2025, contingent on the completion of the current accelerated investment plan [41] Management's Comments on Operating Environment and Future Outlook - Management emphasized that operational issues, rather than demand, are the primary challenges facing the company [39] - The company expects to maintain a gross margin of 26% to 29% in the midterm, despite recent operational difficulties [49] Other Important Information - The company maintained a solid cash position of approximately $17 million after capital expenditures of about $10 million [7] - The first new plating line was delivered and is operational, while additional lines are scheduled for delivery in 2025 and 2026 [16] Q&A Session Summary Question: Are travel difficulties for technical support resolved? - Most travel restrictions have been lifted, and technicians are now able to provide support, although some issues remain with online support [34][35] Question: Are competitive pressures faced in the Israeli or European market? - The competition mentioned is primarily from European companies entering the Israeli market with aggressive pricing, which is expected to be unsustainable [36][37] Question: Are operational challenges more significant than demand issues? - Management confirmed that operational issues are the primary concern, not demand [39] Question: Is there a plan for a new facility in northern Israel? - There are no current plans for a new facility, but future investment plans will be considered after the current investment plan is completed [41] Question: How is the company addressing hiring challenges? - The company is continuously working on recruitment efforts, with recent salary increases helping to retain and attract employees [44]

Company Overview - Eltek Ltd. is a global manufacturer and supplier of advanced solutions in the field of printed circuit boards (PCBs) [20] - The company specializes in complex and high-quality PCBs for high-end markets, including defense, aerospace, and medical industries [20] Financial Performance - For the full year 2024, Eltek reported revenues of $46.5 million, a slight decline of $0.2 million compared to 2023 [10][11] - Net income for 2024 was $4.2 million, down from $6.4 million in 2023, with diluted earnings per share (EPS) of $0.63 compared to $1.07 in 2023 [10][12] - In Q4 2024, revenues were $10.8 million, down from $12.3 million in Q4 2023, with net income at $0 million compared to $1.3 million in the same period last year [10][14][15] Strategic Transition and Investment - Eltek is undergoing a strategic transition expected to continue through mid-2026, initiated by a $15 million investment plan aimed at enhancing manufacturing capabilities and expanding production capacity to $55 million to $65 million annually [3][4] - The investment plan includes the installation of new equipment and production lines while maintaining ongoing production, which has led to temporary disruptions and inefficiencies impacting Q4 2024 [4][5] Market Trends and Industry Outlook - The global PCB industry is experiencing dynamic shifts due to geopolitical and economic factors, including trade tensions between the US and China, which are prompting companies to reduce dependency on Chinese manufacturing [6] - Increased defense budgets worldwide, driven by geopolitical instability, are heightening demand for high-reliability PCBs used in advanced military equipment and secure communication infrastructure [7][8] - Eltek is strategically positioned to leverage these trends by enhancing its manufacturing capabilities and strengthening supply chain resilience [8] Management Insights - CEO Eli Yaffe noted sustained demand for PCBs, with recent tenders expected to positively impact the company long-term [9] - The strategic investments in advanced manufacturing capabilities are aimed at driving operational efficiency and innovation, despite potential short-term fluctuations in profitability [9]