Eltek .(ELTK) - 2021 Q3 - Quarterly Report

Executive Summary Third Quarter 2021 Overview Eltek reported a decrease in Q3 2021 revenue, a net loss, and lower EBITDA, with cash and cash equivalents at 8.9 million USD Q3 2021 Financial Highlights Comparison | Metric | Q3 2021 (million USD) | Q3 2020 (million USD) | | :------------- | :-------------------- | :-------------------- | | Revenue | 8.0 | 9.3 | | Net Profit (Loss) | (0.026) | 0.598 | | EBITDA | 0.553 | 1.0 | - As of September 30, 2021, cash and cash equivalents totaled 8.9 million USD[2] CEO Commentary CEO Eli Yaffe attributed Q3 performance decline to fewer working days and currency impact, highlighting investments in equipment and R&D for future growth - Third quarter performance decline was attributed to fewer working days and increased expenses due to the stronger New Israeli Shekel against the USD[3] - The company invested 1.4 million USD in new equipment and undertook multiple R&D projects in the first nine months of 2021 to enhance manufacturing capabilities and competitiveness[3] - As of September 30, 2021, the company had 12.5 million USD in positive working capital and 3.4 million USD in operating cash flow for the first nine months, indicating improved balance sheet and cash flow positions[4] Financial Highlights Third Quarter 2021 vs. Third Quarter 2020 Eltek experienced year-over-year declines in Q3 2021 revenue, gross profit, operating profit, net profit (turning to loss), and EBITDA, alongside reduced operating cash flow Q3 2021 Financial Highlights Comparison | Metric | Q3 2021 (million USD) | Q3 2020 (million USD) | Change (YoY) | | :------------------------- | :-------------------- | :-------------------- | :----------- | | Revenue | 8.0 | 9.3 | -14.0% | | Gross Profit | 1.4 (17.5% of Revenue) | 1.8 (19.7% of Revenue) | -22.2% | | Operating Profit | 0.065 | 0.638 | -89.8% | | Net Profit (Loss) | (0.026) | 0.598 | -104.3% | | EBITDA | 0.553 | 1.0 | -44.7% | | Cash Flow from Operations | 0.598 | 0.873 | -31.5% | First Nine Months 2021 vs. First Nine Months 2020 For the first nine months of 2021, Eltek saw declines across revenue, gross profit, operating profit, net profit, and EBITDA, with diluted EPS falling to 0.17 USD, though cash and cash equivalents significantly increased to 8.9 million USD First Nine Months 2021 Financial Highlights Comparison | Metric | First Nine Months 2021 (million USD) | First Nine Months 2020 (million USD) | Change (YoY) | | :------------------------- | :----------------------------------- | :----------------------------------- | :----------- | | Revenue | 24.3 | 27.2 | -10.7% | | Gross Profit | 4.9 (20.2% of Revenue) | 5.5 (20.3% of Revenue) | -10.9% | | Operating Profit | 1.1 | 2.1 | -47.6% | | Net Profit | 1.0 | 1.8 | -44.4% | | Diluted Net Income Per Common Share | 0.17 | 0.42 | -59.5% | | EBITDA | 2.5 | 3.2 | -21.9% | | Cash Flow from Operations | 3.4 | 3.7 | -8.1% | | Cash and cash equivalents (period-end) | 8.9 | 4.7 (2020年12月31日) | +89.4% | Company Information Conference Call Details Eltek held a conference call on November 17, 2021, to discuss financial results, hosted by CEO Eli Yaffe and CFO Alon Mualem, with replay available online - The conference call was held on November 17, 2021, at 8:30 AM ET, hosted by CEO Eli Yaffe and CFO Alon Mualem[8] Conference Call Dial-in Numbers | Region | Number | | :----------- | :------------ | | USA | 1-888-723-3164| | Israel | 03-9180691 | | International | +972-3-9180691| - A replay of the conference call will be available on Eltek's website (http://www.nisteceltek.com) in the Investor Information section for 30 days[9] About Eltek Eltek is a global leader in manufacturing and supplying complex, high-quality PCBs, HDI, multilayer, and rigid-flex boards for high-end markets, headquartered in Israel since 1970 - Eltek is a global manufacturer and supplier of Printed Circuit Boards (PCBs) and a leader in the Israeli industry[10] - The company specializes in manufacturing and supplying complex, high-quality PCBs, HDI, multilayer, and rigid-flex boards for leading customers in high-end markets such as defense, aerospace, and medical[10] - Founded in 1970, Eltek's headquarters, R&D, production, and marketing centers are in Israel, operating through a North American subsidiary and global agents and distributors[11] Financial Disclosures Use of Non-GAAP Financial Information The company reports financial results in accordance with US GAAP and provides non-GAAP EBITDA as a supplementary metric for internal assessment and investor analysis - The company reports financial results in accordance with US GAAP and provides non-GAAP EBITDA as a supplementary metric[13] - EBITDA is not a GAAP measure nor a substitute for it, but the company uses it internally for operational assessment and management, and to assist investors with additional financial analysis[13] Forward-Looking Statements Forward-looking statements in the press release involve risks and uncertainties, including future results, COVID-19 impact, product development, market demand, competition, and economic conditions - Forward-looking statements involve risks and uncertainties, including expected future quarterly results and the impact of the COVID-19 pandemic on the economy and operations[14] - Other risk factors include product and technology development, rapid technological change, product demand, competitive products and pricing, market acceptance, sales cycles, and evolving economic conditions[14] Investor Contact Investors can contact CFO Alon Mualem for further information - Investor Contact: Alon Mualem, Chief Financial Officer, Email: alonm@nisteceltek.com, Phone: +972-3-9395023[15] Consolidated Financial Statements Consolidated Statements of Operations The consolidated statements of operations present Eltek's revenue, costs, gross profit, expenses, operating profit, net profit (loss), and EPS for Q3 and the first nine months of 2021 and 2020 Eltek Ltd. Consolidated Statements of Operations (in thousand USD, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | 7,965 | 9,256 | 24,302 | 27,206 | | Cost of Revenue | (6,570) | (7,433) | (19,397) | (21,679) | | Gross Profit | 1,395 | 1,823 | 4,905 | 5,527 | | Selling, General and Administrative Expenses | (1,285) | (1,183) | (3,706) | (3,467) | | Research and Development Expenses, net | (45) | (2) | (55) | - | | Operating Profit | 65 | 638 | 1,144 | 2,060 | | Financial Expenses, net | (121) | (19) | (101) | (158) | | Other Income (Expenses), net | 44 | (10) | 41 | (10) | | Profit Before Taxes | (12) | 609 | 1,084 | 1,892 | | Taxes on Income | (14) | (11) | (64) | (50) | | Net Profit (Loss) | (26) | 598 | 1,020 | 1,842 | | Earnings Per Share | | | | | | Basic and Diluted Net Income Per Common Share | (0.00) | 0.14 | 0.17 | 0.42 | | Weighted Average Common Shares Used in Computing Basic Net Income Per Common Share (in thousand shares) | 5,840 | 4,380 | 5,840 | 4,380 | | Weighted Average Common Shares Used in Computing Diluted Net Income Per Common Share (in thousand shares) | 5,840 | 4,380 | 5,871 | 4,380 | Consolidated Balance Sheets The consolidated balance sheets show Eltek's assets, liabilities, and shareholders' equity as of September 30, 2021, and December 31, 2020, indicating growth in total assets and shareholders' equity Eltek Ltd. Consolidated Balance Sheets (in thousand USD) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------------------------------------------------------------------ | :----------- | :----------- | | ASSETS | | | | CURRENT ASSETS | | | | Cash and cash equivalents | 8,885 | 4,735 | | Accounts receivable: trade, net of allowance for doubtful accounts | 6,441 | 9,062 | | Other | 901 | 700 | | Inventories | 4,216 | 3,704 | | Prepaid expenses | 269 | 619 | | Total current assets | 20,712 | 18,820 | | NON-CURRENT ASSETS | | | | Restricted deposits | 218 | 62 | | Severance pay fund | 64 | 64 | | Operating lease right-of-use assets | 8,802 | 8,948 | | Total non-current assets | 9,084 | 9,074 | | Property and equipment, net of accumulated depreciation | 7,414 | 7,263 | | TOTAL ASSETS | 37,210 | 35,157 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | CURRENT LIABILITIES | | | | Short-term credit and current maturities of long-term debt | 595 | 676 | | Accounts payable: trade | 3,523 | 4,452 | | Other | 3,230 | 3,831 | | Short-term operating lease liabilities | 852 | 742 | | Total current liabilities | 8,200 | 9,701 | | NON-CURRENT LIABILITIES | | | | Long-term debt, excluding current maturities | 3,965 | 1,495 | | Employee severance benefits | 332 | 338 | | Deferred tax liability | 107 | 84 | | Long-term operating lease liabilities | 8,057 | 8,272 | | Total non-current liabilities | 12,461 | 10,189 | | EQUITY | | | | Ordinary shares, NIS 3.0 par value, 10,000,000 shares authorized, 5,840,357 shares issued and outstanding | 5,296 | 5,296 | | Additional paid-in capital | 22,846 | 22,846 | | Accumulated foreign currency translation adjustment | 3,103 | 3,153 | | Capital reserve | 1,394 | 1,084 | | Accumulated deficit | (16,090) | (17,112) | | Total shareholders' equity | 16,549 | 15,267 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 37,210 | 35,157 | Unaudited Non-GAAP EBITDA Reconciliations The unaudited non-GAAP EBITDA reconciliations provide a reconciliation between Eltek's GAAP net profit (loss) and non-GAAP EBITDA for Q3 and the first nine months of 2021 and 2020 Eltek Ltd. Unaudited Non-GAAP EBITDA Reconciliations (in thousand USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | GAAP Net Profit (Loss) | (26) | 598 | 1,020 | 1,842 | | Add back: | | | | | | Financial expenses, net | 121 | 19 | 101 | 158 | | Income tax expense | 14 | 11 | 64 | 50 | | Depreciation and amortization | 444 | 390 | 1,330 | 1,176 | | Non-GAAP EBITDA | 553 | 1,018 | 2,515 | 3,226 | Consolidated Statements of Cash Flow The consolidated statements of cash flow detail Eltek's cash flows from operating, investing, and financing activities, and period-end cash and cash equivalents for Q3 and the first nine months of 2021 and 2020 Eltek Ltd. Consolidated Statements of Cash Flow (in thousand USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | Net profit | (26) | 598 | 1,020 | 1,842 | | Adjustments | 578 | 427 | 1,663 | 1,272 | | Changes in working capital | 46 | (152) | 760 | 636 | | Net cash provided by operating activities | 598 | 873 | 3,443 | 3,750 | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | Purchase of property and equipment | (824) | (348) | (1,362) | (802) | | Restricted deposits | (2) | (1) | (156) | (58) | | Net cash used in investing activities | (826) | (349) | (1,518) | (860) | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | Short-term bank credit, net | - | (1,163) | (377) | (1,928) | | Repayment of long-term bank loans | (111) | (37) | (188) | (145) | | Proceeds from long-term loans | - | - | 3,062 | 1,141 | | Net cash used in financing activities | (111) | (1,287) | 2,212 | (1,894) | | Effect of exchange rate changes | 55 | 7 | 13 | 27 | | Net increase (decrease) in cash and cash equivalents | (284) | (756) | 4,150 | 1,023 | | Cash and cash equivalents at beginning of period | 9,169 | 3,407 | 4,735 | 1,628 | | Cash and cash equivalents at end of period | 8,885 | 2,651 | 8,885 | 2,651 |