Elbit Systems (NasdaqGS:ESLT) Q3 2025 Earnings Call November 18, 2025 09:00 AM ET Company ParticipantsKobi Kagan - CFOBezhalel Machlis - CEODaniella Finn - VP of Investor RelationsConference Call ParticipantsJordan Lyonnais - AnalystEllen Page - AnalystSeth Seifman - AnalystOperatorLadies and gentlemen, thank you for standing by. Welcome to Elbit Systems' Third Quarter 2025 Results Conference Call. All participants are at present in listen-only mode. Following management's formal presentation, instructions ...

Financial Data and Key Metrics Changes - Third Quarter 2025 revenues were $1,922 million, a 12% increase from $1,718 million in the Third Quarter of 2024, with 18% growth for the nine months ended September 30 [5][6] - GAAP gross margin for the Third Quarter was 24.9%, up from 24% in the same quarter last year, while non-GAAP gross margin increased to 25.2% from 24.4% [6][8] - GAAP diluted EPS was $2.80 for the Third Quarter of 2025, compared to $1.77 in the Third Quarter of 2024, with non-GAAP diluted EPS rising to $3.35 from $2.21 [8][11] Business Line Data and Key Metrics Changes - Aerospace segment revenues decreased by 3% year-over-year, primarily due to a decline in precision-guided munitions sales in Asia-Pacific, partially offset by increased sales in Israel and Europe [8][10] - SIFRAE and CYBER revenues increased by 14% year-over-year, driven by sales of radio systems and command-and-control systems in Europe [9] - Land segment revenues surged by 41% in the third quarter, attributed to ammunition and munitions sales in Israel and Europe [10] Market Data and Key Metrics Changes - Europe contributed 28% to total revenues, North America 21%, Asia-Pacific 14%, and Israel 33% [5] - The order backlog as of September 30, 2025, was $25.2 billion, an increase of $3.1 billion from the previous year, with 69% of the backlog from orders outside of Israel [10][11] Company Strategy and Development Direction - The company continues to focus on R&D investments to secure future growth and maintain its market leadership [6] - Recent contracts include a $2.3 billion international contract and a $1.625 billion contract with a European country, indicating strong demand for advanced defense solutions [13][14] - Expansion in Europe includes new facilities in Sweden and Germany to enhance local delivery capabilities [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth driven by strong demand for solutions, particularly in Europe and Israel, despite potential domestic demand fluctuations [12][23] - The company anticipates growth opportunities in high-powered laser systems and UAVs, with significant interest from international markets [30][31] Other Important Information - Cash flow from operating activities for the nine months ended September 30, 2025, was $461 million, significantly higher than $82.5 million in the same period last year [11] - The Board of Directors declared a dividend of $0.75 per share to be paid on January 5, 2026 [11] Q&A Session Summary Question: How enduring is domestic demand with the ceasefire? - Management noted an increase of $1.4 billion in backlog, with growth expected predominantly outside of Israel, especially in Europe [23] Question: What is the trajectory for the air and aerospace business? - Management expects continued growth in the aerospace segment, driven by international sales and demand for UAVs [27][28] Question: What are the opportunities in directed energy? - Management confirmed significant interest in high-powered laser systems, with potential for growth in both domestic and international markets [30][31] Question: What are the drivers of margin expansion? - Margin expansion was attributed to improved backlog profitability and operational excellence, including AI utilization and CapEx investments [34][36] Question: How will the company leverage the US DOD's budget expansion? - Management sees the US market as strategic and is exploring acquisition opportunities while expanding operations in border protection applications [42][44]