Elbit Systems(US:ESLT)2023-03-28 17:35Financial Data and Key Metrics Changes - The company reported fourth quarter revenues of $1.506 billion, an increase from $1.494 billion in the same quarter of 2021 [32] - For the full year 2022, revenues were $5.5 billion compared to $5.3 billion in 2021 [32] - The GAAP gross margin for the fourth quarter was 25.3%, up from 25.1% in the fourth quarter of 2021, while the GAAP gross margin for 2022 was 24.9%, down from 25.7% in 2021 [35] - Non-GAAP operating income for 2022 was $357 million, or 6.5% of revenues, compared to $451 million, or 8.5% of revenues in the previous year [36] - The company ended 2022 with a record order backlog of $15.1 billion, an 11% increase from the end of 2021 [30] Business Line Data and Key Metrics Changes - C4ISR accounted for 29% of revenues, increasing year-over-year due to UAS and anti-submarine warfare sales [18] - Airborne systems represented 37% of revenues but declined year-over-year, offset by growth in training and simulation sales [18] - Land systems accounted for 22% of total revenues, with a decline attributed to the sale of Ashot Ashkelon [33] - Electro-optics increased to 10% of revenues due to higher sales of night vision systems [33] Market Data and Key Metrics Changes - North America contributed 27% of revenues, Europe 23%, Asia-Pacific 26%, and Israel 19% [34] - European revenues increased mainly due to growth in UAS, munitions, and training and simulation sales [34] - Asia-Pacific revenue declined due to lower precision guided munitions and C4ISR sales [13] Company Strategy and Development Direction - The company is focused on being a leader in various markets, investing in R&D, particularly in high power lasers, guided munitions, and autonomy [4][5] - Significant investments are being made in expanding manufacturing capabilities and upgrading production facilities [43][48] - The company is transitioning to a single ERP system to improve operational efficiency, with an expected total investment of approximately $200 million [44] Management's Comments on Operating Environment and Future Outlook - Management noted that global supply chain pressures are expected to ease gradually in 2023, with significant improvements anticipated in the second half of the year [16] - The company is optimistic about growth in demand for unmanned systems and land systems, particularly in Europe [66] - Political developments in Israel have not yet impacted the business, but sustained instability could increase economic uncertainty [57] Other Important Information - The company declared a dividend of $0.50 per share [46] - The construction of a new ammunition production site in Ramat Beka is on schedule to be operational by 2024 [43] Q&A Session Summary Question: How much of the 11% backlog growth can be attributed to Europe? - A significant part of the backlog growth came from Europe, but Asia-Pacific and the U.S. also contributed positively [65] Question: What drove the weakness in unmanned systems in the quarter? - The company sees growing demand for unmanned systems in Europe and is optimistic about future growth in land systems [66] Question: Is a growth range of 4% to 6% reasonable for 2023? - The company does not provide guidance but expects to realize some backlog growth in revenues during 2023 [72] Question: Can the company cover inflation from base labor rates in pricing for 2023? - The company expects an improvement in labor costs in dollar terms due to currency exchange rate changes [75] Question: What are the opportunities in Japan following the recent strategic MOU? - The company sees significant opportunities in Japan's defense market, particularly in training solutions and air defense [81] Question: Updates on ongoing investment programs? - The new facility in Ramat Beka will be operational by June 2024, and the South Carolina facility will enter production in 2023 [82]