Elbit Systems(US:ESLT)2021-05-25 15:42Financial Data and Key Metrics Changes - First quarter revenues were $1,118 million, reflecting a 4.4% year-over-year increase [6] - Non-GAAP gross margin for the first quarter was 25.6%, down from 27.6% in the same quarter of 2020 [8] - GAAP diluted EPS was $1.64, compared to $1.44 in the previous year [10] - The backlog of orders as of March 31, 2021, was approximately $11.8 billion, an increase of $1 billion year-over-year [10] Business Line Data and Key Metrics Changes - Airborne systems accounted for 30.7% of total annual sales, increasing year-over-year due to precision-guided munition sales [6] - Land system sales remained stable at 27% of total revenues [6] - C4ISR sales increased to 23% of total sales, primarily driven by UAS sales to Asia Pacific [6] - Electro-optics sales declined to 9% of total sales, mainly due to the phasing of Elbit Night Vision programs in the U.S. [6] Market Data and Key Metrics Changes - North America contributed 31% of revenues, while Israel accounted for 25%, Asia Pacific for 21%, and Europe for 17% [7] - Growth in Israel was primarily due to UAS security systems, while Asia Pacific sales increased due to UAS and precision-guided munitions [7] - The decline in North America was attributed to lower commercial aerospace and night vision sales [7] Company Strategy and Development Direction - The company is well-positioned to benefit from increased defense spending globally, particularly in response to elevated geopolitical tensions [11] - Recent contracts include a $1.65 billion contract with the Hellenic Ministry of National Defense for a flight training center [12] - The company completed acquisitions of Sparton Corporation and Rokar, enhancing its maritime capabilities and GPS systems [15] Management's Comments on Operating Environment and Future Outlook - Management noted a gradual recovery from COVID-19, with expectations for improved revenues in the second quarter [5][19] - The company anticipates continued demand for its high-technology solutions, supported by a strong backlog [16] - Management expressed optimism about the potential for synergies between its night vision and thermal imaging businesses [14] Other Important Information - The company declared a dividend of $0.44 per share for the first quarter of 2021 [10] - Cash flow from operating activities showed a $13 million outflow, compared to a $10 million outflow in the same quarter last year [10] Q&A Session Summary Question: What is the outlook for the electro-optics business? - Management acknowledged a temporary delay in development processes but expects revenue recovery in the second quarter [17] Question: Is COVID still impacting deal closures, particularly in India? - Management noted improvements but acknowledged ongoing challenges in certain regions due to COVID [19] Question: What drove the sequential improvement in backlog? - The recent Greek contract will be reflected in the second quarter, indicating that first-quarter growth was organic [20][21] Question: Will gross margins continue to be impacted by the strength of the Shekel? - Management expects gradual improvement in gross margins over the year [22][23] Question: What is the status of the IMI payment? - The last payment is planned for the end of 2022, with potential for an additional small payment based on performance [25][27] Question: What is the recovery outlook for civil aviation? - Recovery is expected to be gradual, returning to 2019 levels by 2024 [28] Question: What is the status of the high-power laser development? - Development is ongoing, with operational deployment expected in a few years, pending budget approvals [32] Question: How is the company managing currency exchange impacts? - The company has measures in place to mitigate currency impacts through indexing in contracts and cost management strategies [35][36]