Elbit Systems(US:ESLT)2021-03-24 17:30Financial Data and Key Metrics Changes - Fourth quarter revenue was $1,378 million, an increase of 4.3% year-over-year [8] - Total revenues for 2020 were $4.66 billion, up 3.4% from $4.5 billion in 2019 [8] - Non-GAAP gross margin for Q4 was 26.3%, slightly up from 26.2% in Q4 2019 [12] - GAAP gross margin for Q4 was 26%, compared to 21.5% in Q4 2019 [13] - Non-GAAP operating income for 2020 was $390.1 million, maintaining an 8.4% margin, consistent with the previous year [16] - Operating cash flow for Q4 was $172 million, compared to $87 million in the same quarter last year [23] Business Line Data and Key Metrics Changes - Airborne systems accounted for 35% of total annual sales, increasing year-over-year due to precision munitions and training [8] - Electro-optics represented 10% of total sales, with growth attributed to the acquisition of Elbit Night Vision [9] - Land systems sales made up 27% of total sales, increasing due to revenues from IMI acquired in 2018 [9] - C4ISR sales declined to 25% of total sales, primarily due to lower radio sales to Asia-Pacific [9] Market Data and Key Metrics Changes - North America contributed 32% of revenues, with growth driven by airborne system sales [10] - Israel accounted for 24% of revenues, mainly due to land systems [10] - Asia-Pacific contributed 21% and Europe 18% to total revenues [10] - The order backlog as of December 31, 2020, was approximately $11 billion, indicating a book-to-bill ratio of 1.21 [22] Company Strategy and Development Direction - The company is focused on maintaining technological leadership through R&D investments, which increased to 7.7% of revenues [18] - The integration of IMI is progressing well, with a shift towards international markets for new business [76] - The company aims to capitalize on growing demand in the naval domain and has a strong portfolio for armed vehicles and tanks [41][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the backlog growth of over 10%, indicating potential revenue growth in the next 1.5 to 2 years [45][46] - The company does not foresee significant impacts from COVID-19 on business operations, citing a strong global presence [55][58] - Management is optimistic about future contracts in Israel despite current political uncertainties [52][53] Other Important Information - The effective tax rate for 2020 was 13.9%, up from 7.9% in 2019 due to prior year adjustments [20] - The company declared a dividend of $0.44 per share for Q4 2020 [24] - The company is transitioning its autonomous system technology to land and naval domains [36] Q&A Session Summary Question: 2021 growth outlook and backlog conversion - Management noted that the backlog growth of over 10% provides a positive indication for future revenues, but no specific guidance was given [45][46] Question: Strength in airborne systems and growth momentum - Management expressed confidence in military airborne systems growth, while commercial avionics remains a small part of revenues [47][48] Question: Cash flow and receivables outlook - Management emphasized cash flow management as a priority and expects stabilization in payments from the Israeli Ministry of Defense [49] Question: Israeli defense spending trends post-election - Management is confident that the Israeli Ministry of Defense will fulfill its payment obligations and anticipates new contracts [51][53] Question: COVID-19 impact on business operations - Management reported no significant impact from COVID-19, highlighting the strength of their global subsidiaries [55][58] Question: Hermes contract details and cooperation with Korea - Management clarified that the deal with Korea involves cooperation in UAV markets and the Canadian program includes elements of lease and service [59][60] Question: Margin rate expectations for 2021 - Management discussed factors affecting margins, including currency strength and operational improvements, but did not provide specific guidance [62][64]