Eltek .(ELTK) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record revenue of $13.5 million for Q3 2024, an increase from$ 11.9 million in Q3 2023 [7][17] - Gross profit for Q3 2024 was $3.5 million, down from$ 3.7 million in Q3 2023, primarily due to a less favorable product mix [10][17] - Operating profit decreased to $1.9 million in Q3 2024 from$ 2.3 million in Q3 2023 [18] - Net profit for Q3 2024 was $1.7 million or$ 0.25 per share, compared to $2.1 million or$ 0.36 per share in Q3 2023 [19] - EBITDA for Q3 2024 amounted to $2.3 million, down from$ 2.6 million in Q3 2023 [19] - Positive cash flow from operating activities was $1.6 million in Q3 2024, compared to$ 3.6 million in Q3 2023 [20] Business Line Data and Key Metrics Changes - The self-defense market segment accounted for 64% of total sales, while the industrial market segment contributed 14% and the medical market segment accounted for 7% [7] - Demand in the industrial segment has slowed due to reduced demand from primary customers, but recovery is anticipated in 2025 [9] Market Data and Key Metrics Changes - Demand for products in India remains robust and continues to grow [9] - The company expects critical sectors such as medical and defense to continue generating strong demand for PCBs due to ongoing trade conflicts and global tensions [8] Company Strategy and Development Direction - The company is initiating co-production partnerships with specialized companies overseas to better meet customer demand and improve pricing [9] - An accelerated investment program is underway, with a $2 million investment in a new production facility dedicated to solder mask applications [11] - The company has adopted a dividend distribution policy, allowing for up to 25% of net profit to be distributed as dividends [14] Management's Comments on Operating Environment and Future Outlook - Management does not expect significant changes in market trends and anticipates steady growth in demand for high-end products [8] - The company has stabilized its workforce by hiring new employees and increasing wages to support recruitment [12] - Management believes that the gross profit margin will stabilize between 26% to 29% in the medium to long term [10][41] Other Important Information - The company is in the final stages of an ERP project aimed at streamlining processes and consolidating existing systems, expected to take approximately 2.5 years [13] Q&A Session Summary Question: What is the expected revenue mix for the defense sector going forward? - Management indicated that the increased backlog is mainly due to the strong defense sector, and profitability for these products is expected to remain stable or improve [24] Question: What is the remaining CapEx for the new facility? - The remaining CapEx for the accelerated investment plan is around$ 7 million to $8 million, which will be spent during 2025 [25][37] Question: What is the expected production capacity by the end of the investment program? - The expected production capacity will serve sales of approximately$ 55 million to $65 million by the end of the accelerated investment program [26] Question: Can you elaborate on the labor issues affecting the cost of goods sold? - The company had to increase salaries to retain and recruit employees due to high demand for labor in Israel [31] Question: Are there any updates on exploring opportunities outside of defense and medical markets? - The company is primarily focused on defense, aerospace, industrial, and medical segments, with no significant expansion into other areas expected [33] Question: Will the increase in wages be passed on to customers? - Management confirmed that the increase in wages is expected to be passed on to customers gradually [34][35] Question: What is the forecast for revenue growth in the fourth quarter? - Management does not provide specific forecasts for next quarter revenues but expects gross margins to stabilize in the mid to long term [41]