Q4 2021 Eltek Ltd Earnings Call
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Yeah.
Ladies and gentlemen, thank you for standing by. Welcome to the LTCH LTD fourth quarter and full year 2021 financial results conference call. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session.
Ladies and gentlemen, thank you for standing by welcome to the <unk> L. T D fourth quarter and full year 2021 financial results conference call. All participants are present in a listen only mode. Following management's formal presentation instructions will be forgiven part of the question and answer session for operator assistance. During the conference. Please press Star Zero as a reminder, this.
Speaker Change: For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that LTCH's earnings released today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures.
Conference is being recorded before I turn the call over to Mr. <unk>, Li our Chief Executive Officer, and Ron <unk>, Chief Financial Officer, I'd like to remind you that <unk> earnings release today and this call include forward looking statements within the meaning of the private Securities Litigation Reform Act of 90, 95, and the Securities and Exchange Act.
Of 1934, as well as certain non-GAAP financial measures before making any investment decisions. We strongly encourage you to read our full disclosures on forward looking statements and use of non-GAAP financial measures set forth at the end of our earnings release as well as review our latest.
Speaker Change: Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions.
Billings with the SEC for important material some from.
Speaker Change: important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements.
Important material assumptions expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward looking statements. These forward looking statements are projections and reflect the current beliefs and expectations of the company actual events or results may differ materially.
Speaker Change: These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. Altech undertakes no obligation publicly to publicly release revisions to such forward-looking statements.
<unk> undertakes no obligation publicly to publicly release revisions to such forward looking statements to reflect events or circumstances occurring subsequent to this date I will now turn the call over to Mr. <unk>. Mr. <unk>. Please go ahead.
Speaker Change: to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead. Thank you.
Yeah.
Eli Yaffe: Good morning everyone. Thank you for joining us and welcome to Eltech 2021 fourth quarter and full year earning.
Good morning, everyone. Thank you for joining us and welcome to <unk> 2021 fourth quarter and full year earnings call.
Eli Yaffe: With me is Ron Freund, our Chief Financial Officer, who joined us on January 1, 2016.
With me he's wrong point, our Chief Financial Officer.
Joining us on January one 2022, we will begin by providing you with an overview of our business in summary of it.
Ron Freund: We will begin by providing you with an overview of our business and summary of the principal factors that affected our results in 2021, followed by details of our financial statements.
The principal factors that affected our results in 2021.
All told by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions by now.
Ron Freund: After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our fourth quarter press release, which was released earlier today. The release will also be available on our website at www.nistechheltech.com
Everyone should have access to our fourth quarter press release, which was released earlier today. So at least we will also be available on our website at www dot newspaper taken towards cool.
Ron Freund: 2021 was a very challenging year, both operationally and business-wise. In addition to the COVID-19 pandemic that affected us, our results were affected by the strength of the new Israeli shekels compared to the US dollar and the euro. Nevertheless, we were able to maintain operational profitability and to the end of 2021 with $1.5 million of pre-tax income.
2021 was a very challenging year, both operationally and business Wise. In addition to the COVID-19 pandemic that affected US all results were affected by the strength of the new Israeli shekel compared to the U S dollar and the euro.
Unless we were able to maintain operational and profitability profitability until the end of 2021 with $1 5 million.
Fixed income.
Ron Freund: Based on the fact that we were profitable during the last three years and the several other factors, we concluded that it is more likely than not that we will utilize our tax losses carry forward.
Based on the fact that we were profitable during the last three years and the civil and older festivals. We concluded that it is more likely than not that we will be utilize our tax loss carry forward.
Ron Freund: Therefore, we recorded a one-time tax benefit in the amount of $3.5 million while reversing the tax valuation allowance recorded in prior year.
Therefore, we recorded a one time tax benefit in the amount of $3 $5 million, while reversing the valuation allowance recorded in prior years.
Ron Freund: We ended the year with a net profit of $5 million. Our cash from operation activities totaled $3.5 million.
We ended the year with the net proceeds of $5 million, our cash from operation activities totaled three point.
Ron Freund: 9 million dollars and contribute to our strong balance sheet.
$9 million and contribute to our strong balance sheets.
Ron Freund: As of 2021 year-end, our cash balance totaled $9.3 million.
2021 ear and our cash balance totaled $9 $3 million.
Ron Freund: The outbreak and the spread of the coronavirus during 2021 created operational and business challenges including shortage of certain of our key raw materials. This shortage required us to make quick adjustments to enable us to maintain production and delivery of PCBs to our customers.
The outbreak and the spread of the coronavirus during 2021 created operational and business challenges, including shortage of certain of our key raw materials. This shortage required us to make quick adjustment to enable us to maintain production and deliveries of pcbs to our customers.
Ron Freund: We purchased alternative raw material that we were pre-approved two years ago as a backup plan and managed to obtain authorization from the majority of our customers to use the alternative raw materials in our product.
We purchased alternative raw material that we were preapproved two weeks ago as a backup plan and managed to obtain authorization from the majority of our customers to use alternative raw materials in all products.
Ron Freund: The use of the alternative raw materials provide a reduction in our cost production, flexibility to offer more production option, better pricing, and a secure source of raw materials. It should be noted that currently, we are not suffering from any delivery delays from DuPont, our key suppliers, as we faced during the first quarter of 2021.
The use of the alternative raw materials provide a reduction now of course production flexibility to offer more production option better pricing in a secure source of raw materials. It should be noted that currently we are not suffering from any delivery delays from Dupont are keys to suppliers as we faced during the first quarter of 2021.
Ron Freund: In order to avoid such a situation in the future, we have also increased our raw material inventory level.
In order to avoid such situations in the future. We have also increased our raw material inventory level.
Ron Freund: During the second half of 2021 and to date, we faced significant price increase for some of our raw materials on top of the extra logistic cost of raw material freight. In addition, a majority of our operational expenses are dominated in a new Israeli shape.
During the second half of 2021 and to date, we faced significant price increase so some will fall raw materials Antofagasta extra logistic cost of raw material freight. In addition, and majority of our operation expenses are dominated in the new Israeli shekels the.
Ron Freund: the continuation effect of the devaluation of the U.S. dollar against the Israeli shekel negatively affects our results of operation. Nevertheless, we were able to maintain our gross margin of 20%, similar to our 2020 gross margin.
We continue the continuation of effect of the devaluation of the U S dollar against it.
The Israeli shekel negatively affect our results of operations. Nevertheless, we were able to maintain our gross margin of 20% similar to our 2022.
Similar to our 2020 gross margin.
Ron Freund: This was achieved mainly due to the keeping our operational cost under tight control and implementing steps to increase efficiency in our production lines.
This was achieved mainly due to the keeping our operational costs under tight control and implementing steps to increase efficiency in our production lines.
Our strong balance sheet and cash balance allowed us to continue to invest in a new machine and equipment. We invested one point Australian dollar during 2021 as part of our plan to invest in a new advanced manufacturing equipment, which will be strengthen strengthening our manufacturing capability in <unk>.
Ron Freund: The cash balance allowed us to continue to invest in a new machine and equipment. We invested $1.5 million during 2021 as part of our plan to invest in a new advanced manufacturing equipment, which will strengthen our manufacturing capability and increase our competitiveness.
<unk> competitiveness.
Ron Freund: We have also continued to implement improved production processes and adoption of Industry 4.0 technology.
We have also continued to implement improved production pools fitness and adoption of adoption of industry four points zero.
Technologies.
Ron Freund: As we previously reported, we are conducting several R&D programs in order to maintain our position as an innovative industry leader. Our R&D program is designed to enable us to achieve a significant faster production rate and to reduce scrap.
As we previously reported we are.
Conducting several R&D programs in order to maintain our position as an industry leader. Our R&D program is designed to enable us to achieve a significant faster production rate to reduce scrip.
Ron Freund: If successful, this R&D program will enhance our ability to offer highly reliable printed circuit boards with a shorter production time and at reduced cost.
If successful this R&D program will enhance our ability to fulfill a highly reliable printed circuit boards with a shouldered shorter production time and at reduced costs.
Ron Freund: I should note that there is still more milestone to pass in order to declare its full success.
I should note that there is still more milestone to pass in order to declare success.
Success.
Ron Freund: Eltech, like many companies, face problems with recruiting and retaining employees. So far, our efforts have borne fruits, with slight increase in wages. During 2021, we continue to allocate resources to automation and advanced working.
Ethic like many companies face problems with recruiting and retaining employees, so far although I first wave.
<unk> foods with a slight increase in wages June 2021, we'll continue to allocate resources to automation and advanced walking metals.
Ron Freund: We will continue to pursue new business opportunities and increase customer design engagement activity that will leverage our advanced innovative and technology capabilities.
We will continue to pursue new business opportunities and increase customer design engagement activities that we leverage our advancing innovative technology capability.
Ron Freund: We continue to make efforts to increase our global presence and sales in North America, Europe and Far East markets.
We continue to make efforts to increase our global presence and sales in North America, Europe and far east markets.
Ron Freund: We received a $1.4 million purchase order from a defense customer, which we reported on earlier this year.
We received $1 4 million.
So there are some defense customer, which we reported on earlier this year.
Ron Freund: Our policy is to expand our customer base as much as possible and to accept current order and not to rely only on large production projects that come in every year.
Our policy to expand our customer base as much as supposed to going to exhibit calling older and not rely only on large production.
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Every few years.
Ron Freund: during 2020 and 2021, they're well known. This policy will allow us to maintain a stable level of revenue and not to depend on a large project.
In June 2020 in 2021 still with known this policy will allowed us to maintain a stable level of revenue and also depend on the large project.
This only.
Ron Freund: As for the current situation in Europe , we believe that governments will increase their spending on military projects, which will positively reflect our revenue.
Therefore, the current situation in Europe , we believe the government will increase their spending on military project, which will positively affect our revenue.
Ron Freund: About 50% of our revenue are defense and aerospace related.
About 50% of our revenue our defense and aerospace related.
Ron Freund: During the first quarter of 2021 and the beginning of 2022, our book-to-sell ratio increased significantly, which result in a strong backlog.
During the first quarter of 2021, and the beginning of 2022, our book to sell ratio increased significantly which resulted in strong backlog.
Ron Freund: Therefore, we have decided to accelerate our planned capital investment and to try to implement them in a period of two years instead of five.
Therefore, we have decided to accelerate our planned capital investments and to try to implement them in a period of two weeks.
Instead of five years.
Ron Freund: We are also investing a lot of efforts in recruiting new employees. I will now turn the call over to Ron Freund, our CFO , to discuss our financial status.
We are also investing a lot of efforts and recruiting recruiting new employees I will now turn the call over to <unk>, our CFO to discuss our financial statements.
Ron Freund: Thank you Eli. I am glad to have joined LTCH and look forward to contributing its future success.
Thank you Lee I am glad to have John Amtech, and look forward to contributing its future success.
Ron Freund: I would like to draw your attention to the financial statement for the year ended December 31, 2021 and for the fourth quarter of the next year.
I would like to draw your attention to definition stage right for the year ended December 31, 2021 and for the fourth quarter then ended.
Ron Freund: During this call, I will discuss also certain non-GAAP financial measures.
During this call I will discuss also certain non-GAAP financial measures.
Ron Freund: Eltech uses EBITDA as a non- GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use.
Uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for the definition and the reasons for its use.
Ron Freund: First, I will go over the highlights of 2021.
First I will go over the highlights of 2021.
Ron Freund: Revenues for the full year of 2021 totaled $33.8 million, compared to $36.7 million in 2020, a decrease of 9%.
Revenues for the quarter. Your 2021 total $33.8 million compared to $36 7 million in 2020, a decrease of 9%.
Ron Freund: The decrease in revenue is mainly due to the effect of the COVID-19 crisis on our customers' demand and to the shortage in raw materials that Teddy mentioned before.
Accretion revenue is mainly due to the effect of the COVID-19 crisis on our customers demand and to the shortage in raw materials that Eddie mentioned before.
Ron Freund: Gross profit decreased by 11% reaching $6.9 million compared to a gross profit of $7.7 million in 2020.
Gross profit decreased by 11%, reaching $6.9 million compared to a gross profit of $7 $7 million in 2020.
Ron Freund: That decreases the outcome of the decrease in revenues and the devaluation of the U.S. dollar against...
The decrease is the outcome of the decrease in revenues and the devaluation of the U S dollar against earnings.
Ron Freund: Operating profit amounted $1.9 million in 2021 compared to $3 million in 2020.
Operating profit amounted $1 $9 million in 2021 compared to $3 million in 2020.
Ron Freund: I should note that we have changed the policy of recording share-based compensation expenses.
You should know that we have changed the policy of holding share based compensation expenses.
Ron Freund: from the accelerated method to the straight-line method, which is the more common practice within our economic environment.
From the et cetera, it doesn't matter to the straight line method, which.
Which is the more common practice within our economic environment.
Ron Freund: In our Form 20-F, we disclose the restated results of operations for the first three quarters of 2021. The impact on prior years
In our form 20-F, we disclose the restated results of operations for the first three quarters of 2021 day.
The impact on <unk>.
Ron Freund: The devaluation of the U.S. dollar against Denise contributed to the increase in our dollar-reported expenses in the amount of $1.2 million.
The devaluation of the U S dollar against a nice contributor to the increasing our total reported expenses in the amount of $1.2 million.
Ron Freund: We recorded a tax asset of $3.5 million in 2021.
We recorded a tax assets of $3 $5 million in 2021.
Ron Freund: According to US GAAP, if management estimation is that it is more likely than not that a company will utilize its tax loss carry-forwards, the company has to record a deferred tax assets in that regard.
According to U S. GAAP management estimation is that it is more likely than not that the company will utilize its tax loss carry forwards. The company has to record a deferred tax assets in that regard.
Ron Freund: That resulted in our recording a tax benefit in the same amount.
That resulted in our recording a tax benefit in the same amount.
Ron Freund: Net profit was $5,000,000 or $0.86 per share in 2021 compared to net profit of $2,600,000 or $0.58 per share in 2020.
Net profit was $5 million or 86 cents per share in 2021.
Compared to net profit of $2 $6 million or 58 cents per share in 2020.
Ron Freund: EBITDA was $3.7 million in 2021 compared to $4.6 million in 2020.
EBITDA was $3 7 million down daughter in 2021 compared to $4 6 million in 2020.
During 2021, we enjoyed positive cash flow from operating activities of $3.9 million compared to $3 3 million in 2020.
Ron Freund: During 2021, we enjoyed positive cash flow from variety activities of $3.9 million compared to $3.3 million in 2020.
Ron Freund: As of December 2021, we had cash and cash equivalents of $9.3 million, compared to $4.7 million at the end of 2021.
As of December 2021, we had cash and cash equivalence of $9 3 million compared to $4 $7 million at the end of 2020. This increase is due to our positive cash flow for a variety of activities and the fact that during Q1, we managed to obtain a tenant media.
Ron Freund: This increase is due to our positive cash flow for operating activities and the fact that during Q1 we managed to obtain a 10 million NIS loan from Leumi Bank. The loan is for a period of 10 years with an interest rate of Prime Plus 1.5%, payable from the beginning of the second quarter.
Neil Sloane from Leumi Bank. The loan is for a period of 10 years with an interest rate of Prime plus one 5% payable from the beginning of the second year.
Ron Freund: The loan was part of the Israeli government's actions to help businesses deal with the COVID-19 crisis.
The loan was part of the Israeli government's actions to add businesses deal with the COVID-19 crisis.
Ron Freund: Now I will go over the highlights of the fourth quarter of 2021 compared to the fourth quarter of 2020.
Now I would go over the highlights of the fourth quarter of 2021 compared to the first quarter of 2020.
Ron Freund: Revenues for the first quarter of 2021 were $9.5 million, the same as in the first quarter of 2021.
Revenues for the first quarter of 2021 were $9 5 million the same as in the first quarter of 2020.
Ron Freund: Gross profit amounted to $2 million in the first quarter of 2021, compared to $2.2 million in the first quarter of 2020. Net profit in the first quarter of 2021 was $3.8 million, or $0.65.
Gross profit amounted to $2 million in the fourth quarter of 2021.
Compared to $2 2 million in the fourth quarter of 2020.
Net profit in the first quarter of 2021 was three $8 million or 65 cents spent.
Ron Freund: per fully diluted share compared to a net profit of $0.8 million or $60 million.
Fully diluted share compared to a net profit of 0.8 million or 60.
Ron Freund: $0.16 per fully diluted shares in the first quarter of 2020.
16 cents per fully diluted shares in the fourth quarter of 2020. This increase is mainly due to the $3 $5 million tax benefit was recorded.
Ron Freund: This increase is mainly due to the $3.5 million tax benefit we recorded.
Ron Freund: EBITDA was $1.1 million in the fourth quarter of 2021 compared to EBITDA of $1.4 million in the fourth quarter of 2020.
EBITDA was $1.1 million in the fourth quarter of 2021 compared to EBITDA of one 4 million in the fourth quarter of 2020.
Ron Freund: Cash flow for operating activities was $0.4 million compared to $0.5 million used in operating activities in the first quarter of 2020.
Cash flow for <unk>.
<unk> was 0.4 million compared to 0.5 used in operating activities in the fourth quarter of 2020.
We are now ready to take your questions.
Speaker Change: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1.
Thank you ladies and gentlemen at this time, we will begin the question and answer session.
Have a question please press star one.
Speaker Change: If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions.
If you wish to cancel your request. Please press star two if you are using speaker equipment kind of lift the handset before pressing the numbers questions will be pulled in the order. They are received please standby while we poll for your questions.
Speaker Change: The first question is from Ron Dror. Please go ahead.
The first question is from Ron Dror. Please go ahead.
Ron Dror: Hi, good morning. I have a few questions. The first one is just to make sure you solve all the issues with the raw materials that I encountered during 2021. The second question is if you can give more color about the backlog in 2022.
Hi, Eddie.
Good morning.
To your question. The first one is just to make sure you felt about the issues with the raw materials that are.
Encountered during 2021, the second question.
If you can give more color about the backlog in 2022.
Ron Dror: And the third question is, although you don't give specific guidance, if you can maybe give us a color of how we can model 2022, because you announced the activity with plants and equipment and what we can see.
And then at that question.
Don't give.
The guidance if you can maybe give us a color on how we can model 2022, bad because you announced the activity.
With our plant and equipment and what we can see.
Ron Dror: you know, and maybe model for growth in 2022.
And then maybe model for growth in that group.
'twenty two.
Speaker Change: Thank you, Ron, good morning. Regarding your first question, regarding the raw material, the raw material issue is beyond us.
Thank you Juan good morning.
Regarding your first question regarding your door material the raw material issue are beyond us.
Speaker Change: And as I mentioned in my statement before.
And as.
As I mentioned in my statement before.
Speaker Change: There is no issue on DuPont raw material and we have enough inventory right now.
And there is no issue on Dupont raw material and we have enough inventory right now.
Speaker Change: in our warehouse to support at least 6-7 months from now for 2022. Of course, we'll continue to buy raw material. As you know, there is some hiccups right now in the supply from China and Taiwan.
Hum.
Sure well I was to support.
At least six seven months from now for 2022 of course, we will continue to buy raw material. As you know there is some hiccups right now in the supply from China and Taiwan.
Speaker Change: We have enough inventory in our warehouse that we can go over this hiccup
We have enough inventory.
We can.
Goldfield DC cups.
Speaker Change: Regarding the backlog, as I mentioned, we don't provide the data, but the backlog that we face right now is above what we see in the last years.
Regarding the backlog as I mentioned, we don't provide the doctor about the backlog that we face right now he has and is above what we see in the last two years.
Speaker Change: And as I mentioned, the book-to-cell ratio is significantly high in the last six months. Regarding the plan for 2022, we don't provide...
And as I mentioned, the book to sales ratio significantly I added in the last six months.
Regarding the planned for 2022.
We don't provide.
Yeah.
Forecast.
Speaker Change: But as you can understand from the strong backlog that we have, we will support it with the equipment that we have, and that's the reason that we decided to accelerate our investments instead of five years to invest everything in two years, and to accelerate our capabilities.
But as you can understand from the strong backlog that we have we will support it with the equipment that we have and that's the reason that we decided to accelerate our investments instead of.
Five years to invest everything in two years and to accelerate our capability to grow.
Speaker Change: My last question, if it's possible to ask, is what is like the net contribution of the new incremental sales on the net profit? The same as before.
And my last question is it possible to ask you what do you like the net contribution of new incremental new incremental on that.
And net profit.
The same as before.
Yeah.
Okay.
Okay. Thank you. Thank you.
Speaker Change: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions.
If there are any additional questions. Please press star one if you wish to cancel your request. Please press star two please standby, while we poll for more questions.
Speaker Change: There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on LTCH's website, www.nistechltech.com. Mr. Yaffe, would you like to make your concluding statement?
There are no further questions at this time.
I'll ask Mr. Yap that to go ahead with his closing statement I would like to remind the participants that a replay of this call will be available tomorrow on <unk> website, Www Dot NASDAQ al Tac Dotcom, Mr. Yap that would you like to make your concluding statement.
Eli Yaffe: Before we conclude our call, I would like to thank all our employees for their efforts to make Eltech profitable and capitalize on our strength to renew our position as a leading high-end PCB manufacturer.
Before we conclude our call I would like to thank all our employees for their efforts to make <unk> profitable and capitalize that capitalize on our strengths to win you our position as a leading eye and PCB manufacturer.
Eli Yaffe: I would like to thank also our customers, partners, investors and LTEC team for their continued support. I wish everyone good health and happy Passover.
I would like to thanks also to our customers partners investors and <unk> team for their continued support I wish everyone. Good health and epic Bustle Hill.
Speaker Change: Thank you all for joining us on today's call, have a good day.
You all for joining us on today's calls have a good day.
Speaker Change: This concludes the LTCH LTD fourth quarter and full year 2021 financial results conference call. Thank you for your participation. You may go ahead and disconnect.
This concludes the <unk> L T D fourth quarter and full year 2021 financial results conference call. Thank you for your participation you May go ahead and disconnect.
Yeah.
Speaker Change: Thank you.
[music].