Q1 2022 Eltek Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Alphatec L. T. D. First quarter 2022 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 for operate.
Ladies and gentlemen, thank you for standing by. Welcome to the Eltech LTD first quarter 2022 financial results com.
All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session.
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.
Or assistance during the conference. Please press Star Zero as a reminder, this conference is being recorded before I turn the call over to Mr. Al <unk>, 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 1995, 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.
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, expectations, and risk factors that may cause actual results to differ materially from those anticipated.
As well as review our latest filings with the SEC for important material assumptions, except penetration 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.
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.
Expectations of the company actual events or results may differ materially LTC undertakes no obligation to publicly release revisions to such forward looking statements to reflect events or circumstances occurring subsequent to this date I would now like to turn the call over to Mr. Lee Office, Mr. Yap at.
LTEC undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I would now like to turn the call over to Mr. Eli Yaffe. Mr. Yaffe, would you like to begin pl-
Would you like to begin please.
Thank you. Good morning everyone. Thank you for joining us and welcome to Eltech 2022 First Quarter Running Call. With me is Ron Freund.
Thank you.
Good morning, everyone. Thank you all for joining us and welcome to <unk> 2022 first quarter, earning calls with me is Ron <unk>, our Chief Financial Officer.
We will begin by providing you with an overview of our business and summary of our principal factors that affected our results in the first quarter, followed by the details of our financial results.
We will begin by providing you with an overview of our business and some are real felt principal factors that affected our results in the first quarter followed by the details of our financial results.
After our prepared remarks we will be happy to answer any of your questions.
After our prepared remarks, we will be happy to answer any of your questions.
By now everyone should have access to our press release which was released earlier today. The release will be also available on our website at www.nistecltech.com
By now everyone should have access to our press release, which was released earlier today.
<unk> will be also available on our website at www <unk> com.
In the first quarter of 2022, we recorded a revenue of $9.8 million, despite the challenging supply chain and the labour environment.
In the first quarter of 2022, we recorded revenue of $9 $8 million. Despite the challenging supply chain that the labor environment. This revenue reflects an annual increase of 15% relative to our revenue in 2021, our forecast is that the defense.
This revenue reflects an annual increase of 15% relative to our revenue in 2021. Our focus is that the defense aerospace and space sectors will perform better in 2022 than in the last.
Aerospace and space signals will perform better in 2022 and in the last year.
Our employees did an excellent job of maximizing production by maximization of throughput per hour resulting in increased efficiency.
Our employees did an excellent job of maximizing production by maximization of throughput per hour, resulting in increased efficiency.
During the first quarter of 2022, we mitigate all of the material price increase through additional cost savings, adjustment in the mix of raw materials used during the manufacturing process, and product price adjustment.
During the first quarter of 2020, do we mitigate all of the material price increase through additional cost savings adjustments in the mix of raw materials used fueling their manufacturing process and product price adjustments.
The first quarter of 2022 reflects the continued increase in order received from AUKA.
The first quarter of 2022.
Alex the continued increase in older received form our customers. We ended the quarter with a backlog of 50% greater than the backlog of 2021 ear and.
We ended the quarter with a backlog of 50% greater than the backlog of 2021 e-rent.
Our PCB book-to-bill ratio was 1.4 for the first quarter of 2022, which means that our accumulation of new orders was higher than our revenue recognition.
Our PCB book to Bill ratio was one four for the first quarter of 2022, which means that our accumulation of new old dose was higher than our revenue recognition.
significant increase in the backlog is due to several factors. Factor number one
The significant increase in the backlog is due to several factors factor number one.
The current status of the COVID-19 pandemic enabled most of our customers to return to normal level of business operation, including our customers in the Far East and particularly in India.
Current status of the COVID-19 pandemic enable most of our customers to return to normal level of business operation, including our customers in the far east in particular in India.
In Israel, we did not face significant absence of employees due to the isolation requirement.
Israel.
Did not face significant absence of employees due to the installation requirements.
In addition, the reimbursement of the COVID-19 pandemic in China creates a shift of manufacturing order of non-defense PCBs to the Western market.
In addition, the embarrassment of the COVID-19 pandemic in China create the shift of manufacturing older of nondefense BCBS the wisdom markets.
Factor number two, during Q1 2022, we had no delays in raw materials supply and our increase in inventory levels allowed us more flexibility in our production cycle.
Number two.
During Q1 2022, we had no delays in raw material supply and our increase in inventory levels allowed us more flexibility in our production cycles.
Factor number three, the political and security situation in Europe caused governments to increase their military budget and LTEC as a supplier of significant components to defense system manufacturers and influenced positively by it. In addition, the infiltratory pressures and the continued labor challenges in North America help us in being competitive in price and lead time.
Number three the political and security situation in Europe caused the government to increase the military budget in LTE is a supply of significant components to defense system manufacturers and influenced positively bite. In addition, infliction inflammatory thresholds and the continued labor challenges.
America Lps in being competitive in price and lead times.
Factor number four, increasing demand due to the continuous trend of shifting back to the Western countries PCB manufacturing previously performed in the Far East due to the IP insecurity consideration.
Flagstone them before increasing demand due to the continuous trend of shifting back to the Western World. Currently PCB manufacturing previously performed in the far east due to the IBM security consideration.
Furthermore, some of our customers suffered from the lack of critical components, which forced them to redesign their PCP using available components. This redesign led to further requests for quotations, some of which we won.
Furthermore, some of our customers suffered from.
On the lack of critical components, which falls them to redesign the PCB using available components. This redesign led to further request for quotations Some'll feature we want.
All of these four factors contribute to our backlog and revenue growth during the first quarter of 2022. I should also mention that we recently won a new sales order wherein we will provide a fully turnkey product to one of our Tier 1 customers by outsourcing the assembly service request.
All of these four factors contribute to our backlog and revenue growth during the first quarter of 2022 I should also mention that we recently won a new sales older wherein we will be provide a 40 turnkey product to one of our tier one customers by outsourcing the Assembly service.
Requested.
We will further investigate this niche and its potential for the future.
We will be further investigate this niche and its potential for the future.
The increased demand for the company product has led us to decide to accelerate our investment program.
The increased demand for the company products has led us to decide to accelerate our investment program.
During the first quarter, we began the first phase of the program, which includes investment in amount of $9 million. This phase is expected to last two years.
During the first quarter, we began the first phase of the program, which include investment in amount of $9 million.
These phases is expected to last two years.
The program includes investment in new production lines as well as in infrastructure in order to enable us to increase the company production capability as well as its efficiency.
The program includes investment in new production lines as well as an infrastructure in order to enable us to increase the company production capability as well as its efficiency. We expect that the phase will allows us that the first phase will allowed us.
We expect that the first phase will allow us to increase our yearly sales by $5-8 million based on the continuity of the increased demands for our products.
To increase our yearly sales by $5 million to $8 million based on the continuity of the increased demand for our products.
The total investment program amount is $15 million.
Total investment program amount is $15 million.
During the first quarter, we continued to experience significant increase in the price of for materials.
During the first quarter, we continued to experience a significant increase in the price of raw materials. We communicated this increase to our main customers and adjusted our selling prices. Nevertheless, we continue to invest efforts in improving our manufacturing processes and our efficiency in order to be more flexible in our pricing policies.
<unk> communicated this increase to our main customers and adjusted our selling prices. Nevertheless, we continued to invest efforts and improving our manufacturing processes and our efficiency in order to.
Be more flexible in our pricing policy.
Demand for employees continues to be high in our industry and in a similar one. The situation impairs our production capability and sometimes even forces us to raise wages level in order to achieve our recruitment targets. Our investment
Demand for employees continue to be I in our industry and in a similar one the situation impair us to impair our production capability and sometimes even forced us to raise wages level in order to achieve our recruitment targets our investment program.
mentioned before includes automation components in order to help us to deal with this difficulty. LTCH's long-term strategy remains unchanged. Focus on high-technology PCB in order to maintain our differentiation capability and serve as a highly valued partner to our customers.
<unk> mentioned before includes automation components in order to help us to deal with this difficult.
As <expletive> long term strategy remain unchanged focus on the ice technology PCB nodal to maintain our differentiation capability and serve as a highly valued partner to our customers.
I will now turn the call over to Ron Freund, our CFO , to discuss our financial statements.
We'll now turn the call over to Juan <unk>, our CFO to discuss our financial statements.
Thank you Haley.
I would like to draw your attention to the financial statements for the first quarter of 2022.
I would like to draw your attention to the financial statement for the first quarter of 2022.
During this call, I will discuss also certain non-GAAP financial measures.
During this call I will discuss total certain non-GAAP financial measures.
Eltech uses EBITDA as a non-GAF financial performance measurement. Please see our earnings release for its definition and the reason for its use.
<unk> uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for the definition and the reason for its use.
Now I will go over the highlights of Q1 'twenty to emphasis.
Now I will go over the highlights of Q1 2020.
Revenues for the first quarter of 2022 totaled 9.8 million dollars, compared to 7.2 million dollars in Q1 2021, an increase of 35%.
Revenues for the first quarter of 2022 totaled $9 $8 million.
Compared to $7.2 million in Q1, 2021, an increase of 35%.
The increase in revenues is mainly due to the shortage in raw materials in 2021 and the negative effect it had on our sales in the first quarter of 2021.
The increase in revenues is mainly due to the shortage enormous areas in 2021 and the negative effect on our sales in the first quarter of 2021.
Gross profit increased by 72%, reaching one $9 million compared to a gross profit of one point to $1 million in the first quarter of 2021.
Gross profit increased by 72%, reaching $1.9 million, compared to a gross profit of $1.1 million in the first quarter of 2021. The increase is the outcome of
The increase is the outcome of the increase in revenues.
Operating profit amounted $0.7 million in Q1 2022 compared to $0.1 million in 2021.
Operating profit amounted to <unk> $7 million in Q1, 2022, compared to zero point $1 million in 2021.
The revaluation of the U S dollar against the Israeli shekel contributed to our Q1 2022 results of operation and we recorded financial income in the amount of zero point $1 million.
The revaluation of the US dollar against the Israeli shekel contributed to our Q1 2022 results of operation, and we recorded financial income in the amount of 0.1 million dollars.
We have recorded for the first time in recent years, a tax expense of zero point to $1 million.
We have recorded for the first time in recent years a tax expense of $0.1 million due to the deferred tax asset we recorded in 2021 EUR.
Due to the deferred tax asset recorded in 2021 and <unk>.
As you probably remember, this tax asset was recorded based on management estimation that it is more likely than not that the company will utilize its tax loss carry-forward in future years.
As you probably remember this tax asset was recorded based on management estimation.
That it is more likely than not that the company will utilize its tech.
Tax loss carry forwards in the future.
Net profit was $0.6 million or $0.11 per share in Q1 2022 compared to net profit of $0.2 million or $0.04 per share in Q1 2021.
Net profit was <unk> $6 million or 11 cents per share in Q1, 2022 compared to a net profit of 0.2 million or <unk> <unk> per share in Q1 2021.
EBITA was one one.
EBITDA was $1.1 million in 2022 compared to $0.6 million in 2021.
$1 million in 2022 compared to 0.6 million in 2021.
As of March 31, 2022, we had cash and cash equivalents of $9 $1 million.
As of March 31, 2022, we had cash and cash equivalents of $9.1 million.
This cash balance and anticipated cash flow from operating activities will allow us flexibility in operating our business and financing our accelerated investment program that Ellie mentioned earlier.
This cash balance and the anticipated cash flow from operating activities will allow us flexibility in operating our business and financing our accelerated investment program that Alan mentioned earlier.
We are now ready to take your questions.
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. 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 question.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. You will have a question. Please press star one if you wish to cancel your request. Please press star two you are using speaker equipment currently with the handset before pressing the numbers questions will be pulled in the order. They are received please standby while we poll for your.
Questions.
The first question is from Michael Wu, please go ahead.
The first question is from Michael Please go ahead.
No.
Hello. Hi. Thanks for taking my questions. My first question is.
Thanks for taking my question. So my first question guys.
Do you guys have any estimate of the amount that the revenue you guys got from this quarter because of the manufacturing issue in China, like the new kind of shift to orders to you?
Did you guys have any estimate.
Our bonds.
Revenue you guys Scott since quarter from cost.
Yes.
Manufactured in China, and the UK.
Shifting to orders to you.
Hi Michael, how are you? No, we don't have it.
Hi, Mike Hi, Michael how are you.
No we don't have it but.
Uh huh.
We don't have exact number, but we estimate that it is grow, the shift back from China to Israel, because we got...
We don't have exact numbers, but we estimate that it's.
It is grow the shift back from China to Israel.
Because we got it.
We got approached by customers that ask us to move it back.
We get approached by customers that asked us to move it.
Brian .
But I don't have the exact number. OK, that's fine. Do you have any, like, do you see continuing this kind of trend, like more customers try to query about this manufacturing issues in China?
But we don't have I don't have an exact number.
Okay, that's fine.
Danielle.
Do you see continuing and just kind of like more customers.
Sorry about this.
Founded manufacturing issues in China.
Yes.
Yes, as I told you in my previous comments, I forecast that the shift will continue.
As I told you in my previous comments I forecast.
The shift will continue.
Okay, great. Thank you.
OK, great. Thank you. So second question is, how the manufacturing capacity is running like that? Are you guys in a full capacity right now? Not yet.
Second I will fall on that.
Question is how.
How's the manufacturing.
Capacity is running.
Are you guys in a full capacity right now.
Not yet.
Not yet. So what is the capacity left, I mean, if you can run enough for capacity basis?
Not yet so.
What does that capacity left.
If you kind of running in that full capacity basis.
How many, like, you can still do? We adjust our manpower according to the level of POs that we have. And if we hire more employees, we can produce more.
How many lights.
You can still do.
We adjust our manpower according to the level of appeals that we live and if rely on more employees, we can produce more.
Are you talking you can tour tomorrow.
If it will be justify rely on more employees than we will.
If it will be justified, we'll hire more employees and we'll increase our sales by manufacturing more products.
We'll increase our sales.
By manufacturing more products, yes.
OK, so I have another question. So about the new CapEx, so you said it's total is $15 million for a two-year period for the total investment? The $9 million is over two years. That's the phase one. The $15 million is for the whole program.
Okay.
So.
I have another question so about the new the new Capex. So you said.
Total is 115 meeting for us on a two year period.
The total investment.
The $9 million over two years.
One the $15 million for the whole program.
Okay, that's great. So around the first two years to the 9 million, once you are fully invested, when do you expect the capacity will be fully set up and running? Is it like in a stage, or you need to have to wait for two years and then get the facility up and running?
Okay. Okay, that's great Susan so our arms in that first two years as a 9 million. Once you are fully your question when do you expect to do that.
The capacity will be fully set up and then Ronnie.
In the states you arent you anticipate you'd have to wait for two years, and then Canada facility up in <unk>.
Ronnie.
It's another good question.
That's a very good question. We will go slowly between now and the end of the program, but there will be a jump in the end of the program.
We will go slowly between now and the end of the program, but there will be a jump in the end of the program.
Okay, so basically you were like incrementally during this year, maybe you can see some more capacity getting up and running, right? That's my understanding, right?
Okay. So basically you earn incrementally.
This year, maybe you can see some more capacity getting up on Noorani right. That's my understanding.
The capacity right now is dependent upon the manpower, but if we would like to have a breakdown, we have to invest in the new equipment, which we already started the program.
The capacity right now it depends upon the manpower, but if we would like to have a breakdown we have to.
So investing in new equipment, which we already started a program.
Okay. So basically you are adding the program, adding more equipment right.
Okay, so basically you are adding the program, adding more equipment, right? I mean, you don't need to wait until the end of two years to use the new equipment, right? You can increase the capacity during the time, right? It's more equipment, but that will replace all the equipment.
I mean, you don't need to wait until the end of two years two to use that new equipment you can increase.
Capacity during the time right, it's more equipment that will replace older equipment.
Oh, okay. Okay. So what's the difference? Why? I mean,
Oh, okay. Okay. So what's the difference why.
It's kind of efficiency, quality, less manpower required for the new equipment, more automation, more precise, more adapted to the market demands.
It's kind of efficiency quality.
Less manpower required for their new equipment more automation more precise more adapted to the market demand.
And be more precise.
Okay, so basically, also, like once you replace the new old equipment, you also increase the capacity, right? That's my understanding. Exactly. With the new equipment, we will be able to produce per hour more panels.
Okay. So basically also like what's the replacement.
Our equipment you also increase.
Capacity right got it and I understand exactly who.
With the new equipment, we will be able to produce per hour more way panels.
Okay, so also increase the efficiency, right? Exactly, as I mentioned before, yes.
Okay. So also increase that efficiency right.
As I mentioned before okay.
Okay, that's great. So do you have any kind of color on the defense contract? Any, you know, could you give more, you know, kind of color on this?
Okay. That's great. So do you have any.
Kind of color on the <unk>.
Defense contract and you know could you give more kind of color on this.
Well, usually we don't disclose the name of our.
Usually, we don't disclose the name of our defense contractors. On the 20th, you can see some of the names there and the activity that we mentioned with them. But with all our defense contractors, the market is growing because of the security situation in Europe .
Hence contract roles.
On the 20-F, you can see some of the names there and the activity that we mentioned with them, but with all our defense contractors that the market is growing because of the security situation in Europe .
So how, like, I mean, how big is the trend? Like, do you see, you know, like, how, what is the amount? Not amount, like percentage increase. Do you see the order flow, inflow?
So like I mean, you have.
How big is that do you think do you see.
How what is the amount of monarch percentage increase do you see the order flow inflows.
As I mentioned, the order flow right now, the backlog is 50% more than we had at the end of last year, and they're booked to bill ratio right now.
As I mentioned the order flow right now the backlog is 50% more than we ever had.
End of last year, and the book to Bill ratio right now.
is 1.4, so we gain 40% more order than what we produce.
He is one four so we gained 40% more orders than what we produce.
OK, that's great. That's great to know. My last question, so about the inflation pressure, do you guys see any inflation pressure? Can you pass the price to your customer if you have any labor expenses? Yes, as I mentioned before.
Okay. That's great that's great to know my.
My last question so about the inflation pressure. So do you guys see any inflation pressure can you pass price to your customer.
Have any like a deeper extension, yes, as I mentioned before.
There is a difference in the inflation rate between Israel and the United States, so in the United States it's easier, because inflation in Israel is lower than the inflation in the United States, so it's easier to increase prices in the United States. And in Israel we do it with more difficulty, but we succeed to push the prices up based on the cost of...
There is a there is a difference in the inflation rate between Israel and United States are in United States is easier because inflation in Israel is lower than the inflation in United States. So it's easily to increase prices in United States and in Israel, We do it.
With more difficulty what we succeed to push the prices up based on the cost of.
The adjustment of the cost.
Sorry, I didn't get it. So, you guys be able to increase the price to... In the United States, we do it easily because there is a difference in the inflation rate in the United States, which is higher than the inflation rate in Israel.
I'm, sorry, I didn't get it so you guys.
Increased price too.
And what I would say, we do it easily because there is different than the inflation rate in the United States, which is higher than the inflation rate in Israel.
In Israel we do it, because it's accepted in Israel, and we do it up to the inflation rate that exists in Israel.
In Israel, because it's accepted in Israel, and we do it up to the inflation rate that existing Nissan.
Okay, Okay got it Scott.
OK, OK, got it, got it. OK, that's all my questions. Thank you very much for taking my questions. Congratulations for the good quarter. Thank you, Michael. Thank.
Okay. That's all my questions. Thank you very much for taking my questions. Congratulations for the good quarter. Thank you Michael Thank you.
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.
Okay.
Okay.
There are no further questions at this time before I ask Mr. Yap at it go ahead with his closing statement I would like to remind the participants the replay of this call will be available tomorrow on <unk> website, Www Dot <unk> Dot com Mr. <unk> would you like to make your concluding statement.
There are no further questions at this time. Before I ask Mr. Yaffa 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 ELTEC's website www.nisteceltec.com. Mr. Yaffa, would you like to make your concluding statement?
Before we conclude our calls, I would like to thank all of our employees for their efforts in continuing the company growth. I would like also to thank our customers, partners, investors.
Before we conclude our call I would like to thanks, all of our employees for their efforts and continued company growth I would like also to thank our customers partners investors.
and the LTCH team for their continued support. Thank you for all for joining us on this two-day course. Have a good day.
And the <unk> team for their continued support.
Thank you for all for joining us on this today calls ever good day.
Yes.
Thanks for watching.
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