Q2 2022 Elbit Systems Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems second quarter 2022 results conference call. All participants are at present in a listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. The list that is available in the new section of the company's website www.elbitsystems.com
I would now like to hand over the call to Rami Meyerson, Elbit Systems Investor Relations Director. Rami, please go ahead.
Thank you, Yoni. Good day everyone and welcome to our second quarter 2022 earnings call. On the call with me today are Butsi Machlis, our President and CEO , Kobi Kagan, our CFO and Yossi Gaspar, Senior EVP, Business Management.
Before we begin, I would like to point out that the same file statement in the company's press release issued earlier today also refers to the contents of this conference call.
As we do every quarter, we will provide you both with our regular GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business.
You can find all the detailed GAAP financial data, as well as the non-GAAP information and the reconciliation in today's press release.
Kobi will begin by providing a discussion of the financial results followed by Butsi who will talk about some of the significant events during the quarter and beyond. We will then turn the call over to a question and answer session. With that, I would like to turn the call over to Kobi. Kobi, please. Thank you, Rami. Hello, everyone, and thank you for joining us today.
The second quarter result reflects a pickup in demand with a series of significant contracts award for solutions in the quarter.
as our customers start to implement the lessons learned from the Russian invasion of Ukraine.
Second quarter revenues were similar to 2021, as growth in Europe and Asia to free-feed offset the decline in the US.
Our revenues by geography tend to fluctuate on a quarterly basis.
based on the specific programmes and project performed, as well as milestone reach in a particular quarter.
We believe the long-term revenue trends supported by the growth in the older backlog are more representative and encouraging in most of the systems geographical and markets.
I will now highlight and discuss some of the key figures and trends in our financial results.
Second quarter revenues were $1,303,000,000.
similar to the second quarter of 2021.
In terms of the revenue breakdown across our areas of operation, airborne systems accounted for 39% and land system was 21% of total revenues. C4 ISR at 30% of revenues increased year over year mainly due to UAS to Azure Pacific customers.
Electro-optics accounted for 9% of revenues increasing year over year mainly due to night vision sales.
Other sales accounted for 2% of revenues and declined year over year due to lower medical devices.
The second quarter highlighted the strategic importance of our diverse geographic revenue matte.
In the second quarter, Asia Pacific contributed 29% of our revenues, North America 26%, and Israel and Europe each 20% of revenues.
Asia Pacific revenues increased mainly due to UAS sales.
The growth in European revenues was broad-based and included growth in training and simulation, decision-guided munitions and night vision sales.
Growth in European and Asia Pacific revenues help offset lower North American sales.
The non-gap gross margin for the second quarter was 26.5% compared to the second quarter of 2021 at 26.6%.
Gap gross margin in the second quarter was 26.1% of revenues compared to 26% in the second quarter of 2021.
Second quarter non-GAAP operating income was $103.3 million or 7.9% of revenues.
compared with $114.9 million or 8.8% of revenues last year.
get operating income for the second quarter was $115.1 million versus $117.1 million in the second quarter of 2021.
The operating expense breakdown in the second quarter was as follows. Net R&D expenses were 7.5% of revenues versus 7.3% in 2021.
The recent conflicts have highlighted the alignment of Elbit Systems' product portfolio to the priority areas of our customers.
demonstrating the return on our historic investments in research and development. The current investments in R&D will help upgrade existing and develop new products and solutions and ensure that we continue to supply a range of market-leading solutions to our customers in the future.
Marketing and sale expenses increased to 6.4% of revenues from 5.8% last year.
We continue to invest in sales and marketing to take advantage of the positive inflection in global defence budgets.
and the new opportunities these create.
G&I expenses were 5.6% of revenues compared to 5.1% last year.
Other operating income of $27.2 million include a capital gain related to the sale of our subsidiary Ashotosh Kelon Industry in the second quarter and the sale of a building in Israel.
I would note the significant increase in the share price since the beginning of the third quarter. We would expect a significant impact in compensation expenses related to our stock price linked compensation plans to employees if the shares remain at current levels or increase further.
As we discussed at our first quarter results, we believe these plans help align employee compensation with shared price performance, incentivizing our employees to generate long-term value for all of Elbit Systems' stakeholders.
Financial expenses were $9.3 million in the second quarter compared to $7.1 million in 2021. Other expenses of $12.1 million include the $10.6 million non-recurring pension adjustment expense related to the sale of a shorter schedule.
We recorded a tax expense of $12.8 million in the second quarter compared to $20.1 million in 2021.
The effective text rate in the second quarter was 13.6% compared to 18.5% in 2021.
Our non-GAAP diluted EPS was $1.73 in the second quarter compared with $2.11 last year.
The GAP diluted EPS was $1.82 compared with $2.30 last year.
Our backlog of orders as of 30th of June 2022 was $14.1 billion, approximately half a billion dollars higher than the backlog at the end of June 2021.
Approximately 52% of the current backlog is scheduled to be performed during 22 and 23 and the rest is scheduled for 24 and beyond.
Operating cash flow for the second quarter was a $169 million outflow compared to a $170 billion inflow in the same quarter last year.
The cash flow in the quarter includes the payment of $73 billion following the company decision to release exempt earnings from approval privilege enterprises in Israel.
The cash outflow also includes an inventory bill related to our effort to mitigate supply chain challenges and the timing of receiving payments from various customers. We expect to receive these payments over the coming quarters.
The board of directors declared a dividend of 50 cents per share for the second quarter of 2022.
I will now turn the call over to Mr. Marliss, LBCO. So, Gutsi, please go ahead.
Thank you Kofi. Orders in the second quarter reflect good demands for our solutions from customers around the world.
A series of significant orders in recent months have validated the alignment between LBC scan portfolio and our customer's priority areas.
of defence spending and the mission critical requirements.
I believe that we are at the beginning of a period of global different budget growth.
driven by the escalation in geopolitical tensions.
We are encouraged by the order intake in the second quarter. But as I have learned from decades of experience, the conversion of defense button growth to our fees and then into orders and revenues can take time.
particularly when militaries are adjusting procurement processes and force structures for a new era.
The Abraham records have also helped open new markets and new opportunities for strategic partnership with the nations that are party to this historical agreement. The United Nations has also re-opened Elbe System Emirates at the end of 2021.
and announce our first order for BIRCON systems in March 2022.
Governments and militaries are analyzing the Russian invasion of Ukraine and the evolving conflict to prepare for the next one as they have done in the past with other conflicts.
We have identified five areas that should benefit from increased defence spending over the coming years.
These are platform protection, command control systems, electronic warfare, admin systems, and network decision munitions.
During the second quarter, we announced significant contacts for four of these five priority areas from customers in Europe and other parts of the world.
implementing the distance.
I would like to provide an overview of these priorities for all the areas.
Starting with platform protection, the conflicts in Ukraine have demonstrated the vulnerability of platforms across all domains and the critical need to protect both platforms and their occupants.
Elbit system provides
systems and solutions that enable protection of aerial, naval and ground platforms from a range of threats.
Our Dilcam systems are installed on more than 25 different types of military and commercial aircraft and have accumulated hundreds of thousands of flight hours protecting them from ground to air missiles. In July we received an $80 million contract to supply C-Music Dilcam system.
an airborne E.W. solution to an Asia Pacific country and we were selected to supply a J-Music Zilcon system for a Goldstone G650.
of the Netherlands Ministry of Defence.
Our platform protection systems include infrared missile warning systems, CHESS and FLIR for a range of aircraft. The Iron Fist active protection system for armed vehicles and EW systems that protect ships and sppots.
The second area.
of priorities, spend in advanced command control systems.
These C2 systems are the critical
the critical enabler of combined force and multi-domain operation. Elbit System Torch XC2 solution provides visibility and connectivity to commanders and soldiers.
utilizing the intelligence collected by a multi...
a multitude of sensors across the battlefield identify adversarial enabling
fast decision making and the ability to convert insight into action. Our C2 systems helped shorten multiple sensors to shoot loops as well as supporting logistics. In June we received $548 million dollars.
four-year contract to upgrade the multi-domain combat network warfare capabilities for the armed forces of a nation or country.
As part of this contract, L-bit will provide a range of networking and command control systems, as well as software different modules for all ground and every platform.
The third priority area is electronic warfare that provides...
armed forces with the capability to utilize the electromagnetic spectrum to protect, attack, and exploit the communication and intelligence.
and other enemy activities. Elvit system is the Israeli MOD prime supplier of EW capabilities for air, ground and air platforms and domains. In recent years we received a number of prestigious EW contracts from the US and German air forces and the UK were in need.
In May we received a $69 million contract to supply electric warfare systems to a country in Asia Pacific and in June we received, we were awarded, a $70 million contract to supply a ground-based EW and signal intelligence solution to international customers.
The fourth priority area is un-maintaining.
Elbit Systems has decades of experience developing and manufacturing a board portfolio of unmanned air, ground and maritime solutions.
Lbit also provides the command control system to connect and operate them as well as a range of advanced payloads.
These unmanned solutions can execute a broad range of missions reducing the risks to forces and increasing their effectiveness.
At EuroSaturing in June , we demonstrated LegionX, a multi-domain autonomous network solution for small of unmanned platforms in the air, on land and at sea.
LegionX enables the command and control of a range of unmanned platforms of various sizes and capabilities
in cohesive swarms helping soldiers perform their missions in complex environments such as urban warfare. So anyway, quintessentialific al Khalifa keh
The fifth priority area is network precision munition that enables armed forces to engage time sensitive targets with power, precision and minimum collateral damage. Elbit Systems has combined the portfolio of munition acquired with IMI, our legacy precision guidance and network capabilities and the technologies we acquired from ROCAR last year.
to develop a range of precision munitions from the iron-sting 120mm mortar round to a rampaging-hung range L21 photophonic missile.
In June , we received a $220 million contract to supply LISA of precision guidance kits.
for urban munition of an Asia-Pacific country. In July , the German defense company KMW set a cooperation agreement with Albertson Land and Ebatese and Deutschland in the area of Roke-Otillo. We believe...
This agreement will leverage the leading expertise these companies have in the area of rocket artillery and will enable both companies to address the growing potential in the European market for these solutions.
These are just five areas of LBIT's broad portfolio. We believe that each one has the potential to generate billions of dollars of revenues over the medium term. We believe that each one has the potential to generate billions of dollars of revenues
At the end of June , we closed the sale of our 84.9% stake in a shorter-scale loan industry to fee me opportunities funds for US$84 million.
We regularly review our portfolio to ensure that we remain focused on the core areas of our business.
As part of this review, we decided to sell a shortage cologne that we acquired with RMI in 2018 and was not considered a school business of Elbit.
I would like to take this opportunity to thank the hundreds of Ashorta Shkolon employees for their hard work and dedication and to wish them success in the future.
The LBSM strategy is to focus on global defence markets and I do not expect this to change.
I believe it is important to remain focused on the market and technology.
focused on the market and technology, you know.
and to reduce destruction for markets that may appear attractive but often require different skill sets to exist.
That said, we continue to explore opportunities to leverage our technologies and solutions developed for military application.
in adjacent and new markets.
In July , our US subsidiary Universal Avionics received a US$33 million order from Aerosil for clear vision enhanced flight vision system for Boeing 737NG.
As part of this contract, Universal will supply ClearVision EFVS system featuring the Skylens head wearable display and DBS 5000 cameras. The ClearVision system enables commercial pilots to fly in regulated visibility situations in day and night to take off and land faster, saving time and increasing operational effectivity and safety.
In August , Opgal, our thermal imaging subsidiary, and the Shiba Medical Center, Meso, signed an MOU.
to explore opportunities to utilize thermal imaging technology to improve
the effectiveness of surgery and treatment in 40 areas.
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food, treatment, surgical.
incursion, infection and...
I am proud of our engineers that are looking for additional opportunities to utilize L-B technologies to protect and save lives. And with that I will be happy 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 pulled in the order they are received. Please stand by while we pull for your questions.
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The first question is from Ellen Page of Jeffries. Please go ahead.
Hi guys, thank you for the question.
Hi, Evan. Can we talk about C4ISR has grown double digits for two years now in the first half? Okay.
How do we think about a normalized growth rate in that business and is there anything chunky in there that might
start to anniversary and moderate growth.
Can you please repeat the question? Your line is a little bit disrupted.
here.
Is that better?
Just at C4ISR you've posted double digit growth two years in a row in the second quarter and just how do we think about a normalized growth rate in that business and the sustainability of the demand?
We see room demand for C4I solutions which include communication systems, networking systems, applications, UAVs, autonomous solutions. These are all included under C4I. As was mentioned earlier, UASs and UAVs and ground systems are all under this definition.
And as was mentioned earlier, we see a growing demand.
For such solutions we have vast experience using systems in Israel as well as in other markets and we have delivered them to many customers and with full interoperability to different forces and we own all the technology in half and we see growing demand.
for this segment. So I believe that the growth will continue.
Great. And just on cash, you mentioned that there's a build of inventory related to supply chain disruptions and timing of collections was an impact in the corridor, but can you just walk through working capital in the back half and just go over that $76 million cash tax payment again and how it relates to future tax planning?
This is Kobik again. Thank you Alan for this question. We have in the quarter a one-time payment of $73 million which is related to the company's decision to release exempt earnings from approved and privileged enterprises in Israel. So this is a one-time payment to settle this with the tax.
I look forward to hearing you in Israel.
forward to hearing Israel.
This is of course would not affect the second half of the year as this is a one-time expense. We are seeing the cash flow as a full year and not on quarterly basis. So we think that and we mentioned that we expect to receive payments in the coming quarters from various customers.
Great, thanks. I'll hop back in with you.
Thanks Alan.
Thank you.
The next question is from Pete Skibitsky of Alembic Global. Please go ahead.
Hey, good afternoon everyone.
Good morning, great.
Well, yeah, let me start with, I guess maybe, Butsy, you know, you had good sequential backlog growth this quarter, Butsy, but I think that didn't include the pretty large intelligence systems contract that you booked in Europe , I think was 660 million that closed after the quarter. So that was a nice win. And I'm, you know, I'm curious because I haven't seen an Intel contract that large booked by Elbit and so it, you know, it raises the question, I think.
Do you see other opportunities out there to sell a contract of this magnitude to other countries in the Intel area?
Thank you.
Thank you for the questions. As we all see, the company is transforming, in the middle of transformation. We are getting big contracts and that's on top of the small and medium sized contracts we used to get in the past.
and we continue to get.
So this huge contract includes actually the entire portfolio of the company.
One of the main advantages of Elbit is that we have EWSolutions, we have radar,
we have a optic solution, we have networking system command and control, USVs and other USVs and other platforms.
and with a lot of AI and data analytic capabilities on an application.
So we are quite unique, having such a wide portfolio and this portfolio enables us to which we can smoothly change our perspective on the innovation of the same means-making
and to adapt the technology to the required...
required needs of each customer.
So the answer is yes. We see more demand for end-to-end solutions to mega projects and we got two very big contracts in the second quarter with the networking digitization program we got in Asia Pacific for $560 million and the $660 million we got in Europe . We see more and more demand.
for mega projects, which are on top of the medium size and small projects we continue to get. The whole company is transforming to get more contracts like this and to perform them accordingly.
So we all, we...
has more production capabilities. We are working in several places, three shifts, and this is in order to meet this demand. And we also, we just, if you remember last year, the company was organized in a new way. Actually, we have four main divisions right now in Israel, and not five as we used to have. And that in order to prepare us better for this mega project, which...
we got and we hope to continue to get. But the simple answer is yes. We see more and more demand for combined mega projects which involve many technologies around the world.
I really appreciate all the color and the context there. That's great. If I could now maybe shift the conversation to margins. Could you guys give us an update on where you're at with implementation of the ERP system, as well as how construction is coming along on the new IMI facility? Because I think those two initiatives are important to the...
the midterm margin expansion outlook is my recollection. I will start with IMI activity and then we will continue with the ELP. We are progressing according to the plan with IMI to shift the main production facility of IMI from the central part of the country to the south. We are investing a lot of money in the new infrastructure which is much more modern, much more efficient and to increase yields and productivity which will enable us.
to deliver bigger quantities with better quality and lower cost.
to our customers. So our plan is achieved.
One, the first phase, to shift some of the activities to a new facility will happen by the end of this year. The next phase will be the second phase, which will be the second phase, which will be the
the majority of the plan will be concluded around the end of 2024.
That's according to the plan.
In addition to that, regarding IPEAT, the COC.
regarding the B system, we are on track with that.
Actually, we have now about 60% of the organization implementing the new ERP.
and the next major milestone will be by the end of this year, when we will probably reach somewhere in the 80 plus percent, probably 85 percent, and by mid of next year, the whole organization will be operating on that one ERP system. The benefit from these activities, we expect them to come towards the second half of next year, and we expect them to come towards the third half of next year.
start to come towards the second half of next year and definitely much stronger into the beginning of 2024.
Okay, thank you, Yossi and Koby. Let me ask one more along these lines also with regard to pricing, you know, because obviously we're in kind of a global inflationary environment, you know, labor materials. And so I'm wondering,
I guess mainly with the ERP system coming along, do you feel like you're getting the pricing that you need to offset the impact of inflation? Are you getting net pricing gains? Or will that take more time? And strategically, do you feel like you're getting the prices that you need, given the value you're providing to clients?
As you probably know, prices are defined by the market.
However, we have in our contracts, we have linkage to indexes of labor and indexes of material in many of our contracts. So to some extent we compensate the increase in the cost.
I must say we cannot compensate for everything. We do see in some of the integrated circuits big changes in the short term, but we expect this to change in the longer term and to return to what we call normal. But looking at our bill of material, what is that composed of?
I must say that the basic impact is not material on the cost, but we are not immune because of these increases in some of the electronic parts that we all see as challenges. So the bottom line of all this long discussion is that yes, we are affected, but it is not material from point of view of impact of profitability.
and part is compensated by our contracts which do include indexing to cost of material.
Okay, that's very helpful. That's very helpful. Thank you. Let me ask one last one before and I'll be completely done. But see on the MOU you signed with KMW across MAFE on the rocket artillery. I imagine Europe has to be getting ready to...
To conduct a lot of sales campaigns Are there anything near term in Europe along the lines of rocket sales that you expect to book in the in the second half of? 2022 or maybe maybe won't be until 2023
The answer is yes. I cannot go into the details as you can imagine, but the answer is yes. We see a need for potential for new orders, new work for God's orders.
Thanks so much everyone.
Thank you.
The next question is from Ella Freed of Bank Lumi. Please go ahead.
Good afternoon. Hello? How are we here? Okay, you are hearing me. Well, I have a few follow-up questions, but before, if you don't mind, I really would appreciate you repeating the answer to the first question about double-digit growth or something, because the line was really restarted and there were some people, so for the sake of a few people, please...
So there is growing demand for that. We just announced a contract for an intelligent solution which is part of this segment as well. It's a mega project and we see growing demand for this solution, for this system as a result of the last conflict in Ukraine.
Okay, so another follow-up question. You seem to perform much better in terms of growth than many companies in your peer group and we don't have still this quarter for everybody but on the annual team level you really have the best results for growth in this and then in the wider group as well. How do you explain it?
Is it that some companies are decreasing and Albit is really outperforming? I think the answer to that is off-prodigy.
And our strategy is composed of two main pillars.
The first one is a very wide and deep portfolio.
There aren't many companies that have such a portfolio like Albert.
which includes the UAVs, electro-optics, simulators, avionics, helmets, communication, an EW, electro-optics, lasers, dried ammunition, UAVs, USVs, UGVs, unattended sensors. There are many companies who have such a portfolio and invention. So we have a very...
a very wide and deep portfolio which enables us to tailor solutions to specific needs of customers. That's number one. And all of this portfolio is, most of the portfolio is very mature and is combat proven.
That's the first pillar. We continue to grow the portfolio. We just announced a very nice development of new radar system and we continue to invest in our airborne laser system which is very advanced and unique. So a very wide portfolio is that first pillar. The second pillar is our international position, our global footprint.
We have dozens of subsidiaries all around the globe.
all around the globe, which includes just some names. In the US we have about 4,000 people. We have 600 people in the UK. We have hundreds of people in Germany, hundreds of people. Hundreds of people in Romania. We have a company in Brazil, in Austria, in Beijing, in India, in Australia, in Canada, and many more.
And many customers prefer to buy locally today. There is a growing demand for different solutions. People prefer, countries prefer to buy proven solutions and they prefer to buy locally from their own industries.
and we gain right now from Plibis.
investment and previous strategy to build local facilities. We will do more of the program via this.
via these subsidies. So the combination of growing demand in the market.
large portfolio, global footprint.
All of them together bring us success in the market.
On the other hand, the scope and the versatility of relatively not such a huge company on this ground of the leading companies globally, it's a challenge, I think the challenge of profitability is even intensified by this versatility.
So I will play the
more of creating other centers like, I mean, you have Israel, you have the US, you have developing activities in Asia and Europe , but are you planning to create bigger hubs or, I don't know, because the operation is very costly of all these brands' care, of versatility.
It's true that it's costly to maintain such a machine.
and also to protect the portfolio we have. That's the reason why we invest 7.4% in R&D.
Yeah, you were leading, I know. And which is, I believe, double the nominal number in this market. And this is to support this portfolio and to bring new innovation and new capabilities to the market.
But I wanted to know that although it is a big company with many subsidiaries abroad...
We try not to duplicate capabilities between the different facilities.
Some of the activities, some of the IPs are coming from Israel, some of the capabilities are coming from our subsidies. Just to give an example, in the US we have...
Two main capabilities which serve the entire group, night vision capability that the company we acquired a few years ago in the US, night vision, they are center of experience for the entire group. The same is Sonoball in the US. They are also center of experience for the entire group. Sonov, we do in Canada and they serve the entire group for Sonov. Edge of Radios we do in Germany, they serve the entire group for edge of radio communication systems.
The same is true also for production capabilities. We have centers of excellence for different production capabilities, which enable us to leverage talent,
and the facilities we have all around the globe.
And that's number one. Number two, we reorganize the way we are working with our subsidiaries to make sure that we get maximum efficiency and we gain maximum from the positions we have in the different markets and that's part of the responsibility of Mr. Gaspar who you know very good.
I would like to add one more aspect. If you recall in the past we were emphasizing our international spread that actually helps us in reducing the risk in the business.
And we are almost, I would say, immune to changes in various geographies of the defense budgets while one is declining, the other is growing, and so on. So the basic risk in the business is low. I think that what we are seeing in recent quarters is exactly that. That means that when you, your basic question was, how come that you are growing and the others did not?
or not as much. I think what we see now is exactly the fundamental of the strategy that Butsi explained before of having a widespread business both geographically and product wise.
Okay, thank you. I have a few more questions. One is again in the same direction. You mentioned on the previous call that this second quarter is going to be the first quarter to show actually the impact of the Ukraine war and we saw it.
not as much as we expected but it's a company that performs projects so we expect to see it in the following quarters. But the question is will it have more impact of this interest that you told us about in the previous quarter?
Talking about all the new business we've got.
For example, as was mentioned, we got a $660 million contract for intelligent solutions in Europe . That's one example of the impact of the conflict in Ukraine.
So the first phase of the impact is getting business.
Then it takes some time until it goes down to the revenue level and to the profit level. Most of it is not in the backlog yet, right? Or is it? Part of it is in the backlog. The $660 million contract we got is in the backlog. But you're right. There are many opportunities. We see as a result of the
of the Russian invasion to Ukraine.
And so we see a lot more potential in Europe and in other countries because of that.
But we see also a growing demand not just in Europe . We see also a growing demand in other parts of the world. The Cultura Obispo Askina Klearning and an incredible film by
I've opened a new horizon.
to orbit against a different threat.
As was mentioned, we have opened a company in the UAE and we got already some businesses there. There is a lot of potential for us in our region.
and the conflict between the Western world and China.
is still zero. We also saw what happened in Taiwan just a few weeks ago.
So there is a growing demand in the U.S. and in Europe , also against, and of course in Asia Pacific, also against the Chinese threat.
So there are three main threads which are here.
which exist and all of them create different demands, different requirements for our portfolio which is very relevant to meet this requirement. So it's not just Russia, it's Europe , it's our region and it's also Asia Pacific. In all these areas there is tension, there is growing demand for our portfolio. That's the reason why we are working with Russia.
for the one backlog we have and I see
opportunities and more opportunities of company in the near term future as well as in the long term future.
Thank you for answering my question and I have one more technical question. You mentioned in the press release that the stock price linked plan will affect the next quarter as well. About the scale of this impact, is it going to be more like the first quarter or is it going to be relating to the present stock price? As I understand the stock price is not the only component in this formula.
Well, Hélène, you know what we explained in the first quarter and you have seen the increase in the stock price and the effect to our results.
We don't know yet how we will end this quarter and there is a formula that we are using according to the plan that we have with our employees how to calculate the impact.
So, you can make some general deductions out of that and you can see the rate of growth in the first quarter, how it went, and then compare it to what's happening in the second quarter and that will be a very rough estimate of what will happen. We don't know, we cannot give you guidance now, but...
Bottom line, we really believe the stock goes up. Okay, thank you for taking all my questions and best of success in the next quarter.
Thank you.
There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the US, please call 1-888-782-4291. In Israel, please call 03925-5900 and internationally...
please call 972-3-925-5900. A replay of the call will be also available at the company's website www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?
I would like to thank all our employees for their continued hard work and contribution to orbit system success.
To everyone on the call, thank you for joining us today and for your continued support and interest in our company.
Thank you for joining us today and for your continued support and interest in our company. Have a good day, good bye.
Thank you. This concludes the Elbit Systems LTD second quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.