Q3 2022 Elbit Systems Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to Elbit systems third quarter 2022 results Conference call. All participants are at present in 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 run.
Accordingly, you should have all received by now the Companys press release that is available in the news section of the company's web site Www Dot Elbit systems Dot com.
I'll now like to hand over the call to Mr. Rami Myerson, Elbit Systems' Investor Relations Director Rami. Please go ahead.
Thank you Michelle Good day, everyone and welcome to our third quarter 2022 earnings call on the call with me today are what's the reckless our president and CEO who'll be gagan, CFO and Yossi Gaspar senior EVP business management before we begin I would like to point out that the safe Harbor statement in the company's press release issued earlier today also refers to the contents of this.
Conference call.
We do every quarter, we will provide you with both 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 Koby will begin by providing a discussion of the financial results followed by beauty, who will talk about some of the significant events during the quarter and beyond we will then turn the call over to our question and answer session with that I would like now to turn the.
Over to koby for risk.
Thank you Rami.
Hello, everyone and thank you for joining us today.
Third quarter results reflect sustained demand for our solutions and the investments, we're making to realize the growing potential presented by the increased geopolitical tensions and growing defense budget.
Third quarter revenues were similar to 2021 is growth in Europe , offset lower Asia Pacific revenues, our revenues by geography tend to fluctuate on a quarterly basis based on specific programs and project performance as well as well as milestones reached in a particular quarter.
We believe the longer term revenue trends supported by the growth in the order backlog are more representative as we have discussed with you in the past.
I would not the sale of official Saltish Carillon industries to Feeney was completed at the end of the second quarter of 2022 and our results in the third quarter of 2022 do not include the contribution from us soon.
The current operational environment is challenging due to supply chain disruption and labor cost inflation profitability in the third quarter include expenses related to employee stock price linked compensation plans.
These plants help align employee compensation with share price performance Incentivising, our employees to generate long term value for all of Elbit systems stakeholders.
Our GAAP and non-GAAP results have always included these expenses, but this year there are higher than recent in recent years following the share price appreciation.
Our conservative balance sheet management policies have enabled us to increase inventories and partially offset the supply chain disruptions to maintain deliveries to our customers on schedule.
Our budget.
And longer term planning assume that the global economy trends of supply chain and wage inflation headwinds will gradually subsides from the second half of 2023.
We continue to invest in R&D to enhance our portfolio and maintain our competitive edge, we invest in sales and marketing to expand our customer base and also continue to invest in capex to improve and expand our manufacturing footprint.
The rollout of the new ERP system and the construction of the new facility in the South of Israel and book and progressing are progressing and we expect these and other efforts to support an improved operational performance.
I will now highlight and discuss some of the key figures and trends in our financial results.
First quarter revenues were $1.349 billion compared to $1.364 billion in the third quarter of 2021.
In terms of revenue breakdown across our areas of operation before ISR, if 30% of revenues increased year over year, mainly due to U E S and command and control system sale.
Land systems was 26% of total revenues and increased year over year due to artillery systems sales.
Airborne system accounted for 32% and declined year over year due to lower airborne precision guided munitions sales.
Electro optics accounted for 10% in other sales accounted for 2% of revenues similar to third quarter of 2021.
The geographic revenue breakdown in the third quarter reflect our diverse geographic revenue base in.
In the third quarter, North America contributed 29% Europe , 26% and Asia Pacific in Israel.
Each contributed 19% of revenues.
European revenues increased due to due to growth in training and simulation says Asia Pacific revenues declined mainly to lower precision guided munitions sales North America revenues were lower due to a decline in medical devices soon.
The non-GAAP gross margin for the third quarter was 25% compared to the third quarter of 2021 at 27, 2%.
GAAP gross margin in the third quarter was 24, 2% of revenues compared to 26, 6% in the third quarter of 2021.
Gross margin in the third quarter reflects a combination of unfavorable product mix wage inflation and supply disruption.
GAAP and non-GAAP gross profit in the third quarter include approximately proximately $30 million of expenses related to stock price linked compensation plan.
Third quarter non-GAAP operating income was $84 3 million or six 3% of revenues compared with $123 million or 9% of revenues last year.
GAAP operating income for the third quarter was $73 $4 million versus $110 3 million in the third quarter of 2021.
Operating profit in the third quarter includes expenses of approximately $22 million related to the stock price linked compensation plans.
The operating expense breakdown in the third quarter was as follows.
Net R&D expenses were eight 4% of revenues versus 744% of revenues in 2021.
Marketing and selling expenses were five 1% of revenue down from six 2% of revenues last year.
G&A expenses were five 9% of revenues compared to four 9% of revenues last year due to stock price linked compensation expenses.
Other operating income of $9 4 million included a capital gain related to the sale of a building in Israel, which was included in our GAAP and non-GAAP results.
Financial expenses were $16 $4 million in the third quarter compared to $13 $5 million in 2021.
Other income of $4 $8 million.
Approximately $4 $6 million related to the Remeasurement of an affiliate following an investment drum.
We recorded a tax expense of $7 $9 million in the third quarter compared to $8 2 million in 2021.
Active tax rate in the second quarter was 20 was 12, 8% compared to eight 6% in 2021.
The non-GAAP .
EPS was $1.
40 cents in the third quarter, compared with $2 and 33% last year.
Diluted EPS was $1 26, compared with $2 <unk> last year.
The stock price linked compensation expenses in the quarter were equivalent to approximately 45 cents on an EPS basis.
Our backlog of orders as of September 30th 2022 was 14 $7 billion approximately $1 $1 billion higher than the backlog at the end of September 2021.
Approximately 40% of the current backlog is scheduled to be performed during 'twenty, two and 2023.
The rest is scheduled for 2024 and beyond.
Operating cash flow for the third fourth Florida was a 100 to 178 million dollar inflows compared to no inflow in the same quarter last year.
Cash outflow also included an inventory inventory do related to our efforts to mitigate supply chain challenges as we have leveraged our solid balance sheet to support deliveries to our customers.
Cash flow from investing activities includes the higher capex related to the new facilities in the south of Israel, Charleston in South Carolina, as well as the rollout of the new ERP system.
Board of directors declared a dividend of <unk> 50 cents per share for the for the third quarter of 2022.
I'll now turn the call over to Mr. Mosley Elbit feel boutique. Please go ahead.
Thank you Colby.
Firstly I would like to send to the investors on the call and all of our shareholders for their continued support.
In a volatile world.
It'll be to management team have to make hard choices and decisions as we strive to create value for all stakeholders and they sure we find the right balance between long term value creation and short term performance.
We are fortunate that Elbit systems' shareholders understand the strategy.
As shown in the long term investment horizon that has supported the growth and the success of the company for decades.
We are also well that you expect a better operational performance, including higher profitability.
Then what we delivered in the third quarter.
We are working to improve that.
Short term performance, while maintaining the buttons with a long term success of the system by investing in our people our portfolio and our customers.
Is he this view we increased investments you know people.
Alex employees all of the most critical contributor to our long term success.
We invested to retain talent.
In a competitive labor market in Israel, and the envelope, including stock price and compensation plans.
Ted.
Serial impact profitability in 2022.
I would like to remind you that all executives and employees come to work at that'd be four malls and just suddenly.
It's very joined they join Elbit, because we are an attractive employer that provides them with an opportunity to work on solving the world's most advanced technologies into support dogs as possible for the protection of our loved ones and all countries.
Oh, the businesses is growing and we continue to report along as a world leader all the record backlog and support our customers.
We continue to invest in R&D to develop leading solutions that provide our customers with valuable competitive edge leveraging the fruition experienced a phone to Louise.
The proximity and showed feedback loop with our customers.
We are investing in new facilities.
It is really is building new advanced facilities in Israel.
Germany, and the U S and we continue to gradually gradually upgrade existing facility. These facilities will include the latest manufacturing technology and process processes that should support the operational improvements.
We are also investing in creating value for our customers by providing them with advanced capabilities investing you know.
Subsidiaries around the world and by utilizing our balance sheet to be in.
Inventories and maintain deliveries on scheduling.
We know that our customers appreciate the oilfields and we expect these investments to deliver a good return in the future.
Elbit system lumped them rules has been driven by a healthy combination of both organic growth and acquisitions.
Include Elbit night vision in 2019 and support them in 2021 that enhanced technological portfolio and.
And our position is that you would.
Vodafone and <unk> Division reported significant significant milestones in recent months.
Uh huh.
Also in the World Mono Crystal Flyers.
Awarded a joint five U 5.1 billion U S dollars idea acute contract.
To supply from our boys to the U S Navy.
This follows selection of both of them as a qualified vendor for the multiple award deliberately older contract by them.
Or may do in July .
Is the idea of Q is significantly larger than the previous fuzzy the idea.
This illustrates the importance of anti submarine warfare as news to attentions escalate and the growing demand for lithium in relation to them.
U S Naval forces Central Command is currently conducting three week digital horizon exercise in the middle.
At least focused on employing and integrating unmanned and artificial intelligence system <unk>.
Elbit system of America, together with our Israeli based maritime business unit of showcasing Elbit system.
I mentioned interest result, as part of this exercise.
These events.
Validates the investment <unk> made to build its merit and capabilities and the growing importance of the maritime domain.
In October .
Elbit night vision received at one of them.
7 million.
In order to supply <unk> vision systems to the U S.
As part of the Otas contract received in 2020.
In September Elbit night vision deceived a contract to develop.
In advanced night vision sensor for the U S.
The U S Army's <unk>.
Our system.
Militaries around the world continue to invest to equip the soldiers with capabilities that enable operations at night.
All in Duncan Brown.
Some companies have highlighted the importance of these capabilities.
It is a leading provider of night vision capabilities for folgers, thanks to the acquisition or the acquisition of Elbit night vision and our legacy solution.
We are working to realize the synergies between our night vision capabilities and additional technology.
Is it a big portfolio like the integration of command and control systems that can project information.
Night vision display.
It's the second quarter results conference call, we discussed five capabilities areas that we identified should benefit from increased defense spending over the coming years. Following the lesson learned forms erosion Russian invasion of Crane.
These are platform booked action.
The mine and control system.
Electronic warfare.
Men's systems and network.
Fishing munitions.
We believe that each one has the potential to generate significant revenues over the medium term.
During the third quarter, we announced we announced additional contract.
Both these five loyalty areas.
Starting with platform protection in November , we announced a $200 million.
Construct for military helicopter self protection.
And Asia Pacific customer.
The conflict in Ukraine has highlighted that ended gomphosis equipped with thinking apc's can maneuver and execute large scale operation.
The conflict has also demonstrated.
The vulnerability of platforms across all domain and the critical need to protect both platform and zero occupancy.
This highlights the importance of the importance of active protection system to protect maneuvers maneuvering guang platform.
Fist active protection system developed development is on track for platforms in Israel.
Australia and the U S.
I believe so.
The significant potential for this unique solution that can protect onto some other carriers.
A range and a range of military Robson.
Helicopter provide critical support to maneuvering all sources.
Welcome system or tactical.
And fixed wing aircraft form a range of three.
Another area of priority spend is autonomy and unmanned systems is it.
On the ground and sea.
The effectiveness of loitering munition on an armed UEC is limited when operated.
That platform.
Armed forces required a comprehensive solution that generally target.
The sensor to shooting up quickly and efficiently.
Elbit can supply or customer.
With a multi layer solution.
And intelligence capabilities.
One 2 million visits we can connect these platforms with our command and control solutions and equipped them with a range of electro optical aliens and EW sensors and payloads all developed in house.
The vertical integration will follow.
In terms of supply chain, and hence our ability tayloe unmanned and autonomous solutions to customer requirements.
Increasing effectiveness by maximizing.
The performance of each part of the solution and in reducing costs.
In September we were awarded a $120 million contract to supply Hermes 900 Maritime UAS since the oil tiny.
These U S will configure rate formulary for maritime mission and will.
We will be equipped with maritime radar.
Part of that communication.
The ultra boom inflatable life raft and other capabilities.
In November we received a $72 million contract to supply Hermes.
As to an international customer.
Mr. <unk> has been selected by more than 15 customers alone.
The third area of priority spend advanced radio radios and implementing control system.
To maneuver effectively efficiently and effectively and combined multi domain operation more than all of these have to be equipped with advanced situ system.
We were awarded a $65 million contract to supply the first fully networked mechanized solution to an army Latin America. This solution includes all they call. It owned vehicles equipped with 40 different with your better measurement system.
And many unmanned.
Ariel systems.
October we received a $25 million ballpark from the Finnish from the Finnish Ministry of Defense.
A lot of video communication assistant to the finish on me.
Our military radio communication systems has been selected by several your opinion and NATO countries, including Sweden, Germany, The Netherlands, Switzerland.
And all of them.
And with that I will be happy to take your questions operator.
Thank you ladies.
Ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star. Two so 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.
Yeah.
The first question is from Pizza Kubicki of Alembic Global Please go ahead.
Yes, good afternoon, everyone hope everyone's doing well.
Okay.
Guys I had a question about the airborne systems units.
Revenue was down quite a bit this quarter I think Colby you mentioned it was an airborne precision guided munitions.
It was also down a little bit in the second quarter I'm. Just wondering if there was maybe one large program that's ending that's driving that weakness and then maybe as we get into the fourth quarter or first quarter, we'll see.
Easier comps, there and a return to growth.
Thank you Peter for the question.
As koby.
Youre right. It is a large program that we announced early last last year.
We had a concluded in the previous quarter and in this quarter. We don't have any sales from this large program.
We announced a new urban precision munition sale that we that we got this year. So we expect that the next quarter. We will continue to sell on this film this issue.
Okay. That's helpful. Thanks, so much for that.
And then I just wanted to switch now to.
Maybe to underlying gross margin issues.
In particular pricing I'm just wondering.
As we've heard the U S defense contractors worked our way through the third corner.
They are also experiencing of course higher labor rates.
And there's sort of a delay effect in terms of.
You know not being able to pass on the higher labor rates.
Updated pricing.
Will they start new contracts essentially and so you've got this mix of.
Current contracts with higher labor rates, but pricing that reflects.
You know labor rates for maybe a year or two ago.
So I'm just wondering have you as Albert had.
Success in terms of the ability to pass on.
The costs are higher labor rates through pricing on new contracts and so you know maybe ignoring for now stock linked compensation, but just in terms of base labor rates are you getting better pricing on new contracts as opposed to the contracts that maybe weren't wanted a year ago, when when labor rates were up.
Lower.
Hi, Pete this is yossi.
I would I would address it in the following way first of all.
The extraordinary costs related with our with our stock option plan that is something kind of one time and it goes away and it's not something called the baseline of cost of the company, so that should be neutralized and it.
It does impact the present here, but.
That is not something that will continue with us.
On the baseline cost.
I would say the following some of our contracts with customers.
Do have economic price adjustments.
And therefore, we are getting compensation because of the the.
The growth in the in the cost of labor and also to some extent the growth in the cost of basic materials, which is also.
Is it price adjusted according to what happens in the market.
However, we don't have that in front of all of our contracts.
And therefore, we are suffering to some extent because of that.
We definitely take all of these changes into consideration when we bid.
For new contracts.
<unk>.
I would say that even in the recent growth of backlog that we have experienced.
They already include backlog that takes into account these economic adjustments and we hopefully will these contracts.
In improved profitability in the future.
Speaker 1: color there. I appreciate it. I'll just ask one last one and then get out of the queue there. On the backlog growth, it's a good transition, Yossi. It was very strong this quarter. Year to date backlog growth has been strong. I'm just wondering, can you bifurcate it a little bit by region for us? Is there any one region that's been very, very strong and maybe some laggards? And I'm sure a lot of people are wondering if Europe and even Eastern Europe is driving that growth or if you're seeing strength kind of across the board. I appreciate any color on that topic. First of all, I would say the following about that. We have kind of a steady state business flow, which we were exposed to years ago and we continue to have these are the, what we call the medium sized contracts of tens of millions of dollars each and that continues and even increases. Then we have on top of that some significant number of what we call three digit contract that has in the hundreds of millions of dollars per contract that we have seen in recent two years increase of number of those contracts and definitely the high level dollar value contracts have the potential to improve future definitely revenues but also the bottom line. Regarding the areas, geographic areas, you can look at our press releases of the various content, major contracts that we have announced and if you analyze those, I would say that the contracts in the US are more or less in the state.
Speaker 2: we see an improvement
Speaker 2: The shipment costs are going down, not yet at the historical level, but they are going down.
Speaker 2: and we see also prices going down, metal parts and material going down.
Speaker 2: Once again, not yet at the historical level prior to COVID, but going down. We don't yet see it in the electronic component.
Speaker 2: There we still see a shortage. The main challenge we face right now is mainly around the electronic components.
Speaker 2: That's also the reason why our stocks went up in inventories. From what we understand and from what we estimate, we believe that improvements will happen during the second half of next year. Thank you for watching and see you in the next video.
Speaker 2: taking all the required measures in order to overcome some of these challenges.
Speaker 3: helpful.
Speaker 3: looking at land systems.
Speaker 3: system.
Speaker 3: It was very strong in the quarter and I believe that's where a shot came out. Is that accurate and how do we think about growth going forward as we think about both ammunition and weapons in active production? Are we talking about lens systems? Yes, and a shot. We have the highland, this is Kobe.
Speaker 4: We had stronger artillery sales this quarter. And remember that the Chartage Calonne part was nearly $20 million. So it was not so significant, but we had stronger artillery and ammunition sales due to the situation mainly in Europe . We had stronger quarter and the land system business.
Speaker 3: I'll hop back in the queue. Thank you.
Speaker 5: Thanks, Ellen.
Speaker 6: The next question is from Ella Freed of Bunk Loomie. Please go ahead.
Speaker 7: Good afternoon, thank you for taking my questions. Most of them were answered, but I have just one or two left.
Speaker 7: You marked C and the novel business as one of your strategic moves into the next years.
Speaker 7: And also you have this conversion of products and technologies from air and from land into the sea.
Speaker 7: So...
Speaker 7: Could you give us some milestones of when and how much this will be felt over the next years?
Speaker 2: As you remember, we acquired Spartan in the US.
Speaker 2: It was around two years ago.
Speaker 2: We continue to be an important supplier to the Navy of Sonobuoys. As was mentioned, the 5.1 billion IDIQ contract which should come and be split between three suppliers is also a good indication that...
Speaker 2: that our revenues in spartan will continue to go in the future we also made another acquisition few years ago in canada company by the name of GTI they do phone off
Speaker 2: and they are very successful, the company is growing as well and they have already several international sales
Speaker 2: and we see a growing potential for them also.
Speaker 2: A year and a half ago we won a very important EW naval contract in the UK.
Speaker 2: It was a very difficult competition.
Speaker 2: against local providers, still we want it because of the superior technology we have here in Israel and this technology is similar to the technologies that we are deploying these days on the South 6 and corvettes of the Israeli Navy. So based on our EW capabilities here...
Speaker 2: and based on our capabilities in the US and in Canada, I'm happy to say that we have position in the US, we have position in Canada, we have positions in the UK and in Israel.
Speaker 2: And we... and this is...
Speaker 2: We also have here a nice very advanced autonomous solution by the name of SIGAL, which can be
Speaker 2: The importance of naval autonomous vessels was demonstrated just recently in the Gulf as well as the conflict between Ukraine and Russia.
Speaker 2: So we have several elements, we are combining them together to deliver integrated solutions to our customers. We see a growing potential for that.
Speaker 2: Our long-term focus is to have an activity for naval customers which should be around 1 billion dollars within the EU.
Speaker 7: Okay, thank you. And I have a follow-up question unsurprisingly on the bottlenecks in the industry also, it was quite a lot said about. The question is, if you could give us a bit more color and a bit more specifics about where, I mean, there are the chips, but is it mostly...
Speaker 7: or it's all over and also because there is such a ramp up in...
Speaker 7: in the industry, especially in the US, is there competition between companies and you have sometimes just to stand aside and wait for more rational prices? How is it impacting you? Because the other day, the American...
Speaker 7: companies, they were ahead of you in the supply chain disruptions and you were much better off all this time and now it reached you as well. So I would like to see how is it happening in the industry.
Speaker 1: Hi Ella, this is Yossi. Hi Yossi. I would say the following, we all, the whole industry and not only the aerospace and defense were significantly affected by what's going on in the in the supply chain.
Speaker 1: However, as Butsi explained before, we already see some improvement in areas like the mechanical parts, like transportation and deliveries and so on and so forth. However, the electronic parts are still with us.
Speaker 8: impacting
Speaker 8: The good thing that we did two years ago is that we have anticipated this thing that's going to happen and we have increased our inventories significantly, which did hurt our working capital of course. And you have seen that in our reports. By the end of the day, we continued.
Speaker 8: to work along those lines during the last year and a half to two years.
Speaker 8: However, initially we thought that this will be over or significantly over by this time and this has not happened.
Speaker 8: This explains why we were...
Speaker 8: quite well organized for the initial year, year and a half, and it did not affect us as much as it was by the US, done by the US companies. However, by the end of the day, we are part of the whole global supply chain, and now it does affect us more. We do anticipate by the second half.
Speaker 8: 2023. This will decline and what has happened in the mechanical parts and in the transportation and other areas that will improve also in the electronic parts and we will be back on track somewhere towards the second half of 23.
Speaker 2: Do your competitors also feel optimistic about this timing? Definitely yes. These are the market estimates right now and we are in daily contact with all the suppliers.
Speaker 2: to understand exactly when we can get the missing parts. You understand in some cases we have the entire product ready and we are just missing one transistor or one piece of electronic in order to deliver it to a customer and we can do it. So we are on a daily contact with the relevant suppliers.
Speaker 2: We start to see some improvement, but the estimation right now in the market that it will be solved or most of it will be behind us during the second half of next year.
Speaker 7: Okay, and the last question about the hedge. I know that you have now a new hedge policy and it's less sporadic than it used to be. But this recent month presented quite an opportunity for hedging. So did you stick to this structured hedging or did you take also some opportunities in this field?
Speaker 4: Hi, Ella. This is Koby. Hi, Koby. Hi. We are sticking to a policy which is we are not profit and we cannot anticipate what happens with exchange rates. For instance, nobody anticipate the sharp decline in the British pound. For more information, visit www.fema.gov
Speaker 4: So we are trying, we are sticking to the policy. Next year of course we have some stronger hedges due to the improvement in the rates. And we sometimes take peaks and when we identify peaks, we actually take the opportunity and increase our hedges. But.
Speaker 4: But everything is around the policy. So we maintain strict policy which gives us... We want to work on a steady platform of exchange rates and sometimes it's worth a lot to understand what is the neighborhood of the exchanges that we are working. Again, we...
Speaker 4: taking advantages on spikes that we identify. So it will be more closer to the average and less to the spikes if I read you right. Yeah, this is right. Because we think that the steady platform for the company is very advantageous for our work. And of course we have a significant improvement for next year.
Speaker 9: my question, taking my question. So most of the question was answered, but I want to ask you, what's your opinion about the fear that the session will eventually lead for a lower growth in the defense budget and how it's going to be influenced the company?
Speaker 9: And the second question, we've seen an impressive graph in the backlog. Do you ever range our guidance?
Speaker 9: When are we going to see the graph in the revenue and what's your guidance for the next two years? Yeah, sure, sure.
Speaker 2: With regards to the first question, I think we have a question from the audience.
Speaker 2: We do not see any signs of recession in different spending. On the contrary, we see growth. There is growth in Europe , we see growth in Asia Pacific, and we see also, we also expect growth in our positions in the US and North America. And we also work for here in Israel. After the election we...
Speaker 2: We hope to see stability which will enable long term programs to be executed.
Speaker 2: So we anticipate growth in different spending, we see growing potential for the company, we see more opportunities, we deliver more offers and the funnel of new positions is increasing. So that's with regards to the first question.
Speaker 8: I think that the best indicator for the future growth in revenues is the backlog.
Speaker 8: If you look at our press release, we always give the breakdown of the backlog for the rest of the year plus the following year and the backlog to be sold after the following year. By the end of the third quarter, we have a backlog of $14.7 billion.
Speaker 8: We also said that 40% of that backlog is going to be performed during the fourth quarter of 2022 and 2023.
Speaker 8: just by making a simple calculation that gives you about 4.7 billion dollars of revenues that are going to happen in 2023. We usually have a coverage of backlog for approximately 80% for the following year. So just making a simple mathematics, you can find out that will have very nice growth.
Speaker 8: for the top line for next year.
Speaker 6: The next question is a follow-up from Pete Skibitsky of Alembic Global. Please go ahead....
Speaker 1: Yeah, thanks guys.
Speaker 1: I wanted to ask on the cash flow statement, the contract liabilities line, which I think relates to customer advances. Advances were a little soft in the first half of the year, but they were very strong here in the third quarter. And historically, they've been very strong in the fourth quarter. So I just wanted to see if maybe some advances were pulled forward from the fourth quarter into the third or...
Speaker 2: and we put a lot of emphasis on cash flow in the company these days. This is true also for advances and that's why you see growth in advances in the company and we expect it to continue. Okay, great. Thanks so much. Thank you. Thanks, Pete.
Please press star 2. Please stand by while we pull for more questions. 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 1-888-566.
In Israel, please call 03-925-5900 and internationally, please call 972-3-925-5900. A replay of the call will also be available at the company's website www.elbidsystems.com. Mr. Machlis, would you like to make your concluding statement?
Thank you. I would like to thank all our employees for their continued hard work and contribution to Elbit System's success.
To everyone on the call, thank you for joining us today and for your continued support and interest in our company.
Have a good day and goodbye.
Thank you. This concludes the ALBIT Systems Limited third quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
Thanks for watching!
Thanks for watching!
[music].
from the Russian invasion of Ukraine. These are platform protection, command and control system, electronic warfare, unmanned systems, and network precision munitions. We believe that each one has a potential to generate significant revenues over the medium term. During the third quarter, we announced additional contracts across these five priority areas. Starting with platform protection, in November , we announced a $200 million US contract for military helicopter self-protection suit for an Asian Pacific customer. The conflict in Ukraine has highlighted that only ground forces equipped with tank and APC