Q4 2023 Eltek Ltd Earnings Call

Okay.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Eltek LTD 2023 Annual and Fourth Quarter Financial Results Conference Call. All participants are at present in listen-only mode.

Ladies and gentlemen, thank you for standing by while coming to the <unk> L. T D. 2023 annual and fourth quarter financial 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 for operator assist.

Operator: 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 they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filing. These forward-looking statements are projections and reflect the current beliefs and expectations of the company. However, actual events or results may differ materially.

During the conference. Please press Star Zero as a reminder, this conference is being recorded before I turn the call over to Mr. <unk>, Li Our Chief Executive Officer, and Ron <unk>, Chief Financial Officer, I'd like to remind you that they will be referring to forward looking information in today's presentation and in the Q&A biased.

Major this information contains forecasts assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in opex public disclosure filings.

These forward looking statements are projections and reflect the current beliefs and expectations of the company actual events or results may differ materially we will also be referring to non-GAAP measures.

Eli Yaffe: We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead. Thank you. Good morning.

<unk> undertakes no obligation to publicly release revisions to such forward looking statements to reflect.

Mens or circumstances occurring subsequent to this date I will now turn the call over to Mr. Elie outfit. Mr. Yao. Please go ahead.

Thank you. Good morning. Thank you all for joining us for our 2023 annual yield earning quarter.

Eli Yaffe: Thank you for joining us for our 2023 Annual Year Earnings Call. This is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and a summary of the principal factors that affected our results during 2020. 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 also be available on our website. In 2023, the company achieved unprecedented milestones in terms of both revenue and profitability, setting new records. The company generated revenue of $46.7 million with a set income of $6.4 million. EBITDA reaches $8.6 million, and the cash flow from operations reaches that $8.9 million, remarkably, all key profitability indicators experience a substantial growth rate, underscoring the success of our strategic host initiative.

Let me say at one point, our Chief Financial Officer.

We'll begin by providing you with an overview of our business and the summary of the principal factors that affected our results during 2023.

After our prepared remarks, we will be happy to answer any of your questions.

Bye now.

We want to have access to our press release, which was released earlier today. The release will also be available on our website.

In 2023, the company achieved unprecedented milestone in terms of both revenue and profitability setting new vehicles. The company generated revenue of $46 7 million to allow we set income of $6 4 million EBITDAR reaches $8 6 million.

So form of fruition stood at $8 $9 million.

Remarkably.

Key profitability indicate all experienced substantial gross weight underscoring the success of our strategic cost initiatives.

Eli Yaffe: The ongoing situation in Israel, coupled with the President's rise in the defense budget across European nations and the trade tension between the U.S. and China, continue to influence the demand for our high-end products. Since the inspection of our Accelerated Investment Plan in 2022, our backlog has increased by 130%. The growing demand persists, and we anticipate that the trend will extend into the upcoming year. While the influence of the current conflict in Israel has not been fully manifested in our backlog, we expect more pronounced impacts to become evident later in the second half of 2020.

The ongoing situations in Israel, coupled with the President's rice in the defense budget across European Nations and the trade tension between the U S and China.

Two engines of demand will follow I end products.

Since the inspection of our accelerated investment plan in 2022, our backlog has increased by 170%.

Growing demand persists and we anticipate the trend to extend into the upcoming years.

Why did the influence of the corn conflict in Israel is not being fully money spent our backlog we expected more pronounced impact too.

To become evident later in the second half of 2020.

Eli Yaffe: We have achievably diversified our revenue streams by exploring opportunities beyond the defense and medical devices market. Our focus includes strengthening collaboration. Thank you very much.

We have achieved really diversifies, our revenue streams by exploring opportunities beyond the defense and medical devices market.

Focus includes drinking collaboration and securing substantial order for a new product with a leading customer was machinery and technology play it cool and crude.

Eli Yaffe: Currently, efforts have been underway to augment our commercial sales volume. Our approach to pricing and order acceptance remains a key focus as we continue to optimize this strategy to achieve optimal profitability rates. We are actively progressing with the execution of our accelerated investment. To date, we have committed to an investment of approximately $10 million, and we anticipate fulfilling orders for the entire plan by the end of 2024. In the first quarter of 2024, the machines mentioned in our December 23 press release were received and installed, and the Yaffe line is currently under commissioning stage. We additionally installed additional presses, which is a significant component of the Accelerate investment. The press is in the final installation stages.

Crucial role in the large scale production of <unk>.

Conductor chips.

Going to the effort has been underway to argument our commercial sales volume.

Our approach to pricing and order acceptance remains a key focus as we continue to optimize this strategy to achieve up to one full suitability rates.

We are actively.

I'm guessing with execution of our accelerated investment plans today.

To date, we have committed to an approximately investment of 10 million rollout and we anticipate fulfilling orders for the entire plan by the end of 2024.

The first quarter of 2020 for the machine mentioned in our December 23 press release, both received and installed in the <unk> line is currently under commissioning stages.

Additionally, install additional branch, which is a significant component of the accelerated investment plan the places and final installation installation stages and the software adjustments. Furthermore, we successfully implemented cutting edge engineering software.

Eli Yaffe: Furthermore, we successfully implemented cutting-edge engineering software. During Q1 2024, we plan to complete the training of our engineers. This software positions us at the front end of technological advancement in this field. We have initiated the construction of a new office space within our building in Petrach. This move seeks to optimize office utilization, freeing up space for expanded production capacity. By doing so, we aim to seamlessly integrate new production lines without incurring additional overhead expenses for the existing infrastructure.

During Q1 2024, we plan to complete the training will follow engineers.

The software is a position us at the up they will default and also the technological advancement or industries.

Yeah.

We have initiated the construction of a new office space within our building and pick up a pizza.

This move seeks to optimize office utilization fringe of freeing up space for expanded production capacity.

Are you doing so we aim to seamlessly.

Seamlessly integrate new production lines, resulting fueling additional overhead expenses for the existing infrastructure.

Eli Yaffe: As a result of the security challenges in Israel and the logistical issues hindering the shipment of the arrival of the supplier technical team to the country, we anticipate a potential delay in the Accelerate Investment Program. We are actively dedicating significant efforts to try to mitigate this delay. In our pursuit of expansion of growth, we are actively seeking a quiet PCB manufacturing company in the United States because of the strategic importance of the U.S. market. We anticipate substantial growth in the upcoming years. The underlying motivation behind the Chips and PCB Act to repatriate chips and PCB production to America is foreseeing increased demand for domestic PCB manufacturing.

As a result of the security challenges in Israel, and the logistical issue injuring.

The shipment of the arrival of the supplier technical team to the country, we anticipate potential delay of the accelerated investment program. We are actively dedicating significant efforts to try to mitigate these topics.

You know pursue the expansion of the growth we are actively seeking for acquired PCB manufacturing company in United States like organized it.

The strategic importance of the U S market, when we anticipate substantial substantial growth in the upcoming deals.

The underlying motivation behind the chips and the PCB Act.

Repatriate chips in PCB production to America foreseen increases demand for domestic PCB manufacturing conceptually, we all focus on argument in mass production capacity in the U S.

Eli Yaffe: Conceptually, we are focused on augmenting production capacity in the U.S. In February 2024, we raised capital of $10 million before expenses. This amount will be used by us, together with our existing cash balances, for the purpose of financing continuous growth. I would like to take this opportunity to thank the investors who participated in the offering and for the trust they placed in our company and X-Men.

In February 2024, we raised capital of 10 million before expenses.

This amount will be used by us together with our existing cash balances.

For the purpose of financing continuous loan growth.

We'd like to take this opportunity to thanks to the investors who participated in the offering.

For the trust they placed.

Placed.

In our company and its management.

Eli Yaffe: The successful capital raising and the fact that, during 2023, we have repaid all our bank debt loans will allow us to finance a future M&A transaction, raising debt either from the bank or from the public. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results. Thank you, Eli.

The successful capital raising and the fact that June 2023, we have repaid all of our bank debt alone will allow us to finance our future M&A transaction, so were rising debt raising debt either from the bank or from the public I will now turn the call over to <unk>, our CFO to discuss.

Our financial results.

Thank you Riley <unk>.

Ron Freund: I would like to draw your attention to the financial statements for the year ended December 31, 2023 and for the fourth quarter of 2021. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement.

Like to draw your attention to the financial statements for the year ended December 31, 2023 and for the fourth quarter of 2023.

During this call. We will also discuss certain non-GAAP financial measures <unk> uses EBITDA as a non-GAAP financial performance measurement.

Ron Freund: Please see our earnings release for its definition and the reasons for its use. I will now go over the highlights of 2026. All numbers mentioned revenue is donated. Revenues for the year ended December 31, 2023 totaled $46.7 million compared to $39.7 million in 2022, an increase of $18.3 million. The increase in revenue is mainly due to increased demand for our products during 2023 and our continuous efforts to increase production capacity. Gross profit increased by 58%, reaching $13.1 million, compared to a gross profit of $8.3 million in 2022. The increase is mainly due to the increase in revenue; operating profit amount to $7.3 million in 2023 compared to $3.8 million in 2020. In 2023, we recorded financial income of $0.4 million compared to $0.9 million in 2020. The decrease is due to the revaluation of the NIS against the U.S. dollar in the fourth quarter of 2021.

Please see our earnings release fully to the finishing and the reasons for its use.

I will now go over the highlights of 2023.

As mentioned revenues.

Revenues for the year ended December 31, 2023 totaled $46 $7 million compared to $39 $7 million in 2022, an increase of 18%.

The increase in revenue is mainly due to the increased demand for our products during 2023, and our continuous efforts to increase production capacity.

Gross profit increased by 58%, reaching $13.1 million compared.

Compared to a gross profit of $8 3 million in 2013, the increase is mainly due to the increase in revenues.

Operating profit amounted to.

$7 $3 million in 2023 compared to $300 million in 2022.

In 2023 vehicles recorded financial income of zero point $4 million compared to zero point $9 million in 2022.

The decrease is due to deliver duration of Denise against the US dollar during the fourth quarter of 2023.

Ron Freund: Net profit was $6.4 million, or $1.07 per share, in 2023, compared to net profit of $3.2 million, or $0.55 per share, in 2020. EBITDA was $8.6 million in 2023, compared to $4.5 million in 2020. During 2023, we enjoyed positive cash flow from operating activities of $8.9 million, compared to $3.8 million in 2020. As of December 31, 2023, we had cash and cash equivalents and short and bank deposits in a total amount of $12.1 million, compared to $7.4 million at the end of 2020.

Net profit was $6 4 million or 1.0 $7 per share in 2023 compared to a net profit of $3 2 million or 55 cents per share in 2022.

EBITDA was $8 $6 million in 2023 compared to $4 $5 million in 2022.

During 2023, we enjoyed positive cash flow from operating activities of $8 9 million compared to $3 8 million in 2022.

As of December 31, two and three we had cash and cash equivalents and short term bank deposits in a total amount of $12 1 million compared to $7 $4 million at the end of 'twenty one system.

Ron Freund: I will now go over the highlights of the fourth quarter of 2023 compared to the fourth quarter of 2023. Revenues for the fourth quarter of 2023 were $12.3 million compared to $10.5 million in the fourth quarter of 2023. Gross profit amounted to $3.5 million, compared to $2.2 million in the fourth quarter of 2020. Net profit in the fourth quarter of 2023 was $1.3 million, or $0.22 per share, compared to net profit of $0.8 million, or $0.40 per share, in the fourth quarter of 2020. During the fourth quarter of 2023, we recorded financial expenses of 0.3 million dollars due to the revision of the NIS against the U.S. dollar. In Q4 2022, we recorded financial income in the amount of $0.1 million. The impact of this difference is $0.07 per share. EBITDA was $2.4 million in the fourth quarter of 2023 compared to $1.2 million in the fourth quarter of 2020. Cash flow for operator activities was $2.3 million compared to $1.3 million in the fourth quarter of 2020.

I will now go over to the highlights of the fourth quarter of 2023 compared to the fourth quarter of 2022.

Revenues for the fourth quarter of 2023 were $12 $3 million compared to $10 $5 million in the fourth quarter of 2022.

Gross profit amounted to $3 $5 million compared to $2 2 million in the fourth quarter of 2022.

Net profit in the fourth quarter of 2023 was $1 3 million or 22 cents per share compared to net profit of <unk> 8 million or 40 cents.

<unk> share in the fourth quarter of 2022.

You'll need the fourth quarter of 2023, we recorded financially expanse of zero point $3 million due to leave it there.

In addition over the needs against the U S daughter.

In Q4, 2022, we recorded financial income in the amount of 0.1 million.

The impact of this difference is seven cents per share.

EBITDA was $2 $4 million in the fourth quarter of 2023 compared to EBITDA of $1.2 million in the fourth quarter of 2022.

Cash flow from operating activities was $2 $3 million compared to $1 3 million in the fourth quarter of 2022.

Operator: 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.

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 one.

Wish to cancel your request. Please press star two if you are using speaker equipment kindly lift the handset before pressing the numbers youre questions will be answered in the order. They are a seat. Please standby while we poll for your questions.

Operator: Your questions will be answered in the order they are received. Please stand by while we poll for your questions. I repeat...

Okay.

I repeat.

Operator: If you have a question, please press star 1. There are no questions at this time. The first question is from Roy Scher.

Do you have a question please press star one.

There are no questions.

The first question is from ROI sure. Please go ahead.

Roy Scher: Please go ahead. Hello, I think you did great in this last quarter and last year. I want to find out if you've got any take on what you expect your revenue will be for the entire 2024, as well as your gross profit margin. Hey, Hi, Oi. We expect to continue our increased revenues during 2023-2024. The growth trend should continue as long as we continue with our accelerated growth, and we stick to the forecast that we gave before, two calls about the gross margin. We anticipate it will be around 27%. Do you think that you'll hit $50 million in 24?

I know I think you said, great and this last quarter in the last year.

I want to find out if you've got any take on what you expect your revenue will be for the entire 2020 full as well as your gross profit margin.

Hey, Hi, Ori.

And we expect all weigh them continually increased revenues doing 2023 'twenty four <unk> trend should continue as long as say.

Like I said earlier.

Yes.

And we stick to the forecast that we gave before two calls about the gross margin, we anticipate it will be around 27%.

Okay. So do you.

Think that you'll hit $50 million and 24.

Eli Yaffe: We don't give exact forecasts; you know we are working very hard to meet this target, but I cannot assure you this forecast. Okay, and one final question. Is your stock-based compensation added to your expenses?

We don't give.

The exact day or forecast you know we are working very hard to meet this target, but they I cannot assure you will say focused.

Okay and one final question is just stock based compensation added into your expenses.

Eli Yaffe: We had about $0.4 million in 2023. We expect that it will be in the same area during 2024. Thank you very much. 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. There are no further questions at this time.

We add about.

Zero point $4 million in 2023, we expect that it will be.

In the same manner.

Yeah, Julien 'twenty 'twenty four.

Okay. Thank you very much.

Okay.

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.

There are no further questions at this time before I ask Mr. Yafei 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 our website.

Operator: Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website. Finally, before we conclude our calls, I would like to thank our employees for their continued efforts to meet our strategy of growth and profitability. I would also like to thank all our customers, partners, and investors for their continued support. Thank you all for joining us on today's call. Have a good day. This concludes the Eltek LTD 2023 Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect. Music.

Before we conclude our course I would like to thank our employees for their continued efforts to meet our strategy of close and profitability I would also like to thank all our customers partners and investors for their continued support. Thank you for all for all for joining us on today's call.

Good day.

This concludes the <unk> L. T D 2023 financial results Conference call. Thank you for your participation you May go ahead and disconnect.

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