Q1 2024 Elbit Systems Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by.
Operator: Welcome to Elbit Systems' first quarter 2024 results conference call. All participants are 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 recorded. I would now like to hand over the call to David Revere, Elbit Systems' Investor Relations Director. David, please go ahead.
Welcome to Elbit systems first quarter 2024 results conference call.
All participants are 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 recorded.
Speaker Change: I would now like to hand over the call to David review here.
Speaker Change: Systems' Investor Relations director.
Speaker Change: David Please go ahead.
David Revere: Thank you, Operator. Good day, everyone, and welcome to our first quarter 2024 earnings goal. On the call with me today are Putin-Machlis, our president and CEO, and Kobi Kagan, our CFO. Before we begin, I would like to point out that the safe hour 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 with both our regular GAAP financial data as well as certain supplemental non-GAAP information.
David: Thank you operator, good day, everyone and welcome to our first quarter why do you 24 earnings call.
Speaker Change: On the call with me today are <unk> Barclays.
Speaker Change: Our president and CEO and Bob <unk>, our CFO.
Speaker Change: Before we begin I would like to point out the safe Harbor statement in the company's press release issued earlier today also refers to the contents of this conference call.
Speaker Change: As we do every quarter, we will provide you with both our regular GAAP financial data as well as certain supplemental non-GAAP information.
Speaker Change: We believe that do you see that this non-GAAP information provides additional detail to help understand the performance of the online business.
Speaker Change: Can find all of the detailed GAAP financial data.
Speaker Change: Well at the non-GAAP information and the reconciliation in today's press release, while we will begin by providing a discussion of the pension reform.
Speaker Change: All votes by proxy for me to talk about some of the significant events during the quarter.
Dan: He was Dan.
Speaker Change: On the call over to the question and answer session.
David Revere: We believe that this NAM gap information provides additional details to help understand the performance of the ongoing business. You can find all of the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. We will begin by discussing the financial results, followed by Buzi, who will talk about some of the significant events during the quarter and beyond, then turn the call over to the question and answer session. With that, I would like now to turn the call over to Kobi. Thank you, David.
Speaker Change: Ill now turn the call August Bobby Bobby.
David: Thank you David.
Yaacov Kagan: Hello, everyone, and thank you for joining us today. The financial results of the first quarter of 2024 reflect the significant increase in demand and the opportunities the company has. This demand supported the growth of our order backlog to more than $20 billion. As we mentioned in our previous quarter investment conference, we can see a continuous improvement in our profitability. I will now highlight and discuss some of the key figures and trends in our financial results.
Speaker Change: Hello, everyone and thank you for joining us today.
Speaker Change: The financial results of the first quarter of 2024 reflect the significant increase in demand and opportunities the company has Disney.
Speaker Change: This demand supported the growth of our order backlog for more than $20 billion.
Speaker Change: As we mentioned in our previous quarter investment conference, we can see the continuous improvement in our profitability.
Speaker Change: I will now highlight and discuss some of the key figures and trends in our financial results.
Yaacov Kagan: First quarter revenues were $1,554,000,000 compared to $1,394,000,000 in the first quarter of 2023. Our diverse geographic revenue base is important to the long-term sustainability of our business. In the first quarter of 2024, Europe contributed 25%, North America 21%, Asia-Pacific 20%, and Israel contributed 29% of revenues. Growth in Israeli revenues reflects the increased demand for a broad range of our solutions following the breakout of the swords of iron war.
Speaker Change: First quarter revenues were $1.554 billion compared to $1.394 billion in the first quarter of 2023.
Speaker Change: Our diverse geographic revenue base is important to the long term sustainability of our business.
Speaker Change: In the first quarter of 2024, Europe contributed 25% North America, 21% Asia Pacific, 20% in Israel contributed 29% of revenues.
Speaker Change: We're also in Israeli revenues reflected increased demand for a broad range of our solutions. Following the breakout of the sorts of our own war.
Yaacov Kagan: The non-gap gross margin for the first quarter was 24.7%, compared to 26.5% in the first quarter of 2023. Gap gross margin in the first quarter was 24.1% of revenues, compared to 25.9% in the first quarter of 2020. The first quarter non-GAAP operating income was $121.6 million, or 7.8% of revenues, compared with $108.5 million or 7.8% of revenues in the first quarter of last year. GAAP operating income for the first quarter was $105.4 million, or 6.8% of revenues versus $93.9 million or 6.7% of revenues in the first quarter of 2023.
Speaker Change: The non-GAAP gross margin for the first quarter was 24, 7% compared to 26, 5% in the first quarter of 2023.
Speaker Change: GAAP gross margin in the first quarter was 24, 1% of revenues compared to 25, 9% in the first quarter of 2023.
Speaker Change: Yes.
Speaker Change: The first quarter non-GAAP operating income was $121.6 million or seven 8% of revenues.
Compared with $108 $5 million or seven 8% of revenues in the first quarter of last year.
Speaker Change: GAAP operating income for the first quarter was $105 4 million or six 8% of revenues versus $93 9 million or six 7% of revenues in the first quarter of 2023.
Yaacov Kagan: The operating expense breakdown in the first quarter was as follows. Net R&D expenses were $98.5 million, or 6.3% of revenues, compared to $110.3 million, or 7.9% of revenues, in the first quarter of 2020. Marketing and selling expenses were $89.1 million, or 5.7% of revenues versus $80.2% million, or 5.8 percent, in the first quarter of 2020. G&A expenses were $81.2 million, or 5.2% of revenues, compared to $77.1 million, or 5.5% of revenues, in the first quarter of 2020.
Speaker Change: The operating expense breakdown in the first quarter was as follows net.
Speaker Change: Net R&D expenses were 28, $98 5 million or six 3% of revenues compared to $110 $3 million or seven 9% of revenues in the first quarter of 2023.
Speaker Change: Marketing and selling expenses were $89 $1 million or five 7% of revenues versus 82.
Millions of dollars or five 8% in the first quarter of 2023.
Speaker Change: G&A expenses were $81 $2 million or five 2% of revenues compared to $77 $1 million or five 5% of revenues in the first quarter was 2023.
Yaacov Kagan: Financial expenses were $31.2 million in the first quarter compared to $24.2 million in the first quarter of 2023. Financial expenses in the first quarter reflect the high interest rate environment, as well as a required increase in net working capital.
Speaker Change: Financial expenses were $71.2 million in the first quarter compared to $24 $2 million in the first part of 2023.
Speaker Change: Financial expenses in the first quarter reflect the high interest rate environment as well as requires increasing that's working capital.
Yaacov Kagan: We recorded a tax expense of $11.6 million in the first quarter, compared to $8.7 million in the first quarter of 2023. The effective tax rate in the first quarter of 2024 was 14.6%, compared to 12.8% in the first quarter of 2020. Our non-GAAP diluted EPS was $1.81 for the first quarter of 2024 compared to $1.78 for the first quarter of 2023. Gap diluted EPS was $1.65 for the first quarter of 2024 compared to $1.40 for the first quarter of 2023. I will now review our business segment's first quarter of 2024 financial results. And we note that our segmented disclosure of operational income is provided on a gap basis.
Speaker Change: We recorded a tax expense of $11 $6 million into first quarter.
Speaker Change: <unk> to $8 $7 million in the first quarter of 2023.
Speaker Change: The effective tax rate in the first quarter of 'twenty 'twenty four was 14, 6% compared to 12, 8% in the first quarter of 2023.
Speaker Change: Our non-GAAP diluted EPS was $1 and <unk> 81 cents.
Speaker Change: For the first quarter of 2024 compared to $1 78 in the first quarter of 2023.
Speaker Change: GAAP diluted EPS was $1 65.
Speaker Change: For the first quarter of 2024 compared to $1 40 in the first quarter of 2023.
Yaacov Kagan: TIPORA and cyber revenues increased by 12% year-over-year, mainly due to increasing radio system sales in Israel. ISAR and EW revenues increased by 17% in the first quarter of 2024, mainly due to electronic warfare and electro-optic system sales in Israel. Land revenues increased by 26% in the first quarter of 2024, mainly due to increased ammunition and munition sales in Israel. Aerospace and Elbit Systems of America revenues were similar year over year.
Speaker Change: I will now review our business segments first quarter of 2024 financial results and will note that our segmental disclosure operational income is provided on a GAAP basis.
Speaker Change: People, Ryan cyber revenues increased by 12% year over year, mainly due to increase in registry system sales in Israel.
Speaker Change: I still I need W revenues increased by 17% in the first quarter of 'twenty 'twenty four.
Speaker Change: Mainly due to electronic warfare, and electro optics systems sales in Israel.
Speaker Change: <unk> revenues increased by 26% in the first quarter of 2024.
Speaker Change: Finally, due to increased diminishing in munitions says in Israel.
Speaker Change: Aerospace and Elbit systems of America revenues was similar year over year.
Yaacov Kagan: Our older backlog, March 31st, 2024, was $20.4 billion, $4.5 billion higher than the backlog at the end of the first quarter of 2023. Almost $2 billion of the increase is from Israel. Out of the new orders of the first Putin, $1.5 billion are from Israel. Additionally, approximately 71% of the current backlog is attributable to orders from outside of Israel. Approximately 51% of the current backlog is scheduled to be completed during 2024 and 2025, and the rest is scheduled for 2026 and beyond.
Speaker Change: Our older backlog as of March 31st 2024 was $24 billion.
Speaker Change: The $4 $5 billion higher than the backlog at the end of the first quarter of 2023.
Speaker Change: Almost $2 billion of the increase is from Israel.
Speaker Change: Out of the new orders for the first quarter $1 5 billion dollar is from Israel.
Speaker Change: Approximately 70, 171% of the current backlog is attributable to orders from outside the us Israel.
Speaker Change: Approximately 51% of the current backlog is scheduled to be performed during 2024 and 2025 and the rest is scheduled for 2026 and beyond.
Yaacov Kagan: Operating cash flow for the first quarter was a $6.4 million outflow compared to $73 million outflow in the same quarter last year. The cash flows in the three months ended March 31st, 2024 were affected mainly by the increase in inventories and trade receivables offset by the increase in contract liability.
Speaker Change: Operating cash flow for the first quarter was $6 $4 million outflow.
Baird to $73 million outflow in the same quarter last year.
Speaker Change: The cash flows in the stream.
Speaker Change: <unk> ended March 31st 2024.
Speaker Change: Were affected mainly by the increase in inventories and trade receivables offset by the increase in contract liabilities.
Bezhalel Machlis: The Board of Directors has declared a dividend of 50 cents per share. I will now turn the call over to Mr. Machlis, Elbit's CEO. Buzi, please go ahead.
Speaker Change: The board of Directors has declared a dividend of <unk> 50 per share I will now turn the call over to Mr. Mark <unk> <unk> CEO boots. He please go ahead.
Bezhalel Machlis: Thank you, Corby. I would like to begin by thanking our Elbit employees around the world for their hard work and ongoing commitment to our customers. I wish to thank our employees in Israel who have been working intensively for months and have made it possible for the company to address IMOD's needs during the war. I also want to send my sincere condolences to the families of our employees that have lost loved ones during this conflict and send our prayers to the injured for Speedy Recovery. I alone... We, the entire company, hope for a quick return of all the hostages that remain held in Gaza.
Colby: Thank you Colby I would like to begin by thanking all of them.
Oh elbit employees around the world for their hard work and ongoing commitment to our customers.
Colby: I wish to thank our employees and is one that has been walking principally.
Colby: Four months this and have made it possible for the company to address these needs during the war.
Colby: So want to send my sincere condolences with assemblies for employees that have lost loved ones. During this conflict and send our players cause the injured.
Colby: A speedy recovery.
Colby: Alone.
We the entire company hoped for quick quick.
Colby: Of all.
The hostages.
Speaker Change: Hedging doesn't.
Bezhalel Machlis: I am encouraged by our financial results in the first quarter as there has been a significant increase in our order backlog, with $20 billion surpassed and approximately 12% revenue growth. I would like to highlight two main points of major importance to our business. The relevance of Elbit Systems' portfolio of advanced technological solutions that have been operationally proven in light of the increasing global defense budget and the high demand by the Israeli MoD positively impacts the revenues and growth of the company.
Speaker Change: I'm encouraged by our financial results in the first quarter as it has been significantly increased order backlog.
Speaker Change: But so past 20 billion and approximately 12% in the visit Nichols.
Speaker Change: I'd like to highlight two main points of major importance.
Speaker Change: To all businesses.
Speaker Change: The relevance of Elbit systems portfolio of advanced technological solutions that have been operationally proven in light of the increasing global defense budget and the high demand by the Israeli makes it easier to MLD wheezes well.
Positively impact revenues and growth of the company.
Bezhalel Machlis: Elbit Systems is continuing to implement its long-term strategy and plans while strengthening its global presence and maintaining its commitment to customers. The company is continuing to implement its transformation plan in order to enable our internal target of $7 billion in revenues, which I believe will be achieved ahead of schedule, and our internal target of around 10% operating margin. Through this world of iron ore, we have accelerated the R&D of some of our solutions that were still in development, and some have already been deployed on the front line.
Speaker Change: As the system is continuing to implement its long term strategy and plans, while strengthening its global presence and maintaining its commitment to customers.
Speaker Change: The company is continuing to implement its transformation plan in order to a neighboring town.
Speaker Change: <unk> target of $7 billion revenues, which I believe will be achieved ahead of schedule.
Speaker Change: And though it kind of a target of around 10% operating margin.
Speaker Change: So all this would of Ireland, we have accelerated the R&D.
Speaker Change: Some will fall of solutions that we're still in development.
Speaker Change: Some have already been deployed to their own clients.
Bezhalel Machlis: We are also upgrading multiple systems and solutions based on lessons learned during the war. We have ramped up our production to support the IDF requirements while maintaining deliveries to our international customers. We increased production capacity at our factories by adding shifts and recruiting several hundred additional employees to support the surge in demand. The last quarter was impacted by massive recruitment, and we are still recruiting new employees, mainly for manufacturing and development projects. I would now like to focus on several successful decisions that we have made as part of our long-term strategy that can explain the financial results in the first quarter.
Speaker Change: We are also upgrading multiple systems and solutions based on lessons learned during the war.
We have ramped up.
Speaker Change: Our production to support the idea if requirements, while maintaining deliberate with international.
International customers.
Speaker Change: We increased production capacity at our factories by adding shifts and the coating several hundreds of additional employees to support the surge in demand.
Speaker Change: So last quarter was impacted by multiple continents, and we all stated the quoting new employees, mainly for manufacturing and development projects.
Speaker Change: Oh.
Speaker Change: To now focus on several successful decisions that we have made as part of our long term strategy that can explain definition gets out in the first quarter.
Bezhalel Machlis: The acquisition of IMI was a remarkable success. The synergy between the capabilities of IMI and Elbit Systems enabled us to offer an enhanced portfolio, fulfill the potential of the technology, and increase our market share. There is a significant international as well as Israeli demand for the product that could not have been deployed without the acquisition of IMI. We plan to continue developing precision ammunition and increasing production. The increasing demand requires us not only to operate 24-7 but to grow.
Speaker Change: The acquisition of IMI.
Speaker Change: <unk> success, the synergy between the capabilities of <unk> and Elbit systems.
Speaker Change: Enable us to offer an enhanced portfolio for food the potential of the technological and increase our market share there.
Speaker Change: He is a significant international as well as Israeli demand for the product is that could not have been deployed without the acquisition of family.
Speaker Change: We plan to continue developing precision munition.
Speaker Change: And increased increasing production.
Speaker Change: The increase in demand require of us not only to operate 24 seven.
Bezhalel Machlis: As such, in 2024, we plan to begin operations at our new ammunition production site in Ramat Beka, which will operate in parallel with the IMI facility in Ramat Asheron. A good example of the successful integration of IMI into Elbit Systems was the announcement on May 21st of our awarding a group of contractors, in an aggregate amount of approximately $760 million, for the supply of ammunition to the Israeli Minister of Defense. This will be performed over a period of two years.
Speaker Change: But to grow as such in 2024, we plan to begin.
Speaker Change: As the operations at our new ammunition production site, you know how much pick up.
Speaker Change: We should operate in parallel with I had my facility and a multi shovel.
Speaker Change: A good example of the successful integration of IMI into Elbit system.
Speaker Change: Once the announcement on May 21st Fellow award.
Speaker Change: A group of contract.
Speaker Change: In an aggregate amount of approximately $760 million.
Speaker Change: For the surprises in Indonesia is the Israeli Ministry of Defense the contract will be performed over the period of two years.
Bezhalel Machlis: Since the beginning of this world of the Iron War, Elbit Systems has experienced a materially increased demand for our products and solutions from the Israeli Minister of Defense compared to the demand level prior to the war. Subject to further development, which is difficult to predict, the IMOD increased demand for the company's products and solutions may continue and could generate material additional orders to the company. In addition, on March 26th, we announced that we were awarded an approximately $600 million contract to supply systems to Hanwha Defence Australia for the Australian Land 400 Phase 3 project. This project aims to deliver advanced protection, fighting capabilities, and sensor suite to the Redback Infantry Fighting Vehicle for the Australian Army. The contract will be performed over a period of five years.
Speaker Change: It seems the beginning of this world of island Wall Elbit systems has experienced a material increase demand for our products and solutions.
Speaker Change: The minister of defense compared to the demand level part of the world.
Speaker Change: Subject to further development, which are difficult to predict to predict that I am do increase.
Speaker Change: Increased demand for the company's product and solutions may continue and could generate material additional orders to the company.
Speaker Change: In addition on March 26, we announced that we were awarded an approximately 600 million dollar contracts to supply systems to harmless defense Australia.
Australian Lend 400 phase III project is.
This project aims to deliver advanced protection fighting capabilities and sensor suite to the Red bed Infantry fighting vehicle plus historian on me.
Speaker Change: The contract will be performed over a period of five years.
Bezhalel Machlis: The decision to invest in manufacturing facilities has proven to positively impact our order backlog and revenues, and we hope that our target, as stated in our previous investor conference, will be reached even earlier than expected. In addition to the contract that we received in Israel and in the Netherlands a few months ago, on March 5th, we announced an initial contract of approximately $27 million to supply Iron Fist active protection systems to GDOTS for the upgrade of the U.S. Army Bradley vehicle. The contract will be carried out over a period of 24 months and has significant potential.
Speaker Change: The decision to invest in manufacturing facilities has proven itself positive positively impacting all the bedrock and the news and we hope that our targets as stated in our previous Investor question was would be reached even earlier than expected.
Speaker Change: In addition to the construct that we had received in Israel and in the Netherlands, a few months ago on my team.
Speaker Change: We announced an initial contract of approximately $27 million at all to see.
Speaker Change: Brian Island Fist active protection systems to <unk> to.
Speaker Change: <unk> G D O T S.
Speaker Change: For upgrades in the U S Army Bradley vehicles.
Speaker Change: The contract will be performed over the period of 24 months and has significant potential.
Bezhalel Machlis: The system provides ARM platforms with 360-degree protection from a wide variety of anti-armor threats such as rocket propellant grenades and up to kinetic energy tank rounds in both open terrain and urban environments. This system required years of investment in R&D. There is already a lot of interest in the system, and that is a good example of how our advanced solutions maintain our position as a global leader and contribute to the high demand for our product internationally.
Speaker Change: The system provides on flood phones is 360 degree protection form a wide.
Speaker Change: Alrighty of anti almost threats such as the work it or put in grade and up two kinetic energy bank loans in both open terrain an open environment.
Speaker Change: This system required.
Speaker Change: He is also the investment in R&D.
Speaker Change: So he's already a lot of interest in the system.
Speaker Change: And that is a good example, how our advanced solutions mainly.
Speaker Change: Our position as a global leader.
Speaker Change: And contributes to the high demand.
Speaker Change: Paul.
Speaker Change: Internationally.
Speaker Change: Okay.
Speaker Change: On the night of April 14th.
Bezhalel Machlis: Iran attacked Israel with hundreds of bombs and missiles. On that historic night, Israel, along with its allies, successfully intercepted the majority of the incoming aerial threats with coordinated precision, showcasing the talent of the Israeli Air Force and the strength of its air defense system. Our role in helping to defend against this attack was twofold. Our simulators help train the aircrews, and our strategic command and control centers of the Israeli missile defense system, including the Aero, aid in the interception of the Iranian aerial threat.
Speaker Change: Iran attack, Israel with hundreds of drones and munitions.
Speaker Change: When does that he's still tonight is well along with its allies successfully intercepted the majority of the incoming Helios switch with coordinated precision showcasing the talent.
Speaker Change: Israeli Air Force and the strength of our air Defense systems.
Speaker Change: I have a wall and helping to to defend against these attacks was twofold.
Speaker Change: Our simulators health trend.
Speaker Change: And our strategic command and control centers over the Israeli missile defense system, including zero.
Speaker Change: Eight.
Speaker Change: Interception or was it a wing in areas with Goldman.
Bezhalel Machlis: Our golden almond and citron tree solutions are the heart and brain of the interception system. The synergy of the two elements led to the successful defense of Israel. Now, with that, I will be happy to take your questions.
Speaker Change: Gordon hormones in situ increased submissions I was at heart and brain oriented deception system.
Speaker Change: The synergy of the two elements led to the successful defend.
Speaker Change: Usually.
Speaker Change: And with that I would be happy to take off to take your questions operator.
Speaker Change: Okay.
Speaker Change: Thank you Les.
Speaker Change: Ladies and gentlemen.
Operator: 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 number.
Speaker Change: At this time, we will begin the question and answer session. If you have a question. Please press star one.
Speaker Change: If you wish to cancel your request. Please press star two if you will.
Speaker Change: Using speaker equipment kind of lift the handset before pressing the numbers.
Operator: Your questions will be polled in the order that they are received. Please stand by while we poll for your questions. This is from Pete Skibitski, of Alembic Global. Please go ahead.
Speaker Change: Your questions will be pulled in the order that they're received please standby while we poll for your questions.
Speaker Change: The first question.
Speaker Change: It's from Peter gave me a ski.
Speaker Change: Of Alembic Global Please go ahead.
Peter John Skibitski: Yes, good afternoon everyone, and let me apologize. I'm out of the office right now and on my cell phone, so hopefully you can hear me okay. But see, certainly quite incredible backlog growth in the last couple of quarters. I remember only five years ago, it was about $10 billion in backlog. So this is this, this will challenge your capacity, that's for sure.
Peter Gavemyski: Yes, good afternoon, everyone and let me apologize I'm out of the office right now and on my cell phone. So hopefully you can hear me okay.
Peter Gavemyski: But but.
Certainly quite incredible backlog growth the last couple of quarters I remember only five years ago. It was about 10 billion of backlog.
Peter Gavemyski: So this is this is this will challenge your capacity that's for sure.
Bezhalel Machlis: But let me ask this, because I'm wondering if there's yet another leg up to come, because the U.S. passed a fairly substantial Israeli security supplemental, multiple billions of dollars. I'm not sure how much has flowed yet, but maybe that's what you can give us insight into. To what extent do you think Elbit has exposure to the U.S. security supplemental for Israel? You know, a third, 50 percent, 75 percent, and because it is quite substantial. And over what time frame do you think you would book orders from that funding? Thank you. Hello,
Peter Gavemyski: But.
Speaker Change: Let me ask this because I'm wondering if there is yet another leg up comp because the U S passed up fairly substantial Israeli.
Speaker Change: Israeli security supplemental.
Speaker Change: A couple of billions of dollars.
Speaker Change: I'm not sure how much that has flowed yet, but maybe that's what you can give us insight into.
Speaker Change: To what extent do you think Albert has exposure to the U S securities supplemental or Israel, you know they're.
Speaker Change: A third 50%, 75% and Africa, because it is quite substantial and and over what timeframe. Do you think you would book orders from from that funding.
Thank you.
Bezhalel Machlis: Hello Pete, good morning. I'm, you're right, it's a really remarkable backlog, and I'm sure that we'll be able to handle it and convert it into revenues and profits, and... Yes, it's true Israel is going to get an additional fund, an additional package from the U.S., and Elbit is getting part of it. I cannot mention exactly the percentage or the numbers, but we have part of this package, and we are working with our IMOD right now to discuss the details, and for sure, it will help us to strengthen our position here in Israel as well as in the U.S. Of course, these additional contracts, most of them, will be done in our Elbit system by an Europa subsidiary in our U.S. facility.
Speaker Change: Hello, Good morning.
Speaker Change: Yes.
Peter John Skibitski: Okay, I appreciate that. I guess the last question for me, then?
Speaker Change: I'm you're right it is.
Speaker Change: It's really remarkable bedrock and I'm sure that we'll be able to handle it and to convert it into revenues and profit.
Speaker Change:
Speaker Change: Yes, it's true is really is going to get an additional.
Speaker Change: Funds, an additional package from the U S.
Speaker Change: It is certainly everybody is having part of it I cannot mention exactly the percentage or the numbers, but we have bought.
Speaker Change: This package and we are walking with our with all of them will do right now to discuss the details and for sure. It will help us to strengthen our position here in Israel as well as the U S for schools.
Speaker Change: This these additional contracts with all.
Speaker Change: Or are most of them will be will be done by system with some form of a subsidiary in the U S facility.
Bezhalel Machlis: Can you talk about, you know, workforce challenges and supply chain challenges? Just in terms of your ability to execute on this backlog in a timeframe that your customers want. I know you said you're working 24-7, but just talk about the challenges you face there. Yeah, we will.
Speaker Change: Okay. I appreciate that I guess last question for me then can you talk about you know workforce challenges and supply chain challenges.
Speaker Change:
Speaker Change: Just in terms of your ability to execute on this backlog in a time frame in which your customers want I know you said, you're working 24, seven but just talk about the challenges you face there yeah, well working 24, seven and some of the facilities as well working three.
Bezhalel Machlis: Yeah, we are working 24-7 in some of the facilities; we are working in three shifts. And in order to meet the growing demand, we have invested quite a lot in inventories, and you can see it in the reports. And this is in order to make sure that we don't suffer from any supply chain challenges, or our exposure to supply chain challenges is limited. So we took a strategic decision to increase inventories.
Speaker Change: Three shifts.
Speaker Change: And in order to meet the growing demand.
Speaker Change: We have invested quite a lot in inventories.
Speaker Change: And you can see it in the courts.
Speaker Change: And this is in order to make sure that we don't suffer for many supply chain challenges, though all exposure to the supply chain synergies, though limited. So we took a strategic decision to increase inventories of course, it's cost us money, but.
Bezhalel Machlis: Of course, it costs us money, but this is one way for us to make sure that we can meet our commitments to our customers. And this, on top of that, as was mentioned, we are recruiting hundreds or even thousands of employees just to make sure that we have enough workforce and the Israeli M.O.D. allow us, or we are working with the I.M.O.D. to continue the work we do in Ramat Hasharon in parallel to the new facility in Ramat Beka. So we'll actually have two production sites in parallel that will enable us to meet the demand.
Speaker Change: This is the way we do this is one way.
Speaker Change: For us to make sure that we can meet our commitments to all customers and this is on top of that as was mentioned we are recruiting hundreds and thousands of employees.
Speaker Change: And and just to make sure that we have.
Speaker Change: Enough Wolf work force and.
Speaker Change: The Israeli MLD and allow us when we.
We are walking with I M.
D to continue.
Speaker Change: The work we do in a month is shown in part due to the new facility you know Ahmad Ahmad Becca. So we'll have virtually two production sites in parallel that will enable us to meet the demand.
Speaker Change: Okay. Thank you very much I appreciate it thank you.
Peter John Skibitski: Okay, thank you very much. I appreciate it.
Speaker Change: The next question is from Sheila <unk> of Jefferies. Please go ahead.
Sheila Karin Kahyaoglu: The next question is from Sheila Kahyaoglu of Jeffreys. Please go ahead.
Sheila Karin Kahyaoglu: Good morning guys, and thank you for the time. You've got great top-line momentum, and I know you don't necessarily want to kind of commit to this 12%, but should we continue to think about low double-digit growth for this year just given the sustained level of demand you're seeing out of Israel? And any color you could provide by segment on how we think about the growth trajectory.
Sheila Karin Kahyaoglu: Good morning, guys and thank you for the time.
Speaker Change: Yeah, Great top line momentum and I know you don't necessarily want to Pat.
Speaker Change: Kemet cat.
Sheila Karin Kahyaoglu: And should we continue to think about low double digits growth for this year.
Sheila Karin Kahyaoglu: Just given the sustained level of demand you're seeing out of Israel and any color you could provide it by segment.
Speaker Change: How we think about the growth trajectory.
Sheila Karin Kahyaoglu: Yeah.
Yaacov Kagan: Thank you, Sheila, and good morning. This is Kobi. As you know, we don't provide guidance, but you see the order of backlog, the increase in backlog, which is 29% year over year, and a huge growth also in just this specific quarter. In the end, all the backlog is going to be turned into revenues, so we can. We can predict ongoing revenue growth also for the rest of the year.
Toby: Thank you Sheila and good morning. This is Toby.
Toby: As you know, we don't provide guidance, but that's you see but you see.
Toby: The order backlog the increase in backlog, which is a 29% year over year and a huge growth also in the adjusting that.
Toby: Specific quarter.
Toby: The order backlog is going to be turned to revenues. So we can.
Toby: We can predict.
Toby: Can predict our ongoing revenue growth also for the rest of the year.
Sheila Karin Kahyaoglu: Okay, and maybe, you know, can you talk about how much of it is tied to artillery and ammunition? I know you don't want to put a concrete number around margins for 2024, but I'd be curious if you could provide some high-level puts and takes on the mixed impact of that.
Toby: Okay.
Speaker Change: Maybe can you talk about how much of it is tied to.
Speaker Change: Sure Larry on ammunition.
Speaker Change: I know you don't want to put a concrete number around margins for 2024, but curious if you could provide some high level puts and takes on like the mix impact of that.
Yaacov Kagan: Sheila, I can share two points of view. The first one, as you see in our financial results, there is an increase in our sales in Israel. The revenue in Israel increased year-over-year by $200 million, from $250 million to over $450 million. And secondly, we announced just this week, as Bootsy mentioned, $760 million. A group of orders from the Ministry of Defense. So those are the details that we can provide.
Speaker Change: Sheila I can I can share to two point of view two points of view the first one.
Sheila Karin Kahyaoglu: Okay. All right. I'll jump back in the queue. Thank you.
Speaker Change: As you've seen our financial results there was a there was an increase.
Speaker Change: And our sales in Israel the revenue Israel increased.
Speaker Change: Increased.
Speaker Change: Year over year by $200 million from $250 million to over $450 million.
Speaker Change: And secondly are.
Speaker Change: We announced just this week as books, you mentioned a $760 million.
Speaker Change: Order from a group of orders from the Ministry of Defense.
Speaker Change: So that is those are the details that we can provide.
Speaker Change: Okay, all right I'll jump back in the queue. Thank you, but it's very important issue is very important to mention that as a module to opera news is coming from the international market and it will continue to be this week.
Yaacov Kagan: But it's very important, Sheila, it's very important to mention that the majority of our revenues are coming from the international market, and it will continue to be this way. And we will see.
And we see we see the $7 billion of internal targets that we have that we've.
Yaacov Kagan: And we see the $7 billion, the internal targets that we have, that we see coming over 2026. We see that coming sooner than 2026, with this increased backlog.
Speaker Change: We've sold them coming over 26, we see that.
Speaker Change: Coming sooner than 2026 with this increased backlog.
Speaker Change: Okay.
Omri Efroni: The next question is from Omri Efroni of Oppenheimer. Please go ahead.
Speaker Change: The next question is from Maria <unk> of Oppenheimer. Please go ahead.
Maria: Hi, guys and congrats on a great quarter.
Omri Efroni: Hi guys, and congratulations on a great quarter. I have a couple of questions. The first is you had a huge increase in revenues from Israel, and I wondered, as you now have $760 million in additional munitions contracts, what is the gain, the productivity gain, and gross margin gain you're going to get from getting into full ramp-up and full capacity at the Ramat Beka site compared to Ramat Hasharon?
Maria: A couple of questions, but first you had a huge increase in the red.
Speaker Change: The news from Israel, and I wonder as you've gotten out of the $760 million, though additional a contract with them.
Speaker Change: What is the game at productivity could get productivity gains and gross margin gains you're going to get from getting into full ramp up in full capacity and that I'm gonna take a site compared to children.
Speaker Change: So good afternoon.
Bezhalel Machlis: So, Omri, good afternoon. As we mentioned, we're going to work in parallel, both at the Ramat Hashon and Ramat Beka operational sites, so it's going to double our capacity, and the work there is very intensive and 24-7, and a few shifts every day. We're going to inaugurate the sites in Ramat Beka later this year, so it's not going to be fully operational this year, but it's going to be fully operational next year. So, we're going to enjoy, of course, a better and modern site that will be working gradually increasing in capacity during 2025.
Bezhalel Machlis: And you still need to look at the round-up to be able to complete the first half of 2025. This is a realistic number,
Speaker Change: We as we mentioned we're going to work in parallel both in <unk> and I'm not big opt.
Speaker Change: Operational sites, so it's going to double our capacity.
Speaker Change: The work there is very intensive in the 24, seven and few shifts our everyday.
Speaker Change: We are going to inaugurate this typhoon roadmap Becker later this year.
Speaker Change: So it's not going to be fully operational this year, but but is going to be fully operational next year. So we're going to.
Speaker Change: Enjoy of course are better and our mobile site that would be.
Speaker Change: Working gradually up capacity during 2025.
Speaker Change: And your.
Speaker Change: I couldn't get it done.
Speaker Change: I'm not going to complete in the first half of 'twenty five.
Speaker Change: Another.
Speaker Change: We are going to ramp up production during 2025.
Bezhalel Machlis: We are going to ramp up production during 2025, so I think that the prediction for the first half is a good one.
Speaker Change: That prediction of the first half is a good one.
Okay Gotcha.
Omri Efroni: For the second question from me, I was hoping that you could give some color about the protection systems and against drones, specifically counter-drone systems that maybe Elbit is looking to develop and a little bit more color on the loitering munition as it's proliferated in the Middle East and a lot of our enemies in Israel are using loitering munitions and what Elbit, what opportunities have we seen?
For the second question for me I was hoping that you can get some color about that.
<unk> systems.
Speaker Change: Again.
Speaker Change: Drones.
Speaker Change: Counter drone systems maybe.
Speaker Change: Looking to develop an oligopoly.
Speaker Change: Little bit more color.
Speaker Change: Munis sharing that.
Speaker Change: It's been privileged to add anything to that.
Speaker Change: It's been a lot of the.
Speaker Change: The enemies of Israel.
Speaker Change: Looking at munitions.
Speaker Change: And what they will be one of the.
Speaker Change: Well what opportunities have been seen.
Speaker Change: Thank you.
Omri Efroni: Are you talking about ways to defeat Trump?
Speaker Change: And when it boots, you were talking about ways to defeat wounds.
Bezhalel Machlis: Yeah, both, as the counter-USS systems, the weaponry drones, and additional nuclear munitions for attacking purposes.
Speaker Change: Both I guess the way to think of your own and an additional initial.
Speaker Change: Conditions for a second purposes.
Speaker Change: Okay. So let's divide it into two first do we have a very successful <unk> solution or system, but the NIM of renewal.
Bezhalel Machlis: OK, so let's divide the answers into two. First, we have a very successful solution or system by the name of RIDROM, which can, using unique EW capabilities and an EO and radar package, detect the threat and can block it or jam it. This system is very successful in several countries. We announced, I think it was half a year ago, or maybe even prior to that, a nice contract we won in the Netherlands for this system.
We check in.
Speaker Change: Using our unique <unk>.
Speaker Change: W capabilities.
Speaker Change: And he will in radio package, you can detect threats and can block it or <unk>.
Speaker Change: This system is very successful and several other countries we announced.
Speaker Change: And I think it was a year ago or maybe even prior to that and nice contract. We won in the Netherlands.
Speaker Change: For this system and continues the Dutch voltage is only one customer.
Bezhalel Machlis: I can tell you that the Dutch forces are only one customer for this system, and we see a lot of potential for that in many countries. It can defeat small drones, quadcopters, and it can detect them and defeat them as well. So this is in regards to that. We have a very attractive solution in our portfolio, and there is a big potential for With regard to loitering munition, we have a system by the name of SkyStriker, which has been delivered to many countries as well. It's also a small UAV that can attack as well, and it's a boring market for such a solution for loitering munitions, and we have it in our portfolio with many contractors. Okay, great.
Speaker Change: For this system and we see a lot of potential for that in misery main in many countries and can it can defeat smuggle guns quadcopters.
It can detect them and fit them as well. So this is as regards to that we have a very attractive solution portfolio and there is a big potential for that these days in many countries.
Speaker Change: With regards to loitering munition, and we have a system that is the name of <unk>.
Speaker Change: Which oh this system was delivered to many countries as well.
Speaker Change: So it's a small U Z.
Speaker Change: We can can attack as well.
Speaker Change: And so that's.
Speaker Change: There is a growing market with a solution for low to ammunition and we have it in our portfolio with many constructive.
Omri Efroni: Okay. Okay, great. Great. And congratulations on the great photo. Thank you. Ladies and gentlemen,
Speaker Change: Okay, Okay, great great and congrats on a great quarter.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, if there are any additional questions. Please press star one.
Operator: Ladies and gentlemen, 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 call 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 all participants that a replay of this call will be available for two hours after the conference ends.
Speaker Change: Wish to cancel your request please press star two.
Speaker Change: Please standby, while we poll for more questions.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time.
Before I ask Mr. <unk> to go ahead with his closing statement I would like to remind all participants that a replay of this call will be available in two hours.
Speaker Change: After the conference end.
Operator: In the U.S., please call 1-888-782-4291. In Israel, please call 03-925-5900. And internationally, please call 972-3925-5900. A replay of the call will also be available on the company's website at www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?
In the U S. Please call 188878 to 4291 in Israel. Please call free 90, 55900 and internationally. Please call nine seven to three nine to 55900.
Speaker Change: A replay of the call will be will also be available at the company's website at www Dot Elbit systems Dot com.
Speaker Change: Mr. <unk> would you like to make your concluding statement.
Bezhalel Machlis: And I would like to thank all our employees for their continued hard work and contribution to Elbit Systems' 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.
Speaker Change: I would like to thank all our employees for their continued hard work and contribution to Elbit system success.
Operator: Thank you, Mr. Machlis. This concludes Elbit Systems Limited's first quarter 2024 results conference call. Thank you for your participation. You may now go ahead and disconnect.
Speaker Change: Everyone over the quarter. Thank you for joining us today and for your continued support and interest in our company have a good day and goodbye.
Speaker Change: Okay.
Speaker Change: Thank you Mr. Omar. Please this concludes Elbit systems limited first quarter 2024 results conference call. Thank you for your participation you May now go ahead and disconnect.
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