Q3 2024 Elbit Systems Ltd Earnings Call

launching system, rocket launcher and rockets, as well as hermits and 100 equipped with advanced payloads.

These are 2 of our flagship business lines, which are in.

globally.

This constructs follow a number of success.

We announced during the quarter.

Our extensive on the effort in the

you resulted in a corn cro to supply high power laser for the iron beam air defense system.

This breaks technological solutions provide a

defense against a variety of threats.

We are extremely proud of this development and believe it will be meaningful and meaningful.

technology

In the morning.

We continue to win new contracts to supply.

Iron fist protection system solution.

The latest contract is for the US Army Bradley.

This solution is aimed at enhancing the self defense capabilities.

Of the on platforms against threats.

It is characterized by high performance and low volume, low weight.

Info requirement.

The system provides armed platforms with 260 degree protection from a wide variety of anti.

Almost, such as antitank rockets, guided missiles.

US and loitering threats in both open terrain and complex.

environment.

Finally, Ebit system was awarded a

A partner of the Israeli Defense Ministry.

The

2024 Israel Defense Prize.

Or 3 separate innovative technological.

This includes a price for the

All of the golden almond battle management system.

In the.

And a bit of

A system was also recognized for its role in developing technology for the IDF

as well as for a very classified.

Our ongoing success has been driven.

By two men by

Tuki extensive.

geographical presence of North America, Asia, and Israel.

I wide portfolio of advanced technological solutions which have proven highly effective and increasing global defense budgets.

On behalf of myself and the company, we continue to deeply wish for the immediate release of all hostages held captive in Gaza.

They are constantly in our hearts and minds.

And we eagerly await.

for the safe return home.

And with that I will be happy to take your

Questions.

I

The question and uh congrats on the quarter.

with.

Um, I just wanted to ask.

About the iron beam contract that you received in the quarter.

Um, I think

Hi guys thanks

one of

The

First, like near term.

Uh, high powered laser contract that you've received unless I'm mistaken and I just wanted to.

I wondered if you could talk about that opportunity over the next 3 to 5 years and how you think about that program, uh, contributing to revenue.

Thank you, Alan.

We inhabit, we believe that energy weapons are

growth for the company and we invest in technologies and

In several domains

One of them is power.

Um, we the great advantages for high power lasers actually.

based on

You can defeat.

Uh, threats in a very economical way.

Um, we hope.

Floyd next year.

to

Together with IOD, the first land.

High power laser together with Raphael.

Ion bin system.

However, in parallel, we continue when we see a lot of potential for systems abroad as well.

In parallel, we continue to develop the urban solution.

solution which we lead in Albert has great potential.

And

activating hypers will enable us to reach.

Long distances and to increase the effectiveness of the system.

We are world leader with such technologies and we see a growing potential for hyper lasers.

You know

and for additional energy weapons are you thinking about, um,

opportunity in that region going forward and

Um

The demand environment.

In Europe over the next few.

Hey, hi, this is Kobe.

So, we experienced this quarter of 17% increase in our elders of America's year over year.

of our position in the market and as we mentioned higher night vision cells are medical instrumentation fails.

And this is because

Those are the, the principal issues. So our position in the US, we believe that we're positioned to traditional growth.

And uh

Uh, in the future.

As to the European market, the European market is, we believe we'll experience higher demand as the push for higher defense expenditure.

We come and of course the threat that this market is experiencing.

And then just yesterday announcement of 330.

$5 billion

Of European marketing of two for high runner systems both the pools.

And the UAS did not have its mail.

Experiencing this potential for the company for additional growth in the future.

Thank you, um, I'll leave it there.

Thank you very much.

Uh hello, it's Ella. Uh, I can't hear you very well.

Hello. Good afternoon. We hear you very well, great. OK, thank you. Uh, first I would like to to to congratulate you.

We

on the results and on the exceptional growth and uh I would like to discuss the

A bit further your growth targets and first er the growth of 2.

2025 and uh we actually don't hear so much about your

Plus

Beyond 2025. I know that it will be depending very much on the on the on the political end.

And geopolitical environment, but still I'm sure you have some assumptions do seem to the girls beyond.

2526, a steady or you have a, uh, other, other uh milestones that

you know, leading you to some more growth jumps.

Uh good afternoon.

as we see, uh, as you can see from our backlog, the the company will continue to grow in the, in the coming years, and we accept, we

We

2 digit growth uh in the in the coming quarters.

And in order to deliver the

the volume of the book we have.

He

Uh, we see, uh, growing demand, uh, all over the world.

solution.

We see it in Europe, we see it in the US, we see it in the Far East and the.

Therefore, I expect the company to continue to go on the future of the world.

It's difficult for me right now in our backlog, by the way, covers not just 2025. It covers also the year after 2025, we have a nice coverage for 26 and

and beyond

It's difficult for me to predict what would be exactly the numbers.

Uh, in the far future, but I can, I'm quite confident that the company

We'll continue to grow in the future based on the demand we see right now in the markets.

Um I, I.

I, I would, I would, I would like, I would like to go.

If, if, if

Yes.

I just want to say that you know that our internal goal.

to reach 7 billion by 2026.

We're almost there already.

So it's quite obvious that next year we will be above 7 billion and as I said, we

expect to go further.

25 and 26.

And actually the main um

bottleneck right now to

in order to convert the backlog to revenues and to profit.

His execution is our ability to produce.

stuff in order to meet this.

We are enhancing our capabilities.

are going to inaugurate quite soon a new facility for your visa.

activate

We are going

The production line in Beka.

Together with the production line and you know, the current one that we have in Sharon.

And we are expecting quite a lot.

our production lines for communication for other stuff.

So there is a growing demand that the clock is.

also

is quite high.

And I expect the company to continue to go on in the coming years.

Well,

If I can interpret your, your, um, uh, what, what you say, you, you actually mean that even

beyond 26 you expect not only these numbers to be sustainable, but you expect steady growth. You don't know.

which pays but you you expect the steady growth to continue. I think that in general the answer is yes.

And I didn't mention of course acquisitions, as you know.

of strategy. We continue, we know how to merge companies into orbit.

And we are looking intensively.

Uh

For additional acquisitions for the company.

We are looking for new technologies which we missed in our portfolio and we are looking, we're also looking for new positions.

In the international market.

Yeah thank you.

Also.

Thank you. The following

question actually refers to your internal and external target, which is the 10% uh no uh

operational uh income and and the question is, we are now in a quite positive.

uh.

Um, I mean, it's environment in terms of a.

A conversion

And uh you still have uh uh I'm not sure that optimal, but quite positive value of the hedge.

Uh, given the the time that passed so does it mean that most of the

improvement will be through operational income unless we and we should less expect dramatic.

improvement in the gross margin.

So, so I like Kobe, um,

As, as you know, we, we

providing now

segments

Um-hum and if you go and look and compare uh the profitability.

For our land segment.

Uh, between 23 and 22, we will, we will provide next quarters for 2024.

you compare the same one for LB System America.

Numbers

You see that, uh, in both segments, as we mentioned.

Uh, we are expecting our internal goal.

are to to have uh increased stability expansion.

Uh, on, on the basis in force increased increased.

activity in the land you saw.

Uh, previous quarter 37% growth in revenue this quarter 24%.

Um-hum in the last segment.

a lot of operational efficiency in the in the land segment.

And also huge improvement in all the systems of America. We took many actions.

systems of America to improve profitability.

So we are very happy with the increased 17%, uh, your, your, uh,

So

out the systems of America for us is is a huge success and we're very happy with this with this extension in revenues.

Which will, uh

also for expansion in uh in the profitability margin.

So those are the two places that uh that we, we expect this uh possibility and

and, uh, increased efficiencies and, uh, the other, the other segments, the other three segments keep uh reflect in the possibility.

numbers while extending the revenue as well.

OK, thank you very much for taking my question, yes I would like to say that we are

starting to see results to the investments we made in the new ERP system.

Um, which, uh,

In the past, but right now the entire company is uh on one platform.

has cost us a lot

And it's a very good way.

To reduce costs and to be more efficient and we

very happy that we have

The system already today.

And we continue to evaluate our portfolio all the time.

And we look for activities.

which are less energetic or less or with uh low GP.

And we are looking for a way to them.

regularly and we continue in parallel of cooking for new positions, we are looking into the portfolio all the time to

That's something we do

To look for elements which are less relevant.

that we did 2 years ago with a.

Uh, thank you. I'm if if I make another question on this topic.

You, you mentioned a few times that you are going and you actually starting to see the improvement brought by improvement of

The contracts some of them are linked and and and other improvements and, and of course lesser inflation.

in the United States, so one do you think this impact will be at its peak, the strongest.

Uh, thank you, Ella. So, so we, we experience, we experienced, uh, fixed price contracts without this escalation closes in.

Mostly of America.

Um-hum. We flashed all the

fixed the price the contract with uh with those prices which were

A relatively

profitability in night vision completely.

Uh, in, uh, Spartan.

expect to flush those contracts next year.

So most of, uh, most of the fixed price contract with with lower profitability.

Which happened because of

Uh, the price, uh, pricing index in escalation in the US.

OK, thank you very much for taking my questions.

Thank you.

Hi, uh, can you hear me?

Sure. Yeah.

Question

Thank you for the question. Congratulations on the good results. I had a I have a question about the, the

Cup and in the past maybe 2 or 3 years it was just a little bit under 200 million a year before acquisitions of uh

other other companies?

Uh,

but the increasing the backlog and the the scale of the operation, do you think you're going to need more, uh, topics in the coming years.

Uh, hi guys, uh, as, as we mentioned, um.

We had a very big but he mentioned before where the

A very big investment in the ERP system which uh work around $150 million cost me across several years.

Uh, and the, we actually inaugurated the system. The system is fully operational now.

Uh

er

So, uh,

Across the company also.

Uh this is uh uh this was this is behind us, so, so what we see currently is is additional investments.

Roman facility.

Which will wind down during the next year, so, uh, we estimate the same level of capex investment.

In 2025, uh,

this year

Uh, with the, with the winding down of the investment and uh the concluding document.

investment in the ERP system.

OK, thank you and uh just to to make sure, are you still with the target of 10%.

profit and uh uh medium term maybe 226 and beyond.

So, so, as, as we mentioned, uh,

The internal, uh, we expect, uh, to reach the 10% uh no gap operational.

And then just, those are

Profitability in 2026.

And, uh, as to our UPS, uh,

Uh,

We, we expect our internal dose is, is to reach $9 next year in 1.

in uh in 2026. So actually it's doubling the EPS.

From uh from 2023 to 2026.

OK, thank you very much.

Thank you guys.

There are any additional questions.

R1.

breath

If you wish to cancel your request.

from David Fingold of Dynamic Funds.

are too

while we.

Please go ahead.

Morning

Hi David, good morning. Good afternoon to you.

The next question

Sorry, um, the, uh, the laser contract, is that for both the airborne and the land-based version.

there is a contract you got David.

No, no, the las

The la contract we got.

is a production contract.

For

The system.

OK, so it's only for the ground system and I guess is and Raphael's the system's integrator that's what the.

integrators, the order is splitted.

Uh, they got half of it, got half of it from the IOD.

And this is

The production order of the majority of the concluded.

In parallel, we continue to develop the urban version of the system.

As a prime contractor.

OK, and then that is, is that research and development, or is there or there's a there's a development contract.

Part of it is the development contract and part of it with our own R&D.

Uh

OK, uh, do you disclose the size of the development contract? No.

No, we cannot.

OK.

Anyway, thank you.

Thank you. Thank you, David.

The next question is from

Stanley Bogan of Bernstein.

Please go ahead.

Yes, what is the significance of the decline in sales in Europe.

considering what's going on now in the Ukraine.

Uh, hi, Stanley, thank you for the question. So, um, we.

We, uh, as, as you see, uh, we, we have, uh, increased the, we almost doubled the sales in in Israel.

And, uh, while we,

still win contracts in Europe.

Uh, we keep mostly,

We, we keep mostly, uh, the production with our production limit limitations and.

Uh

The catastrophe

Uh, we keep the same uh sales in Europe, uh, mostly if you look at 3 quarters, there is a not a significant decline.

a small decline in the 3 quarters of revenue.

And, uh, while our backlog in uh in Europe increasing.

So, uh, we hope that with increased production.

capacity that we're working on and uh as he mentioned, our efforts to double the production of the munition sites.

Which was good for this.

For, uh, to be in a position where we can, uh, we can ship it quicker and uh fulfill our backlog in Europe and other places around the world.

the backlog in Europe and of course, of course we need to supply on this battle.

Thank you.

There are no further questions at this time. Before I ask Mr. Mali to go

ahead with his closing statement. I would like to remind participants that a replay of this call will be available 2 hours after the conference ends.

In the US,

1888782.

4291

In Israel, please call 03925590

And internationally, please call 972-392-55900, a replay of the call will also be available.

At the company's website www.albertsystems.com.

Mr. Mas, would you like to make your closing statement.

Thank you.

I would like to welcome

Because

Good.

Thank you very much.

I'd like to thank our employees again for the hard work and dedication 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

includes the Ebert Systems LTD 3rd quarter, 2024 results.

Thank you for your participation. You may go ahead and disconnect.