Q4 2024 Elbit Systems Ltd Earnings Call
Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems 4th Quarter 2024 Results Conference Call. All participants are present in listen only mode. Following manager to informal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded.
You can find all the detailed GAAP financial data as well as the non-GAAP information and a reconciliation in today's press release.
Speaker Change: Koby will begin by discussing the financial results followed by <unk>, who will elaborate on the main events during the quarter and beyond.
Speaker Change: We will then turn the call over to a Q&A session.
Speaker Change: With that I'd like to now turn the call over to Koby Tobey. Please go ahead. Thank you Daniela Hello, everyone and thank you for joining us today.
Speaker Change: The strong set of.
Speaker Change: Financial results for the fourth quarter of 2024 continues to reflect the ongoing demand for our cutting edge solutions.
Speaker Change: We present, another quarter of double digit growth revenue backlog operating profit and non-GAAP EPS.
Speaker Change: During 2024, we'll also delivered $322 million.
Speaker Change: Free cash flow, we are very pleased with these results.
Speaker Change: Diving into the fourth quarter results in detail.
Speaker Change: Fourth quarter revenues increased by 19% to $1.930 billion.
Speaker Change: Compared to $1 billion $626 million in the fourth quarter.
Speaker Change: 23 full year 2024 revenues increased by 14% to 6 billion.
Speaker Change: <unk> and $28 million.
Speaker Change: Sir Pardon me then $975 million.
Speaker Change: At the end of 2023.
Speaker Change: In terms of quarterly revenues by segment Aerospace revenues increased by 27% in the fourth quarter of 2024 compared to the fourth quarter of 2023, mainly due to increased fuel airfields in Israel and Europe.
Speaker Change: Precision guided munitions revenue.
Speaker Change: People run fiber revenue increased.
Speaker Change: <unk> increased by 7% year over year, mainly due to radio systems and command and control system sales.
Speaker Change: Our star and EW revenues increased by 8%, mainly due to electronic warfare and electro optical system sales in Israel.
Speaker Change: NAND revenue increased by 29% due to increase in ammunition and munitions sales in Israel.
Speaker Change: Elbit systems of America revenues increased by 6%, mainly due to increase in night vision systems and medical instrumentation sales.
Speaker Change: Elbit system diverse geographic revenue base as well.
Speaker Change: For your help to reduce revenue volatility and support the long term sustainability of our business.
Speaker Change: Only recently.
Speaker Change: The president of the European Commission stated in the letter that Europe needs to be in charge of its own defense. Subsequently shooting now a dedicated budget 150 billion euros to support this rearmament efforts in Europe.
Speaker Change: For the full year of 2024, Europe contributed 27% of revenues most of America, 22% of revenues Azure Pacific 17% of revenues in Israel contributed 29% of revenues.
Speaker Change: Previous quarter, Israel revenue continued to grow on the back of the sorts of Ireland War. This roof from mainly came mainly from the land segment.
Speaker Change: The non-GAAP gross margin for the fourth quarter was 24, 5% compared to the fourth quarter of 2023 and 20.
Speaker Change: 25, 3% the non-GAAP gross margin for the full year 2024 was 24, 5% compared to the fourth compared to 2023.
Speaker Change: Five 7%.
Speaker Change: GAAP gross margin in the fourth quarter was 24, 1% of revenues compared to $23 five in the fourth quarter of 2023.
GAAP gross margin for the full year 2024, 24% compared to 2023.
Speaker Change: 24, 8%.
Speaker Change: Fourth quarter non-GAAP operating income was 157 $5 million.
Speaker Change: Eight 2% of revenues in the fourth quarter of 2024, as compared to $104 $8 million or six 4% of revenues in the fourth quarter of 2023.
Speaker Change: GAAP operating income for the fourth quarter was one of them was $41 $4 billion or seven 3% of revenues as compared to $67 6 million or four 2% of revenues in the fourth quarter of 2023.
Speaker Change: Full year 2024, non-GAAP operating income was $550 million or eight 1% of revenue as compared to 42 $448 million or seven 5% of revenues in 2023.
Speaker Change: <unk> operating income for 'twenty, one 'twenty 'twenty, four was $489 million or seven 2% of revenue.
Speaker Change: Compared to $369 million or six 2% of revenues in 2023.
Speaker Change: The operating expense breakdown for the full year was as follows net.
Speaker Change: Net R&D expenses were $466 million or six 8% of revenues.
Speaker Change: As compared to $424 million or seven 1% of revenues in 2023.
Speaker Change: The increase is mainly due to investment in expanding our portfolio of precision guided munitions.
Speaker Change: Well as increased investment in high power laser.
Speaker Change: Marketing and selling expenses were seven $375 million.
Speaker Change: Five 5% of revenues in 2024, as compared to $359 million or 6% of revenues in 2023.
Speaker Change: G&A expenses were $311 million or four 6% of revenues 200.
Speaker Change: 2024, as compared to $330 million or five 5% of revenues in the same period last year.
Speaker Change: Financial expenses were $151 million in 2024.
Speaker Change: As compared to $137 million in 2023.
The increase in financial expenses not in 'twenty 'twenty four is mainly due to factory and expenses related to the extension of the premise evacuation agreements.
Speaker Change: The effective tax rate in 2024 was 11, 4% compared to 10, 1% in 2023.
Speaker Change: The tax expenses in 'twenty four.
Speaker Change: And 2023 were.
Were affected by the tax benefits related to adjustments for peer of yours following tax settlements and some of the company's subsidiaries in Israel.
Speaker Change: Our non-GAAP diluted EPS was $2.66 in the fourth quarter of 2024.
Speaker Change: Compared to $1 56 in the fourth quarter of 2023.
Speaker Change: Diluted EPS was $2 for the fourth quarter of two.
Speaker Change: 2024 compared to 67.
Speaker Change: In the fourth quarter of 2023.
Speaker Change: This is the third consecutive quarter of double digit EPS growth.
Speaker Change: non-GAAP diluted EPS was $8 76, and the full year of 2024.
Speaker Change: <unk> to $6 70 in the full year of 2023.
Speaker Change: GAAP diluted EPS was $7 18 for the full year of 2024 compared to $4 82 in 2023.
Speaker Change: Our backlog of orders.
Speaker Change: As of December 31st 2024 was $22 6 billion approximately $4 $8 billion higher than the backlog at the end of 2023.
Speaker Change: Approximately 65% of the current backlog was generated from outside of Israel.
Speaker Change: Approximately 57% of the backlog at the end of December is scheduled to be performed during 2025 and in 2026, while the rest is scheduled to be performed during 2007 and beyond a testimony of the potential of the company's continued growth trajectory.
Speaker Change: Net cash flow provided by operating activities.
Speaker Change: The year ended December 31, 2024 was $535 million.
Speaker Change: Compared to $114 million in the year ended December 31st 123.
Speaker Change: Operating cash flow in 2024.
Speaker Change: It's mainly by the increase in contract liabilities offset by the increase in inventories and trade receivables.
Speaker Change: During 2024, we also delivered $320 million of free cash flow.
It should be noted that our free cash flow generation is usually backend loaded.
Speaker Change: The board of directors has declared a dividend of 60 cents per share.
Mr. Mok: I'll now turn the call over to Mr. Mok, Please <unk> President and CEO voted please go ahead.
Mok: Thank you Colby.
Speaker Change: First and foremost.
I want to express my deep gratitude and appreciation to our global work force pools, and unwavering dedication to our customers worldwide.
Speaker Change: <unk> commitment to remain.
Speaker Change: Exceptional, especially during this period of high demand for our advanced product and solutions.
Speaker Change: This is the fourth quarter interval in which we have delivered double digit year over year growth in revenues.
Speaker Change: Operating profit industrial.
Speaker Change: Backlog has reached a record of $22 6 billion euros doodles.
Speaker Change: EPS has reached a record of $8 $76 per ship.
Speaker Change: Our free cash flow.
Speaker Change: Generation peaked at 320 million U S dollars.
Speaker Change: During the quarter Elbit continued to win meaningful contracts globally and locally.
Speaker Change: These are contracted supply EW and still come self protection suite.
Speaker Change: We need to be in country as well as securing the contract to provide you a mood.
Speaker Change: Official government aircraft with a dual console protection system.
Speaker Change: Advanced communication systems Tuesday, I M D com.
Speaker Change: Counter UAS solutions to a NATO European countries.
Speaker Change: Self protection suite for Israel.
Speaker Change: If 16.
Speaker Change: Aircraft imports August launch artillery systems for German Germany's.
Speaker Change: All sources.
Speaker Change: Continue to invest.
Speaker Change: He was the development of a judge timely solutions to address the overall evolving modern battlefields.
Speaker Change: A year and a half into the conflict, Ed which remains a key strategic partner for the idea.
Speaker Change: Over the past due the company has demonstrated its ability to scale up production massively.
Speaker Change: And meet customers' demands, while maintaining a strong presence alongside the ideas.
Speaker Change: Operating systems in real time during conduct.
Speaker Change: Numerous new technologies capabilities introduced for the first time, leading Z expansion of existing and new contract as well as significant international interest.
Speaker Change: Followings, and Muggy Committee and its subsequent towards proposal defense budgets in Israel are expected to remain elevated.
Speaker Change: To the extent that they are approved.
Speaker Change: The World continues to arm itself.
Speaker Change: This is.
Speaker Change: Manifested in increasing defense budget globally, and especially in Q1.
Speaker Change: Two weeks ago, we witnesses announcements from Germany, and France, the U K regarding the intention to significantly increase the defense budget.
Speaker Change: 2025 and beyond.
Speaker Change: We see a great interest from your technology and portfolio.
Speaker Change: And Ed presence in some European countries via its subsidiaries.
Speaker Change: Big advantage.
Speaker Change: Additionally, we have joint ventures, with leading European defense companies.
Speaker Change: For example, the cooperation with Kansas.
Speaker Change: And the sale of wholesale dealer with system in <unk>.
Speaker Change: Gentlemen.
Speaker Change: In the U S. Elbit is well positioned and prepared for additional opportunities and is in line with the new administration strategy.
Speaker Change: Shifting of modern <unk> solution.
Speaker Change: Syed low low cost with a gel and relevant solutions Esa core principle revolves around mission focus and agility.
Speaker Change: And addressing we'll fight those needs.
Speaker Change: <unk> is an important player in the U S in the industrial base and with successful acquisitions over the yields we are able to roll some of these done.
Speaker Change: Next time.
Speaker Change: This has been a year of significant investment increasing all the capacity to address the growing demand for our products and solutions as.
Speaker Change: As local and global defense spending continues to increase.
Speaker Change: ZIP munition production sites, you know I must because it's partially operational with additional effector with growing production.
Speaker Change: Growing production gradually.
Speaker Change: <unk> will increase during 2025 and so forth.
Speaker Change: By the end of 2025 sites is expenses is expected to be operating with dozens of production lines, while maintaining production at muscle Shoals site until the end of 2026.
Speaker Change: Our new ERP system is enhancing our efficiency.
Speaker Change: Real time data integration.
Speaker Change: 390, <unk> inventory management, and automated work flow improving demand forecasting optimizing logistics and ensuring seamless coordination of course procurement production and distribution and operating.
Speaker Change: A one company operation and language the newly re site either already fully operational.
Speaker Change: The integration of AI to optimize internal processes.
Speaker Change: Baltics in manufacturing and advanced production nine management is becoming a growing part of operations Elbit.
Speaker Change: Elbit is implementing dedicated teams to integrate AI not only into the defense technology solutions, but also across internal company processes, including inventory management.
Slide two and optimization project and project and product management.
Speaker Change: <unk> is a strong emphasis.
Speaker Change: He says this strong emphasis has been placed on improving operational efficiency with AI, playing an important role in various solutions.
Speaker Change: It's our portfolio of solutions continues to grow.
Speaker Change: In a variety of areas, we continue to see our product development focusing on high power laser solutions.
Speaker Change: <unk> systems active protection system, porous artillery and expect extending our guided munition portfolio.
20, <unk> Wolfe with solutions for Lynn L.
Speaker Change: And maritime and more.
Speaker Change: Is it many times tiptoe holds immense potential with a diverse range of relevant product default form leaching.
Speaker Change: Full multiple tissue.
Speaker Change: Our new product include increasing use of AI solutions.
Speaker Change: Elbit systems.
Speaker Change: Strong globally prison.
Speaker Change: Spending Euro North America, Asia, and Israel, combined with our agents and innovative capabilities are driving our continued success is.
Speaker Change: Defense budgets continue to grow globally and they'd be in.
Speaker Change: Enabling us to constantly delivering.
Speaker Change: Impactful results.
Speaker Change: On behalf of myself and say tell company.
Speaker Change: We remain hopeful for the suite and safe return of our postage is still held in Gaza.
Speaker Change: They are always you know thoughts.
Speaker Change: We eagerly await the day zero with then he United with assemblies.
Speaker Change: And with that we'll be happy to take your questions operator.
Speaker Change: Thank you ladies and gentlemen at this time, we will begin the question and answer session. You will have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment kind of lift the handset before pressing the numbers your questions will be pulled in the order. They are received please standby while we poll for your quest.
Speaker Change: <unk>.
Speaker Change: The first question is from Alan Page of Jefferies. Please go ahead.
Alan Page: Hi, guys. Thanks for the question and congrats on the quarter.
Speaker Change: Maybe just on free cash flow you had a pretty great free cash flow year, and I think it was mostly driven by a large contract liability inflow what was that related to.
Speaker Change: Hi, Alan how are you. Thank you for the question.
Speaker Change: What we see.
Speaker Change: <unk> $500 million.
Speaker Change: $535 million to be to be precise.
Speaker Change: The operational cash flow, which is significantly significantly better than the previous years.
Speaker Change: And.
Speaker Change: Also we see expansion in our investment in Capex to $215 million.
Speaker Change: That together creates in the $320 million.
Speaker Change: For your question.
Speaker Change: This is a.
Speaker Change: Leaning on.
Speaker Change: Leaning on contract liabilities that are that.
Speaker Change: That we see.
Speaker Change: Also with some extent expansion of inventories and receivables.
Speaker Change: Hello.
Speaker Change: The next question is from Larry Jack of the New York Times. Please go ahead.
Larry Jack: Hi, lovely to talk to you all today.
Larry Jack: Interested mostly in your export revenues, which I am hoping and I understand and please correct me if I'm wrong that means your export sales are just doing a little math here. If your overall Europe revenues were $6 8 billion.
Larry Jack: And it looks like what 61% of your revenues for export is that would be 484 billion and as sales export sales from Israel last year I just wanted to make sure that those numbers sounded right to you and then also I was curious.
Larry Jack: Why do you think this is that as a time of Israel fighting at least three maybe five fronts.
Larry Jack: In 2020 for why and how Israel and Elbit and there's nothing out there obviously was able to see that.
Larry Jack: So many weapons during this time of war. Thank you.
Larry Jack: Yes.
Laura: Okay. Thank you Laura.
Speaker Change: To answer the first question. Your map is right our experts revenue was $4 8 billion.
Laura: While our Israeli revenue.
Laura: Close to $2 billion.
Speaker Change: He will answer your second question.
Speaker Change: Good afternoon, and one of the advantages of the company and we love to have them.
Speaker Change: Dozens of subsidiaries abroad.
Speaker Change: In the U S Europe and Asia Pacific.
Speaker Change: Also for the 2000 22000 employees, we have worldwide only 14000 and this was the rest of our abroad in all subsidiaries.
Speaker Change: And.
Speaker Change: It really shows the resilience of the company on one hand, we are able to support our local customers who in Israel, but vials subsidiaries, we are able to support our international customers and to continue.
Speaker Change: To export from Israel, as well as via the subsidiary to the global defense needs.
Speaker Change: And the diverse revenue base is one of the big advantages.
Speaker Change: It creates stability and the fact that we have such a wide portfolio in such a global presence is a major part of our strategy.
Speaker Change: Would you say that this is a record high for Elbit exports. During this year or is it a number that's kind of come and gone over the years.
Speaker Change: We are growing to you by you and we see more and more potential for us around the globe.
Speaker Change: In the U S as well as in Asia Pacific.
Speaker Change: We are able to.
Speaker Change: To bring to the market very innovative and operational solutions on one hand, and we're able to be locally to be part of the ecosystem of which countries.
Speaker Change: And so this is a record year for us outside of Israel, but we hope and believe that the potential is huge.
Speaker Change: Big for Us.
Speaker Change: The export activities to continue.
Speaker Change: Volatile from Israel, but the majority the majority is done via our subsidiary with globally.
Speaker Change: Okay. So just to clarify that $4 8 billion in revs.
Speaker Change: Revenues export it that is a record high for Elbit, but you still see potential to grow it in future years correct.
Speaker Change: Correct.
Speaker Change: Thank you.
Speaker Change: The next question is a follow up question from Alan Page of Jefferies. Please go ahead.
Speaker Change: Hi, guys, sorry about that.
Speaker Change: I just wanted to ask on the facility in the South of Israel is that fully operational at this point and how do we think about capacity for additional ammunition volumes from here just given band was such a quest in 2024.
Speaker Change: Okay.
Speaker Change: So we are.
Speaker Change: As you know, we're continuing to expand our capacity and growing capacity.
Speaker Change: The investments that we're doing in our in our premises and in the South where Mac backup do new factory as well as in other other premises in Israel and outside of Israel. We just are not great, but the facilities in the UK and in Germany.
And also in Israel were starting working on there we're not in the room, our tobacco side. So so gradually we're expanding our production to meet to meet the growing demand.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay and can you talk about your expectations for growth the cross.
Speaker Change: And the next regions and end markets and then a few years.
Speaker Change: We're looking at the market.
Speaker Change: You mentioned.
Speaker Change: We see very strong growth in our in.
Speaker Change: And budgets are mostly in Europe.
Speaker Change: With.
Speaker Change: The new old the fresh a 150 billion euros that were announced just recently from the commissioner.
We expect our U.
Very big very big growth in the in Europe.
Bruce: Bruce you mentioned, we have very.
Speaker Change: We are very good were very.
Speaker Change: Very good groups to meet this demand in the dozens of subsidiaries across Europe.
Speaker Change: That is a very strong growth growth trajectory through two hour, but other than that we see we see continued growth in Israel.
Speaker Change: Our backlog increased in 2024 by $3 billion.
Speaker Change: That means that.
Speaker Change: We expect additional growth in Israel as well.
Speaker Change: As your Pacific, which continues to be very strong with higher demand and higher budgets as well.
Speaker Change: Great. Thanks, I'll hop back into queue.
Speaker Change: 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.
Speaker Change: There are no further questions at this time before I ask Mr. Marquis 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 U S. Please call 188878 to 4291 in Israel. Please call zero.
Speaker Change: <unk> nine to 55900 and internationally. Please call nine seven to 390 55900, a replay of this call will also be available on the company's website www Dot Elbit systems Dot com, Mr. Marquis would you like to make your concluding statement.
Speaker Change: I would like to thank our employees again towards the hard work and total commitment to everyone on the call. Thank you for joining us today and for your continued support and interest in our company has a good day and goodbye.
Speaker Change: Thank you. This concludes the Elbit systems L. T D fourth quarter of 2024 results Conference call. Thank you for your participation you May go ahead and disconnect.
Speaker Change: Okay.