Q1 2025 Elbit Systems Ltd Earnings Call
Okay.
Yes.
[music].
Ladies and gentlemen, thank you for standing by.
Unknown Executive: Welcome to Elbit Systems first quarter 2025 results conference call.
Speaker Change: Welcome to Elbit systems first quarter 2025 results conference call.
Speaker Change: All participants are at present in listen only mode.
Unknown Executive: Following management's formal presentation, instructions will be given for the question and answer session.
Speaker Change: Following managements formal presentation instructions will be given for the question and answer session.
Speaker Change: As a reminder, this conference is being recorded.
Unknown Executive: And now I'd like to hand the call over to... vice-president. Thank you.
Speaker Change: I would now like to hand, the call over to MS. Daniella Finn.
Daniella Finn: Elbit systems, Vice President of Investor Relations. Please go ahead.
Unknown Executive: Thank you, Leighton.
Speaker Change: Thank you Nathan.
Daniella Finn: Good day, everyone, and welcome to our first quarter 2025 earnings On the call with me today are Butsi Machlis, President and CEO of Elbit Systems, and Kobi Kagan, CFO. Before we begin, I would like to point out that the safe harbor statement in the company's scratch release issued earlier today also refers to the content of this contract. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-gap information provides additional detail to help understand the performance of the unvaried You can find the detailed GAAP financial data, as well as the non-GAAP information and the reconciliation, in today's press release.
Speaker Change: Everyone and welcome to our first quarter 2025 earnings call on the call with me today are booked to Mark Smith, President and CEO of Elbit system, and Toby Cajun CFO.
Speaker Change: Before we begin I would like to point out that the safe Harbor statement in the company's press release issued earlier today also refers to the content of this conference call.
Speaker Change: As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information.
Speaker Change: We believe that this non-GAAP information provides additional detail to help understand the performance of all very good.
Speaker Change: You can find the detailed GAAP financial data as well as the non-GAAP information and the retail creation.
They expected.
Daniella Finn: Today we will begin by providing a discussion of the financial results, followed by Gutzi who will talk about some of the significant developments during the quarter and beyond.
Speaker Change: We will begin by providing a discussion of the financial results.
Speaker Change: Let's see who will talk about some of the significant developments during the quarter and beyond.
Daniella Finn: We will then turn the call over to question and answer.
Speaker Change: He will then turn the call over to question and answer session.
Kobi Kagan: With that, I would like to now turn the call over to... Toby, please go ahead. Thank you, Daniella. Hello, everyone, and thank you for joining us today. The strong set of results published earlier today continues the trend we've seen over the past few quarters of strong revenue growth and margin expansion. This quarter is the fourth consecutive quarter in which we publish double-digit growth for revenues, backlog, operating income, net income, and DPS. We are very pleased with these results. We continue to make a concerted effort to improve our free cash flow. And I'm happy to announce that in this quarter, we presented strong free cash flow totaling $161 million.
Speaker Change: With that I would like to now turn the call over to Koby Tobey. Please go ahead. Thank.
Thank you Daniela and Hello.
Speaker Change: Hello, everyone and thank you for joining us today.
Speaker Change: The strong set of results published earlier today continues the trend we've seen over the past few quarters of strong revenue growth and margin expansion.
Speaker Change: This quarter is the fourth consecutive quarter in which we publish double digit growth for revenues backlog operating income net income and EPS.
Speaker Change: We are very pleased with these results we continue to make a concerted effort to improve our free cash flow and I'm happy to announce that in this quarter, we presented strong free cash flow totaling $161 million.
Kobi Kagan: I will now highlight and discuss some of the key figures and trends in our financial results. Press photo revenues were $1,896,000,000. compared to $1,554,000,000 in the first quarter of 2024. In the first quarter of 2025, Europe contributed 24%, North America 21%, Asia-Pacific 18%, and Israel contributed 32% of revenues. Demand continues to be robust in all key geographies. Gap gross margin in the first quarter was 24% of revenues compared to 24.1% in the first quarter of 2024. The non-GAAP gross margin for the first quarter was 24.3% compared to 24.7% in the first quarter of 2024. The first quarter GAAP operating income for the first quarter was $149.7 million or 7.9% of revenues versus $105.4 million or 6.8% of revenues in the first quarter of 2024.
Speaker Change: I would now highlights and discuss some of the key figures and trends in our financial results.
Speaker Change: First quarter revenues were $1.896 billion.
Speaker Change: Compared to $1.554 billion in the first quarter of 2024.
Speaker Change: In the first quarter of 2025, Europe contributed 24% North America, 21% Asia Pacific, 18% in Israel contributed 32% of revenues.
Speaker Change: Demand continues to be robust in all key geographies.
Speaker Change: GAAP gross margin in the first quarter was 24% of revenues.
Speaker Change: Third to 24, 1% in the first border of 'twenty 'twenty four.
Speaker Change: The non-GAAP gross margin for the first quarter was 24, 3% compared to 24, 7% in the first quarter of 'twenty 'twenty four.
Speaker Change: The first quarter GAAP operating income for the first quarter was $149 $7 million or seven 9% of revenues versus $105 4 million or six 8% of revenues in the first quarter of 2024.
Kobi Kagan: Non-GAAP operating income was $165.1 million or 8.7% of revenues compared with $121.6 million or 7.8% of revenues in the first quarter of last year.
Speaker Change: non-GAAP operating income was $165 1 million or eight 7% of revenues compared with 121 $6 million or seven 8% of revenues in the first quarter of last year.
Kobi Kagan: The operating expense breakdown in the first quarter was as follows. Net R&D expenses were $114.3 million or 6.1% of revenues compared to $98.5 million or 6.3% of revenues in the first quarter of 2024. Marketing and selling expenses were $100.9 million or 5.3% of revenues versus $89.1 million or 5.7% in the first quarter of 2024. G&A expenses were $89.4 million or 4.7% of revenues compared to $81.2 million or 5.2% of revenues in the first quarter of 2024. Financial expenses were $39 million in the first quarter compared to $31.2 million in the first quarter of 2024. The increase in financial expenses in the first quarter of 2025 was mainly due to the hedging transaction and the net effect of changes in the exchange rates of different currencies in which the company operates.
Speaker Change: The operating expense breakdown in the first quarter was as follows.
Speaker Change: And that's all R&D expenses were one of the <unk> and.
Speaker Change: $14 3 million or six six.
Speaker Change: Six 1% of revenues.
Speaker Change: <unk> to $98 5 million or six 3% of revenues in the first quarter of 2024.
Speaker Change: Marketing and selling expenses were 100 points and $9 million.
Speaker Change: Five 3% of revenues versus $89 $1 million or five 7% in the first quarter of 2024.
Speaker Change: G&A expenses were $89 $4 million or four 7% of revenues compared to $81 $2 million or five 2% of revenues in the first quarter of 'twenty 'twenty four.
Speaker Change: Financial expenses were $39 million in the first quarter compared to $31 $2 million in the first quarter 2024.
Speaker Change: The increase in financial expenses in the first quarter was 20 to 25 was mainly due to the hedging transaction and the net effect of changes in the exchange rates of different tolerances in which the company operates.
Speaker Change: Okay.
Kobi Kagan: We recorded a tax expense of $16.1 million in the first quarter, compared to $11.6 million in the first quarter of 2024. The effective tax rate in the first quarter of 2025 was 13.9%, compared to 14.6% in the first quarter of 2024. Gap diluted EPS was $2.35 for the first quarter of 2025, compared to $1.65 in the first quarter of 2024. Our non-gap diluted EPS was $2.57 for the first quarter of 2025, compared to $1.81 in the first quarter of 2024.
Speaker Change: We recorded a tax expense of $16 $1 million in the first quarter compared to 11 $6 million in the first quarter of 2024.
The effective tax rate in the first quarter of 2025 was 13, 9% compared to 14, 6% in the first quarter of 2024.
Speaker Change: GAAP diluted EPS was $2 and 35.
Speaker Change: For the first quarter of 2025 compared to $1 65 in the first quarter of 'twenty 'twenty four our non-GAAP diluted EPS was $2 57.
Speaker Change: For the first quarter of 2025 compared to $1 81 in the first quarter of 'twenty 'twenty four.
Kobi Kagan: Quarterly segment revenue for the first quarter of 2025. Aerospace revenue increased by 20% year-over-year, mainly due to increase in precision-guided munition sales in Israel and Asia Pacific. CIFRA and cyber revenues increased by 12% year over year, mainly due to increase in radio systems and command and control system sales in Israel and in Europe. EyeStar and EW revenue increased by 4% in the first quarter of 2025, mainly due to electro-optic system sales. Land revenue increased by 48% in the first quarter of 2025, mainly due to increased ammunition and munitions sales in Israel and in Europe. Elbit Systems of America revenues increased by 18% due to the increase in warfighter systems and medical instrument sales.
Fortunately segment revenue for the first quarter of 2025 aerospace revenue.
Speaker Change: We spent 20% year over year, mainly due to increase in precision guided munitions sales in Israel and Asia Pacific.
Speaker Change: Super I'm, sorry, but revenues increased by 12% year over year, mainly due to increase in radio systems and command and control system sales in Israel and in Europe.
Speaker Change: Our store and E. W revenue increased by 4% in the first quarter of 2025, mainly due to electro optic system sales.
Speaker Change: Land revenue increased by 48% in the first quarter of 2025, mainly due to increased ammunition ammunition sales in Israel and in Europe.
Speaker Change: Elbit systems of America revenues increased by 18%.
Speaker Change: Due to the increase in more Pfizer systems and medical information sales.
Kobi Kagan: Our order backlog as of March 31, 2025 was $23.1 billion, $2.7 billion higher than the backlog at the end of the first quarter of 2024. Approximately 66% of the current backlog is attributable to orders from outside of Israel. Approximately 51% of the current backlog is scheduled to be performed due to the remainder of 2025 and during 2026, and the rest is scheduled for 2027 and beyond. Net cash provided by operating activities at the end of the first quarter 2025 was $184 million as compared to $6 million cash used. in the first quarter of 2024. Operating cash flow during the quarter were affected mainly by the increase in net income and an increase in contract liabilities, which were offset by the increase in inventories and trade receivables.
Speaker Change: Our order backlog as of March 31st 2025 was 20, $23 1 billion to $7 billion higher than the backlog at the end of the first quarter of 2024.
Speaker Change: Approximately 66% of the current backlog is attributable to orders from outside of Israel.
Speaker Change: Approximately 51% of the current backlog is scheduled to be performed Youll do remain the remainder of 2025 and during 2026 and the rest is scheduled for 2027 and beyond.
Speaker Change: Net cash provided by operating activities at the end of the first quarter 'twenty to 'twenty five was $184 million as compared to $6 million cash used.
Speaker Change: In the first quarter of 2024.
Speaker Change: Operating cash flow during the quarter were affected mainly by the increase in net income and an increase in contract liabilities, which were offset by the increase in inventories and trade receivables.
Kobi Kagan: During the first quarter of 2025, we also delivered $161 million of free cash.
Speaker Change: During the first quarter of 'twenty to 'twenty five we also delivered $161 million of free cash flow.
Kobi Kagan: The Board of Directors has declared a dividend of 60 cents per share.
Speaker Change: The board of directors has declared a dividend of 60 cents per share.
Daniella Finn: I will now turn the call over to Mr. Machlis, RBCO. Buzi, please go ahead. Thank you, Kobi.
Speaker Change: I will now turn the call over to Mr. Marc Lewis L. B C O boutique. Please go ahead.
Speaker Change: Koby.
Bezhalel Machlis: I would like to begin by thanking our Elbit employees around the world for their hard work and ongoing support and commitment to our customers. These results would not have been achieved without our ongoing commitment and dedication. During Q1 2025, we have seen a dynamic trend of strong growth. continue. as demand in the defense, but business remains high. This is the fourth quarter in a row in which we have delivered double-digit year-over-year growth in revenues, operating profit, net profit, and backlog. Our backlog has reached a record of $23.1 billion, up 40% from last year. For the period of the last four quarters, our gap EPS is almost 8%, and the non-gap EPS is at $9.50.
Speaker Change: I'd like to begin by thanking all Oh Elbit employees, along the world for their hard work and ongoing support and commitment to our customers.
Speaker Change: The result would not have been achieved results all ongoing commitment and dedication.
Speaker Change: During Q1 2025, we have seen a dynamic trend.
Speaker Change: <unk> rules.
Speaker Change: <unk>.
Speaker Change: As demand in the defense business remains high.
Speaker Change: This is the fourth quarter, you know rule in which we have delivered double digit year over year to growth in revenue operating profit net profit and bedrock.
Speaker Change: Our backlog has reached a record of $23.1 billion.
Speaker Change: <unk> 40 per cent for most of you.
Speaker Change: For the period over the last four quarters quotas.
Speaker Change: GAAP EPS is almost 8% and non-GAAP EPS is at nine and a half.
Bezhalel Machlis: The ongoing conflicts in Ukraine and locally here in the Middle East continue to dominate the geographical agenda. These are evidence in government decision-making around the world to increase defense budget. coupled with ongoing rhetoric by President Trump for NATO allies. For NATO allies, to increase defence spending is propelling this super cycle we are seeing in defence spend. where we continue to see strong demand for Elbit's products and advanced technological solutions as evident in our growing backlog and sales. Last week, the METO Secretary General presented a proposal for a plan to further increase defense spending in Europe to gradually reach 5% of GDP by 2032, which is expected to be presented at the next NATO Summit at the end of June.
Speaker Change: The ongoing conflict in Ukraine, and locally here in the middle East continue to dominate.
Speaker Change: The graphical agenda.
Speaker Change: These are evident.
Speaker Change: In government decision, making around the world to increase defense budget.
Speaker Change: Coupled with ongoing with Toby by President Trump for NATO allies.
Speaker Change: For NATO allies to increase defense spending is propelling this super cycle, we all see in defense spend.
Speaker Change: Well, we continue to see strong demand for <unk> products and advanced technological initiatives is evident you know growing backdrop and so.
Speaker Change: Last week, the make too so.
Speaker Change: Secretary General Secretary General presented the proposal for a plan to further increase defense spending in Europe to gradually.
Speaker Change: Reached 5% of GDP by 2032.
Speaker Change: Which is expected to be presented at the mixed NATO summit at the end of June.
Bezhalel Machlis: We believe our growth geographical exposure to Israel, US, Europe, and Asia-Pacific is unique. During the quarter and beyond, we continued to receive orders for our solutions in artillery, ammunition, electronic warfare, radio systems, and self-protection solutions, among others. For example, we want a contract totaling approximately $100 million to provide joint national digital fire command centers for European countries. or contract totaling $80 million to supply the IMOD with advanced airborne self-protection suits for the F-16I fleet, designed to further secure the safety of the F-16I aircraft, enabling it to operate safely in hostile environments. Another self-protection solution was won, this time a maritime EW self-protection solution for a free gate installation to NATO European countries.
Speaker Change: We believe our growth school bus, we call exposure to Israel U S Europe and Asia Pacific is unique.
Speaker Change: During the quarter.
Speaker Change: And beyond we continued to receive orders from fall solutions to Louie ammunition electronic warfare radio system and it will.
Speaker Change: <unk> solutions among others.
Speaker Change: For example, we won a contract totaling approximately $100 million.
Speaker Change: To provide joint National digital players command centers for European country.
Speaker Change: Oh contract totaling $80 million to suppliers of iron Moody with.
Advanced <unk> sales, particularly suits for the F 16, I fleet designed to further secure the safety of the F 16 aircraft, enabling it to operate safely in wholesale environment.
Speaker Change: And other self protection solution was warm this time American EW self water consuming shoot for if we gate installation too late to European country.
Bezhalel Machlis: Elbit, the Cyber Mark 4 countermeasure dispensing system, is an advanced maritime electronic warfare solution designed to effectively counter complex missile attack scenarios. An additional contract secured to a NATO-European country was to supply our redrone counter-UAS solution. This multi-sensor and multi-mission system is part of Elbit's advanced EW, radar, and SIGINT portfolio, enabling the rapid detection and location of multiple drones simultaneously. During the quarter, we continued winning contracts for our advanced rocket munition launcher PULSE, precise and universal launching system. This time, together with KNDS, it was Germany who selected our pool solution, which has now been selected by multiple European countries, including Germany, the Netherlands, and Denmark, among others.
Speaker Change: That'd be you'll see the full contour images dispensing system is an advanced memory time electronic warfare solutions designed to effectively come to complex mis that attack scenarios.
Speaker Change: And additional contracts secured to a NATO country well.
Speaker Change: As to supply a redo on come to U S solution.
Speaker Change: This multi sensor and multi mission system is bolt of Elbit advanced EW read, though and see it.
Speaker Change: Portfolio, and enabling rapid detection and location of multiple drones simultaneously.
Speaker Change: During the quarter, we continued winning contract for advanced Wolcott munitions and field force by size and Universal launching system <unk>.
Speaker Change: This time to graduate who can do this it will Jill money, who selected our full solution, which has now been selected by multiple European countries, including Germany, The Netherlands, and Denmark among buses.
Bezhalel Machlis: testimony of its effectiveness in enhancing defense capabilities in modern battlefields. Additionally, we won a $130 million contract to yet another European NATO country during the quarter. The Scalable Pull System enables a variety of ranges to be used, starting from 35 km up to a range of 300 km. these agile and scalable features of this advanced and versatile artillery rocket system coupled with couple of launching a one range of rocket types from a single platform has been a key win. by our customers versus our solution.
Speaker Change: Testimony or effectiveness.
Speaker Change: Enhancing defense capabilities.
Speaker Change: In modern Butterfield.
Speaker Change: Additionally, we want a $130 million contract to yet another European NATO countries during the quarter.
Speaker Change: The scalable pool system enables the variety of range to be used starting from 35 kilometer up to a range of 300 kilometers.
Speaker Change: A jail and scalable features.
Speaker Change: This advanced and versatile ought to look at system coupling with couple of launching one wage appropriate diets form a single platform.
Speaker Change: Has been a key win.
Speaker Change: By our customers.
Speaker Change: Our solution.
Speaker Change: Yes.
Bezhalel Machlis: In February, we showcased our latest development in air defense technology at the Aeron India Show. Elbit's innovative portfolio featured solutions including unmanned aerial systems, directed in-front countermeasure technology, electronic warfare capabilities, precise guided munition, and our helmet-mounted displays, among others. I am pleased to say that there was a strong interest in our product displays. We continue to see a growing amount of interest in the iron beam system, the high-power laser solution which is expected to be operational by the end of 2025. The laser component of the Iron Bin solution developed by Elbit is intended to provide a robust defense against a variety of incoming threats.
Speaker Change: In February we showcased our latest developments in air Defense technology.
Speaker Change: Indias show.
Speaker Change: The innovative portfolio Pritchard solution, including unmanned aerial system.
Speaker Change: They could inform countermeasure technology.
Speaker Change: Electronic warfare capabilities, but besides go dig munition and our helmet mounted displays among others I am pleased to see that there was a strong interest product displayed.
Speaker Change: We continue to see growing amount of interest in the island build system. The high power laser solution, which is expected to be operational by the end of 2025.
Speaker Change: As a component of that I wouldn't build Vince solution developed by Elbit is intended to provide a boost defense against a variety of incoming strikes.
Bezhalel Machlis: The $200 million contract announced back in October 2024 positioned Elbit as an Israeli Laser Center, and a global leader in high power laser technology, both for land and urban solutions. We shall continue to update you on development in this area.
Speaker Change: $200 million contract announced back in October 2020, full positioned Elbit is an Israeli.
Speaker Change: Need laser center and a global leader in high power laser technology, both for lens, enabling solution.
Speaker Change: We shall continue to update you.
Speaker Change: On development in this area.
Bezhalel Machlis: And with that, I will be happy to answer your questions.
And with that I will be happy to answer your questions operator.
Unknown Executive: Operator. Thank.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you Les.
Unknown Executive: Ladies and gentlemen, welcome to the conference. Next time we will begin the question and If you have a question, please press... To cancel your request, please If you are using speaker equipment, kindly lift the handset. will be polled in the order that they are.
Speaker Change: Ladies and gentlemen 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.
Speaker Change: If you are using speaker equipment kind of lift the handset before pressing the numbers.
Speaker Change: Your questions will be called in the order that they are received.
Daniella Finn: Before that, I would like to hand the call over back to Ms. Daniella Finn. for a few questions that were pre-sent. whatever please Thank you very much, Nathan, and a couple of questions from Chen Kerek from Excellence.
Speaker Change: Before that I would like to hand, the call over back to Ms. Daniella Finn.
For a few questions that were present.
Speaker Change: Prerecorded Daniela. Please go ahead.
Nathan: So very much Nathan in a couple of questions from <unk>.
Speaker Change: Excellent. Thank you very much my question today.
Bezhalel Machlis: Chen, thank you very much for your question today. The first question is, is there an expectation of a slowdown in activity in Israel due to a possible decline in the intensity of the conflict in Gaza or a ceasefire imposed by the U.S.? How is the company preparing for such a scenario? Thank you.
Speaker Change: First question is is there an expectation of a slowdown in activity in Israel due to a possible decline in the second.
Speaker Change: God that OSB via imposed by the U S.
Speaker Change: What is the company preparing for such a scenario.
Speaker Change: Thank you.
Bezhalel Machlis: First, I would like to say that I'm praying for the end of the current war we have in Israel and for the release of the hostages from Gaza. The investment in defense is, I believe, will continue in the future, in the near-term future. The main reason for that is these investments are helping to create an advantage for Israel in our arena, and there is also a need to build more inventories and to treat the equipment which is coming back from the field. So I really believe that this investment will continue. The same we see in Europe.
First I would like to say the timeframe for the end of the call.
Speaker Change: In Israel and for the at least over the whole digits when it doesn't.
Speaker Change: And the investment in defense.
Speaker Change: I believe we will continue.
Speaker Change: And in the future and it in future. The main reason for that is these investments are helping to create.
Speaker Change: An advantage.
Speaker Change: For Israel in the in our arena.
Speaker Change: And to.
Speaker Change: To create.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: So and there's also a need to build more inventories and the two to.
Speaker Change: To reach the equipment, which is coming back from the food. So I really believe that this investment will continue the same we see in New York.
Speaker Change: Countries.
Bezhalel Machlis: Countries are preparing themselves to invest more in defense. In all, they are concerned from Russia, mainly in North Europe. So I do not see any slowdown in defense investment in the coming few years, not in Israel and neither in Europe. Thank you.
Speaker Change: But things are themselves to invest more in defense.
Speaker Change: In old Zelle.
Speaker Change: No not really that concerned from Russia, mainly in North York.
Speaker Change: So I do not see any slowdown in defense of spend and investment in the coming few years looked in Israel.
Speaker Change: Thank you and the second question.
Bezhalel Machlis: And the second question from Chen, is an improvement in the gross profit rate expected in the coming year or will the profitability targets be achieved while relying on operating limits? Thank you, Chen. With the high demands we are witnessing and the expedited growth of our backlog, we can be more selective in the bookings we take. Additionally, on top of that, we will see continuous operational ARPEX leverage, as you mentioned.
Ah is an improvement in the gross profit rate expected in the coming year.
Speaker Change: Profitability targets to be achieved while rely on operating leverage.
Speaker Change: Thank you Pam.
Speaker Change: With the high demand, where we've been seeing and the expedited growth off our backlog.
Speaker Change: We can be more selective in the bookings we take.
Speaker Change: Additionally, on top of that we will see continuous operational opex leverage as you mentioned.
Unknown Executive: Thank you and the next question from Hen is what is the expectation for CAPEX for the rest of the year? We see the same, we see the same, we see the same...
Speaker Change: Thank you and the next question is what is the expectation for Capex for the rest of the year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: We see the same we see the same we see the same.
Unknown Executive: A level of CapEx investment might be a small increase in CapEx investment to around the neighborhood of $250 million, as we recorded $215 million in 2020.
Speaker Change: Our level of Capex investment it might be a small increase in capex investment to go around the neighborhood of $260 million.
Speaker Change: As we recorded 12 and $16 million.
Speaker Change: Okay.
Bezhalel Machlis: I would like to add more flavor to the first question with regards to investment here in Israel and Europe. The main reason for investment is not just to support the current conflict we have, it is also to create deterrence against our enemies here in our region and also in Europe. And because of that, I really believe that that's the main reason for the investment project, not the current conflicts which are happening right now here as well as in Europe, but to create deterrence which can avoid war in the future. Thank you for that.
Speaker Change: Thanks, Tobey I would add too.
Speaker Change: More flavor to the first question with regards to investment two in Israel and Europe.
Speaker Change: Main reason for investment is not just to support the current conflict. We have is also to create deterrence against our enemies Healy Norwegian and also renewables.
Speaker Change: Because that really believes that that's the main reason for these.
Speaker Change: North Dakota completed show happening right now as well as in Europe, but two to create that tailwind, which can avoid well into the future.
Speaker Change: Thank you for that and a final question from Sandy is what is the status of IRB.
Bezhalel Machlis: And a final question from Chen is, what is the status of Iron Beam? Will it be operational by the end of the year? I'm slightly off on that, but Futsik, if you'd like to elaborate slightly on that. Yeah, the Iron Beam, the land solution, should be operational by the end of this year. We are working hard in order to make it happen, and there is a lot of progress there. In parallel, we continue to invest in the airborne pollution. We believe that bringing the airborne solution to the arena will create a great... will be a huge change in the way countries are fighting, mainly against swarms. Hundreds of engineers and physicians are working in order to develop the system, and there is a lot of progress there as well.
Speaker Change: The operational by the end of the year slightly.
Speaker Change: Slightly off of that but let's see if you'd like to elaborate slightly on that yeah.
Speaker Change: Beams the lens solution should be operational by the end of this year, we're working hard in order to make it happen there's a lot of brokers.
Speaker Change: In parallel we continue to invest in is the elbow solution.
Speaker Change: We believe that bringing the elegant solution to the arena will create a great well.
Speaker Change: It would be a huge change.
Speaker Change: The way countries are fighting mainly against swarms.
Speaker Change: Hundreds of engineers and physicians are walking in order to develop the system in that there was a lot of progress though.
Speaker Change: Thank you so with the operator, we could take the following question. Thank you.
Unknown Executive: Thank you both.
Unknown Executive: The operator, we can take the following questions now. Thank you.
Speaker Change: Thank you.
Omri Efroni: The next question is from Omri Efroni of Oppenheimer, please go ahead. Hey guys, congrats on the new quarter. I have three questions, I hope you don't mind.
Speaker Change: The next question is from Maria <unk> of Oppenheimer. Please go ahead.
Speaker Change: Hey, guys congrats on great quarter.
Speaker Change: I have a few questions that I hope you don't mind. The first is about the land division.
Bezhalel Machlis: The first is about the land division. The operating margin was pretty high, it got 9%, and I know that most of the equipment is going into Israel. I was wondering if you have any more upside when Israeli stockpiles are full? Elbit will be able to sell to other countries, that's the first question.
Speaker Change: Operating margin was high at nine.
Speaker Change: 9%.
Speaker Change: I know that most of the equipment going into Israel.
Speaker Change: I was wondering if you have any more upside when Israeli.
Speaker Change: Files or a phone.
Speaker Change: I don't think we'll be able to sell to other countries. That's the first question the.
Omri Efroni: The second question is about the Iron Beam. I was wondering if you have any in-teller price target and sell target, sorry, for the system, and if so, if the system is going to be sold only to Israel or you can sell it into the United States. The third question is about the pictures you put on slide seven. I see here the soldier lethality program aka the IVAS in the United States. I was wondering if you have any targets or any more color you can give on the IBAS and the Augment Reality soldier enhancement and maybe some more color and the maritime sensing and future products that might be much more important next.
Speaker Change: The second question is about the iron beam.
Speaker Change: Did you have any intel or price targets.
Speaker Change: Target sorry.
Speaker Change: For an assistant and if so.
Speaker Change: This is not going to be sold hunting to Israel or you can sell anything into that.
Speaker Change: Okay.
Speaker Change: The first question is about the pictures you put on slide seven E. C. Here. So during a solid T program.
Speaker Change: I've asked in the United States I was wondering if you have any.
Speaker Change: Targets or any more color you can give on the IMS and Baldwin piano TV software enhancements and maybe some more color on the maritime sensing.
Speaker Change: It's a product that's my.
Speaker Change: B.
Speaker Change: Much more.
Speaker Change: Important next year okay.
Bezhalel Machlis: So let's do it one by one. If I'm not mistaken, the first question was in regards to the land revenues, right? Yes. So first, I would like to, Omri, I would like to say that the Land Division is not selling just ammunition. They are selling full-tank solutions, which include the artillery system, howitzers, mortars, command and control system, fire control system, electro-optics, and of course, munition and guided munition as well, all combined. What happened after the acquisition of IMI is that actually we combined all the elements which are related to land solutions into one division, and we are selling a turn-key solution to our customers.
Speaker Change: So let's do it one by one if I'm not mistaken. The first question was with regards to the land revenues right yes.
Speaker Change: So first I would like to and we would like to say that <unk> is not sitting just ammunition.
Speaker Change: Selling full turnkey solutions, which includes the <unk> system hoses models come under control system for control system.
Speaker Change: Our optics are and of course munition and guided munition avoid all combined.
Speaker Change: Happened after the acquisition of <unk> that actually we combined all the elements, which are related to led solutions into one division.
Speaker Change: And we are selling the turnkey solution to our customers.
Bezhalel Machlis: It's not a product, it's a full-term system. Now, if I understood you correctly, you have asked me about what will happen after the demand in Israel will increase, is it right, will decrease, is it right? Yeah, if you have any more upside in terms of operating leverage, operating margin in the land and water. And also, you asked about the demand outside of Israel. Yeah, I suppose it's continuing to be pretty strong. My main question is when you start selling outside of Israel, mainly to Europe in much higher numbers, is the operating margin is going to be enhanced?
Speaker Change: No the product put on the system.
Speaker Change: No.
Speaker Change: If I understood you correctly, you are asking me about the water.
Speaker Change: What will happen to the demand in Israel will.
Speaker Change: We'll increase wasn't EBIT growth will decrease either.
Speaker Change: Yeah, if you have any more upside in towards the operating leverage operating margin in Atlanta.
Speaker Change: And also you asked about the demand outside of Israel.
Speaker Change: I mean I suppose.
Speaker Change: It has to be pretty strong and my main question.
Speaker Change: When you.
Speaker Change: You'd start selling outside of Israel.
Speaker Change: So Europe and much higher numbers, if the operating margin is going to be enhanced.
Bezhalel Machlis: First, we continue to improve our numbers in the land division and we see a big change there and today they are contributing quite a lot to our profits and of course as quantities are going up we have more opportunities to increase the bottom line and we see a lot of growing demand, mainly in Europe, not just in Israel, so I truly believe there is a lot of potential for more revenues and more profit in this domain.
Speaker Change: First we are continuing to improve our numbers insulin division and we see it we see a big change there.
Speaker Change: Today, they are contributing quite a lot of our profit.
Speaker Change: And of course as the quantities are going up we have more opportunities to increase the bottom line.
Speaker Change: And we see a lot of room demand mainly in Europe not just in this one so I truly believe that there is a lot of potential for more revenues and more appropriate in differently.
Okay.
Unknown Executive: Okay, so this was this was with regard to the first question.
Speaker Change: Okay. So this was this was with regards to the first quarter since the spin.
Speaker Change: Second question was around.
Omri Efroni: The second question was around Iron Bim, right? Yes.
Speaker Change: I won't be right yes.
Bezhalel Machlis: So the question was, what are the prices of the system? I'm not really sure I understood the question. The targets of revenue for a system in Israel or the United Usually we don't give this information publicly, I can tell you that there is a huge interest around this system, around the laser solution and other types of energy weapons. We deal not just with laser systems, we deal with several types of energy weapons in Israel as well as abroad. With regards to numbers, this number, usually we don't show this information.
Speaker Change: So the question was what are the prices of system to ensure I understood. The question.
Speaker Change: The targets are.
Speaker Change: Revenue for our system.
Speaker Change: Haven't done that.
Speaker Change: Sure.
Speaker Change: Usually we don't give this information.
Speaker Change: Publicly.
Speaker Change: And tell you that there is a huge interest.
Speaker Change: And the.
Speaker Change: There is a huge interest around the system runs the laser submission and other type of energy weapons that we didn't know just laser systems is due with mainly type of the federal types of energy weapons.
Speaker Change: In Israel as well as abroad with regard numbers. These numbers, usually we don't show that data.
Speaker Change: Okay. Thanks.
Speaker Change: And regarding the third question about Saturday in the maritime sector.
Bezhalel Machlis: Regarding the third question about the soldiers' lethality and American sentencing. Yes, we are very happy with the acquisition of Night Vision, which took place a few years back. This company is growing and improving, and they are providing, as you know, Night Vision equipment for the Army, for the Marines, as well as for other international customers.
Speaker Change: Yes, we are very happy with the acquisition of night vision, which took place Julius Baer.
Speaker Change: Company is growing and improving.
Speaker Change: Zelle, providing as you'll know night vision equipment for the Army and Marines as good as it was the other international customers now based on the exit portfolio, we're able to.
Bezhalel Machlis: Now, based on the Elbit portfolio, we are able to combine a full turnkey solution for infantry soldiers. This is also a lesson learned from the current conflict we have here in our region, and we are tailoring a unique solution for infantry soldiers, for future infantry soldiers, and we are offering it to our different customers in the U.S., as well as abroad.
Speaker Change: Combine a full turnkey solution for infantry soldiers. This is also a lesson learned for me. The current competency has healed in our region.
Speaker Change: We are tailoring unique unique.
Speaker Change: <unk> solution for infantry soldiers for future inferred resources, and we are offering it to our different customers in the U S. As well as abroad I'm very happy to say that we just announced a $112 million contract to the U S Marine Corp.
Bezhalel Machlis: I'm very happy to say that we just announced a $112 million contract to the U.S. Marine Corps. and we see a lot of potential in this specific domain. It's a growing segment in our portfolio.
Speaker Change: And we see a lot of potential in this specific domain, it's a growing sentiment portfolio.
Speaker Change: Yes.
Speaker Change: Okay. Thank you very much.
Unknown Executive: Okay, thank you very much. Thank you.
Speaker Change: Thank you Mike.
Speaker Change: The next question is from corner waters.
Conor Wattles: The next question... and Conor Wattles of Geoffrey. Hi, guys. Good morning.
Speaker Change: Of Jefferies. Please go ahead.
Speaker Change: Hi, guys. Good morning, Congrats on such a excellent quarter, maybe to stick with the top line Q1 was off to a great start with 22% growth well on track for double digit target for the year curious what played out better than expected for the quarter and how we should think about the drivers for the remainder of the year, particularly as we think.
Kobi Kagan: Congrats on such an excellent quarter. Maybe to stick with the top line, Q1 was off to a great start with 22% growth, well on track for the double budget target for the year. Curious, what played out better than expected for the quarter and how we should think about the drivers for the remainder of the year, particularly as we think about the momentum we saw on land?
Speaker Change: The momentum we saw on land and aerospace.
Kobi Kagan: Hi, Connor, how are you? Thank you for the question. We had a very good start for 2025, as you mentioned. It was on plan. It's not something that we didn't plan. We see very big growth in the land backlog, and that was demonstrated with 48% expansion in revenues year over year with the land division. And we see also in the other segments, all of the segments grew from one digit to two digits, most of them two digits growth in this quarter. So, it was on plan, and it's on track in the company's growth. Got it.
Speaker Change: Hi, Conor how are you. Thank you for the question.
Speaker Change: We had a very good start for 2025 is dimension.
Speaker Change: It was on plan, it's not a it's not something that we didn't plan, we see we see very very big growth in the land bank.
Speaker Change: Backlog and that was demonstrated was 48% of the expansion in revenues year over year in the.
Speaker Change: The land Division and we see also in the other segments all of the segments grew from one digit to two digits most of them two digit growth in our in this quarter. So it was on plan.
Speaker Change: It's on track and the company's growth.
Speaker Change: Got it that's very helpful.
Unknown Executive: That's very helpful.
Unknown Executive: And maybe one more for you, Kobi.
Speaker Change: Maybe one more for you koby.
Kobi Kagan: Pre-cash flow generation in the quarter was very strong, again, continuing on that momentum we saw from Q4 of last At nearly 140% conversion on your adjusted net income, curious how we should be thinking about the opportunity for the full year and maybe what's driven this step change in your cashflow. Thank you Conor for pointing this out. We had three major ingredients in the free cash flow generation this quarter. First, increased net income. That is plain vanilla. Just increase the net income and that will translate to better cash conversion. Secondly, we had very strong contract liabilities, down payments in this quarter, which was additional $170 million of contract liabilities in this quarter.
Cash flow generation in the quarter was very strong again, continuing on the momentum we saw from Q4 of last year.
At nearly 140% conversion on your adjusted net income curious, how we should be thinking about the opportunity for the full year and maybe what's driven the step change in your your cash conversion of the last few quarters.
Speaker Change: Oh, Thank you Conor for pointing this out.
Speaker Change: We had three major ingredients into our free cash flow generation. This quarter first increased net income that is plain vanilla just increased the net income and that.
Speaker Change: And that will translate to a better.
Speaker Change: Cash conversion secondly, we had a very strong contract liabilities down payments in this quarter.
Speaker Change: Was addition that additional $170 million.
Speaker Change: Contract liabilities in this quarter.
Kobi Kagan: And thirdly, there was a one-time-off $57 million grant that we received from the Israeli Land Authority, the ILA, which was part of the contract of the evacuation of the facility in Ramat Hasharon, going to Ramat Beka in the end of 2026. Those are the three ingredients in the performance that we had in the first quarter of the free cash flow.
Speaker Change: And thirdly, there was the one time off a $57 million a brand that we received from the Israeli land authority.
Speaker Change: <unk>.
Speaker Change: Which was which was part of the contract to fed the evacuation of the facility and a roadmap to show ongoing to amass Becker in the end of 2026 those are the strength we've seen the performance that we had in the first quarter of <unk>.
Speaker Change: Free cash flow.
Speaker Change: Okay.
Speaker Change: Okay, Great I'll leave it there thanks so much.
Unknown Executive: Okay, great. I'll leave it there. Thanks so much.
Donna: Thanks Donna.
Unknown Executive: If there are any additional questions, please do not hesitate to ask them in the Q&A section of the webinar. Express, Starwatch. To contribute your request, please press start. Please stand by while we call for more. There are no further questions at this time.
Speaker Change: If there are any additional questions. Please press star one.
Speaker Change: You wish to cancel your request please press star two please.
Speaker Change: Please standby, while we poll for more questions.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time before I ask Mr. Mok. Please go ahead with his closing statement I would like to remind participants that a replay of this call will be available in two hours.
Unknown Executive: Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available in two hours after the call. In the US, please call 1-888-782-4291. In Israel please call 03-925-5900 and internationally please call 972-3925-5900.
Speaker Change: After the conference ends.
Speaker Change: In the U S. Please call 188878 to fall to 91.
Speaker Change: In Israel, Please call Oh free 90, 55900 and internationally. Please call 970 239 to 55900.
Bezhalel Machlis: A replay of the call will also be available at the company's website at www.elbitsystems.co.uk Mr Machlis, would you like to make your concluding statement? I would like to thank 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.
Speaker Change: A replay of the call will also be available at the company's website at Www Dot Elbit systems Dot com.
Mr. Marr: Mr. Marr, Please would you like to make your concluding statement.
Speaker Change: Oh and also thank our employees for their continued hard work and contribution to Elbit system success to everyone over the quarter. Thank you for joining us today and for your continued support and interest in our company.
Unknown Executive: Have a good day and goodbye. Thank you.
Mr. Marr: Have a good day and goodbye.
Speaker Change: Thank you. This concludes the Elbit system.
Unknown Executive: This concludes the First quarter 2025 results. Thank you for your participation, you may now go ahead.
Speaker Change: First quarter of 2025 results conference call.
Speaker Change: Thank you for your participation you May now go ahead and disconnect.
Speaker Change: Okay.
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