Q1 2025 Eltek Ltd Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the L. Tech L. P. D 2025 first quarter financial 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 for operator assistance during the conference. Please press.
Operator: Ladies and gentlemen, thank you for standing by.
Operator: Welcome to the Eltek LTD 2025 First Quarter Financial Results Conference Call. All participants are present in listen-only mode.
Operator: Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded.
<unk> zero as a reminder, this conference is being recorded before I turn the call over to Mr. <unk>, Li Our Chief Executive Officer, and Ron <unk>, Chief Financial Officer, I'd like to remind you that they will be referring to forward looking information in today's presentation and in the Q&A by its nature. This information kantar.
Operator: Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings. These forward-looking statements are projections and reflect the current beliefs and expectations of the company.
<unk> forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in <unk> public disclosure filings. These forward looking statements are projections and reflect the current beliefs and expectations of the company actual events or.
Operator: Actual events or results may differ materially.
Speaker Change: <unk> may differ materially we will also be referring to non-GAAP measures. All tech undertakes no obligation to publicly release revisions to such forward looking statements to reflect events or circumstances occurring subsequent to this date I will now turn the call over to Mr. Elliott outfit.
Operator: We'll also be referring to non-GAAP measures.
Operator: Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date.
Operator: I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead. Thank you. Good morning.
Speaker Change: Mr. Yao. Please go ahead.
Speaker Change: Thank you. Good morning, Thank you for joining us for our 2025 first quarter earnings call.
Eli Yaffe: Thank you for joining us for our 2025 first quarter earning call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and summary of the principal factors that affected our results during Q1 2025. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release will also be available on our website.
Speaker Change: With me is all joined our Chief Financial Officer, we will begin by providing you with an overview of our business and summary of the principal factors that affected our results during Q1 2025.
Speaker Change: After our prepared remarks, we will be happy to answer any of your questions by now.
Speaker Change: Everyone should have access to our press release, which was released earlier today. The release will also be available on our website.
Speaker Change: During the first quarter, we can code and stabilizing and calibration of our new equipment installed in our recently launched solder mask application Department.
Eli Yaffe: During the first quarter, we concurred on stabilizing and calibration of our new equipment installed in our recently launched solder mask application department, as well as a machinery relocated to this facility. This was a complex and time-intensive process, further complicated by the unavailability of certain technical support personnel, who declined to travel to Israel for the on-site installation and calibration. As a result, we face challenges in optimizing machine performance and compelling the precise technical adjustment required. This complexity contributes to a lower production yield and negatively impacts our profitability for the quarter.
Speaker Change: As well as the machinery, we relocated to this facility.
Speaker Change: This was a complex and time intensive process further complicated by the unavailability of certain technical support social knowledge will decline to travel to Israel for the onsite installation and calibration.
Speaker Change: As a result, we faced challenges, obviously optimizing machine performance and compelling.
Speaker Change: <unk> technical adjustment required this complexity contributes to lower production and negatively impact our profitability.
Speaker Change: For the quarter.
Eli Yaffe: The good news is that since the beginning of May, these processes are functioning much more smoothly. Production has resumed at a stable pace and efficiency levels have returned to where they were prior to the transition.
Speaker Change: The good news is that.
Speaker Change: Since the beginning of May these processes a function much more smoothly.
Speaker Change: <unk> has resumed its a stable base and efficiency level and return to where they were.
Speaker Change: Prior to the transition.
Eli Yaffe: We will continue the construction work on the basement floor to prepare it for the installation of our new plating line. While our European supplier is making progress with the production of the equipment, they recently informed us on a delay of approximately two months in the delivery of the first and the most significant coating line. Despite this delay, we remain on track to complete our accelerated investment plan by mid-2026.
Speaker Change: We'll continue the construction work on the basement floor to prepare for the installation of our new plating lines.
Speaker Change: While overall European supplier is making progress with the production of this we've meant there recently informed us on a delay of approximately two months in the delivery of the first and the most significant coating line. Despite these delays we remain on track to complete all accelerated investment plan by mid 'twenty.
Speaker Change: 26.
Eli Yaffe: On the human resource front, we will continue our efforts to recruit production workers and engineers. The Israeli labor market remains highly challenging, particularly when it comes to attracting qualified candidates in this field. We are hiring at the most pace within our existing salary structure, following by significant wage adjustment we implemented at the end of Q2 2024, as many of you may recall.
Speaker Change: The human resource, France will continue while Westfield stores called production wont gifts and engineers. These really labor market remains highly challenging.
Speaker Change: Particularly when it comes to attracting qualified candidates in these fields.
Speaker Change: We are hiring at the motor space within our existing salary structure of falling by significant wages adjustment we implemented at the end of Q2 2024 as many of you may recall.
Speaker Change: In terms of market.
Eli Yaffe: In terms of market dynamic, we continue to experience strong demand for our products across all segments. Due to this elevated demand, we are seeing an increase in lead time for customer delivery not only at Eltek, but also across the industry and among our competitors.
Speaker Change: The dynamic we continue to experience strong demand for our products across all segments. Due to this elevated demand. We are seeing an increase in lead times for customers delivery not only at <unk>, but also of course, the industry and among our competitors.
Eli Yaffe: At this stage, there is still no clarity regarding the tariff rate that may apply to products originated from Israel under the new U.S. tariff policy, nor whether defense-related equipment will be included within this framework. However, the company's competitive position in the U.S. market may benefit from the higher tariffs on products from other exporting countries, such as Canada. Additionally, tariffs on imposed raw material could affect the cost structure and competitiveness of the U.S.-based manufacturers.
Speaker Change: At this stage there is still no clarity regarding the salaries right that may apply to products wins or.
Speaker Change: Originated from Israel under the New U S tariff policy Nowheresville defense related equipment will be included within this framework.
Speaker Change: However.
Speaker Change: The company's competitive position in the U S market may benefit from the Io tile roofs on product form also exporting countries such as Canada.
Speaker Change: Additionally.
Speaker Change: Tariffs on imported raw material could affect the cost structure and competitiveness of the U S based manufacturers.
Speaker Change: We estimate that it will be it will take years to establish sufficient domestic production capacity in the U S to meet the customers' demand for the I'm a full day audience product.
Eli Yaffe: We estimate that it will take years to establish sufficient domestic production capacity in the U.S. to meet the customer's demand for the high-end product. as well as we sell. Accordingly, we do not anticipate any material impact on demand for our products in the U.S. market over the near to medium term.
Speaker Change: As well we sell accordingly, we do not anticipate any material impact on demand for products in the U S market over the near to medium term.
Speaker Change: We are actively working to diversify our supply bills in the in the far east to support our goal of expanding our own commercial activity.
Eli Yaffe: We are actively working to diversify our supply bars in the Far East to support our goal of expanding our commercial activity. This initiative includes also exploring opportunities for partial production abroad, with final process and completion taking place in our facility in Israel. The objective is to leverage our reputation and the technological know-how to increase revenue even during the period of production capacity constraints. At the same time, this model enables us to offer our customers more attractive pricing while maintaining the high quality standards associated with Eltek.
Speaker Change: These initiatives include also exploring opportunities for partial production of bold, which funnel process and complete completion, taking place in our facility in Israel.
Speaker Change: <unk> deliberately Joel quotation that the technology can knowhow to increase revenue even during the period of production capacity constraints.
Speaker Change: At the same time this model enable us to offer our customer a small attractive pricing, while maintaining the high quality standards associated with LTE.
Speaker Change: During the first quarter. We also began a company wide process to replace our core information system. This transformation is expected to take approximately 18 months and will mean involve replacing of most of the I T software currently in use across the organization.
Eli Yaffe: During the first quarter, we also began a company-wide process to replace our core information system. This transformation is expected to take approximately 18 months and will involve replacing most of the IT software currently in use across the organization. As part of this transition, we aim to optimize our internal workflow and implement industry standard efficient work methodology.
Speaker Change: As part of this transition we aim to optimize our internal workflow and implement industry standard decision to walk them at all of these are.
Eli Yaffe: A key focus of this project is to develop a structured, centralized digital process. that will capture and preserve critical knowledge previously held by a key personnel. This will allow us to unify production procedure, retain organizational know-how, and ultimately improve operational efficiency across the company.
Speaker Change: A key focus of this project is to develop structure centralized digital process.
Speaker Change: That will capture and preserve critical knowledge previously held by keeping us on all.
Speaker Change: This will allow us to unique unified production procedure retain organizational and oil and ultimately ultimately improve operational efficiency across the company.
Ron Freund: I will now turn the call over to Ron Freund, our CFO, to discuss our financial results. Thank you, Eli. I would like to draw your attention to the financial statements for the first quarter of 2025. During this call, I will also discuss certain UNGAF financial measures. Eltek uses EBITDA as an UNGAF financial performance measurement. Please see our earnings release for its definition and the reasons for its use.
Speaker Change: I will now turn the call over to one point, our CFO to discuss our financial results.
Ali: Thank you Ali I would like to draw your attention to the financial statements for the first quarter of 2025.
Ali: During this call I will also discuss certain non-GAAP financial measures.
Ali: EBITDA is not a good financial performance measurement. Please see our earnings release for the definition and there isn't fully too.
Ron Freund: I will now go over the highlights of the first quarter of 2025. All numbers are mentioned in U.S. dollars. Revenues for the first quarter of 2025 totaled $12.8 million compared to $11.8 million in the first quarter of 2024. Gross profit decreased to $2.2 million, down from $3.3 million in the first quarter of 2024. The decline was primarily driven by higher labor costs and lower yields during the quarter, resulting from the ramp-up of new production equipment, as Eli mentioned earlier. Operating profit for the quarter was $0.7 million compared to $1.7 million in the same period last year.
Ali: I will now roll over the highlights of the first quarter of 2025, all numbers are mentioned in U S dollars.
Ali: Revenues for the first quarter of 2025, total $12.8 million compared to $11 million in the first quarter of 2024.
Ali: Gross profit decreased to $2 $2 million down from $3 $3 million in the first quarter of 'twenty 'twenty four.
Ali: The decline was primarily driven by Ireland labor costs and lower yields during the quarter, resulting from the ramp up of new production equipment as Ellen mentioned earlier.
Ali: Operating profit for the quarter was $7 million compared to $1 $7 million in the same period last year.
Ellen: We recorded financial income of zero point $5 million in the first quarter of 2025, primarily due to the devaluation of the Israeli shekel against the U S dollar and interest earned on our interest bearing accounts.
Ron Freund: We recorded financial income of $0.5 million in the first quarter of 2025, primarily due to the devaluation of the Israeli shekel against the US dollar and interest earned on our interest-bearing account. Net income for the quarter was $1,000,000 or $0.15 per share compared to $1,700,000 or $0.27 per share in the first quarter of 2020. EBITDA for the quarter was $1.2 million compared to $2.1 million in the prior year period. Cash flow from Beretta activities totaled $0.1 million during the first quarter of 2025.
Ellen: Net income for the quarter was $1 15.
Ellen: <unk> per share compared to $1 $7 million or 27 cents per share in the first quarter of 2024.
Ellen: EBITDA was for the quarter was $1 $2 million compared with $2 $1 million in the period in the prior year period.
Ali: Cash flow from operating activities totaled 0.1 million during the first quarter of 2025.
Ron Freund: As of March 31st, 2025, we had $15.7 million in cash, cash equivalent, and short and bank deposit with no outstanding debt.
Ali: Miles 31, 2025 with $57 million in cash cash equivalents and short term bank deposit with no outstanding debt.
Ali: We are now ready to answer your question.
Operator: We are now ready to answer your questions. Thank you.
Ali: Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one 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.
Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2.
Operator: If you are using speaker equipment, kindly lift the handset before pressing the number. The questions will be answered in the order they are received. Please stand by while we poll for your questions.
Ali: Your questions will be answered in the order. They are received please standby while we poll for your questions.
Ali: Yeah.
Ali: Okay.
Speaker Change: The first question is from Guy who island of Analyst. Please go ahead.
Guy Mualim: The first question is from Guy Mualim of Analyst. Please go ahead. Hi, thank you for taking my question regarding the new line that you expect to end the implementation in mid-2026. Will this line also impact the profitability of the company or now that in the next few months you're going to finish the implementation of the current implementation, will you get back to the profitability we've seen in 2023? I'm not sure that I understood your question, but the line that we are going to install and is going to be fully operated in mid-2026 positively is going to impact our profitability because it's going to increase our production significantly and the marginal contribution of any additional sales is going directly to the bottom line, which is a big number.
Speaker Change: Hi, Thank you for taking my question.
Speaker Change: The.
Speaker Change: New line, because you expect other than the conversion in mid 2026.
Speaker Change: This line ultimately impact the profitability of the company ill now.
Speaker Change: In the next few months youre going to finish that implementation of that.
Speaker Change: They can't Oh, yeah.
Speaker Change: Implementation will you get back to the profitability we've seen in 2023.
Speaker Change: Oh, good morning, guys.
Speaker Change: I'm not sure that I understood. Your question, but the line that we are going to install and is going to be fully operated in the mid 2020 <unk>.
Speaker Change: Was it really is going to impact our profitability because it is going to increase our oil production significantly.
Speaker Change: And the marginal contribution of any additional sales is going directly to the bottom line, which is a big number.
Speaker Change: No I understand of course, but I think you had you know profitability. It is because of doing at this time.
Eli Yaffe: No, this I understand, of course, but I'm saying you had your profitability reduced because during this time you had to increase the capacity of the current existing lines and you said that this helped a little bit the manufacturing production, but now the new line, the next time that you're going to implement is going to be a new line and it's not going to, the implementation of it is not going to be interfering with the existing line. Yeah, I understand. No, you're right. The new line is not going to interfere the current production. So will we see you get back to the profitability we've seen maybe in 2023?
Speaker Change: The capacity of the current existing lines and he said that this oh.
Speaker Change: Uh huh.
Speaker Change: For manufacturing.
Speaker Change: Production, but now the new line. The next time that you are going to implement there is gonna be a new line in there.
Speaker Change: Uh huh.
Speaker Change: And then.
Speaker Change: The implementation of it is not gonna be interfacing with the existing lines.
Speaker Change: Now I understand no youre right. The new line is not going to interfere with the current production.
Speaker Change: So we will see you get back to the profitability, we've seen maybe in 2023.
Speaker Change: We don't hold defaults on its own.
Operator: We don't, as you know, we don't give forecasts. Okay, thank you. If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions at this time.
Speaker Change: You know, we don't give a forecast.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Is there 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 there's an additional question from Etan Etzioni of Etzioni portfolio management. Please go ahead.
Eitan Etzioni: Before I ask, there is an additional question from Eitan Etzioni of Etzioni Portfolio Management. Please go ahead. You mentioned that in Q1 you were held back by operational difficulties and and people refusing to travel to Israel. Once these difficulties are resolved, how do you see sales picking up or to what extent was the hold back? The holdback in Q1 was we suffered from reduced yield, which affected our gross margin, but we overcame the problem with our local engineers and local support. The constraint of some people not to arrive to Israel still exists. The main production line which I mentioned before, the plating line, they are going to come from the Republic of Czechoslovakia and they are going to arrive.
You mentioned that in Q1, you were held back by operational difficulties in the.
Speaker Change: And.
Speaker Change: People.
Speaker Change: Refusing to travel to Israel.
Speaker Change: Once these difficulties are are resolved how do you see.
Speaker Change: How do you see sales picking up or to what extent was that was the whole back in Q1.
Speaker Change: The old back in Q1 was we suffer a formal abuse, the el do which affect our gross margin.
Speaker Change: But we overcome the problem with our around local engineers local support.
Speaker Change: Constrain off some people not derived or Israel still exist.
Speaker Change: But there.
Speaker Change: The main.
Speaker Change: The main production line, which I mentioned before the plating line.
Speaker Change: They're going to come from the Republic of Slovakia, and Theyre going to arrive they notifies the Dell going to arise.
Eli Yaffe: They notified that they are going to arrive. That's the 26th project that you were talking about earlier? It's during 2025. We expect them to arrive by, as we said, around August, and then it will take us several months to install the first plating line, which is the most significant one. And we hope that by the end of 2025 it will be in good position and stable, and we can increase our capacity and efficiency. So an additional line at the end of 25 and another line in 26. And that's, and how many existing lines do you have again, please?
Larry: That's the 26 projects that you were talking about there Larry.
Speaker Change: It's the only to 2025, we expect them to arrive by as we said around the August and then it will take us several months to install their first plating line, which is the most significant one.
Larry: And we will.
Speaker Change: By the end of 2025, it will be in <unk>.
Larry: <unk> position is stable and we can.
Chris: Chris our capacity and efficiency.
Chris: So an additional an additional line at the end of 'twenty five in another line in 'twenty six.
Chris: How many existing lines you have again. Please now we have currently we have two plating lines I'll tell you very old ones.
Eli Yaffe: Now, we have currently, we have two plating lines, very, very old ones. And we are now building in the basement floor an area, which we will install in it the two new ones. One which is going to arrive by August, and the second one will arrive... I think during 2026 in the first half. And these lines we will stabilize and calibrate it as we produce in the old ones. Once finished installation, we start to produce or manufacture in the new lines and stop manufacturing in the old lines.
Chris: And we are now building in the basement flow an area, which we will be installing at the two new ones, one which is going to arrive by <unk>. The second one will arrive.
Chris: I think during 2026 in the first half.
Chris: And these lines, we will stabilize and calibrated.
Chris: We will produce in the old ones. Once finished installation will start to produce and manufacture and Disney the new lines and stop in our franchise.
Eli Yaffe: So will the new lines only help operational efficiency or will they also help in the increased revenues? They increase capacity significantly. And quality? Increase quality and efficiency. Give us momentum to upgrade the technological to new technologies. It is state of the art lines with the higher technology existing now.
Chris: So will the new lines.
Chris: Only help operational efficiency or will they also help in the.
Chris: Increased revenues, the increased capacity significantly and quality leaf quality and efficiency.
Chris: Give us a momentum to upgrade the technological.
Chris: Two new technologies.
Chris: It is state of the outlines.
Chris: <unk> technology existing now.
Eli Yaffe: And do you see a demand to support the increased capacity? The demand? Yes, we see it. Okay, thank you.
Chris: Do you see the demand to support the increased capacity.
Chris: The demand, yes, we see it.
Chris: Okay. Okay. Thank you.
Chris: Thank you.
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 participants that a replay of this call will be available tomorrow on our website. Mr. <unk> would you like to make your concluding statement.
Operator: There are no further questions at this time.
Operator: Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on our website.
Eli Yaffe: Mr. Yaffe, would you like to make your concluding statement? Yes, before we conclude, I would like to take a moment to thank our dedicated employees for their expectational efforts during what we've seen a particular demanding period. The successful stabilization of our new solder mask application production lines, alongside the inteniation of the IT transformation and ongoing expansion efforts, would not have been possible without their commitment and their reliance.
Speaker Change: Yes, before we conclude I would like to take a moment to thanks, our dedicated employees for their likes fictional affords doing that what we have seen that particular demanding.
Speaker Change: The successful stabilization of our new solder mask application production lines alongside the <unk> nation of the IP transformation and ongoing expansion efforts would not have been possible without the commitment and the.
Speaker Change: Reliance's.
Eli Yaffe: I would also like to thank our shareholders and partners for their continued trust and support. Our confidence in Eltek enables us to pursue our long-term strategy and invest in the infrastructure, technology, and people that will drive our future growth.
Speaker Change: I would also like to thank our shareholders and partners for their continued trust and support.
Speaker Change: Our confidence in <unk> enable us to pursue our long term strategy and invest in the infrastructure technology and people that will drive our future goals. Thank you for joining us on today call ever good day.
Eli Yaffe: Thank you for joining us on today's call, have a good day. Thank you.
Speaker Change: Thank you this concludes L tax.
Operator: This concludes Eltek. 2025 First Quarter Financial Results Conference Call. Thank you for your participation.
Speaker Change: 2025 first quarter financial results conference call. Thank you for your participation you May go ahead and disconnect.
Operator: You may go ahead and disconnect.
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