Q2 2025 Elbit Systems Ltd Earnings Call

Speaker 5: Ladies and gentlemen, thank you for standing by. The conference will begin shortly. Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems Second Quarter 2025 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems Vice President of Investor Relations. Daniella, please go ahead.

Speaker #2: All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded.

Speaker #2: I would now like to hand over the call to Daniella Finn, ELBIT SYSTEMS VP Investor Relations. Daniella, please go ahead.

Speaker #3: Thank you, Yaacov. Good day, everyone, and welcome to our second quarter 2025 earnings call. On the call with me today are Butsu Machlis, President and CEO, and Kobe Kagan, CFO.

Daniella Finn: Thank you, Daniella. Good day, everyone, and welcome to our Second Quarter 2025 Earnings Call. On the call with me today are Bezhalel Machlis, President and CEO, and Yaacov Kagan, CFO. 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 contents of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplement non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data, as well as the non-GAAP information and the reconciliation in today's press release. As usual, Yaacov will begin by providing a discussion of the financial results, followed by Bezhalel, who will talk about some of the significant developments during the quarter and beyond.

Speaker #3: Before we begin, I would like to point out that the safe harvest statement in the company's press release issued earlier today also refers to the contents of this conference call.

Speaker #3: As usual, we will provide you with both gaps, financial data, as well as certain supplement, non-gap information. We believe that this non-gap information provides additional detail to help understand the performance of the ongoing business.

Speaker #3: You can find all the detailed gap financial data as well as the non-gap information and the reconciliation in today's press release. As usual, Kobe will begin by providing a discussion of the financials results.

Speaker #3: Followed by Butsu, who will talk about some of the significant developments during the quarter and beyond. We will then turn the call over to a question-and-answer session. With that, I would like to now turn the call over to Kobe.

Daniella Finn: We will then turn the call over to the question and answer session. With that, I would like to now turn the call over to Yaacov. Yaacov, please go ahead.

Speaker #3: Kobe, please go ahead.

Speaker #4: Thank you, Daniella. Hello everyone, and thank you for joining us today. We are very pleased to announce another set of quarterly results with strong double-digit year-over-year growth across all parameters.

Yaacov Kagan: Thank you, Daniella Finn. Hello, everyone, and thank you for joining us today. We are very pleased to announce another set of quarterly results with strong double-digit year-over-year growth across all parameters. We recorded growth across all business segments and geographies, especially in Europe, as well as margin expansion. Backlog increased 12% from the corresponding quarter in 2024, and free cash flow generated this quarter totaled $71 million. I will now highlight and discuss some of the key figures and trends in our financial results this quarter. Q2 2025 revenues were $1,973 million compared to $1,626 million in Q2 2024. In Q2 2025, Europe contributed 29%, North America 21%, Asia Pacific 13%, and Israel was 34% of revenues. Demand continued to be robust in all three geographies, as evident in the higher sales in all geographies this quarter.

Speaker #4: We recorded growth across all business segments in geographies especially in Europe, as well as margin expansion. Backlog increased 12% from the corresponding quarter in 2024, and free cash flow generated this quarter totaled $71 million.

Speaker #4: I will now highlight and discuss some of the key figures and trends in our financial results this quarter. Second quarter 2025 revenues were $1,973 million compared to $1,626,000,000 in the second quarter of 2024.

Speaker #4: In the second quarter of 2025, Europe contributed 29%, North America 21%, Asia-Pacific 13%, and Israel 34% of revenues. Demand continued to be robust in all key geographies, as evident in the higher sales in all regions this quarter.

Speaker #4: Gap growth margin in the second quarter was 24% of revenues, compared to 24% in the second quarter of 2024. The non-gap margin for the second quarter was 24.4% of revenues, compared to 24.4% in the second quarter of 2024.

Yaacov Kagan: GAAP gross margin in Q2 was 24% of revenues compared to 24% in Q2 2024. The non-GAAP margin for Q2 was 24.4% of revenues compared to 24.4% in Q2 2024. GAAP operating income for Q2 was $157.8 million or 8% of revenues versus $116.5 million or 7.2% of revenues in Q2 2024. Non-GAAP operating income was $175.1 million or 8.9% of revenues compared with $130.5 million or 8% of revenues in Q2 of last year. We are very pleased with this margin expansion, which is a result of Elbit Systems' joint effort to improve profitability. The operating expense breakdown in Q2 was as follows: Net R&D expenses were $129.7 million or 6.6% of revenues compared to $116.8 million or 7.2% of revenues in Q2 2024. Elbit Systems continues to invest in R&D to develop cutting-edge technological products and solutions, which will maintain Elbit Systems' position as a market leader.

Speaker #4: Gap operating income for the second quarter was $157.8 million or 8% of revenues, versus $116.5 million or 7.2% of revenues, in the second quarter of 2024.

Speaker #4: Non-gap operating income was $175.1 million or 8.9% of revenues, compared with $130.5 million or 8% of revenues, in the second quarter of last year.

Speaker #4: We are very pleased with this margin expansion, which is a result of the company's joint effort to improve profitability. The operating expense breakdown in the second quarter was as follows: Net R&D expenses were $129.7 million or 6.6% of revenues, compared to $116.8 million or 7.2% of revenues, in the second quarter of 2024.

Speaker #4: ELBIT continues to invest in R&D to develop cutting-edge technological products and solutions. Which will maintain ELBIT's position as a market leader. Marketing and selling expenses were $91.5 million or 4.6% of revenues, versus $87.7 million or 5.4% in the second quarter of 2024.

Yaacov Kagan: Marketing and selling expenses were $91.5 million or 4.6% of revenues versus $87.7 million or 5.4% in Q2 2024. G&A expenses were $93.9 million or 4.8% of revenues compared to $68.7 million or 4.2% of revenues in Q2 2024. The increase in G&A expenses for Q2 2025 was mainly due to one-time expenses incurred during the current quarter. G&A expenses during Q2 2024 were lower than average. Financial expenses were $31.2 million in Q2 compared to $29.1 million in Q2 2024. Financial expenses during the quarter were impacted by the relatively sharp fluctuations of exchange rate, by the strong free cash flow from the beginning of the year, and from the offering proceeds that in the short term decreased the company's loan portfolio. We recorded a tax expense of $7.1 million in the second quarter compared to $11.3 million in the second quarter of 2024.

Speaker #4: G&A expenses were $93.9 million or 4.8% of revenues, compared to $68.7 million or 4.2% of revenues, in the second quarter of 2024. The increase in G&A expenses for the second quarter of 2025 was mainly due to one-time expenses incurred during the current quarter.

Speaker #4: G&A expenses during the second quarter of 2024 were lower than average. Financial expenses were 31.2 million in the second quarter, compared to 29.1 million in the second quarter of 2024.

Speaker #4: Financial expenses during the quarter were impacted by the relatively sharp fluctuations of exchange rate by the strong free cash flow from the beginning of the year, and from the offering proceeds that in the short term decreased the company's loan portfolio.

Speaker #4: We recorded a tax expense of 7.1 million in the second quarter, compared to 11.3 million in the second quarter of 2024. The effective tax rate in the second quarter of 2025 was 5.6%, compared to 13.2% in the second quarter of 2024.

Yaacov Kagan: The effective tax rate in the second quarter of 2025 was 5.6% compared to 13.2% in the second quarter of 2024. The decrease in effective tax rate for the second quarter of 2025 was mainly due to the increase in deferred tax assets and the settlement of tax assessments. GAAP-diluted EPS was $2.69 for the second quarter of 2025 compared to $1.76 in the second quarter of 2024. Our non-GAAP diluted EPS was $3.23 for the second quarter of 2025 compared to $2.08 in the second quarter of 2024. Quarterly segment revenue for the second quarter of 2025. Aerospace revenue increased by 12% year-over-year, mainly due to increase in precision guided munitions sales in Israel and Asia Pacific and unmanned aerial system sales in Europe. C4I and cyber revenues increased by 21% year-over-year, mainly due to radio systems and command and control systems sales in Israel and in Europe.

Speaker #4: The decrease in effective tax rate for the second quarter of 2025 was mainly due to the increase in deferred tax assets, and the settlement of tax assessments.

Speaker #4: Gap-diluted EPS was $2.69 for the second quarter of 2025, compared to $1.76 in the second quarter of 2024. Our non-GAAP diluted EPS was $3.23 for the second quarter of 2025, compared to $2.08 in the second quarter of 2024.

Speaker #4: Quarterly segment revenue for the second quarter of 2025: Aerospace revenue increased by 12% year-over-year, mainly due to increase in precision-guided munitions sales in Israel and Asia-Pacific, and UAS sales in Europe.

Speaker #4: Ciphorine cyber revenues increased by 21% year-over-year, mainly due to radio systems and command and control system sales in Israel and in Europe. ISTAR and EW revenues increased by 15% in the second quarter of 2025, mainly due to electro-optical system sales in Israel and electronic warfare system sales in Europe.

Yaacov Kagan: ISTAR and Electronic Warfare systems revenues increased by 15% in the second quarter of 2025, mainly due to Electro-Optic systems sales in Israel and Electronic Warfare systems sales in Europe. Land revenues increased by 45% in the second quarter of 2025 due to ammunition and munition sales in Israel and in Europe. Elbit Systems of America revenues increased by 4% due to the increase in maritime and warfighter systems sales. Our order backlog as of June 30, 2025, was $23.8 billion, $2.6 billion higher than the backlog at the end of the second quarter of 2024, and $626 million higher than the backlog in the first quarter of 2025. The increase in backlog during the quarter came mainly from new international orders. Approximately 68% of current backlog is delivered from orders outside of Israel.

Speaker #4: Land revenues increased by 45% in the second quarter of 2025, due to ammunition and munitions sales in Israel and in Europe. ELBIT systems of America revenues increased by 4%, due to the increase in maritime and warfighter system sales.

Speaker #4: Our order backlog as of June 30, 2025, was 23.8 billion $2.6 billion higher than the backlog at the end of the second quarter of 2024, and $626 million higher than the backlog in the first quarter of 2025.

Speaker #4: The increase in backlog during the quarter came mainly from new international orders. Approximately 68% of the current backlog is derived from orders outside of Israel.

Speaker #4: Approximately 46% of the current backlog is scheduled to be performed during the reminder of 2025 and during 2026, and the rest is scheduled for 2027 and beyond.

Yaacov Kagan: Approximately 46% of the current backlog is scheduled to be performed during the remainder of 2025 and during 2026, and the rest is scheduled for 2027 and beyond. Cash flow provided by operating activities in the six months ended June 30, 2025, was $304 million as compared to $26 million in the six months ended June 30, 2024. The cash flow in the six months ended June 30, 2025 was affected mainly by the strong increase in net income. On the back of the continued strong financial performance of the company, the board of directors has decided to increase the dividend and declare a dividend of $0.75 per share, 50% higher than the dividend distributed last year, and the second dividend raised this year. I will now turn the call over to Mr. Machlis, Elbit Systems Ltd. CEO. Bezzy, please go ahead.

Speaker #4: Cash flow provided by operating activities in the sixth quarter and the June 30, 2025, was $340 million as compared to $26 million in the six months ended June 30, 2024.

Speaker #4: The cash flow in the six months ended June 30, 2025, was affected mainly by the strong increase in net income. On the back of the continued strong financial performance of the company, the board of directors has decided to increase the dividend and declare a dividend of $0.75 per share.

Speaker #4: 50% higher than the dividend distributed last year, and the second dividend raised this year. I will now turn the call over to Mr. Bezhalel Machlis, ELBIT CEO. Butsu, please go ahead.

Speaker #5: Thank you, Kobe. Hello everyone, and thank you again for joining us today. As Kobe just described, there are indeed exceptional results with double-digit growth in all parameters of revenue and profitability growth across all our segments and geographies.

Bezhalel Machlis: Thank you, Kobi. Hello, everyone, and thank you again for joining us today. As Kobi just described, there are indeed exceptional results with double-digit growth in all parameters of revenue and profitability growth across all our segments and geographies. I am very pleased with these results. During the quarter, we carried out a successful share offering, raising $573 million net, with demand for the shares offered reaching three times the initial amount. These proceeds will help support and grow Elbit's future businesses, enabling us to increase our production capacity and deliver on the growing demand of our products. Additionally, these proceeds will potentially enable us to further expand via M&A activity, acquiring either new technology or expanding our global reach. During the quarter, the conflict between Israel and Iran had escalated and resulted in a 12-day campaign against Iran.

Speaker #5: I'm very pleased with these results. During the quarter, we carried out a successful share offering, raising $573 million net, with demand for the shares offered reaching three times the initial amount.

Speaker #5: This proceeds will help support and grow Elbit's future businesses, enabling us to increase our production capacity and deliver on the growing demand for our products.

Speaker #5: Additionally, these proceeds will potentially enable us to further expand via M&A activity, acquiring either new technologies or expanding our global reach. During the quarter, the conflict between Israel and Iran escalated and resulted in a 12-day campaign against Iran.

Speaker #5: Since the October 7 war, the Middle East has gone through significant changes, in many aspects thanks to the technological superiority of the IDF. ELBIT played a key role in supplying the IDF with our advanced technologies and solutions.

Bezhalel Machlis: Since the October 7th war, the Middle East has gone through significant changes in many aspects, thanks to the technological superiority of the IDF. Elbit played a key role in supplying the IDF with our advanced technologies and solutions. These included the Hermes 900 drones armed with various payloads flying over the skies of Tehran, as shown on social media. ISTAR systems provided crucial and continuous information, which were a key factor in defending our forts. Electronic Warfare systems self-protection suits played a vital role in protecting the IDF aircraft. Our trainers made sure pilots and other fighters were professionally trained for one of the most complicated missions ever carried out. I am extremely proud of all Elbit employees who took part in this important mission and of all who contributed to the development of solutions that supported the IDF during the conflict and since October 7th.

Speaker #5: This included the Hermes 900 drones, armed with various payloads, flying over the skies of Tehran, as shown on social media. ICR systems provided crucial and continuous information, which were a key factor in defending our posts.

Speaker #5: EW self-protection suits played a vital role in protecting the IDF aircraft. Our trainers made sure pilots and other fighters were professionally trained for one of the most complicated missions ever carried out.

Speaker #5: I'm extremely proud of all ELBIT employees who took part in this important mission, and of all who contributed to the development of solutions that supported the IDF during the conflict and since October 7.

Speaker #5: For all of this, I am truly grateful. During the quarter, and up until the announcement today, ELBIT won additional significant new contracts. This morning, we announced we were awarded a contract worth $1.625 billion to deliver a range of defense solutions to European countries over the next five years.

Bezhalel Machlis: For all of this, I am truly grateful. During the quarter and up until the announcement today, Elbit won additional significant new contracts. This morning, we announced we were awarded a contract worth $1.625 million to deliver a range of defense solutions to European countries over the next five years. Under the contract, Elbit Systems will deliver a variety of its products and solutions, including a comprehensive military digitization and network combat solution, as well as Torch-X C4ISR suite of command and control applications, advanced rocket capabilities and PULS launchers, a range of unmanned aerial systems such as the Hermes 900, loitering munitions, and soldier-level tactical drones, among others. The contract also included a range of reconnaissance capabilities, including Electronic Warfare systems and signaling systems. This contract, among others in Europe, marks another important milestone in Elbit Systems' expanding footprint in Europe and its growing operations across the continent.

Speaker #5: Under the contract, Elbit will deliver a variety of its products and solutions, including comprehensive military digitization and network combat solutions, as well as the Torch X Ciphorine SAR suite of command and control applications.

Speaker #5: Advanced working capabilities and pulse launchers, a range of unmanned aerial systems such as the Hermes 900, Stylar 3, loitering munitions, and the Luminus soldier-level tactical drones, among others.

Speaker #5: The contract includes a range of ISTAR capabilities, including electronic warfare and signal systems. This contract, among others in Europe, marks another important milestone in Elbit's expanding footprint in Europe and its growing operations across the continent.

Speaker #5: Operations across the continent. A couple of weeks ago, ELBIT was awarded a contract worth approximately $260 million by Airbus to supply its J-Music Direct Infrared Countermeasures self-protection systems for installation on the German Air 400 A400 transport aircraft.

Bezhalel Machlis: A couple of weeks ago, Elbit Systems was awarded a contract worth approximately $260 million by Airbus to supply its JMUSIC DIRCM systems self-protection system for installation on the German A400M transport aircraft. We continued to gain traction with the PULS rocket launchers in Europe, winning yet another contract to European countries for $130 million. In May, we received a delivery order value of $110 million from the Marine Corps as part of the multi-year IDAQ contract previously secured. These systems will support the U.S. Marine Corps missions in operation with low light and no light conditions worldwide. Elbit Systems was also awarded a contract worth approximately $100 million to supply the advanced UT30 unmanned turret system to General Dynamics European Land Systems. The systems will be installed on the ASCOD-armed fighting vehicles and supplied to NATO and European countries.

Speaker #5: We continue to gain traction with the Pulse Rocket Launcher in Europe, winning yet another contract to European countries for $130 million USD. In May, we received a delivery order value of $110 million for SB-NVG from the Marine Corps as part of the multi-year IDIQ contract.

Speaker #5: Previously secured, this system will support the US Marine Corps missions in operation with low-light and no-light conditions worldwide. ELBIT was also awarded a contract worth approximately $100 million to supply the advanced UT30 unmanned turret system to General Dynamics Europe Land System.

Speaker #5: The systems will be installed on the Ascot Armed Fighting Vehicles and supplied to NATO and European countries. This system will enhance the firepower and survivability of the Ascot vehicles.

Bezhalel Machlis: These systems will enhance the firepower and survivability of the ASCOD vehicles. During the quarter, we were awarded several contracts valued approximately $330 million by international customers, including NATO member countries, to supply a broad range of advanced naval technology and solutions, including Electronic Warfare systems and anti-submarine warfare systems, modernizing and upgrade programs, combat management systems, and more. Two days ago, we announced two contract wins for about $260 million for the supply of airborne munitions to the Israeli Ministry of Defense. Despite some delays due to the ongoing conflict in our region, we are progressing well with the Ramot Beka site. Construction is continuing, and initial production is expected towards the end of this year.

Speaker #5: During the quarter, we were awarded several contracts valued approximately $330 million by international customers, including NATO member countries, to supply a broad range of advanced naval technological and solutions including electrical warfare and anti-submarine warfare systems, modernizing and upgrading programs combat management systems, and more.

Speaker #5: And last but not least, two days ago, we announced two contract wins for about $260 million for the supply of airborne munitions to the Israeli Ministry of Defense.

Speaker #5: Despite some delays due to the ongoing conflict in our region, we are progressing well with the Ramat Beka site. Construction is continuing, and initial production is expected towards the end of this year.

Speaker #5: This production site will be a state-of-the-art and will include automated AI and robotic solutions and platforms to enable utmost facility efficiency. I'm truly inspired by our employees.

Bezhalel Machlis: This production site will be a state-of-the-art and will include automated AI and robotic solutions and platforms to enable autonomous facility efficiency. I am truly inspired by our employees' dedication and commitment to the company and would like to personally thank each and every one of our employees for contributing immensely to the success of the company. It wouldn't be possible without you. With that, we will be happy to answer your questions. Operator.

Speaker #5: By our employees' dedication and commitment. Through the company, and would like to personally thank each and every one of our employees for contributing immensely to the success of the company.

Speaker #5: It truly is possible without you. And with that, we will be happy to answer your questions. Operator,

Speaker #2: 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.

Speaker 9: 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, kindly leave the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull through your questions. The first question is from Jordan Lioness of Bank of America. Please go ahead.

Speaker #2: If you wish to cancel your request, please press *2. If you are using secure equipment, kindly lift the handset before pressing the numbers.

Speaker #2: Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Jordan Lionez of Bank of America.

Speaker #2: Please go ahead.

Speaker #6: Hey, good morning. Thanks for taking my question.

Jordan Lioness: Good morning. Thanks for taking my question.

Speaker #7: Good Good morning. Good

Yaacov Kagan: Good morning.

Speaker #6: Kobe?

Speaker #7: Good morning.

Speaker #6: Going into the back half of the year, how should we think about the margin expansion and what's going to drive it?

Jordan Lioness: Going into the back half of the year, how should we think about the margin expansion and what is going to drive it?

Speaker #4: Thank you, Jordan, for the question and good morning, guys. We are paying a lot of attention and a lot of effort into expanding our margins, as demonstrated in the last three years where we enjoyed around 3% margin expansion.

Yaacov Kagan: Thank you, Jordan, for the question. Good morning, guys. We are paying a lot of attention and a lot of effort into expanding our margins, as demonstrated in the last three years, where we enjoyed around 3% margin expansion. As we demonstrated in the past, we are committed to continue improving the margin by our new ERP, one ERP system, for instance, by operational leverage that is playing an important factor in the margin expansion, and by other means.

Speaker #4: As we demonstrated in the past, we are committed to continue improving the margin. By our new ERP, one ERP system, for instance, by operational leverage, that is playing an important factor in the margin expansion, and by other means.

Speaker #6: Got it. And then, if I could too, could you guys give any updates on Iron Beam or what you're seeing in supply chains specifically for SRMs?

Jordan Lioness: Got it. If I could, could you guys give any updates on Iron Beam or what you are seeing in supply chain specifically for SRMs?

Speaker #4: On Iron Beam? Yeah, we are developing and delivering the high-power laser source for the Iron Beam solution. And the Iron Beam solution is led by Rafael, who are the main integrator of the system.

Yaacov Kagan: On Iron Beam? Yeah, we are developing and delivering the high-power laser source for the Iron Beam solution. The Iron Beam solution is led by Rafael, who are the main integrator of the system. However, the laser part is coming from us. We are starting the delivery. We are starting to deliver the first unit to Rafael for integration quite soon, and we expect to deploy the system by the end of this year. In parallel, we are developing the prime and airborne high-power solution for the Israeli Air Force, and there is a lot of interest for this solution for other customers, international customers as well globally.

Speaker #4: However, the laser part is coming from us. And we are starting the delivery; we are starting to deliver the first unit to Rafael for integration quite soon, and we expect to deploy the system by the end of this, by the end of this year.

Speaker #4: In parallel, we are developing the prime and airborne high-power solution. For the Israeli Air Force, and there is a lot of interest for this solution for other customers, international customers as well globally.

Speaker #6: Thank you so much.

Jordan Lioness: Thank you so much.

Speaker #2: Thank you, Jordan. The next question is from Sheila Kaiglu of Jefferies. Please go ahead.

Speaker 9: Thank you, Jordan. The next question is from Sheila Kaglu of Jeffries. Please go ahead.

Speaker #8: Good Good morning, guys, and thank you so much for the time. Can you hear me okay?

Sheila Kaglu: Good morning, guys, and thank you so much for the time. Can you hear me okay?

Speaker #6: Yes, of course. Good morning, Sheila.

Yaacov Kagan: Yes, good morning, Sheila. Hi, how are you?

Speaker #9: Hi. Hi, how are you?

Speaker #8: Okay, good. Maybe just if we could start on the top line. You know, year-to-date growth of 22% is pretty phenomenal, de-risked even the mid-teens growth guidance for the year.

Sheila Kaglu: Okay. I am good. Maybe just if we could start on the top line, year-to-date growth of 22% is pretty phenomenal. Even the mid-teens growth guidance for the year. How do we think about the deceleration in the second half and outlook for 2026 as you think about capacity utilization and all these new orders coming in?

Speaker #8: You know, how do we think about the deceleration in the second half, and outlook for '26, as you think about capacity utilization and all these new orders coming in?

Speaker #4: Hi, hi Sheila, Kobe. As you know, we mentioned that we are looking at 2025 at mid-teens, and this is our internal targets. Looking forward, of course, to 2026, again, our internal targets are double-digit growth also for next year, and I believe that the announcement this morning, of course, will support the backlog required to facilitate double-digit growth.

Yaacov Kagan: Hi, Sheila. Kobi, as you know, we mentioned that we are looking at 2025 at mid-teens, and this is our internal targets. Looking forward, of course, to 2026, again, our internal targets are double-digit growth also for next year. I believe that the announcement this morning, of course, will support the backlog required to facilitate double-digit growth. Beyond that, as you know, our policy is not to give guidance. This is actually our internal targets and what we can provide.

Speaker #4: So beyond that, we are beyond that, as you know, our policy is not to give guidance, so this is actually our internal targets, and what we can provide.

Speaker #8: No, thanks, Kobe. Maybe any detail you could give on the segments? Obviously, land showed a 45% growth in Q2; pretty spectacular. Tracking ahead of your stock commentary on the $2.25 billion for the year.

Sheila Kaglu: Thanks, Kobi. Maybe any detail you could give on the segments. Obviously, Land 45% growth in Q2 is pretty spectacular. Tracking ahead of your soft commentary on the $2.25 billion for the year, how long is that sustainable? Airspace is also doing quite well. When we think about the new artillery award, it comes into just confirming it will be in the Land segment?

Speaker #8: How long is that sustainable on air spaces also doing quite well? And when we think about the new artillery award, it comes into just confirming it would be in the land segment?

Speaker #6: So as you mentioned,

Yaacov Kagan: As you mentioned, Sheila, all segments actually did very well, and we had growth across all segments. As you mentioned, Land especially became the biggest segment now in Elbit Systems, with 45% increase year-over-year and almost more than $550 million. That will drive, we believe, additional growth in this segment, which enjoys very, very high demand for all the leading products. As we mentioned, it is not just ammunition, but also Iron Fist. We have the Sigma, which is the new howitzer, which we are starting supplying now to the IDF, and also the Rampage missile, which was heavily used during the 12-day Iran war. That enjoys also domestic and international demand. We believe that this segment is going to continue to grow in revenue and also expand the margins, further expand the margins.

Speaker #4: Sheila, all segments actually did very well, and we had growth across all segments. As you mentioned, land has especially become the biggest segment now in Elbit.

Speaker #4: And with 45% increase year over year, and almost more than $550 million that will drive additional, we believe additional growth in this segment, which enjoys very, very high demand for the for all the leading products.

Speaker #4: And as we mentioned, it's not just ammunition, but also iron fist. We have the Sigma, which is the new Harvester, which started was starting supplying now to the IDF.

Speaker #4: And also the Rampage, missile, which was heavily used during the 12 days Iran war. And that enjoys also domestic and international demand we believe that this segment is going to continue to grow in revenue and also expand also the margins further expand the margins.

Speaker #8: Great. And one last one if I may. Great job on turning around ESA. How can we think about what's left to do there, whether it's restructuring or legacy diluted contracts?

Sheila Kaglu: Great. One last one, if I may. Great job on turning around Elbit Systems of America. How do we think about what is left to do there, whether it is restructuring or legacy diluted contracts?

Speaker #4: As we mentioned, we have turned around ESA. ESA was recording a loss in 2023, and we see expansion in the margins. With, as you mentioned, with flashing out, losing contracts, this next quarter, Q3, will be the last quarter of Spartan Maritime Company.

Yaacov Kagan: As we mentioned, we have turned around Elbit Systems of America. Elbit Systems of America was recording a loss in 2023, and we see expansion in the margins, as you mentioned, with flashing out losing contracts. This next quarter, Q3, will be the last quarter of Spartan, the maritime company, with the last quarter losing contract. That will allow us to further expand the margins in Elbit Systems of America. This year, as always, we will secure next year continued expansion in margin.

Speaker #4: With the last quarter losing contract, that will allow us to further increase to further expand the margins in Elbit Systems America. This year is always will secure next year continue expansion in margin.

Speaker #8: Great. Thank you so much. I appreciate the color.

Sheila Kaglu: Great. Thank you so much. Appreciate the caller.

Speaker #4: Thank you, Sheila.

Yaacov Kagan: Thank you, Sheila.

Speaker #8: Thanks, Sheila.

Daniella Finn: Thanks, Sheila.

Speaker #2: If there are any additional questions, please press *1. If you wish to cancel your request, please press *2. Please stand by while we pull for your questions.

Speaker 9: If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we pull through your questions.

Speaker #3: Hi, Hila. It's Daniella, and I have a couple of questions from an investor who sent them to me over email. The first question is, given the strong demand for UAS counter-drone measures, what are the company's plans for future development?

Daniella Finn: Hi, Ila. It's Daniella, and I have a couple of questions from an investor who sent it to me over email. The first question is, given the strong demand for UAS counter-drone measures, what are Elbit Systems' plans for future development? Could you also address the issue of potential exports of these solutions to Europe and to the U.S.?

Speaker #3: And could you also address the issue of potential exports of these solutions to Europe and to the U.S.?

Speaker #4: We thank you, Daniella. We have a system by the name of RidgeOne, and this system is actually a combination of several technologies from the company.

Yaacov Kagan: Thank you, Daniella. We have a system by the name of RidgeOne, this system is actually a combination of several technologies from the company, several technologies for detections, and several technologies for the effectors. Talking about detections, there are radar technologies, EO technologies, sigging technologies, and others. Talking about effectors, there are soft-kill technologies like jamming, energy weapon solutions, and hard-kill solutions as well. All of these are combined together into a coherent solution. The name of this system is RidgeOne. This system was delivered and heavily used successfully by the IDF here in Israel. I am happy to say that it was also exported to other countries. We have a handful of customers abroad. One of them is the Dutch Army, who have chosen this system.

Speaker #4: Several technologies for detections and several technologies for as a sectors. And talking about detections being there are radar technologies, EO technologies, sigging technologies, and others.

Speaker #4: And talking about effectors, there are soft-kill technologies, like jamming, energy weapon solutions, and hard-kill solutions as well. All of these are combined together into a coherent solution; the name of this system is RidgeOne.

Speaker #4: This system was delivered and heavily used successfully by the IDF here in Israel, and I'm happy to say that it was also exported to other countries.

Speaker #4: We have handful of customers abroad. One of them is a Dutch army who have chosen this system, and they are additional country in NATO which acquired this system from us, and there are other customers around the globe for this system as well.

Yaacov Kagan: There are additional countries in NATO which acquired this system from us, and there are other customers around the globe for this system as well. This system is a combination of many good technologies from the company and all fused together with AI. We believe that this is one of the most advanced solutions which is available in the market right now.

Speaker #4: This is actually the system is a combination of many good technologies from the company, and all fused together with AI and we believe that this is one of the most advanced solutions which is available in the market right now.

Speaker #3: Thank you, Butsu. And the second question from Henk Kerrit from Excellent. Henk, , thank you very much for your questions today. Is with regards to CapEx x investments, so we saw during the quarter total amount of $72 million.

Daniella Finn: Thank you, Bezzy. The second question is from Hen Carrot from Excellence. Hen, thank you very much for your questions today. It is with regards to CapEx investments. We saw during the quarter a total amount of $72 million, which is lower than the figure in the corresponding quarter last year. What can we expect in terms of the pace of capital investments during the year, and what is the total expenditure expected for 2025?

Speaker #3: Which is lower than the figure in the corresponding quarter last year. What can we expect in terms of the pace of capital investments during the year?

Speaker #3: And what is the total expenditure expected for 2025?

Speaker #4: Thank you, Daniella, and thank you, Henk. As mentioned in the first quarter, we enjoyed the governmental evacuation funds from the Israeli Land Authority. And that drove Q1 CapEx investment down.

Yaacov Kagan: Thank you, Daniella, and thank you, Hen. As mentioned, in the first quarter, we enjoyed the governmental evacuation funds from the Israeli Land Authority, and that drove Q1 CapEx investment down. The running rate of the CapEx investment is around $250 million, and we are currently looking at expanding the investment based on the follow-on offering that money that was received during May.

Speaker #4: The running rate of the CapEx investment is around $250 million, and we are currently looking at expanding the investment based on the follow-on offering that was received during May.

Speaker #3: Thank you, Kobe. And the final question from Henk. Regarding the Israel's geopolitical positioning, on one hand, we are seeing a lot of demand for defense security applications; on the other hand, Israel is in a tough geopolitical predicament.

Daniella Finn: Thank you, Kobi. The final question from Hen regarding Israel's geopolitical positioning. On one hand, we are seeing a lot of demand for defense security applications. On the other hand, Israel is in a tough geopolitical predicament. How is the company experiencing these difficulties? Obviously, apart from the big announcement that we saw this morning.

Speaker #3: How is the company experiencing these difficulties? Obviously, apart from the big announcement that we saw this morning.

Speaker #4: Yeah. So I would like to say that Daniella, as you mentioned, there is a growing demand for defense solutions right now worldwide. And ELBIT is in a unique position to offer a very advanced portfolio.

Yaacov Kagan: So I would like to say that, Daniella, as you mentioned, there is a growing demand for defense solutions right now worldwide. Elbit Systems is in a unique position to offer a very advanced portfolio. As you saw this morning in our announcement, what we are able to provide is an integrated solution for customers. We are able to sit with the customer and to help him to shape a transformation for his forces. This is based on the operational experience we have and the very wide portfolio we have, connecting all of those together into one coherent, very advanced solution, which enables a country to leapfrog with its operational capability. Such kind of partnership that Elbit Systems is able to offer is very unique, and we are in a very unique position here.

Speaker #4: And like you saw this morning in our announcement, what we are able to provide is an integrated solution for customers. We are able to sit with the customer and help him to shape transformation in his process.

Speaker #4: And this is based on the operational experience we have and the very wide portfolio we have. Connecting all the dots together into one coherent, very advanced solution enables a country to leapfrog with its operational capabilities.

Speaker #4: That kind of partnership that ELBIT is able to offer is very unique, and we are in a very unique position here. And I can say that there is a lot of interest for many, many customers worldwide to understand the breadth of the portfolio we have, the operational experience we have, and we have very good there is there are many, many discussions every day with many customers in Europe as well as in other places to try to understand how we are doing what we did in Iran, for example, and to understand also what is exportable and how we can help these countries to get such capabilities for themselves as well.

Yaacov Kagan: I can say that there is a lot of interest for many, many customers worldwide to understand the breadth of the portfolio we have, the operational experience we have. We have very good, there are many, many discussions every day with many customers in Europe as well as in other places to try to understand how we are doing what we did in Israel, for example, and to understand also what is exportable and how we can help these countries to get such capabilities for themselves as well. On top of this, I would like to mention that we are working abroad mainly via our subsidiaries. We have about 40 subsidiaries worldwide, quite a lot in Europe as well, almost all over the continent. What we are offering to our customer is not buying directly from Elbit Systems Israel.

Speaker #4: On top of this, I would like to mention that we are working abroad mainly via our subsidiaries. We have about 40 subsidiaries worldwide, quite a lot in Europe as well, almost all over the continent.

Speaker #4: So actually, what we are offering to our customers is not buying directly from ELBIT Israel. We are also enabling our customers to work via the subsidiaries.

Yaacov Kagan: We are also enabling our customer to work via the subsidiaries, which helps them to speak their own language and to do developments locally, to do production locally, to create jobs, to boost their economy. This is also a very unique position that we are in, and that's also a big advantage that we have. On top of this, we are working also with many partners abroad. Just to give an example, in Germany, as we just mentioned, we are working with Airbus to promote our JMUSIC DIRCM systems on the A400M. We are working with General Dynamics European Land Systems to promote the PULS rocket launchers and the rocket solutions, not just for Germany, also for Europe. So actually, we are in a unique position to offer very advanced solutions based on our wide portfolio, operational experience, and local jobs to support the local economies.

Speaker #4: And which helps them to speak their own language, and to do developments locally, to do production locally, to create jobs, to boost their economies, and this is also a very unique position that we are in, and that's also a big advantage that we have.

Speaker #4: And on top of this, we are working with many partners abroad. Just to give an example, in Germany, as was just mentioned, we are working with Airbus to promote our Zircon system on the A400. We are also collaborating with Dell and KMDS to promote the Pulse and Rocket solutions, not just for Germany, but for Europe as well.

Speaker #4: So actually, we are in a unique position to offer very advanced solutions based on our wide portfolio, operational experience, and local jobs to support the local economies.

Speaker #4: Now, I believe that it's true that in some cases, for example, in France, which is not a customer of Elbit in general, there is some resistance to buying from Israeli companies.

Yaacov Kagan: I believe that it is true that in some cases, for example, in France, which is not a customer of Elbit Systems Ltd. in general, there is some resistance to buying from Israeli companies. Altogether, I can tell you that the potential that we are seeing is huge. We never faced so many opportunities like we face today. I believe that we are in a unique position to continue the growth of the company in the near future.

Speaker #4: But altogether, I can tell you that the potential we are seeing is huge. We have never faced so many opportunities as we do today.

Speaker #4: And I believe that we are in a unique position to continue the growth of the company in the near future.

Speaker #2: There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends.

Speaker 9: There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the U.S., please call 1-888-782-4291. In Israel, please call 03-925-5900. Internationally, please call 9720-923-925-5900. A replay of the call will also be available at the company's website, www.elbitsystem.com. Mr. Machlis, would you like to make a concluding statement?

Speaker #2: In the US, please call 1-888-782-4291. In Israel, please call 03-925-5900. And internationally, please call 972-023-9255900. A replay of the call will also be available at the company's website.

Speaker #2: www.elbitsystem.com. Mr. Machlis, would you like to make a concluding statement?

Speaker #6: Thank you. I'd like to thank everyone on the call for joining us today and for your continued trust and support of ELBIT. Have a good day and goodbye.

Yaacov Kagan: Thank you. I would like to thank everyone on the call for joining us today and for your continued trust and support of Elbit Systems. Have a good day and goodbye.

Speaker 9: Thank you. This concludes the Elbit Systems Ltd. Second Quarter 2025 Results Conference Call. Thank you for your participation. You may now go ahead and disconnect.