Q4 2025 Northern Technologies International Corp Earnings Call

One of the 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 VP Investor Relations Daniela. Please go ahead.

Thank you, Karen and Hello, everyone and welcome to our third quarter of 2025 earnings call on.

On the call with me today are booked through monthly president and CEO of Elbit system, and Kobe Kagan corporate CFO.

Before we begin I would like to point out that the safe Harbor statement in the company's press release issued earlier today.

Good day and thank you for standing by. Welcome to Northern Technologies International Corp's Q4 2025 earnings conference call on webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press *1, 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Today's conference is being recorded.

As to the contents of this conference call.

As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information.

We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business.

as part of the discussion today, the representatives from ntic will be making certain board looking statements regarding NC's feature financial and operating results as well as their business plans, objectives and expectations

Auguste Philip Richard: I think that high-powered lasers in the air will be a game changer in the way countries are fighting against drones, against swarms, and against cruise missiles. This is still under development. Although it's still in development, there is a lot of interest for that from many, many customers abroad. We are not developing just high-powered lasers. We have other types of energy weapons, which are in a very advanced phase of development. Some of them are confidential, but I can tell you that they are very unique. We really believe that this energy weapon activity is a very important growth engine for Northern Technologies International Corporation for the future.

You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release.

Please be advised that this portal looking statements are covered under the Safe Harbor, provisions of the private security investigation, Reform Act of 1995. And that ncic desires to Avail itself of the protections of the Safe Harbor for DST statements.

Jose will begin by providing a discussion of the financial results followed by Blue C, who will talk about some of the significant developments during the quarter and beyond.

He will then turn the call over to question and answer session.

Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risk and uncertainties including those described in niches. Most recent

With that I would like to now turn the call over to Koby.

Annual report on form 10 K, subsequent quarterly reports on form 10 q and recent, press releases.

Please go ahead.

Thank you Daniela.

Hello, everyone and thank you for joining us today.

Please read these reports and other future filings that ntic will make with the SEC.

We're very pleased to announce another circle quarterly results with double digit year over year growth in revenues backlog and EPS.

Ntic disclaims any duty to update, or revise is for logging statements.

Quarterly free cash flow was solid at $101 million underscoring our healthy cash generation.

I will now hand the conference call over to Mr. Patrick Lynch NC. Oh please go ahead sir.

I will now highlight and discuss some of the key figures and trends and after eventual results this quarter.

Good morning. I'm Patrick Lynch, Jac's CEO, and I'm here with Matt Wilson, Niches CFO.

Seth Safeman: Thanks very much.

Auguste Philip Richard: Thank you.

Operator: The next question is from Ellen Page of Jefferies. Please go ahead.

Third quarter 125 revenues were 1 billion meinhardt does $922 million.

Please note that a press release regarding our fourth quarter and full year fiscal, 2025 Financial results.

Was issued earlier this morning and is available at nic.com.

Ellen Page: Hi, guys. Thanks for the question. The margin was very strong in the quarter on a year-over-year and sequential basis. Can you discuss the drivers of that? Was there any element of mix that supported profitability in the quarter? How do we think about the progression of margins from here?

Bird to $1 billion seven 700.

Millions of dollars in the third quarter of 2024.

During today's call, we will review various key aspects of our fiscal 2025, fourth quarter and full your financial results.

Provide a brief business update.

12% growth in quarterly revenues year over year and 18% growth.

And then conclude with a question and answer session.

Over a year of performance.

For the nine months ended September.

In the third quarter of 2025 Europe countries.

We are referring to the fourth quarter and full year of our fiscal 2025.

Timothy Clarkson: Hi, Ellen. How are you? If you notice, there is a very strong expansion in margins this quarter, as you indicated, which comes as a 0.9% improvement, a 1%, shy of 1% in the gross profitability of the company, and additional 0.5% on the operational expenses. We are looking at a 1% expansion in the gross profitability and 1.5% expansion in the operational profitability. Those two are the fruits of improvement in our backlog profitability and for using a lot of operational excellence, both investments, and also processes that were inaugurated in the company, including using AI for different purposes of operational use. That is driving not just our operational profitability, but also our gross profitability up. This is the first quarter that we see this kind of expansion in both the gross profitability and the operational profitability.

in comparison to the fourth quarter and full year of last fiscal year.

Contributed 28% North America, 21%.

Asia Pacific, 14% in Israel with 33% of revenues.

Fiscal 2025 was marked by order timing shifts and select softness in our zeros, coil, and gas and nature markets.

GAAP gross margin in the third quarter was 24, 9% of revenues compared to 24% in the third quarter of 2024.

So, NC used this period to strengthen its competitive position and to execute strategic initiatives that we believe will enhance our long-term growth potential.

non-GAAP gross margin for the third quarter was 25, 2% of revenues.

Bird to 24, 4% in the third quarter of 2024.

We accelerated product Innovation within nature, Tech Advanced new, Zero Solutions across Global industrial markets and pursued emerging opportunities in the South American offshore oil and gas sector.

GAAP operating income for the third quarter was $171.4 million.

Or eight 9% of revenues.

These actions have expanded our pipeline sharpen, our focus and positioned, ntac to re accelerate growth and improve profitability in fiscal 2026 and Beyond.

$125 $8 million or seven 3% of revenues in the third quarter of 2024.

non-GAAP operating income was $186 $7 million or nine 7% of revenues.

In fiscal 2026. We expect to start reaping the benefits gained from the Strategic Investments ntsc made over the past 3 years to upgrade our Global operations and support future growth.

Compared with $147 million or eight 2% of revenues in the third quarter last year.

We are also focused on flattening our operating expenses while expanding gross margins. In the end, we aim to drive sales in the higher margin parts of our business.

Which we expect will improve our profitability and strengthen our balance sheet in fiscal 2026.

We're very pleased with this margin expansion trajectory.

The operating expense breakdown in the third quarter was as follows net R&D expense were $129 $1 million or six 7% of revenues.

Timothy Clarkson: On top of that, we are also doing CapEx investments, which are yielding fruits, as we discussed many times in the past, the ERP system that is fully operational, the one ERP system that is fully operational in the company, and also robots and cobots that we are also using now mainly in the ammunition and munition factories. If I can summarize everything, we can see that we have our advantages to the size, which with the increase in revenue, we are doing better conversion to profits.

While we anticipate macroeconomic headwinds to persist specially in Europe, we believe ntsc is positioned to deliver growth and improved profitability across many of our key markets in the coming fiscal year.

So with this overview, let's examine the drivers of the fourth quarter in more detail.

<unk> to $119 9 million or 7% of revenues in the third quarter of 2024.

For the fourth quarter ended August 31, 2025.

Elbit continues to invest in R&D to secure future profitable growth, which will maintain <unk> position as the market leader in years to come.

Our total consolidated net sales decreased 4.4% to $2,022.3 million as compared to the fourth quarter and the period ending August 31, 2024.

Marketing and selling expenses.

$91 million or four 7% of revenues versus $91 $3 million or five 3% in the third quarter of 2024.

Broken down by business unit, this includes a 29.4% decrease in zero oil and gas net sales and a 10% decrease in niche net sales.

Ellen Page: Great. That's very helpful. How do we think about the impact of less operational disruption, assuming the ceasefire holds? Is that an opportunity for another step up from here?

Partially offset by 5.8% increase in zeros industrial net sales.

G&A expenses were $86 7 million or four 5% of revenues.

Turning to our joint venture sales, which we do not consolidate in our financial statements.

Compared to $75 $7 million or four 4% of revenues in the third quarter of 2024.

Timothy Clarkson: We are very happy. We are very happy with the ceasefire, of course, and that is we prayed, everybody here prayed for that after two years of this conflict. We all hope that this quiet will be maintained here in Israel. For the company, it allows us to regroup, people to come back from mobilization, and to get back to normal business, which is, as you know, Northern Technologies International Corporation is mainly predominantly working outside of Israel. This is our strength of doing around 70% of the business outside of Israel. It allows us to invest more in the business outside of Israel, and to focus, of course, more about doing the ordinary business as we did before this 7 October 2023 conflict. This is an opportunity for the company to receive more opportunities and more new business to strengthen our backlog.

Total net sales for the fiscal 2025 fourth quarter by our joint ventures increased year-over-year by 4.7% to 24.4 million

Financial expenses were $34 $5 million in the third quarter.

To $45 million in the third quarter of 2024.

The decrease in financial expenses Nap in the third quarter of 2025 was mainly due to a reduction in the average net debt.

For fiscal 2025 joint venture sales declined, 4.9% reflecting. The continued impact of high energy prices and regional political pressures on the European economy as well as significantly increased uncertainty related to us, trade and economic policies and the potential impacts this will have on Global Supply chains.

We recorded a tax expense of $11 $4 million.

The third quarter compared to $12 $8 million in third quarter of 2024.

We continue to closely monitor trends across our European markets for signs of stabilization. Following years of subdued demand as governments begin to implement targeted economic stimulus packages.

The effective tax rate in the third quarter of 2025 was eight 2% compared to 14, 6% in third quarter of 2024.

We expect that any economic recovery from these stimulus packages will lead to a positive impact on our joint venture operating income in future periods, especially in Germany.

The decrease in the effective tax rate for the third quarter of 2025 was mainly due to the increase in deferred tax assets.

Improving sales trends at our wholly owned, ntic, China subsidiary continue.

GAAP diluted.

Fiscal 2025 fourth quarter, net sales at ntac, China, increased by 12% to 4 million dollars.

<unk> was $2 80 for the third quarter of 2025 compared to $1 77.

Third quarter of 2024, our non-GAAP diluted EPS was $3 35 for.

Ellen Page: Great. Thank you for that. I'll leave it there.

For fiscal 2025 ntsc, China sales, increased 14% to 16.2 million, the second strongest year of sales. We have experienced in this market,

Daniela Finn: Thank you, Ellen.

Operator: Thank you. I'm passing the call to Daniela. Please go ahead.

For the third quarter of 2025 compared to $2 21.

Ntsc China, sails for fiscal 2025, demonstrate that the man continues to grow in this geography.

Daniela Finn: Thank you, operator. We have a couple of questions from Chen Kerrit from Excellence. Chen, thank you very much for your questions today. The first one is, has there been any update to the company's profitability target for 2026, 10% operating profit, following the expansion of the order backlog and the improvement in gross margins in the current quarter?

First quarter of 2024.

Fourthly segment revenue for the third quarter of 2025 aerospace.

Furthermore given that the majority of ndac China's sales are for domestic Chinese consumption. We Believe ntic China's exposure to us. Tariffs is limited.

Third quarter revenues decreased by 3% year over year, mainly due to decrease in precision guided munitions sales in Asia Pacific.

We expect demand in China will continue to improve in fiscal 2026 helping to support higher incremental sales and profitability in this market.

Partially offset by the increase in PGM sales in Israel, and an increase in unmanned aerial system sales in Europe.

Timothy Clarkson: Thank you, Daniela and Chen. As you know, we're not giving specific targets and providing guidance. Saying that, we will still maintain our internal targets to continue to improve our profitability. This is, of course, a strong target in the company, as well as cash conversion, which is a principal target in the company to continue the improvement in cash conversion in the company.

We continue to believe that China will likely become a significant market for our industrial and bioplastic segments.

So we'll continue to take steps to enhance our operations in this geography.

Revenues for the nine months were up 9%.

FIFA Ryan cyber.

Now, moving on to zero, so oil and gas.

Revenues increased by 14% to your year over year, mainly due to radio systems and command and control system sales in Europe for.

Fourth quarter of fiscal 2025 0 to oil and gas sales were 3 million compared to 4.2 million in the same period last year.

For the nine months revenue rose by 15%.

I started in <unk>.

Revenues increased by 5% in the third quarter of 2025, mainly due to electro optic systems and then joining for system sales in Israel and high power laser sales in Israel.

As a reminder, 0 oil and gas sales for the fourth quarter last year. Benefited from approximately 600,000 dollars in sales, that shifted from the third quarter, due to timing.

Daniela Finn: Thank you, Kobi. The second question from Chen is, how does Northern Technologies International Corporation plan to generate added value from the significant expansion in the US Department of Defense's budget? Specifically, is there a concrete plan to pursue an M&A transaction in the US and/or to expand into verticals such as drone swarms or border protection applications?

For the nine months revenue increased by 8% land.

Where 7. 3 9.

<unk> revenue increased by 41% in the third quarter of 2025 due to ammunition ammunition sales in Israel and in Europe for the nine months revenue were up 44%.

Decline was primarily due to timing of orders.

We have continually invested in zero soil and gas.

To enhance our sales team and add resources to support future growth.

Auguste Philip Richard: Thank you. Thank you, Daniela and Chen. The US market is very strategic to Northern Technologies International Corporation. We see the US as our home market. I'm very pleased with our performance in the US. The last two acquisitions we made, the Night Vision activity and Spartans, the Sonoboys activity, both of them are very successful. Both of them are growing. We certainly look for opportunities for acquisitions in the US. We're exploring the market. I would like to say that in the past, we delivered a system to the CBP for border protection. Our equipment is deployed along the borders. We believe that the current need for additional systems along the borders is very relevant to us. We are planning to pursue it. The rest of our activities in the US are very successful as well. Our avionics activities are growing.

Systems of America revenues decreased by 2% due to due to a decrease in that.

This has improved our sales pipeline as the size. And number of opportunities have expanded among both new and existing customers.

Electronic systems and medical instrument sales, partially offset.

Our pipeline includes global opportunities to protect above ground, oil storage tanks, pipeline casings, and offshore oil rigs from corrosion.

By the increase in maritime and Warfighters system sales.

For the nine months revenue rose 6%.

The nature of this industry will always cause certain fluctuations in zero swelling and gas sales.

The order backlog as of September 30 of 2025 was $25 $2 billion $3 $1 billion higher than the backlog at the end of the third quarter of 2024, and $1 $4 billion higher than the backlog in the second quarter of 2025.

Nevertheless, we still expect to see serious oil and gas sales and profitability.

To improve significantly in fiscal 2026. As we leverage these Investments and reign in operating expense growth.

Earlier this month, we announced that our 85%-owned subsidiary.

Zero spil.

The increase in backlog during the quarter came mainly from new European orders.

Security new 3 year contract for a major offshore project with the leading Global EPC company.

Approximately 69% of the current backlog is derived from order outside of Israel, approximately 38% of the current backlog is scheduled to be performed during the reminder of 2025 and during 2026 and de risked is scheduled for 2027 and beyond.

Under this agreement, zeros Brazil will provide Advanced Corrosion Protection solutions, for floating production storage and offloading units or fpso.

But an estimated total value of approximately $70 million, Brazilian riots, which is equal to approximately $13 million US dollars, based on current exchange rates.

Cash flow provided by operating activities in the nine months ended September 30 is 20 to 25 was $461 million as compared to $82 5 million in the nine months ended September 32024.

The project started in Q4 and is expected to ramp up during our fiscal 2026 and then continue through calendar 2028.

Auguste Philip Richard: Our active protection system is doing very well in the US on top of the Bradley flight tank. We will continue to invest in the US, continue to recruit additional people, and we would like to expand our position in this very important market for Northern Technologies International Corporation.

This is a significant validation of our engineering capabilities, scalability of our zest, oil and gas business, and the reputation we've built as a trusted partner to Leading offshore operators.

The cash flow in the nine months ended September 30th 2025 was affected mainly by the strong increase in net income.

Brazil represents 1 of the fastest growing deep water, markets globally and we believe this wind provides a strong foundation for continued growth and expansion across International oil and gas markets.

On the back of the continued strength of the company's result.

Turning to our nature Tech bioplastics business.

<unk> of directors declared a dividend of <unk> 75 per share.

Daniela Finn: Thank you, Bootsy. Operator, if there are no more questions, we can wrap up.

Fourth quarter in H. Tech sales were $5.1 million.

On January 5th.

Operator: Thank you. Before I ask Mr. Mahfiz to go ahead with his closing statement, I'd like to remind participants that a replay of this call will be available two hours after the conference ends. In the US, please call 1-888-782-4291. In Israel, please call 03-925-5900. Internationally, please call 972-3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Mahfiz, would you like to make your concluding statement?

2026.

I will now turn the call over to Mr. Mok, Please all be CEO.

Representing a 10% year-over-year. Decline in nature, Tech sales primarily due to pricing Dynamics, and the timing of orders.

Please go ahead.

Thank you Colby Hello, everyone and thank you once again for joining us today.

For example, during the past year, a large North American customer of our resident compounds late purchasing for nearly 6 months.

It could be just described.

As they made tooling adjustments to increase the output of their manufacturing line.

Continuing the growth and margin expansion project.

Driven by strong demand for our solutions, particularly in Europe and UK.

Lbs centers consequences quarter of double digit growth.

Oh, this contributed to a nature. Text decline in sales for fiscal 2025. We've already received orders for the first and second quarters of the new fiscal year for the equivalent of what this customer purchased from from us in all of fiscal 2025.

Further demonstrate our global leadership.

But just.

Ah recently tested and proven solutions position us as the leading authority.

It's also worth mentioning that in Q4 fiscal 2025, we entered into a preferred supplier agreement with the nation's leading. Specialized distributor, for Jansen food, service, and Industrial Packaging.

Oh, obviously changing industry as defense budgets continue to rise globally and our customers seek.

We expect this new relationship to translate into higher nature, Tech sales growth and fiscal 2026.

Auguste Philip Richard: I would like to thank everyone on the call for joining us today, and for your continued trust and support of Northern Technologies International Corporation. Have a good day, and goodbye.

Cutting edge, but improving system to secure and booked.

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We are also working on several large larger opportunities for our nature Tech solutions that we believe holds significant promise to benefit our sales in the coming quarters.

Our portfolio of relevant technologies.

Operator: Thank you. This concludes the Northern Technologies International Corporation, third quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.

Both of our customers through a suite of it.

Including advancing, the compostable food, packaging solution. We mentioned on our last call.

Advanced wound fight this solution across all domains.

On the back.

On the strong results I'm proud that we continue to improve.

Overall, we believe Nature Tech is a best-in-class compostable plastic business, well positioned for significant further growth in the U.S. and abroad.

The translation of our revenue goals and growth in both profits and cash flow.

While fiscal 2025 was more challenging than we expected at the beginning of the fiscal year.

This is a fixed consequently quarter, where we delivered positive free cash flow and improve the company's cash conversion.

we remained steadfast on pursuing, our strategic growth plan,

we're confident in the direction. We are headed.

Yesterday, we announced the signing of an international corn crop.

Strategic solution.

Oxiclean $2 3 billion in U S dollars.

Before I turn on the call over to Matt, I wanted to acknowledge the hard work and dedication of our Global team of both employees and join Venture Partners, our success and our ability to navigate more complex. Economic periods are in a direct result of their efforts.

This contract will be performed over a period of Ecu.

Im extremely pleased with.

With this overview, let me now turn the call over to Matt Wallace to summarize our financial results for the fourth quarter and full fiscal year 2025.

This announcement of the largest contract in <unk> history.

Sure.

Testament to the discipline.

Our product and we will.

<unk> to equip our customers with.

Advanced and relevant submissions.

During the quarter Elbit received another large corn crop and shop.

Thanks Patrick compared to the prior fiscal year period, nca's Consolidated. Net sales decreased 1.0% in fiscal 2025, and decreased 4.4% in fiscal 2025 fourth quarter. Because of the trends, Patrick reviewed, his prepared remarks.

<unk> been in country needs a range of both solutions totally.

162 5 billion.

<unk> to be delivered over the next five years.

Sales across our Global joint ventures increased 4.7% in the fourth quarter. Joint venture operating income in the fourth quarter, increase 6.6% compared to the prior fiscal year period, primarily due to the corresponding increase in net sales.

Crop include long range precision strike I'll tell you to look at system.

Two of them in the cornerstone and <unk> are a common system highly sophisticated ISR capabilities, including seeking coming and electric office system.

For fiscal, 2025 sales across our Global joint ventures decreased 4.9% while joint venture operating income decreased 9.8% compared to the prior fiscal period.

And then <unk>.

Intelligence collections and processing system will also be delivered along with advanced optics and night vision system combat vehicle upgrade and protective.

Primarily due to strategic investments in zest, oil, and gas.

Yes.

Sales infrastructure and increased personnel expenses, including new hires, benefits, and higher travel and professional fees.

New orders also included contracts for all of her missed 100 loans.

Unsaleable munition.

As, as a percentage of net sales operating expenses were 43.5% for the fourth quarter, compared to 40.7% for the prior fiscal year period.

I am indeed, and $260 million contract for the income assistance.

Following is a 12 day campaign against Iran.

For fiscal 2025 operating expenses. As a percentage of net sales were 44.7% compared to 41.6% for the prior fiscal year.

Ebix has seen.

Growing interest in our solutions mainly.

So not exclusively for the helmet drones EW system and funding.

Gross profit as a percentage of net sales was 37.9% during the 3 months ended August 31st, 2025 compared to 43.8% during the prior fiscal year period.

Yeah.

The illness platforms enable us to cross sell product from other segments and offer our customers comprehensive solutions.

Gross profit is a percentage of net sales was 37.6% for the fiscal year, ended August 31st, 2025 compared to 39.7% for the prior fiscal year.

Since its first order in 2011.

Almost 100, hasnt been selected but over 20 customers worldwide.

lower gross margin for the fourth quarter and full year periods, were primarily due to a less profitable mix of sales

And all.

We successfully launched the advanced Jupiter based carnival abroad, and National advanced optical system.

There were a couple of 1 time items that impacted profitability during the fiscal year, including a 1.1 million benefit to other income due to the receipt of cash.

Yeah.

From the employer retention credit, that was payable in February of 2025.

Supporting a wide span of Earth observation missions.

Clothing military operations, environmental monitoring and scientific research.

Developed by LTE system Eyestone EW Jupiter is one of the wound most advanced based come along.

Secondly, ntsc recognized 387,000 in other expense during the fourth quarter of 2025 as nts's. Chinese subsidiary, was assessed penalties. From ningo Customs Customs Authority in China as a result of technical? Classification matter.

Switching it really like a very large upper jaw and and ex <unk>.

We have since updated our export documents and internal review procedures and believe this issue is now been fully resolved.

Okay.

Exceptionally lightweight design.

The camera is multi spectral offering a combination of imaging.

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We also experienced an increase in our effective tax rate for fiscal 2025, which was 67.5% for fiscal 2025 compared to 17.3% in the prior fiscal year.

<unk> this quarter.

Expanded our operation are you opening new facilities in Sweden, and Germany to enhance our local delivery capabilities to ensure a more secure foster support to our customers.

The changes primarily reflect increased income tax expense in our foreign subsidiaries and is primarily due to the increase in income tax expenses, compared to reduce Consolidated, pre-book tax income.

Being close to our customers.

<unk> for us.

And hence president and CEO.

So listen our ability to deliver a modern and reliable solution base required to ensure the onslaught of ability.

As a result, our effective tax rate was unusually high, and volatile in fiscal 2025. We expect the effective rate to normalize in future periods when additional profits are recognized and in North American operations,

Send your formal offenders won't be offended.

In June we launched pulse to.

Generation infrared missile warning system.

NTIC reported a net loss of $1.1 million, or 11 cents per diluted share, for the fiscal 2025 fourth quarter, compared to net income of $1.8 million, or 19 cents per diluted share, for the fiscal 2024 fourth quarter.

Like aircraft designed to enhance the mobility and the Polish it ought to fit the.

The system detects the wide wide range of threats, regardless of secret diet.

And provides advanced protection for fighter jet transport aircraft and helicopter operating in complex high spreads environments.

For folded full year, ntac reported. Net income of 18,000 or 0 cents per diluted share compared to 5.4 million or 55 cents per diluted share for the fiscal 2024 full year.

At the NCI.

And a cutting edge one wide area of persistence, so when a system designed to address.

The increasing complexity and intensive intensity of border protection challenges.

For the fiscal 2025 fourth quarter, NTIC reported a gap-adjusted net loss of $607,000, or $0.06 per diluted share, compared to a non-GAAP adjusted net income of $1.9 million, or $0.20 per diluted share, for the fiscal 2024 fourth quarter.

<unk> autonomously operate multiple thug central.

Premium and classify splits.

In only the most wherever and analyze information towards.

For the fiscal 2025 non-gaap adjusted. Net loss was 12,000 or 0 cents per diluted share compared to net income of 5.8 million or 59 cents per diluted share for fiscal 2024.

It was appropriate for.

Its leverage advanced artificial intelligence to optimize instead of just gathering and decision making across land and maritime domains.

For reconciliation of GAAP to non-GAAP financial measures, it is available in our fourth quarter, fiscal year 2025 earnings press release, those issued this morning.

All of these notable achievements would not have been possible result, or dedicated employees.

Day and night commitment to Elbit is truly unique.

As of August 31, 2025, working capital is $20.4 million, including $3.7 million in cash and cash equivalents, compared to $2.3724 million.

I would like to take each and every one of our outstanding employees for their continued professionalism and dedication.

As of August 31st 2025.

And we said that we'd be happy to answer your questions operator.

At outstanding debt of $12.2 million, this included $9.3 million in borrowings under our existing revolving line of credit compared to $4.3 million. As of August 31, 2024,

Yeah.

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.

Reducing debt through positive operating, cash flow and improving working. Capital efficiencies will be a strategic Focus for fiscal 2026.

Wish to cancel your request please press star two.

You are using speaker equipment kind of lift the handset before pressing the numbers.

Questions will be called in the order they are received.

Please stand by while we poll for your questions.

We generated 2.4 million dollars in operating cash flows for the fiscal year ended August 31st, 2025 a year end. The company had 28.6 million of investment in joint ventures of which 51.7% are 14.8 million, was in cash with the remaining balance primarily invested in other working capital.

The first question is from Jordan scientists.

Bank of America. Please go ahead.

Hey, good morning, Thanks for taking the question or afternoon for you guys.

2025 to stockholders of record, on July 30th 2025.

So I know them well.

With me to fire now happening how enduring.

I was thinking about.

Domestic demand and if we do see a slowdown in the domestic buckling salary how should we think about the tradeoffs with margins as we were start to skew more towards international.

Thank you Jordan how are you.

To conclude our prepared remarks, we are optimistic and witness momentum building across many parts of our business. We believe our multi-year strategies are working, our global markets are expanding, and our team is delivering results. With a clear vision and disciplined execution, we're confident that the foundation we've built will drive continued growth, stronger profitability, and meaningful value creation.

Right.

So your question about the domestic demand.

Value creation for our shareholders.

With this overview, Patrick and I are happy to take your questions.

We can look at this quarter, we had an increase of $1 $4 billion, and our backlog $200 million in Israel and $1 $2 billion outside of Israel.

Thank you, ladies and gentlemen, to ask a question, you will need to press star 1 1 1 on your telephone, and wait, for your name to be announced.

We're looking at that.

Again, that's star 1111 to ask questions, 1 moment for our first question.

Some kind of.

The nature of the growth of the backlog for the future.

And we have a question coming from the line of Tim Clarkson with Ben Clements. You, let us know. Open.

We're targeting around a flattish backlog in Israel and growth outside of Israel predominantly in Europe that that would be the.

The growth area, which are we.

We see the our final we see our opportunities and we see the demand that's coming out from Europe, and we think that this is the place that dominantly will provide the growth in the future in the backlog.

Hey, Patrick. Hey man. Um, you know, the, uh, obviously, this this year was not what everyone wanted, but, uh, just a couple of background questions. Um, in general are the, are the income taxes on our international business? Are they higher than than the dough than the taxes domestically here in the United States?

Got it thank you so much.

The next question is from Seth salesman from J P. Morgan.

Yeah go ahead.

Afternoon, everyone.

I wanted to ask about when we think about.

Aeronaut aerospace business from here.

And we saw the decline in the quarter, how should we think about the trajectory in that business going forward.

I know you called out some decline in sales to Asia, but also some trying orders during the quarter, so kind of where where does that go from here.

Um, it's not that it's higher. It's that essentially what you have is. You have a situation where with all of our subsidiaries, let's say that the main 5 subsidiaries, they have a standard statutory tax rate, you know, somewhere between 20% and and 33 34% depending on the country. And so all of those subsidiaries are profitable so they generate tax expense. So if you look at it from an effective tax rate, when you put it all together, you have essentially the numerator and the effective tax rate calculation is a fixed number. There isn't a significant amount of their, there isn't a significant amount of tax expense from North America. However we do have tax expense in North America based off of the you know, we recognize here based off of the royalties and dividends that we receive from JVS

Hello, Good morning, I believe I've been invested.

That will continue to see growth in this segment as well.

First I would like to mention that the lagoon Xs embedded on top of most of the western platform.

It includes all hasn't been but not only that also quite well.

The issue that we have is that the denominator in the calculation, um, there's very little profit especially in fourth quarter that went into that number. And so what it created is a is a is a, a very large effective tax rate for fourth quarter, the expectations are then going forward as there is more profitability specifically in North America, the denominator in that calculation is going to be increased.

Well, that's a lot of.

Equipment from us is embedded.

Yeah.

In our niche.

Many many platforms.

You know, for example, if we had more profit in North America, we would have had the same numerator, the same tax expense, but the denominator on the calculation would have been significantly higher and would have led to a more normalized effective tax rate.

In many many countries not just in the U S.

Um, it's just the nature of how the tax provision calculation works.

So we enjoy from living news coming all in the International Theater Boyne located in another OEM.

Uh, especially when we had, you know, obviously a difficult fourth quarter from a North American standpoint.

That's on the books.

I really believe that this market will continue to work for us.

So, I do, I do expect it to normalize in the, uh, in, in fiscal 2026.

And like also to mention usually there is a huge demand for US is we're literally in the nation.

Um, you know, as we get back to similar profit levels that we had before.

We have the 'twenty cost international customers, who book to know.

101 loss.

And we.

We provide not just a platform we provide an integrated solution, which includes all of sensors and payloads.

From the company and we have the ability unique.

Offering to our customers.

And the growing market for us these or menu Z, but ultra small uavs and fallopian munitions.

The whole on the edible in Sydney.

So I believe that.

We will continue to grow the company.

In Israel, and mainly a bullish.

And in fact that this is going to be too to further to further add on what his answer.

We if you look at the three quarters over three quarters last year.

Okay, sure. So I I know you you mentioned that you're you're looking to cut expenses in the company, too. I I mean, how realistic, how much money do you think you can cut to to improve profitability? The goal at this point isn't to cut expenses. The goal is to I would say maintain the same level of operating expenses that we had or close to the same level of operating expenses that we had in fiscal 25. I mean you you recall all through, you know, the the end of 2024 and through 2025, we talked about the increase Investments that we've made in the oil and gas group and a couple of other areas inside of the company, and it with the ability to kind of, you know, use those Investments to drive revenues going forward. We didn't see the revenue increases in fiscal 2025. The expectations are the Investments that we made in 2024.

Aerospace segment grew 9%.

We think that are the relevant the gross number for the aerospace is a single digit growth in revenues.

Because this this segment is leaning.

Predominantly on the U S budgets with a lot of our revenue coming from the U S, which is the single thing.

In 2025, we'll start seeing, you know, the results of that in 2026 and beyond. As those investments, specifically the people that we hired, um, you know, are able to gain traction and drive revenue growth. So, the expectation is that we're going to drive revenue growth in 2026. Those gross margin dollars falling down to the operating profit line as we're able to hold operating expenses as stable as possible.

Budget growth.

And and for that reason a that is a that is the number that we think is relevant for this quarter for this segment.

Okay excellent excellent. Thanks.

If I could add one follow up question.

Can you talk a little bit more about the opportunities that are emerging and and directed energy.

Sure. Okay. On on the oil and gas I it sounds like there's some additional business that will kick into the into the first quarter and further on out with some of these larger orders. Now what's Drive is driving this business, is it just having more sales been out in the field in places like the Middle East and Brazil or is it, you know, it's the technology finally.

We've seen some other progress on iron P M.

Stuff.

Or are you seeing a lot of opportunities emerge for directed energy solutions outside of Israel as well.

Yeah.

Um,

Yeah. The answer is yes.

Can you hear me?

Well part of it is the Israeli program for grown the high power laser systems they live the salt.

Yeah, I can hear you. Go ahead.

Hi. Hi. Okay. Uh, it's um.

He's coming from us in the first system to be deployed.

And by the end of this year the island's been system.

There's going to be I believe that next year, we see many more orders healing newsletter for ground up outlet.

uh, it's a combination of having to do. It's just general acceptance of the technology in in the market where we've proven that that it works over and over and over again. We're getting repeat business from uh existing customers as we're pulling a new customers and uh that that's really trying to

uh,

Based on the success soon as well.

A lot of interest and many many other places.

Oh.

Starting to give our our oil and gas business. Uh ah ah ah the attention that we think it deserves

In high power lasers.

And for height for growing type of laser system.

And we are volatile.

A solution.

Human as when we need it.

The airborne Typo litho system.

During the development phase.

Sure, sure, uh, in ter, in terms of the, um, the packaging. Uh, I know that you guys had a breakthrough in terms of, you know, being able to kind of, you know, replace the traditional Saran Wrap, uh, packaging. That's that doesn't allow, uh, are to go out and, and you've now developed packaging. That's similar to that. That's

And.

Actually and I believe they didn't see the petition.

Potential for us.

Uh, composed of all, I mean, how close are we from getting some business from that?

For the system I think the type of lasers.

It will be a game changer in the way countries, all at Viking films and against <unk>.

Um, for that. I'd like to turn the question over to Vinita L who runs our Niche business.

Sure, you want to go ahead.

Yeah, this is Vinnie.

Uh, yeah. We have several customers.

And the Greens closing he says.

And this is still under development, but also it sounds like it's only it's still in development.

A lot of interest.

So all of that.

For many many customers.

It broke and we are not developing just high power lasers, we have that.

Other type of energy weapons the jaw.

We're doing trials with um compulsive packaging, especially for food um, consumer food applications. So this is something that we're working on. We've gotten some good feedback, not just, uh, here in North America but also in India, uh, where there's a big market for these kind of applications. So we expect some of those opportunities to start uh uh, hitting our, our sales and 2026.

1 billion advanced phase of development.

Each al.

Some of them are confidential, but I can tell you that the ability will need.

We really believe that.

Energy Lippen activity is a very.

Important.

The growth engine for the future.

Okay. Are the are the costs similar for the compostable product versus the Legacy product product, know the, the, the the the cost is definitely higher as the premium, uh, solution. But uh, due to legislation and and government regulations in in countries like India. Uh, these companies are forced to use compostable packaging instead of traditional plastic packaging.

Thanks very much.

Thank you.

The next question is from Alan Page of Jefferies. Please go ahead.

Okay. Okay. Okay. Well, great. Well, I'm looking forward to seeing some of those results. I'm done. Thanks guys.

Thanks. Thanks.

Thank you.

Hi, guys. Thank you for the question.

Marcia was very strong in the quarter on a year over year and sequential basis.

Our next question coming from the lineup because Richard with Northland Capital Park, Marcus Elan is now open.

Ken.

Just the drivers of that and was there any element of connected support.

Profitability in the quarter and how do we think about that.

The professional it might change from here.

Yes, thanks for taking the questions. Um, you mentioned we came from North America. Um, could you just describe where that's coming from? Um,

Hi, Alan how are you.

If you if your analysis there there is a.

The main weakness is North America. We experienced, you know, throughout.

There is a very strong expansion in margins this quarter as you indicated which come up.

Um, you know, the entire fiscal 2025 was primarily the Nature Tech group in the Oil and Gas group.

0.9% improvement of 1% shy of 1% in the gross profitability of the company an additional 0.5% on the operational expenses. So we are.

if you look at the, you know, the the, the the,

The oil and gas group in North America was down close to 46% on the year. Nature Tech North America is down about 13% on the year.

We're looking at 1%.

Expansion in the gross profitability in 1.5% expansion and operational profitability.

Got it. Okay. Um, and then

Those two are the fruits of Oh for improvement in our backlog profitability.

In the um, floating platforms for the oil and gas. Um,

For using a lot of operational excellence.

I'm I'm trying to wrap my mind around how um Your solution Works floating on the water and and how much does that uh open up the market opportunity for you?

Both investments and also and also processes that are that are where we're inaugurated in the company, including using AI.

Let's see, a new market for us overall.

Um, it's not nice. You're trying to uh,

For a different purpose to support personal use.

And that's a that is driving our not just not just our operational profitability, but also our growth our profitability up and this is the first quarter, but we see this this kind of expansion in both.

Or packet, put the entire rig into a package. But you're taking sections of it and finding unique ways to apply our technology in those sections to provide long-term corrosion protection.

The gross profitability and operational profitability.

Including the on top of that we're also doing capex investments, which are yielding fruit as.

um and based on what we've seen in practice in Brazil so far, we think this is an opportunity to help us to see that will that can uh

As we discussed many times in the past the ERP system that that is fully operational the one ERP system that is fully operational in the company and also robots and cutbacks.

Uh, it would be very beneficial for us to consciously consider other areas around the world where they use offshore platforms.

We are also using now mainly in the ammunition ammunition.

Our factories and on top of that if I can summarize everything.

We can see that we have our advantages to the size.

With the increase in revenue, we are doing better conversion into profit.

Yeah.

Great that's very helpful.

And how do we think about the impact of.

Can be on those platforms to do the installation work.

And so that's a different.

Operational disruption.

I Oh.

Is that an opportunity or another.

Yeah.

kind of a different sales process than we typically see uh with onshore where we're typically selling these Solutions and it's getting installed and then you know, you don't need to continually apply and continually uh

So we see that we are very happy we're very happy with our with the ceasefire orphan.

Upkeep it.

That is.

We pray to everybody here afraid a full floor back after two years.

Okay? And just out of curiosity, is that, um, having to have focus on the rigs, you know, and continually reapplying?

A fact that this conflict and we all hope that.

Is.

It's a quiet wind will be maintained here in Israel and of course for the company below allows us to regroup.

People to come back for mobilization.

To get back to normal business, which is as you know elbit is mainly predominantly working outside of Israel, but this is our strength doing around 70% of the business outside of Israel. It allows us to invest more in the business outside of Israel and to focus on.

Does that have an impact on the margin profile? For the floating platforms? Yeah, there's I mean, it's a slightly decreased, uh, margin given the service component and things like that, compared to just selling, uh, any of the other zeros soil and gas Solutions where you're just selling the actual product and somebody else is doing the, uh, the installation work.

Got it. Thanks for that. Super helpful. And then the one-time dose is the Chinese.

More about doing the ordinary business.

We did before this seventh October a.

Conflict.

This is an opportunity for the companies to receive more opportunities and more around your business.

To strengthen our backlog.

Okay.

Power of custom. Whatever the heck that charge was is was that a 1 time event and non non reoccurring, or is there an impact to the tnl going forward? Know that, well, any you want to address that? Yeah. It it was a 1 time event. I mean, it, essentially we produce some compounds in China that are uh, filled with compounds. So they they contain minerals and then that we export out of China and when you export it, uh, I mean, we've always followed International norms for HDs schools.

Yeah.

I'll leave it there.

And Kevin.

Thank you I'm passing the call to Daniela. Please go ahead.

Thank you operator, we have a couple of questions from Canada from excellent and thank you very much for your questions. Today. The first one is has there been any update to the company's profitability targets for 2020.

10% operating profit following the expansion of the order backlog and the improvement in gross margins in the current quarter.

Thank you Daniela and Sam.

We as you know we're not a.

Giving.

Specifically targets and are providing guidance.

Saying that we will still maintain our internal targets to continue to improve our profitability and this is of course some targets in the company as well.

Uh, that we use, you know, here in the US and India in Europe. Um, and, and essentially, uh, when we exported out of China, we get a vat credit, uh, now, because of the trade war between the US, and, and China, and Chinese, uh, Customs cracking down on any exports that contain minerals or rare Earths. Uh, there's a customs official, uh, who basically said that, uh, because you're, you know, your compounds contains minerals. You're not eligible for that refund. And so that basically accounted for, you know, we had to repay back all the the credit or the rebate that we got. Uh so we expect this to be a 1 time event, moving forward, you know, that will be part of our you know cost of goods sold.

Cash conversion, we should which is a very is the principal target in the company to continue the improvement in cash conversion in the company.

So essentially it was a couple years worth of uh, vat that the Chinese government clawed back as well as a penalty on top of that for using what they've deemed to be the wrong, uh, the wrong code for the vat.

Thank you Coby and the second question is how does <unk> plan to generate added value from the significant expansion in the U S. Dod's budget, specifically is there a concrete plan to <unk>.

So, the expectations are, it's a one-time charge that we took and decided. You know, we weren't going to challenge the Chinese government in this. We wanted to move forward as quickly as possible with the, you know, with the process. So we can continue the, you know, the import and export of the, uh, of the product.

An M&A transaction in the U S and or to expand into vertical such as dry wall and border protection applications.

Got it and then on the food, packaging application.

You know, is, is this going to be? You know, like

Packaging in.

Thank you Danielle.

um, you know, like a

The U S market is very strategic.

vegetable produce.

We see that you looked at our own markets.

Supplier? Or is there something applied in a supermarket order, you know?

And we are I am very pleased with our performance in the U S.

Chicken breast or whatever. Um, sort of

Two acquisitions that we made.

The night vision activity and bolt ons the funnel both activities.

Most of them are very successful most of them are willing.

And.

We certainly look for opportunities for acquisitions in the U S. We're exploring the market.

I would like to I'd like to say that in the past we delivered.

In our system to the CBD or border protection.

Equipment is deployed alone along the border the borders.

And we all certainly we believe that the column to the current need for additional assistance along the borders although it doesn't have to us.

We are planning to pursue it.

And we have.

We put out the rest of our activities in the U S.

Got it.

Our very successful as well or.

Yeah.

It will not have the onyx activity.

Go ahead. Yeah, so we are looking at multiple applications um 1 of the applications that we're looking at. In India is packaging of milk. So these are milk pouches where we're working with all the largest dairies in India to uh, change over from conventional polyethylene. Packaging to a fully compostable solution and we've run trials. Uh, we have to engineer the product so that it meet met the, the barrier performance, the shelf life performance, the the handling, and then even on their form field machines, the throughput was with our solution was equivalent to the 2 foot with existing plastic uh uh technology. Uh and so we have broken all that and we we expect that to be a growth business at least in India uh in the US we are working with uh, consumer Foods companies where they're looking to get looking at multi-layer structures, which would be used for, you know, things like sauces and salad, dressings, and uh, those kind of, uh, food ideas.

<unk>.

And our active protection system.

He's doing very well in the U S on top of the Buddy.

Like then.

We see we will continue to invest in the U S.

Oh, okay. So, replacement for a Tetra Pak. Yeah. Or pouches, you know, like these little pouches for, um, you know, salad dressings or short shelf-life, uh, you know, sauces.

Continue to include additional people.

We would like to extend our position in this very important market, Florida.

Thank you birthday, operator, if there are no more questions, we can wrap up.

Thank you before I ask Mr. Matthew just 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.

Got it like the pouches you would get in a restaurant for salad. Yep. Yep. In a restaurant or a QSR. So, um, this one, you know, the project that you're working on in the U.S. that essentially is for a QSR site.

Um, and when do you expect that to sort of add to Nature revenue? Is that, um, you know, revenue?

In the U S. Please call 188878 to 40 291 in Israel. Please call 039 to 55900.

The second half of fiscal 2026, you know, is it starting today? Can you give a little bit of color as to when you expect that to, to revenue?

Internationally. Please call nine seven to three nine to 55900 and replay of the call will also be available at the company's website Www Elbit systems Dot com.

The the application in in the US that requires some, you know, I would say for fine tuning, so we're working closely with the customer.

Mr. <unk> would you like to make your concluding statement.

I would like to thank everyone on the call for joining us today and for your continued trust and support.

On trials and prototype validation, so that will probably take several quarters at least before we can introduce that to the market. But the application in India, we've already gotten an initial POH from one of the dairy companies, and we expect that business to kind of grow probably, you know, by Q2 or Q3 of school 2026.

Have a good day and goodbye.

Thank you. This concludes the Elbit systems Ltd's third quarter 2025 results conference call. Thank you for your participation you May go ahead and disconnect.

Got it. That's it for me. Thanks so much.

Thank you.

And I'm sure there are no further questions.

Call back over to Mr. Patrick Lynch for any closing remarks.

Um, 1 just queue up.

Coming from the line of Sacred Desmond, legitimate world advisor, the seal is now open.

Uh, hey. Good morning guys. Thanks for taking the question. Um, you know, on your presentations here over the last, I think a couple years you've had a strategic objective of of hitting

Greater than 15% top line growth and, um, you know, slower expense growth. I'm just curious. Um, I know the last couple of years have been sort of, you know, investment years for you. But how are you thinking about?

Those objectives uh, looking forward.

um,

I'm Matt. I think there's a better quality to handle this.

Like I guess from a Topline growth standpoint, we are still certainly still optimistic. We look at the opportunities that we have in specifically in oil and gas specifically in nature Tech. You know, the expectations are that those 2 groups are going to have some significant growth in 2026. The traditional zeros business is going to be relatively slave, relatively stable, with some slight growth. But certainly the opportunity that we have in nature Tech and oil and gas kind of worldwide are what we expect, the kind of fuel that 15% growth this year.

Um certainly we didn't get that last year, but we think the Investments that we've made would should put us back to that uh that kind of growth rate.