Q4 2025 Eltek Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2025 Annual and Q4 Financial Results Conference Call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. Before I turn over the call to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, the Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2025 Annual and Q4 Financial Results Conference Call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. Before I turn over the call to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, the Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings.
Speaker #3: Following management's formal presentation, instructions will be given for the question-and-answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded.
Speaker #3: Before I turn over the call to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A.
Speaker #3: By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risk and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings.
Operator: These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.
Operator: These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.
Speaker #3: These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures.
Speaker #2: Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe.
Speaker #2: Mr. Yaffe, please go ahead.
Eli Yaffe: Thank you. Good morning. Thank you for joining us for our 2025 annual earning call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and summary of the principal factors that affected the results during 2025. After our prepared remarks, we'll be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release was also available on our website. Revenue for 2025 totaled $51.8 million, representing an 11% increase compared to 2024. This growth reflects the company's strategic accelerated investment program, which is the beginning of our bear fruit, also not yet its full potential. It will be elaborate on this shortly. I will elaborate on this shortly.
Eli Yaffe: Thank you. Good morning. Thank you for joining us for our 2025 annual earning call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and summary of the principal factors that affected the results during 2025. After our prepared remarks, we'll be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release was also available on our website. Revenue for 2025 totaled $51.8 million, representing an 11% increase compared to 2024. This growth reflects the company's strategic accelerated investment program, which is the beginning of our bear fruit, also not yet its full potential. It will be elaborate on this shortly. I will elaborate on this shortly.
Speaker #3: Thank you. Good morning. Thank you for joining us for the our 2025 annual earnings call. With me is Ron Freund, our Chief Financial Officer.
Speaker #3: We will begin by providing you with an overview of our business and summary of the principal factors that affected the results during 2025. After our prepared remark, we'll be happy to answer any of your questions.
Speaker #3: By now, everyone should have access to our press release, which was released earlier today. The release was also available on our website. Revenue for 2025 totaled $51.8 million, representing an 11% increase compared to 2024.
Speaker #3: This growth reflects the company's strategic accelerated investment program, which is the beginning of our barefoot, also not yet at its full potential. It will be elaborated on this shortly.
Speaker #3: I will elaborate on this shortly. During the year, we faced several operational challenges, including the reallocation of the machinery and production lines within the facility to prepare for the installation of the new plating lines.
Eli Yaffe: During the year, we faced several operational challenges, including the reallocation of the machinery and production lines within the facility to prepare for the installation of the new plating lines, difficulties in recruiting employees, challenges in retaining highly experienced personnel, and a significant depreciation of the US dollar exchange rate, which adversely affect the dollar-dominated profitability we report by approximately $2.2 million compared to 2024 profitability. I will now address each of these areas in more detail. As noted, we concluded the year with revenue approaching $52 million. At the time we approved the accelerate investment plan, Eltek was generating average annual revenue of approximately $37 million. The subsequent increase in revenue reflects strong demand for the company products, alongside the substantial investment made in the machinery and equipment over the recent years.
Eli Yaffe: During the year, we faced several operational challenges, including the reallocation of the machinery and production lines within the facility to prepare for the installation of the new plating lines, difficulties in recruiting employees, challenges in retaining highly experienced personnel, and a significant depreciation of the US dollar exchange rate, which adversely affect the dollar-dominated profitability we report by approximately $2.2 million compared to 2024 profitability. I will now address each of these areas in more detail. As noted, we concluded the year with revenue approaching $52 million. At the time we approved the accelerate investment plan, Eltek was generating average annual revenue of approximately $37 million. The subsequent increase in revenue reflects strong demand for the company products, alongside the substantial investment made in the machinery and equipment over the recent years.
Speaker #3: Difficulties in recruiting employees, challenges in retaining highly experienced personnel, and a significant depreciation of the US dollar exchange rate, which adversely affected the dollar-dominated profitability we report by approximately $2.2 million compared to 2024 profitability.
Speaker #3: I will now address each of these areas in more detail. As noted, we concluded the year with revenue approaching $52 million. At the time we approved the accelerated investment plan, Eltek was generating average annual revenue of approximately $37 million.
Speaker #3: The subsequent increase in revenue reflects strong demand for the company’s products, alongside the substantial investment made in machinery and equipment over recent years.
Eli Yaffe: As previously communicated, we are targeting annual revenue installed capacity in the current plant of $60 to 65 million at current market prices. During the year, we encouraged significant operational constraint that affected our ability to meet customers' delivery schedule. This situation, combined with the demand level exceeding domestic production capacity in Israel, led to increased competition from overseas players seeking to capture a share of the local demand. We continue to observe strong demand for our products, including from international customers, driven by limited manufacturing capability in the Western countries. We are steadily improving delivery performance for our domestic customers, recognize that many Western countries, including Israel, aim to preserve local manufacturing capability. At the same time, we are actively expanding our presence in overseas market, particularly in the United States, to increase order volume from these regions. Turning to operations.
Eli Yaffe: As previously communicated, we are targeting annual revenue installed capacity in the current plant of $60 to 65 million at current market prices. During the year, we encouraged significant operational constraint that affected our ability to meet customers' delivery schedule. This situation, combined with the demand level exceeding domestic production capacity in Israel, led to increased competition from overseas players seeking to capture a share of the local demand. We continue to observe strong demand for our products, including from international customers, driven by limited manufacturing capability in the Western countries. We are steadily improving delivery performance for our domestic customers, recognize that many Western countries, including Israel, aim to preserve local manufacturing capability. At the same time, we are actively expanding our presence in overseas market, particularly in the United States, to increase order volume from these regions. Turning to operations.
Speaker #3: As previously communicated, we are targeting annual revenue in installed capacity in the current plan of $60 to $65 million at current market prices.
Speaker #3: During the year, we encountered significant operational constraints that affected our ability to meet customers' delivery schedules. This situation, combined with the demand level exceeding domestic production capacity in Israel, led to increased competition from overseas players seeking to capture a share of the local demand.
Speaker #3: We continue to observe strong demand for our products, including from international customers, driven by limited manufacturing capability in Western countries. We are steadily improving delivery performance for our domestic customers, recognizing that many Western countries, including Israel, aim to preserve local manufacturing capability.
Speaker #3: At the same time, we are actively expanding our presence in overseas markets, particularly in the United States, to increase order volume from this region.
Speaker #3: Turning to operations, we are making steady progress on our investment program. The core component expected to drive meaningful improvement in output and quality are the two new plating lines.
Eli Yaffe: We are making steady progress on our investment program. The core component expected to drive meaningful improvement in output and quality are the two new plating lines. While they do not represent the majority of the accelerate investment budget in financial terms, their impact on production is highly significant. The first line arrived to the facility at the beginning of 2026, and it is currently in the assembly phase, which was interrupted by the current tension situation in Israel. We remain hopeful that the ongoing conflict will not result further delay in the completing the installation. Following the installation, an extensive qualification process will be required to certify the lines across the full range of our product portfolio.
Eli Yaffe: We are making steady progress on our investment program. The core component expected to drive meaningful improvement in output and quality are the two new plating lines. While they do not represent the majority of the accelerate investment budget in financial terms, their impact on production is highly significant. The first line arrived to the facility at the beginning of 2026, and it is currently in the assembly phase, which was interrupted by the current tension situation in Israel. We remain hopeful that the ongoing conflict will not result further delay in the completing the installation. Following the installation, an extensive qualification process will be required to certify the lines across the full range of our product portfolio.
Speaker #3: While they do not represent the majority of the accelerated investment budget in financial terms, their impact on production is highly significant. The first line arrived at the facility at the beginning of 2026, and it is currently in the assembly phase, which was interrupted by the current tension situation in Israel.
Speaker #3: We remain hopeful that the ongoing conflict will not result in further delay in the completing of the installation. Following the installation, an extensive qualification process will be required to clarify and to certify the lines across the full range of our product portfolio.
Eli Yaffe: Throughout the years, we also address the need to recruit additional employees, particularly engineers, to support the extended base of the machinery and equipment, as well to manage the operational complexities created by reallocation production lines and the resulting impact of ongoing manufacturing. In addition, we experienced the departure of several highly acknowledged employees, including re-retirements. These operational challenges weighted on overall efficiency. We continue to make progress in advancing the process of bringing foreign workers from abroad in order to support our workforce needed as the company expands. Finally, the depreciation of the US dollars results in the increase of approximately $2.2 million is reported in NIS denominated expenses compared to 2024, adversely affecting both gross and operational profits. It was nothing that part of our current book backlog was priced based on higher exchange rate.
Eli Yaffe: Throughout the years, we also address the need to recruit additional employees, particularly engineers, to support the extended base of the machinery and equipment, as well to manage the operational complexities created by reallocation production lines and the resulting impact of ongoing manufacturing. In addition, we experienced the departure of several highly acknowledged employees, including re-retirements. These operational challenges weighted on overall efficiency. We continue to make progress in advancing the process of bringing foreign workers from abroad in order to support our workforce needed as the company expands. Finally, the depreciation of the US dollars results in the increase of approximately $2.2 million is reported in NIS denominated expenses compared to 2024, adversely affecting both gross and operational profits. It was nothing that part of our current book backlog was priced based on higher exchange rate.
Speaker #3: Throughout the years, we also addressed the need to recruit additional employees, particularly engineers, to support the extended base of the machinery and equipment, as well as to manage the operational complexities created by reallocating production lines and the resulting impact of ongoing manufacturing.
Speaker #3: In addition, we experienced the departure of several highly acknowledged employees, including retirements. These operational challenges weighed on overall efficiency. We continue to make progress in advancing the process of bringing foreign workers from abroad in order to support our workforce needed as the company expands.
Speaker #3: Finally, the depreciation of the US dollar results in an increase of approximately $2.2 million reported in the NAES denominated expenses compared to '24.
Speaker #3: Adversely affecting both gross and operational profits, it was noted that part of our current backlog was priced based on a higher exchange rate; therefore, margin on these orders will remain below the level originally anticipated at the time of the quotations.
Eli Yaffe: Therefore, margin on these orders will remain below the level originally anticipated the same, in the time of the quotations. Despite these challenges, we remain confident in the company's business and in our ability to return to healthy profitability levels upon completion of the investment program, installation of the new plating lines, and stabilization of the production. In line with this long-term commitment, we extended the lease agreement for our manufacturing facility through the end of 2039. As part of this extension, we received a payment intended to partially offset the company investment in the facility. This amount will be amortized over the lease terms and will modestly reduce annual rental expenses. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Eli Yaffe: Therefore, margin on these orders will remain below the level originally anticipated the same, in the time of the quotations. Despite these challenges, we remain confident in the company's business and in our ability to return to healthy profitability levels upon completion of the investment program, installation of the new plating lines, and stabilization of the production. In line with this long-term commitment, we extended the lease agreement for our manufacturing facility through the end of 2039. As part of this extension, we received a payment intended to partially offset the company investment in the facility. This amount will be amortized over the lease terms and will modestly reduce annual rental expenses. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Speaker #3: Despite these challenges, we remain confident in the company's business and in our ability to return to LC profitability levels upon completion of the investment program, installation of the new plating lines, and stabilization of the production.
Speaker #3: In line with this long-term commitment, we extended the lease agreement for our manufacturing facility through the end of the year 2039. As part of this extension, we received a payment intended to partially offset the company investment in the facility.
Speaker #3: This amount will be amortized over the lease terms, and we'll modestly reduce annual rental expenses. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Ron Freund: Thank you, Eli. I would like to draw your attention to the financial statements for the year ended 31 December 2025, and for Q4 2025. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reason for its use. I will now go over the highlights of 2025. All numbers mentioned are in US dollars. Revenues for the year ended 31 December 2025, totaled $51.8 million compared to $46.6 million in 2024. Gross profit was $8 million compared to $10.3 million in 2024. Gross margin was 15% compared to 22% in 2024.
Ron Freund: Thank you, Eli. I would like to draw your attention to the financial statements for the year ended 31 December 2025, and for Q4 2025. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reason for its use. I will now go over the highlights of 2025. All numbers mentioned are in US dollars. Revenues for the year ended 31 December 2025, totaled $51.8 million compared to $46.6 million in 2024. Gross profit was $8 million compared to $10.3 million in 2024. Gross margin was 15% compared to 22% in 2024.
Speaker #4: Thank you, Eli. I would like to draw your attention to the financial statements for the year ended December 31, 2025, and for the fourth quarter of 2025.
Speaker #4: During this call, I will also discuss certain uncapped financial measures. Eltek uses EBITDA as an uncapped financial performance measurement. Please see our earnings release for its definition and the reason for its use.
Speaker #4: I will now go over the highlights of 2025. All numbers mentioned are in US dollars. Revenues for the year ended December 31, 2025, totaled $51.8 million compared to $46.6 million in 2024.
Speaker #4: Gross profit was $8 million compared to $10.3 million in 2024. Gross margin was 15% compared to 22% in 2024. The declining gross profit and gross margin was primarily attributable to higher NIS-denominated expenses resulting from the depreciation of the US dollar in 2025, as well as reduced production efficiency.
Ron Freund: The decline in gross profit and gross margin was primarily attributable to higher NIS-denominated expenses resulting from the depreciation of the US dollar in 2025, as well as reduced production efficiency. Operating profit amounted to $2.3 million in 2025 compared to $4.4 million in 2024. In 2025, we recorded financial expenses of $1.3 million compared to financial income of $0.7 million in 2024. This change was primarily due to the depreciation of the US dollar against the NIS. Net profit was $0.8 million dollar or $0.12 per share in 2025 compared to net profit of $4.2 million or $0.63 per share in 2024. EBITDA was $4.5 million in 2025 compared to $5.9 million in 2024.
Ron Freund: The decline in gross profit and gross margin was primarily attributable to higher NIS-denominated expenses resulting from the depreciation of the US dollar in 2025, as well as reduced production efficiency. Operating profit amounted to $2.3 million in 2025 compared to $4.4 million in 2024. In 2025, we recorded financial expenses of $1.3 million compared to financial income of $0.7 million in 2024. This change was primarily due to the depreciation of the US dollar against the NIS. Net profit was $0.8 million dollar or $0.12 per share in 2025 compared to net profit of $4.2 million or $0.63 per share in 2024. EBITDA was $4.5 million in 2025 compared to $5.9 million in 2024.
Speaker #4: Operating profit amounted to $2.3 million in 2025, compared to $4.4 million in 2024. In 2025, we recorded financial expenses of $1.3 million, compared to financial income of $0.7 million in 2024.
Speaker #4: This change was primarily due to the depreciation of the US dollar against the NIS. Net profit was $0.8 million, or 12 cents per share, in 2025, compared to net profit of $4.2 million, or 63 cents per share, in 2024.
Speaker #4: EBITDA was $4.5 million in 2025 compared to $5.9 million in 2024. During 2025, we generated positive cash flow from varying activities of $0.6 million compared to $4.5 million in 2024.
Ron Freund: During 2025, we generated positive cash flow from operating activities of $0.6 million compared to $4.5 million in 2024. As of 31 December 2025, we had cash and cash equivalents and short-term bank deposits in the total amount of $12.1 million. I will now go over the highlights of Q4 2025 compared with Q4 2024. Revenues for Q4 2025 were $13.2 million compared to $10.8 million in Q4 2024. Gross profit amounted to $1.2 million in Q4 2025 compared to $1.9 million in Q4 2024.
Ron Freund: During 2025, we generated positive cash flow from operating activities of $0.6 million compared to $4.5 million in 2024. As of 31 December 2025, we had cash and cash equivalents and short-term bank deposits in the total amount of $12.1 million. I will now go over the highlights of Q4 2025 compared with Q4 2024. Revenues for Q4 2025 were $13.2 million compared to $10.8 million in Q4 2024. Gross profit amounted to $1.2 million in Q4 2025 compared to $1.9 million in Q4 2024.
Speaker #4: As of December 31, 2025, we had cash and cash equivalents and short-term bank deposits in the total amount of $12.1 million. I will now go over the highlights of the fourth quarter of 2025 compared with the fourth quarter of 2024.
Speaker #4: Revenues for the fourth quarter of 2025 were $13.2 million, compared to $10.8 million in the fourth quarter of 2024. Gross profit amounted to $1.2 million in the fourth quarter of 2025, compared to $1.9 million in the fourth quarter of 2024.
Ron Freund: Net loss in Q4 2025 was $0.3 million or $0.05 per share compared to net profit of $23,000 in Q4 2024. EBITDA was $0.7 million in Q4 2025 compared to $0.8 million in Q4 2024. We are now ready to take your questions.
Ron Freund: Net loss in Q4 2025 was $0.3 million or $0.05 per share compared to net profit of $23,000 in Q4 2024. EBITDA was $0.7 million in Q4 2025 compared to $0.8 million in Q4 2024. We are now ready to take your questions.
Speaker #4: Net loss in the fourth quarter of 2025 was $0.3 million, or 5 cents per share, compared to net profit of $23,000 in the fourth quarter of 2024.
Speaker #4: EBITDA was $0.7 million in the fourth quarter of 2025 compared to $0.8 million in the fourth quarter of 2024. We are now ready to take your questions.
Operator: 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 lift the handset before pressing the numbers. Your questions will be answered in the order they received. Please stand by. The first question is from Mark Sharogradsky of Kepler Capital. Please go ahead.
Operator: 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 lift the handset before pressing the numbers. Your questions will be answered in the order they received. Please stand by. The first question is from Mark Sharogradsky of Kepler Capital. Please go ahead.
Speaker #1: 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.
Speaker #1: If you are using speaker equipment, kindly lift your hands up before pressing the numbers. Your questions will be answered in the ordinary sequence. Please stand by.
Speaker #1: The first question is for Mark of Kepler Capital. Please go ahead.
Rachel Smith: Hello, guys. The first question I have, the gross margin for this quarter was really low, like 9%, if I calculate correctly. When will you expect to see some improvements of this result? Revenue was pretty okay, but the gross margin was really low. How do you see the situation?
Mark Sharogradsky: Hello, guys. The first question I have, the gross margin for this quarter was really low, like 9%, if I calculate correctly. When will you expect to see some improvements of this result? Revenue was pretty okay, but the gross margin was really low. How do you see the situation?
Speaker #5: Hello, guys. The first question I have is, the gross margin for this quarter was really low, like 9%, if I calculate it correctly. So, when can we expect to see some improvement in this result? Because revenue was pretty okay, but the gross margin was really low.
Speaker #5: So, how do you see the situation?
Eli Yaffe: Hi, Mark. As we previously reported, we expected complete integration and installation of the new plating line, which arrived the beginning of 2026, by mid-2026. The line is expected to streamline the core manufacturing processes and expand the production capacity. Following the completion of the installation, we will begin qualification process, and it's expected to continue through the remainder of 2026. During this period, we plan to qualify product families and gradually basis, enabling the phase transition of the production to the new line until fully comply and full qualification for all company products is completed. We also expect that time our production process will be stabilized. We should contribute to the improvement of the gross margin.
Eli Yaffe: Hi, Mark. As we previously reported, we expected complete integration and installation of the new plating line, which arrived the beginning of 2026, by mid-2026. The line is expected to streamline the core manufacturing processes and expand the production capacity. Following the completion of the installation, we will begin qualification process, and it's expected to continue through the remainder of 2026. During this period, we plan to qualify product families and gradually basis, enabling the phase transition of the production to the new line until fully comply and full qualification for all company products is completed. We also expect that time our production process will be stabilized. We should contribute to the improvement of the gross margin.
Speaker #6: Hi, Mark. As we previously reported, we expected complete integration and installation of the new plating line, which arrived at the beginning of 2026, by mid-2026.
Speaker #6: The line is expected to streamline the core manufacturing processes and expand the production capacity. Following the completion of the installation, we will begin the qualification process, and it's expected to continue through the remainder of 2026.
Speaker #6: During this period, we plan to qualify product families on a gradual basis, enabling the phase transition of the production to the new line until we fully comply and full qualification for all company products is completed.
Speaker #6: We also expect that, by that time, our production process will be stabilized. We should contribute to the improvement of the gross margin. And as we noted in the past, each additional dollar of revenue contributes meaningfully to the gross profit.
Eli Yaffe: As we noted in the past, each additional dollar of revenue contributes meaningfully to the gross profit and of course to the net income. Therefore, the answer to your question is increasing our sales volume is expected to have significant positive impact on the profitability and improve the gross margin.
Eli Yaffe: As we noted in the past, each additional dollar of revenue contributes meaningfully to the gross profit and of course to the net income. Therefore, the answer to your question is increasing our sales volume is expected to have significant positive impact on the profitability and improve the gross margin.
Speaker #6: And of course, to the net income. Therefore, the answer to your question is: increasing our sales volume is expected to have a significant positive impact on profitability and improve the gross margin.
Rachel Smith: Yeah. Eli, I'm trying to understand that even before you had the gross margins of 27% to 29%, and now I understand the dollar situation and everything, but why such a sharp drop on the margins even now, even before those lines are installed?
Mark Sharogradsky: Yeah. Eli, I'm trying to understand that even before you had the gross margins of 27% to 29%, and now I understand the dollar situation and everything, but why such a sharp drop on the margins even now, even before those lines are installed?
Speaker #5: Yeah, but I'm trying to understand that even before, you had the gross margins of 27% to 29%. And now, I understand the dollar situation and everything, but why such a sharp drop in the margins even now, even before those lines are installed?
Ron Freund: Mark, hi, this is Roni.
Ron Freund: Mark, hi, this is Roni.
Speaker #6: Mark, hi, this is Ronnie. So, on the fourth quarter, you know, the depreciation of the US dollar continued. And this caused us significant additional NIS-reported, NIS-denominated expenses to be, dollar-reported amounts to increase.
Rachel Smith: Hi, Roni.
Mark Sharogradsky: Hi, Roni.
Ron Freund: On the Q1, you know, the depreciation of the US dollar continued. This caused a significant additional NIS-denominated expenses to be dollar reported amounts to increase. In addition, you know, the same as was in prior quarters, we have issues with efficiency in production. We expect that, as Eli said previously, once we will achieve increased sales volume, gross margin will return to its positive prior margins.
Ron Freund: On the Q1, you know, the depreciation of the US dollar continued. This caused a significant additional NIS-denominated expenses to be dollar reported amounts to increase. In addition, you know, the same as was in prior quarters, we have issues with efficiency in production. We expect that, as Eli said previously, once we will achieve increased sales volume, gross margin will return to its positive prior margins.
Speaker #6: In addition, you know, the same as was in prior quarters, we have issues with efficiency in production. And we expect that, as Eli said previously, once we achieve increased sales volume, gross margin will return to its positive prior margins.
Rachel Smith: Okay. Can you guys speak a little bit about the pricing dynamic? Because everyone is saw this USD depreciation, but I've also today on PCB call, and they said they are raising prices now to adjust this depreciation to, you know, to work on normal gross margin. How you see the pricing dynamic going forward?
Mark Sharogradsky: Okay. Can you guys speak a little bit about the pricing dynamic? Because everyone is saw this USD depreciation, but I've also today on PCB call, and they said they are raising prices now to adjust this depreciation to, you know, to work on normal gross margin. How you see the pricing dynamic going forward?
Speaker #5: Okay. And can you guys speak a little bit about the pricing dynamic? Because everyone saw this USD depreciation, but I was also today on PCB calls and they said they are raising prices now to adjust for this depreciation.
Speaker #5: You know, to work on normal gross margin. So, how do you see the pricing dynamics going forward?
Eli Yaffe: The pricing dynamic is that we immediately update our pricing system to reflect the new depreciation and the new exchange rate of the dollar. As I mentioned before, we have quotations on the way that was based on long-term proposals, that was based on dollar to NIS ratio, that is higher than today. We will get this proposal. We will get this purchase orders. We will have some of our basket in the future is going to be below the expected volume of our proposals today.
Eli Yaffe: The pricing dynamic is that we immediately update our pricing system to reflect the new depreciation and the new exchange rate of the dollar. As I mentioned before, we have quotations on the way that was based on long-term proposals, that was based on dollar to NIS ratio, that is higher than today. We will get this proposal. We will get this purchase orders. We will have some of our basket in the future is going to be below the expected volume of our proposals today.
Speaker #6: The pricing dynamic is that we immediately update our pricing system to reflect new depreciation and the new exchange rate of the dollar. But, as I mentioned before, we have quotations on the way that were based on long-term proposals.
Speaker #6: That was based on a dollar-to-NIS ratio that is higher than today. And we will get this proposal. We will get these purchase orders, and we will have some of our basket in the future that is going to be below the expected volume.
Speaker #6: Of our proposals today.
Ron Freund: Mark, it is not just quotation. We have actually orders that were given and received in a higher dollar rate. This, in these orders, we expect a lower margin than anticipated for new orders to be received in the next months.
Ron Freund: Mark, it is not just quotation. We have actually orders that were given and received in a higher dollar rate. This, in these orders, we expect a lower margin than anticipated for new orders to be received in the next months.
Speaker #5: And Mark, it is not just quotation. We actually have orders that were given and received at a higher dollar rate. So, in these orders, we expect a lower margin than anticipated for new orders to be received in the next months.
Rachel Smith: Of course, I understand. Because if you will adjust those orders to the new USD, NIS exchange rates, when do you expect to see some improvement of this adjustment? In the next quarter, in Q1 or in Q2?
Mark Sharogradsky: Of course, I understand. Because if you will adjust those orders to the new USD, NIS exchange rates, when do you expect to see some improvement of this adjustment? In the next quarter, in Q1 or in Q2?
Speaker #4: Of course, I understand, because if you will adjust those orders to the new USD/NIS exchange rates, when do you expect to see some improvement from this adjustment in the next quarter?
Speaker #4: One or in Q2?
Ron Freund: You know, as we told before, you usually we have a 1 to 2 quarters backlog. We didn't wait till this call. We already updated our pricing system. We expect to see it within, I don't know, 4 to 5 months to see some increase.
Ron Freund: You know, as we told before, you usually we have a 1 to 2 quarters backlog. We didn't wait till this call. We already updated our pricing system. We expect to see it within, I don't know, 4 to 5 months to see some increase.
Speaker #6: You know, as we told before, usually we have one to two quarters' backlog. And we didn't wait till this call. We already updated our pricing system.
Speaker #6: So, we expect to see it within four to five months, to see some increase.
Rachel Smith: I understand. Okay. No, because you. I assumed that you also updated it before because the problems began already in Q3.
Mark Sharogradsky: I understand. Okay. No, because you. I assumed that you also updated it before because the problems began already in Q3.
Speaker #5: Understood. Okay. No, because I assumed that you also updated it before, because the problems began already in Q3.
Ron Freund: Yeah, you're right. you know, as in Q4, the depreciation continued...
Ron Freund: Yeah, you're right. you know, as in Q4, the depreciation continued...
Speaker #6: Yeah, you're right. But, you know, as in the fourth quarter, the depreciation continued.
Rachel Smith: Yeah, I understand
Mark Sharogradsky: Yeah, I understand
Ron Freund: ... we had to update it again.
Ron Freund: ... we had to update it again.
Speaker #5: Yeah, I understand.
Speaker #6: We had to update it again.
Rachel Smith: I understand. Okay. I don't have a further question.
Mark Sharogradsky: I understand. Okay. I don't have a further question.
Speaker #5: I understand. I understand. Okay. Okay. I don't have further questions. Thank you.
Ron Freund: Thank you, Mark.
Ron Freund: Thank you, Mark.
Rachel Smith: Thank you.
Mark Sharogradsky: Thank you.
Operator: 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 for more questions. There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website. Mr. Yaffe?
Operator: 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 for more questions. There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website. Mr. Yaffe?
Speaker #1: Are there any additional questions? Please press star one. If you wish to cancel your request, please press star two. Please stand by while we pull for more questions.
Speaker #1: There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website.
Speaker #1: Mr. Yaffe?
Eli Yaffe: As we conclude, I would like to thank our investors for their support and confidence in the company. Your long-term representative and the belief in our strategy enable us to continue investing in our capability and pursuing our growth objectives. I also want to recognize the commitment of our employees. Their professionalism, adaptability, and dedication throughout the period have been critical to maintaining our operation and advancing our strategic initiatives. Thank you for joining us today. Have a good day.
Eli Yaffe: As we conclude, I would like to thank our investors for their support and confidence in the company. Your long-term representative and the belief in our strategy enable us to continue investing in our capability and pursuing our growth objectives. I also want to recognize the commitment of our employees. Their professionalism, adaptability, and dedication throughout the period have been critical to maintaining our operation and advancing our strategic initiatives. Thank you for joining us today. Have a good day.
Speaker #6: As we conclude, I would like to thank our investors for their support and confidence in the company. Your long-term representation and belief in our strategy enabled us to continue investing in our capabilities and pursuing our growth objectives.
Speaker #6: I also want to recognize the commitment of our employees. Their professionalism, adaptability, and dedication throughout the period have been critical to maintaining our operation and advancing our strategic initiatives.
Speaker #6: Thank you for joining us today. Have a good day.
Operator: This concludes the Eltek Ltd. 2025 financial results conference call. Thank you for your participation. You may go ahead and disconnect.
Operator: This concludes the Eltek Ltd. 2025 financial results conference call. Thank you for your participation. You may go ahead and disconnect.