Eltek Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 11, 2024

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2023 Annual and 4th Quarter Financial Results Conference Call. All participants are at present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session.

Operator

As a reminder, this conference is being recorded. Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward looking information in today's presentation and in the Q and A. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings. These forward looking statements are projections and reflect the current beliefs and expectations of the company.

Operator

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.

Operator

Mr. Yaffe, please go ahead.

Speaker 1

Thank you. Good morning. Thank you for joining us for our 2023 annual year earnings call. This is Ron Freund, our Chief Financial Officer. Officer.

Speaker 1

We will begin by providing you with an overview of our business and the summary of the principal factors that affected our results during 2023. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release will also be available on our website. In 2023, the company achieved unprecedented milestone in terms of both revenue and profitability, setting new records.

Speaker 1

The company generated revenue of $46,700,000 with set income of $6,400,000 EBITDA reaches $8,600,000 the cash flow from operations stood at $8,900,000 Remarkably, all key profitability indicator experienced substantial growth rate underscoring the success of our strategic growth initiatives. The ongoing situation in Israel coupled with the President's rise in the defense budget across European nations and the trade tension between the U. S. And China continue to influence the demand of our high end products. Since the inspection of our accelerated investment plan in 2022, our backlog has increased by 130%.

Speaker 1

The growing demand persists and we anticipate that the trend to extend into the upcoming years. While the influence of the current conflict in Israel has not been fully managed by our backlog, we expected more pronounced impact to become evident later in the second half of twenty twenty. We are achievably diversified our revenue streams by exploring opportunities beyond the defense and medical devices market. Our focus includes strengthening collaboration and securing substantial orders for new products with a leading customer whose machinery and technology play a crucial role in the large scale production of semiconductor chips. Currently, efforts has been underway to augment our commercial sales volume.

Speaker 1

Our approach to pricing and order acceptance remains as a key focus as we continue to optimize this strategy to achieve optimal profitability rates. We are actively progressing with execution of our accelerated investment plan. To date, we have committed to an approximately investment of $10,000,000 and we anticipate fulfilling orders for the entire plan by the end of 2024. In the Q1 of 2024, the machine mentioned in our December 'twenty three press release were received and installed and the VIA fee line is currently under commissioning stages. We additionally installed additional press which is significant component of the Accelerate investment plan.

Speaker 1

The press is in final installation stages and the software adjustment. Furthermore, we successfully implemented cutting edge engineering software. During Q1 2024, we plan to complete the training of our engineers. This software is positioned us at the up or the front end of the technological advancement or in this field. We will initiate the construction of new office space within our building in Petartigla.

Speaker 1

This move seeks to optimize office utilization, freeing up space for expanded production capacity. By doing so, we aim to seamlessly integrate new production lines without incurring additional overhead expenses for the existing infrastructure. As a result of the security challenges in Israel and the logistical issue hindering the shipment of the arrival of the supplier technical team to the country, we anticipate potential delay of the accelerated investment program. We are actively dedicating significant efforts to try to mitigate this delay. In our pursuit expansion of the growth, we are actively seeking for acquired PCB manufacturing company in United States, recognizing the strategic importance of the U.

Speaker 1

S. Market. We anticipate substantial growth in the upcoming years. The underlying motivation behind the Chips and the PCB Act to repatriate chips and PCB production to America, foreseeing increased demand for the domestic PCB manufacturing. Conceptually, we are focused on our remaining production capacity in the U.

Speaker 1

S. In February 2024, we raised capital of $10,000,000 before expenses. This amount will be used by us together with our existing cash balances for the purpose of financing continuous growth. I would like to take this opportunity to thanks to the investors who participate in the offering for the trust they placed in our company and its management. The successful capital raising and the fact that during 2023 we have repaid all our bank debt loan will allow us to finance a future M and A transaction, so raising debt raising debt either from the bank or from the public.

Speaker 1

I will now turn the call over to Ron Freund, our CFO to discuss our financial results.

Speaker 2

Thank you, Eli. I would like to draw your attention to the financial statements for the year ended December 31, 2020 3 and for the Q4 of 2023. 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 reasons for its use.

Speaker 2

I will now go over the highlights of 2023. All numbers mentioned are in U. S. Dollars. Revenues for the year ended December 31, 2023 totaled $46,700,000 compared to $39,700,000 2022, an increase of 18%.

Speaker 2

The increase in revenue is mainly due to the increased demand for our products during 2020 3 and our continuous efforts to increase production capacity. Gross profit increased by 58% reaching $13,100,000 compared to a gross profit of $8,300,000 in 20.20 2. The increase is mainly due to the increase in revenues. Operating profit amounted to $7,300,000 in 20.23 compared to $3,000,000 in 2022. In 2023, we recorded financial income of $400,000 compared to $900,000 in 2022.

Speaker 2

The decrease is due to the devaluation of Denise against the US dollar during the Q4 of 2023. Net profit was $6,400,000 or $1.07 per share in 2023 compared to net profit of $3,200,000 or 0.5 $5 per share in 20.22. EBITDA was $8,600,000 in 20 23 compared to $4,500,000 in 2022. During 2023, we enjoyed positive cash flow from operating activities of $8,900,000 compared to $3,800,000 in 2022. As of December 31, 2023, we had cash and cash equivalents and short term bank deposits in a total amount of $12,100,000 compared to $7,400,000 at the end of 20 22.

Speaker 2

I will now go over to the highlights of the Q4 of 2023 compared to the Q4 of 2022. Revenues for the Q4 of 2023 were $12,300,000 compared to 10 point $5,000,000 in the Q4 of 2022. Gross profit amounted to $3,500,000 compared to $2,200,000 in the Q4 of 2022. Net profit in the Q4 of 2023 was 1 point $3,000,000 or $0.22 per share compared to net profit of $800,000 or $0.40 per share in the Q4 of 2022. During the Q4 of 2023, we recorded financial expense of $300,000 due to the reiteration of the NIS against the U.

Speaker 2

S. Dollar. In Q4 2022 we recorded financial income in the amount of $100,000 The impact of this difference is $0.07 per share. EBITDA was $2,400,000 in the Q4 of 2023 compared to EBITDA of 1 point $2,000,000 in the Q4 of 2022. Cash flow from operator activities was $2,300,000 compared to 1 point $3,000,000 in the Q4 of 2022.

Speaker 2

We are now ready to take your questions.

Operator

Thank The first question is from Roy Scheer. Please go ahead.

Speaker 3

Hello. I think you did great this last quarter and the last year. I wanted to find out if you've got any take on what you expect your revenue will be for the entire 2024 as well as your gross profit margin?

Speaker 2

Hi Roy. We expect to continue our increased revenues during 2024. The growth trend should continue as long as we continue in our accelerated and we stick to the forecast that we gave before 2 calls about the gross margin. We anticipate it will be around 27%.

Speaker 3

Okay. Do you think that you'll hit $50,000,000 in 'twenty four?

Speaker 2

We don't give an exact forecast. We are working very hard to meet this target, but I cannot assure you this forecast.

Speaker 3

Okay, and one final question. Is your stock based compensation added into your expenses?

Speaker 2

We had about 0 point $4,000,000 in 2023. We expect that it will be in the same area during 2024.

Speaker 3

Okay. Thank you very much.

Operator

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

Before we conclude our calls, I would like to thank our employees for their continued efforts to meet our strategy of growth and profitability. I would also like to thank all our customers, partners and investors for their continued support. Thank you for all for joining us on today's call. Have a good day.

Operator

This concludes the Eltek Ltd. 2023 financial results conference call. Thank you for your participation. You may go ahead and disconnect.

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Key Takeaways

  • Eltek reported record annual results in 2023 with revenue of $46.7 million (up 18%), net income of $6.4 million, EBITDA of $8.6 million, and operating cash flow of $8.9 million.
  • Backlog has jumped by 130% since implementing the accelerated investment plan in 2022, driven by higher defense budgets in Europe, trade tensions, and demand for high‐end products.
  • The company has committed ~$10 million to its accelerated investment plan—installing new production presses and cutting‐edge engineering software—with full deployment expected by end of 2024, though Israel’s security situation may cause delays.
  • Eltek is diversifying beyond defense and medical sectors by securing orders in semiconductor equipment and planning a U.S. PCB manufacturing acquisition, supported by a $10 million capital raise in February 2024.
  • Management expects continued revenue growth and a ~27% gross margin in 2024, while remaining cautious on confirming a >$50 million revenue target and maintaining pricing discipline.
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Earnings Conference Call
Eltek Q4 2023
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