Elbit Systems Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 26, 2024

Key Takeaways

  • Order backlog grew to $17.8 billion, an 18% organic increase, providing strong visibility for deliveries through 2026.
  • Full-year 2023 revenue rose 8% to approximately $6 billion, supported by broad-based demand across Europe, North America, Asia-Pacific, and Israel.
  • GAAP results were weighed down by a $52 million non-cash write-off in Q4 related to the closure of an underperforming U.S. subsidiary, reducing margins.
  • Non-GAAP diluted EPS fell to $1.56 in Q4 2023 from $1.71 a year ago, reflecting the write-off and higher financing costs.
  • The board declared a $0.50 per-share dividend, and recent capacity expansions—including new global facilities and ERP deployment—position the company to support its growing backlog.
AI Generated. May Contain Errors.
Earnings Conference Call
Elbit Systems Q4 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good day, everyone, and welcome to our 4th quarter 2023 earnings call. This is Rami Myerson, Elbit Systems' VP, Investor Relations. On the call with me today are Butti Makhliss, our President and CEO Kobi Kaganath, CFO, and Yossi Gaspar, Senior All participants are at present in a listen only mode. Following the formal presentation, instructions will be given for the question and answer session. As a reminder, this call is being recorded.

Operator

I would like to point out that the Safe Harbor statement in the company's press release issued earlier today also refers to the contents of this conference call. As we do every quarter, we will provide you with both our regular GAAP financial data as well as certain supplemental non GAAP information. We believe that this non GAAP information provides additional details to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non GAAP information and reconciliations in today's press release. Kobi will begin by providing a discussion of the financial results, followed by Butti who will talk about some of the significant events during the quarter and beyond.

Operator

We will then turn the call over to a question and answer session. Earlier today, we hosted an investor conference at the Tel Aviv Stock Exchange. A presentation of the event is available in the Investor Relations section of our website at www.helbitsystems.com. Any investor and analysts wish to ask questions related to the topics discussed at the investor conference are welcome to present their questions during the Q and A session of the call. With that, I would like now to return the call over to Kobi.

Operator

Kobi, please.

Speaker 1

Thank you, Rahim. Hello, everyone, and thank you for joining us today. The 2023 annual results reflects Elbit's resilience as well as our commitment to supporting the IDF's efforts during the current war and also delivering to our customers around the world. Many of our customers are investing significantly to upgrade and expand their armed forces, driven by geopolitical tensions. This demand supported the growth of our order backlog to almost $18,000,000,000 providing good visibility.

Speaker 1

As part of our operational transformation, we continue to invest to expand capacity and delivering the growing backlog. Our financial performance in 2023 also includes the write off of $52,000,000 non cash expenses in the 4th quarter related to the closing of an underperforming subsidiary of Elbit Systems of America with limited synergies and a discontinued project managed under the subsidiary. Approximately $18,000,000 of the expenses related to the restructuring were recorded in COGS and excluded from non GAAP results. Dollars 34,000,000 of the expenses were recorded in G and A and were not excluded from non GAAP results. I will now highlight and discuss some of the key figures and trends in our financial results.

Speaker 1

4th quarter revenues were $1,626,000,000 compared to 1,000,005 $6,000,000,000 in the Q4 of 2022. For 2023 as a whole, our revenue were approximately $6,000,000,000 versus approximately $5,500,000,000 last year. Our diverse geographic revenue base is important to the long term sustainability of our business. In 2023, Europe contributed 30%, North America 24%, Asia Pacific 21% and Israel contributed 20% of revenues. The increase in European revenues was broad based and included growth in UAS, munitions, C4R and radios, EW and training and simulation sales.

Speaker 1

Growth in Israeli revenues reflects the increased demand for a broad range of our solutions following the breakout of the Swords of Iron War. Israel contributed 27% of sales in the 4th quarter compared to 20% of revenues over the whole of 2023. North America revenues were lower mainly due to lower airborne sales systems. Asia Pacific revenues declined mainly due to lower sale of precision guided munitions. The non GAAP gross margin for the 4th quarter was 25.3% compared to Q4 of 2022 at 25.8%.

Speaker 1

For the full year of 2023, non GAAP gross margin was 25.7% compared with 25.5% last year. GAAP gross margin in the 4th quarter was 23.5% of revenues compared to 25.3% in the Q4 of 2022. Gross profit in the 4th quarter was reduced by approximately $18,000,000 of expenses related to the closing of a subsidiary. GAAP gross margin in 2023 was 24.8% compared with 24.9% in 2022. The 4th quarter non GAAP operating income was $105,000,000 or 6.4 percent of revenues compared with $104,000,000 or 6.9 percent of revenues last year.

Speaker 1

GAAP operating income for the Q4 was $68,000,000 versus $120,000,000 in the Q4 of 2022. Operating income in the 4th quarter included $52,000,000 of expenses as explained above, of which approximately $18,000,000 were excluded from the non GAAP operating income. Non GAAP operating income in 2023 was $449,000,000 or 7.5 percent of revenues compared with $367,000,000 or 6.7 percent of revenues last year. GAAP operating income was $369,000,000 versus $368,000,000 last year. The operating expenses breakdown in 2023 was as follows.

Speaker 1

Net R and D expenses were $424,000,000 or 7.1 percent of revenues compared to $436,000,000 or 7.9 percent of revenues in 2022. Marketing and selling expenses were 6% of revenues versus 5.9% last year. G and A expenses were $330,000,000 or 5.5 percent of revenues compared to $313,000,000 or 5.7 percent of revenues in 2022 and includes $34,000,000 of expenses related to the write off. Financial expenses were $46,000,000 in the 4th quarter compared to $27,000,000 in 2022. Financial expenses in 2023 were $138,000,000 compared to $51,000,000 last year, reflect mainly the increased interest rate environment and higher debt.

Speaker 1

Other expenses were $5,000,000 in 2023 compared to $24,000,000 in 2022. The reduction includes the reevaluation of holdings in affiliated companies and expenses related to non service costs of pension plans. We recorded a tax benefit of $5,000,000 in the 4th quarter that was similar to 2022. The effective tax rate in 2023 was 10.1% compared to 8.2% in 2022. Our non GAAP diluted EPS was $1.56 in the 4th quarter $6.70 for the full year of 2023, compared to $1.71 in the Q4 of $2,028.27 in 2022.

Speaker 1

GAAP diluted EPS was $0.67 for the Q4 of $2,027.82 for the full year compared to $0.67 in the Q4 of $2,022.06 $0.18 in 2022. 2023 non GAAP earnings per share reflects improved operational profitability, partially offset by the $52,000,000 write off and higher financial expenses as mentioned previously. I will now review the annual financial results of our business segments and will note that our segmented disclosure of operational income is provided on a GAAP basis. Aerospace revenue increased by 8% in 2023, mainly due to training and simulation revenues in Europe and UAS, revenues in Asia Pacific and Europe, partially offset by lower sales of precision guided munitions. Aerospace operating income in 2023 was $125,000,000 6.7 percent of segment revenues compared to $107,000,000 and 6.2 percent in 2022.

Speaker 1

The increase in operating income was mainly due to increased revenues and positive program mix. C4I and cyber revenues increased by 6% year over year, mainly due to C4I revenues in Asia Pacific. C4I and Cyber operating income in 2023 was $51,000,000 7 percent of segment revenues compared to $49,000,000 7.2 percent in 2022. Istar and EW revenues increased by 13% in 2023, mainly due to the electronic warfare and electro optic system sales in Europe and countermeasure systems. IStar and EW operating income in 2023 was $135,000,000 11.4 percent of Istar and EW segment revenues compared to $49,000,000 4.7 percent of segment revenues in 2022.

Speaker 1

The increase in operating income was mainly due to increased revenue and poverty program mix. Land revenues increased by 12% in 2023 compared to 2022, mainly due to increase in artillery and weapon station sales in Europe and ammunition and munition sales in Israel. Land operating income in 2023 was $81,000,000 6.2 percent of segment revenues compared to $29,000,000 2.4 percent of segment revenues in 2022. The increase in operating income was mainly due to increased revenue, positive program mix and progress in the operational transformation of IMI. Albit Systems of America revenues were similar year over year.

Speaker 1

The $5,000,000 operating loss in 2023 compares to an operating profit of $75,000,000 5.1 percent margin in 2022. The operating loss was mainly due to the $52,000,000 write off discussed previously as well as negative program mix. Our backlog of orders as of December 31, 2023 was $17,800,000,000 $2,700,000,000 higher than the backlog at the end of 2022. Approximately 60% of the current backlog is scheduled to be performed during 2024 2025 and the rest is scheduled for 2026 and beyond. Operating cash flow for the Q4 was a $314,000,000 inflow compared to $195,000,000 inflow in the same quarter last year.

Speaker 1

For 2023, we reported operating cash flow of $114,000,000 versus $240,000,000 in 2022. The Board of Directors has declared a dividend of $0.50 per share. I will now turn the call over to Mr. Matlise, Elbit's CEO. Woodsy, please go ahead.

Speaker 2

Thank you, Kobi. I would like to begin by thanking all Elbit employees around the world for their hard work and their ongoing commitment to all of our customers. I also want to send my sincere condolences to the families of our employees that have lost their loved ones during this conflict and our prayers for speedy return of all the hostages. The financial results of 2023 combined with the resilience the company continues to demonstrate provides me with confidence in our ability to realize the potential of our employees and our advanced technological solutions. We finished 2023 with another record backlog and 8% revenue growth that reflects the strong demand for our relevant portfolio of solutions that we have developed over many years as well as our broad geographical footprint.

Speaker 2

At the beginning of March, we announced the closing of an unperforming subsidiary with limited synergies to our businesses as well as the discontinuation of a project managed by the subsidiary. This decision is part of our effort to improve our portfolio management and ensure the relevance and synergies of the different parts of Elbit's portfolio. Kobi discussed the financial impact in his remarks. At our annual investor event today, I presented the core pillar of our strategy that we have discussed with you in the past. The first one is our multi domestic strategy and global presence.

Speaker 2

Elbit's revenues are broadly split between the U. S, Europe, Asia Pacific and Israel. We adopted this strategy many years ago to ensure stable growth during periods of different budget increases and cuts and to reduce risk. To deliver this strategy, we invested in building domestic subsidiaries in key markets around the world. These subsidiaries provide engineering, manufacturing and support with the local defense forces and also export their solutions to other customers.

Speaker 2

They employ domestic managers and employees and are fully integrated into the defense industrial ecosystem in their own market, ensuring that defense budgets are spent locally. LV System provides cutting edge operationally proven technology to our subsidiaries that are then adapted to the specific requirements of each customer. Our multi domestic presence has also helped us overcoming challenges including the current war in Israel and the COVID pandemic. Edvard Systems of America provides a good example of the implementation of our strategy. Over the last 20 years, EBIT System of America has increased sales from approximately $200,000,000 to approximately $1,500,000,000 in 2023 and employs approximately 3,600 people across the U.

Speaker 2

S. It is fully integrated into the American Defense Industrial Base applying a radio advanced solutions as both as prime contractor and supplier to all branches of the U. S. Building. In November 2023, Ezeq Night Vision received a $500,000,000 IQA cube contract to supply cold Benecar and Night Vision Global to the U.

Speaker 2

S. Marine Corps. This follow on order highlights our position as a prime contractor to the DoD. The second pillar of our strategy is our portfolio of technology, technological advanced solutions. We provide a range of solutions that help armed forces close the sensor to shooter loop rapidly and effectively.

Speaker 2

We provide a range of sensors that can detect the enemy in day and night, communication solutions that can transfer the information around the battlefield and a range of factors to engage quickly and precisely, helping to reduce collateral damage. Our solutions are developed by employees that have served and are familiar with the challenges of the modern battlefield. Most of our solutions have been used operationally and we strive to improve them regularly based on our experience accumulated by our end customers. In February, we signed 2 contracts for $600,000,000 $300,000,000 to supply arms field solutions to the Star and Arm, Army and European customers. This solution integrated range of sensors and other systems that will help increase the totality and operational effectiveness of our vehicles equipped with our solutions.

Speaker 2

The 3rd pillar of our strategy is our significant investment in R and D. Helvet Systems continue to invest more than 70% of revenue to develop a broad range of cutting edge solutions for our customers. As a percentage of revenue, this is a higher than most of our defense peers. By investing our own money in R and D, we will take control of the IP as well as the ability to maximize the synergy that can be generated across the portfolio. The increased digitization of the mono battlefield provides multiple new opportunities to leverage these synergies and incorporating artificial intelligence strategies are our 9,000 19,000 employees.

Speaker 2

Most of our employees are veterans that understand the requirements of our customers based on their own experience. Many of them continue to serve in reserve after the regular military service providing a valuable feedback loop between the battlefield and the La Porto. During the current conflict, more than 50% of our employees in Israel were mobilized into reserve duties for the IDF and are about and about half of them of those mobilized are still in uniform. We look forward to the speedy and safer term. Our strategy is working as demonstrated by the acceleration in the growth of both our order backlog and revenues in recent years.

Speaker 2

This growth reflects a successful combination of our international footprint, portfolio of relevant solutions, sustained investments in R and D and our high caliber employees. At our 2022 investor conference, we presented the investors we presented the investors with our making in our operational transformation to support the broader transformation of Elbit Systems and help improve performance and our ability to deliver the growing backlog. In 2023, we made further progress in the operational transformation. In 2023, we opened 4 new facilities around the world. In the U.

Speaker 2

S, we opened a new ground commerce vehicle assembly and integration center of experience in Charleston, South Carolina. And in January, we opened a new production support facility at our Spartan facility in Florida. We also opened new facilities in the U. K. And Germany.

Speaker 2

In 2023, we also completed the implementation of the new ERP systems across the company. In 2024, we plan to begin operation at our new ammunition production plant to Ahmad Becca and the new UAV facility in Modin. In these recent years, we increased CapEx to fund the building of new facilities and the rollout of the new ERP system. We believe these investments will deliver good returns and support growth over the coming years. The one area the improvement has taken longer than expected for the supply chain.

Speaker 2

The availability and cost of electronic components improved during the year as expected. However, we have experienced increased delays and disruption to our supply chain for the installed flows of iron ore. SD Systems supplies a range of solutions to the Israel Defense Forces. This includes the digital army program, the DAP DAS750 command and control solution, electronic warfare systems, UAVs, our artillery and motor systems, systems for main battle tanks and arms vehicles, night vision systems as well as a range of training and simulation solutions from the single closure to the squadron and battalion level across all domains and more. Our solutions are currently being used extensively by the IGS.

Speaker 2

Since the 7th October, we have accelerated the development of some of our solutions that were still in development and were scheduled to be fielded in the medium or longer term. They have already been sent to the field in days or weeks. We did this, thanks to the dedication of our employees and our culture of innovation and creativity. We are also upgrading multiple systems and solutions following the lesson learned during the conflict. We have ramped up production to support the IDS requirement and maintain deliveries to our international customers at the same time.

Speaker 2

We increased production capacity at our factories by adding ships and recruiting 700 additional employees to support the search. Before we move to the question and answer, I would like to thank Rami for his contributions to Altice Systems and wishing success in his future endeavors. From the 1st April, responsibility for investors relations will move to corporate. In summary, we continue to implement the strategy that has built Elbit into a leading global defense company. The current one has not changed our long term plans and the operational transformation is progressing well.

Speaker 2

I am encouraged by the resilience we have demonstrated overcoming multiple challenges in recent years. All these increase make confidence in our ability to deliver our potential to all our stakeholders, our customers, our employees and of course to you, our shareholders. And with that, I would be happy to take your questions.

Speaker 3

Thank The first question is from Pete Skibitski of Alembic Global. Please go ahead.

Speaker 4

Yes. Hello, everyone, and good afternoon.

Speaker 5

Hi, Luke.

Speaker 4

Maybe we can start with the very strong backlog growth in the Q4, 7.2%. I think it worked out to be almost 18% for the full year, pretty much all organic. So as you alluded to, Butsy, the demand is pretty strong, unusually strong right now. But I wanted to clarify just a little bit, Are you seeing the greatest strength in order flow from the Israeli MOD right now? Because I noted that Israeli revenue almost doubled sequentially into the Q4.

Speaker 4

So I just was wondering if you could clarify the fastest regional growth in demand?

Speaker 1

Good morning, Pete. This is Kobi. Thank you for your comments and questions. First, as we mentioned, we had 18% organic growth in backlog and $1,100,000,000 organic growth of backlog just in the 4th quarter, which is above 7%. And as we presented in the last few months, we have a strong intake of international.

Speaker 1

International programs, which we mentioned, for instance, the write back in Australia, the LAND 400, which is a $600,000,000 intake. So while having significant orders, as we mentioned in November, from the Ministry of Defense, we have also very strong demand from the international market.

Speaker 4

Okay, very good, very good. Appreciate that. And then just if I look at operating margins by segment, which you guys give annually, it looks like you did have operating margin expansion in all of your segments year over year except for ESA, where you took the charge, of course. And so I'm just wondering, given the momentum in some of the other segments, does this give you confidence that 2023 is perhaps the trough margin year for Elbit and that we'll see expansion in 'twenty four and beyond, just given you should have better volume and the improvement you've seen in the other segments?

Speaker 2

Christophe, it's Bussie. As I'm sure you remember, our plan was to get to reach a level of revenues of between US6.5 billion dollars to US7 billion dollars at 20.26 and operational profit of about 10% that year as well. We are quite confident and quite confident that we'll be able to reach the level of revenues earlier than 2020 6 and we are still fully committed to reach the OP level of 10%. We are working hard to do that And you can see that we are on track. You can see that quarter by quarter, we're improving our operational profit.

Speaker 4

One last one for me. I was just wondering, your margin plan, I know, relied will rely on the new facility in the south of Israel. I'm just wondering, has the war slowed down construction of that new facility at all or is it still planned for completion by the end of the year?

Speaker 2

No, no. On the contrary, we're expecting we have accelerated activity and we expect to start the activity there or to inaugurate it around the Q4 of this year.

Speaker 3

The next question is from Ellen Page of Jefferies.

Speaker 6

Congrats on the quarter. So just following up on Pete's question about that facility, how do we think about your ability to continue to grow artillery volume from here just given demand is strong? Do you have capacity for growth prior to Q4 or is it more constrained?

Speaker 2

Thank you. Thank you for the question. The answer is yes. We have invested in additional production capacity. We increased the amount of employees and we are working 3 shifts.

Speaker 2

And as was mentioned, we are going to we have we opened already last year several new facilities around the globe. And this year, we will open 2 new facilities, one in Mudin for UAVs here in Israel and another one in the south part of Israel at Ramaz Becca, which we are planning to inaugurate around the Q4 of this year. So we think that all these investments that were made not just recently were made during the last few years will yield into new capacity for production and will enable us to meet our commitment for the Israeli market as well as for international markets.

Speaker 6

Okay. That's helpful. And just on cash, you had to use the cash again this year. How do we think about working capital or last year, sorry, how do we think about working capital through 2024? And are you expecting to have better inventory management going forward or how do we think about that $350,000,000 use earnings?

Speaker 1

Good morning, Alan. This is Kobi. So in terms of cash, we had to increase working capital to meet the growing demand. As Boutsi mentioned, we have increased revenue of above 8% year over year and 8% in Q4. And as we presented in our backlog, our backlog is 17% higher than last year.

Speaker 1

So we are increasing we need to increase production to meet our customers' demand. That requires strong working capital, that requires inventories. And as mentioned, we increased inventories by $350,000,000 Another specific reason is the issue of maritime transportation, which require us to hold more inventories to be able to supply the demand. So we are looking at that very closely with our new ERP systems. We're monitoring that very, very closely and we are receiving concise and precise decisions to meet our demand, while of course the capital and cash expenses are a big issue to be dealt with.

Speaker 3

The next question is from Omry Efroni of Oppenheimer. Please go ahead.

Speaker 5

Hi, guys, and congrats on the great quarter. Maybe to elaborate the last question about financial expenses, It has a pretty high financial expenses, approximately $140,000,000 for the whole year of 2023. Maybe if you can elaborate a little bit more about the working capital and how should I think about it? Is it tied up more of one segment, maybe the aerospace and the land division? And what about the guarantee?

Speaker 5

Are you thinking about a way to lower the price of credit interest and I say on the guarantees and how one should think about it? Thank you.

Speaker 1

Hi, Humphrey. So as discussed previously in our conference, we have $138,000,000 of financial expenses during the year. Part of the expenses are a backlog of more than $4,000,000,000 of guarantee financial guarantees, which we are required to hand to our customers, mainly when we receive down payments. And we are working with the banks, of course, of reducing this cost as much as possible. But we always prefer to issue a guarantee, which cost us around 0.5% and receive down payment other than use credit, which cost us at market rates more than 6%.

Speaker 5

Okay, great. Thanks for the color. We're happy if you can give a little bit of explanation and about the UA View segment. Now Elbit is taking his new facility, he's opened as a new facility in Modi'in. Later you can talk about it more of how much capacity is going to be added to the aerospace and especially the tactical UAVs and the large strategic UAVs that you can sell to especially the UAVs?

Speaker 5

Thanks.

Speaker 2

We received recently many orders for UAVs in many countries and they are all embedded in the airborne segment. The airborne segment is not just for UAVs, it's our entire airborne portfolio, which includes the training and simulation, avionics, helmet and some more activities. But talking specifically on UAVs, we see a growing demand for our UAVs here in Israel, but also around the world. We have, as you know, a family of UAVs, from small tactical UAVs to male UAVs. The uniqueness of our solution is not just UAV itself, is our ability to provide operational solution for our customers based on our different sensors and effectors, which are all linked to the UAVs.

Speaker 2

Actually, what we are able to our unique offering is not just a simple UAV, is a full integrated package, which helps several operational scenarios, which are required in the market. And there we bring the entire synergy of the company. In order to meet this the backlog of UroLift, we got recently in many countries, we took a decision to invest in a new facility for UAVs and Modine. And this facility will be inaugurated around mid around June, July this year.

Speaker 5

Great. Maybe a last one for me, if I may. And coming to the Q4 of 'twenty four, the facility in Ramat Baker is going to come online. How should I think about the ramp up in the capacity and the production in the facility? Is it going to be a quick one?

Speaker 5

Or it supposedly can be longer 6 months, 3 months, 12 months? Thank you.

Speaker 2

We will start production in the new facility in the last quarter. And we'll gradually increase capacity and increase production. It will take us probably around 9 months to get into full production capacity in that facility. And we have invested quite a lot in this new facility. It includes a lot of automation, new robots, new technologies for production.

Speaker 2

And in order to ensure good quality, improved yield and good productivity for the new program. The level of orders we got recently is requiring this new facility and the investment we made during the last 2 years will certainly help us to deliver all these goods and all our commitment to our customers.

Speaker 3

The next question is from Atink Ozkan of Wood and Company. Please go ahead.

Speaker 7

Thank you and congratulations for a strong backlog

Operator

at the end

Speaker 7

of the year. I have 3 questions today. The first one is, if you could provide an update on how we should look at investment needs going forward given that the Ramat Pekka investment will be mostly completed in 2024? I know that you have been spending around $180,000,000 $200,000,000 per annum, But demand is there and are you going to see new investments from Albit, let's say, in 2025? My second question is kind of related to that.

Speaker 7

Given the emerging need for multi domain warfare across the globe and what we see in Gaza, Red Sea or Ukraine and given out its capabilities, wide range of capabilities, in which segment do you see the strongest growth, not regions, big segments? For instance, I noticed that there is this emerging kamikaze drone and monitoring munition threats and there appears to be no remedy, soft kill or hard kill when these come in swarms. So is there a solution for that? Do you have a specific solution for this that you could basically teach to global militaries? That's the second one.

Speaker 7

And the third one is I've seen some articles in Israeli press that the MOE with Hitocha in Japan has been canceled. But Japan is probably going to be the 3rd largest military defender. They are boosting their defense budget. So what is your strategy there to basically penetrate this important market? Thank you.

Speaker 1

Thank you, Atinj and good morning. As you know, we're not providing guidance, but with the inauguration of the Ramat Becca facility and fully going live of the ERP, the new ERP system, which required a lot of CapEx investment in recent years. We might expect a reduction in CapEx investment in the coming years. So I think that gives my view of how we are going to address CapEx in recent years.

Speaker 7

Should I take that as reduction in absolute levels or as a percentage of revenues?

Speaker 1

Again, you should take it as a non guidance remark of a small reduction in CapEx in the coming years.

Speaker 7

Understood. Thank you.

Speaker 2

With regards to the second question, I don't think that there is one area which I can identify as a growth engine for the company. Actually, there are different growth engines in each division, in each segment. And each one of them has its own uniqueness and its own capabilities. And that's the beauty of our portfolio that we are not dependent on just on one segment or just on one growth engine. And with regard to just to answer your question about the phones and UAVs, of course, we have solutions for that, which are based on car discount measures, based on hot kit solution and based on energy weapon solutions as well, which we are developing for many customers around the globe.

Speaker 2

With regards to Japan, we of course expect the decision. Japan is an imported market and we know that budgets are increasing in this market. We have collaboration in this place and we have opportunities in this in Japan and we'll continue to work in this market.

Speaker 3

There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available 2 hours the conference ends. In the U. S, please call 1-eight eighty eight-seven eighty two-four thousand two hundred and ninety one.

Speaker 3

In Israel, please call 3,9,255,900. And internationally, please call 9,723, 9255,900. A replay of this call will also be available on the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?

Speaker 2

Yes. I would like to thank all our employees for their continued hard work and contribution to Albit Systems' success. To everyone on the call, thank you for joining us today and for your continued support and interest in our company. Have a good day and goodbye.

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