Eltek Q1 2024 Earnings Report

Eltek EPS Results

• Actual EPS: $0.27
• Consensus EPS: $0.26
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Eltek Revenue Results

• Actual Revenue: $11.78 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Eltek Announcement Details

• Quarter: Q1 2024
• Date: 5/21/2024
• Time: N/A
• Conference Call Date: Tuesday, May 21, 2024
• Conference Call Time: 8:30AM ET

Eltek (NASDAQ:ELTK) manufactures, markets, and sells printed circuit boards (PCBs) in Israel, Europe, North America, India, the Netherlands, and internationally. It offers a range of custom designed PCBs, including rigid, double-sided and multi-layer PCBs, and flexible circuitry boards. The company also provides high density interconnect, flex-rigid, and multi-layered boards. It primarily serves medical technology, defense and aerospace, industrial, telecom, and networking equipment industries, as well as contract electronic manufacturers. The company markets and sells its products primarily through direct sales personnel, sales representatives, and PCB trading and manufacturing companies. Eltek Ltd. was incorporated in 1970 and is headquartered in Petah Tikva, Israel. Eltek Ltd. operates as a subsidiary of Nistec Golan Ltd.

Eltek Q1 2024 Earnings Call Transcript

Key Takeaways

• Defense demand surge: Requests for quotations rose sharply, driving the company's backlog up approximately 25% and signaling further order growth in H2 2024 and early 2025.
• Q1 financial strength: Revenues reached $11.8 million with gross profit up 8% to $3.2 million, net profit of $1.7 million, EBITDA of $2.1 million, and $19.9 million in cash with no debt.
• Secured multi-year defense order: Eltek booked a $1.6 million repeat order from an overseas defense client, with $1.0 million to be delivered in 2024 and the remainder in 2025.
• Accelerate investment plan on track: Installation of two new coating lines is progressing as planned despite the complexity of conducting extensive construction alongside active production.
• Manpower bottleneck: To meet rising production needs, the company plans a 15% workforce increase with wage hikes, adding pressure on operational costs.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2024 first 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. For operator assistance during the conference, please press star zero. 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&A. By its nature, this information contains forecast 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. Mr. Yaffe, please go ahead.

[Eli Yaffe, CEO at Eltek Ltd.]

Thank you. Good morning. Thank you for joining us for our 2024 first quarter earnings call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and a summary of our principal factors that affected our results during Q1 2024. 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 be also available on our website. Throughout the quarter, we witnessed a notable surge in request for quotations, primarily, primary with the defense sector. Correspondingly, we have seen the rise of the volume of orders received. Our backlog since the year's outset has escalated to approximately 25%. This surge is directly attributed to the demand for the defense product worldwide.

[Eli Yaffe, CEO at Eltek Ltd.]

We anticipate that the full impact of this demand for the defense products is yet to be reflected in the purchase order received and expected the demand wave to intensify in the later half of 2024 and early 2025. Despite the increase in demand, we have refrained from significantly increased prices. Our pricing policy remains consistent with previous years. However, expedited production requests are subject to higher pricing than standard production. During the quarter, we secured a repeated order from an overseas defense client totaling $1.6 million, with $1 million scheduled to delivery by the end of 2024 and the remainder by the end of 2025. This order aligned with our strategy to secure long-term contracts, facilitating more efficient production planning. The operational landscape for the coming years presents significant challenges.

[Eli Yaffe, CEO at Eltek Ltd.]

During these years, we plan to receive and install the two coating lines, which are the main components of our accelerated investment plan. Unlike various other machines required, these coating lines span tens of meters and require extensive construction work. Consistent with our policy of executing investment without disturbing current production, we face the task of conducting construction alongside active production lines. Presently, the plan remains on track, with our technical team focused on establishing the new manufacturing area and installing new machinery while supporting ongoing production processes and maintenance. In addition, we have finished issuing purchase orders for all the remaining machines, including accelerated plan. In addressing current production volume requirements, manpower has emerged as a bottleneck. Our immediate focus lies in recruiting additional employees, aiming to bolster the workforce by approximately 15%.

[Eli Yaffe, CEO at Eltek Ltd.]

This required substantial resource allocation, including wage increase, to attract a sufficient number of employees. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.

[Ron Freund, CFO at Eltek Ltd.]

Thank you, Eli. I would like to draw your attention to the financial statements for the first quarter of 2024. 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 the first quarter of 2024. All numbers mentioned are in US dollars. Revenues for the first quarter of 2024 were $11.8 million, compared to $11.5 million in the first quarter of 2023. Gross profit increased by 8%, reaching $3.2 million, compared to a gross profit of $3 million in the first quarter of 2023.

[Ron Freund, CFO at Eltek Ltd.]

The increase is mainly due to the increase in revenue and the fixed component of part of the expenses included in cost of the revenues. Operating profit amounted to $1.7 million in Q1 2024, compared to $1.6 million in Q1 2023. We recorded financial income of $0.4 million during Q1 2024... due to the devaluation of the NIS against the US dollar and from interest on our interest-bearing accounts. Net profit was $1.7 million, or $0.27 per share, in Q1 2024, compared to net profit of $1.6 million, or $0.27 per share, during Q1 2023. EBITDA was $2.1 million, compared to $1.9 million in Q1 2023.

[Ron Freund, CFO at Eltek Ltd.]

During the first quarter of 2024, we enjoyed a positive cash flow for operating activities of $1.3 million. As of March 31, 2024, we had cash and cash equivalents and short-term bank deposits of $19.9 million, with no debt outstanding. We are now ready to answer 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 polled in the order they are received. Please stand by while we poll for your questions. I repeat, if you have a question, please press star one. There are no 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, would you like to make your con- there is a question. The first question is from Mr. Sharogradsky of Kepler Capital. Please go ahead.

[Mark Scharogradsky, CIO at Kepler Capital]

Hello. I want to ask a short question: How you see about the growth at this year, 2024, and how you look on your gross profit also this year? Thank you.

[Ron Freund, CFO at Eltek Ltd.]

Hi. Good morning. We don't give any forecast for the year. It was not our policy, and we will not change this policy. As for the gross profit or the gross margin, we said in previous calls and we still keep it, we anticipate that in the medium term will be around the 27% gross margin.

[Mark Scharogradsky, CIO at Kepler Capital]

Do you see possibility to increase the gross margin after the construction is ended in 2025?

[Ron Freund, CFO at Eltek Ltd.]

So we are not sure whether it will be, because at the same time, we hope that the investment will bring more efficiency. However, new investment require a new depreciation, and the depreciation expenses will increase. We think that at the near term, it will be around the 27%.

[Mark Scharogradsky, CIO at Kepler Capital]

Okay. All right. Thank you. Thank you.

[Operator]

There are no further questions at this time. Mr. Yaffe, would you like to make a concluding statement?

[Eli Yaffe, CEO at Eltek Ltd.]

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

[Operator]

Thank you. This concludes the Eltek Ltd. 2024 first quarter financial results conference call. Thank you for your participation. You may go ahead and disconnect.

Participants

Executives

• Eli Yaffe, CEO
• Ron Freund, CFO

Analysts

• Mark Scharogradsky, CIO at Kepler Capital