Elbit Systems Q1 2025 Earnings Call Transcript

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May 20, 2025
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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems First Quarter twenty twenty five 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. As a reminder, this conference is being recorded.

Operator

I would now like to hand the call over to Ms. Daniella Finn, Elbit Systems' Vice President of Investor Relations. Daniella, please go ahead.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you, Nathan. Good day, everyone, and welcome to our first quarter twenty twenty five earnings call. On the call with me today are Botsi Mutlis, President and CEO of Elder Systems and Kobi Kagan, CFO. Before we begin, I would like to point out that the Safe Harbor statement in the company's press release issued earlier today also refers to the content of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplemental non GAAP information.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

We believe that this non GAAP information provides additional details to help understand the performance of the ongoing business. You can find the detailed GAAP financial data as well as the non GAAP information and the reconciliation in today's press week. Sophie will begin by providing a discussion of the financial results, followed by Guzzi, who will talk about some of the significant developments during the quarter and beyond. We will then turn the call over to question and answer session. With that, I would like to now turn the call over to Kobi. Kobi, please go ahead.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Thank you, Daniela. Hello, everyone, and thank you for joining us today. The strong set of results published earlier today continues the trend we've seen over the past few quarters of strong revenue growth and margin expansion. This quarter is the fourth consecutive quarter in which we published double digit growth for revenues, backlog, operating income, net income and EPS. We are very pleased with these results.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

We continue to make a concerted effort to improve our free cash flow, and I'm happy to announce that in this quarter, we presented strong free cash flow totaling $161,000,000 I will now highlight and discuss some of the key figures and trends in our financial results. First quarter revenues were $1,896,000,000 compared to $1,554,000,000 in the first quarter of twenty twenty four. In the first quarter of twenty twenty five, Europe contributed 24%, North America twenty one %, Asia Pacific eighteen %, and Israel contributed 32% of revenues. Demand continues to be robust in all key geographies. GAAP gross margin in the first quarter was 24% of revenues compared to 24.1% in the first quarter of twenty twenty four.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

The non GAAP gross margin for the first quarter was 24.3% compared to 24.7% in the first quarter of twenty twenty four. The first quarter GAAP operating income for the first quarter was $149,700,000 or 7.9% of revenues versus $105,400,000 or 6.8% of revenues in the first quarter of twenty twenty four. Non GAAP operating income was 100

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Non the first quarter of last year. The operating expense breakdown in the first quarter was as follows: Net R and D expenses were $114,300,000 or 6.1% of revenues compared to $98,500,000 or 6.3% of revenues in the first quarter of twenty twenty four. Marketing and selling expenses were $100,900,000 or 5.3% of revenues versus $89,100,000 or 5.7% in the first quarter of twenty twenty four. G and A expenses were $89,400,000 or 4.7% of revenues compared to $81,200,000 or 5.2% of revenues in the first quarter of twenty twenty four. Financial expenses were $39,000,000 in the first quarter compared to $31,200,000 in the first quarter of twenty twenty four.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

The increase in financial expenses in the first quarter of twenty twenty five was mainly due to the hedging transaction and the net effect of changes in the exchange rates of different currencies in which the company operates. We recorded a tax expense of $16,100,000 in the first quarter compared to $11,600,000 in the first quarter of twenty twenty four. The effective tax rate in the first quarter of twenty twenty five was 13.9% compared to 14.6 in the first quarter of twenty twenty four. GAAP diluted EPS was $2.35 for the first quarter of twenty twenty five compared to $1.65 in the first quarter of twenty twenty four. Our non GAAP diluted EPS was 2.57 for the first quarter of twenty twenty five compared to $1.81 in the first quarter of twenty twenty four.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Quarterly segment revenue for the first quarter of twenty twenty five. Aerospace revenue increased by 20% year over year, mainly due to increase in precision guided munitions sales in Israel and Asia Pacific. C4I and Cyber revenues increased by 12% year over year, mainly due to increase in radio systems and command and control systems sales in Israel and in Europe. IStar and EW revenue increased by 4% in the first quarter of twenty twenty five, mainly due to electro optic system sales. Land revenue increased by 48% in the first quarter of twenty twenty five, mainly due to increased ammunition and munitions sales in Israel and in Europe.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Albeit Systems Of America revenues increased by 18% due to the increase in Warfighter Systems and Medical Instrumentation sales. Our order backlog as of 03/31/2025 was $23,100,000,000 2 point 7 billion dollars higher than the backlog at the end of the first quarter of twenty twenty four. Approximately 66 of the current backlog is attributable to orders from outside of Israel. Approximately 51% of the current backlog is scheduled to be performed during the remainder of 2025 and during 2026, and the rest is scheduled for 2027 and beyond. Net cash provided by operating activities at the end of the first quarter twenty twenty five was $184,000,000 as compared to $6,000,000 cash used in the first quarter of twenty twenty four.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Operating cash flow during the quarter were affected mainly by the increase in net income and an increase in contract liabilities, which were offset by the increase in inventories and trade receivables. During the first quarter of twenty twenty five, we also delivered $161,000,000 of free cash flow. The Board of Directors has declared a dividend of $0.60 per share. I will now turn the call over to Mr. Machlis, our CEO. Bouty, please go ahead.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Thank you, Kobi. I would like to begin by thanking our Elbit employees around the world for their hard work and ongoing support and commitment to our customers. These results would not have been achieved without our ongoing commitment and dedication. During Q1 twenty twenty five, we have seen a dynamic trend of strong growth continue as demand in the defense business remains high. This is the fourth quarter in a row in which we have delivered double digit year over year growth in revenues, operating profit, net profit and backlog.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Our backlog has reached a record of $23,100,000,000 up 40% from last year. For the period of the last four quarters, our GAAP EPS is almost 8% and the non GAAP EPS is at $9.5 The ongoing conflicts in Ukraine and locally here in The Middle East continue to dominate the geographical agenda. These are evident in government's decision making around the world to increase defense budget, coupled with ongoing rhetoric by President Trump for NATO Allies to increase defense spending is propelling this super cycle we are seeing in defense spend, where we continue to see strong demand for LBIDS products and advanced technological solutions as evident in our growing backlog and sales. Last week, the NATO Secretary General presented a proposal for a plan to further increase defense spending in Europe to gradually reach 5% of GDP by 02/1932, which is expected to be presented at the next NATO summit at the June. We believe our growth geographical exposure to Israel, U.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

S, Europe and Asia Pacific is unique. During the quarter and beyond, we continued to receive orders for our solutions in artillery, ammunition, electronic warfare, radio system and self protection solutions, among others. For example, we won a contract totaling approximately $100,000,000 to provide joint national digital fire command centers for European countries, or contracts totaling $80,000,000 to supply the IMOD with advanced airborne self protection suits for the F-16I fleet designed to further secure the safety of the F-16I aircraft, enabling it to operate safely in hostile environments. Another self protection solution was one, this time a maritime EW self protection solution for a free grade installation to a NATO European country. Elbit, the Siever Mark IV countermeasure dispensing system is an advanced maritime electronic warfare solution designed to effectively counter complex missile attack scenarios.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

An additional contract secured to a NATO European country was to supply our redrawn counter U. S. Solution. This multi sensor and multi mission system is part of Elbit's advanced EW, radar and seeking portfolio, enabling the rapid detection and location of multiple drones simultaneously. During the quarter, we continued winning contract for our advanced rocket munition launcher PULSE, precise and universal launching system.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

System. This time, together with KNDS, it was Germany who selected our Pulse solution, which has now been selected by multiple European countries, including Germany, The Netherlands and Denmark among others, testimony of its effectiveness in enhancing defense capabilities in modern battlefield. Additionally, we won a 130,000,000 contract to yet another European NATO country during the quarter. The scalable pull system enables a variety of range to be used starting from 35 kilometers up to a range of 300 kilometers. These agile and scalable features of this advanced and versatile arterial rocket system coupled coupled with launching a one range of rocket types from a single platform has been a key win by our customers versus our solution.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

In February, we showcased our latest development in air defense technology at the Aero India show. Elbit's innovative portfolio of featured solutions, including unmanned aerial systems, directed infant countermeasure technology, electronic warfare capabilities, precise guided munition and our helmet mounted displays among others. I am pleased to say that there was a strong interest in our product displays. We continue to see growing amount of interest in the IronBeam system, the high power laser solution, which is expected to be operational by the end of twenty twenty five. The laser component of the iron solution developed by Elbit is intended to provide a robust defense against a variety of incoming threats.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

The $200,000,000 contract announced back in October 2024 positioned Elbit as an Israeli lead laser center and a global leader in high power laser technology, both for land and airborne solutions. We should continue to update you on development in this area. And with that, I will be happy to answer your questions. Operator?

Operator

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. If you are using speaker equipment kindly lift the handset before pressing the numbers. Your questions will be polled in the order that they are received. Before that I would like to hand the call over back to Ms. Daniella Finn for a few questions that were pre sent and pre recorded. Daniella, please go ahead.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you very much, Nathan. And a couple of questions from Henk Gerecht from Exane. Henk, thank you very much for your questions today. The first question is, is there an expectation of a slowdown in activity in Israel due to a possible decline in the intensity of the conflict in Gaza or a ceasefire imposed by The U. S? How is the company preparing for such a scenario?

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Thank you. First, I would like to say that I'm praying for the end of the current war we have in Israel and for the lift of the hostages from Gaza. Investment in defense is I believe will continue in the future, in the near term future. And the main reason for that is these investments are helping to create an advantage for Israel in our arena and to create so and there is also a need to build more inventories and to treat the equipment which is coming back from the field. So I really believe that this investment will continue.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

The same we see in Europe. Countries are preparing themselves to invest more in defense. In all, are not very concerned from Russia, mainly in North Europe. So, do not see any slowdown in defense spend investment in the coming few years, not in Israel and neither in Europe.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you. And the second question from Ren. Is an improvement in the gross profit rate expected in the coming year? Or will the profitability targets be achieved while relying on operating leverage?

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Thank you, Hen. With the high demand we are witnessing and the expedited growth of our backlog, we can be more selective in the bookings we take. Additionally, on top of that, we will see continuous operational OpEx leverage as you mentioned.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you. And the next question from Hernie is, what is the expectation for CapEx for the rest of the year?

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

We see the same level of CapEx investment. It might be a small increase in CapEx investment to around the neighborhood of $250,000,000 as we recorded $215,000,000 in 2024.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thanks, Cody.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

I would like to add more flavor to the first question with regards to investment here in Israel and Europe. The main reason for investment is not just to support the current conflict we have, it's also to create deterrence against our enemies here in our region and also in Europe. And because of that, I really believe that that's the main reason for the investment, not the current conflicts which are happening right now here as well as in Europe, but to create deterrence which can avoid war in the future.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you for that. And a final question from Sani is, what is the status of Ironbeam? Will it be operational by the end of the year? We slightly answered that, but Fusi, if you'd like to elaborate slightly on that.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Yes. The Ironbeam, the land solution should be operational by the end of this year. We are working hard in order to make it happen and there is a lot of progress there. In parallel, we continue to invest in the airborne solution. We believe that bringing the airborne solution to the arena will create a great will a huge change in the way countries are fighting mainly against swarms.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Hundreds of engineers and physicians are working in order to develop the system and there is a lot of progress there as well.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thank you, Bouti. Operator, we can take the following questions now. Thank you.

Operator

Thank you. The next question is from Omri Efroni of Oppenheimer. Please go ahead.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Hey guys and congrats on the great quarter. Have three questions, I hope you don't mind. First is about the land division. The operating margin was pretty high. It's gotten 9%.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

And I know that most of the equipment is going into Israel. I was wondering if you have any more upside when Israeli stockpiles are full and probably we will be able to sell to other countries. That's the first question. The second question is about the IronBeam. I was wondering if you have any internal price target sell targets, sorry, for the system?

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

And if so, if the system is going to be sold only to Israel or you can sell it into The United States? And the third question is about the pictures you put on slide seven. I see here the Soldier Lethality Program, aka the IVAS in The United States. I was wondering if you have any targets or any more color you can give on the IVAS development soldier enhancement? And maybe some more color on the maritime sensing and future products that might be much more important in the next years? Thanks.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

So let's do it one by one. If I'm not mistaken, the first question was with regards to the land revenues, right?

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Yes.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

First, would like to we would like to say that the land division is not the munition. They are selling full turnkey solutions, includes the artillery system, howitzers, mortars, command and control system, fire control system, electro optics and of course, munition and guided munition as well, all combined. What happened after the acquisition of VMI is that actually we combined all the elements which are related to land solutions into one division and we are selling a turnkey solution to our customer. Not a product, it's a full term system. Now, if I understood you correctly, you have asked me about what will happen after the demand in Israel will increase, Was it EBIT price will decrease EBIT Yes.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

If you have any more upside into the operating leverage operating margin in the Land division.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

And also you asked about the demand outside of Israel.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Yes. I suppose it's continued to be pretty strong. My main question is when you start selling outside of Israel, mainly to Europe in much higher numbers, if the operating margin is going to be enhanced?

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

First, we continue to improve our numbers in the Land division and we see a big change there. And today, they are contributing quite a lot to our profit. And of course, as quantities are going up, we have more opportunities to increase the bottom line. And we see a lot of growing demand, mainly in Europe, not just in Israel. So I truly believe that there is a lot of potential for more revenues and more profit in this domain.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Okay. So this was with regards to the first question. The second question was around IronBeam, Yes. So the question was what are the prices of system? I'm not really sure I understood the question.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

The targets of revenue for the system, Israel or The United States.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Usually, we don't give this information publicly. I can tell you that there is a huge interest around this system, around the laser solution and other type of energy weapons. We deal not just with laser systems. We deal with many type of several types of energy weapons in Israel as well as abroad. With regards to numbers, these numbers usually we don't share the data.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Okay.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Regarding the third question about the social lethality and maritime sensing?

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Yes. We are very happy with the acquisition of Night Vision, which took place a few years back. This company is growing and improving and they are providing, as you know, Night Vision equipment for the Army, for the Marines, well as for the other international customers. Now, on the Elbit portfolio, we are able to combine a full turnkey solution for infantry soldiers. This is also a lesson learned from the current conflict we have here in our region.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

And we are tailoring unique solution for infantry soldiers, for future infantry soldiers, and we are offering it to our different customers in The U. S. As well as abroad. I'm very happy to say that we just announced a $112,000,000 contract to the U. S.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Marine Corps. And we see a lot of potential in this specific domain. It's a growing segment in our portfolio.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Yes. Okay. Thank you very much.

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

Thank you.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Thank you, Omar.

Operator

The next question is from Connor Walthaus of Jefferies. Please go ahead.

Conor Walters
Conor Walters
US Aerospace & Defense and Airlines Equity Research Associate at Jefferies

Hi guys, good morning. Congrats on such an excellent quarter. Maybe to stick with the top line, Q1 was off to a great start with 22% growth, well on track for the double digit target for the year. Curious what played out better than expected for the quarter and how we should think about the drivers for the remainder of the year, particularly as we think about the momentum we saw in Land and Aerospace?

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Hi, Conor. How are you? Thank you for the question. We had a very good start for 2025 as you mentioned. It was unplanned.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

It's not something that we didn't plan. We see very big growth in the land backlog and that was demonstrated with 48% expansion in revenues year over year with the Land division. And we see also in the other segments, all of the segments grew from one digit to two digits, most of them two digits growth in this quarter. So, it was on plan and it's on track in the company's growth.

Conor Walters
Conor Walters
US Aerospace & Defense and Airlines Equity Research Associate at Jefferies

Got it. That's very helpful. And maybe one more for you, Kobi. Free cash flow generation in the quarter was very strong again, continuing on the momentum we saw from Q4 of last year. At nearly 140% conversion on your adjusted net income, curious how we should be thinking about the opportunity for the full year and maybe what's driven this step change in your cash conversion of the last few quarters?

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Thank you, Conor, for pointing this out. We have three major ingredients in the free cash flow generation this quarter. First, increased net income. That is plain vanilla. Just increase the net income and that will translate to better cash conversion.

Yaacov Kagan
Yaacov Kagan
Executive VP & CFO at Elbit Systems

Secondly, we had very strong contract liabilities, down payments in this quarter, which was additional $170,000,000 of contract liabilities in this quarter. And thirdly, there was a one time off $57,000,000 of grant that we received from the Israeli land authority, the ILA, which was part of the contract of the evacuation of the facility in Ramat Hasharon going to Ahmad Beqa in the end of twenty twenty six. Those are the three ingredients in the performance that we had in the first quarter of the free cash flow.

Conor Walters
Conor Walters
US Aerospace & Defense and Airlines Equity Research Associate at Jefferies

Okay, great. I'll leave it there. Thanks so much.

Daniella Finn
Daniella Finn
VP - IR at Elbit Systems

Thanks,

Operator

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 replay of this call will be available in two hours after the conference ends. In The U. S, please call 808-0291.

Operator

In Israel, call 20900 and internationally, please call 97090900. A replay of the call will also be available at the company's website at www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?

Bezhalel Machlis
Bezhalel Machlis
President & CEO at Elbit Systems

I would like to thank our employees for their continued hard work and contribution to Elbit 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.

Operator

Thank you. This concludes the Elbit Systems first quarter twenty twenty five results conference call. Thank you for your participation. You may now go ahead and disconnect.

Executives
    • Daniella Finn
      Daniella Finn
      VP - IR
    • Yaacov Kagan
      Yaacov Kagan
      Executive VP & CFO
    • Bezhalel Machlis
      Bezhalel Machlis
      President & CEO
Analysts
    • Omri Efroni
      Investment Research at Oppenheimer & Co. Inc.
    • Conor Walters
      US Aerospace & Defense and Airlines Equity Research Associate at Jefferies
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Key Takeaways

  • Elbit delivered its fourth consecutive quarter of double-digit year-over-year growth in revenues (Q1: $1.896B, +22%), backlog, operating income, net income, and EPS.
  • Order backlog reached a record $23.1B (up 40% YoY), with 66% from outside Israel and over half of the work scheduled for completion by end-2026.
  • Robust demand across all key segments drove Land revenues up 48%, Aerospace +20%, C4I & Cyber +12%, ISTAR & EW +4%, and Elbit Systems of America +18%.
  • The company generated $161M in free cash flow on operating cash flow of $184M and declared a quarterly dividend of $0.60 per share.
  • Elbit secured multiple multi-$100M contracts for advanced solutions—PULS rocket launchers, EW self-protection systems, digital fire command centers—and expects its high-power laser IronBeam system to be operational by year-end.
AI Generated. May Contain Errors.
Earnings Conference Call
Elbit Systems Q1 2025
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