Eltek Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. first quarter 2020 financial results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For upgrade or 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 Alon Mualim, Chief Financial Officer, I would like to remind you that Eltek's earnings released today and this call including forward-looking statements within the meetings of the Private Security Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934 as well as certain non-GAAP financial measures. Before making any investment decision, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release as well as review our latest filings with the SEC for important material assumptions. Thank you. Good morning, everyone.

Thank you for joining us and welcome to Eltek's 2020 first quarter earning call. With me is Alon Moalem, our Chief Financial Officer. We will begin by providing you with an overview of our business and summary of the principal factors that affected our results in the first quarter of 2020, followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. By now everyone, should have access to our first quarter running press release which was released earlier today. The release will be also available on our website at www.nistekltek.com. This is the fifth quarter in a row that we achieved both operation and net profit. Our revenue in the first quarter of 2020 rose to $9.2 million from $8.7 million in the first quarter of 2019. I am pleased that our revenue reflects year-over-year growth in the defense and aerospace segments. I am also pleased with the continuous improvement in production efficiency that is evident in our improved gross margin. The outbreak of the coronavirus has created new operational and business challenges. which required a quick adjustment to enable us to maintain our production of PCBs while maintaining the safety of our workforce. We see both risk and new opportunities in the existing business environment and are making the necessary adaptions to meet customers' demand in our revenue and profit margin goals. As we said in the past, We also see an opportunity to grow our business in the U.S. due to the worsening the relationship between the U.S. and China. The impact of any trade war between the U.S. and China will also impact the Israeli market since we see the U.S. pressure on the Israeli government to reduce the Israel-China trade activity. At the same time, we also are facing slowdown from some of our customers in India and are expected to be closed that are expected to be closed through the end of June 2020 due to the COVID-19 virus. So far, we have financed our growth strategy by our own internal resources. During 2020 and 2021, we plan to increase our investment in new equipment and expansion of our facility and infrastructure to support our long-term sales growth. As previously announced, we filed a self-registration statement during the third quarter of 2019 to provide the company with the ability to raise additional funds to support our plan to grow and expand our business. We expect that any proceeds will be used in part for additional investment and to accelerate our long-term growth. The increase in our top line in Q1 2020 reflects the continued market recognition of our high-quality and reliable products, mainly in the Flex PCB sector. Our defense revenue grew from $4.1 million during Q1 2019 to $4.6 million in Q1 2020, 12% growth year-over-year. Our customers continue to see the value proposition of our products and have a great deal of trust in our company and its capabilities. We continue to pursue new business opportunities and increase customer design engagement activity that will leverage the advanced technology capabilities. We remain focused on operational excellence and financial discipline as well as our strategic growth goals. We are all focused on addressing the challenges that the widespread health crisis has on us and we are working diligently on expanding our business while maintaining the trend of improved operational efficiency. I will now turn the call over to Alon Mor Alem, our CFO, to discuss our financials.

Thank you Eli. I would like to draw your attention to the financials of the first quarter of 2020. During this call, I will also be discussing certain non-GAAP financial measures. LTEK uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use. Now I will go over the highlights of the first quarter of 2020 compared to the first quarter of 2019. Revenues for the first quarter of 2020 were $9.2 million, up from revenues of $8.7 million in the first quarter of 2019. Gross profit was $1.8 million in the first quarter of 2020, compared to $1.5 million in the first quarter of last year. Net profit was $541,012. The share in the first quarter of this year compared to a net profit of 242,000 or 12 cents per share in the first quarter of 2019. EBITDA was approximately $1 million in the first quarter of 2020 compared to EBITDA of 811,000 in the first quarter of 2019. Cash flow provided by operating activities was $1.5 million compared to $1.6 million in the first quarter of 2019. As Eli mentioned before, we remain focused on operational excellence and financial discipline as well as our long-term strategic growth goals. We are now ready to take your questions.