Eltek Ltd.

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 of and Alon Wallen, Chief Financial Officer, I'd like to remind you that LTEC's earnings released today and this call include forward-looking statements within the meaning of the Private Securities 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 decisions, 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, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. LTEC 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.

Thank you. Good morning, everyone. Thank you for joining us and welcome to LTEC's 2020 second quarter running call. With me is Alon Mualem, our Chief Financial Officer. We will begin by providing you with an overview of our business, a summary of the principal factors that affect our results in the second quarter of 2020, and an update on how COVID-19 has impacted our business, followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. Everyone should have access to our second quarter earnings press release, which was released earlier today. The release will be also available on our website at www.nistakeltek.com. This is the sixth quarter in a row that we achieved both operating and net profit. Our revenue in the second quarter of 2020 rose to $8.8 million from $8.2 million in the second quarter of 2019. Revenues for the six months of 2020 were $17.9 million compared to $16.9 million in the first six months of 2019. This growth is a result of 11% growth in sales to customers in Israel and reflects year-over-year growth in sales to defense segment and the contract electronics manufacturers. I am also pleased with the continued improvement Our diversified end market allowed us to grow revenue year-over-year despite the weakness in the Indian market. In addition, strong operational execution overcome production inefficiency and extra costs due to COVID-19. The COVID-19 pandemic has created operational difficulties, macroeconomic uncertainty, and employee concerns. I am extremely proud how LTEC's employees have worked to deliver excellent performance despite challenging environments. We have had three employees who had tested positive for COVID-19 this year, with others returning to work after being cleared following testing quarantine protocols. We continue to use contact tracing and quarantine individuals who are in close contact with the infected team members in addition to the deep cleaning affected work area. We also continue other measures such as extensive internal communication, masking, temperature checks and proper distancing in our facility. Because of the preventing measures in place and our culture of transparency in communication, These events have minimal impact on our manufacturing operational to date. The outbreak of the coronavirus had created new operational and business challenges which required quick adjustment to enable us to maintain our production of PCB 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' demands and our revenue and profit margin goals. As we said in the past, we also see an opportunity to grow our business in the US market due to the worsening relationship between the US and China. The impact of any trade war between the US and China will also impact the Israeli market since we see US pressure on the Israeli government to reduce the Israeli-Chinese trade activities. At the same time, We are also facing a slowdown from some of our customers in India to the continued negative impact of COVID-19 in this territory. So far, we have financed our growth strategy by our positive operating cash flow and 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. The increase in our top line 2020 reflects the continued market recognition of our high quality and reliable products, mainly in the flex PCB sectors. Our revenue from the defense sector and contract electronic manufacturers grew from $13.8 million during the first half of 2019 to $15.3 million in the first half of 2020, 11% growth year-over-year. The medical sectors contribute 9.7% of our revenue during the first half of 2020, representing 4% growth year-over-year. Our customers continue to see the value proposition of our products and have a great deal of interest in our company and its capabilities. We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology capability. We remain focused on operational excellence and financial discipline as well as our strategic growth goals. We are all focused in addressing the challenges that our widespread health crisis has on us and are working delightfully to expanding our business while maintaining the trend of improved growth and operational results. I will now turn the call over to Alon Mualim, our CFO, to discuss our financial.

Thank you, Eli. I would like to draw your attention to the financials of the second quarter of 2020. During this call, I will also be discussing certain non-GAAP financial measures. LTEC uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reason for its use. Now I will go over the highlights of the second quarter of 2020 compared to the second quarter of 2019. As Eli mentioned, revenues for the second quarter of 2020 were 8.8 million, up from revenues of 8.2 million in the second quarter of 2019. Gross profit increased from 1.3 million or 15.3% of revenues in the second quarter of 2019 to 1.9 million or 21.6% in the second quarter of 2020. During the second quarter of 2020, we had an operating profit of 809,000 as compared to an operating profit of 7,000 in the second quarter of 2019. Net profit was $704,000 or $0.16 per share in the second quarter of 2020 compared to a net profit of $790,000 or $0.19 per share in the second quarter of 2019. The results of the second quarter of 2019 were positively affected by non-recurring other income of $871,000 as a result of a receipt of an insurance payment associated with damage incurred to one of our manufacturing machines. EBITDA was approximately 1.2 million in the second quarter of 2020 as compared to EBITDA of 1.25 million in the second quarter of 2019. During the second quarter of 2020, we had positive operating cash flow of 1.4 million compared to net cash used in operating activities of 301,000 in the second quarter of 2019. During the first half of 2020, the company achieved a positive operating cash flow of $2.9 million as compared to positive operating cash flow of $1.3 million in the first half of 2019. As Eli mentioned before, We remain focused on operational excellence and financial discipline as well as our long-term strategic growth goals. As previously announced, we filed a SHERF registration statement during the third quarter of 2019 to provide the company with the ability to raise additional funds. The company is also considering different options to fund raising to support our plan to grow and expand our business. We are now ready to take your questions.