Eltek Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the LTCH Limited fourth quarter and full year 2020 financial result conference call. All participants are present in a 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. Eliafeh, Chief Executive Officer, and Alon Mualem, Chief Financial Officer, I'd like to remind you all that LTCH's earning 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 the earning release as well as review our latest filing 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. LTCH 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 over the call to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.

Mr. Thank you. Good morning, everyone. Thank you for joining us, and welcome to LTECH's 2020 First Quarter and Full Year Earnings Call. With me is Alon Mualim, 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 2020, followed by the detailed financial results. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our fourth quarter press release, which was released earlier today. The release will also be available on our website at www. This is the eighth quarter in a row that we achieved both operating and net profit, with a cumulative 12-month EBITDA of $4.6 million. We achieved this result despite higher financial expenses due to devaluation of the US dollar against the new Israeli shekels during 2020. Our revenues. in the full year of 2020 increased to $36.7 million from $34.8 million in 2019 that represent 5.5% growth in revenue year over year. Our revenues in the fourth quarter of 2020 rose to $9.5 million from $8.6 million in the fourth quarter of 2019 that represent 10.5% increase. We are glad that the fourth quarter results continued to reflect the growth in our revenues and the continued improved operation efficiencies. The outbreak of the spread of the coronaviruses created new operational and business challenges, including the shortage of Pyrolux raw material that we are dealing with in 2021. Eltek qualified ahead of time alternatives to the Pyrolux, but this take time to Eltech customers to improve it. Eltech sales that we cannot produce due to the parallel shortage will be delivered in the near future. We have managed successfully through the COVID pandemic in 2020 because of the made necessary adjustment, increased revenue from the defense sector, raised additional funds through the right offering and obtained loans with preferred terms. I am also pleased with the continued improvement in production efficiency that is evident in our improved operation profit, which more than doubled year-over-year. Our diversified end market allowed us to grow revenue year-over-year, mainly in the Israeli market and the Netherlands. In addition, strong operational execution overcame production inefficiencies and extra costs due to COVID-19. The COVID-19 pandemic created operational difficulties and employees' concerns. I am extremely proud of our employees' efforts to deliver excellent performance despite of the challenges of this environment. We are continuing to invest in new equipment in order to benefit from the soft market in the capital equipment for manufacturing. During the second half of 2020, we installed and began to operate a new state-of-the-art DES line, which is one of the main PCB production lines, and four new optical-oriented drilling machines, where and now are in operation. In order to benefit more from the soft market of capital equipment, Eltech applied and was awarded a grant from the Israel Investment Authority that will fund 15 to 20% of the Eltech's expected $1.5 million investment in the advanced manufacturing equipment. As we already notified, major portion of LTEK investment program that are under the grant program are expected to be completed and become operational by the mid of 2021. The recent investment and the planned future investment will strengthen LTEK manufacturing capability and increase our competitiveness by implementing improved production processes and adoption of industry 4.0 technologies. In addition, As we already announced, Eltek received final approval from the Israeli Innovation Authority for a 50% royalty-bearing participation in approximately $250,000 for 2021 R&D program. This 2021 R&D program is meant to enable Eltek to achieve significantly faster production rate and reduce scrap. The 2021 R&D program, if succeeded, will yield a growth in manufacturing capacity with minor investment. The fruits of 2021 R&D programs, if succeeded, will enhance LTEK's ability to offer by the end of 2022 highly reliable printed circuit boards and a shorter production time at reduced cost. The two prior programs that were approved in 2017 and 2020, together with the newly 2021 program are part of the technology roadmap that LTCH launched as part of its strategic plan to become an innovative industrial leader for low-quantity production of high-performance printed circuit boards. I am proud that the fruits of the 2017 R&D program already contributed to LTCH sales during 2020 and going forward, while the fruits of ELTECH 2020 R&D program will arrive if success, if succeed in 2022. During 2021, we plan to continue our investment in new equipment and the expansion of our facility and infrastructure to support our long-term sales course. The increase in our top line in 2020 reflects the continued market recognition of our highly high quality and reliable products, mainly in the flex PCB sector. Our revenue from the defense sector and contract electronic manufacturers grew from $28.1 million in 2019 to $31.6 million in 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 will continue to pursue new business opportunities and increase customer design engagement activity that will leverage our advanced technology capabilities. We remain focused on operational excellence by using advanced technology and financial discipline and in making the necessary adjustment to address the challenges we face from the widespread health crisis and the shortage of raw materials. We will continue to work delightfully on expanding our business while maintaining the trends of improved operational margins and results. I will now turn the call over to Alon Moalem, our CFO, to discuss our financial.

Thank you, Eli. I would like to draw your attention to the financials for the full year and the fourth quarter of 2020. During this call, I will be discussing certain non-GAAP financial measures LTIC uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use. First, I will go over the highlights of the full year of 2020. As Eli said, revenues for the full year of 2020 went up to $36.7 million from $34.8 million in 2019 an increase of 5.5% year over year. Gross profit increased by 28.3% in 2020, reaching 7.7 million or 21% of revenues compared to gross profit of 6 million or 17.3% of revenues in 2019. Operating profit was $3 million in 2020 compared to an operating profit of $1.4 million in 2019.