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Operator
Ladies and gentlemen, thank you for standing by. Welcome to the LTCH Limited first quarter 2021 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 over the call to Mr. Eliafeh, Chief Executive Officer, and Alon Mualim, Chief Financial Officer, I'd like to remind you that LTAC's earning release 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 our non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and the 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. ELTEC 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. Eliafeh. Mr. Eliafeh, please go ahead.
Eliafeh
Thank you. Good morning, everyone. Thank you for joining us and welcome to ELTEC's 2021 First Quarter Earnings Call. With me is Alon Moalem, our Chief Financial Officer. We will begin by providing you with an overview of our business and a summary of the principal factors that affected our results in the first quarter of 2021, 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 earning press release, which was released earlier today. The release will also be available on our website at www.nistecheltech.com. This quarter was very challenging, both operationally and business-wise. In addition to the COVID-19 pandemic that was affecting certain areas that some of our customers located, we had quickly addressed the shortage of key raw materials. And yet, we were able to maintain operational efficiency and record both operational and net profit for nine quarters in a row. Also, our revenue declined from $9.2 million in the first quarter of 2020 to $7.2 million in the first quarter of 2021. The spread of COVID-19, which still affects some of our customers, and the shortage of Pyralux AP, the laminate produced by DuPont, that is used in the production of flexible and flex-rigid printed circuit boards, created new operational and business challenges, which required quick adjustment to enable us to maintain our production and delivery of PCBs to our customers. We are making the necessary adaptions to meet customers' demand and maintain our operational efficiency. The COVID-19 pandemic created operational difficulties, and we are facing a continuous slowdown in order from some of our customers in India due to the continuous negative impact of COVID-19 in this territory. Eltek is prepared to the point that the Indian market will recover and ready to react operationally to the expected high demand that was accumulating in India in the last months. Due to the raw material shortage, we already purchased an enough inventory of alternative raw materials that was pre-approved by Eltech two years ago as a backup plan for our production of PCB and introduce it to our customers. We expect that revenues will be rebound during the rest of the years and lost sales of Q1 2021 will be recovered upon the expected availability of Pyralux AP and the authorization of the alternative raw material by our customers. Once the alternative raw material will be fully approved by all our customers, we expect some reduction in our cost of production, which will give Eltech the flexibility to offer our customers more options of production, as well as better pricing and better secure sources of raw material. Eltech Salesforce already shifted its focus to non-flex PCB, which will contribute to our future revenue goals, As soon as the interruption in flexible material will be eliminated. As we said in the past, we also see an opportunity to grow our business in the U.S. due to the shift back to the Western production by the defense, aerospace, space, and communication PCB sectors, due to the cyber threats by China and the lack of production capacity in the USA, Europe, and Israel. So far, we have financed our growth strategy from our own internal resources and through right offering to our shareholders. During 2021, we plan to continue investing in a sales activity that will enable us to grow revenue with focus on U.S. market as well as continue investing in new equipment and the expansion of our facility and infrastructure to support our long-term sales growth. In yesterday board meeting, our board of directors approved I will obtain a loan of 10 million new Israeli shekels. It's approximately $3.1 million from Bank Leumi Israel. The loan has a term of 10 years with favorable terms, including the repayment schedule that starts after 12 months grace period and carried interest of prime plus 1.5, which is waived for the first year of the loan. As we have previously reported, major portion of our investment program that is under the grant program are expected to be completed and become operational by mid-2021. This recent investment and the planned future investment will be strengthened LTECH 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 50% royalty-bearing participation in the R&D program, which already started on March 1, 2021, and we already crossed its first milestone having the full technical definition. This 2021 R&D program is meant to enable Eltek to achieve a significantly faster production rate and reduce scrap. This 2021 R&D program, if succeeded, will enhance Eltech's ability to offer highly reliable printed circuit boards at a shorter production time and at reduced costs. We will continue to pursue new business opportunities and increase customer design engagement activity that will leverage our advanced technology capabilities. In addition, we are already as we already announced, Eltek applied to the Israeli Land Authority for allocation of land in the north of Israel, where Eltek intends to build a second production facility. This is a major part of our long-term and strategic roadmap in order to grow and accelerate the expansion of our business. We remain focused on operational excellence by using advanced technology and financial discipline and in making all the necessary adjustments to address the challenges we face from the widespread health crisis and the shortage of raw material. We have continued to work delightly on expanding our business while maintaining operational efficiency and maintain profitability. I will now turn the call over to Alon Moalem, our CFO, to discuss our financials.
Alon Moalem
Thank you, Eli. I would like to draw your attention to the financials of the first quarter of 2021. During this call, I will be also discussing certain non-GAAP financial measures. LTCH 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 2021 compared to the first quarter of 2020. Revenues for the first quarter of 2021 were 7.2 million compared to revenues of 9.2 million in the first quarter of 2020. Gross profit was 1.1 million in the first quarter of 2021 compared to 1.8 million in the first quarter of 2020. Net profit was 223,000 or 4 cents per share in the first quarter of 2021. compared to net profit of 541,000 or 12 cents per share in the first quarter of 2020. EBITDA was 577,000 in the first quarter of 2021 compared to EBITDA of approximately 1 million in the first quarter of 2020. Cash flow provided by operating activities was $2.5 million in the first quarter of 2021, compared to $1.5 million in the first quarter of 2020. As previously announced, we filed a shelf 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. As Ali 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.
Operator
Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the headset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Michael Wu of... Please go ahead.
Michael Wu
Hello, hi. Yeah, I have a question about... the alternative material so currently how what's the percentage of customers um currently approved the new material you guys can give us some color on that uh as you know we don't provide a looking forward statement however as you know we are facing shortage of key raw material that is used in the production of flexible and flex and flex rigid printed circuit boards but
Eliafeh
We do expect that revenues will rebound during the rest of the year, and lost sales will be recovered upon the full availability of Pyralux AP, which was in short supply, and with the authorization of the use of the alternative raw material by our customers. And as I mentioned before, we have the alternative raw material in stock right now, and we're working with this raw material already.
Michael Wu
Yeah, my question is about so currently how many customers kind of like what is the customer's percentage kind of accepted the new material? Like agreed to use the new material? Like is there anyone like doesn't want to use the new material?
Eliafeh
I would say in this world, majority of the customers already accepted.
Michael Wu
Oh, okay. That's great. That's great. So you expect that like by the end of the year, maybe. roughly are using the new ones, right?
Eliafeh
Yes, or alternatively, Pyralux AP will continue to supply raw material, and then the rest of the customers that don't approve the alternative raw material, they will get the Pyralux AP.
Michael Wu
Oh, okay, okay. So the... Okay, okay, that's great. So how about, I have a second question about the new factory. So I don't have any, could you give more kind of detailed plan? What's the budget for that new factory, the second facility? When is the timeline?
Eliafeh
It's very, very early stage. And this stage of the game, the board of directors directors of Eltech allowed us to purchase the lot and it's in north of Israel and it's in a very nice lot and it's a long-term plan and we'll put the first milestone is buying the land and then we'll start to plan it. We don't have a full budget approved yet.
Michael Wu
Okay, okay, so it's kind of still pretty early yet, right?
Eliafeh
Yes, we make the application to the Israeli authority land management and And the application is there. We have a recommendation from the government to get the land at a subsidized cost, subsidized development cost. And I hope that we'll go there soon.
Michael Wu
Okay, great. So do you have any, can you give some rough number of what is the capacity running currently, like now on your, you know, existing factory like this?
Eliafeh
I know the existing capacity is approximately two cells. We... 66%.
Michael Wu
Ah, okay. So, does any... I mean, do you guys have any, like, interruption or, you know, the current situation in Israel? Like, is there anything... No, not at all.
Eliafeh
I... I'll say, Eltech is considered as a sessional enterprise, and working at this time so far has no impact on our operation. We are very closely following the security situation and hope that soon the life will return to normal. But you have also to remember that a large portion of our revenue are coming from the security and defense sectors, but we cannot know if it will have impact on orders received in the future.
Michael Wu
Okay, okay. That's great. Okay, thank you very much. I have no questions.
Eliafeh
Thank you, Michael.
Michael Wu
Thank you.
Operator
If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further 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 LTCH's website at www.nistechltch.com. Mr. Yaffe, would you like to make your concluding statement, please?
Eliafeh
Yes. Before we conclude our call, I would like to thank all our employees for the efforts to make LTCH profitable again and even in these challenging times. I would like to thank, again, to all our customers, partners, investors, and LTCH team for their continued support. Thank you all for joining us today. Have a good day.
Operator
Thank you. This concludes the LTCH Limited First Quarter and Full Year 2021 Financial Result Conference Call. Thank you for your participation. You may go ahead and disconnect.
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