Eltek Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the LTCH LTD 2025 First Quarter 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 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. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in LTCH's public disclosure filings. These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures. 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 the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.

Thank you. Good morning. Thank you for joining us for our 2025 first quarter earning call. With me is Ron Freund, 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 during Q1 2025. After our prepared remarks, we will be happy to answer any of your questions. By now, Everyone should have access to our press release, which was released earlier today. The release will also be available on our website. During the first quarter, we concurred in stabilizing and calibration of our new equipment installed in our recently launched solder mask application department, as well as the machinery relocated to this facility. This was a complex and time-intensive process, further complicated by the unavailability of certain technical support personnel who declined to travel to Israel for the on-site installation and calibration. As a result, we faced challenges in optimizing machine performance and compelling the precise technical adjustment required. This complexity contributed to a lower production yield and negatively impacted our profitability for the quarter. The good news is that since the beginning of May, these processes are functioning much more smoothly. Production has resumed at a stable pace and efficiency levels have returned to where they were prior to the transition. We will continue the construction work on the basement floor to prepare it for the installation of our new plating lines. While our European supplier is making progress with the production of the equipment, they recently informed us on a delay of approximately two months in the delivery of the first and the most significant coating line. Despite this delay, we remain on track to complete our accelerated investment plan by mid-2026. On the human resources front, We'll continue our efforts to recruit production workers and engineers. The Israeli labor market remains highly challenging, particularly when it comes to attracting qualified candidates in these fields. We are hiring at the most pace within our existing salary structure, following by significant wage adjustment we implemented at the end of Q2 2024, as many of you may recall. In terms of market dynamic, we continue to experience strong demand for our products across all segments. Due to this elevated demand, we are seeing an increase in lead time for customer delivery, not only at Eltech, but also across the industry and among our competitors. At this stage, there is still no clarity regarding the tariff rate. that may apply to products originated from Israel under the new U.S. tariff policy, nor whether defense-related equipment will be included within this framework. However, the company's competitive position in the U.S. market may benefit from the higher tariffs on products from other exporting countries, such as Canada. Tariffs on imposed raw material could affect the cost structure and competitiveness of the U.S.-based manufacturers. We estimate that it will take years to establish sufficient domestic production capacity in the U.S. to meet the customer's demand for the high-end product as well we sell. Accordingly, we do not anticipate any material impact on demand for our products in the U.S. market over the near to medium term. We are actively working to diversify our suppliers in the Far East to support our goal of expanding our commercial activity. This initiative includes also exploring opportunities for partial production abroad, with final process and completion taking place in our facility in Israel. The objective is to leverage our reputation and the technological know-how to increase revenue even during the period of production capacity constraints. At the same time, this model enables us to offer our customers more effective pricing while maintaining the high quality standards associated with Eltech. During the first quarter, we also began a company-wide process to replace our core information system. This transformation is expected to take approximately 18 months. and will involve replacing most of the IT software currently in use across the organization. As part of this condition, we aim to optimize our internal workflow and implement industry standard efficient work methodologies. The key focus of this project is to develop structure centralized digital process that will capture and preserve critical knowledge previously held by key personnel. This will allow us to unify production procedure, retain organizational know-how, and ultimately improve operational efficiency across the company. I will now turn the call over to one point, our CFO, to discuss our financial results.

Thank you, Eli. I would like to draw your attention to the financial statement for the first quarter of 2025. During this call, I will also discuss certain un-GAF financial measures. SFU's EBITDA is an un-GAF financial performance measurement. Please see our earnings release for its definition and the reasons for its use. I will now go over the highlights of the first quarter of 2025. All numbers are mentioned in US dollars. Revenues for the first quarter of 2025 total $12.8 million compared to $11.8 million in the first quarter of 2024. Gross profit decreased to $2.2 million, down from $3.3 million in the first quarter of 2024. The decline was primarily driven by higher labor costs and lower yields during the quarter, resulting from the ramp-up of new production equipment, as Eli mentioned earlier. Operating profit for the quarter was $0.7 million, compared to $1.7 million in the same period last year. We recorded financial income of $0.5 million in the first quarter of 2025, primarily due to the devaluation of the Israeli shekel against the US dollar, and interest earned on our interest-bearing accounts. Net income for the quarter was $1 million, or $0.15 per share, compared to $1.7 million, or $0.27 per share, in the first quarter of 2024. EBITDA for the quarter was $1.2 million compared to $2.1 million in the prior year period. Cash flow comparatively is totaled $0.1 million during the first quarter of 2025. As of March 31, 2025, we had $15.7 million in cash, cash equivalent, and short and bank deposits with no outstanding debt. We are now ready to answer your questions.