Eltek Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the LTCH LTD 2025 Annual and Fourth Quarter Financial Results Conference Call. All participants are at 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. Eli Yaffe, Chief Executive Officer, and Ron Spreud, 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 risk 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 revision 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 Annual Earnings 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 the results during 2025. After our prepared remark, 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 was also available on our website. Revenue for 2025 totaled $51.8 million, representing an 11% increase compared to 2024. This growth reflects the company's Strategic Accelerated Investment Program, which is the beginning of our barefoot, also transparent, not yet its full potential. I will elaborate on this shortly. During the year, we faced several operational challenges, including the reallocation of the machinery and production lines within the facility to prepare for the installation of the new plating lines, difficulties in recruiting employees, challenges in retaining highly experienced personnel, and a significant depreciation of the U.S. dollar exchange rate, which adversely affects the dollar-dominated profitability we report by approximately $2.2 million compared to 2024 profitability. I will now address each of these areas in more detail. As noted, we concluded the year with revenue approaching $52 million. At the time we approved the accelerated investment plan, Eltech was generating average annual revenue of approximately $37 million. The subsequent increase in revenue reflects strong demand for the company products, alongside the substantial investment made in the machinery and equipment over the recent years. As previously communicated, we are targeting annual revenue installed capacity in the current plan, of $60 to $65 million at current market prices. During the year, we encouraged significant operational constraints that affected our ability to meet customers' delivery schedules. This situation, combined with the demand level exceeding domestic production capacity in Israel, led to increased competition from overseas players seeking to capture a share of the local demand. We continue to observe strong demand for our products, including from international customers, driven by limited manufacturing capability in the Western countries. We are steadily improving delivery performance for our domestic customers, recognize that many Western countries, including Israel, aim to preserve local manufacturing capability. At the same time, we are actively expanding our presence in overseas markets, particularly in the United States, to increase order volume from these regions. Turning to operation, we are making steady progress on our investment program. The core components expected to drive meaningful improvement in output and quality are the two new plating lines. While they do not represent the majority of the accelerated investment budget in financial terms, Their impact on production is highly significant. The first line arrived to the facility at the beginning of 2026, and it is currently in the assembly phase, which was interrupted by the current tension situation in Israel. We remain hopeful that the ongoing conflict will not result further delay in the completing the installation. Following the installation, an extensive qualification process will be required to certify the lines across the full range of our product portfolio. Throughout the years, we also addressed the need to recruit additional employees, particularly engineers, to support the extended base of the machinery and equipment, as well to manage the operational complexities created by reallocation production lines and the resulting impact of ongoing manufacturing. In addition, we experienced the departure of several highly acknowledged employees, including retirements. These operational challenges weighted on overall efficiency. We continue to make progress in advancing the process of bringing foreign workers from abroad in order to support our workforce needed as the company expands. Finally, the depreciation of the U.S. dollars results in the increase of approximately $2.2 million. It's reported in the NAS demonet expenses compared to 24%. adversely affecting both gross and operational profits. It was nothing that part of our current backlog was priced based on higher exchange rate, therefore margin on these orders will remain below the level originally anticipating the same in the time of the quotations. Despite these challenges, we remain confident in the company's business and in our ability to return to ELSI profitability levels upon completion of the investment program, installation of the new plating lines, and stabilization of the production. In line with this long-term commitment, we extended the lease agreement for our manufacturing facility through the end of the year 2039. As part of this extension, we received a payment intended to partially offset the company investment in the facility. This amount will be amortized over the lease terms and will modestly reduce annual rental expenses. I will now turn the call over to one friend, our CFO, to discuss our financial results.

Thank you, Eli. I would like to draw your attention to the financial statements for the year ended December 31, 2025 and for the fourth quarter of 2025. During this call, I will also discuss certain un-gapped financial measures. EdTech uses EBITDA as a non-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 2025. All numbers mentioned are in U.S. dollars. Revenues for the year ended December 31, 2025, totaled $51.8 million, compared to $46.6 million in 2024. Gross profit was $8 million compared to $10.3 million in 2024. Gross margin was 15% compared to 22% in 2024. The decline in gross profit and gross margin was primarily attributable to higher NIS-denominated expenses resulting from the depreciation of the U.S. dollar in 2025, as well as reduced production efficiency. Operating profit amounted to $2.3 million in 2025 compared to $4.4 million in 2024. In 2025, we recorded financial expenses of $1.3 million compared to financial income of $0.7 million in 2024. This change was primarily due to the depreciation of the U.S. dollar against the NIS. Net profit was $0.8 million or $0.12 per share in 2025 compared to net profit of $4.2 million or $0.63 per share in 2024. EBITDA was $4.5 million in 2025 compared to $5.9 million in 2024. During 2025, we generated positive cash flow from varying activities of $0.6 million, compared to $4.5 million in 2024. As of December 31, 2025, we had cash and cash equivalents and shortened bank deposits in the total amount of $12.1 million. I will now go over the highlights of the fourth quarter of 2025 compared with the fourth quarter of 2024. Revenues for the fourth quarter of 2025 were $13.2 million compared to $10.8 million in the fourth quarter of 2024. Gross profit amounted to $1.2 million in the fourth quarter of 2025 compared to $1.9 million in the fourth quarter of 2024. Net loss in the fourth quarter of 2025 was $0.3 million, or $0.05 per share, compared to net profit of $23,000 in the fourth quarter of 2024. EBITDA was $0.7 million in the fourth quarter of 2025, compared to $0.8 million in the fourth quarter of 2024. We are now ready to take your questions.