Elbit Systems Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' fourth quarter 2022 results conference call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. That is available in the news section of the company's website, www.elbitsystems.com. I would now like to hand over the call to Rami Meyerson, Elbit Systems Investor Relations Director. Rami, please go ahead. Thank you, Yoni.

Good day, everyone, and welcome to our fourth quarter 2022 earnings call. On the call with me today are Buti Maklis, our President and CEO, Kobi Kagan, our CFO, and Yossi Gaspar, Senior EVP, Business Management. Before we begin, I would like to point out that the safe harbor statement in the company's press release issued earlier today also refers to the content of this conference call. As we do every quarter, we will provide you with both our regular GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Corby will begin by providing a discussion of the financial results. followed by Bussi, who will talk about some of the significant events during the quarter and beyond. We will then turn the call over to a question and answer session. Earlier today, we hosted an investor conference at the Tel Aviv Stock Exchange. A recording of the event is available in the investor relations section of our website at www.elbertsystems.com. Investors and analysts who wish to ask questions related to the topics discussed at the investor conference are welcome to present their questions during the Q&A session of the call. With that, I would like to turn the call over to Kobi. Kobi, please.

Thank you, Rami. Hello, everyone, and thank you for joining us today. The 2022 annual results reflect a healthy business environment supported by growing defense budgets around the world and another year of significant contract awards. We ended the year with a record order backlog of $15.1 billion, up 11% relative to the end of 2021. Our financial performance in 2022 also includes the impact of supply chain disruptions and labor cost inflation. This includes a $62 million expense related to employee stock price link compensation plans and an additional $10 million of retention bonuses. Our GAAP and non-GAAP results have always included these expenses but this year they were higher than in recent years following the share price appreciation. Our budgets and long-term planning assume that the global economic trends, supply chain, and wage inflation headwinds will gradually subside from the second half of 2023. We continue to invest in R&D to enhance our portfolio and maintain our competitive edge. We invest in sales and marketing to expand our customer base and also continue to invest in CapEx to improve and expand our manufacturing footprint. I would note that the sale of Ashot Ashkelon to FEMA Opportunity Funds was completed at the end of the second quarter of 2022, and our results in the second half of 2022 do not include a contribution from Ashot Ashkelon. I will now highlight and discuss some of the key figures and trends in our financial results. Fourth quarter revenue were $1,506,000,000 compared to $1,494,000,000 in the fourth quarter of 2021. For 2022 as a whole, our revenues were $5.5 billion versus $5.3 billion last year. In terms of annual revenue breakdown across our areas of operation. C4ISR, its 29% of revenues increased year over year, mainly due to UAS and anti-submarine warfare sales. Airborne systems accounted for 37% and declined year over year. The growth in training and simulation sales helped offset lower airborne precision guided munition sales. Land systems was 22% of total revenues, and the year-over-year decline is mainly due to the sale of Ashot Ashkelon. Electro-optics accounted for 10% and increased year-over-year due to increased sales of night vision systems. Other sales accounted for 3% and declined year-over-year, mainly due to lower sales at our U.S. medical instrumentation subsidiary. Our diverse geographic revenue base is important to the long-term sustainability of our business. In 2022, North America contributed 27 percent, Europe 23 percent, Asia Pacific 26 percent, and Israel contributed 19 percent of revenues. European revenues increased mainly due to growth in UAS, munitions, and training and simulation sales. North America revenues were lower, mainly to the decline in medical devices sales. Asia Pacific revenue declined mainly due to lower precision guided munitions and C4I sales. The non-GAAP gross margin for the fourth quarter was 25.7% compared to the fourth quarter of 2021 at 25.5%. For the full year of 2022, Non-GAAP growth margin was 25.5% compared with 26.2% last year. GAAP growth margin in the fourth quarter was 25.3% of revenues compared to 25.1% in the fourth quarter of 2021. GAAP growth margin in 2022 was 24.9% compared with 25.7% in 2021. Gross margin in 2022 reflects an unfavorable program mix, wage inflation, and supply chain disruptions. GAAP and non-GAAP gross profit in 2022 include expenses related to stock price-linked compensation plans. The fourth quarter non-GAAP operating income was $103 million, or 6.8 percent of revenues. compared with $120 million or 8% of revenues last year. GAAP operating income for the fourth quarter was $120 million versus $107 million in the fourth quarter of 2021. Non-GAAP operating income in 2022 was $357 million or 6.5% of revenues compared was $451 million or 8.5% of revenues last year. Gap operating income was $368 million versus $419 million last year. Operating margins declined year over year due to higher R&D and sales and marketing expenses. The operating expenses breakdown in 2022 was as follows. Net R&D expenses were 7.9 percent of revenues versus 7.5 percent in 2021. Marketing and selling expenses were 5.9 percent of revenues versus 5.5 percent last year. G&A expenses were 5.7 percent of revenues compared to 5.1 percent last year. We have increased investment in R&D and in sales and marketing to realize the potential opportunities provided by defense budget growth and increased demand for our capabilities. Other operating income of $68.9 million in 2022 included capital gains related to the sale of buildings in Israel and the UK, as well as facility relocation grant of $28.6 million received by a subsidiary in Israel in the fourth quarter. Operating profit in 2022 include expenses of approximately $62 million related to stock price link compensation plans and an additional $10 million of retention bonuses. Financial expenses were $27 million in the fourth quarter compared to $20 million in 2021. Financial expenses in 2022 were $51 million compared to $40 million last year and reflect the higher interest rate environment. Other expenses were $24 million in 2022 and resulted mainly from the re-evaluation of holding in affiliated companies and expenses related to non-service costs of pension plans. We recorded a tax benefit of $5 million in the fourth quarter compared to a tax expense of $92 million in 2021. Taxes on income in the fourth quarter of 2021 included a one-time expense of approximately $80 million related to the amendment of legislation regarding exempt earnings from approved enterprises in Israel. The effective tax rate in 2022 was 8.2% compared to 34.3% in 2021 that included that extraordinary expense. Our non-GAAP diluted EPS was $1.68 in the fourth quarter and $6.03 for the full year of 2022. GAAP diluted EPS was $1.91 for the fourth quarter of 22 and $6.18 for the full year. The stock price link compensation expenses in 2022 were $1.26 on an EPS basis and an additional 20 cents of retention bonuses on an EPS basis. Our backlog of orders as of December 31st, 2022 was $15.1 billion, a $1.4 billion higher than the backlog at the end of 2021. Approximately 60% of the current backlog is scheduled to be performed during 23 and during 2024, and the rest is scheduled for 25 and beyond. Operating cash flow for the fourth quarter was a $195 million inflow compared to $260 million inflow in the same quarter last year. For 2022, we reported a $240 million operating cash inflow versus a $417 million cash inflow in 2021. Cash flow from investing activities includes the higher capex related to the new facilities in Israel and in Charleston, South Carolina, as well as the rollout of the ERP system. the Board of Directors declared the dividend of $0.50 per share. I will now turn the call over to Mr. Maklis, Elbit CEO. Bootsy, please go ahead.