Elbit Systems Ltd. Price & Performance (ESLT)

Statements. As usual, we will provide you with both non [indiscernible] [indiscernible] financial data as well as certain [indiscernible] non GAAP information. We believe that the non GAAP information provides additional transparency [indiscernible] better understand the performance of the ongoing You can find all the detailed GAAP financial data as well as the non GAAP information and the reconciliation in today's press release.

Kobi will begin by discussing the financial results followed by Busby, who will elaborate on the main events during the quarter and beyond. We will then turn the call over to to the and A session. With that, I'd like to now turn the call over to Kobi. Kobi? Please go ahead. Thank you, Daniela.

Hello, everyone, and thank you for joining us today. The strong set of financial results for the fourth quarter of twenty twenty four continues to the ongoing demand for our cutting edge solutions. As we present another quarter of double digit growth in revenues backlog operating profit and non GAAP EPS. During 2024, we also delivered $320,000,000 of free cash flow We are very pleased with these results. Diving into the fourth quarter results in detail. Fourth quarter revenues increased by 19% to $1,930,000,000 compared to $1,626,000,000 in the fourth quarter of twenty twenty three. Full year 2024 revenues increased by 14% to $60,000,008,028,000,000,000 dollars compared to $5,000,000,009.07 $5,000,000,000 in in the 2023. In terms of quarterly revenues by segment, Aerospace revenues increased by 27% in the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three mainly due to increased UAS sales in Israel and Europe. And increased precision guided munitions revenue. Deep Orion Cyber revenues increased by 7% year over year mainly due to radio systems and command and control systems systems sales. IStar and EW revenues increased by 8% mainly due to electronic warfare and electro optical systems sales in Israel. Land revenue increased by 29% due to increase in Ammunition and Munition sales in Israel.

Elbit Systems of America revenues increased by 6% mainly due to increase in night vision systems and medical instrumentation sales. Elbit Systems' diverse geographic revenue base as well as [indiscernible] portfolio helped to reduce revenue volatility and support the long term sustainability of our business. Only recently, the President of the European Commission stated in a letter that Europe needs to be in charge of its own defense subsequently she announced a dedicated budget of 100 and and €50,000,000,000 to support this re armament effort in Europe. For the full year of 2024, Europe contributed 27% of revenues North America 22% of revenues, Asia Pacific 17% of revenues and Israel contributed 29% of revenues. As in previous quarter, Israel revenue continued to grow on the back of the swords of iron ore. This growth [indiscernible] mainly mainly from the Land segment. The non GAAP gross margin for the fourth quarter was 24.5%. [indiscernible] to the fourth quarter of twenty twenty three at 25.3%. The non GAAP gross margin for the full year 2024 was 24.5% compared to the fourth compared to to 2023 at 25.7%. GAAP gross margin in the fourth quarter was 24.1% of revenues, compared to 23.5 in the fourth quarter of twenty twenty three.

GAAP gross margin for the full year 2024 was 24% compared to 2023 at 24.8%. Fourth quarter non GAAP operating income was $157,500,000 or 8.2% of revenues in the fourth quarter of twenty twenty four as compared to $104,800,000 or 6.4% of revenues in the fourth quarter of twenty twenty three. GAAP operating income for the fourth quarter was $141,400,000,000 or 7.3% of revenues as compared to $67,600,000 or 4.2% of revenues in the fourth quarter of twenty twenty three. Full year 2024 non GAAP operating income was $550,000,000 or 8.1% of revenue as compared to 40 to $448,000,000 or 7.5% of revenues in 2023. GAAP operating income for 2024 was $489,000,000 or 7.2% of revenue as compared to $369,000,000 or 6.2% of revenues in 2023. The operating expense breakdown for the full year was as follows: Net R and D expenses were $456,000,000 or 6.8% of revenues, as compared to $424,000,000 or 7.1% of revenues in 2023. The increase is mainly due to investment in expanding our portfolio of precision guided munitions. [indiscernible] as well as increased investment in high power laser. Marketing and selling expenses were $7.03 $75,000,000 or 5.5% of revenues in 2024, as compared $359,000,000 or 6% of revenues in 2023.

G and A expenses were $311,000,000 or 4.6% of revenues in two in 2024. As compared to $330,000,000 or 5.5% of revenues in the same period last year. Financial expenses were $151,000,000 in 2024 as compared to $137,000,000 in 2023. The increase in financial expenses net in 2024 is mainly due to factoring expenses related to the extension of the premise evacuation agreement. The effective tax rate in 2024 was 11.4% compared to 10.1% in 2023. The tax expenses in 2024 and 2023 were affected by the tax benefit related to adjustments [indiscernible] years following tax settlements in some of the company's subsidiaries in Israel. Our non GAAP diluted EPS was $2.66 in the fourth quarter of twenty twenty four compared to $1.56 in the fourth quarter of twenty twenty three. GAAP diluted EPS was two point for the fourth quarter of twenty twenty twenty four compared to $0.67 in the fourth quarter of twenty twenty three. This is the third consecutive quarter of double digit EPS growth. Non GAAP diluted EPS was $8.76 in the full year of 2024, [indiscernible] to $6.7 in the full year of 2023. GAAP diluted EPS was $7.18 for the full year of 2024, compared to $4.82 in 2023.

Our backlog of orders as of December 31, 2024 was $22,600,000,000 approximately $4,800,000,000 higher than the backlog at the end of 2023. Approximately 65% of the current backlog was generated from outside of Israel. Approximately 57% of the backlog at the December is scheduled to be performed during 2025 and in 2026, while the rest scheduled to be performed during 'twenty seven and beyond. A testimony of the potential of the company's continued growth trajectory. Net cash flow provided by operating in the year ended 12/31/2024, was $535,000,000 as compared to $114,000,000 in the year ended 12/31/2023. Operating cash flow in 2024 were affected mainly by the increase in contract liabilities offset by the increase in inventories and trade receivables. During 2024, we also delivered $320,000,000 of free cash flow. It should be noted that our free cash flow generation is usually back end loaded The Board of Directors has declared a dividend of $0.60 per share. I will now turn the call over to [indiscernible] Bouti, please go ahead. Thank you, Kopi. First and foremost, I want to express my deep gratitude and appreciation to our global work for their unwavering dedication dedication. To our customers, worldwide. Their commitment remains exceptional especially during this period of high demand for our advanced product [indiscernible] Solutions.

Is the fourth quarter in a row in which we have delivered double digit year over year growth in revenues operating profit and backlog. Our backlog has reached a record of 22,600,000,000.0 US dollars. Our EPS has reached a record of $8.76 per share. Now, free cash flow generation peaked at $320,000,000 During the quarter, Elbit continued to win meaningful contracts globally and locally, Among these are contracts to supply EW and DIRCAM self protection suites. To a NATO European country as well as securing the contract to provide [indiscernible] official government aircraft with a dual council protection system advanced communication system, to the iMUDI, counter UAS solutions to NATO European countries self protection suite for Israel F-16i aircraft in [indiscernible] [indiscernible] Launcher Artillery System for German German's armed forces. We continue to invest in the development of agile timely solutions to address the over evolving modern battle. A year and a half into the conflict, Elbit remains a key strategic partner for the IDF. Over the past year, the company has demonstrated its ability to scale up production massively and meet customer demands while maintaining a strong presence alongside ZIF. Upgrading systems in real time during combat Numerous new technology capabilities were introduced for the first time leading the expansion of existing and new contract as well as significant international interests.

Following the Nagir Committee, and its subsequent proposal [indiscernible] budgets in Israel are expected to remain elevated to the extent that they are approved. The world continues to arm itself and this is manifested in increasing defense budget globally and especially in Europe. Only two weeks ago, we witnessed announcements from Germany and from The UK regarding their intention to significantly increase their defense budget in 2025 and beyond.

We see a great interest from Europe our technology and portfolio and Elbit's presence some European countries via its subsidiaries is a big advantage.

Additionally, we have joint ventures with leading European defense companies For example, the cooperation with KNDS and the sale of Pulse Artillery in Germany. In The U. S, Elbit, is well positioned and prepared for additional opportunities and is aligned with the new administration strategy and objectives of modern battle [indiscernible] [indiscernible] [indiscernible] low lower cost with agile and relevant solution. PSA principle [indiscernible] around mission focus and agility and addressing warfighter needs. ESA is an important player in The U. S. In dark industrial base and with successful acquisitions over the years, we are able to grow through these dynamic times. This has been a year of significant investment in increasing our capacity to address the growing demand for our product [indiscernible] Solutions as local and global defense spending continues to increase. The munition production site [indiscernible] partially operational with additional factories [indiscernible] production growth growing production gradually as production will increase during 2025 and therefore by the end of twenty twenty five, the site is expected is expected to be operating with dozens of production lines while maintaining production at the Ramatah Sharon site until the end of twenty twenty six. Our new ERP system is enhancing our efficiency through real time data integration streamlining inventory management, and automated work flow, improving demand forecasting optimizing logistics and ensuring seamless coordination.

Across procurement, production, and distribution and operating a one company operational land The new UAV site is already fully operational. The integration of AI to optimize internal processes robotics in manufacturing, and advanced production line management is becoming a growing part of our operations. Elbit is implementing dedicated teams to integrate AI not only into the defense technology solutions, but also a across internal company processes including inventory management supply chain optimization, project and project and product management, This year is a strong emphasis This year, a strong emphasis has been placed on improving operational efficiency with AI, playing an important role in various solutions. As our portfolio of solutions continues to grow, in a variety of areas, we continue to see our product development focusing on high power laser solutions autonomous systems, active protection systems, pulse artillery, [indiscernible] [indiscernible] our guided munition portfolio electronic warfare solutions for land air, and maritime and more. The maritime sector holds immense potential with Elbit diverse range of relevant [indiscernible] still far from reaching [indiscernible] full market potential. Our new product [indiscernible] increasing use of AI solutions. Elbit Systems strong global presence spanning Europe North, America, Asia and Israel, combined with our agile innovative capabilities our driving our continued success as defense budget continues to grow globally enabling us to constantly delivering impactful results.

On behalf of myself, and the entire company, we remain for the sweet and safe return of our hostages still held in Gaza. They are always in our [indiscernible] and we eagerly await the day they are [indiscernible] reunited with their family. And with that, we'll be happy to take your questions.

Operator?

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. You wish to cancel your request, please press 2. If you're using The first question is from Ellen Page of Jefferies. Please go ahead. Hi, guys. Thanks for the question and congrats on the quarter. Maybe just on free cash flow, you had pretty great free cash flow year and I think it was mostly driven by a large contract liability inflow was that related to?

Hi, Lynn. How are you? Thank you for the question. What we see over $500,000,000 $535,000,000 to be to be precise. Of operational cash flow which is significantly significantly better than previous years. And also, we see expansion in our investment in CapEx. To $15,000,000 And that together [indiscernible] $320,000,000 For your question, this is leaning on leaning on contract liabilities that we see. Also with some expansion of inventories and receivables. [indiscernible] The next question is from Lara Jack of The New York Times. Please go ahead.

Hi, lovely to talk to you all today. I am just interested mostly in your ex export revenue which I am hoping and I am assuming please correct me if I'm wrong, that means your ex sales Just doing a little math here, if your overall year revenues were 6,800,000,000.0 and it looks like what [indiscernible] 1% of your revenues were ex exported that would be 4,840,000,000.00 [indiscernible] [indiscernible] [indiscernible] sales from Israel last year. Just wanted to make sure that those numbers sounded right to you.

And then also I was curious as to why you think this is. That it's a time of Israel fighting at least three, maybe five fronts. In 2024. Why and how Israel and Elbit will able mostly Elbit obviously was able to so many weapons during the time of war. Thank you.

Okay. Thank you, Laura. I'll I'll answer the first question. Your math right. Our export revenue is $4,800,000,000 while our Israeli revenue [indiscernible] close to $2,000,000,000 Bouti will answer your second question.

Hello, good afternoon. One of the advantages of the company is that we have dozens of sustainably abroad in The U. S, in Europe, well as in Asia Pacific. Out of the twenty twenty two thousand employees we have worldwide only 14,000 are in Israel, the rest are abroad in our subsidiaries, And it really shows the resilience of the On one hand, we are able to support our local customers here in Israel but via our we are able to support our international customers and to continue to export Israel as well as via the subsidiary to the global defense needs. And diverse revenue base is one of our big advantages It creates stability, and the fact that we have such a wide portfolio and such a global presence is a major part of our strategy.

Would you say that this is a record high for Elbit expert exports during this year or is it a number that's kind of come and gone over the years? [indiscernible] growing year by year. And we see more and more potential for us. Around the globe in Europe, in The U. S. As well as in Asia Pacific, we are able to to bring to the market very innovative and operational solutions on one hand, and we are able to be local. To be part of the ecosystem of each country. And so this is a record year for us out of the freezer but we hope and believe that the potential is huge is big for us, and we expect the export activities to continue. Part of it from Israel but the majority is done via our [indiscernible] globally.

Okay. So just to clarify, that's $4,800,000,000 in revenues ex that is a record high for Elbit but you still see potential to grow it in future years. Correct?

That's correct.

Thank you. The next question is a follow-up question from Ellen Page of Jefferies. Please go ahead.

Hi guys. Sorry about that. I just wanted to ask on the facility in the South Of Israel. Is that fully operational at this point? And how do we think about capacity for additional ammunition volumes from here just given land was such a growth leader in 2024?

So we are Alan as you know we are continuing to expand our capacity and growing capacity with investments that we're doing in our premises in the South Ramatbeka, new factory as well as in other other premises in Israel and outside of Israel. We just inaugurate [indiscernible] [indiscernible] in The U. K. And in Germany And also in Israel, we're starting working on the [indiscernible] we're expanding our production to meet to meet the growing demand.

Great. And can you talk about your expectations for growth the across [indiscernible] the next regions and end markets? In the next few years?

REPRESENTATIVE:] We're looking at the markets that as Bucci mentioned, we see a very strong growth in budget mostly in Europe and with the new fresh share €100,000,000,000 that were announced just recently from the Commissioner we expect a very big growth in Europe as Guthrie mentioned, we have very we are very good very good group to meet [indiscernible] demand in dozens of subsidiaries across Europe and that is a very strong growth growth trajectory to Albic. Other than that, we see continued growth in Israel. Where our backlog increased in 2024 by $3,000,000,000 That means that we expect additional growth in Israel as well. And Asia Pacific, continues to be very strong, with higher demand and higher budget as well.

Great. Thanks. I'll hop back in the queue.

If there are any additional questions please press 1. If you wish to cancel your request, please press 2. Please standby while we poll, There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference at In The U. S, please call +1 808-0291. In Israel, please call 03925590 And internationally, please call 97239255900. A replay of this call will also be available on the company's website www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?

Would like to thank our employees again for their hard work and total commitment. To everyone on the call thank you joining us today and for your continued and interest in our campus. Have a good day and good bye.

Thank you. This concludes the Elbit Systems Ltd. Fourth quarter twenty twenty four Results Conference Call. Thank you for your participation. You may go ahead and disconnect.