Elbit Systems (ESLT) 24 Mar 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems Fourth Quarter and Full Year 2020 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.

As a reminder, this conference is being recorded.

received in the the the at all that press company’s have www.elbitsystems.com. available is News should by company’s now release website You section of Myerson, over now call to would Investor hand I to Director. like Rami Elbit Systems Relations the ahead. Rami, please go

Operator. And welcome Good XXXX fourth to everyone. call. day, you, our quarter Thank earnings

and call Chief Financial our with Butzi On Gaspar, today the Machlis, our Yossi are me President and CEO; Officer.

press statement release like to earlier point that in Before the to begin, Harbor company’s refers this I would also we of conference issued the today out contents Safe the call.

help every will that the GAAP believe certain ongoing the As quarter, we performance our well non-GAAP both supplemental you this regular non-GAAP do of data, as understand as we to business. provide information We with provides information. financial detail additional

You followed Butzi providing details all non-GAAP will events and financial the well release. and the of as of in discussion during talk the the begin information the significant beyond. data, by Yossi as quarter today’s who results, press will the reconciliation about some by can find GAAP financial

the turn turn to call the Yossi, over to session. With a then that, now I call will We Yossi. please? to question-and-answer would like over

had rollout period These us demand solutions of sustained solutions. is and helped you for of Thank you, Hello, resilience broad uncertainty COVID-XX of advanced us vaccines our encouraging. increased of the and portfolio everyone, capabilities and caused fourth pandemic, balance today. The Systems, Rami. services results quarter COVID-XX technological in for Elbit joining thank our the by of the reflect and geographical footprint The

in we of adhering the the operate. closely, continue We various of instructions while situation the the to government which countries monitor

heavily and performance customers close results, monitoring by periods. with around pleased impacted these and been worldwide with our with was maintaining the the during now to subsidiaries we year The pandemic. in has are that challenging Turning subsidiaries the our the world contact of them our

to I comparison in as maintain as in revenue revenues line implemented on impact some increased and margins trends backlog year-over-year. in XXXX order with increased year-over-year results. to with measures profit mitigate now our due We operations, previous Fourth Our COVID-XX and an generation focus and quarter. of cash we well financial highlight $X,XXX discuss financial key the million figures increased quarter will of and of X.X% the pandemic. improved

our XXXX revenues versus were billion growth billion as a $X.X representing whole, a last $X.XX For of X.X%. year,

the a accounted Night in munitions sales mainly and In accounted in annual acquired declined primarily of terms for areas of due as the acquisition and due year-over-year, XXXX and across year-over-year precision to XX% annual mainly of of total CXISR annual in XXXX. of Vision systems total result for year-over-year to and the due revenue U.S. Elbit our IMI to simulation. mainly radio training year-over-year system Asia-Pacific. XX% increase sales of sales airborne increased increased sales XX% to and at breakdown accounted XX% Electro-optics revenues operation, a of total sales Land for sales lower of

certain to with largest sales was the fourth the Europe The XX.X%. quarter non-GAAP our XXXX representative America of and offset XXXX, due compared more the airborne of year was primarily important sales to North strong This the North to Israel quarter of The system we America programs was long-term sales North mainly and growth in contributing more that due margin base phasing business. gross land the reflects was growth from The diverse Vision in increased the in longer quarter Our fourth Night the of markets. and of XX%. believe of the We sustainability are was XX.X%, business. Compared in other systems. is quarter-to-quarter. Israel payments to lower geographic revenue saw America XX% fourth for last Asia-Pacific growth revenues, term of with XX%, XX% In fluctuate systems. trends our than

in For limit Non-GAAP gross an COVID-XX mix due in the program reflect XXXX the of XX.X%, write-offs unfavorable This cost was of activities full year impacted pandemic. was by expenses by measures and margin of of COVID-XX year. result incurred quarter Net ENV a revenues in aviation to quarter impact XX.X% compared largely fourth our X.X% implemented year-over-year due last asset the of the expenses in income the XX.X% million of fourth in R&D gross presented $XXX.X maintained reorg of incurred. last at in inventory X.X% GAAP -- operating profit quarter and $XXX.X in impact additional the year. was GAAP in of Vision. revenues XXXX. cost XXXX XXXX expenses X.X% higher $XX XXXX charge the and to the XXXX million year. was GAAP of or margin profit revenues, from XXXX, $XXX.X control the compared GAAP XXXX of the with offset was profit impairments in fourth million a revenues, quarter as versus year. fourth to or gross settlement reorganization successfully last despite follows. non-GAAP we the was with R&D of to the of charges The operating to million were with of the was compared by XXXX. in income pandemic. includes last expenses fourth to litigation levels breakdown help $XX.X operating the that in charges gross in compared pleased expenses the million U.S. of $XX million fourth $XXX.X a non-cash as pandemic included The X.X% charges. the revenues, to Night that XX.X% X.X% financial of I am ENV quarter. quarter X.X% in margin due margins non-GAAP or for $XXX.X income included or we the was million and the to related expense Margins with challenges related income in of in was the benefited million acquisition operating million XXXX margin $XXX.X XXXX G&A approximately compared XXXX Elbit gross related quarter. G&A year XX%, million That GAAP and of non-cash in above. as mentioned declined XX% versus Non-GAAP of to commercial GAAP versus fourth for gross reorganization increased the quarter COVID-XX income reorganization last XXXX operating operating $XXX.X cost XXXX revenues

Israeli technological and similar selling expenses to our X.X% XXXX to long-term travel Marketing enables R&D of to Financial X.X% rate XXXX The in build million Authorities the participation of as were $XX.X related prior leadership the the X.X% tax due increase Tax Taxes million, was income the quarter, mainly mentioned expenses to for following investment to to a $X.X above. with X.X% to the compared prospects. underpins year. Our due fourth last We were us maintain and $XX.X revenues $XX.X in in in on in effective year settlement period. year. versus exhibitions. exchange expense the years expenses were declined in fourth income reduced for rate reduced of the charges and Financial trade million XX.X%, for expenses adjustments compared to in compared to XXXX our were quarter, and years. recorded tax in was compared last XXXX. due million G&A of $XX.X tax to XXXX adjustments in XXXX. revenues shekel-dollar in million million last prior in $X.X The to

second by the XX.X Systems our slight shares, share about investors raised X% to institutional quarter sale million impact our treasury having the XXXX, During to count year. a approximately in million $XXX last shares of relative Elbit of corresponding on share to earnings This increased per Israel. through

in $X.XX a Our XXXX year. quarter non-GAAP full $X.XX EPS was GAAP $X.XX quarter and and for whole. for diluted as the the the fourth EPS for diluted $X.XX was

-- $XXX of revenues revenues. similar quarter and the $XX as and end XXXX the XXXX scheduled that higher of The visibility more to XX% good XXXX fourth for $XX and during is than $X XXXX, orders the fourth the current million end ratio backlog the and X.XX. of -- that an as of attractive inflow, beyond. was cash future first This at to was higher is book-to-bill million quarter of the of with the order the of XX, be quarter of compared performed million rest flow December same last quarter is represents at XX than the of year. provides backlog year. breakdown two last XXXX. than and Approximately in $XXX backlog of approximately the billion, This scheduled equivalent billion Operating Our for XXXX to for years is backlog

Operating operating timing now whole, fourth please? customer a Defense. we For of Machlis. declared Mr. dividend for flow of phasing Israeli flow $XX outflow cash Board inflow share last Directors the remains million as versus of the XXXX year. quarter in dependent $X.XX flow payments over will mainly benefited call Ministry of million I of to advances Butzi, from on cash The received fourth The quarter. of the a per turn XXXX. cash from $XXX reported in the

demand overall. with provide you, third am customers. our from of provide instruments. Elbit an are indication multiyear very value strong and Many contracts positions these our will significant or contracts supporting and we market encouraging with the volume strategic sustaining Thank pleased in Yossi. I results announced of quarter value These and

support UK’s In network an XXXX information prepared cumulative command In National over of new the Flight lower January, target of It’s air acquisition different Swiss solution MOD British The joint and Elbit contract the controllers price range that new and from provide world evaluation communicate In as competition. Royal joint develop Royal our Royal of first at radio Swiss modernize contract the the after dismounting around systems, support supply for a static from realistic $XXX we Fisher a tactical systems XXXX a a integration will Systems is integrated XX-year Army, training to Air an network and dismounted is Greece provide provider in is we a Air Spanish UK of army-wide with of of Israel portfolio Armed future for the XX million UK solution January, Radio Systems selection keen million of Night Forces Hellenic under program. enable US Software subsidiary of militaries contract to building the consortium the by Department contract the Navy better The November of performance and between a Systems operation. non-precision Center crews. both have program. for Naval with provide to training continents. the Rotary-Wing the In the artillery solution. Defined operate was the Vision more for Royal Defense Navy was customers than required costs. contract battalion from around submarine conduct National attack, Elbit system Software contracts XX% has a cumulative for Software Force British Systems E-Lynx integrator decades computers contingent Radio, will of Solution software pioneer and target and election solutions operation systems close our provide Systems ability tender. International MOD December, a awarded XXXX, at part Program following with we supply tactical combat about The to Defined Elbit customers the the control to of world. Force, Future for Israeli the MOD. selected followed international finds led Fire acquisition the tactical expand ministries Our the AI with a of System and systems that was part Navy. provide services the establish field Netherlands we received rigorous soldiers Hellenic in the to hundreds completion defense battalion Training multi-domain been imposed Dutch in a UK radios precision MOD the Army radio probation and for system fire million better resilient the a and competitive is contract aircraft to radio of Defense. negotiation the militaries vehicles. accumulated end is the received training radios, for network followed of value and the and and Spanish weapon, solutions helicopter and UK capabilities selected important the the of by DJ will European is service the systems Force. so control Fire The to the the Air of Capita. contract Radio interface wide E-Lynx and world are Systems technical train Elbit Elbit the signed network Armed Training Navy. Spanish evaluation we combat combat Defined with level step -- system Hellenic agreement training UAS. Army mobile Ministry Army consortium Defense more for British and with US$XX award modernization terminal The of aircraft operator In three supply to for and Forces were of sensors countries in all legacy of synthetic by the to The by the an $XX in to and and Forces Elbit an school believe the a engagement awarded its Ministry the awarded of January US$XXX capabilities, and computers. effective US$XXX UK, November contract market fires. MOD. in around December Royal of January supply are different manage and command with to combat the acquires Training which of Defense ratio that We and Elbit five were tablet In and supply future tactical a scenarios and numerous that across DJ Elbit by million with connect Mission we them defined Center pilots to training the and multi-domain target blocks that competitive provide we Spanish and million unmanned acquisition network of unmanned radio and supporting the fires solution and or

Hermes will certified December, In missions matured Government we civilian fleets now protection -- the Arctic Asia. certify environmental along the like As and StarLiner subsystems, In to in StarLiner $XXX operate to Aircraft as our and March, will upgraded Systems, in integrated this offering maritime has the technology a have Eastern Canadian million the the country five-year Coast. services support platforms UAS and of Unmanned well be and and supply selected Western to provide maintenance Helmet support Canadian Mounted we aerospace. were to awarded XXX in that the contract as

technology We are land system and autonomous also the experience our naval transitioning domains. and to

mine of and to civil the in country while navy solutions are specifically Systems turrets, a manned or vessel to communication countermeasures USVs acquisition, surface option aid missions, control armed contract to and Israeli unmanned warfare were contract Asia-Pacific. technologies Navy active vehicles Under and fire target systems. provide perform civil a portfolio had the received Elbit Elbit configured a and protection, the that models. including supply the for tanks facilitating of antisubmarine unmanned large to will civil operational Our generally Systems USV USVs is with we in

inside for country vision technology army that combat combat Active the supply to Tanks legacy in in In US$XXX Iron contract Light we generation Our the Asia-Pacific. XXX-degree new demonstrator million the vehicle. Sabrah vehicles. with from division latest our RNLA Protection integrated of generally, crew a provided Fist capabilities of to and the include with Systems technologies announced These

systems, Light supply ASCOD management of by Personnel The Pandur prime Tanks army the fire platforms -- a from Elbit to we contract powerful supply Systems high range Vehicles Both Defence Software Iveco The a February, sights, electro-optical were to unique Elbit in systems. in and/or the dynamics the based control developed target E-LynX Army will wheeled on Excalibur platform a Sabrah Armored Army. tank general contractor, platform by As will including received wheeled XxX of Sabrah XXXX million battle XXX with millimeter cooperation with manufactured be the provides subsystems Republic. systems, TORCH-X of capacity XX-ton In in or Radio country APCs a Tank Carriers Brazilian and combination the $XX Asia-Pacific. Defined fire maneuverability. XXX Czech

of a contractor equipped and the turrets be company’s range prime with APCs As Elbit Systems subsystems. will the

Military February maritime U.S. Royal by world on broad Iron to a Forces. to CVXX like including would invite orders. is investment demand naval retail Investor Capital improve protection our call a the building Xth. conditions to Conference electronic Management and investment range armored Systems with potential their sensors for deterrence. $XX Hägglunds aX significant due that participants be signed we worth domain. program visibility and conference in our The business, questions. in continue our The the backlog high-tech provide subsidiary, solutions. the receipt conditioned protection On Elbit is opportunity for engines our our on December, on it Systems on growing Fist trends U.S. with of whole the our Systems on focus on of sights Navies portfolio clause the will provide will combat capitalize to and increasingly the active the presence growth all the take including support to XXrd your and expanding take to BAE the agreement acquire I supplies around with see and will to in contested are system the undersea shareholders supply happy Army that, America of Sparton world contract increasing of continues strategic Sparton the to capabilities innovation. well-positioned Cerberus leading around regulatory and million. definitive Operator? the electro-optical summary, vehicles of warfare contract interests I U.S. and develops and transaction Navy in Corporation. to April the period After to be a COVID-XX a Netherland will Allied various arena, and us for our good this commander modernization pandemic. Elbit And technology long-term The long discussion We In on is to conference virtual global the

Thank question Jefferies. ahead. Greg from Instructions] go is first you. Konrad of Please [Operator The

morning. Good

type mean, start, little very I strong you talk mean, if about XXXX, year. you single-digit we is to required a any backlog support think Just orders you about in when book-to-bill change been conversion had has or mid change there could a that to duration think the it When bit long-term, XXXX? I either dynamic makeup what target growth in booking of and of that about

would What the -- say I following.

guidance. You that do provide we know not

backlog our happen about in transformed going growth But can and of indication this doubt backlog that. more to a the year revenues. what to us into XX% is than half does years. two some the about be No However, in this year give next

we yes, were about past So, talking the growth. in the mid single-digit

However, to level, you in the guidance any affect are am that. backlog a strong on give position what not To sure in I growth may the that. we

called in you airborne know there QX, little reset look business precision QX inflected headwinds up kind kind on rate airborne That’s I about of or think munitions the helpful. systems? And items at momentum bit strength training there’s one-time mean, in the and do I has of were growth you the we and been higher, how a I aero on mean as growth kind for structure and of in the simulation, of and then, out side. that

did because part. this for which not general as is lines But which also the the small comfortable that very reassess X% Well, in a does of than with and growth in backlog area were we aspect that we feel grow less of pandemic. on in military business growth avionics, well. There’s airborne actually in platforms is in XXXX the of airborne the this our revenues piece -- includes there the our systems commercial airborne

So part the growing is very military nicely.

of but one about Israel largely you comments strong phasing cash talked kind the very last were this receivables for any what of on maybe and of the I how me, I And is quite based least there the headwind. capital ranges Okay. then for you a to mean, in year QX, at just bracket your way working year a the thinking for are trends? you dependent on mean, or flow had some

still the Ministry put here have in We as a Well, priority in that you and address Israel is lot item high creating of way in lagging flow management we emphasis cash the a our we of probably some is in spoken the to the it. Defense know and about extent. free cash, yes, past, behind

in start focus the the that come future important a the believe aspects, management business through. is cash of we other will However, in things in stabilizing the also very our once part All Israel, part management.

Thank you.

The next question Pete go Alembic Skibitski is Global. of Please ahead. from

good and afternoon. Rami, Hey,

Pete. afternoon, Good

early, of payments? Guys cash any kind just on it’s give of governing indication has MOD defense And the you yesterday? spending formed. flow, today greater have this coalition you where I But clarity do Israeli to trend any on versus Guys does to stay earlier may questions early obviously, still kind -- a be of yesterday yeah. the we think, and had level, top election

far as in first they for -- of IDF And contracts as no already first and will new was that Yeah. year five-year the owe some and and money. activated political actually pay signs because doubt we the they particularly more we the they that Pete, for no for planning situation well. last confident the Israel, waiting as for there you also that active quite But final still we yield program five-year are in owe be will is mentioned Israel everything rightly Yossi of I are us, IDF here as and for planning said, us the no results there here -- as because earlier. seeing or planning am of

Israel. at concerned new am I all about in not programs So

the new future owe we positions We secure company money Israel amount of the are they near the see don’t pay with XXX% have any contracts for in in and confident I soon. good associated here will us risk to and very -- they

very we That’s in on about deliveries. just to talked last development get clarity compare thing a level for of and the conduct And are well the is another forward you impact and you I you know the the in of Thank COVID that. top to in couple COVID terms fourth slowing travel, the like Okay. progress it not first Israel quarters Can of helpful. of just business slowing contracts just or I then, and wanted really is, from of quarter? business seeing environment terms extrapolating and to ability vaccination. doing second the quarter quarter to seems with maybe signing

I issues still. some globally sure there So seems be out But that’s there helping. to am

was I ability to So conduct the last if characterize you versus wondering maybe just business just now could quarter?

our Yeah. business. COVID that Pete, any us on I see must we impact on on the say significant not do

contracts globe us a to get and of strength support needs subsidiaries, fact help dialogue On unemployment economic level to means, which of jobs the there our have of their the to continue have and also the the understand economies its deal the one acquisition reasons company. huge to continuously around globe also is we to create is of countries. local is within dozens but new the also programs is which important support around to that local that fact to subsidiaries countries is the to to course and contrary support military crisis its globes with another economy the requirements. The customers in globe of to and dozens contracts -- their defense the around local we make with the Because around

a but of had. overcome ever last we actually supply We just issues the company We see in it’s business quite when very potential. quickly is chain. it big, the the of biggest had with them and issues new we year any of the lot don’t funnel quarter started second we So see some

future. optimistic about the So I quite am

great. great. That’s That’s

Okay. Appreciate the color.

me last be well. get will ask very which Let on one just queue I back and one to in seems Hermes, doing

You for understand, about know then wanted contract the you can And Canada then had just Hermes, the And just that a this big earlier I was this to if deal? any means arrangement Hermes sales current could is new deal with provide if Korea, talk kind million don’t year? just I color of I lease you also of also a with unmanned $XXX there? the wondering potential KAI? system, or that the for development so

Yeah.

we With around the the discussing cooperation current our of country of the KAI, the and are StarLiner a the adaptation needs. with well and as market as in the portfolio its that local we StarLiner, Korea of And and promoting new kind of the for program it’s UAVs have. platform in Canadian list

Combination.

Okay.

Okay. That’s great.

to I about will Maybe let Yossi elaborate a more bit that.

services. It’s a deal of that’s sale combining some elements and of lease

Okay.

Understood. Understood. Okay.

But, XXXX? should on. volume. as did seems we or to maintaining how expecting have how will you me performance we additional but Okay. you great you, do sense color I be of will have margin in mix rate Yossi, while give rated trend I won’t in a and know margin we rate I and trend margin and volume how Maybe in shakes of that sense out? have some in back any thought XXXX, like Last to all any XXXX, us a actually guys one It get kind job don’t mix for XXXX.

know guidance. give that you we not do Well,

rate in that impacting very is One of That and currency the which is However, one there the with U.S. three strong does a dollar cost are to is negative the our here a elements parameter. is labor. affect Israel compared negative this that part. that which consider shekel,

is and that the overhead. are on. -- and operations, is including of necessarily part, element, UI supports -- the yields, is elements. which One the growth improved overheads which the so other company, improved two On positive in there in system the of corresponding operation positive production, costs continuous ongoing growth that not also ERP And improvement carries

of am out do that. disappointed So would yeah give would we -- say, I a I coming but put see these guidance not all if all of we do be not result you on sorry, that, but we together, positive

I No. very much. color Thanks the appreciate very much guys.

help I just I -- increase a we I between to and you, order add to Thank different of sure it the the the G&A activities the of Pete. company organization am and announced bottomline. efficiency the get reduce synergy just that’s to and company. that want will Pete, in months more few ago also

Thank Great. guys. Right. you,

question from Liz Please Cohernour, Winters Advisers. from -- Wint Wintergreen is of next ahead. The David go and --

does quality a distinguishes many for upward. that impact the Cohernour. years business grow Could long difference Liz have is the is take acquisition, This models going they business, on and of growth disclosures, company and five integrate the and a and finer to And stock or think to noticed some to you do it we U.S. your part the everything I that of just index have admired management, as Hi. the and bounced I others? in I and I approximately seem the have comment sense A we between shareholder index, indexes in that has finances, you is price have an for the two corporate question with of through for lesser Elbit believe on between me along company experience company’s that Israel. difference been far time being into could part and operations, for which of know a have responsibility management, what what’s

very you Thank for Rami. question. is much this the Liz,

of we Tel into -- on At technical geographies need within There listed being and the various a the Aviv indexes to In be various listed the particular I taken indexes of think Stock -- is listed. Exchange. moment, company in are to be because be of account. the I we are a moment, are the eligibility on the in business -- that on we on good of of to at eligible indexes. think U.S., the listed or pure specific that be But not is we we indexes, a regardless index. is part there a part are not big operations whether of those a business focus to

businesses I big good was a The personal But a be certainly seems curious. preference you. just Thank for driver. quality to is price. at index my

your and for response. for work you thank So your I

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Thank you.

the would a and have Korshunov We from from received the IMIs? of Leader integration to like what of she question Dina status know offline

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improve our the -- plans plans. we We Actually original of are continue profits exceeding the our to company.

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Thanks. Operator?

further [Operator Instructions] time. at There no this are questions

for Before are Mr. questions There this am I I ask at sorry that. further time. no Machlis,

ahead XX-XXX-XXXX hours I would Before in Mr. conference this available at a U.S., XXXX-XXX-XXXX. replay this and be Israel, to of closing internationally, to ask will also company’s you after remind be make Mr. like available go Machlis be the replay please that call statement? ends. two call please of website would call will participants A please the concluding the call I In his with Machlis, like to -- on call your will X-XXX-XXX-XXXX, statement, www.elbitsystems.com.

support all April I speaking continued interest you for good-bye. the our particularly in day thank on good to challenging at your Have for joining forward thank and continued today to hard a would I employees the us and call, To Yossi in and everyone you again Conference our times. like company. work to for on look Xth. and our these Investor

for quarter Limited Systems results Elbit call. conference fourth your the concludes year This you full Thank you. Thank participation. and XXXX

disconnect. may go You ahead and