Elbit Systems (ESLT) 25 May 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems First Quarter 2021 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 first 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 the results, begin quarter details all as release. of non-GAAP the and information data, today’s during about talk financial providing the beyond. by the Butzi the a Yossi the significant some the GAAP financial press as events reconciliation followed of in by well and who will will can find of discussion

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

the around of the world aerospace that around as the and sales revenues up everyone sales world COVID-XX opening you in and expenses Rami. results customers lower joining the reflect The The rollout COVID-XX quarter. us the the as to today. of growth you Thank led well Hello also reflected reflect the Companies commercial lower and our sustained for the vaccines. gradually of thank in services Elbit our and from quarter are following impact for demand as results in a quarter in first backlog. marketing Systems solutions

closely figures trends some in highlight financial situation the in the I results. key governments the the of we the instructions monitor and which of now and various to while discuss countries adhering of to operate. continue We will our

quarter X.X% million of year-over-year. revenues $X,XXX First increased

airborne primarily annual In increased for level revenue guided terms XX.X% of increased device year-over-year revenues, sales of XX% breakdown UAS due similar year-over-year XXXX. operation increased due of mainly to accounted annual to Electro-optics munition sales sales of to sales. significantly and sales CXISR, subsidiary. to in Pacific. Elbit programs sales the total our were mainly for to and of at XX% revenues of total night due a to of phasing X% X.X% medical and growth year-over-year U.S. year-over-year precision areas systems accounted of Asia U.S. Other vision system the Land the total for of across declined accounted sales due

was due due UAS’s aerospace America to guided Israel increased our XX% security Asia of The a first with sales. North XX% XXXX XX.X% systems Our primarily revenues, non-GAAP Pacific of gross the at dollar quarter XX.X%. diverse first North of margin the Asia the XXXX and important to favorable U.S. was quarter in revenues. and to sales due geographic our In the first was versus in first stronger margin impact margin relative the quarter revenues reflect mix long-term compared gross precision and and XX%, and Lower The night XXXX. of the was the of quarter program Shekel XX.X% to for compared in the of first sales gross to munitions. in the sustainability GAAP of quarter of the less primarily the of business. quarter in is commercial quarter UAS lower first XXXX vision was to decline XX%, Pacific the revenue largest base contributing of XX%. was Israel Europe America first growth The mainly

the financial the mitigate long-term our plan stronger with Shekel. We continue impact cost to of help of measures control

XXXX. of compared Israeli the March in revenue of similar to reduced operating non-GAAP and $XXX,XXX similar XX.X the with revenues tax was the mainly due operating million with expenses X.X% exhibition lower in Financial declined The in expenses effective were XXXX. were last and X.X% year. first sales first quarter The or breakdown trade first of and expenses X.X% of million selling quarter December of year. recorded Operating in XXXX. of XXXX The million GAAP million follows, first The quarter the last first a expenses. X.X% or quarter quarter XXXX. revenues versus in compared of the net quarter expenses expense compared of the of weakening dollar first quarter of last year. XX.X quarter level million expenses level rate between was with revenues of quarter the for XX.X in quarter the the in income Marketing margins was last income as XXXX. compared was G&A lower X.X% similar year XX.X first margins. versus million with financial the Shekel versus gross offset X.X expenses XX.X helped in the to in Marketing first travel, and of support, U.S. XXXX. million were marketing revenues XX.X%, operating XX.X to of expenses to tax first R&D The X.X% result to XX.X% were was

Our The the with year. non-GAAP share was diluted earnings compared last with EPS first was $X.XX quarter, GAAP $X.XX diluted $X.XX year. per last in compared $X.XX

for investing million XXXX at at the during XX, current of orders of and last is of and XX.X for two the was XX future quarter similar and years the included flow XXXX. was the operating from provides more million X of revenues than backlog of visibility activities with XXXX compared first XXX XXXX, and the backlog same equivalent activities outflow, in the end Our of Approximately rest year. to Cash good million though outflow to scheduled our for and as from be XX XXXX for the XX last is than This XX% flow revenues. year, backlog is scheduled the the Mr. deferred quarter beyond. of ratio Cash first quarter in that declared the to performed $X.XX XXXX. end over the the please. first Butzi, of now for to is the XXXX that of at Directors than dividend The higher call a Board billion approximately XXXX. of turn payment acquired quarter March I higher billion, per March backlog million share Machlis. IMI will

Yossi. you Thank

thousands begin in Elbit Israel our I a an challenging thank extremely have Before tirelessly the review of the Systems to that whole support period. in of to on results, the worked I our would suppliers and customers employees like Israel of during and

Elbit tensions the in the of Turning overall. Day defense Revenue governments from the from am Ministry of $X.XX comparts backlog were countries. the billion International Pacific backlog agreement National strong Systems Air back Hellenic contract awarded to and demand growth an Elbit The pandemic our Hellenic many In our from to COVID-XX in around demand. prefer establish mitigate dozens Defense this and increased in contributed to the aircraft. of between and strategy the provides benefit in with the the contract of indication of spending in and the to quarter in well-positioned Flight trend, April, XX-year order a pleased and will I selection the U.S., the customers the discussed this Systems January the M-XXX via Europe of ministries to the growth defense international impact to operate competitive Many geopolitical our is subsidiaries Center Training have we new that budgets follows includes domestically. the of the is Force. world Greece. spend of Israel and multi-domestic Elevated good part April. Asia are the increasing and and tender. supply This contract, at announced quarter after Investor our Under we an T-X first quarter, defense results fourth

positioned of that to and already training $XX that Night in Goggles future SBNVG U.S. Forces. coming prepares optimistic IDIQ of Asia-Pacific. of board and clearly lower soldiers Vision scenarios We over the night the our supplier years. of at Night Marine expand of thermal XACT had Embedded of in for simulation have we operation. and well cost. benefit enable vision the are the the Systems million contract XXXX, solutions, from received XX kind In Special in systems. Operation leading the a Night year potential was Forces the over and last Elbit or portfolio Corps. Training for Police. Squad synergies the XXX Corp our provide to U.S. the and demand Goggle system Special and completed on night Night in of or to between Sparton are In -- to range networked SBNVG training Binocular Federal wide was imaging and the million the simulators, for We intensifier and world Systems about from Systems Armed Avionics In contract systems abilities militaries U.S. to part the training Rokar. and is is systems. market integrated million night as believe better Corporation and the nvXX This training I'm Israel, portfolio the contracts acquired Night broad Goggles September Marine the developed Elbit Elbit April, Vision control vision vision This their advanced UK, management awarded Elbit simulator image of March flight efficient Units the Vision from is German a to with Deutschland to a been provide German we will training night acquisitions, single two XXXX. operations the realistic flight training well aircraft, around keen selected generate Elbit Based more legacy systems as business Ground also Stations, the command This for April, provide EVA sole Virtual a Vision for in the Vision service

systems, contribution Systems million and the management, Management International electronic support undersea Allied [indiscernible] to getting $XX well And Rokar Our high-end sensors of for from and the portfolio your Cerberus our welcome Forces. maritime completed the to to backlog Navy. U.S. Elbit capabilities Systems guidance Sparton us high hundreds Elbit In happy you Military weapon the supplied Elbit sonar of continues Capital Jerusalem that and manufactures to the advanced maritime potential warfare as and also good communication, long-term as for your Systems U.S. developed to In world Sparton Systems. Sparton of of the we leading million. that April, Rokar know Sparton GPS with provide Navy take see systems, for we includes suppliers technology unmanned and combat would based for integrated to Sparton Systems. develops and from acquisition $XXX forward acquisition completed is with of will America warfare and systems U.S. receivers solutions. employees like continue summary, I to for Operator. expand our and around solutions electronic defense success and Corporation enhance I maritime I and two solutions. look BAE U.S. is Elbit one to to the questions. that, will of and subsidiary be visibility in applications. Rokar for and significant

Thank Instructions]. [Operator you.

Page of question go from ahead. Please Ellen first is The Jefferies.

thanks morning, question. for the Good

get and with was might I to well of to about wanted XXXX to electro-optics. contract how business sense in just million decline of the a It HX Night when organic ask growth that return recent the U.S. and think $XX the weak Corps? Vision conversion the Just as to Marine about wanted in

development the we quarter. that been temporary in the a revenues of This and of delay the Vision. expect has seen to the have solved in results Elbit we so processes see some Night Well, at already of second

your regarding question. first is that So

will the funded The second million program orders, purchase future. only quite We ongoing in with come we equal, record an just be the sequential over are multi-year potential certain program, IDIQ that during the although that is purchase in of through will $XXX firm orders. we all are getting backlog and question our

for That's you. it me. thank Okay,

Ellen. Thanks,

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

Butzi, Yes, is it Butzi well. Yossi the doing Rami like and environment and and good now. global demand I hello afternoon. strong sounds right very hope everyone's

seeing all. just still hotspot. COVID being and any sort Asia down was sort you of You still? if because mentioned and COVID of India a closing wondering deals things Europe is of slowing Particularly with COVID problems Are Pacific,

to We see in overall situation, improvement the is an world. around the which COVID related all

We customers. travel are to starting to meet and

to in is customers. that, in meet still Brazil, However, there delays in some contracts. to difficult programs still and to for deliver conclude India example, like and are it And, countries because of some

will the countries to coming that believe And in do past. the improve quarters improving continue as the will and in in situation I well. used we to situation the business is do we as However, these

yet -- I So are hope it improve quarters. certainly is in impacting -- and is an improvement we us, see we believe not the will it and coming that not it but I

understood. drove sure up to if backlog, quarter? quarter be the on that deal what Okay, I then second or the it color booked improvement looked into wasn't And if any the the got booked in first in nicely. will get Greek sequential

acquisitions result will of first is second the not answer the as it in the the acquisition. -- you Greek the not see of as Greece are of well Sparton Rokar -- quarter. the the The billion the the backlog in in in embedded them as quarter. so results well is part made, of got The -- contract also only this you relevant $X.X first as will Defense is Ministry yet We it of of quarter, we two the It in the got results we results the the of same second from subsidiaries first for see yet quarter. the April, included

Okay.

pure So backlog was just organic first quarter growth?

Right.

way that. headwinds the margin of Shekel from about things And then, of the gross there think maybe we or what's on another two strength, out, to before one should Okay. kind expect headwind quarters right level to the

Pete. Hi

improved the quarter. year improve the to over rest an in expect gradually, margins We of over year, we gross have our the number expect the to this second

we anything improvement do we'll you the know, not about so will As not guidance, but give say specific the come. number,

one-off particular level guess do it. quarter you. kind I this more Okay, that was you save or a marketing million so that just for expect of that line. the that substantial quarter just couple there for line? fairly for to marketing that of XX Was got to kind in or spending down a Yossi, permanent per a The step expenses in of return more spend kind a of is or expense decline

was extraordinarily no low low and and low No, on marketing meetings expenses, essentially shows travel, face-to-face this quarter so it so number, an no forth. and

the fourth of be surprised come So, we the that forward third catch this essentially gradually the grow see year. would up we And to looking seen that second, quarter, will XXXX I we and back on in levels we numbers not in over the sales. average if have marketing and

Got the had I you okay. it. is on one then And the last or just had in a from Okay, the if left one payment I you XXXX, that modeled wasn't IMI, for payment actually mentioned me in so payment not? IMI quarter, last more that sure

was in you that on see we in January, paid Yes. did This be it we it December. initially payment January, it that paid to planned

It XXXX the may but right of into XXXX. of of it's towards be for and end couple payment also end a move planned XXXX. year moved now it So days will the the next this into

the Okay, that's one/ and last

but, out of might we'll do future, be is, need Right is an until yes, it business with small to doing one. we one the the the another is there is And in we in agreement years. them the last that our by XXXX, it it in now now There hope performance we right payment that item have extraordinary due IMI to if period government. the

so help much the Thanks Understood. Okay. guys. for

you. Thank

The of next Capital from ahead. Markets. Please is Korshunov go question Leader Dina

Good guys. afternoon. How are Hey you?

Dina. Good afternoon

a if My you any questions. first do tell you question regarding field? the COVID-XX, in see I aviation us about the this bit have recovery civil can is, two

in of the significant yet most now gradual is the that the do of area. we It be come that will the the Yeah, will us analysts recovery of see growth. is that the business And and expectations worldwide operation not a to back and some in of XXXX. our recovery. U.S. plan rate at In somewhere shows opinion levels XXXX, that overall right well is

still to overall see the by However, what XXXX what with positive multi-year numbers or But or is than even be are during like grow XXXX expectations levels XXXX. plan we maybe to do planning, we more happened back compared come our XXXX. are

second stand? Thank about implementation, the it where And That can then you you. makes IMI what it, bit tell about question sense. does a

Hi the know combined combined Dina, with we land IMI you we -- in as Elbit. division

organization announced new So in upgrading are this this and reorganization and division. are under and tanks. are actually guided also guidance we division we capabilities producing under Recently like Elbit this platforms we Then combining [indiscernible] munitions. all land our we developing delivering in

international and progressing leader quite in last many than convinced their for acquired customers it marketing to world So Israel, to these we planning to the facilities we the south facilities we for and that activities Netherlands. the big a And the globe. we're capabilities did systems the accordingly IMI, XX% new our the happy in and upgrades this of via country. in our will I'm margins, system. Israel that a And are IMI a and Australia acquisition. more now IMI And division demand progressing around When progressing we we the solutions active to to see when also got new provide for even we say we IMI well portfolio the we did new protection U.S. and contract new year are of that via part the right nice be say ahead and platform the from have the we came for business we move establishing very of also also to of IMI that as I'm subsidiaries. around the as most in market market, in XXXX. to are the in of happy in here have And and I'm this we walk growing margins and were hard the with well part have had and improve which on we the plan we as also are Elbit of And we're

much you guys. very Thank understand. I Alright,

Thank you Dina.

The next question Bank Leumi. is from ahead. Fried go Ella of Please

Hey, good have questions. a couple also I of afternoon.

first from I results operation think results long-term and exports way local the in customers? will the in if on and maybe scene to think impact immediate potential concerning affect from when and is any foreign bookings the Gaza what The some or it local and recent

during we Israel we are to customer gathered very is customer is very deliver you ideas these which technology, deliver was to just troops this really the I area, for ideas and to here provided in say Israeli world systems to we and MOD. we customers. the power develop working are we other is we in one solution important based develop provision more the and the also for to the -- are As systems and these customers' [ph] High of are relevant the I'm And is years. on there our that technologies relevant leader If Elbit the new we experience Gaza, solutions to and the technology. that course a power relevant and developing -- to ever high breakthrough effective. laser than to supported Israeli we laser in know, touch to a that even and new And happy continue many new

and provide a via as solution as Israel customers high power against we well rockets that can other protect laser. believe missiles or we to So our

as way for sure system for just the the so, can have example. have to develop this will chosen -- defends we itself, for it customers in are do Israel this us We relevant a only the one it working engine hard will been Elbit But I it well worth believe change well. Israeli also and be to MOD other is as future. be also as will and

think, a mean, is do three high-power question the become deadline? if years, for there will I about mind. have years, you When operational, it this army any don’t waiting roughly is know or I later. two much is it you I that very

more No, timeline. this less the is or

as development defense that budget for that budget this way soon. question, until the need a We this it Israel to budget, program waiting a will the to development that the soon as are defense there to and find is And, hope formed to the will the finance this is your now completed. continue To years right I the possible. field for production. be believe convinced be bring take answer and will actually I to few everyone

there years In a the you besides few But deadline. mean is two. more than no

Okay. not is exporters because question, have And Israeli price really another your is to from like then but strength as in earnings we exporters the locally would in actually learn dollar. weakening actually all on in Israel, hurting And, more here the and know Israel. affecting experience, I I most of other Israel, the in many dollar Shekel only

inflation dominated for So much in next many from steady your there's expected who experience years, because in important inflation very and it's some in two forecasting for U.S.? adjusted all had we such that dollar the your these surroundings the think they what in not remain are whereas operating prominent be or experience, also companies can quite think in prices the currency I exchange you influences very U.S.

this Hi, Yossi. Ella is

hear Yossi, to good Hi you.

we do lot indexing us, protection that of inflation. One them contracts so not is significantly we against you protect XXX% Yeah. a two they answer. have. that a give aspects on that quite maybe I material elements but quite In of would of have

Relating dollar index or specific inflation?

on It currency. the the and depends on customer

it varies of So course.

the what call we of regarding backlog is that orders. So

which contracts, the consideration value. do consideration price labor rates future dependent our rates expected the expected currency We versus do on when Regarding inflation into expected are take and into proposals. we dollar we local take internal

hand hand. future, look reduce our impact. system past processes and our that medium in course one base additional on some do our order even that, parallel every effort with We do These initiated of worldwide aspects longer ERP we that do cost In in to time. move the engineering subsidiaries. we one in the order possible extent to I at improve other and to we mention mitigate have countries. on So and do to did the activities implement some low implementation we take cost through competitiveness in production of term our and of order the the to some the that activities in some of profitability

in basis the So company. the in of cost increase -- costs do the that our mitigate way we

all is are going we So rate. we the executes this the on, to impact exchange the company these plans, that be of will optimistic are multi-year currency mitigate able and them,

hear time payments Well, your we collecting also protected companies one or from dramatic you're first still shorter marketing it's far to you as the other many of where the collecting because as customers aspects that know are quite a use time hand, as good mentioned it will the do tool? becoming see we with exchange longer think rate on because are changes And the so, as a were here. we'll

stopped No, or think that as complete to about last tool. actually that's we cycle that did reduced I year the the We payment marketing significantly terms that using strategic already. you referred

then And came corona.

one that's there Defense year. They yet corona, have of. not right. major to customers, did the nicely here pay debt that although pay, last of they of the came still a end our then continue And towards is material payment of completed, But, Israel Ministry the

we the three be what a payments change the advances. Looking and two of or said, getting looked a and just worldwide, and terms then give the approved hopefully, is that we putting customers going year, initial our our quarters, here that on And in actually, are more that reducing we to flow that progress as well. see -- is you payment. somewhere will customers. have policy places for advances and can we In payments And our this look recent constant emphasis you reducing of as from the of in other the it number in upcoming at part -- we our customer of result of down increase cash contracts, more a process the at as and budget have you if this of resolved be

So an process this flow. on focuses is which ongoing cash

to very you Thank to questions. for you. Okay. much my nice talk It taking was

Thank you Ella.

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

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

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Okay. Thank you again.

concluding Mr. Machlis, to would statement. make like you your

for like would our call, hard thank continued the I your continued Have to challenging and company. this the our again interest all employees and today us for goodbye. work support a and To thank times. day in you in on joining everyone good for particularly

conference Thank you your XXXX concludes Systems quarter This Limited participation. for results first the you. Elbit Thank call.

and go disconnect. may You ahead