Eltek Ltd. Q3 FY2024 earnings call

• Business overview: Concluded Q3 2024 with record revenue. Self-defense market has strong backlog and expected steady growth. Industrial segment had slowdown due to reduced customer demand, but recovery anticipated in 2025. - Operational highlights: Final stage of opening new production for solder mask application, part of $2M investment. Stabilized workforce by hiring 13 new employees and adjusting wages. Initiated ERP project to replace computing systems, expected to take ~2.5 years. Board adopted dividend distribution policy with up to 25% of net profit potentially distributed after annual financials.

In the third quarter of 2024, Eltek Ltd. achieved a record revenue of $13.5 million. The self-defense market segment accounted for 64% of total sales, the industrial market segment contributed 14%, and the medical market segment made up 7%. Gross profit for the quarter was $3.5 million, resulting in a gross margin of 26%.

• Anticipate gross profit margin of 26% to 29% in medium to long term. - Accelerated investment plan: $2M already spent on Q4 2024 facility, remaining ~$7M - $8M to be paid in 2025 for coating lines. - No specific forecast for Q4 revenue growth provided.

• Gross profitability affected by product mix change and labor wage adjustments. - Co-production partnerships with overseas companies have not seen significant progress in sales. - Labor market conditions in Israel could impact costs if not managed properly.

Q: About defense sector orders, what to expect for revenue mix going forward?

A: As mentioned, increased backlog due to strong defense sector, profitability of defense products may go up.

Q: CapEx for new facility, left CapEx for this year and next year?

A: $2M already paid for year-end 2024 facility, remaining in accelerated plan is ~$7M - $8M to be paid in 2025, including coating lines arriving in 2025.

Q: Worker labor issue in COGS, will it continue?

A: Reached good salary level, no expected further increases at this stage.

Q: Progress on exploring opportunities outside defense and medical?

A: Operating in defense, aerospace, industrial, medical; trying to increase commercial operations, no expansion to other areas planned.

Q: Fourth quarter revenue growth and gross margin outlook?

A: No forecast for Q4 revenue growth; mid to long-term gross margin expected 26% - 29%