Elbit Systems Ltd. Q4 FY2024 earnings call

• Continuous double-digit year-over-year growth in revenues, operating profit, and backlog for the fourth consecutive quarter, with backlog reaching a record $22.6 billion, EPS at $8.76 per share, and free cash flow at $320 million. - Won meaningful contracts globally and locally during the quarter, including supplying EW and DIRCM Self-Protection Suites to a NATO European country, securing a contract for Germany's government aircraft, and providing counter UAS solutions to NATO European countries. - Continues to invest in developing agile and timely solutions to address the evolving modern battlefield, being a key strategic partner for the IDF and scaling up production to meet customer demands. - Has a wide global presence with subsidiaries in the U.S., Europe, and Asia Pacific, with 22,000 employees worldwide (14,000 in Israel), leveraging global presence and innovation capabilities. - Invests in developing high-power laser solutions, autonomous systems, active protection systems, PULS artillery, and expands guided munition portfolio, with maritime sector having significant potential and increased use of AI solutions.

Fourth quarter revenues increased by 19% to $1,930 million compared to $1,626 million in the fourth quarter of 2023. Full-year 2024 revenues increased by 14% to $6,828 million compared to $5,975 million in 2023. Aerospace revenues in the fourth quarter of 2024 increased by 27% mainly due to increased UAS sales in Israel and Europe and increased Precision Guided Munitions revenue. C4I and Cyber revenues increased by 7% year-over-year mainly due to radio systems and command and control system sales. ISTAR and EW revenues increased by 8% mainly due to Electronic Warfare and Electro-Optic system 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. Full-year 2024 revenue contribution: Europe 27%, North America 22%, Asia Pacific 17%, Israel 29%.

• Anticipates strong growth in Europe due to the newly announced EUR150 billion budget. - Expects continued growth in Israel where backlog increased by $3 billion in 2024. - Sees Asia Pacific as continuing to be very strong with higher demand and budget.

Q: Hi guys, thanks for the question and congrats on the quarter. Maybe just on free cash flow. You had a pretty great free cash flow year, and I think it was mostly driven by a large contract liability inflow. What was that related to?

A: Hi, Ellen, how are you? Thank you for the question. We -- what we see is over $535 million of operational cash flow, which is significantly better than previous years. And also, we see expansion in our investment in CapEx to $215 million. And that together created $320 million. For your question, this is leaning on contract liabilities that we see. Also with some expansion of inventories and the receivables.

Q: Hi, lovely to talk to you all today. I'm interested mostly in your export revenues, which I'm hoping and I'm assuming, but please correct me if I'm wrong, that means your export sales, just doing a little math here, if your overall year of revenues were $6.8 billion, and it looks like what, 61% of your revenues were exported, that would be $4.84 billion of sales, exported sales from Israel last year? I 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 at a time of Israel fighting at least three, maybe five fronts in 2024, why and how Israel and Elbit was able -- mostly Elbit, obviously, was able to export so many weapons during this time of war?

A: Okay, thank you, Lara. I'll answer the first question. Your math is right. Our export revenue was $4.8 billion, while our Israeli revenue is close to $2 billion. Butzi will answer your second question.

A: Hello, good afternoon. One of the advantages of the company is, we have dozens of subsidiaries abroad, in the U.S., in Europe as well as in Asia Pacific. Out of the 22,000 employees we have worldwide, only 14,000 are in Israel, the rest are broad in our subsidiaries. And it really shows the resilience of the company. On one hand, we are able to support our local customers here in Israel, but via our subsidiaries we are able to support our international customer and to continue to export from Israel as well as via the subsidiary to the global defense needs. And the 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.

Q: Okay, so just to clarify that $4.8 billion revenues exported, that is a record high for Elbit, but you still see potential to grow it in future years, correct?

A: That's correct.

Q: 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?

A: So we are -- Ellen, as you know, we are continuing to expand our capacity and growing capacity with the investments that we're doing in our premises in the South Ramat Beka, the new factory as well as in other premises in Israel and outside of Israel. We just inaugurated facilities in the U.K. and in Germany. And also in Israel, we're starting working -- in the Ramat Beka. So gradually, we are expanding our production to meet the growing demand.

Q: And can you talk about your expectations for growth across regions in the -- regions and end markets in the next few years?

A: We are looking at the market as Butzi mentioned, we see a very strong growth in budgets, mostly in Europe. And with the new -- the fresh EUR150 billion that were announced just recently from the commissioner, we expect very big growth in Europe. As Butzi mentioned, we have very -- we are very good group to meet this demand in dozens of subsidiaries across Europe and that is a very strong growth trajectory to Elbit. Other than that, we see continued growth in Israel, where our backlog increased in 2024 by $3 billion. That means that we expect additional growth in Israel as well and Asia Pacific, which continues to be very strong with higher demand and higher budget as well.