Elbit Systems Ltd. Q3 FY2025 earnings call

• Strong quarterly results with double-digit growth in revenues, backlog, and EPS. Quarterly free cash flow $101M. • Q3 2025 revenues $1.922B vs $1.718B in 2024, 12% YOY growth; 9 months up 18%. • GAAP gross margin 24.9%, non-GAAP 25.2%. GAAP operating income $171.4M (8.9% of revenues), non-GAAP $186.7M (9.7% of revenues). • R&D expenses $129.1M (6.7% of revenues), marketing/selling $91M (4.7%), G&A $86.7M (4.5%). • Signed large contracts: ~$2.3B contract over 8 years, ~$1.635B contract over 5 years, Hermes 900 drones, DIRCM system to Airbus. • Launched JUPITER space camera, expanded Europe facilities, PAWS 2 and Frontier systems.

Third quarter 2025 revenues were $1.922 billion, up 12% YOY. Regional breakdown: Europe 28%, North America 21%, Asia Pacific 14%, Israel 33%. Segment performances: Aerospace: Q3 revenues down 3% YOY, 9 months up 9%; C4I and Cyber: Q3 up 14% YOY, 9 months up 15%; ISTAR and EW: Q3 up 5% YOY, 9 months up 8%; Land: Q3 up 41% YOY, 9 months up 44%; Elbit Systems of America: Q3 down 2% YOY, 9 months up 6%.

• No specific 2026 profitability targets given, but aim to maintain and improve profitability and cash conversion.

• Ceasefire impact on domestic demand and potential margin trade-off if orders skew to international. • Operational disruptions from conflicts affecting business operations.

Q: With the ceasefire now happening, how enduring are you guys thinking about the domestic demand? And if we do see a slowdown in the domestic bookings, how are we -- how should we think about the trade-off with margins as orders start to skew more towards international?

A: We had $1.4B increase in backlog, $200M in Israel and $1.2B outside. Target flattish backlog in Israel, growth outside, predominantly in Europe.

Q: I wanted to ask about when we think about the Aerospace business from here, and we saw the decline in the quarter. How should we think about the trajectory in that business going forward?

A: Aerospace segment will continue to grow; avionics embedded in Western platforms, UAV demand strong with 20 international customers for Hermes 900.

Q: The margin was very strong in the quarter on a year-over-year and sequential basis. Can you discuss the drivers of that? And how do we think about the impact of less operational disruptions assuming the ceasefire hold?

A: Expansion in backlog profitability, operational excellence including ERP and robots, AI use. Ceasefire allows regrouping, focus on non-Israel business, potential for more opportunities.

Q: Has there been any update to the company's profitability target for 2026, 10% operating profit following the expansion of the order backlog and the improvement in gross margins in the current quarter? How does Elbit plan to generate added value from the significant expansion in the U.S. DoD's budget?

A: No specific 2026 targets, but aim to improve profitability. U.S. market strategic; exploring acquisitions, expanding in verticals like drone swarms and border protection.