管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2026 First Quarter Financial Results Conference Call. As a reminder, this conference is being recorded. Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings. These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.
Thank you. Good morning. Thank you for joining us for our 2026 first quarter earnings call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and a summary of the principal factors that affected our results during Q1 2026. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release will be also available on our website. As we previously indicated, revenue in the quarter were below our expectations. This was primarily driven by the mix and timing of backlog conversion, ongoing logistic constraints and foreign exchange impact rather than any change in the underlying demand. The product mix in the quarter was primarily a function of backlog release timing rather than any change in price discipline, customer quality or market positioning. During the quarter, a larger portion of our shipments originated from orders received in the prior period at lower average pricing levels, while a significant portion of the higher-value programs and advanced products added more recently to the backlog are scheduled for delivery later in the year and into 2027. In addition, due to supply chain and material allocation constraints, we prioritized certain deliveries in order to maintain customers' commitments and production continuity, which also impacted our quarterly mix. As a result, the average selling price of products delivered during the quarter declined, negatively impacting profitability. We believe that the current quarter does not reflect the normalized margin profile of the business going forward. Important underlying dynamics remain. During the quarter, our backlog more than doubled compared to the beginning of the year. This increase includes the two orders we publicly announced with deliveries expected across 2026 and 2027. We believe this substantial backlog growth improves our revenue visibility and provides a strong foundation for future growth, so the timing of revenue recognition may continue to vary between quarters. However, due to the ongoing complexity and global logistical challenges, our ability to manufacture sufficient volume to efficiently absorb fixed operating costs was affected. Air freight capacity from the Far East, Europe and the United States remained constrained and certain chemicals that were previously eligible for air transportation can no longer be shipped by air, reducing logistical flexibility. In addition, extended sea freight transit time and an ongoing global shortage of prepaid materials contributed to longer supply cycles. The prepaid shortage is being driven in part by strong demand for fiberglass materials from the rapidly expanding AI hardware infrastructure market. These operational and logistical challenges further impacted production efficiency during the quarter and limited our ability to increase output levels. In addition, the continued weakness of the U.S. dollar against the Israeli shekel had a significant negative impact on our operational results and increased operational loss by approximately $1.3 million compared to the corresponding quarter last year. We are actively managing these dynamics through close coordination with suppliers and customers. In response to increased raw material constraints and costs, we have updated our pricing structure and are currently selling relevant fiberglass products at adjusted price levels and under allocation quotas designed to secure supply continuity and protect operational efficiency. Turning to our investment plan. We continue to make progress. The first new production line was delivered and partially installed. As previously noted, due to the current situation in Israel and the war with Iran, the installation team from the supplier had temporarily left the country, which created a delay in the installation process. We are pleased to report that the supplier installation team returned to Israel yesterday and installation work has now resumed. We expect the installation process to be completed over the coming weeks, at which point we plan to begin the ramp-up for commercial production. While recent events have created some delays in the installation timeline, they do not change our direction. As we have noted in previous guidance, the line is expected to enter commercial production later in the year, and we are encouraged by the strength of demand, the significant backlog and the progress we have made. In parallel, the process of bringing foreign workers into our operation continues to advance. We believe that these actions will put us in a stronger position to address the ongoing challenges in the local labor market and better support our planned production growth and operational efficiency. Looking ahead, our focus remains on gradually returning to normalized profitability levels. A key element in achieving this objective is our continuous effort to secure new orders at pricing levels that appropriately reflect the increase in raw material costs, the impact of the weaker U.S. dollar environment and the value of the company's execution capability, technological expertise and on-time delivery performance. At the same time, we continue to invest in operational improvement, production capacity expansion and supply chain stability in order to better support long-term profitable growth and strengthen our competitive position in the market. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Thank you, Eli. I would like to draw your attention to the financial statements for the first quarter of 2026. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use. I will now go over the highlights of the first quarter of 2026. All numbers mentioned are in U.S. dollars. Revenues for the first quarter of 2026 totaled $10.4 million compared to $12.8 million in the first quarter of 2025. Gross loss was $1.9 million, down from $2.2 million gross profit in the first quarter of 2025. The decline was driven by the mix and timing of backlog conversion, ongoing logistic constraints and foreign exchange impact. Operating loss for the quarter was $3.3 million compared to operating profit of $0.7 million in the same period last year. We recorded financial expenses of $0.1 million in the first quarter of 2026 compared to financial income of $0.5 million in the first quarter of 2025. The expenses recorded in the current quarter are primarily due to the devaluation of the U.S. dollar against the Israeli shekel, net of interest earned on our interest-bearing accounts. Net loss for the quarter was $2.9 million or $0.42 per share compared to net income of $1.0 million or $0.15 per share in the first quarter of 2025. EBITDA loss for the quarter was $2.7 million compared to EBITDA of $1.2 million in the prior year period. Cash flow used in operating activities totaled $0.4 million during the first quarter of 2026. As of March 31, 2026, we had $11.1 million in cash and cash equivalents with no outstanding debt. We are now ready to answer your questions.
分析師問答
The first question is from Mark Sharogradsky from Kepler Capital.
Hi Eli, hi all. When can we expect a return to normal operations?
Hi Mark, yes, it's really not good results. As you know, we don't give forecasts or forward-looking statements with specific guidance. But as I discussed in my prior remarks, I gave all the background for you to decide when we'll return to normal operation. It depends upon the length of the conflict with Iran. It depends upon the labor market, it depends upon the shekel against the dollar and a lot of factors that are unknown to us. But we do everything to adjust to, accommodate and mitigate this risk. For example, we adjusted our prices to offset the devaluation of the shekel against the dollar. But if there is more devaluation, we cannot predict it and we cannot forecast it. I never forecast that we'd be at ILS 2.9 per dollar. I didn't forecast the shutdown and the hours that we lost during the first quarter because of the sirens in Israel. We cannot do it. What we can promise is that for the long term, as I mentioned before, we continue with our strategic plan to have the two lines operating by the end of this year and start to move from this point to a better future.
Okay. So I want to understand: let's say the dollar stabilizes and you finish your construction lines. Do you still project that you will be able to achieve 27% to 28% gross margin if there are no further devaluations of the U.S. dollar and you stop production of the old backlog?
Yes. As we said, Mark, this is Ronnie. As we said in the past, when we finish our investment plan and taking into account that current circumstances stay the same—no devaluation, no new bad news—we expect that our revenues will increase up to what we told before, up to around $60 million to $65 million. At that volume, we estimate that gross profit will be 26% to 28% as we previously said.
Okay. Nice. And I see—if I read recently the earnings call of TTMI, I see huge demand in the U.S. and they even need to cancel or delay some projects. Do you think you will be able to secure some additional orders from the U.S. in the current environment?
As we announced at the beginning of the year, we won a meaningful piece of work in competition with TTM from a defense contractor in the United States that we compete with head-to-head. It's a good signal.
Yes. So now also the big orders for hyperscalers. Do you think you may be able to secure some orders from those clients because they also need specialized PCBs to be manufactured?
Mark, we don't know exactly which segments in the future will request bids from us. But what we can say is that our high-technology products can serve many high-end segments. We hope that we will be able to compete with TTM in that market also. Currently, we are investing energy in trying to get more orders from customers abroad. The U.S. is a very important market. We are also pursuing opportunities in Europe. And we hope to increase our backlog. As we said before, we more than doubled our backlog from the beginning of the year.
Okay. And it's also very important: the mix of the backlog. So do you see enough products in the backlog not only in rigid PCBs, but also in flex PCBs?
Yes. The basket of future products is well organized. I don't have it in front of me now, but some portion of the basket is based on dollar-to-shekel at 3.3. And actually right now we are at about 2.9. So there is a weakness in these POs that we have to honor anyway.
Okay. And if the U.S. dollar against the shekel rises in the near future, you will benefit from the current orders that you received?
Of course, like all exporters, we will benefit from a stronger dollar relative to the shekel.
Thank you, Mark.
Thank you, Mark.
The next question is from an Unidentified Investor from Private Investor.
First question is regarding the sourcing problem. Can you elaborate more on that—like until when you're going to face this problem? Second question is, now I hear for the first time that the integration of the new equipment and facility is going to happen by the end of this year. Last time you mentioned it would be due by the end of the first half of 2026.
Can you repeat the first question? I didn't hear your first question clearly.
You mentioned that in the first quarter you had a problem with sourcing. Can you elaborate more on that? Is it over? Do you still face it in this quarter? When do you think it will be over?
The sourcing problem and the logistic problem in the first quarter can be divided into two parts. First, there is an international problem: there is a shortage of fiberglass all over the world because of AI demand, as I mentioned before. Suppliers allocate to quotas. If we are not ready to pay the AI premium prices, we'll be left out of quota; we agreed to pay higher prices because we didn't want to remain in shortage. This was problem number one. Problem number two is how to bring this raw material to Israel. This material has a limited shelf life and often requires cooled transport during the conflict. As I mentioned before, there was a shortage of flights between the Far East, the United States and Europe—these are the main three hubs from which we bring fiberglass to Israel. We suffered from a shortage of raw material, which is not the situation today because we agreed to pay higher prices and the bottleneck is open for now. If the conflict returns, the problem could return again. This addresses your first question. Regarding the second question...
For the first question, the AI constraint is going to continue. It's not done, right? We are still facing it.
It's only impacting allocation: if we are not willing to pay the AI premium for fiberglass, we will be under quotas. If we want to stay at our previous prices and not pay the premium that AI customers are willing to pay, we will be allocated less material. That said, we have been engaging with customers and suppliers, and we are taking actions to secure supply, including accepting higher prices in some cases to avoid shortages.
Yes. But the question is, does your pricing model take into consideration paying a premium to get the material? Do you load that into your target gross margin?
I don't have a choice; I have to pass material cost increases through to our prices to customers. It is very tough. We have started to do it, and we received objections from some customers. It requires significant explanation work, showing articles and market data to customers to explain that this is beyond our control. We are going from customer to customer explaining the situation. I think this is a common problem for PCB suppliers globally, not only in Israel.
So can you increase prices to the customers?
It's very tough. We started to do it, and we faced objections from customers. It requires a lot of explanation. There was a well-known investment bank report that helped us in those discussions. We go customer by customer to explain that these cost increases are beyond our control. Again, this is a common issue across the industry.
And this is something that is going to accompany the company into the coming future as well?
Yes.
Regarding the second question about the production line integration and timeline?
Regarding the second question: the installation had begun as planned. During the first two days of the conflict with Iran, the supplier team—about eight laborers and two engineers—left Israel immediately and they returned only yesterday. It was almost six to seven weeks that they were not here, and that caused another delay. Once they finish the installation, we have to qualify the line. The update I had before was that by July 1 we would have the line up and running; given the delay, that timeline has shifted but the work has resumed and we expect to complete the installation and qualification in the coming weeks.
There are no further questions at this time. Before I ask Mr. Eli Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website.
In summary, while we are navigating near-term challenges related to timing, logistics and foreign exchange, we remain confident in the foundation of the business. Demand continues to be strong, as reflected in the significant growth in our backlog and the long-term visibility it provides. At the same time, we continue to make strategic investments to expand our capacity and support future growth. As these initiatives progress and external constraints begin to ease, we believe we are well positioned to translate our strong demand environment into improved financial performance in the period ahead. I would like to take the opportunity to thank the employees for their dedication and resilience, particularly in the current environment, as well as our investors for their continued support and confidence in our strategy. Thank you all for joining us on today's call. Have a good day.
This concludes the Eltek Ltd. 2026 First Quarter Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.