管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2026 Second Quarter Financial Results Conference Call. Operator instructions: 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.
Good morning, and thank you for joining us for our 2026 Second 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 Q2 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 also be available on our website. As we stated in our press release, our second quarter results continue to reflect a loss as we remain in an important transition period, focused on stabilization of manufacturing operations and building the human and operational infrastructure required to support our next phase of growth. I would like to provide some additional context on this transition and the progress we are making. The market environment remains strong with continued demand for our products and a strong backlog. The challenge we are facing is not demand, but our ability to continuously convert this demand and our backlog into production and shipments at the level we would like. Second quarter revenues were $11.5 million, growing revenue for the first half of 2026 to approximately $22 million. We recognize that this level of revenue is below the level that the current demand environment would support. Given our cost structure, the company required a significantly higher level of revenue than we achieved during the first half of the year in order to fully leverage our fixed operating expenses and reach our full profitability potential. At the same time, we are beginning to see some development in our gross margin performance. Gross loss in the second quarter was $1 million compared to a $1.8 million loss in the first quarter. This improvement was driven by the higher level of revenue as well as improvement in the average selling price of the PCBs. The improvement in the average selling price reflects the gradual adjustment of our pricing to the higher cost environment. This captures both the impact of the weaker U.S. dollar and the significant pressure we have seen across raw materials, production overhead and depreciation. As newer orders booked under our updated pricing structure move through production and become a larger part of our sales mix, we expect this pricing adjustment to increasingly reflect in our results. At the same time, the supply environment remained challenging. We continue to experience limitations in our availability of certain raw materials, particularly fiberglass-based material, which is also in strong demand from the rapidly growing AI infrastructure industry. In some cases, we are facing significant raw material price increases; in other cases, supply is subject to allocation quotas. We have been able to secure the material required to continue operations and serve our customers, but doing so has become significantly more difficult and has required much closer coordination with our suppliers. Beyond our defense portfolio, we remain firmly focused on driving growth in our medical and high-end industrial markets. In the medical sector, we have secured key certifications that position us well to capture future demand. Meanwhile, our high-end industrial business continued to perform strongly, backed by robust demand for our offering. Together, these strategic initiatives will help balance our market mix and diversify our revenue stream going forward. We are making steady progress in strengthening our operational infrastructure. We are well involved in the implementation of our new ERP system, which we believe will provide a stronger foundation for managing and scaling our operations. We have also completed the installation of our newly arrived PCB plating line and have started acceptance testing in parallel with initial trial production for customers' qualifications. We expect to kick off the official qualification process during the third quarter. As we have previously discussed, this process is expected to take several months before the line reaches full commercial production. Additionally, our second plating line is currently scheduled by our supplier to arrive in Israel by the end of this year, backed with contractual penalties for any delayed installation. We are also continuing to strengthen our workforce. During the quarter, we successfully integrated approximately 15 foreign employees into our operation, and we have continued the process of bringing in an additional approximately 15 foreign employees. Strengthening the workforce is an important component in our ability to improve production capacity and operational efficiency and support the growth of the business. Taken together, these initiatives are aimed at strengthening the foundation of our manufacturing operation and providing us with the capacity, workforce and infrastructure required to support higher production levels. We remain encouraged by the strong demand environment and the high level of our backlog. Our focus now is on completing the transition and improving our ability to convert that demand into higher levels of production and revenue. As we achieve greater operational stability and higher revenue levels, we believe we will be able to leverage our existing cost structure more efficiently. Together with the improvements we are seeing in the average selling price and the continued adjustment of our pricing to reflect the current cost environment, we believe this will put us on a path toward a return to the profitability levels the company achieved historically. We are making steady progress across these areas and remain confident that the steps we are taking are building a stronger foundation for improved operational and financial performance in the period ahead. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Thank you, Eli. I would now like to review the financial results for the second quarter of 2026. During this call, I will also refer to certain non-GAAP financial measures. Eltek's EBITDA is a non-GAAP measure of financial performance. Please refer to our earnings release for the definition of EBITDA and the reasons for its use. I will now review the key financial highlights for the second quarter. All figures are presented in U.S. dollars. Revenues for the second quarter of 2026 were $11.5 million compared to $12.5 million in the second quarter of 2025. Gross loss was $1 million compared to gross profit of $3 million in the prior year period. The year-over-year decline in gross profitability was driven by lower revenue volume, production inefficiencies and appreciation of the U.S. dollar against the Israeli shekel. Operating loss was $2.5 million compared to operating profit of $1.5 million in the second quarter of 2025. Financial expenses were $0.7 million compared to $1 million in the prior year period. The financial expense in the current quarter primarily reflected the depreciation of the U.S. dollar against the Israeli shekel, partly offset by interest income earned on our cash balances. Net loss for the quarter was $2.7 million, or $0.41 per share, compared to net income of $0.4 million, or $0.05 per share, in the second quarter of 2025. EBITDA loss was $1.9 million compared to EBITDA of $1.9 million in the prior year period. Despite the net loss, operating activities generated $0.7 million of cash during the quarter. As of June 30, 2026, we had $11.5 million in cash and cash equivalents and no outstanding debt, providing us with a strong and solid balance sheet. We are now ready to answer your questions.
分析師問答
Operator instructions: The first question is from Mark Sharogradsky of Kepler Capital.
I have a few questions. The first one: when will we begin to see any improvement, especially in the gross margin, because we invested a lot of money in the production lines and now we are not seeing any improvement, even deterioration in the operating results? The next question: have you already finished installing all the plating lines, and can you give us some update on this? And then what do you see on the demand side?
Regarding your first question, we expect the improvement to be gradual as several key factors come together. This includes increased production volume, improved production efficiency, better utilization of our existing capacity, the ramp-up of our new production lines, as I explained in response to your second question, and improved availability of critical raw materials. At the same time, we are working to secure new orders at pricing levels that better reflect the current cost environment and the value of our products. While the timing of the improvement may vary from quarter to quarter, we believe that as these factors stabilize and our investments become fully operational, we will be in a stronger position to return to more normalized levels of revenue and profitability. Regarding your second question, as I mentioned in detail during the discussion, the first plating line is already fully installed. Acceptance testing has already started, and by this coming Thursday we are going to make the first plating just for demonstration. The next step is to work with customers to certify the lines customer by customer. The second plating line is currently being built abroad in Europe; it will be shipped to Israel and installed and completed before year-end. The qualification process for the second line will continue after installation as well. On demand, as I mentioned before, demand continues to be strong.
So I don't understand: if demand is so strong and we hear about huge demand in the U.S., especially for data centers and specialized defense, why is the gross margin still negative? Why aren't you able to drive normal growth, because I don't think the customers have many alternatives?
I think that I answered it. The issue is the operational side, not the demand side.
And Mark, you cannot just increase prices arbitrarily. We are working in a competitive environment; even if demand is strong, there is still competition from local and foreign competitors. So you can't simply double your price and expect to keep receiving purchase orders. We need to deliver and convert the current backlog that we have, which I think is the highest since I arrived at the company, and our mission is to convert it to sales and to be in quarters with increased revenues and not at the low levels that we saw in the first half of 2026.
Okay. Ron, can you speak a little bit about backlog pricing? I assume that in the last two quarters you were working on backlog that you built in 2025 when the USD was much higher. So now, when you go into Q3, you are beginning to work on orders you got in Q1 and maybe end of Q1 when the USD was much lower. So will we see revenue and gross profit improvement in the next quarter?
This is Eli. I have to say that approximately one-third of our backlog is unrelated to the current exchange rates; these are long-term POs that we received for multi-year supply, and until they are completed this one-third will be a heavy weight on our profitability. The second one-third is in the range of exchange rates around approximately 3.2. The last one-third of our backlog is at the current exchange rate of around 3.0. This last one-third is the most profitable backlog that I mentioned.
Okay. So we should expect to see improvement in the current quarter.
We don't give any forecasts, Mark. But as we said earlier in this call, we saw improvement in our average selling price during the second quarter of 2026, and we hope that we will see additional increases in average prices and in the sales mix.
Operator instructions: There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind our participants that a replay of this call will be available tomorrow on our website.
In summary, we remain encouraged by the underlying strength of our business and the opportunities ahead. Our strong backlog continues to provide solid visibility, reflecting sustained demand for our products and solutions. At the same time, we are making meaningful progress in expanding our capacity and strengthening the operational foundation needed to support growth. I would like to thank our employees for their continued dedication, professionalism and resilience, and our investors for their ongoing confidence and support. Thank you for joining us on today's call. Have a good day.
Thank you. This concludes the Eltek Ltd. 2026 Second Quarter Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.