Eltek Ltd. Q1 FY2025 earnings call

• Stabilization of new equipment in the Solder Mask Application Department faced challenges due to technical support personnel not traveling to Israel, but improved since May. - Construction of basement for plating lines with European supplier delaying first coating line by ~2 months but on track for mid-2026. - Continued efforts to recruit production workers and engineers in challenging Israeli labor market. - Strong demand across all segments, leading to increased lead times. - Uncertainty regarding US tariffs on Israeli products, but competitive position in US market may benefit from tariffs on other countries. - Actively diversifying supply base in Far East and exploring partial production abroad. - Company-wide process to replace core information system expected to take 18 months to optimize workflow.

In the first quarter of 2025, Eltek Ltd reported revenues of $12.8 million compared to $11.8 million in the first quarter of 2024. Gross profit decreased to $2.2 million from $3.3 million in the prior year. Operating profit was $0.7 million versus $1.7 million in Q1 2024. Net income was $1 million or $0.15 per share compared to $1.7 million or $0.27 per share in Q1 2024. EBITDA for the quarter was $1.2 million compared to $2.1 million in the prior year period. Cash flow from operating activities totaled $0.1 million during Q1 2025.

• The new line to be fully operated by mid-2026 will positively impact profitability as it will significantly increase production. - Plating line from Republic of Czechoslovakia expected to arrive around August 2025, with installation taking several months, expecting to increase capacity and efficiency by end of 2025.

• Challenges in stabilizing new equipment due to technical support personnel not traveling to Israel, causing lower production yield and negatively impacting profitability. - Delay of ~2 months in delivery of the first coating line by European supplier. - Difficulties in Israeli labor market in hiring qualified production workers and engineers. - Uncertainty regarding US tariff policy on Israeli products and inclusion of defense-related equipment in the tariff framework.

Q: Regarding the new line expected to end implementation in mid-2026 and its impact on profitability, and if profitability will return to 2023 levels.

A: Eli Yaffe stated the new line will positively impact profitability as it will significantly increase production, and the marginal contribution of additional sales goes to the bottom line. He also mentioned the new line won't interfere with current production but didn't give forecast on returning to 2023 profitability.

Q: About Q1 holdback due to operational difficulties and people refusing to travel to Israel, and how sales will pick up.

A: Eli Yaffe said Q1 holdback was due to reduced yield affecting gross margin, overcome with local engineers. Ron Freund mentioned plating line from Republic of Czechoslovakia expected to arrive, and it's during 2025, with installation taking several months expecting to increase capacity and efficiency by end of 2025.