Elbit Systems Ltd. Q3 FY2024 earnings call

• The third quarter reflects strong demand for technology and solutions, with third consecutive quarter of double-digit revenue growth.
• Non-GAAP gross margin was 24.4%, GAAP gross margin 24%. Non-GAAP operating income was $140.7 million or 8.2% of revenues.
• Backlog as of September 30, 2024, was $22.1 billion, $5.5 billion higher than Q3 2023. New orders were $2.7 billion, $1.4 billion from Israeli market.
• Awarded $335 million contract for European customer, developed Iron Beam high-power laser and Iron Fist Active Protection System, and received Israel Defense Prize wins.
• Expanded production facilities, increased inventories, and recruited employees to meet demand. Expressed gratitude to workforce and wished for hostages' release.

Third quarter revenue increased by 14% to $1.718 billion. Aerospace revenues increased by 7% mainly due to increased UAS sales in Israel. C4I and Cyber revenues increased by 13% year over year mainly due to radio system and command and control system sales. ISTAR and EW revenues increased by 13% mainly due to electronic warfare and electro-optical system sales. Land revenues increased by 24% due to the increase in ammunition and munition sales in Israel. Elbit Systems of America revenues increased by 17% mainly due to increase in night vision systems and medical instrumentation sales. Geographic revenue breakdown: Europe contributed 25% of revenues, North America contributed 23%, Asia-Pacific 18%, and Israel contributed 29%.

• Internal target to reach over $7 billion by 2025. Target 2026 non-GAAP operating margin around 10%.
• Expect double-digit revenue growth in coming quarters to fulfill backlog.
• Ongoing organic growth, and looking for acquisitions to add technologies and market positions.
• ERP system implementation aiding cost reduction and efficiency.

• Supply chain challenges due to growing backlog and production needs.
• Geopolitical uncertainties impacting demand and operations.

Q: Ellen Page asked about the Iron Beam contract and its future revenue contribution.

A: Butzi Machlis discussed energy weapons as a growth engine, investment in high-power lasers, and potential of urban solution.

Q: Ella Fried inquired about growth beyond 2025.

A: Butzi Machlis mentioned organic growth, acquisitions, and ongoing demand. Kobi Kagan talked about segment profitability and ERP system benefits.

Q: Unidentified Analyst asked about capex.

A: Kobi Kagan discussed ERP investment completion and future capex for production expansion.

Q: David Fingold asked about laser contract details.

A: Butzi Machlis explained it's a ground system production contract with Rafael as integrator, and ongoing airborne development.

Q: Stanley Bogen asked about Europe sales decline.

A: Kobi Kagan mentioned increased backlog in Europe and production efforts to fulfill it.