Eltek Ltd (ELTK) 2024 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Limited 2024 Second Quarter Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

女士們先生們，謝謝你們的支持。歡迎參加 Eltek Limited 2024 年第二季財務業績電話會議。（操作員指示）謹此提醒，本次會議正在錄製中。

Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer; and Ron Freund, Chief Financial Officer, I would like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A.

在我將電話轉給執行長 Eli Yaffe 先生之前；和財務長 Ron Freund，我想提醒您，他們將在今天的演示和問答中提到前瞻性資訊。

By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings.

就其性質而言，這些資訊包含對未來結果的預測、假設和預期，這些結果受到此處概述的風險和不確定性的影響，並在 Eltek 的公開披露文件中進行了更全面的討論。

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.

這些前瞻性陳述是預測，反映了公司當前的信念和期望。實際事件或結果可能有重大差異。我們也將提及非公認會計原則措施。Eltek 沒有義務公開發布對此類前瞻性陳述的修訂，以反映此日期之後發生的事件或情況。

I will now turn the call over to Mr. Eli Yaffe, Mr. Yaffe, please go ahead.

我現在將電話轉給 Eli Yaffe 先生，Yaffe 先生，請繼續。

Thank you. Good morning. Thank you for joining us for 2024 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 summary of the principal factors that affected our results during quarter two, 2024. After our prepared remarks, we will be happy to answer any of your questions.

謝謝。早安.感謝您參加我們的 2024 年第二季財報電話會議。和我在一起的是我們的財務長 Ron Freund。我們將首先向您概述我們的業務，並總結影響我們 2024 年第二季業績的主要因素。在我們準備好發言後，我們將很樂意回答您的任何問題。

By now, everyone should have access to our press release which was released earlier today. The release will be also available on our website. Today, I would like to address two key areas: revenues and operations. I will start with revenues.

到目前為止，每個人都應該可以訪問我們今天早些時候發布的新聞稿。該版本也將在我們的網站上發布。今天，我想談談兩個關鍵領域：收入和營運。我將從收入開始。

Since the beginning of 2023, we have demonstrated consistent growth driven by high demand for our products, timely workforce expansion and ongoing investment in machinery and infrastructure. We actually forecast increased demand and initiate an accelerated investment plan in early 2022, which has already enhanced our capacity and will continue to do so through the end of 2025.

自 2023 年初以來，我們在產品的高需求、及時的勞動力擴張以及對機械和基礎設施的持續投資的推動下實現了持續增長。事實上，我們預測需求會增加，並在 2022 年初啟動加速投資計劃，這已經增強了我們的產能，並將持續到 2025 年底。

However, in this quarter, we experienced a decrease in revenue and profit compared to the previous period. This decline is primarily due to the significant timing shift of some of our key customers who prioritize orders for PCB with medium technology requirements, resulting in lower price and margins.

然而，本季我們的收入和利潤較上一季有所下降。這種下降主要是由於我們的一些主要客戶的時間發生重大變化，他們優先考慮具有中等技術要求的 PCB 訂單，導致價格和利潤下降。

We did not succeed to maintain our profitable mix from the prior period and orders and more complex, higher-margin PCB were pushed to the end of Q2 ‘24 and Q3 2024. Moreover, as mentioned in the previous call, our current bottleneck is manpower. During the second quarter, we continue to face production delays due to the manpower-related capacity constraints. During the quarter, we had 59 working days, compared to 60 to 90 days in Q2 2023, a decrease of 5%.

我們未能成功維持上一期的獲利組合，訂單和更複雜、利潤更高的 PCB 被推遲到 2024 年第二季末和 2024 年第三季末。而且，正如先前電話中提到的，我們目前的瓶頸是人力。在第二季度，由於人力相關的產能限制，我們繼續面臨生產延遲。本季我們有 59 個工作日，而 2023 年第二季為 60 至 90 天，減少了 5%。

The shortage of manpower and decrease in workdays prevent us from producing and delivering some of the high-margin PCB orders we had on hand for Q2 delivery. This unfavorable mix had negatively impacted our short-term financial performance. We finished Q2 with $10.5 million in revenue, gross profit of $1.6 million and gross margin of 16%.

由於人力短缺和工作日減少，我們無法生產和交付第二季交付的部分高利潤 PCB 訂單。這種不利的組合對我們的短期財務表現產生了負面影響。第二季末，我們的營收為 1,050 萬美元，毛利為 160 萬美元，毛利率為 16%。

As mentioned earlier, the lower gross margin for the quarter is attributable to the product mix. Manufacturing costs remains consistent with the previous quarter, but the average sales price was lower leading to a decline in gross margin. We remain confident in our long-term strategy and market position. We expect to return to profitability parameters of previous quarters in Q3 and Q4 2024. As product mix strategies are realigned.

如前所述，本季毛利率較低是由於產品組合所致。製造成本與上一季保持一致，但平均銷售價格較低，導致毛利率下降。我們對我們的長期策略和市場地位仍然充滿信心。我們預計 2024 年第三季和第四季將恢復到前幾季的獲利參數。隨著產品組合策略的重新調整。

As of today, our backlog has increased by 30% since the beginning of 2024. This increase highlights our need to increase capacity immediately, primarily by growing our workforce, which we'll discuss later. Increase in backlog is due to the strong defense sector demand related to the current situation in our area and the shift back of manufacturing from the East. These two factors are major influence in our backlog and future revenues.

截至今天，我們的積壓訂單自 2024 年初以來增加了 30%。這一成長凸顯了我們需要立即增加產能，主要是透過增加勞動力來實現，我們將在稍後討論。積壓的增加是由於與我們地區當前局勢相關的強勁國防需求以及製造業從東方的轉移。這兩個因素對我們的積壓訂單和未來收入有重大影響。

We estimate that we have not yet seen the full impact of the regional conflict and we anticipate further increase in the defense sector demand for our products in the coming quarters. We continue to focus on securing long-term orders rather than short-term orders. We have also decided that in spite of the high defense sector demand, we will continue to allocate enough capacity to meet the demand of our high-end industrial and medical sectors, and we will try to keep the mix of the service segment as before.

我們估計，我們尚未看到地區衝突的全面影響，預計未來幾季國防部門對我們產品的需求將進一步增加。我們繼續專注於獲得長期訂單而不是短期訂單。我們也決定，儘管國防部門需求很高，但我們將繼續分配足夠的產能來滿足高端工業和醫療領域的需求，並且我們將盡力保持服務領域的組合和以前一樣。

I will now discuss our accelerated investment plan and our action to deal with the management -- with the manpower issues. We are continuing our accelerated investment plan with a significant focus on three new coating lines. The first coating line, which called VFV line is already installed and operational.

我現在將討論我們的加速投資計劃以及我們處理管理層和人力問題的行動。我們正在繼續加速投資計劃，並專注於三條新的塗裝線。第一條塗裝線（稱為 VFV 線）已經安裝並投入運作。

During the quarter, we reviewed the status of our suppliers and confirm that the installation of the remaining two coating lines will be installed by the end of 2025. These new lines will increase our capacity, enable the production of more advanced technological products and improve yields. We are currently in the middle of the transition office space within our building to accommodate the required construction for the remaining two coating lines.

本季度，我們審查了供應商的狀況，並確認剩餘兩條塗裝線將於 2025 年底安裝。這些新生產線將提高我們的產能，能夠生產更先進的技術產品並提高產量。我們目前位於大樓內過渡辦公空間的中間，以容納剩餘兩條塗裝線所需的建設。

By the end of the second quarter, we had issued purchase order to all the components of the plan. The balance of payment forecast through the end of 2025 is approximately $8 million. It's important to note that as mentioned previously, this investment is in addition to our regular capital expenditure, which range from $2 million to $3 million per year.

到第二季末，我們已經對該計劃的所有組成部分發出了採購訂單。到 2025 年底的國際收支預計約 800 萬美元。值得注意的是，如前所述，這項投資是在我們每年 200 萬至 300 萬美元的常規資本支出之外的。

Regarding manpower, we are navigating the challenging market with the strong demand for employees. In response to this demand and our forecast for the increased order flow, we have adjusted our recruitment policy, primarily by increasing direct labor salaries. This action has already had positive effect, and we are now increasing our workforce daily. Our plan is to add about 50 new employees in the coming months and to extend our manufacturing capacity to include an extended sales shift. We expect these measures to help us to meet delivery schedule, accelerate delivery dates and increase revenue.

在人力資源方面，我們正應對充滿挑戰的市場以及對員工的強勁需求。為了因應這項需求以及我們對訂單流量增加的預測，我們調整了招聘政策，主要是提高直接勞動力薪資。這項行動已經產生了積極的效果，我們現在每天都在增加員工。我們的計劃是在未來幾個月內增加約 50 名新員工，並擴大我們的製造能力，包括延長銷售班次。我們希望這些措施能幫助我們滿足交貨計劃、加快交貨日期並增加收入。

I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.

我現在將把電話轉給我們的財務長 Ron Freund，討論我們的財務表現。

Thank you, Eli. I would like to draw your attention to the financial statements for the second quarter of 2024.

謝謝你，伊萊。請您關注2024年第二季的財務報表。

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.

在這次電話會議中，我也會討論某些非公認會計準則財務指標。Eltek 使用 EBITDA 作為非 GAAP 財務業績衡量標準。請參閱我們的收益報告，以了解其定義及其使用原因。

I will now go over the highlights of the second quarter of 2024. All numbers mentioned are in US dollars. Revenues for the second quarter of 2024 were $10.5 million, compared to $11 million in the second quarter of 2023. Gross profit reached $1.6 million, compared to a gross profit of $3 million in the second quarter of 2023. The decrease is due to the decrease in revenue and the unfavorable mix of products sold.

我現在回顧一下 2024 年第二季的亮點。所有提及的數字均以美元為單位。2024 年第二季的營收為 1,050 萬美元，而 2023 年第二季的營收為 1,100 萬美元。毛利達到 160 萬美元，而 2023 年第二季的毛利為 300 萬美元。減少的原因是收入減少和銷售產品組合不利。

Operating profit amounted to $0.4 million in Q2 2024, compared to $1.4 million in Q2 2023. We recorded a financial income of $0.5 million during Q2 2024, including income from the devaluation of the NIS against the US dollar and interest on our interest-bearing bank deposits.

2024 年第二季的營業利潤為 40 萬美元，而 2023 年第二季為 140 萬美元。2024 年第二季度，我們錄得 50 萬美元的財務收入，包括新謝克爾兌美元貶值帶來的收入以及計息銀行存款利息。

Net profit was $0.8 million or $0.11 per share in Q2 2024, compared to net profit of $1.3 million or $0.22 per share in Q2 2023. EBITDA was $0.10 million, compared to $1.7 million in Q2 2023. During the second quarter of 2024, we enjoyed positive cash flow from operating activities of $1.8 million.

2024 年第二季淨利為 80 萬美元，即每股 0.11 美元，而 2023 年第二季淨利為 130 萬美元，即每股 0.22 美元。EBITDA 為 10 萬美元，而 2023 年第二季為 170 萬美元。2024 年第二季度，我們的經營活動產生的正現金流為 180 萬美元。

As of June 30, 2024, we had cash and cash equivalents and short-term bank deposits of $18.3 million with no debt outstanding.

截至 2024 年 6 月 30 日，我們擁有現金和現金等價物以及短期銀行存款 1,830 萬美元，沒有未償債務。

We are now ready to answer your questions.

我們現在準備好回答您的問題。

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions)

謝謝。女士們、先生們，現在我們將開始問答環節。（操作員說明）

Tom Kerr, Zacks.

湯姆·科爾、札克斯。

Good morning. Can you explain in more detail the timing shift by these customers that go to medium technology? What specific reason would they shift to medium technology PCBs instead of traditional complex PCBs?

早安.您能否更詳細地解釋這些客戶轉向中等技術的時間轉變？他們轉向中等技術 PCB 而不是傳統複雜 PCB 的具體原因是什麼？

The reason for this unfavorable mix was the timing of production that was required by our customers for lower technology than the regular mix. And that (inaudible) said, we produced more than 40% of region instead of the average of 30%. It was a requirement by our customers. And usually, we try to support our customers and change the manufacturing plan according to their requirements.

造成這種不利混合的原因是我們的客戶要求生產時間的技術低於常規混合。也就是說（聽不清楚），我們生產了超過 40% 的地區，而不是平均值的 30%。這是我們客戶的要求。通常，我們會盡力支持客戶並根據他們的要求更改製造計劃。

Okay. And you indicated it will return to more complex PCBs in the third and fourth quarter. Will that mean the traditional gross margin of 27% will be returning?

好的。您表示將在第三季和第四季回歸更複雜的 PCB。這是否意味著 27% 的傳統毛利率將會回歸？

Yes. Hi, Tom, it's Eli. Yes, we'll return to the 27% for long-term. And as I mentioned before, some of the high-end PCB were pushed to the end of Q2 and toward Q3 2024.

是的。嗨，湯姆，我是伊萊。是的，我們將長期回到 27%。正如我之前提到的，一些高階 PCB 被推遲到第二季末和 2024 年第三季。

Got it. And I noticed that capital expenditures were $5.9 million for the quarter. Is that all related to the accelerated investment program?

知道了。我注意到該季度的資本支出為 590 萬美元。這一切都與加速投資計畫有關嗎？

Most of it.

大部分。

Most of it and what can we expect that in the next --

其中大部分內容以及接下來我們可以期待什麼--

Just one correction, the $5.9 million is for the six months, not the quarter. In the quarter, we invested $3 million.

只是一個更正，590 萬美元是六個月的費用，而不是季度的費用。本季我們投資了 300 萬美元。

Okay. Sorry, I thought that was the other one. Where do you expect that in the second-half of the year in terms of capital expenditures?

好的。抱歉，我以為那是另一件。您預計下半年的資本支出會如何？

So as we say, it depends mainly on the timing of installation of machines and delivery. We have a balance of about $8 million regarding the accelerated investment plan to be paid during the rest of 2024 and 2025. I estimate that during the next half year, we'll spend some somewhere around $2 million.

正如我們所說，這主要取決於機器安裝和交付的時間。關於加速投資計劃，我們在 2024 年剩餘時間和 2025 年期間支付的餘額約為 800 萬美元。我估計在接下來的半年裡，我們將花費約 200 萬美元。

Okay. So much of that will be in 2025, then --

好的。那麼其中大部分將在 2025 年實現--

Yes.

是的。

And one more, are you guys still looking for a presence in North America? Any progress on that?

還有一個問題，你們還在尋找在北美的業務嗎？這方面有進展嗎？

Yes, we are still looking for a suitable target company. We cannot tell something about it. It hasn't reached a stage we will report something, but we are working with this issue also.

是的，我們仍在尋找合適的目標公司。我們無法透露任何有關它的資訊。目前還沒有達到我們要報告的階段，但我們也在處理這個問題。

Okay. Thank you. I'll jump back in the line. Thank you.

好的。謝謝。我會跳回隊伍中。謝謝。

The next question is from Michael Wu. Please go ahead.

下一個問題是 Michael Wu 提出的。請繼續。

Hi. First of all, would you mind to disclose the percentage of the revenue mix for the defense sector?

你好。首先，您介意透露國防部門收入組合的百分比嗎？

The defense sector is approximately was 60% in Q2 2024.

2024 年第二季度，國防部門約 60%。

So it's the same, right, around --

所以都是一樣的，對吧，左右--

Yes. Yeah. It does not change. What was changed is the mix of the product within the defense sector.

是的。是的。它不會改變。改變的是國防部門內的產品組合。

Okay. So I mean, do you expect the Q3, Q4 will be the same similar like revenue mix?

好的。所以我的意思是，您是否預期第三季、第四季的營收組合會相同？

No, the mix is going to change back to 30%-70% as we mentioned, not 40%-60% as it was as it was in Q2, sorry.

不，正如我們所提到的，混合比例將變回 30%-70%，而不是第二季的 40%-60%，抱歉。

Okay. So we'll go up a little bit, right?

好的。所以我們會上升一點，對嗎？

Yes. It will go up.

是的。它會上漲。

It will go up. High-margin PCBs will go up.

它會上漲。高利潤PCB將上漲。

Okay. Great. About the CapEx for the next 1.5 years until the end of 2025, would you expect like the total CapEx would be around $10 million, $12 million-ish million

好的。偉大的。關於截至 2025 年底的未來 1.5 年的資本支出，您預計總資本支出約為 1000 萬美元、1200 萬美元左右

We expect that it will be around $10 million.

我們預計該金額約為 1000 萬美元。

Okay, great. Thank you. That’s all my questions. Thanks.

好的，太好了。謝謝。這就是我所有的問題。謝謝。

(Operator Instructions)

（操作員說明）

Tom Kerr, Zacks.

湯姆·科爾、札克斯。

Hi, just one follow-up on the manpower issue. I couldn't quite hear the phone line was a little blurry, but did you say you will be hiring 50 people and maybe just explain the manpower issue one more time?

你好，我只是關於人力問題的一個後續行動。我聽不太清楚，電話線有點模糊，但你是不是說你會僱用 50 個人，也許只是再解釋一次人力問題？

Right now, the current situation in the manpower labor market in Israel is very tough. So we increased in July 1 to increase salary of direct employees in Eltek. And by doing it, we start to absorb more people to work with us. I'm speaking about direct employees. And the plan is to increase the manpower by 50 people, five-0.

目前，以色列勞動市場情況十分嚴峻。所以我們在7月1日增加了Eltek直接員工的薪水。透過這樣做，我們開始吸引更多的人與我們一起工作。我說的是直接員工。並且計劃增加人手50人，五比零。

And we are hoping to do it by the year-end. It's a very tough market, but our steps shown performance. That means that once we raise the salaries of direct labor, we could recruit more employees, and we are recruiting on a daily basis.

我們希望在年底前做到這一點。這是一個非常艱難的市場，但我們的舉措顯示出了成效。這意味著一旦我們提高直接勞工的薪資，我們就可以招募更多的員工，而且我們每天都在招募。

And are those all primarily manufacturing employees? Or are there other areas?

這些都是主要的製造業員工嗎？或是有其他領域嗎？

Manufacturing employees.

製造員工。

Direct employees and manufacturing employees, yes.

直接員工和製造員工，是的。

Great. Okay. Thanks.

偉大的。好的。謝謝。

Thank you, Tom.

謝謝你，湯姆。

That's all I had.

這就是我所擁有的一切。

Next question is from Ron Su. So please go ahead.

下一個問題來自Ron Su。所以請繼續。

Hi, everyone. First question is regarding this potential future deal in North America, how are you going to finance these kind of deals? Do you consider like future offering as you did in the $16 per share offering? Or do you consider financing with bank loan or change of shares? This is the first question.

大家好。第一個問題是關於北美未來潛在的交易，您將如何為此類交易提供資金？您是否考慮像在每股 16 美元的發行中那樣進行未來的發行？或考慮透過銀行貸款或換股融資？這是第一個問題。

Second question is, do you think that the changes in the mixture of PCB complex products that you can compensate on even the revenue and the profit. So that in the total year, you will reach your -- I don't know if it's target, because you don't publish target, but to compensate even more for the 27% gross margin and for even higher revenue than previous quarters?

第二個問題是，您認為PCB複雜產品混合的變化您可以在收入和利潤上進行補償嗎？那麼，在全年中，你將達到你的——我不知道這是否是目標，因為你沒有公佈目標，但為了補償 27% 的毛利率和比前幾個季度更高的收入？

Hi, Ron. So in regard to your first question, any financing plans for the purchase will depend, of course, on the scope of acquisition and the form of financing that will be discussed and agreed between the parties. But at this point, our plans are to try and finance the purchase with the cash we have on hand. And by raising debt, we do not intend at this stage to raise additional capital for this purchase.

嗨，羅恩。因此，關於你的第一個問題，任何收購的融資計劃當然都取決於雙方將討論和商定的收購範圍和融資形式。但目前，我們的計劃是嘗試用我們手頭上的現金為購買提供資金。透過舉債，我們現階段不打算為此次收購籌集額外資金。

Regarding your second question, Ron, regarding the mix of product in Q2, as I said in our PR, the mix of the quarter contained mortgage requirement that results lower prices and margins, but the normal average is 30% rigid PCB and 70% rigid flex with high margins. But this quarter, in quarter two, the mix was contained 42%, more precisely, 42% of rigid PCB with low margin and 58% high-end PCB with high margin.

關於你的第二個問題，羅恩，關於第二季度的產品組合，正如我在PR 中所說，該季度的組合包含抵押貸款要求，導致價格和利潤下降，但正常平均值是30% 剛性PCB 和70% 剛性PCB高利潤的彈性。但本季度，即第二季度，該組合包含 42%，更準確地說，42% 是低利潤率的剛性 PCB，58% 是高利潤率的高端 PCB。

And we agreed to receive and produce this order since we have long-term relationships with our key customers. And when there is a demand for change priorities, we support our customers and change our manufacturing plan accordingly. And that's the reason that we know that it was an event, because of the situation in the defense sector in Israel, and we support them. But for long-term, we still focused 27% gross margin.

由於我們與主要客戶有著長期的合作關係，因此我們同意接收並生產該訂單。當需要改變優先事項時，我們會為客戶提供支援並相應地改變我們的製造計劃。這就是我們知道這是一個事件的原因，因為以色列國防部門的情況，我們支持他們。但長期來看，我們仍關注27%的毛利率。

And as for the balance of the year, we don't give guidelines, as you probably know. We believe that we will make better than this quarter. And at this point, I will stop.

至於今年的剩餘時間，我們不會給出指導方針，您可能知道。我們相信我們會比本季做得更好。在這一點上，我會停下來。

Okay. Thank you.

好的。謝謝。

Thank you.

謝謝。

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 the participants that a replay of this call will be available tomorrow on the website. Would you like to make a concluding statement?

目前沒有其他問題。在我請 Yaffe 先生繼續結束語之前，我想提醒與會者，明天將在網站上提供本次電話會議的重播。您願意做一個總結性發言嗎？

Before we conclude, I want to express my gratitude to our employees and their unwavering dedication and executing our strategy. I also extend my thanks to our customers, partners and investors for their ongoing support. Thank you all for joining today's call. Have a great day.

在結束之前，我想對我們的員工以及他們堅定不移的奉獻精神和執行我們的策略表示感謝。我還要感謝我們的客戶、合作夥伴和投資者的持續支持。感謝大家參加今天的電話會議。祝你有美好的一天。

Thank you. This concludes the Eltek Limited 2024 second quarter financial results conference call. Thank you for your participation. You may now go ahead and disconnect.

謝謝。Eltek Limited 2024 年第二季財務業績電話會議至此結束。感謝您的參與。現在您可以繼續並斷開連接。