- Order backlog at $20.4 billion; Revenues of $1.6 billion;
- Non-GAAP net income of $81 million; GAAP net income of $74 million;
- Non-GAAP net EPS of $1.81; GAAP net EPS of $1.65
Haifa, Israel. 28 May 2024 . Elbit Systems Ltd. the international high technology defense company, reported today its consolidated results for the first quarter ended March 31, 2024.
In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive view of the Company’s business results and trends. For a description of the Company’s non-GAAP definitions see page 4 below, “Non-GAAP financial data”. Unless otherwise stated, all financial data presented is US-GAAP financial data.
Management Comment:
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented:
“The significant increase in our order backlog, which surpassed $20 billion, highlights the relevance of Elbit Systems’ portfolio of advanced technological and operationally proven solutions in light of the increase in defense budgets world-wide, which positively impacts the revenues and growth of the Company.
Elbit Systems is continuing to implement its long-term strategy and plans, while strengthening its global presence and maintaining its commitments to customers.”
First quarter 2024 results:
Revenues in the first quarter of 2024 were $1,554.0 million, as compared to $1,393.5 million in the first quarter of 2023.
Aerospace revenues were similar to the revenues in the first quarter of 2023. C4I and Cyber revenues increased by 12% in the first quarter of 2024, as compared to the first quarter of 2023 mainly due to radio systems sales in Israel. ISTAR and EW revenues increased by 17% mainly due to Electronic Warfare and Electro-Optic systems sales in Israel. Land revenues increased by 26% due to the increase in ammunition and munition sales in Israel. Elbit Systems of America revenues were similar to the revenues in the first quarter of 2023.
Non-GAAP(*) gross profit amounted to $383.4 million (24.7% of revenues) in the first quarter of 2024, as compared to $369.0 million (26.5% of revenues) in the first quarter of 2023. GAAP gross profit in the first quarter of 2024 was $374.1 million (24.1% of revenues), as compared to $361.5 million (25.9% of revenues) in the first quarter of 2023.
Research and development expenses, net were $98.5 million (6.3% of revenues) in the first quarter of 2024, as compared to $110.3 million (7.9% of revenues) in the first quarter of 2023.
Marketing and selling expenses, net were $89.1 million (5.7% of revenues) in the first quarter of 2024, as compared to $80.2 million (5.8% of revenues) in the first quarter of 2023.
General and administrative expenses, net were $81.2 million (5.2% of revenues) in the first quarter of 2024, as compared to $77.1 million (5.5% of revenues) in the first quarter of 2023.
Non-GAAP(*) operating income was $121.6 million (7.8% of revenues) in the first quarter of 2024, as compared to $108.5 million (7.8% of revenues) in the first quarter of 2023. GAAP operating income in the first quarter of 2024 was $105.4 million (6.8% of revenues), as compared to $93.9 million (6.7% of revenues) in the first quarter of 2023.
Financial expenses, net were $31.2 million in the first quarter of 2024, as compared to $24.2 million in the first quarter of 2023. The financial expenses in 2024 were higher mainly as a result of the significant increase in interest rates, and the required increase in net working capital.
Taxes on income were $11.6 million in the first quarter of 2024, as compared to $8.7 million in the first quarter of 2023.
Non-GAAP(*) net income attributable to the Company’s shareholders in the first quarter of 2024 was $80.7 million (5.2% of revenues), as compared to $79.0 million (5.7% of revenues) in the first quarter of 2023. GAAP net income attributable to the Company’s shareholders in the first quarter of 2024 was $73.7 million (4.7% of revenues), as compared to $62.1 (4.5% of revenues) in the first quarter of 2023.
Non-GAAP(*) diluted net earnings per share attributable to the Company’s shareholders were $1.81 for the first quarter of 2024, as compared to $1.78 for the first quarter of 2023. GAAP diluted earnings per share attributable to the Company’s shareholders in the first quarter of 2024 were $1.65, as compared to $1.40 in the first quarter of 2023.
The Company’s order backlog as of March 31, 2024 totaled $20.4 billion. Approximately 71% of the current backlog is attributable to orders from outside Israel. Approximately 51% of the backlog is scheduled to be performed during the remainder of 2024 and 2025.
Cash flow used in operating activities in the three months ended March 31, 2024 was $6.4 million, as compared to $73.0 million in the three months ended March 31, 2023. The cash flow in the three months ended March 31, 2024 was affected mainly by the increase in inventories and trade receivables offset by the increase in contract liabilities.
Impact of the “Swords of Iron” War on the Company:
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of brutal attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in many other parts of Israel. Israel has also been attacked by other terrorist organizations on different fronts, including from Lebanon, which have prompted military responses from Israel. Following the attacks, the State of Israel declared a state of war, which is ongoing.
Since the commencement of hostilities, Elbit Systems has experienced a material increased demand for our products and solutions from the Israel Ministry of Defense (IMOD) compared to the demand levels prior to the war. We have also increased our support to the IMOD, mainly through deliveries of our systems and the dedicated efforts of our employees. At the same time, the Company continues its activities in the international market including through its local subsidiaries. Subject to further developments, which are difficult to predict, the IMOD’s increased demand for the Company’s products and solutions may continue and could generate material additional orders to the Company.
While the vast majority of our facilities in Israel continue to operate uninterrupted, some of our operations have experienced disruptions due to supply chain and operational constraints, the relocation of certain production lines, evacuation of employees and mobilization of our employees for reserve duty. Since March 2024 the number of employees mobilized has decreased to approximately 6% as of May 19, 2024, and could fluctuate depending on future developments.
Elbit Systems has taken a number of steps to protect the safety and security of our employees, support our increased production, mitigate potential supply chain disruptions and maintain business continuity, among them relocation of production lines from facilities in areas of the country that have been evacuated to other facilities; recruitment of additional employees; increased monitoring of our global supply chain to identify delays, shortages and bottlenecks; rescheduled deliveries to certain of our customers as necessary; and increased inventories.
The extent of the effects of the war on the Company’s performance will depend on future developments of the war that are difficult to predict at this time, including its duration and scope. We continue to monitor the situation closely.
Non-GAAP financial data:
The following non-GAAP financial data, including Adjusted gross profit, Adjusted operating income, Adjusted net income, and Adjusted diluted earnings per share, is presented to enable investors to have additional information on our business performance as well as a further basis for periodical comparisons and trends relating to our financial results. We believe such data provides useful information to investors and analysts by facilitating more meaningful comparisons of our financial results over time. The non-GAAP adjustments exclude amortization expenses of intangible assets related to acquisitions that occurred mainly in prior periods, capital gains related primarily to the sale of investments, restructuring activities, uncompensated costs related to “Swords of Iron” war, non-cash stock based compensation expenses, revaluations of investments in affiliated companies, non-operating foreign exchange gains or losses, one-time tax expenses, and the effect of tax on each of these items. We present these non-GAAP financial measures because management believes they supplement and/or enhance management’s, analysts’ and investors’ overall understanding of the Company’s underlying financial performance and trends and facilitate comparisons among current, past, and future periods.
Specifically, management uses Adjusted gross profit, Adjusted operating income, and Adjusted net income attributable to the Company’s shareholders to measure the ongoing gross profit, operating profit and net income performance of the Company because the measure adjusts for more significant non-recurring items, amortization expenses of intangible assets relating to prior acquisitions, and non-cash expense which can fluctuate year to year.
We believe Adjusted gross profit, Adjusted operating income, and Adjusted net income attributable to the Company’s shareholders are useful to existing shareholders, potential shareholders and other users of our financial information because they provide measures of the Company’s ongoing performance that enable these users to perform trend analysis using comparable data.
Management uses Adjusted diluted earnings per share to evaluate further adjusted net income attributable to the Company’s shareholders while considering changes in the number of diluted shares over comparable periods.
We believe adjusted diluted earnings per share is useful to existing shareholders, potential shareholders and other users of our financial information because it also enables these users to evaluate adjusted net income attributable to Company’s shareholders on a per-share basis.
The non-GAAP measures used by the Company are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.
Investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies. They should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP Supplemental Financial Data:
(US Dollars in millions, except for per share amounts)
| Three months ended March 31, 2024 | Three months ended March 31, 2023 | Year ended December 31, 2023 | |||
| GAAP gross profit | $ 374.1 | $ 361.5 | $ 1,483.0 | ||
| Adjustments: | |||||
| Amortization of purchased intangible assets(*) | 6.4 | 7.0 | 27.3 | ||
| Restructuring of a subsidiary’s activities | — | — | 17.5 | ||
| Stock based compensation | 0.4 | 0.5 | 1.8 | ||
| Uncompensated labor costs related to “Swords of Iron” war | 2.5 | — | 4.3 | ||
| Non-GAAP gross profit | $ 383.4 | $ 369.0 | $ 1,533.9 | ||
| Percent of revenues | 24.7 % | 26.5 % | 25.7 % | ||
| GAAP operating income | $ 105.4 | $ 93.9 | $ 369.1 | ||
| Adjustments: | |||||
| Amortization of purchased intangible assets(*) | 10.3 | 11.2 | 43.9 | ||
| Restructuring of a subsidiary’s activities | — | — | 17.5 | ||
| Stock based compensation | 2.4 | 3.4 | 12.1 | ||
| Uncompensated labor costs related to “Swords of Iron” war | 3.5 | — | 6.1 | ||
| Non-GAAP operating income | $ 121.6 | $ 108.5 | $ 448.7 | ||
| Percent of revenues | 7.8 % | 7.8 % | 7.5 % | ||
| GAAP net income attributable to Elbit Systems’ shareholders | $ 73.7 | $ 62.1 | $ 215.1 | ||
| Adjustments: | |||||
| Amortization of purchased intangible assets(*) | 10.3 | 11.2 | 43.9 | ||
| Restructuring of a subsidiary’s activities | — | — | 17.5 | ||
| Stock based compensation | 2.4 | 3.4 | 12.1 | ||
| Uncompensated labor costs related to “Swords of Iron” war | 3.5 | — | 6.1 | ||
| Revaluation of investment measured under fair value method | — | — | 3.0 | ||
| Non-operating foreign exchange (gains) losses | (7.5) | 3.7 | 12.0 | ||
| Tax effect and other tax items, net | (1.7) | (1.4) | (10.9) | ||
| Non-GAAP net income attributable to Elbit Systems’ shareholders | $ 80.7 | $ 79.0 | $ 298.8 | ||
| Percent of revenues | 5.2 % | 5.7 % | 5.0 % | ||
| GAAP diluted net EPS | $ 1.65 | $ 1.40 | $ 4.82 | ||
| Adjustments, net | 0.16 | 0.38 | 1.88 | ||
| Non-GAAP diluted net EPS | $ 1.81 | $ 1.78 | $ 6.70 |
While amortization of acquired intangible assets is excluded from the measures, the revenue of the acquired companies is reflected in the measures and the acquired assets contribute to revenue generation.
Recent Events:
On April 30, 2024, the Company announced that it was awarded a contract in an amount of approximately $50 million for its new air defense system, “Red Sky”™, by an international customer. The contract will be executed over a period of two years.
On May 5, 2024, the Company announced that it was awarded an initial contract of approximately $37 million to supply Iron Fist Active Protection Systems (APS) to General Dynamics Ordnance and Tactical Systems (GD-OTS) for upgrades to the U.S. Army’s Bradley M2A4E1 Infantry Fighting Vehicles (IFVs). The contract will be performed over a period of two years.
On May 8, 2024, the Company announced that it was awarded a contract worth approximately $53 million to supply the Crossbow Unmanned Turreted 120mm Soft Recoil Mortar Systems to General Dynamics European Land Systems (GDELS) for the installation on Pandur 6×6 APC wheeled armored vehicle for a European customer. The contract will be performed over a period of six years.
On May 21, 2024, the Company announced, further to the report in its Annual Report on Form 20-F for the year ended December 31, 2023, filed on March 28, 2024, that it was awarded a group of contracts in an aggregate amount of approximately $760 million for the supply of ammunition to the IMOD. The contracts will be performed over a period of two years.
On May 23, 2024, the Company announced that it was awarded a contract to supply systems to an international customer, in an amount of approximately $260 million. The contract will be performed over a period of two years.
Dividend:
The Board of Directors declared a dividend of $0.50 per share. The dividend’s record date is June 18, 2024. The dividend will be paid on July 1, 2024, after deduction of withholding tax, at the rate of 16.8%.
