Elbit Systems (ESLT) 2022 Annual Report Transcript

Elbit Systems 2022 Annual Report Conference Call Summary Company Overview - Company: Elbit Systems (NASDAQ: ESLT) - Date of Call: May 1, 2023 - Participants: - Rami Myerson - Investor Relations - Butzi Machlis - President, CEO - Kobi Kagan - CFO - Yossi Gaspar - Senior EVP, Business Management Key Points Industry and Company Context - Elbit Systems operates in the defense and aerospace industry, focusing on advanced technology solutions for military and commercial applications [6][7]. Financial Performance - Consolidated Revenues: Increased by 4% to $5.5 billion in 2022 from$ 5.3 billion in 2021 [11]. - GAAP Operating Income: Decreased to $368 million in 2022 from$ 419 million in 2021 [11]. - Non-GAAP Operating Income: $357 million (6.5% of revenues) in 2022 compared to$ 451 million (8.5% of revenues) in 2021 [11]. - Stock Price Linked Compensation Expenses: Approximately $62 million impacted both GAAP and non-GAAP operating income [11]. Segment Performance - **Aerospace**: - Revenues increased by 9% to$ 1.73 billion in 2022 [12]. - Operating income decreased to $106.8 million (6.2% of revenues) from$ 129.2 million (8.2% of revenues) in 2021 [12]. - C4I and Cyber: - Revenues increased by 8% to $678 million [13]. - Operating income increased to$ 49 million (7.2% of revenues) from $44.4 million (7.1% of revenues) in 2021 [13]. - **ISTAR and EW**: - Revenues increased by 2% to$ 1.05 billion [14]. - Operating income decreased to $49.1 million (4.7% of revenues) from$ 66 million (6.4% of revenues) in 2021 [14]. - Land: - Revenues increased by 5% to $1.17 billion [14]. - Operating income decreased to$ 28.6 million (2.4% of revenues) from $35.6 million (3.2% of revenues) in 2021 [14]. - **Elbit Systems of America (ESA)**: - Revenues decreased by 2% to$ 1.46 billion [14]. - Operating income decreased to $75 million (5.1% of revenues) from$ 124.3 million (8.3% of revenues) in 2021 [14]. Strategic Initiatives - Transformation Goals: Aiming for annual revenues of $6 billion to$ 7 billion with improved profitability and cash generation [6][18]. - Segment Reporting Structure: New segment reporting structure adopted to enhance transparency and align with operational management [5][7]. - Investment in Facilities: Hundreds of millions of dollars invested in new facilities across Israel, the U.S., Germany, and the U.K. to support transformation and backlog conversion [27][31]. Market Outlook - Supply Chain and Cost Pressures: Supply chain disruptions and increased electronic component prices affected all segments in 2022, but expected to be less relevant in 2023 [31]. - Margin Improvement: Management targets a long-term operating margin of around 10% across all segments [26][27]. Miscellaneous - Incentive Compensation: Defined goals for executives include cash generation, profitability, and revenue growth, measured quarterly [21]. - No IPO Plans for ESA: Elbit Systems of America will remain integrated within the company, with no plans for an IPO [39]. Conclusion - Elbit Systems is focused on enhancing operational efficiency, improving profitability, and capitalizing on growth opportunities in the defense and aerospace sectors while navigating challenges related to supply chain and cost pressures [6][31].