Eltek ((ELTK)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Eltek’s recent earnings call painted a picture of robust financial performance, with strong revenue growth and improved profitability. The company has successfully expanded its capacity and capitalized on strong demand in the defense sector. However, these positive developments were somewhat tempered by one-time financial expenses, cash flow challenges, and recruitment difficulties.
Revenue Growth
Eltek reported impressive revenue growth, with Q2 2025 revenues totaling $12.5 million, marking a 20% increase compared to the same period last year. For the first half of 2025, revenues reached $25.3 million, up from $22.2 million in the first half of 2024, showcasing the company’s strong market position.
Gross Profit and Margin Expansion
The company’s gross profit nearly doubled to $3 million in Q2 2025, with a significant expansion in gross margin to 24.1% from 15.6% in Q2 2024. This improvement is attributed to enhanced operational efficiencies and a favorable product mix.
Operational Income Increase
Eltek’s operational income saw a substantial rise, reaching $1.5 million, up from $0.4 million in Q2 2024. This increase indicates improved profitability and effective cost management.
Strong Defense Market Performance
The defense market was a major contributor to Eltek’s revenue, accounting for approximately 65% of total revenues. The company benefited from increased demand both domestically and internationally, underscoring its strategic focus on this sector.
Infrastructure and Capacity Expansion
Eltek has made significant strides in infrastructure and capacity expansion, including a new 40-meter coating line expected by the end of 2025 and a completed upgrade to the cooling system, providing a 20% surplus capacity.
One-time Financial Expenses
The company recorded $1 million in one-time financial expenses due to a 9% devaluation of the U.S. dollar against the Israeli shekel, impacting its financial results.
Cash Flow Challenges
Eltek faced cash flow challenges, with $2.9 million used in operating activities in Q2 2025, primarily due to increased trade receivables and inventory.
Recruitment Challenges
The company is experiencing difficulties in recruiting qualified manufacturing personnel. Efforts are underway to address this issue through a government program aimed at easing recruitment challenges.
Forward-looking Guidance
Eltek’s forward-looking guidance remains optimistic, with expectations of continued revenue growth and profitability. The company anticipates that incremental revenue will significantly impact profitability, potentially contributing approximately $0.50 on a dollar to their gross profit. This positive outlook is supported by strong financial metrics, including an EBITDA of $2 million, representing 15.6% of revenue.
In summary, Eltek’s earnings call reflected a positive sentiment with strong revenue growth and improved profitability, driven by strategic capacity expansion and robust demand in the defense sector. Despite facing some financial and operational challenges, the company’s forward-looking guidance suggests continued growth and profitability, making it an attractive prospect for investors.