Yitzhak Nissan - Chairman and CEO Roberto Tulman - Deputy CEO and CTO Amnon Shemer - Chief Financial Officer

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Limited Third Quarter Financial Results Conference Call. All participants are present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, November 26, 2014. Before I turn the call over to Mr. Yitzhak Nissan, Chairman of the Board and Chief Executive Officer; Roberto Tulman, Deputy CEO and Chief Technology Officer; and Amnon Shemer, Chief Financial Officer. I would like to remind participants that comments made during this conference call may contain projections or other forward-looking statements regarding future events or the future financial performance of Eltek Limited. These statements are only projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. With that said, it is routine for internal projections and expectations to change as quarters progress. All forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update such statements. Please refer to the documents the company files from time to time with the SEC, specifically the company’s annual report on Form 20-F, its periodic reports on Form 6-K and the Safe Harbor language contained in the company’s press releases. These documents contain and identify important factors that could cause the company’s actual results to differ materially from those contained in its projections or forward-looking statements, which the company urges all investors to consider. Eltek takes no -- undertakes no obligation to publicly release their revisions to such forward-looking statements that maybe made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. I would now like to hand the call over to Mr. Amnon Shemer. Mr. Shemer, please go ahead.

Good morning. Thank you for joining us. And welcome to Eltek’s 2014 third quarter earnings call. Presenting on today’s call will be Yitzhak Nissan, Chairman of the Board of Directors and Chief Executive Officer; Roberto Tulman, Deputy CEO and Chief Technology Officer; and myself. By now everyone should have access to our third quarter press release, which was released earlier today. If you have not received the release, it is available on our website at www.eltekglobal.com. Our call today will begin with my presentation of Eltek’s financial results, followed by an overview of our business and a summary of the principal factors that affected our operating results during the third quarter of 2014 by our Chairman and CEO, Mr. Yitzhak Nissan. During this conference call, we will be discussing non-GAAP financial results such as EBITDA. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for our definition of and the reasons for its use. Revenues for the quarter ended September 30, 2014 were $11.7 million compared to revenues of $12.8 million for the third quarter of 2013. Gross profit for the third quarter of 2014 was $1.5 million, 12.8% of revenues, compared to gross profit of $2.5 million or 18.4% of revenues for the third quarter of 2013. The decrease in gross profit and gross profit as a percentage of revenues is mainly attributable to the decline in revenues while a portion of our cost of sales is fixed. During the third quarter of 2014, the company recorded one-time expenses in the amount of $559,000. This expense reflects our previously announced management downsizing, and a goodwill impairment charge associated with the acquisition of our German subsidiary, Kubatronik. Please see the reconciliation table in the press release. Operating loss for the third quarter of 2014 was $446,000. Excluding the above mentioned one-time expenses, operating profit for the third quarter was $113,000, compared to operating profit of $735,000 for the third quarter of 2013. Net loss for the third quarter of 2014 was $532,000, or $0.05 per fully diluted share. Excluding the above mentioned one-time expenses, net profit for the third quarter was $27,000, compared to net profit of $585,000, or $0.09 per fully diluted share, for the third quarter of 2013. EBITDA; in the quarter ended September 30, 2014, Eltek had EBITDA of $134,000. Excluding the above mentioned one-time expenses, EBITDA for the third quarter was $613,000 compared to EBITDA of $1.2 million in the third quarter of 2013. I will now turn the call over to Yitzhak Nissan for his overview of our business and the key factors that affected our third quarter operating results. Yitzhak?

Good morning to our participants. Eltek’s revenue in the third quarter was still weak. We experienced a decline in demand by the domestic defense sector for printed circuit boards manufactured locally. This decline was not sufficiently compensated by sales to the domestic civilian market. In addition, there was a reduction in orders received from the United States. We have taken measures to streamline our operations and to better leverage our competitive advantages. We expanded our sales force in the United States and in Israel, and we are making good progress in modernizing our product lines. In addition, we are offering imported boards to our customers that prefer low cost products. As a leading manufacturer, we can provide these customers better quality control and high-level services. We believe that with these measures, our company will be well positioned to increase its market share in the near future. We are now ready to take your questions.

Thank you. [Operator Instructions] Your first question is from [Robert Temko] [ph]. Please go ahead.

Good morning. I have a question about when you think that the company will return to profitability, do you have a quarter in mind?

Good morning. Up to now, we are trying not to give any future results. This is the policy of the company but as you understand, we are trying very hard to improve our performance and that’s why we have implemented the new way equipment and that’s why we have changed the management team and we are working hard in order to see the result in the future.

Has the money, the $4 million around there have been fully invested yet or you are still equipping the company?

[Due to the effects] [ph] most of the money has been invested, not all the equipment has been write yet, and part of it because of the wall, the technicians of the wall didn’t come in September, they come late there to run the machines. Those machines that we have been received are now starting to be operated. And I believe that all the investment will be launching by the half of 1915 -- 2015.

And will those machines bring new customers and will that enhance the sales to current customers?

We believe they are going to bring us new customers, because we are projecting to new customers too. Although our old customers are still with us, and we saved them to the best of what their requirements.

And my last question, there was announcement about Camtek, I guess their 3D printer, is that going -- is there some revenue involved in that, is that happening already, or is that future revenue?

I don’t believe so. We were part of the team to run those -- these machines here in our facility. Maybe Roberto would like to -- our Chief Technology would like to add a few words about it.

All right. Great. Good morning.

Good morning. The Camtek machine is installed here and has been running on the better side for last three, four months. The machine is working well and we are planning to use it for our customers when the customers approved the new materials, but there is no actual revenue involved with the machine. Although it improved our quality and technology and gives us more flexibility and types of product to kind of manufacture for our customers.

All right. One last question, why is that the policy of the company not to make any projections as far as profitability and things like that?

Okay. There is -- the company’s policy is not to provide guidelines and there is a simple explanation for that. The PCB industry operates under quick turnaround though that are issued for short delivery times. That’s the reason that we prefer not to provide any guidelines for earnings and profitability for future quarters.

I see. Okay. Thank you very much for all your responses.

You’re welcome.

You’re welcome.

The next question is from [Tamira Shenoi] [ph]. Please go ahead.

My first question is about the impact of the dollar? In the past you always said, the last few quarters that the fact that the dollar was so weak or the shekel was strong, does this impacted your profitability? Do you expect that the fact that dollar is now stronger it will impact your profitability positive?

Definitely. Yes. There are reason that -- is a positively and definitely.

Okay. And then one more question, in the past, I think was last quarter, two quarters ago that, there was a tax, deferred tax gain? Obviously, as the company is now gaining traction in business unit making it profitable? What is the purpose of such a transaction long-term?

Okay. We had in the past losses carried forward for tax purposes and those losses were had to be recovered back into the balance sheet, because the company has been profitable for the last three years. There was no reason to leave it written-off. Also in the previous period, we see -- in that contract we see losses. We believe that such losses are temporary and the company will return to profitability in the future and that’s why we believe that the tax asset is -- [recording] [ph] of the tax asset is in place.

So you’re saying that the deferred taxes at this time will be used in order to offset profitability?

That’s what we believe, yes.

Okay. And I understand that at some point you were looking for bank loan in order to continue finance -- continuing operation? How does that look?

Okay.

Okay. Could you please repeat the question?

Yeah. Sure. You were speaking in the past about the bank loan that you were looking to get in order to finance continuing operation? How does that look?

Oh! Excellent. We are looking various banks, we -- some of the loans we have already have taken, some of them, we don’t need them yet, but we have all the insurance from the banks to get those loans.

Okay. So you’re optimistic about being able to continue to finance your operation?

Of course. That’s why we’re working hard. We believed -- in a matter of fact, I believe, we won’t need all the loans that they’re sending for us. We have done very odd reducing our expenses here and those can help us -- will help us into the future.

Thank you. And the couple of very quick question and thank you for your patience.

You’re welcome.

Obviously, it’s a very long-term investor. I was excited to see a year ago that Nistek has taken a majority part in Eltek. How is Nistek going to contribute to Eltek’s future sales? How is that working out?

We are now starting -- in a matter of fact, we have started about few months ago to look for those customers that they Nistek designed board for them. Because as you know, the first stage is to design the boards, then comes the second stage which is manufacturing of the board. The third stage is assemble the boards. Nistek is using the first stage and the third stage. And Eltek is a manufacturing the board. So most of the customers that we designed the board, now we are trying to bring them in and to give them the opportunity to order the board from Eltek. Although everybody has all the options, but for the future I believe it will be more and more that a customer will design the board, manufacture the board and assemble the board under the same roof mainly for the prototypes.

I see. Okay. As a very long-term investor in Eltek’s, following close to 10 years, so is there anything you can say to us, as a group of investors have been holding stock for long time that will, I guess enhance the opportunity to continue to hold them as the manager of the company?

I’ll tell you what, in a matter of fact, it’s very hard to tell you, to give you some precise advises. But I can tell you that we put, as you know, not a small amount of money in this and we believe that we have done a good decision.

In buying, Eltek?

In buying, ELTK, of course.

Okay. Well, thank you very much. I appreciate it.

You are welcome.

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Nissan to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on Eltek’s website, www.eltek.co.il. Mr. Nissan, would you like to make your concluding statement? A - Yitzhak Nissan: Thank you all for your participation in your interest in Eltek. We hope to see you all in our future events. Good morning.

This concludes Eltek Limited third quarter 2014 financial results conference call. Thank you for your participation. You may go ahead and disconnect.