Yitzhak Nissan - Chairman of the Board and Chief Executive Officer Roberto Tulman - Deputy CEO and Chief Technology Officer Amnon Shemer - Chief Financial Officer

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd Fourth Quarter and Full Year 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, April 02, 2015. 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 the 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 undertakes no obligation to publicly release their revisions to such forward-looking statements that maybe made to reflect the events or circumstances after the date hereof, or to reflect the occurrence of anticipated events. I would now turn over the call to Mr. Amnon Shemer. Please begin.

Good morning. Thank you for joining us. And welcome to Eltek’s 2014 full year and fourth 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 full year and fourth quarter press release, which was released earlier today. If you have not received the release, it is available on our website at www.nisteceltek.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 results 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 reason for its use. Revenues for the full year ended December 31, 2014 were $46.6 million compared to revenues of $16.2 million recorded in 2013. Gross profit for the full year of 2014 was $6 million, 12.9% of revenues, compared to gross profit of $8 million 15.9% of revenues in 2013. During 2014, the company recorded a decrease in deferred tax assets of $1.5 million due to changes in market conditions and increase uncertainty about the company’s ability to utilize fair tax assets in the foreseeable future. In addition, the company recorded onetime expenses in the amount of $680,000 associated with management downsizing and a goodwill impairment charge associated with our German subsidiary, Kubatronik. Total one-time expenses recorded in 2014 was $2.2 million. Net loss for the full year of 2014 was $2.7 million or $0.26 per fully diluted share, compared to net profit of $3.8 million or $0.53 per fully diluted share in 2013. Before one-time expenses recorded in 2014 and before the $3 million tax asset recognition in 2013, net loss for the full year of 2014 on a non-GAAP basis was $457,000 or $0.05 per fully diluted share, compared to net profit of $848,000, or $0.09 per fully diluted share in the full year of 2013 on a non-GAAP basis. Please see the reconciliation table included in the press release. Fourth quarter 2014, revenues for the quarter ended December 31, 2014 were $10.6 million compared with revenues of $12.7 million recorded in the fourth quarter of 2013. Gross profit for the fourth quarter of 2014 was $1.3 million 12.5% of revenues compared with gross profit of $1.8 million 14% of revenues in the fourth quarter of 2013. Net loss for the fourth quarter of 2014 was $1.8 million, or $0.18 per fully diluted share, compared to net profit of $2.8 million or $0.39 per fully diluted share in the fourth quarter of 2013. Before the one-time expenses recorded in the fourth quarter of 2014 and before the tax asset recognition in the fourth quarter of 2013, net loss for the fourth quarter of 2014 on a non-GAAP basis was $172,000 or $0.02 per fully diluted share, compared to a net loss $271,000 or $0.04 per fully diluted share in the fourth quarter of 2013. Please see the reconciliation table included in the press release. EBITDA; for the full year of 2014, Eltek had EBITDA of $1.2 million compared with EBITDA of $3 million in 2013. In the fourth quarter of 2014, Eltek had EBITDA of $250,000 compared with EBITDA of $321,000 in the fourth 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 results. Yitzhak.

Thank you, Amnon. Eltek’s revenues in 2014 suffered mostly due to the decline in sales to the defense sector and also reduction in global demand for printed circuit boards of the type we manufacture. We have also faced increased price competition in our marketplace. We have adopted efficiency measures, which significantly reduced our operating costs. The savings were partially reflected in 2014 and are expected to positively impact our results in 2015. In addition, new equipment that we recently purchased is expected to allow us to enhance our solution offerings. We are now ready to take your questions.

Thank you. [Operator Instructions] The first question is from Tamia [Indiscernible] of PI. Please go ahead.

Yes, good morning, I have a few questions. The first question is, you are speaking about reduced global demands and I’m reading it from the press release for printed circuit boards of the type we manufacture. I assume we are speaking about your – what you currently manufacture, is your new equipment going to change that or do you see that as a continued trend?

No as a matter of fact the use of the demand is because of the moving from hardware to software. We don’t expect the new machines would enable us to manufacture different boards since we are in technology we are very strong and we believe that we can manufacture all kind of boards, that our customer needs. We are facing good reduction in the demand but this doesn’t have to do with build -- the technology build that we have.

So do you expect this reduction to change direction or do you anticipate this to continue, maybe I’m not understanding. Is it a fundamental shift from boards to software?

It generally is , in general yes, but we first of all we are trying to enlarge our market shares by doing some changes by reducing our prices but second we believe that it will be changed since we already have held that designs in hardware are a little bit growing now and I hope it will change. Also, I can tell you that we have hired another [Indiscernible] in the United States. We already are seeing a growing in the order of deduct coming from the United States. So this reduction we believe won’t continue.

Thank you. Please bear with me; I have a few more questions.

That’s okay.

In terms of the revenue when I look at the year your Q1 was 12.2, Q2 12.3, Q3 11.7, Q4 10.6, how do you see yourselves reversing this trend of dropping revenues, number one? And number two, in the last few quarters you constantly stated that the strength of the dollar was – sorry the weakness of the dollar was merged [ph] in EBITDA to increasing earnings and now that the dollar is strong do you believe that that is going to make an impact moving forward?

As you have seen we have experienced a decline in the sales of 2014, but the gross deduction measures we adopted together with the strength of the dollar helps to offset part of the negative impact or the decline in the revenues. So the effects of the reduction of the revenues is less when you see the results of the negative losses.

Got it, thank you. Now in terms of the cash, when I look at -- the cash is down by $1.4 million short term credit is up by almost $1 million so obviously that creates a situation that the current liabilities and current assets are now misaligned, how do you plan to get back on track? Do you have, do you see an issue?

Hi, this is Amnon there. We have lines of credit that are not utilized, we are a – as we stated the losses were generated most of them due to one time expenses and a reduction or right of tax assets. That doesn’t have much of an impact on our relationship with the bank. We can’t see any negative impact on the -- our with the bank and we still have our lines of credit available to us, so continue the growth of the company and the investment that we have already started in new equipment.

Okay. Now Amnon, can you explain to me please the income tax logic because a year ago exactly you said that you took that profit or added asset because you for saw that this is going to be used against profits. Now you are saying exactly the opposite. Why the shift suddenly and what happened during this year there is such a 180 degrees back?

Okay, in 2014 we reduced the certain -- tax assets due to changes in the PCB market conditions, as we discussed before. And also the increase uncertainty about our ability to utilize these tax assets in the foreseeable future. This asset is the result from a reduced amount to oil [ph] products. Also a change in the PCB buying patterns by our domestic military customers which shifted some of the PCB acquisitions overseas, also increased the competition and coupled with a reduced prices in the local market. Also from ongoing manufacturing challenges and forcible devaluation of the U.S. dollar in the future, all of which and they have a adverse effect on our future profitability. In 2013, we determine that certain of our tax assets were more likely than not to be realized in the future areas, based on the three years of consistent profit profits that we have. In 2014 the changes describe that I just described required us to re-examine this matter. And the result of the analysis was that we had to reduce the tax asset.

So does that mean that you don’t anticipate profits in the foreseeable future?

No, we didn’t say that. We didn’t write off all the tax assets. It was an analysis that we performed which reflect -- the result of this analysis show that we had to reduce it, only certain portion of it not all of it.

Does it has an -- does it have an expiry date?

It doesn’t have expiry date.

So why not just leave it on the balance sheet as is?

As you know the accounting, the accounting terms require us to be conservative. And…

Okay, that makes sense. I hear you. Now, Mr. Nissan you made a comment a year ago as you took over the company or majority sharing the company that internally we’ve seen the mistake that you expected to double the revenues. I know you don’t make any comment on future, I fully understand that, but do you are you still as optimistic as you were a year ago?

I should be since I am a -- I have the majority of the shares; in minimal effect the simulation with Nistec can give a lot more opportunity to Eltek. It’s not so simple because we are facing a [Indiscernible] hall of fame, I would do it in English but anyway relation between the companies and that’s why we have to be careful not – it’s not so easy to order everything from Eltek. Even though we did order PCBs from Eltek but now we are working on an agreement that we’ll have to bring to the committee so we’ll be able to order more. I really believe that the synergy between Nistec and Eltek can do a lot more than we have done last year.

How would you see these two companies working together? Do you see the synergies that you were planning on working, moving forward and growing both?

That’s what I said. I see right now we designed from example, we designed in software which customers from Eltek don’t use. We design with software that only customers from Nistec are using. Now we are planning to get into a new software, so we’ll be able to give our Eltek customers, we’ll be able to give them software services, mail services and these probably allows the opportunities for Eltek. Because as you know if you design the board according to the ability that you can manufacture then the possibility of having good boards on time will increase and this is what we are now working on.

I see. Okay last question. And this is about the current quarter and I know you can’t speak moving forward, but this quarter is finished a few days ago, a couple of days ago. Was it positive, was it soft, do you see a turn what – can you give us any color on what it looks like?

The company’s policy is not to provide any guidelines on the future revenues. So as long as we haven’t announced anything to all the shareholders it’s -- we are very restricted on elaborating on this.

And just one thing I’ve known. You are at the end of the quarter, quarter is over and you are not speaking about any future and all the shareholders they are hopefully listening to this, and I’m not asking about the profit. I just asked if you have any idea to kind of give us some color on it, but I guess if you cannot you cannot ask the quarter is over?

If you allow us, please we would like not to answer this question if it’s possible.

Got it, certainly. Thank you very much.

You’re welcome. Thank you very much.

[Operator Instructions] The next question is from Robert Temko [ph]. Please go ahead.

Yes, when you’ll be announcing the next quarter’s earnings?

Could you repeat the question please?

When will the announcement of the first quarters earning be announced?

It’s still too early to say but as we usually issue a press release with the exact date of releasing the quarterly results.

So approximately when?

You can look at the last year; it will be around the same time.

So one more last question, are you glad that you brought into this company?

You are asking me?

Yes.

Okay, I am still glad that I brought it because now I am inside and I can see that there is a lot to do. If I do everything before, I still would buy the same and pay the same, and I’m optimistic for the future.

I’m glad to hear that.

All right, thank you.

You’re welcome.

There are no further questions at this time. Before I ask Mr. Nissan to go ahead with his closing statements, I would like to remind the participants that a replay of this call will be available tomorrow on Eltek’s website www.eltek.co.in. Mr. Nissan, would you like to make your concluding statements.

Yes, I would like to thank, to thank you all for your participation and your interest in Eltek. We hope to see you all in our future events. And thank you very much and good bye.

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