Yitzhak Nissan - Chairman & CEO Amnon Shemer - CFO

Welcome to the Eltek Ltd. Second Quarter 2017 Financial Results Conference Call. [Operator Instructions]. 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 the 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, it's 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 the revisions to such forward-looking statements that may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. I will now turn over the call to Mr. Yitzhak Nissan. Mr. Nissan, please go ahead.

Thank you. Good morning everyone. Thank you for joining us and welcome to Eltek 2017 second quarter earning call. With me are Amnon Shemer, our Chief Financial Officer and Roberto Tulman, Deputy CEO and Chief Technology Officer. We will begin by providing you with an overview of our business and a summary of the principal sectors that affected our results in the first quarter; followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our second quarter press release which was released earlier today. The release is also available on our website at www.nisteceltek.com. Our sales in the second quarter were $7.5 million, 14.6% lower than the second quarter of 2016 excluding Kubatronik. The decrease was primarily attributable to the continued competition in the local market and weakness in our global operations. The company is vigorously continuing the implementation of efficiency measures to each operating system which now support higher sales relative to the rate superior to such implementation. Furthermore the market is indicating a qualitative momentum with an increase in the frequency of incoming orders beginning this July. The increase includes a significant order for [indiscernible] authority that we announce in July 24 this year. As told previously release we have enhanced our marketing and sales force in Israel, Europe and United States alongside our efforts made to streamline expenses. We're determined to bring the company back to profitability in the near future. I believe that our actions to-date along with the renewal of manufacturing equipment that we're currently implementing will assist us to reach these goals quickly and efficiently. I will now turn the call over to Amnon Shemer, our Chief Financial Officer to discuss our financials. Amnon please.

Thank you, Yitzhak. Let me please turn your attention to the financials for the second quarter of 2017. During this conference call I will be discussing also non-GAAP financial results such as EBITDA and performance financial information. Eltek uses such as information as a non-GAAP financial performance measurement. Please see our earnings release for our definition of and the reasons for its use. Before going into detail on the most important financial statement items please note that the consolidated financial statements for the second quarter of 2016 included Kubatronik which was our German subsidiary at that time. Therefore selective financial information is also presented on a pro forma basis excluding Kubatronik's results in first six months and the second quarter of 2016. Highlights for the second quarter of 2017, Revenues for second quarter of 2017 were $7.5 million compared with to $9.9 million in the second quarter of 2016, and $8.8 million excluding Kubatronik. Gross profit was $134,000, 1.8% of revenues compared to gross profit of $1.5 million, 14.8% of revenues in the second quarter of 2016. Excluding Kubatronik gross profit was $1.4 million or 16.3% of revenues. The decrease in gross profit and gross profit margins reflect the decreased sales, while a significant portion of our cost of sales remained constant. Operating loss was $1 million compared to an operating profit of $244,000 in the second quarter of 2016, and $373,000 excluding Kubatronik. Net loss was $1.1 million or $0.11 per share, compared to net profit of $217,000 $0.02 per share in the second quarter of 2016, and $327,000 or $0.03 per share excluding Kubatronik. EBITDA was a negative amount of $583,000, compared to EBITDA of $754,000 in second quarter of 2016 and $809,000 excluding Kubatronik. Net cash used by operating activities amounted to $516,000 compared to net cash used by operating activities of $37,000 in the second quarter of 2016. The decline is mainly attributable to the operating results in this quarter. Cash and cash equivalents as of June 30, 2017 were $792,000 compared to $894,000 as of June 30, 2016. That concludes the formal part of our call. We're now ready to take your questions.

[Operator Instructions]. The first question is from Robert Temco [ph]. Please go ahead.

I'm Robert Temco [ph] I'm an investor in the U.S. My question is I've been investor for I don’t know 15 years maybe. Do you see this company becoming profitable in the near future?

It's like a solid [ph] answer, as I mentioned before we're now doing all our best in order to bring the company to profit. We did a lot of actions for that. We stated our sales in Europe, in United States and also in Israel, for the other part we're reducing our cost and making a lot of changes in operation. With the renewal of the machinery I believe that we're going to see the results in the near future.

What are your sales in North America? How are they progressing? How are they compared to last year?

We have changed our manager here in United States as I mentioned before. The lady now is in-charge of the sales in the United States she is really capable. She knows the material. She is coming from the area of manufacturing of PCB. She knows a lot of contact there and we see already good results but we don’t see yet in the sales but we're seeing very, very good results from the activity in the United States.

[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 the participants that a replay of this call will be available tomorrow on Eltek's website, www.nisteceltek.com. Mr. Nissan, would you like to make your concluding statement?

Yes. I would like to thank all of you for joining us on the today's call. We believe that our selfless efforts growth in sales and orders and for improving manufactured flexibility alongside the tightly managed expenses will help us being profitable on the long run. Before we conclude our call, I would like to thank once again all our customers, partners, investors, and the Eltek team for their continued support. Have a good day and thank you.

This concludes the Eltek Ltd second quarter 2017 financial results conference call. Thank you for your participation. You may go ahead and disconnect.