Yitzhak Nissan - Chairman & CEO Roberto Tulman - Deputy CEO and Chief Technology Officer Amnon Shemer - CFO

Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. Third Quarter 2017 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 27, 2017. 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, 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 their 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 the call over to Mr. Yitzhak Nissan. Mr. Nissan, please go ahead.

Thank you, good morning everyone. Thank you for joining us and welcome to Eltek 2017 third quarter earning call. With me are, Amnon Shemer, our Chief Financial Officer and Roberto Tulman, my Deputy CEO and Chief Technology Officer. We will begin by providing you with an overview of our business and a summary of the principal factors that affected our results in the third 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 third quarter press release which was released earlier today, the release is also available on our website at www.nisteceltek.com. The third quarter was very challenging for the Company due to several significant equipment failures, which impacted our ability to supply our customers order and affected our online delivery performance. In addition, the unsatisfactory operating results resulted into a $1.3 million on the operating cash flow. As a result in November 2017, the Company obtained an additional NIS3 million which is $850,000 line of credit that was guaranteed by Nistec, Eltek's controlling shareholder. We have recently made several changes in our manufacturing operations to address the difficulties encountered in the third quarter. The vast majority of the delayed order will successfully supplied during October 2017. Based on these changes, we were better organized to supply higher sales in the fourth quarter, compared to the third quarter. Furthermore, the backlog of orders as of September 30, 2017 was higher than that at September 30, 2016. In addition to the changes made to the manufacturing operations, we were able to reduce our operating costs compared to the third quarter of 2016. During the third quarter, the Company received a $1.3 million order for one of our existing customers in the United States. Additionally, it should be noted that the governmental project which we announced in July 2017 is progressing as scheduled. Cash and cash equivalents, as of September 30, 2017 were $1 million compared to $842,000 as of September 30, 2016. Taking into account the Company's current cash position, management believes that the Company to generate quarterly revenues of at least $8.8 million in orders -- in order to continue operating without external financing. Management believes that the revenue goals for the fourth quarter will be achieved. I'll now turn the call over to Amnon Shemer, our Chief Financial Officer to discuss our finance. Amnon, please.

Thank you, Yitzhak. Let me please turn your attention to the financials for the third quarter of 2017. During this conference call, I'll be discussing also non-GAAP financial results such as EBITDA and pro forma financial information. Eltek uses such as information as a non-GAAP financial performance measurement. Please see our earnings release for our definition of and our reasons for its use. Before going into detail on the most important financial statement items, please note that the results for the third quarter and the first nine months of 2017 do not include the operations of Kubatronik which were included in the tax results for the comparable periods in 2016. Therefore, we have provided selected financial information on a pro forma basis excluding Kubatronik's results in 2016. Highlights for the third quarter of 2017, revenues for the third quarter of 2017 were $7.7 million, compared to $9.3 million in the third quarter of 2016 and $8.4 million excluding Kubatronik. Gross loss was $32,000, 0.4% of revenues. Excluding a $348,000 one-time amortization of a software system, gross profit for the third quarter was $316,000, 4.1% of revenues compared to gross profit of $880,000, 9.5% of revenues in the third quarter of 2016, and $871,000 or 10.3% of revenues excluding Kubatronik. The decrease in gross profit and gross profit margins reflects the decreased sales, while a significant portion of our cost of sales remained constant, along with the adverse effects of the previously mentioned amortization expense and the 6.3% decrease in the dollar exchange rate. Operating loss was $1.2 million compared to an operating loss of $338,000 in the third quarter of 2016, and $193,000 excluding Kubatronik. As you are all aware, on November 22, 2017, the Company effected a 5:1 reverse stock split. Therefore, I will be providing the earnings per share for both number of shares before and cause the reverse split. Net loss was $1.2 million or $0.12 per share and $0.69 per share post the reverse split, compared to a net loss of $446,000 or $0.04 per share and $0.22 per post split share in the third quarter of 2016. Net loss in Q3 2016 excluding Kubatronik was $317,000 or $0.03 per share and $0.16 per share post the reverse split. EBITDA was a negative amount of $422,000 compared to a positive amount of $164,000 in the third quarter of 2016 and $239,000 excluding Kubatronik. Net cash used in operating activities was $1.3# million, compared to net cash provided by operating activities of $643,000 in the third quarter of 2016 and $705,000 excluding Kubatronik. Cash and cash equivalents as of September 30, 2017 were $1 million, compared to $842,000 as of September 30, 2016. We are now ready to take your questions.

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Robert Temco [ph]. Please go ahead.

This is Robert Temco, just a private investor. I have been investing in Eltek probably trading it for 15 years plus. My question is do you think this company has finally made a turnaround and will start growing. I've been very disappointed over the years as every quarterly report seems to have one excuse after another, and I'm just questioning whether I should continue to hold the stock I like your opinion on that? Thank you.

It's very hard for us to suggest you whether or not to hold the stocks as you've probably been known, but we are trying to do all our best in order to come to that point of turnaround. We've made a lot of changes and we've made a lot of savings as you probably see on the results. At the end of last quarter, we have made another change in operating in order to be able to manufacture more according to the orders that we have. I just mentioned that we do have more orders than we had at the same time last year. So I believe that we are doing all what we can in order to make the Company change the direction and start growing. We will be able to see probably in the end of the fourth quarter.

So you are optimistic?

Yes, otherwise I wouldn’t be here…

Alright good because I know you've invested a lot of money in the Company and I'm hopeful that you are successful. So thank you very much.

I would tell you, welcome I did and I made also another guarantee that NIS3 million for the Company in the last months.

[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.nisteceltek.com. Mr. Nissan, would you like to make your concluding statement?

Yes of course. I would like to thank all of you for joining us on today's call. 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 wonderful day. Thank you very much.

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