Elbit Systems in Q2 2018: Revenues at $892 Million
The Company’s backlog of orders for the quarter ended June 30, 2018, totaled $8,065 million as compared to $7,329 million in the second quarter of 2017
IsraelDefense
| 17/08/2018
Photo: Elbit Systems
Elbit Systems reported its consolidated results for the quarter ended June 30, 2018.
“We are pleased with the second quarter year over year revenue growth of 9% while maintaining the 10% year over year growth in our backlog,” said Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems. “This quarter, in particular, we see the fruits of our prior investment in Cyberbit. In line with our strategy of partnering with strategic investors to aid in the development of our commercial businesses, we had this quarter a $30 million external investment in Cyberbit. We believe that Cyberbit will further develop its business together with our new partner.
“Furthermore, our strategy of enhancing organic growth with synergistic acquisitions continues. The results of this quarter for the first time include those of Universal Avionics Systems Corporation, a company we acquired that is active in the field of commercial avionics. This acquisition is part of our strategy of strengthening our footprint in this business area. Our combined portfolio will create strong synergies that we believe will ultimately generate further growth opportunities for us.”
Q2 2018 Results
Revenues in the second quarter of 2018 were $892.2 million, as compared to $818.3 million in the second quarter of 2017.
Non-GAAP gross profit amounted to $254.8 million (28.6% of revenues) in the second quarter of 2018, as compared to $248.3 million (30.4% of revenues) in the second quarter of 2017. GAAP gross profit in the second quarter of 2018 was $250.0 million (28.0% of revenues), as compared to $242.3 million (29.6% of revenues) in the second quarter of 2017. The gross profit margin was affected by the mix of projects sold in the quarter.
Research and development expenses, net were $76.6 million (8.6% of revenues) in the second quarter of 2018, as compared to $67.1 million (8.2% of revenues) in the second quarter of 2017.
Marketing and selling expenses, net were $69.9 million (7.8% of revenues) in the second quarter of 2018, as compared to $66.3 million (8.1% of revenues) in the second quarter of 2017.
General and administrative expenses, net were $37.0 million (4.2% of revenues) in the second quarter of 2018, as compared to $33.6 million (4.1% of revenues) in the second quarter of 2017. The lower expenses in the second quarter of 2017 resulted from revaluation of liabilities related to assets and activities acquired in prior years.
Other operating income, net in the second quarter of 2018 amounted to $45.4 million. This was the result of net gains related to valuation of shares in two of our Israeli subsidiaries in the cyber and medical instrumentation areas, due to third-party investments.
Non-GAAP operating income was $73.1 million (8.2% of revenues) in the second quarter of 2018, as compared to $82.7 million (10.1% of revenues) in the second quarter of 2017. GAAP operating income in the second quarter of 2018 was $111.8 million (12.5% of revenues), as compared to $75.3 million (9.2% of revenues) in the second quarter of 2017.
Financial expenses, net were $10.7 million in the second quarter of 2018, as compared to $6.8 million in the second quarter of 2017. The increase in financial expenses in the second quarter of 2018 was mainly a result of higher level of debt and increased libor interest rates.
Taxes on income were $7.3 million (effective tax rate of 7.6%) in the second quarter of 2018, as compared to $10.3 million (effective tax rate of 15.1%) in the second quarter of 2017. The effective tax rate is affected by the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income and other income that is not part of the taxable income.
Other expenses, net in the second quarter of 2018 amounted to $5.1 million. This was the result of an adjustment to the fair value of our investment in an Israeli subsidiary.
Equity in net earnings of affiliated companies and partnerships was $3.3 million (0.4% of revenues) in the second quarter of 2018, as compared to $4.8 million (0.6% of revenues) in the second quarter of 2017.
Net income attributable to non-controlling interests was $0.1 million in the second quarter of 2018, as compared to $0.4 million in the second quarter of 2017.
Non-GAAP net income attributable to the Company's shareholders in the second quarter of 2018 was $57.5 million (6.5% of revenues), as compared to $68.8 million (8.4% of revenues) in the second quarter of 2017. GAAP net income in the second quarter of 2018 was $91.9 million (10.3% of revenues), as compared to $62.6 million (7.6% of revenues) in the second quarter of 2017.
Non-GAAP diluted net earnings per share attributable to the Company's shareholders were $1.35 for the second quarter of 2018, as compared to $1.61 for the second quarter of 2017. GAAP diluted earnings per share in the second quarter of 2018 were $2.15, as compared to $1.46 for the second quarter of 2017.
The Company’s backlog of orders for the quarter ended June 30, 2018, totaled $8,065 million as compared to $7,329 million as of June 30, 2017. Approximately 74% of the current backlog is attributable to orders from outside Israel. Approximately 55% of the current backlog is scheduled to be performed during 2018 and 2019.
Operating cash flow used in the six months ended June 30, 2018, was $1.1 million, as compared to $2.7 million provided in the six months ended June 30, 2017.
Recent Events
On May 31, 2018, the Company announced that its wholly-owned subsidiary in Canada, GeoSpectrum Technologies Inc. was awarded a contract from STX Engine Co., to deliver a full end-to-end Underwater Sound Source System and software package to the Republic of Korea Navy. The system will be supplied by the end of 2018. The contract is in an amount that is not material to Elbit Systems.
On June 4, 2018, the Company announced that its wholly-owned subsidiary, Cyberbit Ltd. (Cyberbit), raised a $30 million investment from the private equity investor Claridge Israel L.P. Engaged in the cybersecurity area, Cyberbit provides the cyber training and simulation solution - Cyberbit Range and a consolidated detection and response platform that protects an organization’s entire attack surface across IT, OT and IoT networks.
On June 13, 2018, the Company announced that its subsidiary, Beyeonics Surgical Ltd. (Beyeonics), concluded a first round of funding, raising a $11.5 million investment from leading investment groups including an international corporation. Beyeonics develops innovative surgeon-centered visualization technologies that improve the surgeon’s efficiency and substantially enhance patient safety and surgical outcomes.
On June 19, 2018, the Company announced that the agreements reached between Elbit Systems and the Israeli Government for the acquisition of IMI Systems Ltd. (IMI), were approved by the Committee for the Tender of the Sale of State Shares and by the Board of Directors of the Company. The purchase price will be approximately $495 million (NIS 1.8 billion), with an additional payment of up to approximately $27 million (NIS 100 million) contingent upon IMI meeting certain performance goals.
On June 21, 2018, the Company announced that it was awarded an approximately $17 million contract from a European country to supply a range of advanced ground-based electronic warfare and signal intelligence systems. The contract will be performed over a two-year period.
On June 28, 2018, the Company announced that in light of the progress in the acquisition of IMI by the Company, as announced by the Company on June 19, 2018, the Israeli rating agency Midroog Ltd. ("Midroog"), placed the Series "A" Notes issued by the Company in 2010 and in 2012 (the Notes") under review for downgrade (Credit Review). The Notes are currently rated "Aa1" (on a local scale). The Credit Review will be performed by Midroog following the closing of the acquisition transaction.
On August 7, 2018, the Company announced that it was awarded an approximately $85 million contract from the Israeli Ministry of Defense to supply electronic warfare suites for the Israeli Navy Sa'ar 6-class corvettes that will be tasked with the protection of Israel's Economic Exclusion Zone. The contract will be performed over a 10-year period.
The Company’s backlog of orders for the quarter ended June 30, 2018, totaled $8,065 million as compared to $7,329 million in the second quarter of 2017
Photo: Elbit Systems
Elbit Systems reported its consolidated results for the quarter ended June 30, 2018.
“We are pleased with the second quarter year over year revenue growth of 9% while maintaining the 10% year over year growth in our backlog,” said Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems. “This quarter, in particular, we see the fruits of our prior investment in Cyberbit. In line with our strategy of partnering with strategic investors to aid in the development of our commercial businesses, we had this quarter a $30 million external investment in Cyberbit. We believe that Cyberbit will further develop its business together with our new partner.
“Furthermore, our strategy of enhancing organic growth with synergistic acquisitions continues. The results of this quarter for the first time include those of Universal Avionics Systems Corporation, a company we acquired that is active in the field of commercial avionics. This acquisition is part of our strategy of strengthening our footprint in this business area. Our combined portfolio will create strong synergies that we believe will ultimately generate further growth opportunities for us.”
Q2 2018 Results
Revenues in the second quarter of 2018 were $892.2 million, as compared to $818.3 million in the second quarter of 2017.
Non-GAAP gross profit amounted to $254.8 million (28.6% of revenues) in the second quarter of 2018, as compared to $248.3 million (30.4% of revenues) in the second quarter of 2017. GAAP gross profit in the second quarter of 2018 was $250.0 million (28.0% of revenues), as compared to $242.3 million (29.6% of revenues) in the second quarter of 2017. The gross profit margin was affected by the mix of projects sold in the quarter.
Research and development expenses, net were $76.6 million (8.6% of revenues) in the second quarter of 2018, as compared to $67.1 million (8.2% of revenues) in the second quarter of 2017.
Marketing and selling expenses, net were $69.9 million (7.8% of revenues) in the second quarter of 2018, as compared to $66.3 million (8.1% of revenues) in the second quarter of 2017.
General and administrative expenses, net were $37.0 million (4.2% of revenues) in the second quarter of 2018, as compared to $33.6 million (4.1% of revenues) in the second quarter of 2017. The lower expenses in the second quarter of 2017 resulted from revaluation of liabilities related to assets and activities acquired in prior years.
Other operating income, net in the second quarter of 2018 amounted to $45.4 million. This was the result of net gains related to valuation of shares in two of our Israeli subsidiaries in the cyber and medical instrumentation areas, due to third-party investments.
Non-GAAP operating income was $73.1 million (8.2% of revenues) in the second quarter of 2018, as compared to $82.7 million (10.1% of revenues) in the second quarter of 2017. GAAP operating income in the second quarter of 2018 was $111.8 million (12.5% of revenues), as compared to $75.3 million (9.2% of revenues) in the second quarter of 2017.
Financial expenses, net were $10.7 million in the second quarter of 2018, as compared to $6.8 million in the second quarter of 2017. The increase in financial expenses in the second quarter of 2018 was mainly a result of higher level of debt and increased libor interest rates.
Taxes on income were $7.3 million (effective tax rate of 7.6%) in the second quarter of 2018, as compared to $10.3 million (effective tax rate of 15.1%) in the second quarter of 2017. The effective tax rate is affected by the mix of the tax rates in the various jurisdictions in which the Company's entities generate taxable income and other income that is not part of the taxable income.
Other expenses, net in the second quarter of 2018 amounted to $5.1 million. This was the result of an adjustment to the fair value of our investment in an Israeli subsidiary.
Equity in net earnings of affiliated companies and partnerships was $3.3 million (0.4% of revenues) in the second quarter of 2018, as compared to $4.8 million (0.6% of revenues) in the second quarter of 2017.
Net income attributable to non-controlling interests was $0.1 million in the second quarter of 2018, as compared to $0.4 million in the second quarter of 2017.
Non-GAAP net income attributable to the Company's shareholders in the second quarter of 2018 was $57.5 million (6.5% of revenues), as compared to $68.8 million (8.4% of revenues) in the second quarter of 2017. GAAP net income in the second quarter of 2018 was $91.9 million (10.3% of revenues), as compared to $62.6 million (7.6% of revenues) in the second quarter of 2017.
Non-GAAP diluted net earnings per share attributable to the Company's shareholders were $1.35 for the second quarter of 2018, as compared to $1.61 for the second quarter of 2017. GAAP diluted earnings per share in the second quarter of 2018 were $2.15, as compared to $1.46 for the second quarter of 2017.
The Company’s backlog of orders for the quarter ended June 30, 2018, totaled $8,065 million as compared to $7,329 million as of June 30, 2017. Approximately 74% of the current backlog is attributable to orders from outside Israel. Approximately 55% of the current backlog is scheduled to be performed during 2018 and 2019.
Operating cash flow used in the six months ended June 30, 2018, was $1.1 million, as compared to $2.7 million provided in the six months ended June 30, 2017.
Recent Events
On May 31, 2018, the Company announced that its wholly-owned subsidiary in Canada, GeoSpectrum Technologies Inc. was awarded a contract from STX Engine Co., to deliver a full end-to-end Underwater Sound Source System and software package to the Republic of Korea Navy. The system will be supplied by the end of 2018. The contract is in an amount that is not material to Elbit Systems.
On June 4, 2018, the Company announced that its wholly-owned subsidiary, Cyberbit Ltd. (Cyberbit), raised a $30 million investment from the private equity investor Claridge Israel L.P. Engaged in the cybersecurity area, Cyberbit provides the cyber training and simulation solution - Cyberbit Range and a consolidated detection and response platform that protects an organization’s entire attack surface across IT, OT and IoT networks.
On June 13, 2018, the Company announced that its subsidiary, Beyeonics Surgical Ltd. (Beyeonics), concluded a first round of funding, raising a $11.5 million investment from leading investment groups including an international corporation. Beyeonics develops innovative surgeon-centered visualization technologies that improve the surgeon’s efficiency and substantially enhance patient safety and surgical outcomes.
On June 19, 2018, the Company announced that the agreements reached between Elbit Systems and the Israeli Government for the acquisition of IMI Systems Ltd. (IMI), were approved by the Committee for the Tender of the Sale of State Shares and by the Board of Directors of the Company. The purchase price will be approximately $495 million (NIS 1.8 billion), with an additional payment of up to approximately $27 million (NIS 100 million) contingent upon IMI meeting certain performance goals.
On June 21, 2018, the Company announced that it was awarded an approximately $17 million contract from a European country to supply a range of advanced ground-based electronic warfare and signal intelligence systems. The contract will be performed over a two-year period.
On June 28, 2018, the Company announced that in light of the progress in the acquisition of IMI by the Company, as announced by the Company on June 19, 2018, the Israeli rating agency Midroog Ltd. ("Midroog"), placed the Series "A" Notes issued by the Company in 2010 and in 2012 (the Notes") under review for downgrade (Credit Review). The Notes are currently rated "Aa1" (on a local scale). The Credit Review will be performed by Midroog following the closing of the acquisition transaction.
On August 7, 2018, the Company announced that it was awarded an approximately $85 million contract from the Israeli Ministry of Defense to supply electronic warfare suites for the Israeli Navy Sa'ar 6-class corvettes that will be tasked with the protection of Israel's Economic Exclusion Zone. The contract will be performed over a 10-year period.
