Elbit Reports Revenue Growth in Q2 2019
The company reports a solid revenue growth of over 19%, driven mainly by the acquisition of IMI Systems
IsraelDefense
| 15/08/2019
Elbit President and CEO Bezhalel (Butzi) Machlis (Photo: Elbit Systems)
Elbit Systems on Thursday reported its consolidated results for the quarter ended June 30, 2019.
“With the IMI consolidation, our ongoing focus on efficient operations enabled us to maintain a similar level of operating margins to that of the second quarter last year,” commented Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems. “We continue to integrate and extract synergies from all our recent acquisitions and are looking forward to further growth of our business.”
Main Q2 2019 Results
Revenues in the second quarter of 2019 were $1,064.0 million, as compared to $892.2 million in the second quarter of 2018. The strong growth was driven mainly by the consolidation of IMI.
Non-GAAP gross profit amounted to $294.3 million (27.7% of revenues) in the second quarter of 2019, as compared to $254.8 million (28.6% of revenues) in the second quarter of 2018. GAAP gross profit in the second quarter of 2019 was $288.4 million (27.1% of revenues), as compared to $250.0 million (28.0% of revenues) in the second quarter of 2018.
Research and development expenses, net were $77.3 million (7.3% of revenues) in the second quarter of 2019, as compared to $76.6 million (8.6% of revenues) in the second quarter of 2018.
Marketing and selling expenses, net were $73.6 million (6.9% of revenues) in the second quarter of 2019, as compared to $69.9 million (7.8% of revenues) in the second quarter of 2018.
General and administrative expenses, net were $57.2 million (5.4% of revenues) in the second quarter of 2019, as compared to $37.0 million (4.2% of revenues) in the second quarter of 2018.
Other operating income, net in the second quarter of 2018 was $45.4 million. This was the result of net gains related to valuation of shares in two of our Israeli subsidiaries in the commercial cyber and medical instrument areas, due to third party investments.
Non-GAAP operating income was $89.6 million (8.4% of revenues) in the second quarter of 2019, as compared to $73.1 million (8.2% of revenues) in the second quarter of 2018. GAAP operating income in the second quarter of 2019 was $80.3 million (7.5% of revenues), as compared to $111.8 million (12.5% of revenues) in the second quarter of 2018.
Financial expenses, net were $20.3 million in the second quarter of 2019, as compared to $10.7 million in the second quarter of 2018. Financial expenses, net in the second quarter of 2019 include exchange rate differences of approximately $5.2 million related to the recognition of lease liabilities denominated in foreign currencies (mainly in New Israeli Shekels) as a result of the adoption of ASC 842, Leases, effective January 1, 2019.
Other income, net was $1.6 million in the second quarter of 2019, as compared to other expenses, net of $5.1 million in the second quarter of 2018, mainly due to the non-service cost components of pension plans, in accordance with ASU 2017-07 and adjustments to the fair value of our investments in Israeli subsidiaries.
The Company’s backlog of orders as of June 30, 2019 totaled $9,796 million, as compared to $8,065 million as of June 30, 2018. Approximately 60% of the current backlog is attributable to orders from outside Israel. Approximately 56% of the current backlog is scheduled to be performed during the second half of 2019 and 2020.
Operating cash flows used in the six months ended June 30, 2019 was $91.5 million, as compared to $1.1 million used in the six months ended June 30, 2018.
Investing cash flows include approximately $344.9 million in proceeds from factoring of the premises evacuation asset related to the IMI acquisition.
Financing cash flows include approximately $184.8 million in proceeds resulting from the issuance of shares to institutional investors.
Recent Events
On June 16, 2019, the Company announced that its wholly-owned subsidiary, Elbit Systems - Cyclone Ltd., was awarded an approximately $50 million contract for the supply of structural parts from composite materials for an aircraft of a customer in North America. The contract will be performed over six years.
On June 19, 2019, the Company announced that it was awarded an approximately $73 million contract from Diehl Defence GmbH & Co. KG to provide J-MUSIC™ Directed Infrared Counter Measure systems for the German Air Forces’ Airbus A400M aircraft. The contract will be performed over a four-year period.
On June 25, 2019, the Company announced that its subsidiary, BrightWay Vision Ltd. (BWV), raised a $25 million investment from Koito Manufacturing Co, Ltd. and Magenta Venture Partners, following which they hold approximately 38.5% of BWV’s shares, on a fully diluted basis.
On June 26, 2019, the Company announced, further to its announcement of August 17, 2017, that on June 25, 2019, the United States Court of Appeals for the Federal Circuit in Washington, DC ruled completely in Elbit Systems’ favor against Hughes Network Systems, LLC for infringing an Elbit Systems patent relating to high-speed satellite communications, US Patent No. 6,240,073.
On June 26, 2019, the Company announced that its subsidiary in the US, Elbit Systems of America, LLC ("Elbit Systems of America"), was awarded an approximately $26 million contract from the United States Customs and Border Protection (CBP) to install an Integrated Fixed Towers (IFT) system in the US Border Patrol Casa Grande Area of Responsibility (AoR) in Arizona. The project will be performed over a one-year period. To date, Elbit Systems of America has been awarded a number of contracts from CBP to install IFT systems in numerous AoR’s covering a total of approximately 200 miles of the Arizona-Mexico border.
On August 7, 2019, the Company announced that it was awarded a contract valued at approximately $80 million to upgrade tanks and supply radio systems for an Army of a country in South East Asia. The contract will be performed over a period of 32 months.
On August 12, 2019, the Company announced that its subsidiary, Elbit Systems of America LLC, ("Elbit Systems of America") was awarded a contract by the US Navy for the supply of components of the Color Helmet Mounted Display System of the CV-22 aircraft. The contract is in an amount that is not material to Elbit Systems and is expected to be completed by October 2020.
The company reports a solid revenue growth of over 19%, driven mainly by the acquisition of IMI Systems
Elbit President and CEO Bezhalel (Butzi) Machlis (Photo: Elbit Systems)
Elbit Systems on Thursday reported its consolidated results for the quarter ended June 30, 2019.
“With the IMI consolidation, our ongoing focus on efficient operations enabled us to maintain a similar level of operating margins to that of the second quarter last year,” commented Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems. “We continue to integrate and extract synergies from all our recent acquisitions and are looking forward to further growth of our business.”
Main Q2 2019 Results
Revenues in the second quarter of 2019 were $1,064.0 million, as compared to $892.2 million in the second quarter of 2018. The strong growth was driven mainly by the consolidation of IMI.
Non-GAAP gross profit amounted to $294.3 million (27.7% of revenues) in the second quarter of 2019, as compared to $254.8 million (28.6% of revenues) in the second quarter of 2018. GAAP gross profit in the second quarter of 2019 was $288.4 million (27.1% of revenues), as compared to $250.0 million (28.0% of revenues) in the second quarter of 2018.
Research and development expenses, net were $77.3 million (7.3% of revenues) in the second quarter of 2019, as compared to $76.6 million (8.6% of revenues) in the second quarter of 2018.
Marketing and selling expenses, net were $73.6 million (6.9% of revenues) in the second quarter of 2019, as compared to $69.9 million (7.8% of revenues) in the second quarter of 2018.
General and administrative expenses, net were $57.2 million (5.4% of revenues) in the second quarter of 2019, as compared to $37.0 million (4.2% of revenues) in the second quarter of 2018.
Other operating income, net in the second quarter of 2018 was $45.4 million. This was the result of net gains related to valuation of shares in two of our Israeli subsidiaries in the commercial cyber and medical instrument areas, due to third party investments.
Non-GAAP operating income was $89.6 million (8.4% of revenues) in the second quarter of 2019, as compared to $73.1 million (8.2% of revenues) in the second quarter of 2018. GAAP operating income in the second quarter of 2019 was $80.3 million (7.5% of revenues), as compared to $111.8 million (12.5% of revenues) in the second quarter of 2018.
Financial expenses, net were $20.3 million in the second quarter of 2019, as compared to $10.7 million in the second quarter of 2018. Financial expenses, net in the second quarter of 2019 include exchange rate differences of approximately $5.2 million related to the recognition of lease liabilities denominated in foreign currencies (mainly in New Israeli Shekels) as a result of the adoption of ASC 842, Leases, effective January 1, 2019.
Other income, net was $1.6 million in the second quarter of 2019, as compared to other expenses, net of $5.1 million in the second quarter of 2018, mainly due to the non-service cost components of pension plans, in accordance with ASU 2017-07 and adjustments to the fair value of our investments in Israeli subsidiaries.
The Company’s backlog of orders as of June 30, 2019 totaled $9,796 million, as compared to $8,065 million as of June 30, 2018. Approximately 60% of the current backlog is attributable to orders from outside Israel. Approximately 56% of the current backlog is scheduled to be performed during the second half of 2019 and 2020.
Operating cash flows used in the six months ended June 30, 2019 was $91.5 million, as compared to $1.1 million used in the six months ended June 30, 2018.
Investing cash flows include approximately $344.9 million in proceeds from factoring of the premises evacuation asset related to the IMI acquisition.
Financing cash flows include approximately $184.8 million in proceeds resulting from the issuance of shares to institutional investors.
Recent Events
On June 16, 2019, the Company announced that its wholly-owned subsidiary, Elbit Systems - Cyclone Ltd., was awarded an approximately $50 million contract for the supply of structural parts from composite materials for an aircraft of a customer in North America. The contract will be performed over six years.
On June 19, 2019, the Company announced that it was awarded an approximately $73 million contract from Diehl Defence GmbH & Co. KG to provide J-MUSIC™ Directed Infrared Counter Measure systems for the German Air Forces’ Airbus A400M aircraft. The contract will be performed over a four-year period.
On June 25, 2019, the Company announced that its subsidiary, BrightWay Vision Ltd. (BWV), raised a $25 million investment from Koito Manufacturing Co, Ltd. and Magenta Venture Partners, following which they hold approximately 38.5% of BWV’s shares, on a fully diluted basis.
On June 26, 2019, the Company announced, further to its announcement of August 17, 2017, that on June 25, 2019, the United States Court of Appeals for the Federal Circuit in Washington, DC ruled completely in Elbit Systems’ favor against Hughes Network Systems, LLC for infringing an Elbit Systems patent relating to high-speed satellite communications, US Patent No. 6,240,073.
On June 26, 2019, the Company announced that its subsidiary in the US, Elbit Systems of America, LLC ("Elbit Systems of America"), was awarded an approximately $26 million contract from the United States Customs and Border Protection (CBP) to install an Integrated Fixed Towers (IFT) system in the US Border Patrol Casa Grande Area of Responsibility (AoR) in Arizona. The project will be performed over a one-year period. To date, Elbit Systems of America has been awarded a number of contracts from CBP to install IFT systems in numerous AoR’s covering a total of approximately 200 miles of the Arizona-Mexico border.
On August 7, 2019, the Company announced that it was awarded a contract valued at approximately $80 million to upgrade tanks and supply radio systems for an Army of a country in South East Asia. The contract will be performed over a period of 32 months.
On August 12, 2019, the Company announced that its subsidiary, Elbit Systems of America LLC, ("Elbit Systems of America") was awarded a contract by the US Navy for the supply of components of the Color Helmet Mounted Display System of the CV-22 aircraft. The contract is in an amount that is not material to Elbit Systems and is expected to be completed by October 2020.
