Elbit Systems Reports $1.1B in Revenues in Q3 2019
IsraelDefense
| 26/11/2019
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems (Photo courtesy of the company)
Elbit Systems reported Tuesday its consolidated results for the quarter ended September 30, 2019.
“We are pleased with the strong growth in our revenues, especially in North America, a strategic region for us, where sales in the quarter increased to 30% of our total revenue,” commented Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems.
“Over the past year we completed a number of important acquisitions that broadened our product portfolio and increased our penetration into strategic markets. The integration of recent acquisitions is progressing as expected, and we continue to explore additional opportunities to extract revenue and cost synergies.
“Elbit Systems has a successful track record of value creation through both organic and acquisitive growth, and we intend to continue pursuing this strategy for the foreseeable future,” Machlis added.
Main Q3 2019 Results
Revenues in the third quarter of 2019 were $1,101.2 million, as compared to $895.2 million in the third quarter of 2018. The strong growth was driven mainly by the consolidation of IMI.
Non-GAAP gross profit amounted to $290.0 million (26.3% of revenues) in the third quarter of 2019, as compared to $260.7 million (29.1% of revenues) in the third quarter of 2018. GAAP gross profit in the third quarter of 2019 was $286.2 million (26.0% of revenues), as compared to $255.9 million (28.6% of revenues) in the third quarter of 2018.
Research and development expenses, net were $79.5 million (7.2% of revenues) in the third quarter of 2019, as compared to $69.6 million (7.8% of revenues) in the third quarter of 2018.
Marketing and selling expenses, net were $75.5 million (6.9% of revenues) in the third quarter of 2019, as compared to $69.4 million (7.8% of revenues) in the third quarter of 2018.
General and administrative expenses, net were $57.5 million (5.2% of revenues) in the third quarter of 2019, as compared to $37.8 million (4.2% of revenues) in the third quarter of 2018.
Other operating income, net in the third quarter of 2019 was 28.0 million. This was the result of a capital gain related to a sale and lease back of buildings by a subsidiary in Israel.
Non-GAAP operating income was $80.7 million (7.3% of revenues) in the third quarter of 2019, as compared to $85.7 million (9.6% of revenues) in the third quarter of 2018. GAAP operating income in the third quarter of 2019 was $101.7 million (9.2% of revenues), as compared to $79.1 million (8.8% of revenues) in the third quarter of 2018.
Financial expenses, net were $18.5 million in the third quarter of 2019, as compared to $8.1 million in the third quarter of 2018. Financial expenses, net in the third quarter of 2019 include exchange rate differences of approximately $6.6 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.
Taxes on income were $7.6 million (effective tax rate of 9.5%) in the third quarter of 2019, as compared to $8.9 million (effective tax rate of 12.6%) in the third quarter of 2018. 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 and expenses that are not a part of the taxable income.
The Company’s backlog of orders as of September 30, 2019 totaled $9,796 million, as compared to $8,108 million as of September 30, 2018. Approximately 62% of the current backlog is attributable to orders from outside Israel. Approximately 46% of the current backlog is scheduled to be performed during the fourth quarter of 2019 and during 2020.
Recent Events
On September 10, 2019, the Company announced that its UK subsidiary, Elbit Systems UK Ltd., was awarded an approximately $38 million contract from the UK Ministry of Defense to supply comprehensive JFST systems to the British Army. The JFST systems will be supplied over a period of two years following which Elbit Systems UK will provide an additional four years of maintenance, technical support and on-site training.
On September 15, 2019, the Company announced that its U.S. subsidiary, Elbit Systems of America, LLC, completed the acquisition of the Night Vision business of L3Harris Technologies (NYSE:LHX) for a purchase price of $350 million.
On September 26, 2019, the Company announced that its subsidiary, Elbit Systems of America LLC, was awarded an $85 million firm-fixed-priced contract, with no option periods, by the U.S. Navy for the repair of Digital Display Indicator (DDI) systems aboard F/A-18 aircraft. The contract will be performed in Talladega, Alabama over a five-year period.
On October 3, 2019, the Company announced that its U.S. subsidiary, Elbit Systems of America LLC, was awarded a delivery order valued at approximately $23 million for the supply of systems and various spare components to the U.S. Marine Corps. The order will be executed in Roanoke, Virginia and will be supplied over the next 10 months.
On October 6, 2019, the Company announced that it was awarded a contract valued at approximately $153 million to supply an army of a country in Southeast Asia with a comprehensive, multi-layered array of Unmanned Aircraft Systems. The contract will be performed over a 22-month period.
On October 29, 2019, the Company announced that following extensive testing by Federal Office for Defense Procurement (Armasuisse) and the Swiss Armed Forces, the Company was selected by the Swiss Federal Department of Defense, Civil Protection and Sport ("DDPS") to provide the Swiss Armed Forces with an army-wide tactical Software Defined Radio (SDR) solution under the Telecommunications Armed Forces (TK A) program, Ersa mob Komm. Contract award is subject to Swiss Parliament approvals.
On October 31, 2019, the Company announced that it was awarded a contract valued at approximately $50 million from the Portuguese Ministry of Defense (MoD) to supply the Portuguese Air Force (PtAF) with a complete Electronic Warfare (EW) suite and Customer Logistics Support for the new KC-390 multi-mission aircraft. The contract will be performed over a five-year period.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems (Photo courtesy of the company)
Elbit Systems reported Tuesday its consolidated results for the quarter ended September 30, 2019.
“We are pleased with the strong growth in our revenues, especially in North America, a strategic region for us, where sales in the quarter increased to 30% of our total revenue,” commented Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems.
“Over the past year we completed a number of important acquisitions that broadened our product portfolio and increased our penetration into strategic markets. The integration of recent acquisitions is progressing as expected, and we continue to explore additional opportunities to extract revenue and cost synergies.
“Elbit Systems has a successful track record of value creation through both organic and acquisitive growth, and we intend to continue pursuing this strategy for the foreseeable future,” Machlis added.
Main Q3 2019 Results
Revenues in the third quarter of 2019 were $1,101.2 million, as compared to $895.2 million in the third quarter of 2018. The strong growth was driven mainly by the consolidation of IMI.
Non-GAAP gross profit amounted to $290.0 million (26.3% of revenues) in the third quarter of 2019, as compared to $260.7 million (29.1% of revenues) in the third quarter of 2018. GAAP gross profit in the third quarter of 2019 was $286.2 million (26.0% of revenues), as compared to $255.9 million (28.6% of revenues) in the third quarter of 2018.
Research and development expenses, net were $79.5 million (7.2% of revenues) in the third quarter of 2019, as compared to $69.6 million (7.8% of revenues) in the third quarter of 2018.
Marketing and selling expenses, net were $75.5 million (6.9% of revenues) in the third quarter of 2019, as compared to $69.4 million (7.8% of revenues) in the third quarter of 2018.
General and administrative expenses, net were $57.5 million (5.2% of revenues) in the third quarter of 2019, as compared to $37.8 million (4.2% of revenues) in the third quarter of 2018.
Other operating income, net in the third quarter of 2019 was 28.0 million. This was the result of a capital gain related to a sale and lease back of buildings by a subsidiary in Israel.
Non-GAAP operating income was $80.7 million (7.3% of revenues) in the third quarter of 2019, as compared to $85.7 million (9.6% of revenues) in the third quarter of 2018. GAAP operating income in the third quarter of 2019 was $101.7 million (9.2% of revenues), as compared to $79.1 million (8.8% of revenues) in the third quarter of 2018.
Financial expenses, net were $18.5 million in the third quarter of 2019, as compared to $8.1 million in the third quarter of 2018. Financial expenses, net in the third quarter of 2019 include exchange rate differences of approximately $6.6 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.
Taxes on income were $7.6 million (effective tax rate of 9.5%) in the third quarter of 2019, as compared to $8.9 million (effective tax rate of 12.6%) in the third quarter of 2018. 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 and expenses that are not a part of the taxable income.
The Company’s backlog of orders as of September 30, 2019 totaled $9,796 million, as compared to $8,108 million as of September 30, 2018. Approximately 62% of the current backlog is attributable to orders from outside Israel. Approximately 46% of the current backlog is scheduled to be performed during the fourth quarter of 2019 and during 2020.
Recent Events
On September 10, 2019, the Company announced that its UK subsidiary, Elbit Systems UK Ltd., was awarded an approximately $38 million contract from the UK Ministry of Defense to supply comprehensive JFST systems to the British Army. The JFST systems will be supplied over a period of two years following which Elbit Systems UK will provide an additional four years of maintenance, technical support and on-site training.
On September 15, 2019, the Company announced that its U.S. subsidiary, Elbit Systems of America, LLC, completed the acquisition of the Night Vision business of L3Harris Technologies (NYSE:LHX) for a purchase price of $350 million.
On September 26, 2019, the Company announced that its subsidiary, Elbit Systems of America LLC, was awarded an $85 million firm-fixed-priced contract, with no option periods, by the U.S. Navy for the repair of Digital Display Indicator (DDI) systems aboard F/A-18 aircraft. The contract will be performed in Talladega, Alabama over a five-year period.
On October 3, 2019, the Company announced that its U.S. subsidiary, Elbit Systems of America LLC, was awarded a delivery order valued at approximately $23 million for the supply of systems and various spare components to the U.S. Marine Corps. The order will be executed in Roanoke, Virginia and will be supplied over the next 10 months.
On October 6, 2019, the Company announced that it was awarded a contract valued at approximately $153 million to supply an army of a country in Southeast Asia with a comprehensive, multi-layered array of Unmanned Aircraft Systems. The contract will be performed over a 22-month period.
On October 29, 2019, the Company announced that following extensive testing by Federal Office for Defense Procurement (Armasuisse) and the Swiss Armed Forces, the Company was selected by the Swiss Federal Department of Defense, Civil Protection and Sport ("DDPS") to provide the Swiss Armed Forces with an army-wide tactical Software Defined Radio (SDR) solution under the Telecommunications Armed Forces (TK A) program, Ersa mob Komm. Contract award is subject to Swiss Parliament approvals.
On October 31, 2019, the Company announced that it was awarded a contract valued at approximately $50 million from the Portuguese Ministry of Defense (MoD) to supply the Portuguese Air Force (PtAF) with a complete Electronic Warfare (EW) suite and Customer Logistics Support for the new KC-390 multi-mission aircraft. The contract will be performed over a five-year period.
