Eltek Ltd (ELTK) Q1 2025 Earnings Call Highlights: Revenue Growth Amid Operational Challenges

Eltek Ltd (ELTK) reports increased revenues and production efficiency, despite facing profitability pressures and labor market challenges.

Author's Avatar
May 21, 2025
Article's Main Image

Release Date: May 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Eltek Ltd (ELTK, Financial) reported an increase in revenues for Q1 2025, totaling $12.8 million compared to $11.8 million in Q1 2024.
  • Production efficiency has improved since the beginning of May, with operations stabilizing after initial challenges with new equipment.
  • The company is on track to complete its accelerated investment plan by mid-2026, despite a two-month delay in equipment delivery.
  • Eltek Ltd (ELTK) is actively working to diversify its supply chain in the Far East to expand commercial activities and leverage technological know-how.
  • The company has initiated a company-wide IT transformation to optimize internal workflows and improve operational efficiency.

Negative Points

  • Gross profit decreased to $2.2 million from $3.3 million in Q1 2024, primarily due to higher labor costs and lower yields.
  • Operating profit for the quarter was $0.7 million, down from $1.7 million in the same period last year.
  • Net income for Q1 2025 was $1 million or $0.15 per share, compared to $1.7 million or $0.27 per share in Q1 2024.
  • The Israeli labor market remains challenging, making it difficult to attract qualified candidates for production and engineering roles.
  • There is uncertainty regarding the tariff rates that may apply to products originating from Israel under the new US tariff policy, which could impact cost structures.

Q & A Highlights

Q: Regarding the new line expected to be completed by mid-2026, will it impact the company's profitability, or will profitability return to 2023 levels once the current implementation is finished?
A: The new line, once fully operational in mid-2026, is expected to positively impact profitability by significantly increasing production. The marginal contribution from additional sales will directly benefit the bottom line. The new line will not interfere with current production, allowing for a return to previous profitability levels without disruption.

Q: You mentioned operational difficulties in Q1 due to personnel not traveling to Israel. How do you see sales picking up once these issues are resolved?
A: The operational difficulties in Q1 affected our gross margin due to reduced yield. However, we have overcome these issues with local engineers and support. The main production line, which is crucial, will have personnel arriving from the Republic of Czechoslovakia, ensuring progress. We expect the first plating line to be installed by the end of 2025, increasing capacity and efficiency.

Q: How many existing lines do you have, and what impact will the new lines have on operations?
A: Currently, we have two very old plating lines. We are building a new area for two new lines, with the first arriving by August 2025 and the second in the first half of 2026. These new lines will significantly increase capacity, quality, and efficiency, allowing us to upgrade to new technologies.

Q: Will the new lines only improve operational efficiency, or will they also increase revenues?
A: The new lines will significantly increase capacity, improve quality and efficiency, and allow us to adopt new technologies. This will provide momentum for revenue growth as we meet increased demand with higher-quality products.

Q: Do you see demand supporting the increased capacity from the new lines?
A: Yes, we see strong demand that will support the increased capacity provided by the new lines.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.