Elbit Systems Ltd. (NASDAQ:ESLT) Q4 2023 Earnings Call Transcript

Elbit Systems Ltd. (NASDAQ:ESLT) Q4 2023 Earnings Call Transcript March 26, 2024

Elbit Systems Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Rami Myerson: Good day, everyone, and welcome to our Fourth Quarter 2023 Earnings Call. This is Rami Myerson, Elbit Systems’ VP, Investor Relations. On the call with me today are Butzi Machlis, our President and CEO; Kobi Kagan, our CFO; and Yossi Gaspar, Senior EVP, Business Management. All participants are at present in a listen-only mode. Following the formal presentation, instructions will be given for the question-and-answer session. As a reminder, this call is being recorded. I would like to point out that the safe harbor statement in the company’s press release issued earlier today also refers to the contents of this conference call. As we do every quarter, we will provide you with both our regular GAAP financial data as well as certain supplemental non-GAAP information.

We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and their reconciliation in today’s press release. Kobi will begin by providing a discussion of the financial results, followed by Butzi, who will talk about some of the significant events during the quarter and beyond. We will then turn the call over to a question-and-answer session. Earlier today, we hosted an Investor Conference at the Tel Aviv Stock Exchange. A presentation of the event is available in the Investor Relations section of our website at www.elbitsystems.com. Investors and analysts who wish to ask questions related to the topics discussed at the Investor Conference are welcome to present their questions during the Q&A session of the call.

With that, I would like now to turn the call over to Kobi. Kobi, please.

Kobi Kagan: Thank you, Rami. Hello, everyone and thank you for joining us today. The 2023 annual results reflects Elbit’s resilience as well as our commitment to supporting the IDF’s efforts during the current war and also delivering to our customers around the world. Many of our customers are investing significantly to upgrade and expand their armed forces, driven by geopolitical tensions. This demand supported the growth of our order backlog to almost $18 billion, providing good visibility. As part of our operational transformation, we continue to invest to expand capacity and delivering the growing backlog. Our financial performance in 2023 also includes the write-off of $52 million non-cash expenses in the fourth quarter related to the closing of an under-performing subsidiary of Elbit Systems of America with limited synergies and a discontinued project managed under the subsidiary.

Approximately $18 million of the expenses related to the restructuring were recorded in COGS and excluded from non-GAAP results. $34 million of the expenses were recorded in G&A and were not excluded from non-GAAP results. I will now highlight and discuss some of the key figures and trends in our financial results. Fourth quarter revenues were $1.626 billion compared to $1.506 billion in the fourth quarter of 2022. For 2023 as a whole, our revenue were approximately $6 billion versus approximately $5.5 billion last year. Our diverse geographic revenue base is important to the long-term sustainability of our business. In 2023, Europe contributed 30%, North America 24%, Asia Pacific 21% and Israel contributed 20% of revenues. The increase in European revenues was broad-based and included growth in UAS, munitions, C4I and radios, EW and training and simulation sales.

Growth in Israeli revenues reflects the increased demand for a broad range of our solutions following the breakout of the Swords of Iron War. Israel contributed 27% of sales in the fourth quarter compared to 20% of revenues over the whole of 2023. North America revenues were lower, mainly due to low airborne sales systems. Asia Pacific revenues declined mainly due to lower sale of precision-guided munitions. The non-GAAP gross margin for the fourth quarter was 25.3% compared to fourth quarter of 2022 at 25.8%. For the full year of 2023, non-GAAP gross margin was 25.7% compared with 25.5% last year. GAAP gross margin in the fourth quarter was 23.5% of revenues compared to 25.3% in the fourth quarter of 2022. Gross profit in the fourth quarter was reduced by approximately $18 million of expenses related to the closing of a subsidiary.

GAAP gross margin in 2023 was 24.8% compared with 24.9% in 2022. The fourth quarter non-GAAP operating income was $105 million, or 6.4% of revenues, compared with $104 million, or 6.9% of revenues last year. GAAP operating income for the fourth quarter was $68 million versus $120 million in the fourth quarter of 2022. Operating income in the fourth quarter included $52 million of expenses as explained above, of which approximately $18 million were excluded from the non-GAAP operating income. Non-GAAP operating income in 2023 was $449 million, or 7.5% of revenues, compared with $367 million, or 6.7% of revenues last year. GAAP operating income was $369 million versus $368 million last year. The operating expenses breakdown in 2023 was as follows.

Net R&D expenses were $424 million, or 7.1% of revenues compared to $436 million, or 7.9% of revenues in 2022. Marketing and selling expenses were 6% of revenues versus 5.9% last year. G&A expenses were $330 million, or 5.5% of revenues compared to $313 million, or 5.7% of revenues in 2022 and includes $34 million of expenses related to the write-off. Financial expenses were $46 million in the fourth quarter compared to $27 million in 2022. Financial expenses in 2023 were $138 million compared to $51 million last year, reflect mainly the increased interest rate environment and higher debt. Other expenses were $5 million in 2023 compared to $24 million in 2022. The reduction includes the re-evaluation of holdings in affiliated companies and expenses related to non-service costs of pension plans.

We recorded a tax benefit of $5 million in the fourth quarter, that was similar to 2022. The effective tax rate in 2023 was 10.1% compared to 8.2% in 2022. Our non-GAAP diluted EPS was $1.56 in the fourth quarter and $6.70 for the full year of 2023, compared to $1.71 in the fourth quarter of 2022 and $0.18 in 2022. GAAP diluted EPS was $0.67 for the fourth quarter of 2023 and $4.82 for the full year, compared to $0.67 in the fourth quarter of 2022 and $6.18 in 2022. 2023 non-GAAP earnings per share reflects improved operational profitability partially offset by the $52 million write-off and higher financial expenses as mentioned previously. I will now review the annual financial results of our business segments and will note that our segmented disclosure of operational income is provided on a GAAP basis.

Aerospace revenue increased by 8% in 2023, mainly due to training and simulation revenues in Europe and UAS revenues in Asia Pacific and Europe, partially offset by lower sales of precision-guided munitions. Aerospace operating income in 2023 was $125 million and 6.7% of segment revenues, compared to $107 million and 6.2% in 2022. The increase in operating income was mainly due to increased revenues and positive program mix. C4I and Cyber revenues increased by 6% year-over-year, mainly due to C4I revenues in Asia Pacific. C4I and Cyber operating income in 2023 was $51 million and 7% of segment revenues, compared to $49 million and 7.2% in 2022. ISTAR and EW revenues increased by 13% in 2023, mainly due to the Electronic Warfare and Electro-Optic systems sales in Europe and countermeasure systems.

ISTAR and EW operating income in 2023 was $135 million and 11.4% of ISTAR and EW segment revenues, compared to $49 million and 4.7% of segment revenues in 2022. The increase in operating income was mainly due to increased revenue and positive program mix. Land revenues increased by 12% in 2023 compared to 2022, mainly due to increase in artillery and weapon stations sales in Europe and ammunition and munition sales in Israel. Land operating income in 2023 was $81 million and 6.2% of segment revenues, compared to $29 million and 2.4% of segment revenues in 2022. The increase in operating income was mainly due to increased revenue, positive program mix, and progress in the operational transformation of IMI. Elbit Systems of America revenues were similar year-over-year.

The $5 million operating loss in 2023 compares to an operating profit of $75 million and 5.1% margin in 2022. The operating loss was mainly due to the $52 million write-off discussed previously as well as negative program mix. Our backlog of orders as of December 31st 2023 was $17.8 billion, $2.7 billion higher than the backlog at the end of 2022. Approximately 60% of the current backlog is scheduled to be performed during 2024 and 2025 and the rest is scheduled for 2026 and beyond. Operating cash flow for the fourth quarter was $314 million inflow compared to $195 million inflow in the same quarter last year. For 2023, we reported operating cash flow of $114 million versus $240 million in 2022. The Board of Directors has declared a dividend of $0.50 per share.

I will now turn the call over to Mr. Machlis. Elbit’s CEO, Butzi, please go ahead.

Butzi Machlis: Thank you, Kobi. I would like to begin by thanking all Elbit employees around the world for their hard work and their ongoing commitment to all of our customers. I also want to send my sincere condolences to the families of our employees that have lost their loved ones during this conflict, and our prayers for a speedy return of all hostages. The financial results of 2023 combined with resilience the company continues to demonstrate, provide me with confidence in our ability to realize the potential of our employees and our advanced technological solutions. We finished 2023 with another record backlog and 8% revenue growth that reflects the strong demand for our relevant portfolio of solutions that we have developed over many years, as well as our broad geographical footprint.

At the beginning of March, we announced the closing of an non-performing subsidiary with limited synergies to our businesses, as well as the discontinuation of a project managed by the subsidiary. This decision is part of our effort to improve our portfolio management and ensure the relevance and synergies of the different parts of Elbit’s portfolio. Kobi discussed the financial impact in his remarks. At our Annual Investor event today, I presented the core pillars of our strategy that we have discussed with you in the past. The first one is our multi-domestic strategy and global presence. Elbit’s revenues are broadly split between the U.S., Europe, Asia Pacific and Israel. We adopted this strategy many years ago to ensure stable growth during periods of different budget increases and cuts and to reduce risks.

To deliver this strategy, we invested in building domestic subsidiaries in key markets around the world. These subsidiaries provide engineering, manufacturing and support to the local defense forces and also export their solutions to other customers. They employ domestic managers and employees and are fully integrated into the defense industrial ecosystem in the whole market, ensuring that defense budgets are spent locally. Elbit Systems provides cutting-edge, operationally proven technology to our subsidiaries that are then adapted to the specific requirements of each customer. Our multi-domestic presence has also helped us overcoming challenges including the current war in Israel and the COVID pandemic. Elbit Systems of America provides a good example of the implementation of our strategy.

Over the last 20 years, Elbit Systems of America has increased sales from approximately $200 million to approximately $1.5 billion in 2023 and employs approximately 3,600 people across the U.S. It is fully integrated into the American defense industrial base, supplying a range of advanced solutions as both as prime contractor and supplier to all branches of the U.S. DoD. In November 2023, Elbit Night Vision received a $500 million ID/IQ contract to supply Squad Binocular Night Vision Goggle to the U.S. Marine Corps. This follow-on order highlights our position as a prime contractor to the DoD. The second pillar of our strategy is our portfolio of technology, technologically advanced solutions. We provide range of solutions that help armed forces close sensor to shooter loop rapidly and effectively.

We provide a range of sensors that can detect the enemy in day and night, communication solutions that can transfer the information around the battlefield and a range of effectors to engage quickly and precisely, helping to reduce collateral damage. Our solutions are developed by employees that have served and are familiar with the challenges of the modern battlefield. Most of our solutions have been used operationally and we strive to improve them regularly based on our experience accumulated by our end customers. In February, we signed two contracts for $600 million and $300 million to supply armed vehicle solutions to the Australian army and a European customer. This solution integrate a range of sensors and other systems that will help increase the vitality and operational effectiveness of armed vehicle equipped with our solution.

The third pillar of our strategy is our significant investment in R&D. Elbit Systems continued to invest more than 7% of revenues to develop a broad range of cutting-edge solutions for our customers. As a percentage of revenue, this is higher than most of our defense deals. By investing our own money in R&D, we retain control of the IP as well as the ability to maximize the synergy that can be generated across the portfolio. The increased digitization of the modern battlefield provides multiple new opportunities to leverage these synergies and incorporating artificial intelligence and machine learning into our solutions. The fourth pillar of our strategy are our 19,000 employees. Most of our employees are veterans that understand the requirements of our customers based on their own experience.

Many of them continue to serve in reserves after the regular military service, providing a valuable feedback loop between the battlefield and the laboratory. During the current conflict, more than 50% of our employees in Israel were mobilized into reserve duties for the IDF and about half of them of those mobilized are still in uniform. We look forward to the speedy and safe return. Our strategy is working as demonstrated by the acceleration in the growth of both our order backlog and revenues in recent years. This growth reflects the successful combination of our international footprint portfolio of relevant solutions, sustained investments in R&D, and our high-quality of employees. At our 2022 Investor Conference, represented the investors with our making in our operational transformation to support the broader transformation of Elbit Systems and help improve performance and our ability to deliver the growing backlog.

In 2023, we made further progress in the operational transformation. In 2023, we opened four new facilities around the world. In the U.S., we opened a new Ground Combat Vehicle Assembly and Integration Center of Excellence in Charleston, South Carolina. And in January, we opened a new production support facility at our Sparton subsidiary in Florida. We also opened new facilities in the UK and Germany. In 2023, we also completed the implementation of the new ERP system across the company. In 2024, we plan to begin operation at our new ammunition production site in Ramat Beka, and the new UAV facility in Modine. In these recent years, we increased CapEx to fund the building of new facilities and the rollout of the new ERP system. We believe this investment will deliver good returns and support growth over the coming years.

The one area the improvement has taken longer than expected for the supply chain is the availability and cost of electronic components improved during the year as expected. However, we have experienced increased delays and disruption to our supply chain following Swords of Iron War. Elbit Systems supplies a range of solutions to the Israel Defense Forces. These include the Digital Army program, [depth 750] command and control solution, electronic warfare system, UAVs, artillery and motor systems, systems for main battle tanks and armed vehicles, night vision systems as well as a range of training and simulation solutions from the single soldier to the squadron and battalion level across all domains and more. Our solutions are currently being used extensively by the IDF.

Since the 7th of October, we have accelerated the development of some of our solutions that were still in development and were scheduled to be fielded in the medium or longer term. They have already been sent to the field in days or weeks. We did this thanks to the dedication of our employees and our culture of innovation and creativity. We are also upgrading the multiple systems and solutions following the lesson learned during the conflict. We have ramped up production to support the IDF requirement and maintained deliveries to our international customers at the same time. We increased production capacity at our factories by adding shift and recruiting several hundred additional employees to support the surge. Before we move to the question and answers, I would like to thank Rami for his contribution to Elbit Systems and wishing success in his future endeavors.

From the 1st of April responsibility for investor relationship — relations will move to Kobi. In summary, we continued to implement the strategy that has built Elbit into a leading global defense company. The current war in Israel has not changed our long-term plans and the progression and transformation is progressing well. I am encouraged by the resilience we have demonstrated overcoming multiple challenges in recent years. All these increased my confidence in our ability to deliver our potential to all our stakeholders, our customers, our employees, and of course to you, our shareholders. And with that, I will be happy to take your questions.

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Q&A Session

Operator: [Operator Instructions] The first question is from Pete Skibitski of Alembic Global. Please go ahead.

Pete Skibitski: Yes, hello everyone and good afternoon.

ButziMachlis: Good afternoon.

Pete Skibitski: Maybe we can start with the very strong backlog growth in the fourth quarter of 7.2%. I think it worked out to be almost 18% for the full year, pretty much all organic. So as you alluded to Butzi, the demand is pretty strong, unusually strong right now. But I wanted to clarify just a little bit. Are you seeing the greatest strength in order flow from the Israeli MoD right now? Because I noted that Israeli revenue almost doubled sequentially into the fourth quarter. So I just was wondering if you could clarify the fastest regional growth in demand.

KobiKagan: Good morning, Pete. This is Kobi. Thank you for your comments and questions. First, as you mentioned, we had 18% organic growth in backlog and $1.1 billion organic growth of backlog just in the fourth quarter, which is above 7%. And as we presented in the last few months, we have a strong intake of international programs, which we mentioned, for instance, the Redback in Australia, the Land 400, which is a $600 million intake. So while having significant orders, as we mentioned in November from the Ministry of Defense, we have also very strong demand from the international market.

Pete Skibitski: Okay, very good, very good. Appreciate that. And then just if I look at operating margins by segment, which you guys give annually, it looks like you did have operating margin expansion in all of your segments year-over-year, except for ESA, where you took the charge, of course. And so I’m just wondering, given the momentum in some of the other segments, does this give you confidence that 2023 is perhaps the trough margin year for Elbit and that will see expansion in ’24 and beyond? Just given you should have better volume and the improvement you’ve seen in the other segments.

ButziMachlis: Hi, this is Butzi. As I’m sure you’ll remember, our plan was to reach a level of revenues of between $6.5 billion to $7 billion at 2026, and an operational profit of about 10% that year as well. We are quite confident — I’m quite confident that we’ll be able to reach the level of revenues earlier than 2026. And we are still fully committed to reach the OP level of 10%. We are working hard to do that. And you can see that we are on track. You can see that quarter-by-quarter we are improving our operational profit.

Pete Skibitski: Very good, very good. One last one for me. I was just wondering, your margin plan, I know rely on the new facility in the south of Israel. I’m just wondering, has the war slowed down construction of that new facility at all or it’s still planned for completion by the end of the year?

ButziMachlis: No, on the contrary, we have accelerated the activity and we expect to start the activity there or to inaugurate it around the fourth quarter of this year.

Pete Skibitski: Okay, great news. Thanks so much guys. Appreciate it.

ButziMachlis: Thank you.

KobiKagan: Thanks Pete.

Operator: The next question is from Ellen Page of Jefferies. Please go ahead.

Ellen Page: Hi, guys. Congrats on the quarter. So just following up on Pete’s question about that facility, how do we think about your ability to continue to grow artillery volume from here? Just given demand is strong, do you have capacity for growth prior to Q4, or is it more constrained? Thank you.

ButziMachlis: Thank you. Thank you for your question. The answer is, yes. We have invested in additional production capacity. We increased the amount of employees. And we are working three shifts. And as was mentioned, we are going to — we have — we opened already last year several new facilities around the globe. And this year we will open two new facilities, one in Modine for UAVs here in Israel, another one in the south part of Israel at Ramat Beka, which we are planning to inaugurate around the fourth quarter of this year. So we think that all these investments that were made not just recently were made during the last two years will yield into new capacity for production and will enable us to meet our commitment for the Israeli market, as well as for our international customers.

Ellen Page: Okay, that’s helpful. And just on cash. You had a use of cash again this year. How do we think about working capital — or last year, sorry. How do we think about working capital through 2024? And are you expecting to have better inventory management going forward? Or how do we think about that $350 million use of earnings?

KobiKagan: Good morning, Ellen. This is Kobi. So in terms of cash, we had to increase working capital to meet the growing demand. As Butzi mentioned, we have increased revenue of above 8% year-over-year and 8% in Q4. And as we presented in our backlog, our backlog is 17% higher than last year. So we are increasing — we need to increase production to meet our customers’ demand, that requires strong working capital, that requires inventories. And as mentioned, we increased inventories by $350 million. Another specific reason is the issue of maritime transportation, which require us to hold more inventories to be able to supply the demand. So we are looking at that very closely with our new ERP systems. We’re monitoring that very, very closely. And we are receiving concise and precise decisions to meet our demand. While, of course, the capital and cash expenses are a big issue to be dealt with.

Ellen Page: Okay, that’s helpful. I’ll leave it at that.

Rami Myerson: Thanks, Ellen.

Operator: The next question is from Omri Efroni of Oppenheimer. Please go ahead.

Omri Efroni: Hi, guys, and congrats on the very great quarter. Maybe to elaborate on the last question about financial expenses. You have pretty high financial expenses, approximately $140 million for the whole year of ’23. Maybe if you can elaborate a little bit more about the working capital. And how should I think about it? Is it tied up more of one segment? Maybe the average state and land division? And what about the guarantees? Are you thinking about a way to lower the price of credit, of interest and I say on the guarantees and how one should think about it? Thank you.

ButziMachlis: Hi, Omri. So, as discussed previously in our conference, we have $138 million of financial expenses during the year. Part of the expenses are a backlog of more than $4 billion of guarantees, financial guarantees, which we are required to — which we are required to hand to our customers, mainly when we receive down payments. And we are working with the banks, of course, of reducing this cost as much as possible. But we always prefer to issue guarantee, which cost us around half a percent, and receive down payment other than use credit, which cost us at market rates, more than 6%.

Omri Efroni: Okay, great. Thanks for the color. We’re happy if you can give a little bit of explanation about the UAV segment. Now, Elbit is taking its new facility, it’s opening the new facility in Modine. Maybe you can talk about it more of how much capacity is going to be added to the aerospace and especially the tactical UAVs and the large strategic UAVs that you can sell to [indiscernible]. Thanks.

KobiKagan: We received recently many orders for UAVs in many countries, and they are all embedded in the airborne segment. The airborne segment is not just for UAVs, it’s our entire airborne portfolio, which includes the training and simulation, avionics, helmets, and some more activities. But talking specifically on UAVs, we see a growing demand for our UAVs here in Israel, but also around the world. We have, as you know, a family of UAVs, from small tactical UAVs to MALE UAVs. The uniqueness of our solution is not just the UAV itself, it’s our ability to provide operational solution for our customers based on our different sensors and effectors, which are all linked to the UAVs. Actually, what we are able to — our unique offering is not just a simple UAV, is a fully integrated package, which helps several operational scenarios which are required in the market.

And there we bring the entire synergy of the company in order to meet this backlog of UAVs we got recently in many countries, we took a decision to invest in a new facility for UAVs in Modine. And this facility will be inaugurated around the mid — around June, July this year.

Omri Efroni: Great. Maybe a last one for me if I may. And coming to the fourth quarter of ’24, the facility in Ramat Beka is going to come online. How should I think about the ramp-up in the capacity and the production in facility? Is it going to be a quick one or supposedly can be long as six months, three months, 12 months? Thank you.

KobiKagan: We will start production in the new facility in the last quarter. And we will gradually increase capacity and increase production. It will take us probably around nine months to get into full production capacity in that facility and we have invested quite a lot in this new facility. It includes a lot of automation, new robots, new technologies for production. And in order to ensure good quality, improved yields and good productivity for the new program, the level of orders we got recently is requiring this new facility and the investment we made during the last two years will certainly help us to deliver all these goods and all our commitments to our customers.

Omri Efroni: Thank you very much guys. And congrats again.

KobiKagan: Thank you.

Rami Myerson: Thank you, Omri.

ButziMachlis: Thanks Omri.

Operator: The next question is from Atinc Ozkan of WOOD & Company. Please go ahead.

Atinc Ozkan: Thank you, and congratulations for a strong backlog growth at the end of the year. I have three questions today. The first one is if you could provide an update on how we should look at investment needs going forward, given that the Ramat Beka investment will be mostly completed in 2024. I know that you have been spending around $180 million, $200 million per annum, but demand is there and are we going to see new investments from Elbit, let’s say in 2025? My second question is kind of related to that. Given the emerging need for multi-domain warfare across the globe and what we see in Gaza, Red Sea or Ukraine, and given Elbit’s capabilities, wide range of capabilities, in which segment do you see the strongest growth?

Not regions, which segments? For instance, I noticed that there is this emerging kamikaze drones and loitering munition threats and there appears to be no remedies, soft skill or hard skill when these come in swarms. So is there a solution for that? Do you have a specific solution for this that you could basically teach to global militaries? That’s the second one. And the third one is I’ve seen some articles in Israeli press that the MoU with Itochu in Japan has been cancelled. But Japan is probably going to be the third largest military defender. They are boosting — spender — they are boosting their defense budget. So what is your strategy there to basically penetrate this important market? Thank you.

KobiKagan: Thank you, Atinc and good morning. As you know, we’re not providing guidance, but with the inauguration of the Ramat Beka facility and fully going live of the ERP, the new ERP system, which required a lot of CapEx investment in recent years, we might expect a reduction in CapEx investment in the coming years. So I think that gives my view of how we are going to address CapEx in recent years.

Atinc Ozkan: Should I take that as reduction in absolute levels or as a percentage of revenues?

KobiKagan: Again, you should take it as a non-guidance remark of a small reduction in CapEx in the coming years.

Atinc Ozkan: Understood. Thank you.

ButziMachlis: With regard to the second question, I don’t think that there is one area, which I can identify as growth engine for the company. Actually, there are different growth engines in each division, in each segment. And each one of them has its own uniqueness and its own capabilities. And that’s the beauty of our portfolio, that we are not dependent just on one segment or just on one growth engine. With regard to just to answer your question about swarms and UAVs, of course we have solutions for that, which are based on countermeasures, based on hard-kit solution and based on energy weapon solutions as well, which we are developing for many customers around the globe. With regards to Japan, we of course respect the decision. Japan is an important market and we know that budgets are increasing in this market. We have collaboration in this place and we have opportunities in Japan. And we’re going to continue to work in this market.

Atinc Ozkan: Thank you, gentlemen.

Rami Myerson: Thank you, Atinc.

Operator: [Operator Instructions] There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the U.S., please call 1-888-782-4291. In Israel, please call 039-255-900, and internationally please call 9723-9255-900. A replay of this call will also be available on the company’s website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?

Butzi Machlis: Yes, I would like to thank all our employees for their continued hard work and contribution to Elbit Systems’ success. To everyone on the call, thank you for joining us today and for your continued support and interest in our company. Have a good day and goodbye.