Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2025 Third Quarter Financial Results Conference Call. As a reminder, this conference is being recorded. Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer; and Ron Freund, Chief Financial Officer, I'd like to remind you that we'll be referring to forward-looking information in today's presentation and in the Q&A. By its nature, information contains forecasts, assumptions and expectations about future outcomes, which are subject to risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings. These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.

Thank you. Good morning. Thank you for joining us for the third quarter fiscal year 2025 earnings call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and a summary of the principal factors that affected our results during the third quarter followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release will also be available on our website. We ended the third quarter with sales of $13.3 million, and sales for the first nine months totaled $38.6 million. Gross profit for the quarter was $1.6 million with breakeven operating income and a net loss of $0.2 million. Our results were affected by the sharp depreciation of the U.S. dollar against the Israeli shekel, which increased our reported NIS-denominated expenses and reduced gross profits. The total impact of the currency erosion on the operating profit was approximately $800,000 compared to the third quarter of 2024. At the end of the second quarter, we updated our pricing model to reflect the currency trends. We expect to see the positive impact of the revised pricing beginning in the coming quarters as the new quotations issued after the end of Q2 2025 take effect. Our bottom line was further impacted by approximately $0 million in financial expenses, primarily reflecting the continued depreciation of the U.S. dollar against the shekel. This effect was mainly related to the U.S. dollar-denominated assets, including cash and cash equivalents, short-term deposits, and trade receivables net of trade payables. On the operational front, we continue to experience some instability in our production processes. This is primarily related to the ramp-up of new equipment installed over the past year as well as the integration of the newly recruited engineers and production staff, who are still gaining experience with these systems. As we have mentioned in previous calls, we are in a transitional period as we absorb significant additional capacity and technology upgrades. In addition to the foreign exchange impact, the key contributor to the operational results in this quarter were: higher depreciation expenses resulting from the purchase of new machines that became operational during this year; increased raw material consumption driven by fluctuations in process instability during the rebound phase; higher energy costs reflecting peak summer rates. We expect these effects to gradually be modest as the new line stabilizes, processes mature, and the expanded team reaches full proficiency. From the market perspective, demand for our products remains strong, led by the defense sector, which represents 63% of the quarterly sales, alongside 9% for the industrial sector and 6% from medical customers. Rigid flex products account for 66% of the quarterly sales and 65% of the first nine months of this year. We are seeing the entry of several new foreign competitors into our market. While this trend may limit price increases in certain segments, Eltek's technological leadership, longstanding customer relationships, and specifications in high-end complex PCB solutions position us well to maintain and, in some cases, expand our competitive advantage. Delivery times across the industry remain extended, reflecting strong global demand and constrained manufacturing capacity. Pricing dynamics are also affected by segments. In low-volume, high-complexity production, competition remains limited, allowing for greater pricing flexibility. In mid- to high-volume production, we are seeing increased competition from new entrants. We are also facing pressure from several large Israeli customers to extend credit terms, which has increased working capital requirements and financial expenses. Encouragingly, the recent improvement in regional security has had a positive effect on logistics, with shorter raw material delivery times allowing us to gradually reduce inventory levels and partially offset the higher working capital requirements. Our production capacity expansion program is progressing well. We're finishing the construction and preparation of the new production hall, which will house the new coating line. Finally, our RRP project continues to progress according to plan. We are preparing to go live during 2026. The system will replace and integrate all company platforms, including production satellite systems, providing a modern data-driven work environment with greater operational visibility, control, and efficiency across all business functions. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.

Thank you, Eli. I would like to draw your attention to the financial statements for the third quarter of 2025. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for the definition and the reasons for its use. I will now go over the highlights of the 2025 third quarter. All numbers mentioned are in U.S. dollars. Revenues for the third quarter of 2025 were $13.3 million compared to $13.5 million in the third quarter of 2024. Gross profit for Q3 2025 totaled $1.6 million compared to $3.5 million in 2024. Operating profit for the third quarter of 2025 was $50,000 compared to $1.9 million in the same period last year. We recorded financial expenses of $0.3 million in Q3 2025 compared to financial income of $0.3 million in Q3 2024, mainly driven by changes in the shekel exchange rate relative to the U.S. dollar, net of interest earnings on our cash reserves. Net loss for Q3 2025 was $0.2 million or $0.03 per share compared to net income of $1.7 million or $0.25 per share in Q3 2024. EBITDA amounted to $0.6 million in Q3 2025 compared to $2.3 million in the prior year period. In the third quarter of 2025, we generated positive cash flow from operating activities of $2 million compared to $1.6 million in Q3 2024. As of September 30, 2025, our cash balances totaled $11.6 million. We are now ready to answer your questions.

The first question is from Mark Sharogradsky at Kepler.

It's a pretty low quarter for you. So I wanted to understand because last quarter, you said that all your operational issues were almost behind you. So how, again, do you speak about the operating issues? And then, when will we see the improvement of your pricing lift due to USD depreciation?

Thank you, Mark. What we reported last quarter was that the construction challenges, including dust, erosion, and wall break, are now behind us. The current instability is related to engineering and manpower issues, particularly with the machine operator. These are two separate concerns. Regarding your second question?

Regarding when we will see the effect of price increases due to the lower USD?

Usually, it takes 6 to 9 months until quotations mature and translate to profits.

I understand. And when do you think you will be behind your operational difficulties?

It's tough to say because it depends upon the absorption rate of the employees and the absorption rate of the engineering forces, which is gained from day to day. It's hard to say and hard to predict when it's going to end. But of course, it's our goal to reduce this period to as short as possible.

Okay. I have one more question. You guided for '26, '27 gross margin in the middle term. When approximately will we be able to reach those gross margins?

So Mark, as we reported in the past, we expect to complete the integration of the new coating line scheduled to arrive soon by the mid of 2026. This line is expected to streamline our core manufacturing processes and expand our production capacity. We also hope to stabilize our production processes by that time and improve our gross margin. As we have noted in the past, each additional dollar of revenue contributes meaningfully to our gross profit and, of course, to net income. Therefore, increasing our sales volume is expected to have a significant positive impact on this profitability.

Yes, because this quarter was pretty okay on the revenue. But again, I don't understand why we always have these operational difficulties.

So I think that you should take a look at, first of all, the dollar influence, which is unpredictable and we cannot change it. But except for that, as Eli said before, our production processes are still not stable enough, and we suffer from increased raw material consumption. It is not that production stopped or that we have a problem with the machine. The efficiency is not at the level we want it to be, and it is slow. As we move forward, people gain more knowledge in exactly how to work with the new machines. We hope that by the end or by the middle of 2026, we will solve these problems as well. We are not satisfied with the results as you are, but that's the situation.

The next question is from Ran Su.

I wanted to ask three questions. First of all, can you elaborate more about the negative impact, as you said, from new competition? Second, about the price pressure you said you felt this quarter? And third question is, can we assume the negative impact from currency and foreign exchange to U.S. dollars will continue this quarter?

Regarding your first question, the competition starts globally, not just in Israel, but competition from abroad, particularly from the Far East, but not China. They are starting to penetrate more and more into the defense sector. What was your second question?

About the price pressure you said you felt this quarter?

That has, of course, limited our ability to increase prices to any level we would like because they are at the entry level and they put some pressure mainly in the high-volume production to be at the entry level and reduce prices. I think all in the...

Is it something sustainable?

In the volume, there is less competition right now.

Is it something you see as sustainable competition from the new entry?

The new entry is going to stay. It's going to stay. The question is, what will the price level be? And it's hard to forecast. But right now, the entry-level pricing is hurting us, particularly in high-volume production. In low-volume production, there is less competition, and we have more flexibility in pricing, as I said before. What was your third question?

It was in regards to the U.S. dollar erosion. So as I hope you understand, we are being affected by the erosion of the U.S. dollar in financial expenses and in our operating income. As long as the dollar keeps eroding, we will have additional financing expenses, and our NIS-denominated expenses will be at a higher level. As we said previously, we hope that the new pricing will allow us to cover these extra dollar expenses. But I think that you are asking about the next quarter, the fourth quarter. As long as the dollar exchange rate is lower than it was at the end of the third quarter, then you should expect financial expenses and operating income to be affected by it.

So as I understand, we should expect compounded pressure both from the top line because of the new entry and from the foreign exchange in the fourth quarter?

The new entry will limit us in the new quotations that we can send.

There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on our website.

In closing, I would like to thank the company's employees and the management teams for their hard work during this time and to thank our customers and our investors for their continued support.

This concludes the Eltek Ltd. 2025 Third Quarter Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.