Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems Fourth Quarter 2025 Results Conference Call. As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems VP, Investor Relations. Daniella, please go ahead.

Thank you, operator. Hello, everyone, and welcome to our fourth quarter 2025 earnings call. On the call with me today are Butzi Machlis, President and CEO; Kobi Kagan, CFO; and myself, Daniella Finn, VP, Investor Relations. Earlier today, we held an investor conference at Tel-Aviv Stock Exchange. A full recording of the event is available in the Investor Relations section of our website at www.elbitsystems.com. Before I begin, 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. I would like to remind our listeners that the conference call today may contain forward-looking statements regarding the company and its subsidiaries' business. Actual future results may differ materially from those forward-looking statements. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional transparency to better understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Kobi will begin by discussing the financial results, followed by Butzi, who will elaborate on the main events during the quarter and beyond. We will then turn the call over to the Q&A session. With that, I'd like to now turn the call over to Kobi. Kobi, please go ahead.

Thank you, Daniella. Hello, everyone, and thank you for joining us today. We are closing another strong year and quarter, delivering double-digit growth in revenues, operating profit, EPS and backlog, which grew by $5.5 billion. In 2025, we also generated record free cash flow, surpassing the $0.5 billion mark. We are extremely proud of these results and the outstanding execution by our global teams. Taking a closer look into the fourth quarter results. Fourth quarter revenues increased by 11% to $2.149 billion compared to $1.930 billion in the fourth quarter of 2024. This is the first time our quarterly revenues surpassed the $2 billion mark. Full year 2025 revenues increased by 16% to $7.939 billion compared to $6.828 billion in 2024. In terms of quarterly revenues by segment, C4I and Cyber revenues increased by 19% in the fourth quarter of 2025 as compared to the fourth quarter of 2024, mainly due to sales of radio and command and control systems in Europe and in Israel. ISTAR and EW revenues increased by 39%, mainly due to increased sales of Maritime and Electro-Optic systems, which include Electronic Warfare and counter-UAS solutions. Land revenues increased by 22%, mainly due to ammunition and munition sales in Israel and Europe. Elbit Systems of America revenues increased by 9%, mainly due to the increase in the sales of Night-Vision and Maritime systems, partially offset by the decrease in the sales of medical devices. Aerospace revenues decreased by 14%, mainly due to training and simulation in Europe and higher sales of PGM in the fourth quarter of 2024. We take great pride in our diverse global customer base, which is a key differentiator for Elbit and ensures we are not reliant on any single country's defense budget. For the full year of 2025, Europe contributed 27% of revenues; North America, 21%; Asia Pacific, 16%; and Israel contributed 32% of revenues. We expect Europe to be a meaningful growth engine going forward, followed by Asia Pacific. GAAP gross margin in the fourth quarter was 24.7% of revenues compared to 24.1% in the fourth quarter of 2024. GAAP gross margin for the full year 2025 was 24.4% compared to 24% in 2024. Non-GAAP gross margin for the fourth quarter was 25% compared to the fourth quarter of 2024 at 24.5%. Non-GAAP gross margin for the full year 2025 was 24.7% compared to 24.5% in 2024. GAAP operating income in the fourth quarter was $192 million or 9% of revenues as compared to $141 million or 7.3% of revenues in the fourth quarter of 2024. Non-GAAP operating income was $210 million or 9.8% of revenues in the fourth quarter of 2025 as compared to $157 million or 8.2% of revenues in the fourth quarter of 2024. GAAP operating income for the full year 2025 was $671 million or 8.5% of revenues as compared to $489 million or 7.2% of revenues in 2024. Non-GAAP operating income for 2025 was $737 million or 9.3% of revenues as compared to $550 million or 8.1% of revenues in 2024. I am happy we have reached our internal targets for operating profit margins. The operating expense breakdown for the full year was as follows: Net R&D expenses were $517 million or 6.5% of revenues as compared to $466 million or 6.8% of revenues in 2024. This increase is mainly due to investments in expanding our portfolio of precision-guided munitions as well as increased investment in Night Vision solutions. Elbit continues to invest heavily in disruptive R&D initiatives, including advanced AI capabilities to drive future profitable growth and reinforce the company's position as a market leader in the years ahead. Our strategy focuses on development of advanced solutions funded both internally and in some cases, partially supported by the Israeli Ministry of Defense, ensuring sustainable growth today and well into the future. Marketing and selling expenses were $399 million or 5% of revenues in 2025 as compared to $375 million or 5.5% of revenues in 2024. G&A expenses were $347 million or 4.4% of revenues in 2025 as compared to $311 million or 4.6% of revenues in the same period last year. Financial expenses were $138 million in 2025 as compared to $151 million in 2024. The decrease in financial expenses net in 2025 is mainly due to lower interest expenses and lower levels of debt. We recorded a tax expense of $55 million in 2025 compared to $39 million in 2024. The effective tax rate in 2025 was 9.9% compared to 11.4% in 2024. The decrease in the tax rate in 2025 was as a result of the valuation allowance releases and adjustments to deferred taxes related to prior years following tax settlements in some of the company's subsidiaries in Israel. GAAP diluted EPS for the fourth quarter of 2025 was $3.52 compared to $2 in the fourth quarter of 2024. Once again, a significant double-digit EPS growth in the quarter. Our non-GAAP diluted EPS was $3.56 in the fourth quarter of 2025 compared to $2.66 in the fourth quarter of 2024. GAAP diluted EPS for 2025 was $11.39 compared to $7.18 in 2024. Non-GAAP diluted EPS was $12.75 in the full year of 2025 compared to $8.76 in 2024, well ahead of our internal targets. Our backlog of orders as of December 31, 2025, was $28.1 billion, approximately $5.5 billion higher than the backlog at the end of 2024. Approximately 72% of the current backlog was generated from outside of Israel. Approximately 54% of the backlog at the end of December is scheduled to be performed during 2026 and 2027, while the rest is scheduled to be performed during 2028 and beyond. Backlog growth was driven by international customer demand. Net cash provided by operating activities in the year ended December 31, 2025, was $778 million as compared to $535 million in the year ended December 31, 2024. Operating cash flows in 2025 were affected mainly by the increase in contract liabilities, offset by the increase in inventories and trade receivables. During 2025, we also delivered $553 million of free cash flow, up 73% from the $320 million free cash flow generated in 2024. The Board of Directors has declared a dividend of $1 per share, yet another dividend increase for 2025 on the back of our strong results. I will now turn the call over to Mr. Machlis, Elbit's President and CEO. Butzi, please go ahead.

Thank you, Kobi. I want to begin by acknowledging the remarkable dedication of our global workforce. Despite the challenging reality at home, our teams around the world continue to demonstrate exceptional focus and professionalism. Their consistent effort, especially during this period of intensified demand for our advanced systems, is a testament to their resilience and commitment to our mission. As Kobi just outlined, our Q4 and full year 2025 results are very strong. We achieved double-digit growth across all key metrics: sales, operating profit, earnings per share and backlog. In addition, during 2025, we generated record free cash flow, surpassing the $0.5 billion mark. During 2025, Elbit Systems achieved significant milestones, most notably securing a contract from the IMOD for an Airborne High-Power Laser compact jet fighter pod and for a High-Power Laser solution for helicopters. This contract further strengthens Elbit's position as the world's leading supplier of next-generation directed energy weapons, including state-of-the-art military-grade high-power laser solutions. This has been a remarkable year for Elbit winning large-scale contracts. We received our largest ever contract from an international customer for a strategic solution worth approximately $2.3 billion. Earlier in the year, we won another large contract worth $1.6 billion to deliver a range of defense solutions to European countries. Our PULS rocket artillery system continues to be a high runner for Elbit, especially in Europe. Our backlog for this product surpassed the $2 billion mark as more countries selected our agile and technologically advanced system. In December, we reported that the Hellenic Parliament has approved a budget for the purchase of these systems for the Hellenic Armed Forces. Numerous contracts have been secured for our leading electronic warfare EW system and our DIRCM self-protection solution. We continued winning contracts for our Active Protection System, the Iron Fist for the NATO European CV90 fleet as well as follow-on contract for the U.S. Army Bradley IFV upgrades. I'm very proud of all these contract wins, which are translated into the exceptional financial performance we presented today. The ongoing war continued for most of 2025. As always, Elbit continues to support the IDF during these times, scaling up production to meet elevated demand. Last week, the Israeli government approved a further addition to the defense budget of ILS 39 billion, about USD 13 billion. As we told you in the previous call, at the end of Q3, we continued to expand our production facilities globally and especially in Europe. We are making significant strategic CapEx investments to address growing global capacity constraints, recognizing that capacity is a critical element of our long-term strategy. These include, among others, the continued investment in the Ramat Beka facility here in Israel as well as expanding our production facilities in Germany, Sweden, Romania, in Europe and in the U.S. Europe accounted for 27% of Elbit sales in 2025, surpassing the $2 billion mark. We believe Europe will remain our primary growth engine going forward with Germany playing a central role. This momentum was evident through the year, reflected in the numerous contracts awarded across a wide range of systems, including our PULS rocket launchers, Iron Fist Active Protection Solution and multiple DIRCM programs, among others. We expect strong revenue growth from Europe as countries are supported by Elbit's well-established presence on the continent through our subsidiaries and joint ventures with leading local partners. During 2025, Elbit continued to invest heavily in disruptive R&D programs, including AI enhancements across multiple platforms as part of its strategy to develop advanced solutions self-funded or partially funded by the Israeli IMOD, ensuring both current and future growth. Dedicated cross-functional AI teams integrate intelligent capabilities across defense systems and core operations, strengthening decision-making, operational agility and scalability as global demand continued to grow. In closing, Elbit entered 2026 stronger, more resilient and better positioned than ever. With a record backlog, breakthrough technological achievements, expanding capacity and a global team that delivers under the most demanding conditions, we are confident in our ability to sustain our growth and continue to create long-term value for our stakeholders. And with that, I will be happy to take your questions. Operator?

The first question is from Kristine Liwag of Morgan Stanley.

So maybe you guys called out the record backlog that the company has today. But then we see the conflict and Butzi, you mentioned it in your prepared remarks that one conflict ends and another starts in the Middle East. And with this global demand growing, can you talk about what your capacity or CapEx investments could mean in terms of potential maximum revenue that you could generate off of the incremental capacity increases? And also as you increase your CapEx, when do we anticipate this capacity opening up new revenue? How do we think about that with the supply issue that's coming out of the Red Sea? Any context for the ability to meet this unprecedented high demand would be really helpful.

Kristine, thank you for the question. It's a combination of questions. I'll talk first to the CapEx investment. The company increased the CapEx investment this year to $225 million. We are consistently investing in CapEx nearly $200 million for the past 5 years, and we are planning to increase the spend this year in 2026 to around $300 million. And this additional investment comes with stronger free cash flow. So we both increased the free cash flow and increased CapEx, and that is — we are very happy with this result. Having — investing around $300 million will go specifically to invest in Israel and outside of Israel. We're not just investing in Israel. We're investing also outside of Israel and mostly factories for land capacity. We tripled the size of the factory in the southern part of Israel. The new ammunition and munition factory was tripled. And the additional investments are planned to meet the high demand, especially for munition and ammunition demand. We're also increasing investment in electronic assemblies factories in Israel and outside of Israel. And by that, we feel comfortable with meeting the high demand, as you mentioned, the record backlog and the very strong funnel that we see ahead. Butzi?

Yes, I would like to add — thank you, Kobi. I would like to add that on top of our own investment, some customers of ours are investing with us here in Israel as well as abroad in order to create additional capacity, mainly around production. And so actually, every dollar that we invest, there is an additional investment by our customers. So that's number one. Number two, this year, we believe that we will start delivering equipment from the Ramat Beka facility. Actually, it should happen quite soon. The Israeli government has approved to continue working in the current facility we have in the central part of the country and the current infrastructure we have. So in parallel, we'll have two active production lines, which will enable us to deliver the growing demand. I also want to emphasize that our new facilities are all equipped with robots and with a lot of AI in them in order to increase effectiveness and productivity and with the most advanced technology which is available in the market. So we are working, in some cases, in three shifts in order to meet the demand and with the new factories that we will start, some of them are active already. Some will start being effective quite soon. I believe we'll be able to meet the current demand and the future demand. With regards to supply chain, Elbit as part of the strategy is a very vertical company. And we are trying to reduce dependencies on external suppliers. That's part of our strategy. We develop our own diodes and our own detectors and many, many other examples. And through this war, we have invested with the Israeli IMOD even more funds to be more vertical and to control our destiny. And in areas where we are lacking material, we were able to create enough inventories to support the current and the future demand that we see. Kobi, do you want to add?

Yes. On top of what Butzi mentioned, we are also streamlining the Ramat Beka, the southern part of Israel factory. We are streamlining the factory processes, which will bring additional yields and additional effectiveness of this factory. And another more financial point, we saw 24% growth in our backlog during 2025 and 16% growth of revenue. And as you know, Kristine, there should be convergence between those two numbers. And that means that the potential of growth is very significant, the double-digit potential of growth also in the future.

Wonderful. Super helpful. And if I could have a second question. You've called out the contract wins you've had on directed energy, specifically at high-powered lasers. I was wondering, can you talk more about what's the breakthrough in technology that you were able to achieve here? And then also when we think about fighting low-cost drone swarms, what's the role for this kind of equipment? And how is Elbit positioned?

I would say the following. First, currently, many countries are fighting against drones and against cruise missiles with interceptor missiles. That's a very expensive fight and it's not sustainable. So because of that, we thought that bringing High-Power Laser to the air will create a new situation where actually we are becoming the ultimate player. And putting High-Power Laser in the air enables us first to overcome some of the challenges of the ground like weather and dust and turbulence. Flying above cloud will enable us to gain more ranges and to be more effective and also to eliminate the stretch far away from our borders. Now from a technical point of view, it's not an easy task. You need to mature the elements and you need to—while moving, you need to lock yourself on a target in a very precise way. But we were able to overcome many of these challenges, and we are very advanced in the development. And when this solution will be mature and operational, I believe it will be a breakthrough in the way countries are defeating drones and other types of threats. There is a huge demand for such solutions in the market. We are a leading player in this domain. We are controlling the entire technology in-house, and we see currently a very big demand for such solutions worldwide. And I believe that it will bring Elbit a new stream of revenues and profit in the near future. And I also want to add that High-Power Laser is not just a defensive weapon. As you can understand, it has more applications. That's one example of unique technologies that we are developing with our R&D fund. Actually, the company is investing more than $0.5 billion in R&D. On top of that, we get more R&D from our customers. Six and a half percent of our revenues we invest in R&D. And we do it in order to be able to predict what will be the demand in the market in the future. We understand the operational needs. We understand very well the technological opportunities we have. We are combining them both, and we are coming with new technology to the market. This is just one example. As we speak, we develop more unique solutions that we will present to you in the future.

The next question is from Ellen Page of Jefferies. On top of that, we get more R&D from our customers. We invest six and a half percent of our revenues in R&D. We do this to better predict future market demand. We understand the operational needs and the technological opportunities we have. We are combining both and bringing new technology to the market. This is just one example. We are currently developing more unique solutions that we will present to you in the future.

Just on your recent media reports about your PULS system in Europe, and you also received budget approval for an order from Greece. How do we think about the opportunity set there? And what differentiates that solution relative to peers? What makes you win?

First I want to say that with regards to the Greek opportunity, it's not a contract yet. We didn't receive it yet. It was approved by the parliament, and we hope to get the contract soon, but it's not yet in our backlog. It's a big contract that we hope to get soon. The same is true also in Germany. We got an initial contract in Germany for a small quantity which is not yet full production in Germany, but the potential that we believe that will mature in the future, but it's not yet in our backlog. We have a very unique solution. First, we have a generic launcher, which is able to fire different types of missiles for different ranges with different capabilities, which includes loitering munitions as well from short ranges to very long ranges with different kinds of guidance solutions, all coming from Elbit. And it's an open architecture, so other solutions which are available with our customers can be implemented as well on top of the launcher. Not only that, we have joint venture partnership agreements with KNDS and with Rheinmetall in Germany and with other partners in Europe to continue to develop and to produce fully this solution, the launcher and the rocket in Europe. So it's in Europe, and we call it EuroPULS, a European solution that was tailored for the unique requirements of the modern battlefield, reflecting lessons from the war between Russia and Ukraine and it's operational already by many countries in Europe. It was acquired by the Danish Forces, by the Dutch and by many other countries, not just in Europe. And we believe that that's the leading solution which is available currently in the market, and we continue to develop it. You will hear more about this product and about the system in the future.

Great. And if I can just sneak in one more. Profitability was very strong at 9.8% in the quarter and expanded across most segments, except for C4ISR. How are you thinking about the moving pieces to margins from here across the different segments? Where is there more room for expansion? And where could there be pressure?

Ellen, this is Kobi. Thank you for the question. We see an expansion in margins now for the fourth consecutive year. And we are very happy with this result. It's an expansion of nearly 1% annually. And this is a trend that we see now and we believe the expansion in margins will continue as we have the operational leverage with the very strong growth of revenues and with the stronger pipeline and backlog profitability, which turns into stronger profitability. And we believe this will continue into the future. And as Butzi mentioned earlier, with the self-funded R&D, additional self-funded R&D that we're going to invest and we're going to continue increasing the self-funded R&D in the future, will not harm the bottom line. We will still maintain growth also at the operating profit level and also on the EPS level.

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 2 hours after the conference ends. In the U.S., please call 1 (888) 782-4291. In Israel, please call (03) 925-5900. And internationally, please call 972-3-925-5900. A replay of the call will also be available on the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make a concluding statement?

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.

Thank you. This concludes the Elbit Systems Ltd. Fourth Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.