Eltek (NASDAQ:ELTK) reported higher revenue for 2025 but lower profitability as operational disruption, staffing challenges, and a weaker U.S. dollar weighed on margins, according to management’s comments on the company’s annual and fourth-quarter results conference call.
Revenue rose 11% as investment plan begins to “bear fruits”
Chief Executive Officer Eli Yaffe said 2025 revenue totaled $51.8 million, up 11% from 2024, reflecting strong demand and the company’s “strategic accelerated investment plan,” which he described as beginning to show results but “not yet its full potential.” He noted that when the accelerated investment plan was approved, Eltek was generating average annual revenue of about $37 million.
Operational constraints and staffing issues pressured efficiency
Management said several factors affected 2025 performance, including internal production disruption tied to facility changes ahead of new equipment installation. Yaffe cited the “reallocation of the machinery and production lines within the facility” in preparation for installing new plating lines, which contributed to operational constraints and impacted the company’s ability to meet customer delivery schedules.
He added that demand exceeded domestic production capacity in Israel, which in turn “led to increased competition from overseas players seeking to capture a share of the local demand.” Still, the company said it continues to see strong demand from both domestic and international customers, which it attributed in part to limited manufacturing capability in Western countries. Yaffe said Eltek is working to improve delivery performance for domestic customers while also expanding its overseas presence—particularly in the U.S.—to grow order volume.
Staffing remained another challenge. Yaffe described difficulty recruiting employees and retaining highly experienced personnel, including departures tied to retirements. He said the company is seeking to recruit additional employees, “particularly engineers,” to support an expanded machinery base and manage operational complexity created by the reallocation of production lines. He also said Eltek is making progress on efforts to bring foreign workers to support workforce needs as the company expands.
Two new plating lines highlighted as key driver of future margin improvement
The company’s investment program centers on two new plating lines that management expects will meaningfully improve output and quality. Yaffe said the first plating line arrived at the facility in early 2026 and is currently in the assembly phase, though he noted the process was interrupted by “the current tension situation in Israel.” He said the company remains hopeful the conflict will not cause further delays to installation.
After installation, Eltek expects an extensive qualification process to certify the lines across the company’s product portfolio. In response to an analyst question about when gross margin could improve, management said it had previously expected integration and installation by mid-2026, with qualification continuing through the remainder of 2026. Management described a gradual product-family qualification approach that would enable a phased transition to the new line until full qualification is completed.
Yaffe also emphasized operating leverage, saying each additional dollar of revenue is expected to contribute meaningfully to gross profit and net income once production stabilizes and volume increases.
Dollar depreciation cited as major factor; company updating prices
Yaffe and Chief Financial Officer Ron Freund repeatedly pointed to a significant depreciation of the U.S. dollar versus the Israeli shekel (NIS) as a headwind. Yaffe said the currency move adversely affected Eltek’s dollar-reported profitability by approximately $2.2 million compared with 2024.
Freund said the decline in gross profit and margin in 2025 was primarily attributable to higher NIS-denominated expenses resulting from the weaker U.S. dollar, as well as reduced production efficiency.
On pricing, management said it updated its pricing system to reflect the new exchange rate. However, they also noted that some existing backlog and orders were quoted or received when the dollar-to-NIS rate was higher, which is expected to lead to lower margins than originally anticipated on those orders. Freund said the company has a typical backlog of one to two quarters, and management expected to see some benefit from repricing within roughly “four to five months,” while acknowledging the dollar depreciation continued into the fourth quarter and required additional updates.
Financial results: higher sales, lower margins; Q4 loss
Freund detailed results for the year ended Dec. 31, 2025:
- Revenue: $51.8 million vs. $46.6 million in 2024
- Gross profit: $8.0 million vs. $10.3 million
- Gross margin: 15% vs. 22%
- Operating profit: $2.3 million vs. $4.4 million
- Financial result: $1.3 million in financial expenses vs. $0.7 million in financial income
- Net profit: $0.8 million ($0.12 per share) vs. $4.2 million ($0.63 per share)
- EBITDA (non-GAAP): $4.5 million vs. $5.9 million
- Operating cash flow: $0.6 million vs. $4.5 million
- Cash and equivalents plus short-term deposits: $12.1 million as of Dec. 31, 2025
For the fourth quarter of 2025 compared with the fourth quarter of 2024, Freund reported:
- Revenue: $13.2 million vs. $10.8 million
- Gross profit: $1.2 million vs. $1.9 million
- Net loss: $0.3 million ($0.05 per share) vs. net profit of $23,000
- EBITDA (non-GAAP): $0.7 million vs. $0.8 million
During the Q&A, an analyst highlighted the quarter’s low gross margin and asked when improvement could occur. Management pointed to continued currency pressure and production inefficiencies, while reiterating expectations for margin improvement as sales volume rises and the new plating line is installed, qualified, and production stabilizes through 2026.
Yaffe also noted the company extended the lease for its manufacturing facility through 2039. As part of the lease extension, Eltek received a payment intended to partially offset the company’s investment in the facility, which will be amortized over the lease term and modestly reduce annual rent expense.
About Eltek (NASDAQ:ELTK)
Eltek Ltd. manufactures, markets, and sells printed circuit boards (PCBs) in Israel, Europe, North America, India, the Netherlands, and internationally. It offers a range of custom designed PCBs, including rigid, double-sided and multi-layer PCBs, and flexible circuitry boards. The company also provides high density interconnect, flex-rigid, and multi-layered boards. It primarily serves medical technology, defense and aerospace, industrial, telecom, and networking equipment industries, as well as contract electronic manufacturers.
