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ELTK
Earnings call · Jun 2026 (Q2 FY26)

ELTEK Q2 FY26 earnings call ELTK

Aug 18, 2026 Source

Executive summary

Eltek Ltd. Q2 FY26 — Operational Transition Amidst Strong Demand

Eltek is navigating a critical transition period in Q2 FY26, marked by strong market demand and a robust backlog, yet constrained by operational inefficiencies and raw material supply challenges. The company is focused on strengthening its manufacturing infrastructure, including ERP implementation and new plating line installations, and expanding its workforce to convert demand into higher production and revenue. Management believes these initiatives, coupled with pricing adjustments, will drive a return to historical profitability levels.

Highlights

5

  • Second quarter revenue reached $11.5 million, contributing to $22 million for the first half of 2026.

  • Gross loss improved to $1 million in Q2 FY26 from $1.8 million in Q1 FY26.

  • The company secured key certifications in the medical sector, positioning it for future demand.

  • Operating activities generated $0.7 million of cash during the quarter.

  • Cash and cash equivalents stood at $11.5 million with no outstanding debt as of June 30, 2026.

Concerns

5

  • The company reported a net loss of $2.7 million or $0.41 per share in Q2 FY26, compared to net income of $0.4 million or $0.05 per share in Q2 FY25.

  • Revenue of $11.5 million in Q2 FY26 was below the $12.5 million reported in Q2 FY25 and below the level the current demand environment would support.

  • Gross loss was $1 million in Q2 FY26, a decline from a gross profit of $3 million in Q2 FY25.

  • Operating loss was $2.5 million in Q2 FY26, compared to an operating profit of $1.5 million in Q2 FY25.

  • Supply environment remains challenging, particularly for fiberglass-based materials, due to strong demand from the AI infrastructure industry and allocation quotas.

Orderbook & backlog

Backlog Highest since CFO arrived Q2 FY26

Strong backlog provides solid visibility, but conversion to production and shipments is the current challenge.

Product announcements

ProductTypeDetails
New PCB Plating Line (First)milestone
New PCB Plating Line (Second)roadmap

Risks & headwinds

Operational inefficiencies and production capacity limitations Ongoing

Revenue of $11.5M in Q2 FY26 is below the level current demand would support; company requires significantly higher revenue to leverage fixed operating expenses.

Mitigation:Implementation of new ERP system, installation and qualification of new PCB plating lines, strengthening workforce with additional foreign employees.

Raw material supply chain challenges Ongoing

Significant raw material price increases and allocation quotas for fiberglass-based materials.

Mitigation:Closer coordination with suppliers to secure required materials; gradual adjustment of pricing to reflect higher costs.

Impact of historical backlog pricing on profitability Until long-term POs are fulfilled (e.g., 2 years)

Approximately one-third of current backlog is tied to historical, higher USD exchange rates (long-term POs), acting as a 'heavy weight on our profitability'.

Mitigation:Securing new orders at pricing levels that better reflect the current cost environment and value of products; gradual adjustment of pricing.

Weaker U.S. dollar against Israeli shekel Q2 FY26 and ongoing

Contributed to year-over-year decline in gross profitability and financial expenses of $0.7M.

Mitigation:Gradual adjustment of pricing to higher cost environment, including impact of weaker U.S. dollar.

What to watch in Q3 FY26

PCB Plating Line 1 Qualification

Q3 FY26
Current Acceptance testing and initial trial production underway
Target Official qualification process kicked off and progressing

Why it matters

Successful qualification is essential for the line to reach full commercial production and contribute to increased capacity and revenue.

We expect to kick off the official qualification process during the third quarter. As we have previously discussed, this process is expected to take several months before the line reaches full commercial production.

Q&A highlights

When will gross margin improve, given investments in production lines? Are plating lines fully installed? What is the demand outlook?

Management expects gradual improvement in gross margin driven by increased production volume, efficiency, new line ramp-up, and better raw material availability. The first plating line is installed and undergoing qualification; the second will arrive by year-end. Demand remains strong.

“Regarding your first question, we expect the improvement to be gradual as several key factors come together. This includes increased production volume, improved production efficiency, better utilization of our existing capacity, the ramp-up of our new production lines, as I will explain later in your second question and improved availability of critical raw materials.”

asked by Mark Sharogradsky · answered by Eli Yaffe

2 min read 6 chapters

Detailed narrative

Operational Transition and Infrastructure Build-Out

Eltek is undergoing a significant transition to stabilize manufacturing operations and build the necessary human and operational infrastructure for future growth. Key initiatives include the implementation of a new ERP system to strengthen operational management and scalability. The first new PCB plating line has been fully installed, with acceptance testing and initial trial production for customer qualifications underway, and official qualification expected in Q3 FY26. A second plating line is scheduled to arrive in Israel by year-end, with contractual penalties for delayed installation.

Workforce Expansion and Production Capacity

The company is actively strengthening its workforce, having integrated approximately 15 foreign employees during the quarter and continuing the process to bring in an additional 15. This expansion is crucial for improving production capacity and operational efficiency, which are necessary to support business growth and leverage the existing cost structure more effectively. The goal is to achieve higher production levels and revenue by enhancing the manufacturing foundation.

Market Demand and Backlog Strength

Despite current revenue levels, the market environment for Eltek's products remains strong, with continued demand and a high level of backlog. Management emphasized that the challenge is not demand, but rather the ability to consistently convert this demand and backlog into production and shipments. The backlog is noted as the highest since the CFO joined the company, providing solid visibility for future operations.

Gross Margin Improvement and Pricing Adjustments

Eltek is beginning to see improvements in its gross margin performance, with gross loss narrowing to $1 million in Q2 FY26 from $1.8 million in Q1 FY26. This improvement is attributed to higher revenue and an increase in the average selling price of PCBs. The company is gradually adjusting its pricing to reflect higher costs, including the weaker U.S. dollar and increased raw material and production overheads. As new orders with updated pricing move through production, further margin improvement is anticipated.

Raw Material Supply Challenges

The supply environment remains challenging, particularly concerning the availability of fiberglass-based materials, which are in high demand from the rapidly growing AI infrastructure industry. Eltek faces significant raw material price increases and allocation quotas. While the company has secured necessary materials to continue operations, doing so requires close coordination with suppliers, highlighting ongoing supply chain pressures.

Strategic Market Diversification

Beyond its defense portfolio, Eltek is focused on driving growth in the medical and high-end industrial markets. The company has secured key certifications in the medical sector, positioning it for future demand, and its high-end industrial business continues to perform strongly. These initiatives aim to balance the market mix and diversify revenue streams, reducing reliance on any single sector.

AI-generated summary of the company's earnings call. Not investment advice.