Elbit Systems Ltd. (NASDAQ:ESLT) Q1 2022 Earnings Conference Call May 24, 2022 9:00 AM ET

Company Participants

Rami Myerson - Investor Relations Director

Butzi Machlis - President and CEO

Kobi Kagan - CFO

Yossi Gaspar - Senior EVP, Business Management

Conference Call Participants

Scott Forbes - Jefferies

Ella Fried - Bank Leumi

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems First Quarter 2022 Results Conference Call [Operator Instructions]. As a reminder, this conference is being recorded. You should have all received by now the company's press release that is available in the News section of the company's Web site, www.elbitsystems.com. I would now like to hand the call to Rami Myerson, Elbit Systems Investor Relations Director. Rami, please go ahead.

Rami Myerson

Thank you, operator. Good day, everyone, and welcome to our first quarter 2022 earnings call. On the call with me today are Butzi Machlis, our President and CEO; Kobi Kagan, our CFO; and Yossi Gaspar, Senior EVP, Business Management. Before we 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 content of this conference call. As we do every quarter, we will provide you with both our regular and 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 the 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.

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. It is both an honor and a privilege to present Elbit Systems' first quarter results to you today. I would like to thank Yossi Gaspar for results in recent months. Yossi has retained responsibility for capital markets and investor relations. I look forward to meeting Elbit Systems investors and analysts over the coming weeks and months. The first quarter results reflect a healthy market environment for Elbit Systems and sustained demand for our solutions from customers around the world. Revenue growth in the quarter was primarily due to the fulfillment of orders received in previous years and the Sparton acquisition. The Russian invasion of Ukraine in last February and proposed budget increases didn't have a material impact on order intake or revenues in the quarter. Profitability in the quarter includes a sharp increase in expenses related to employee stock price-linked compensation plans. These plans help align employee compensation with share price performance, incentivizing our employees to generate long term value for all of Elbit Systems' stakeholders. Our GAAP and non-GAAP results have always included these expenses. In the first quarter, compensation expenses were significantly larger than normal following the appreciation in the share price after the Russian invasion of Ukraine, reducing profitability in the quarter, as noted in our fourth quarter and full year 2021 results press release published on March 29, 2022. Assuming a decline in share price volatility, we expect that these stock price-linked compensation expenses to return to historic levels.