[Management View]
Key metrics: Revenue increased by 20% YoY to $12.5 million. Gross profit nearly doubled to $3.0 million, with a gross margin of 24.1%. Operating profit rose to $1.6 million.
Strategic priorities: Focus on expanding production capacity, improving product mix, and addressing labor constraints through government-supported foreign worker programs.

[Outlook]
Performance guidance: Management expects continued strong demand in the defense sector and plans to shift to a more NIS-aligned pricing model.
Future plans: Installation of a new 40-meter coating line by year-end 2025, expected to enable annual revenue capacity of $55-$60 million.

[Financial Performance]
YoY trends: Revenue up 20%, gross profit nearly doubled, gross margin improved from 15.6% to 24.1%.
QoQ trends: EBITDA margin (non-GAAP) declined compared to Q1 2025.

[Q&A Highlights]
Question 1: Could you give me some update about the capital investment for the rest of 2025 and 2026?
Answer: The remaining capital investment for 2025 and 2026 includes the installation of the coating line, with a current balance of $6 million in the accelerated investment plan. The first 40-meter coating line is expected to arrive by the end of 2025 and will be ramped up immediately.

Question 2: What is the percentage of revenue for the international and defense sectors as a percentage of total revenue?
Answer: This quarter, 65-70% of total revenues came from flex-rigid products, with the defense sector accounting for roughly 65% of total revenue.

Question 3: How do you see the strong defense demand affecting your business in the rest of '25 and going into '26?
Answer: Strong defense demand is expected to continue, with increasing military budgets in Israel, the US, and Europe. The company hopes to secure orders from these regions.

Question 4: Can you quantify the backlog or order pipeline?
Answer: The backlog increased by about 10% since the beginning of the year, but the company does not disclose specific figures. Orders are typically received for the next quarter or two.

Question 5: Do you expect improvements in profitability to continue?
Answer: Yes, any additional revenue will contribute approximately 50 cents to the gross margin, as fixed costs are fully absorbed.

Question 6: What will your annual revenue capacity be once the new 40-meter coating line is installed?
Answer: The annual revenue capacity is expected to reach $55-$60 million once the line is fully operational.

Question 7: Why was there a negative cash flow from operating activities during the quarter?
Answer: The negative cash flow was due to a delayed customer payment, which was collected in July, and increased inventory levels to mitigate supply risk from regional instability.

Question 8: Could you provide some color on the change in inventory levels?
Answer: Inventory levels were increased mainly in lamination and aluminum due to the war in Israel, and to address operational challenges from Q4 2024 and Q1 2025.

[Sentiment Analysis]
Tone of analysts: Generally positive, with a focus on understanding future investments and revenue potential.
Tone of management: Confident, emphasizing strategic investments and addressing operational challenges.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-----------------------|---------------|---------------|
| Revenue | $12.5 million | $10.5 million |
| Gross Profit | $3.0 million | $1.6 million |
| Gross Margin | 24.1% | 15.6% |
| Operating Profit | $1.6 million | $0.4 million |
| Net Income | $0.4 million | $1.4 million |
| EBITDA (non-GAAP) | $2.0 million | $0.8 million |
| Cash Flow from Ops | $(2.9) million| N/A |
| Cash Position | $11.2 million | N/A |

[Risks and Concerns]
- Currency volatility: A $1 million one-time financial expense due to a 9% devaluation of the U.S. Dollar against the Israeli shekel.
- Labor constraints: Ongoing challenges in recruiting qualified manufacturing personnel.
- Regional instability: Increased inventory levels to mitigate supply risk from regional conflicts.

[Final Takeaway]
Eltek reported strong revenue and gross profit growth in Q2 2025, driven by robust defense sector demand and improved product mix. The company is focused on expanding production capacity with the installation of a new 40-meter coating line by year-end 2025, which is expected to significantly increase annual revenue potential. Management is addressing labor constraints through government-supported foreign worker programs and plans to shift to a more NIS-aligned pricing model to mitigate currency volatility. Despite a one-time financial expense and negative cash flow from operating activities, the outlook remains positive with continued strong demand in the defense sector and strategic investments in infrastructure and capacity expansion.