This article first appeared on GuruFocus .
Release Date: August 18, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Eltek Ltd ( NASDAQ:ELTK ) reported a strong demand environment with a high level of backlog, providing solid visibility for future revenue.
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Gross loss improved to $1 million in Q2 2026 from $1.8 million in Q1 2026, driven by higher revenue and improved average selling prices.
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The company completed installation of its new PCB plating line and has begun initial trial production, with official customer qualification expected in Q3 2026.
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Eltek Ltd ( NASDAQ:ELTK ) successfully integrated approximately 15 foreign employees into its operations and is adding another 15 to strengthen its workforce and production capacity.
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The company maintains a strong balance sheet with $11.5 million in cash and cash equivalents and no outstanding debt.
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Eltek Ltd ( NASDAQ:ELTK ) is making progress in adjusting pricing to reflect higher costs, with about one-third of its backlog now priced at current exchange rates, which should improve profitability.
Negative Points
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Eltek Ltd ( NASDAQ:ELTK ) reported a net loss of $2.7 million for Q2 2026, a significant decline from net income of $0.4 million in the same period last year.
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Revenue decreased to $11.5 million in Q2 2026 from $12.5 million in Q2 2025, reflecting production inefficiencies and lower volume.
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The company continues to face challenges in converting strong demand and backlog into production and shipments at desired levels.
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Supply chain issues persist, particularly for fiberglass-based materials, with significant raw material price increases and allocation quotas impacting operations.
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Approximately one-third of the company's backlog is priced at historical exchange rates, which will continue to weigh on profitability until those orders are fulfilled.
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The second plating line is delayed and is now scheduled to arrive by the end of 2026, with contractual penalties incurred for the delay.
Q & A Highlights
Q: When will we begin to see improvement in gross margin, especially given the significant investments in production lines? Also, are the plating lines fully installed, and what is the current demand outlook? A: Eli Yaffe (CEO) stated that improvement is expected to be gradual, driven by increased production volume, improved efficiency, better capacity utilization, the ramp-up of new production lines, and improved raw material availability. The first plating line is fully installed, with acceptance tests starting and the first demonstration plating scheduled for the coming Thursday. Customer qualification will follow, while the second plating line is being built in Europe and is expected to arrive in Israel by the end of the year. Demand remains strong, with the backlog at its highest level since he joined the company.
Q: Given the strong demand and lack of alternatives for customers, why is gross margin still negative, and why aren't you raising prices to achieve normal gross margins? A: Eli Yaffe (CEO) clarified that the issue is operational, not demand-driven. The company operates in a competitive environment, so it cannot simply double prices. The focus is on converting the record backlog into sales and increasing revenues, which is expected to improve profitability.
Q: Can you provide more detail on the backlog pricing, as it seems the current backlog was built when the exchange rate was much higher? Will we see the benefit in Q3 revenue and gross profit? A: Eli Yaffe (CEO) explained that approximately one-third of the backlog is tied to historical exchange rates and long-term purchase orders (up to two years), which will continue to weigh on profitability. Another third is at an exchange rate of around 3.2, and the final third is at the current rate of around 3.0, which is the most profitable. The company does not provide forecasts, but noted an improvement in average selling prices in Q2 2026 and hopes to see further increases in the mix.
Q: What were the key financial results for the second quarter of 2026? A: Ron Freund (CFO) reported revenues of $11.5 million, down from $12.5 million in Q2 2025. Gross loss was $1.0 million, compared to a gross profit of $3.0 million in the prior year. Operating loss was $2.5 million, and net loss was $2.7 million, or $0.41 per share. EBITDA loss was $1.9 million. The company generated $0.7 million in cash from operations and ended the quarter with $11.5 million in cash and no debt.
Q: What is driving the year-over-year decline in gross profitability? A: Ron Freund (CFO) attributed the decline to lower revenue volume, production inefficiencies, and the depreciation of the U.S. dollar against the Israeli shekel.
Q: How is the company addressing the raw material supply challenges, particularly for fiberglass-based materials? A: Eli Yaffe (CEO) noted that the supply environment remains challenging, with limitations on certain raw materials like fiberglass, which is in high demand from the AI infrastructure industry. The company has faced significant price increases and allocation quotas but has managed to secure necessary materials through closer coordination with suppliers.
Q: What progress is being made in the medical and high-end industrial markets? A: Eli Yaffe (CEO) stated that the company has secured key certifications in the medical sector, positioning it well for future demand. The high-end industrial business continues to perform strongly with robust demand, helping to balance the market mix and diversify the business.
Q: How is the company strengthening its workforce to support growth? A: Eli Yaffe (CEO) mentioned that approximately 15 foreign employees were integrated into operations during the quarter, with an additional 15 being brought in. This is a key component of improving production capacity and operational efficiency.
Q: What is the company's cash position and balance sheet strength? A: Ron Freund (CFO) confirmed that as of June 30, 2026, the company had $11.5 million in cash and cash equivalents with no outstanding debt, providing a solid balance sheet despite the net loss.
Q: What is the company's outlook for returning to profitability? A: Eli Yaffe (CEO) expressed confidence that as the company achieves greater operational stability, higher revenue levels, and continued pricing adjustments to reflect the current cost environment, it will be able to leverage its cost structure more efficiently and return to historical profitability levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
