Increasing Profits, R&D Blowout: Elbit Systems’ 2023 Summary
In a year rife with global conflicts and economic instability, substantial research investments paid off – big time
Summarizing the events of 2023 proves to be a challenging endeavour, given the year’s tumultuous nature marked by wars, both local and global military conflicts, and constant economic, political, and security fluctuations.
As the first quarter of 2024 came to an end, Elbit Systems gathered its leadership and stakeholders to present a detailed report on its performance throughout the eventful previous year, deeply affected by the intricate security environment surrounding Israel and the global community.
At the beginning of the conference, Bezalel Machlis, CEO of Elbit Systems, expressed sincere condolences to the families of employees who had served in the reserves and tragically lost their lives in the Gaza conflict.
Machlis stated, “We deeply considered whether to proceed with this year’s conference. During these times, our thoughts and support firmly align with the families of our fallen colleagues, and we commit to ongoing support for them.”
Doubled in Size in Less than a Decade
In the midst of a solemn atmosphere and debates about the appropriateness of holding the conference, Dr. Kobi Kagan, Elbit Systems’ CFO, presented the company’s financial milestones for 2023.
“The results are clear,” Kagan highlighted. “Our backlog has escalated to $17.8 billion, marking a significant rise of $2.7 billion from the last year, including an impressive increase of $1.1 billion in this very quarter alone, the fourth quarter.”
“We’ve hit a milestone with sales reaching six billion dollars, establishing a new record,” Kagan proclaimed. “Reviewing the results of this year, we see a growth rate surpassing 8% relative to 2022.” He stressed that this advancement stems from a detailed and rigorously supervised work plan executed by the company’s management, aimed at maintaining operational profitability.
The CEO acknowledged the economic trials of the previous year but affirmed the effectiveness of Elbit Systems’ strategy. “I’m convinced that we’re advancing well in implementing the strategy we’ve developed,” Machlis added. “Our goal was to reach 10% profitability by 2026, and I can now say that the current forecast indicates we’re exceeding our sales targets more than I initially anticipated.”
“The company is in the midst of a significant transformation, having doubled in size in about seven years,” he detailed. “This growth is reflected in our sales, number of employees, operational fields, and market standings. Moreover, the increase in our backlog, which outpaces the growth in sales, is a clear indicator of this progress.”
A Growing Need for Security
“Unfortunately, the world is witnessing several significant conflicts that are driving growth in security budgets globally,” explained the CEO. “The first is the tension between the US and China, leading to increased security budgets with a focus on maritime and aerial domains – both in relevant areas within the US and in countries surrounding China and the Asia-Pacific region, such as Japan, Australia, South Korea, Thailand, and the Philippines – countries where Elbit Systems is very active.”
The CEO pointed out two additional key drivers behind the global increase in security funding. The first is the conflict between Russia and Ukraine, underscoring Europe’s push for greater independence. The second involves the ongoing tensions in the Middle East, particularly between the coalition of Sunni Muslim countries and Iran, along with Shia countries, their affiliates, and militias.
An R&D Territory
Elbit Systems’ remarkable growth in 2023 can also be attributed to its significant investment in research and development (R&D). Information shared with investors revealed that approximately $424 million was dedicated to R&D in the past year, supplemented by nearly $200 million in capital expenditures (CAPEX).
“We’ve developed a portfolio tailored to each customer,” Machlis elaborates. “It’s not about duplicating one product globally. We excel at understanding each customer’s strategic challenges and creating bespoke solutions for them. That’s why our investments in development and research are substantial — to support this comprehensive portfolio and maintain our global leadership across all areas of operation.”
A key element supporting the company’s strategic execution is its extensive global presence, reaching nearly every corner of the globe. “We operate dozens of subsidiaries worldwide, in locations including the USA, Canada, UK, Germany, Sweden, Switzerland, Romania, Australia, India, and many other countries,” Machlis explained.
In his closing remarks, Machlis touched on the company’s most valuable asset: its people. “We are powered by incredible personnel,” he summarized. “Our team members dedicate themselves fully, frequently transitioning directly from home to the missile production lines, including weekends. Their motivation knows no bounds.”
