Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' third quarter 2022 results conference call. All participants are at present in listen only mode. Following management's formal presentation, instructions will be given for the question- and- answer session. 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 website www.elbitsystems.com. I will now like to hand over the call to Mr. Rami Myerson, Elbit Systems Investor Relations Director. Rami, please go ahead.
Thank you, Michal. Good day, everyone, and welcome to our third quarter 2022 earnings call. On the call with me today are Butzi Machlis, our President and CEO, Kobi Kagan, 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 applies to the contents of this conference call. As we do every quarter, we will provide you with both our regular 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 the detailed GAAP financial data, as well as the non-GAAP information and the reconciliations 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 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.
Thank you, Rami. Hello, everyone, and thank you for joining us today. The third quarter results reflects the sustained demand for our solutions and the investments we are making to realize the growing potential presented by increased geopolitical tension and growing defense budgets. Third quarter revenues were similar to 2021, as growth in Europe offset lower Asia Pacific revenues. Our revenues by geography tend to fluctuate on a quarterly basis based on specific programs and project performance, as well as milestones reached in a particular quarter. We believe the longer term revenue trends supported by the growth in order backlog are more representative, as we have discussed with you in the past.
I would note the sale of Ashot Ashkelon Industries to FIMI was completed at the end of the second quarter of 2022, and our results in the third quarter of 2022 do not include a contribution from Ashot. The current operational environment is challenging due to supply chain disruption and labor cost inflation. Profitability in the third quarter include expenses related to employee stock price link compensation plans. These plans help align employee compensation with share price performance, incentivizing our employees to generate long-term value for Elbit, for all of Elbit Systems stakeholders. Our GAAP and non-GAAP results have always included these expenses, but this year they are higher in recent years following the share price appreciation. Our conservative balance sheet management policies have enabled us to increase inventories and partially offset the supply chain disruption to maintain deliveries to our customers on schedule.
Our budgets and longer term planning assume that the global economy trends of supply chain and wage inflation headwinds will gradually subside from the second half of 2023. We continue to invest in R&D to enhance our portfolio and maintain our competitive edge. We invest in sales and marketing to expand our customer base and also continue to invest in CapEx to improve and expand our manufacturing footprint. The rollout of the new ERP system and the construction of the new facility in the south of Israel are progressing, and we expect these and other efforts to support an improved operational performance. I will now highlight and discuss some of the key figures and trends in our financial results.
Third quarter revenues were $1.349 billion compared to $1.364 billion in the third quarter of 2021. In terms of revenue breakdown across our areas of operation, C4ISR, at 30% of revenues, increased year-over-year, mainly due to UAS and command control system sales. Land systems was 26% of total revenues and increased year-over-year due to artillery system sales. Airborne system accounted for 32% and declined year-over-year due to lower airborne precision guided munition sales. Electro optics accounted for 10% and other sales accounted for 2% of revenues, similar to third quarter of 2021. The geographic revenue breakdown in the third quarter reflects our diverse geographic revenue base. In the third quarter, North America contributed 29%, Europe 26%, Asia Pacific and Israel each contributed 19% of revenues.
European revenues increased due to growth in training and simulation sales. Asia Pacific revenues declined mainly to lower precision guided munition sales. North America revenues were lower due to a decline in medical devices sales. The non-GAAP gross margin for the third quarter was 25% compared to the third quarter of 2021 at 27.2%. GAAP gross margin in the third quarter was 24.2% of revenues compared to 26.6% in the third quarter of 2021. Gross margin in the third quarter reflects a combination of unfavorable product mix, wage inflation, and supply disruption. GAAP and non-GAAP gross profit in the third quarter include approximately $13 million of expenses related to stock price link compensation plan.
Third quarter non-GAAP operating income was $84.3 million, or 6.3% of revenues, compared with $123 million or 9% of revenues last year. GAAP operating income for the third quarter was $73.4 million versus $110.3 million in the third quarter of 2021. Operating profit in the third quarter include expenses of approximately $22 million related to the stock price link compensation plan. The operating expense breakdown in the third quarter was as follows: Net R&D expenses were 8.4% of revenues versus 7.4% of revenues in 2021. Marketing and selling expenses were 5.1% of revenues, down from 6.2% of revenues last year.
G&A expenses were 5.9% of revenues compared to 4.9% of revenues last year due to stock price link compensation expense. Other operating income of $9.4 million included a capital gain related to the sale of a building in Israel, which was included in our GAAP and non-GAAP results. Financial expenses were $16.4 million in the third quarter compared to $13.5 million in 2021. Other income of $4.8 million included approximately $4.6 million related to the remeasurement of an affiliate following an investment round. We recorded a tax expense of $7.9 million in the third quarter compared to $8.3 million in 2021.
The effective tax rate in the second quarter was 12.8% compared to 8.6% in 2021. The non-GAAP diluted EPS was $1.40 in the third quarter, compared with $2.33 last year. The GAAP diluted EPS was $1.26, compared with $2.08 last year. The stock price link compensation expenses in the quarter were equivalent to approximately $0.45 on an EPS basis. Our backlog of orders as of September 30, 2022, was $14.7 billion, approximately $1.1 billion higher than the backlog at the end of September 2021. Approximately 40% of the current backlog is scheduled to be performed during 2022 and 2023, and the rest is scheduled for 2024 and beyond.
Operating cash flow for the third quarter was a $100 million-$178 million inflow compared to no inflow in the same quarter last year. The cash outflow also included an inventory build related to our efforts to mitigate supply chain challenges as we have leveraged our solid balance sheet to support deliveries to our customers. Cash flow from investing activities includes the higher CapEx related to the new facilities in the South of Israel, Charleston, South Carolina, as well as the rollout of the new ERP system. The board of directors declared a dividend of $0.50 per share for the third quarter of 2022. I will now turn the call over to Mr. Machlis, Elbit CEO. Butzi, please go ahead.
Thank you, Kobi. Firstly, I would like to thank the investors on the call and all our shareholders for their continued support. In a volatile world, we, Elbit's management team, have to make hard choices and decisions as we strive to create value for all our stakeholders and ensure we find the right balance between long-term value creation and short-term performance. We are fortunate that Elbit Systems shareholders understand the strategy, the potential, and the long-term investment horizons that have supported the growth and the success of the company for decades. We are also aware that you expect a better operational performance, including higher profitability, than what we delivered in the third quarter. We are working to improve the short-term performance while maintaining the balance with the long-term success of Elbit Systems by investing in our people, our portfolio, and our customers.
This year, we increased investment in our people. Elbit's employees are the most critical contributor to our long-term success. We invested to retain talent in a competitive labor market in Israel and around the world, including stock price link compensation plan that had material impact on the profitability. I would like to remind you that our executives and employees come to work at Elbit for more than just a salary. They join Elbit because we are an attractive employer that provides them with an opportunity to work on some of the world's most advanced technologies, and to support those responsible for the protection of our loved ones in our countries. Our businesses is growing, and we continue to recruit around the world to deliver our record backlog, and support our customers.
We continue to invest in R&D to develop leading solutions that provide our customers with valuable competitive edge, leveraging the operational experience of our employees, the proximity and short feedback loop with our customers. We are investing in new facilities. Elbit is building new advanced facilities in Israel, the U.K., Germany, and the U.S. We continue to gradually upgrade existing facilities. These facilities will include the latest manufacturing technology and processes that should support the operational improvements. We are also investing in creating value for our customers by providing them with advanced capabilities, investing in our multiple subsidiaries around the world, and by utilizing our balance sheet to build inventories and maintain deliveries on schedule. We know that our customers appreciate our effort. We expect this investment to deliver good return in the future.
Elbit Systems long-term growth has been driven by a healthy combination of both organic growth and acquisitions. These include Elbit Night Vision in 2019, and Sparton in 2021, that enhanced our technological portfolio and strengthened our position in the U.S. Sparton and Elbit Night Vision reported significant milestones in recent months. In October, Sparton was one of three suppliers awarded a joint five-year, $5.1 billion IDIQ contract to supply Sonobuoys to the U.S. Navy. This follows selection of Sparton as a qualified vendor for the Multiple Award Delivery Order contract by MADO in July. The IDIQ is significantly larger than the previous five-year IDIQ. This illustrates the importance of anti-submarine warfare as near peer tensions escalate, and the growing demand for next generation Sonobuoys.
US Naval Forces Central Command is currently conducting a three-week Digital Horizon exercise in the Middle East focused on employing and integrating unmanned and artificial intelligence systems. Elbit Systems of America, together with our Israeli-based maritime business unit, are showcasing Elbit Systems Seagull unmanned surface vessel as part of this exercise. This event validates the investment Elbit has made to build its maritime capabilities, and the growing importance of the maritime domain. In October, Elbit Night Vision received a $107 million order to supply night vision system to the U.S. Army as part of the OTA contract received in 2020. In September, Elbit Night Vision received a contract to develop an advanced night vision sensor for the U.S. Army's IVAS system.
Militaries around the world continue to invest to equip their soldiers with capabilities that enable operations at night or in dark environments. Recent conflicts have highlighted the importance of these capabilities. Elbit is a leading provider of night vision capabilities for soldiers, thanks to the acquisition of Elbit Night Vision, and our legacy solution. We are working to realize the synergies between our night vision capabilities and additional technologies in Elbit portfolio, like the integration of our command and control system that can project information on the night vision display. At the second quarter results conference call, we discussed five capabilities areas that we identified should benefit from increased defense spending over the coming years following the lesson learned from the Russian invasion of Ukraine. These are platform protection, command and control system, electronic warfare, unmanned systems, and network precision munition.
We believe that each one has the potential to generate significant revenues over the medium term. During the third quarter, we announced additional contracts across these five priority areas. Starting with platform protection, in November, we announced a $200 million contract for military helicopter self-protection suit for an Asia Pacific customer. The conflict in Ukraine has highlighted that only ground forces equipped with tank and APCs can maneuver and execute large-scale operations. The conflict has also demonstrated the vulnerability of platforms across all domains, and the critical need to protect both platforms and their occupants. This highlights the importance of active protection systems to protect maneuvering ground platforms. The Iron Fist active protection system development is on track for platforms in Israel, the Netherlands, Australia, and the U.S.
I believe there is a significant potential for this unique solution that can protect armed personnel carriers, a range, and a range of military platforms. Helicopters provide critical support to maneuvering armed forces, and our DIRCM system protects helicopters and fixed-wing aircraft from a range of threats. Another area of priority spend is autonomy and unmanned systems in the air, on the ground, and at sea. The effectiveness of loitering munition on an armed UAV is limited when operated as a single platform. Armed forces require a comprehensive solution that generates targets and close the sensor to shoot a loop quickly and efficiently. Elbit can supply our customers with a multilayer solution of autonomous aerial intelligence capabilities from small drones to manned UAVs.
We can connect these platforms with our command and control solutions, and equip them with a range of electro-optical, ELINT, and EW sensors and payloads, all developed in-house at Elbit. The vertical integration of our internal supply chain enhance our ability to tailor unmanned and autonomous solutions to customer requirements, increasing effectiveness by maximizing the performance of each part of the solution and reducing costs. In September, we were awarded a $120 million contract to supply Hermes 900 maritime UAS to the Royal Thai Navy. This UAS will configure it for maritime mission, and will be equipped with maritime radar, satellite communication, droppable inflatable life raft, and other capabilities. In November, we received a $72 million contract to supply Hermes 900 UAS to an international customer.
The Hermes 900 UAS has been selected by more than 15 customers around the world. The third area of priority spend are advanced radios and command control systems. To maneuver efficiently and effectively in combined multi-domain operations, modern armies have to be equipped with advanced C2 systems. In October, we were awarded a $65 million contract to supply the first fully networked mechanized solution to an army in Latin America. This solution includes armed vehicles equipped with software-defined radios, the battle management system, and many unmanned aerial systems. In October, we received a $25 million contract from the Finnish Ministry of Defence to supply radio communication systems to the Finnish Army. Our military radio communication system has been selected by several European and NATO countries, including Sweden, Germany, the Netherlands, Switzerland, Spain, and others.
With that, I will be happy to take your questions. Operator?
Thank you. Ladies and gentlemen, at this time, we will begin the question -and- answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your question. The first question is from Pete Skibitski of Alembic Global . Please go ahead.
Yes, good afternoon, everyone. Hope everyone's doing well.
Hey, Pete.
Guys, I had a question about the airborne systems unit. Revenue was down quite a bit this quarter. I think, Kobi, you mentioned that it was on airborne precision-guided munitions. Is there... It was also down a little bit in the second quarter. I'm just wondering if there was maybe, you know, one large program that's ending that's driving that weakness and that maybe as we get into the fourth quarter, we'll see easier comps there and a return to growth.
Thank you, Pete, for the question. This is Kobi. You're right. It is a large program that we announced early last year that we had concluded in the previous quarter. In this quarter, we don't have any sales from this large program. We announced a new airborne precision munition sale that we got this year. We expect that next quarter, we will continue to sell on this on this issue.
Thanks for that. I just wanted to switch now to, maybe to, you know, underlying gross margin issues, in particular pricing. I'm just wondering, you know, as we've heard the U.S. defense contractors work their way through the third quarter, you know, they are also experiencing, of course, higher labor rates. There's sort of a delay effect in terms of, you know, not being able to pass on the higher labor rates through updated pricing until they start new contracts, essentially. You've got this mix of, you know, current contracts with higher labor rates, but pricing reflects, you know, labor rates from maybe a year or two ago. I'm just wondering, have you...
Has Elbit had success in terms of the ability to pass on the cost of higher labor rates through pricing on new contracts? You know, maybe ignoring for now stock linked compensation, but just in terms of base labor rates, are you getting better pricing on new contracts as opposed to the contracts that maybe were awarded a year ago when labor rates were a bit lower?
Hi, Pete. This is Yossi. I would address it in the following way. First of all, the extraordinary cost related with our stock option plan, that is something kind of a one-time, and it goes away, and it's not something called the baseline of cost of the company. That should be neutralized. It does impact present here, but that is not something that will continue with us. On the baseline cost, I would say the following. Some of our contracts with customers do have economic price adjustments, and therefore, we are getting compensation because of the growth in the cost of the labor, and also, to some extent, growth in the cost of basic materials, which is also price adjusted according to what happens in the market.
However, we don't have that in for all of our contracts. Therefore, we are suffering to some extent because of that. We definitely take all these changes into consideration when we bid for new contracts. I would say that, even in the recent growth of backlog that we have experienced, they already include backlog that takes into account these economic adjustments. We hopefully these contracts will result in improved profitability in the future.
Okay. That's very helpful. Great color. I appreciate it. I'll just ask one last one and then get out of the queue there. On the backlog growth, it's a good transition, Yossi. It was very strong this quarter. Year to date, backlog growth has been strong. I'm just wondering, can you bifurcate a little bit by region for us? Is there any one region that's been very, very strong and maybe some laggards? I'm sure a lot of people want. you know, are wondering if, you know, if Europe and even Eastern Europe is driving that growth or if you're seeing strength kind of across the board. Would appreciate any color on that topic.
Yeah. First of all, I would say the following about that. We have kind of a steady state business flow, which we were exposed to years ago, and we continue to have. These are the, what we call the medium-sized contracts of tens of millions of dollars each, and that continues and even increases. We have on top of that, some significant number of what we call three-digit contract that has in the hundreds of millions of dollars per contract that we have seen in recent two years, increase of number of those contracts. Definitely the high level, dollar value contracts have the potential to improve future, definitely revenues, but also the bottom line.
Regarding the areas, geographic areas, you can look at our press releases of the various major contracts that we have announced. If you analyze those, I would say that the contracts in the U.S. are more or less in the steady-state growth that we have seen past years. Contracts in Europe and Asia Pacific are higher in the growth than what we have seen in the past, especially related with some of these three-digit contracts that I mentioned earlier. The contracts in Israel, of course, are more or less at the level that we have seen that in the past, maybe with some middle single-digit growth from what we have seen in the past.
In total, year-over-year, our backlog has increased by $1.1 billion, which is a significant number. The spread, the global spread, as I said, the higher level growth is in Asia Pacific, Europe, and all the others are at the normal level.
Okay, that's great. Appreciate the call, guys.
Thanks, Pete.
Thank you, Pete.
The next question is from the line of Ellen Page of Jefferies. Please go ahead.
Hi, guys. Thanks for the question.
Hi, Ellen.
Just to start, looking at both from a cash and margin perspective, how would you describe supply chain disruptions today relative to where they were in Q2? Are things improving at all, both from a ability to source materials and also from an inflation perspective?
Hi, Ellen. It's Kobi. With regards to supply chain, we see an improvement in shipment. The shipping costs are going down, not yet at the historical level, but they are going down. We see also prices going down in metal parts and material going down. Once again, not yet as at the historical level prior to COVID, but going down. We don't yet see it in electronic components. There we still see a shortage. The main challenge we face right now is mainly around electronic components. That's also the reason why Our stocks went up in inventories.
From what we understand and from what we estimate, we believe that improvement there will happen during the second half of next year. We are taking all the required measures in order to overcome some of these challenges.
Helpful. Just looking at land systems. It was very strong in the quarter, I believe that's where Ashot came out. Like, is that accurate, and how do we think about growth going forward as we think about both ammunition and weapons in that section?
Are we talking about land system, Ellen?
Yes, and Ashot.
Yeah.
The divestment.
Hi, Ella, this is Kobi. We have stronger artillery sales this quarter. Remember that the Ashot Ashkelon part was nearly $20 million, so it was not so significant. We had stronger artillery and ammunition sales due to the situation, mainly in Europe. We had a stronger quarter in the land system business.
Helpful. I'll hop back in the queue. Thank you.
Thank you.
Thanks, Ellen.
The next question is from Ella Fried of Bank Leumi. Please go ahead.
Good afternoon. Thank you for taking my questions. Most of them were answered, but I have just one or two, yeah, left. You marked sea and the naval business as one of your strategic moves into the next years. Also, you have this conversion of products and technologies from air and from land into the sea. Could you give us some milestones of when and how much this will be felt over the next years?
Hi, Ella.
Hi.
As you remember, we acquired Sparton, in the U.S., around two years ago.
Yes.
We continue to be an important supplier to the Navy of sonobuoys. As we've mentioned, the $5.1 billion IDIQ contract, which should come and be split between three suppliers, is also a good indication that our revenues in Sparton will continue to grow in the future. We also made another acquisition a few years ago in Canada, a company by the name of GTI. They do sonar, and they are very successful. The company is growing as well, and they have already several international sales, and we see a growing potential for them also. A year and a half ago, we won a very important EW naval contract with the U.K.
It was a very difficult competition against the local providers, and still we won it because of the superior technology we have here in Israel. This technology is similar to the technology that we are deploying these days on the Sa'ar 6 corvettes of the Israeli Navy. Based on our EW capabilities here and based on our capabilities in the U.S. And in Canada, I'm happy to say that we have position in the U.S., we have position in Canada, we have positions in the U.K. and Israel.
We also have here a nice, very advanced autonomous solution by the name of Seagull, which the importance of naval autonomous vessel was demonstrated just recently in the Gulf as well as the conflict between Ukraine and Russia. We have several elements. We are combining them together to deliver integrated solution to our customers. We see a growing potential for that, and our long-term forecast is, I mean, is to have an activity which for naval customer should be around $1 billion revenue view.
Okay. Thank you. I have a follow-up question, unsurprisingly, on the bottlenecks in the industry also. It was quite a lot said about. The question is, if you could give us more, a bit more color and a bit more specifics about where, I mean, there are the chips, but is it mostly Asia or it's all over? Also, because there is such a ramp-up in the industry, especially in the U.S., is there competition between companies and you have sometimes just to stand aside and wait for a more rational prices? How is it impacting you?
Because the other, the American, companies, they were ahead of you in this supply chain disruptions, and you were much better off all this time, and now it reached you as well. I would like to see how is it, happening in the industry?
Hi, Ella. This is Yossi.
Hi, Yossi.
Hi. I would say the following. We all, the whole industry, not only the aerospace and defense, were significantly affected by what's going on in the supply chain. However, as Butzi explained before, we already see some improvement in areas like the mechanical parts, like transportation and deliveries, and so on and so forth. However, the electronic parts are still with us and impacting. The good thing that we did 2 years ago is that we have anticipated this thing that's going to happen, and we have increased our inventories significantly, which did hurt our working capital, of course. You have seen that in our reports.
By the end of the day. We continued to work along those lines during the last year and a half to two years. However, initially, we thought that this will be over, or significantly over by this time.
This has not happened. This explains why we were quite well organized for the initial year and a half, and it did not affect us as much.
Okay.
as it was by the U.S., done by the U.S. companies. However, by the end of the day, we are part of the whole global supply chain, and now it does affect us more. We do anticipate by the second half of 2023, this will decline. What has happened in the mechanical parts and in the transportation and other areas, that will improve also in the electronic parts. We will be back on track somewhat towards the second half of 2023.
Do your competitors also feel optimistic about this, more or less this timing, considering this?
These are the market estimate right now. We are on a daily contact with all the suppliers to understand exactly when can we get the missing parts. You understand? In some cases, we have the entire product ready, and we are just missing one transistor or one piece of electronic in order to deliver to a customer, and we can't do it. We're on a daily contact with the relevant suppliers. We start to see some improvement, the estimation right now in the market that it will be solved or most of it will be behind us during the second half of next year.
Okay. Last question about the hedge. I know that you have now a new hedge policy, and it's less sporadic than it used to be. This recent months presented quite an opportunity for hedging. Did you stick to this structured hedging or did you take also some opportunities in this term?
Hi, Ella. This is Kobi.
Hi, Kobi.
Hi. We are sticking to a policy which is. We are not profits and we cannot anticipate what happens with exchange rates. Nobody anticipate the sharp decline in the British pound. We are sticking to the policy. Next year, of course, we have some stronger hedges due to the improvement in the annual rate. We sometimes take peaks, and when we identify peaks. We actually take the opportunity and increase our hedges. Everything is around the policy.
Yeah.
We maintain a strict policy. We want to work on steady platform of exchange rates. Sometimes it worth a lot to understand what is the neighborhood of the exchanges that we are working. We've taken advantages on spikes that we have identified.
It will be more closer to the average and less to the spikes if I read you right?
Yeah. This is right. Because we think that the steady platform for the company is very advantageous for our work. Of course, we have a significant improvement for next year in terms of the platform of the exchange rates that we are going to work with.
Okay. Thank you very much, and thank you for taking my questions. Good afternoon.
Thank you.
Thank you.
The next question is from Ilya Fainer of Leader. Please go ahead.
Okay. Thank you. Taking my question. Most of the question was answered, but I want to ask you, what's your opinion about the fear that the recession will eventually lead for a lower growth in the defense budget, and how it's gonna be influence the company? The second question, we've seen an impressive growth in the backlog. Do you have a range or guidance when we're going to see the growth in the revenue, and what's your guidance for the next two years?
Hello, with regards to the bank question, we do not see any kind of recession currently on the control of the global situation specifically, and we also expect a global recession in the U.S., North America, and also Europe as well. So after that, we will see stability, which will enable a long-term program to execute. So we anticipate growth spending, the growing potential of the company, the more opportunities, we have a more offer, and the panel of new positions is increasing. So that's the regards to the first question.
Well, I think that the best indicator for the future growth in revenues is the backlog. If you look at our press release, we always give the breakdown of the backlog for the rest of the year, plus the following year, and the backlog to be sold after the following year. By the end of the third quarter, we had a backlog of $14.7 billion. We also said that 40% of backlog is going to be performed during the fourth quarter of 2022 and 2023. Just by making a simple calculation, that gives you about $4.7 billion of revenues that are going to happen in 2023. We usually have a coverage of backlog for approximately 80% for the following year.
Just making a simple mathematics, you can find out that we'll have very nice growth for the top line for next year.
Okay. Thank you.
Thank you, Ilya.
The next question is a follow-up from Pete Skibitski of Alembic Global. Please go ahead.
Yeah. Thanks, guys. I wanted to ask on the cash flow statement, the contract liabilities line, which I think relates to customer advances. Advances were a little soft in the first half of the year, but they were very strong here in the third quarter, and historically, they've been very strong in the fourth quarter. I just wanted to see if maybe some advances were pulled forward from the fourth quarter into the third, or do you expect the fourth quarter to be a, you know, another good quarter for advances? You know, typically a good advances quarter for Elbit means a good free cash flow quarter as well. Just wanna get a sense of that. Thanks.
Hi, Pete. It's Butzi. The answer is no. We didn't change anything. what you see right now is a reflection of the third quarter only. There is a lot of, we put a lot of emphasis on cash flow in the company these days. this is true also for advances. that's why you see growth in advances in the company, and we expect it to continue.
Okay, great. Thanks so much.
Thank you.
Thanks, Pete.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the U.S., please call 1-888-782-4291. In Israel, please call 03-925-5900. Internationally, please call 972-3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?
Thank you. I'd like to thank all our employees for their continued hard work and contribution to Elbit Systems' success. To everyone on the call, thank you for joining us today and for your continued support and interest in our company. Have a good day and goodbye.
Thank you. This concludes the Elbit Systems Ltd. third quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.