Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems second quarter 2022 results conference call. All participants are at present in a 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 would now like to hand over the call to Rami Myerson, Elbit Systems Investor Relations Director. Rami, please go ahead.
Thank you, Yoni. Good day, everyone, and welcome to our second quarter 2022 earnings call. On the call with me today are Butzi Machlis, our President and CEO, Kobi Kagan, our CFO, and Joseph 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 contents of this conference call. As we do every quarter, we will provide you both with 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 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 to turn the call over to Kobi. Kobi, please.
Thank you, Rami. Hello, everyone, and thank you for joining us today. The second quarter results reflect a pickup in demand with a series of significant contracts awarded for our solutions in the quarter, as our customers start to implement the lessons learned from the Russian invasion of Ukraine. Second quarter revenues were similar to 2021, as growth in Europe and Asia Pacific offset the decline in the U.S. Our revenues by geography tend to fluctuate on a quarterly basis based on the specific programs and projects performed, as well as milestone reached in a particular quarter. We believe the long-term revenue trends supported by the growth in the order backlog are more representative and encouraging in most of Elbit Systems geographical end markets. I will now highlight and discuss some of the key figures and trends in our financial results.
Second quarter revenues were $1.303 billion, similar to the second quarter of 2021. In terms of the revenue breakdown across our areas of operation, airborne systems accounted for 39%, and land systems was 21% of total revenues. C4ISR at 30% of revenues increased year-over-year, mainly due to UAS sales to Asia Pacific customers. Electro-optics accounted for 9% of revenues, increasing year-over-year, mainly due to night vision sales. Other sales accounted for 2% of revenues and declined year-over-year due to lower medical device sales. The second quarter highlighted the strategic importance of our diverse geographic revenue base. In the second quarter, Asia Pacific contributed 29% of our revenues, North America 26%, and Israel and Europe each at 20% of revenues. Asia Pacific revenues increased mainly due to UAS sales.
The growth in European revenues was broad-based and included growth in training and simulation, precision-guided munitions, and night vision sales. Growth in European and Asia Pacific revenues helped offset lower North American sales. The non-GAAP gross margin for the second quarter was 26.5% compared to the second quarter of 2021 at 26.6%. GAAP gross margin in the second quarter was 26.1% of revenues compared to 26% in the second quarter of 2021. Second quarter non-GAAP operating income was $103.3 million or 7.9% of revenues compared with one hundred and fourteen point nine million or 8.8% of revenues last year.
GAAP operating income for the second quarter was $115.1 million versus $117.1 million in the second quarter of 2021. The operating expense breakdown in the second quarter was as follows: Net R&D expenses were 7.5% of revenues versus 7.3% in 2021. The recent conflicts have highlighted the alignment of Elbit Systems product portfolio to the priority areas of our customers, demonstrating the return on our historic investment in research and development. The current investments in R&D will help upgrade existing and develop new products and solutions and ensure that we continue to supply a range of market leading solutions to our customers in the future. Marketing and sales expenses increased to 6.4% of revenues from 5.8% last year.
We continue to invest in sales and marketing to take advantage of the positive inflection in global defense budgets. The new opportunities these create. G&A expenses were 5.6% of revenues compared to 5.1% last year. Other operating income of $27.2 million include a capital gain related to the sale of our subsidiary, Ashot Ashkelon Industries, in the second quarter and the sale of a building in Israel. I will note the significant increase in the share price since the beginning of the third quarter. We would expect a significant impact in compensation expenses related to our stock price link compensation plans to employees if the shares remain at current levels or increase further.
As we discussed at our first quarter results, we believe these plans help align employee compensation with share price performance, incentivizing our employees to generate long-term value for all of Elbit Systems stakeholders. Financial expenses were $9.3 million in the second quarter compared to $7.1 million in 2021. Other expenses of $12.1 million includes a $10.6 million non-recurrent pension adjustment expense related to the sale of Ashot Ashkelon. We recorded a tax expense of $12.8 million in the second quarter compared to $20.1 million in 2021. The effective tax rate in the second quarter was 13.6% compared to 18.5% in 2021.
Our non-GAAP diluted EPS was $1.73 in the second quarter compared with $2.11 last year. The GAAP diluted EPS was $1.82 compared with $2.30 last year. Our backlog of orders as of June 30th, 2022 was $14.1 billion, approximately $500,000,000 higher than the backlog at the end of June 2021. Approximately 52% 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 second quarter was a $169 million outflow compared to a $170 million inflow in the same quarter last year.
The cash flow in the quarter includes the payment of $73 million following the company decision to release exempt earnings from approved privileged enterprises in Israel. The cash outflow also includes an inventory build related to our effort to mitigate supply chain challenges and the timing of receiving payments from various customers. We expect to receive these payments over the coming quarters. The board of directors declared a dividend of $0.50 per share for the second quarter of 2022. I will now turn the call over to Mr. Machlis, Elbit CEO. Butzi, please go ahead.
Thank you, Kobi. Orders in the second quarter reflect good demand for our solutions from customers around the world. A series of significant orders in recent months have validated the alignment between Elbit Systems' portfolio and our customers' priority areas of defense spending and the mission-critical requirements. I believe that we are at the beginning of a period of global defense budget growth, driven by the escalation in geopolitical tensions. We are encouraged by the order intake in the second quarter, but as I have learned from decades of experience, the conversion of defense budget growth to RFPs and then into orders and revenues can take time, particularly when militaries are adjusting procurement processes and force structures for a new era. The Abraham Accords have also helped open new markets and new opportunities for strategic partnership with the nations that are party to this historical agreement.
We opened Elbit Systems Emirates at the end of 2021 and announced our first order for DIRCM Systems in March 2022. Governments and militaries are analyzing the Russian invasion of Ukraine and the evolving conflict to prepare for the next one, as they have done in the past with other conflicts. We have identified five areas that should benefit from increased defense spending over the coming years. These are platform protection, command and control systems, electronic warfare, armament systems, and network precision munition. During the second quarter, we announced significant contracts for four of these five priority areas from customers in Europe and other parts of the world who are implementing the lessons learned. I would like to provide an overview of these priority areas.
Starting with platform protection, the conflict in Ukraine have demonstrated the vulnerability of platforms across all domain and the critical need to protect both platforms and their occupants. Elbit Systems provides systems and solutions that enable protection of aerial, naval, and ground platforms from a range of threats. Our DIRCM Systems are installed on more than 25 different type of military and commercial aircraft and have accumulated hundreds of thousands of flight hours protecting them from ground-to-air missiles. In July, we received an $80 million contract to supply C-MUSIC DIRCM System and airborne EW solution to an Asia Pacific country, and we were selected to supply a J-MUSIC DIRCM System for a Gulfstream G650 of the Netherlands Ministry of Defense. Our platform protection system include infrared missile warning system, chaff and flare for a range of aircraft.
The Iron Fist Active Protection System for armored vehicles, and EW system that protects ships and submarines. The second area of priority spend in advanced command and control systems. These C2 systems are the critical enabler of combined forces and multi-domain operations. Elbit Systems Torch-X C2 Solution provides visibility and connectivity to commanders and soldiers, utilizing the intelligence collected by a multitude of sensors across the battlefield, identify adversaries, enabling fast decision-making and the ability to convert insight into action. Our C2 systems help shorten multi-sensor to shooter loops as well as supporting logistics. In June, we received a $548 million four-year contract to upgrade the multi-domain combat network warfare capabilities for the armed forces of an Asia Pacific country.
As part of this contract, Elbit Systems will provide a range of networking and command and control systems as well as software-defined radios for air, ground, and naval platforms. The third priority area is electronic warfare that provides armed forces with the capability to utilize the electromagnetic spectrum to protect, attack, and exploit the communication, intelligence, and other enemy activities. Elbit Systems is the Israeli MOD prime supplier of EW capabilities for air, ground, and naval platforms and domains. In recent years, we received a number of prestigious EW contracts from the U.S. and German Air Force and the U.K. Royal Navy. In May, we received a $69 million contract to supply electronic warfare system to a country in Asia Pacific, and in June, we were awarded a $70 million contract to supply a ground-based EW and signal intelligence solution to an international customer.
The fourth priority area is unmanned system. Elbit Systems has decades of experience developing and manufacturing a broad portfolio of unmanned air, ground, and maritime solution. Elbit also provides the command and control system to connect and operate them, as well as a range of advanced payloads. These unmanned solutions can execute a broad range of missions, reducing the risk to forces and increasing their effectiveness. At Eurosatory in June, we demonstrated Legion-X, a multi-domain autonomous network solution for swarms of unmanned platforms in the air, on land, and at sea. Legion-X enables the command and control of a range of unmanned platforms of various sizes and capabilities in a cohesive swarm, helping soldiers perform their missions in complex environments such as urban warfare. The fifth priority area is network precision munition that enable armed forces to engage time-sensitive targets with power, precision, and minimum collateral damage.
Elbit Systems has combined the portfolio of munitions acquired with IMI, our legacy precision guidance and networking capabilities, and the technologies we acquired from Rokar last year to develop a range of precision munitions from the Iron Sting 120 mm mortar round to a Rampage Long-Range air-to-ground supersonic missile. In June, we received a $220 million contract to supply these precision guidance kits for airborne munitions of an Asia Pacific country. In July, the German defense company, KMW, signed a cooperation agreement with Elbit Systems Land and Elbit Systems Deutschland in the area of rocket artillery. We believe this agreement will leverage the leading expertise these companies have in the area of rocket artillery and will enable both companies address the growing potential in the European market for these solutions.
These are just five areas of Elbit's broad portfolio. We believe that each one has the potential to generate billions of dollars of revenues over the medium term. At the end of June, we closed the sale of our 84.9% stake in Ashot Ashkelon Industries to FIMI Opportunity Funds for $84 million. We regularly review our portfolio to ensure that we remain focused on the core areas of our business. As part of this review, we decided to sell Ashot Ashkelon that we acquired with IMI in 2018. was not considered as core business of Elbit. I would like to take this opportunity to thank the hundreds of Ashot Ashkelon employees for their hard work and dedication, and to wish them success in the future. Elbit Systems' strategy is to focus on global defense market, and I do not expect this to change.
I believe it is important to remain focused on the market and technology you know, and to reduce distractions for markets that may appear attractive, but often require different skill set to succeed, to access. That said, we continue to explore opportunities to leverage our technology and solutions developed for military application in adjacent and new markets. In July, our US subsidiary, Universal Avionics, received $33 million order from AerSale for ClearVision Enhanced Flight Vision System for Boeing 737 NG. As part of this contract, Universal will supply ClearVision EFVS system featuring the SkyLens Head-Wearable Display and EVS-5000 panels. The ClearVision system enables commercial pilots to fly in degraded visibility situation in day and night to take off and land faster, saving time and increasing operational effectiveness and safety.
In August, OPGAL, our thermal imaging subsidiary, and the Sheba Medical Center in Israel signed an MOU to explore opportunities to utilize thermal imaging technology to improve the efficiency, effectiveness of surgery and treatment in four key areas, heart surgery, diabetes, foot treatment, surgical incision infection, and respiratory monitoring. I'm proud of our engineers that are looking for additional opportunities to utilize Elbit technologies to protect and save lives. With that, I will be happy to take your questions.
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 polled in the order they are received. Please stand by while we poll for your questions. The first question is from Ellen Page of Jefferies. Please go ahead.
Hi, guys. Thank you for the question.
Hi, Ellen.
Can we talk about C4ISR has grown double digits for a few years now in the first half. How do we think about a normalized growth rate in that business? Is there anything chunky in there that might start to anniversary and moderate growth?
Can you please repeat the question?
Ellen, can you please repeat the question? Your line is a little bit disrupted.
Here. Is that better?
Yes, much better.
Just at C4ISR, you've posted double-digit growth two years in a row in the second quarter. Just how do we think about a normalized growth rate in that business and the sustainability of this demand?
We see growing demand for C4I solution, which includes communication system, networking system, application, UAVs, autonomous solutions. These are all included under C4I. As was mentioned earlier, USVs and the UAS, and the UAVs, and ground unmanned systems are all under this definition. As was mentioned earlier, we see a growing demand for such solutions. We have got experience using unmanned systems in Israel as well as in other markets. We have delivered them to many customers, and with full interoperability to different forces. We own all the technology in-house, and we see growing demand for this service. I believe that the growth will continue.
Great. Just on cash, you mentioned that there's a build of inventory related to supply chain disruptions and timing of collections was an impact in the quarter. Can you just walk through working capital in the back half and, just go over that $76 million cash tax payment again and how it relates to future tax planning?
[audio distortion].
Yeah. This is Kobi Kagan again. Thank you, Ellen, for this question. We had in the quarter a one-time payment of $73 million.
Which is related to the company's decision to release exempt earnings from approved and privileged enterprises in Israel. This is a one-time payment to settle this with the tax authority here in Israel. This, of course, would not affect the second half of the year as if this is a one-time expense. We are seeing the cash flow as a full year and not on a quarterly basis. We think that, and we mentioned that we expect to receive payments in the coming quarters from various customers.
Great. [audio distortion] with you.
Thanks, Ellen.
The next question is from Pete Skibitski of Alembic Global. Please go ahead.
Hey, good afternoon, everyone.
Good morning, Pete.
Yeah. Oh, yeah. Let me start with, I guess maybe Butzi. You know, you had good sequential backlog growth this quarter, Butzi, but I think that didn't include the pretty large intelligence systems contract that you booked in Europe. I think it was $660 million. It closed after the quarter. So that was a nice win and I'm, you know, I'm curious because I haven't seen an intel contract that large booked by Elbit. You know, it raises the question, I think. Do you see other opportunities out there to sell a contract of this magnitude to other countries in the intel area?
Yeah. Thank you. Thank you for the question. As you are, as we all see, the company is transforming, is in the middle of transformation. We are getting big contracts, and that's on top of the small and medium-sized contracts we used to get in the past. We continue to get. These huge contracts includes actually the entire portfolio of the company. One of the main advantages of Elbit is that we are very vast. We have EW solution, we have radars, we have Active Optic Solution, we have networking systems, command and control, UAVs and other, USVs and other, and other platforms. With a lot of AI and data analytic capabilities on an application.
We are quite unique having such a wide portfolio, and this portfolio enables us to win mega projects, and to adapt the technology to the required needs of each customer. The answer is yes. We see more demand for end-to-end solution to mega projects, and we got two very big contracts in the second quarter, which the networking, the digitization program we get in Asia Pacific for $560 million and the $660 million we got in Europe. We see more and more demand for mega projects, which that's on top of the medium size and small projects we continue to get.
The whole company is transforming, is transformed, to perform and to get more contracts like this and to perform them accordingly. We have more production capabilities. We are working in several places, three shifts, and this is in order to meet this demand. We also, if you remember last year, the company was organized in a new way. Actually, we have four main divisions right now in Israel and not five as we used to have. That's in order to prepare us better for these mega projects which we got and we hope to continue to get. The answer, the simple answer is yes, we see more and more demand for combined mega projects which involve many technologies from the group.
That's great. I really appreciate all the color and the context there. That's great. If I could now maybe shift the conversation to margins. Could you guys give us an update on where you're at with implementation of the ERP system, as well as how construction is coming along on the new IMI Facility? Because I think those two initiatives are important to kind of the midterm margin expansion outlook, is my recollection.
I will start with IMI activity, and then Yossi will continue with ERP. We are progressing according to the plan with IMI to shift the main production facility of IMI from the central part of the country to the south. We're investing a lot of money in the new infrastructure, which is much more modern, much more efficient, and to increase yields and productivity, which will enable us to deliver bigger quantities with better quality and lower cost to our customers. Our plan is actually first phase to shift some of the activities to a new facility will happen by the end of this year. The majority of the plan will be concluded around the end of 2024. That's according to the plan.
In addition to that, regarding IP, this is Yossi. Regarding the ERP system, we are on track with that. Actually, we have now about 60% of the organization implementing the new ERP. Next major milestone will be by the end of this year, when we will probably reach somewhere in the 80%+, probably 85%. By mid of next year, we will be, the whole organization will be operating on that one ERP system. The benefit from these activities, we expect them to start to come towards the second half of next year, and definitely much stronger into the beginning of 2024.
Okay. Thank you, Yossi and Kobi. Let me ask one more along these lines also with regard to pricing. You know, 'cause obviously we're in kind of a global inflationary environment, you know, labor, materials. I'm wondering, I guess, mainly, you know, with the ERP system coming along, do you feel like you're getting the pricing that you need to offset the impact of inflation? Are you getting net pricing gains, or will that take more time? Strategically, do you feel like you're getting the prices that you need, given the value you're providing to clients?
Well, as you probably know, Pete, prices are defined by the market. However, we have in our contracts linkage to indexes of labor and indexes of material in many of our contracts. To some extent, we compensate the increase in the cost. I must say, we cannot compensate for everything. We do see in some of the integrated circuits big changes in the short term. We expect this to change in the longer term and to return to what we call normal. Looking at our bill of material, what is that composed of? I must say that the basic impact is not material on the cost.
But we are not immune because of these increases in some of the electronic parts that we all see as challenges. Bottom line of all this long discussion is that, yes, we are affected, but it is not material from point of view of impact of profitability. Part is compensated by our contracts, which do include indexing to cost of material.
Okay. That's very helpful. Thank you. Let me ask one last one before, and I'll be completely done. Butzi, on the MOU you signed with Krauss-Maffei Wegmann on the rocket artillery, are there I imagine Europe has to be getting ready to conduct a lot of sales campaigns. Are there anything near term in Europe along the lines of rocket sales that you expect to book in the second half of 2022 or maybe it won't be until 2023?
Pete, the answer is yes. I cannot go into the details, as you can imagine, but the answer is yes. We've seen near-term potential for new orders, new bookings for guided rockets.
Right. Thanks so much, everyone.
Thanks, Pete.
The next question is from Ella Fried of Bank Leumi. Please go ahead.
Good afternoon. Hello?
Hello, Ella.
We hear you.
Okay, you are hearing me. Well, I have a few follow-up questions, but before, if you don't mind, I really would appreciate you repeating the answer to the first questions about double-digit growth or something, because the line was really restored, distorted. There were some people, so for the sake of new people, please tell what you told.
Yeah. Ella Fried, it's Butzi Machlis. The question was with regards to C4I solutions. If I believe that the growth will continue, the answer was yes. We see growing demand for C4ISR solutions, which includes UAVs, USVs, UGVs, different sensors, different payloads, different command and control system, interoperable solution. There's growing demand for that. We just announced a contract for an intelligent solution which is part of this segment as well. It's a mega project and we see growing demand for this solution, for this system as a result of the last conflict in [audio distortion] .
Okay. Another follow-up question. You seem to perform much better in terms of growth than many companies in your peer group. We still don't have this quarter for everybody, but on the annual level, you really have the best results for growth in this and in the wider group as well. How do you explain it? What is it that some companies are decreasing and Elbit is really outperforming?
I think the answer to that is our strategy. Our strategy is composed of two main pillars. The first one is very wide and deep portfolio. There aren't many companies that have such a portfolio like Elbit, which includes the UAVs, electro-optics, simulators, avionics, helmets, communication, EW, electro-optics, lasers, guided munition, UAVs, USVs, UGVs, advanced sensors. There aren't many companies that have such a portfolio, and I didn't mention everything. We have a very wide and deep portfolio, which enables us to tailor solutions to the specific need of customers. That's number one. All of this portfolio is most of the portfolio is very mature and is combat proven. That's the first pillar.
We continue to grow the portfolio. We just announced a very nice development of new radar system, and we continue to invest in our airborne laser system, which is very advanced and unique. A very wide portfolio, that's the first pillar. The second pillar is our international position, our global footprint. We have dozens of subsidiaries all around the globe, which includes just some name. In the U.S. we have about 4,000 people. We have 600 people in the U.K. We have hundreds of people in Germany, hundreds of people in Romania. We have a company in Brazil, in Austria, in Belgium, in India, in Australia, in Canada, and many more. Many customers prefer to buy locally today. There is a growing demand for defense solutions.
People prefer, countries prefer to buy proven solutions, and they prefer to buy locally from their own industries. We gain right now from previous investment and previous strategy to build local subsidiaries, and we win most of the program via this, via these subsidiaries. The combination of growing demand in the market, large portfolio, global footprint, all of them together bring us the success in the markets.
On the other hand, the scope and the versatility of relatively not such a huge company on this ground of the leading companies globally, it's a challenge. I think the challenge of profitability is even intensified by this versatility. Are you planning more of creating other centers like, I mean, you have Israel, you have U.S., you have, you know, developing activities in Asia and Europe, but are you planning to create bigger hubs or, I don't know because the operation is very costly of all these grand scale of versatility.
It's true that it's costly to maintain such a machine, and also to protect the portfolio we have. That's the reason why we invest 7.4% in R&D.
Yeah. You were leading, I know.
Which is, I believe, double the nominal number in this market. This is to support this portfolio and to bring new innovation and new capabilities to the market. I must say, I want you to know that although it's a big company with many subsidiaries abroad, we try not to duplicate capabilities between the different facilities. Some of the activities, some of the IPs is coming from Israel. Some of the capabilities are coming from our subsidiaries. Just to give you an example, in the U.S., we have two main capabilities which serves the entire group. Night vision capability, that's a company we acquired a few years ago in the U.S. as night vision. They are center of excellence for the entire group. The same is sonobuoy.
In the U.S., they are also center of excellence for the entire group. Sonars, we do in Canada, and they serve the entire group for sonars. SDR radios, we do in Germany, and they serve the entire group for radio solution, radio communication system. The same is true also for production capabilities. We have center of excellence for different production capabilities, which enable us to leverage talent and facilities we have all around the globe. That's number one. Number two. With our subsidiaries to make sure that we get maximum efficiency and we gain maximum from the positions we have in the different markets, and that's part of the responsibility of Mr. Gaspar, who you know very good.
I would like to add, Ella, one more aspect. If you recall, in the past, we were emphasizing our international spread that actually helps us in reducing the risk in the business. We are almost, I would say, immune to changes in various geographies of the defense budgets. While one is declining, the other is growing, and so on. The basic risk in the business is low. I think that what we are seeing in recent quarters is exactly that. Your basic question was, how come that you are growing and the others did not, or not as much? I think what we see now is exactly the fundamental of the strategy that Butzi explained before of having a widespread business, both geographically and product wise.
Okay. Thank you. I have a few more questions. One is, again, in the same direction. You mentioned on the previous call that this second quarter is going to be the first quarter to show actually the impact of the Ukraine war. We saw it not as much as we expected, but it's a company that performs projects, so we expect to see it in the following quarters. The question is, will you have more impact of this interest that you told us about in the previous quarter?
Talking about all the new business we got. For example, the one that, as was mentioned, we got a $660 million contract for intelligence solution in Europe. That's one example of the impact of the conflict in Ukraine. The first phase of the impact is getting business. Then it takes some time until it go down to the revenue level and to the profit level. But.
Most of it. I'm sorry, I cut you. Most of it is not in the backlog yet, right? Or is it?
Part of it is in the backlog. The $660 million contract we got is in the backlog. You're right. There are many opportunities. We see the result of the Russian invasion to Ukraine. We see a lot more potential in Europe than in other countries because of that. We see also a growing demand, not just in Europe. We see also a growing demand in other parts of the world. The Abraham Accords have opened a new horizon to Elbit against the different threats. As was mentioned, we have opened a company in the UAE, and we got already some business there.
There's a lot of potential for us in our region. The conflict between the Western world and China is still there. We all saw what happened in Taiwan just a few weeks ago. There is a growing demand in the U.S. and in Europe also against, and of course, in Asia Pacific, also against the Chinese threats. There are three main threats which exist, and all of them create different demands, different requirements for our portfolio, which is very relevant to meet this requirement. It's not just Russia, it's Europe, it's our region, and it's also Asia Pacific. In all these areas, there is tension, there is growing demand for our portfolio.
That's the reason for the strong backlog we have, and I see growing opportunities and more opportunities for company in the near-term future as well as in the long-term future.
Thank you both for answering my question, and I have one more technical question. You mentioned in the press release that the stock price linked plan will affect the next quarter as well. About the scale of this impact, is it going to be more like the first quarter or is it going to be I mean, relating to the present stock price? As I understand, the stock price is not the only component in this formula.
Well, Ella, you know what we explained in the first quarter, and you have seen the increase in the stock price. Look at how we would end this quarter. There is a formula that we are using according to the plan that we have with our employees, how to calculate the impact. You can make some general deductions out of that, and you can see the rate of growth in the first quarter, how it went, and then compare it to what's happening in the second quarter, and that would be a very rough estimate of what will happen. We cannot give you guidance now, but bottom line, we really believe the stock goes up.
Okay, thank you for taking all my questions and best.
Thank you.
Best of success in the next quarter.
Thank you.
Thanks.
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 972-3-925-5900. A replay of the call will be also available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement?
I would 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. Goodbye.
Thank you. This concludes the Elbit Systems Ltd. second quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect your lines.