Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. 2023 Q1 Financial 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. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. Before I turn the call over to Mr. Eli Yaffe, Chief Executive Officer, and Ron Freund, Chief Financial Officer, I'd like to remind you that they will be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in Eltek's public disclosure filings. These forward-looking statements are projections and reflect the current beliefs and expectations of the company.
Actual events or results may differ materially. We'll also be referring to non-GAAP measures. Eltek undertakes no obligation to publicly release revisions to such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.
Thank you. Good morning, everyone. Thank you for joining us, welcome to Eltek 2023 Q1 earnings call. With me is Ron Freund, our Chief Financial Officer. We will begin by providing you with an overview of our business and summary of our principal factors that affected our results during the Q1, followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our press release, which was released earlier today. The release will also be available on our website at www.nisteceltek.com. The trend of high demand for our company products that we witnesses in 2022 continue into the Q1 of 2023.
I'm pleased to report that the efforts of our dedicated employees and the strong demand have result to record sales of $11.5 million during this quarter. Our backlog today is 10% higher than its in the beginning of the year. We are currently experiencing a significant trend we identify recent years, we have prepared to. The shift back of PCBs manufactured to Western countries. In the segments in which we prepared, mainly the military, defense, aerospace, and medical market, this policy of shifting manufacturing back to the Western countries began in recent years, due mainly to the security consideration. This trend supported our forecast of sustained high demand and is the reason for our significant efforts to enhance our operation policies as well as for our ongoing investment plan.
During the Q1 of 2023, we finished issuing orders for all the machines and production lines planned to be purchased as part of the first phase of our accelerated investment plan. Some of these machines are already operational and are contribute to our production capacity, while the rest, last machines, is scheduled to arrive by the end of 2025. It is important to note that the installation of these machines will take place gradually through this period, resulting in a gradual contribution to our sales and profitability. The increase in our gross profit margin to 26% in Q1 2023 is mainly attribute to the growth of our sales. Our fixed expenses, such as rent, municipal taxes, and insurance, do not vary in the same ratio as sales. As a result, the higher of our sales, the greater our company gross profitability.
We ended the Q1 of 2023 with a record pretax income of $1.9 million and net income of $1.6 million. This results and the high profitability during the last quarters of 2022 resulted in high cash flow from operating activity. In light of this, we decided to repay $1.6 million of long-term loans in order to reduce our financial expenses given the high prevailing interest rates. I will now turn the call over to Ron Freund, our CFO, to discuss our financial results.
Thank you, Eli. I would like to draw your attention to the financial statements for the Q1 of 2023. During this call, I will also discuss certain non-GAAP financial measures. Eltek uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use. I will now go over the highlights of 2023 Q1. All numbers mentioned are in US dollars. Revenues for the Q1 of 2023 were $11.5 million compared to $9.8 million in the Q1 of 2022. Gross profit increased by 54%, reaching $3 million compared to a gross profit of $2 million in the Q1 of 2022.
The increase is mainly due to the increase in revenue and the fixed component of part of the expenses included in cost of revenues. Operating profit amounted $1.6 million in Q1 2023 compared to $0.7 million in Q1 2022. We recorded financial income of $0.3 million during Q1, and $0.1 million in Q1 2022 due to the devaluation of the NIS against the US dollar. Profit before income tax amounted $1.9 million in Q1 2023 compared to $0.8 million in Q1 2022. Net profit was $1.6 million or 27 cents per share in Q1 2023, compared to net profit of $0.6 million or 11 cents per share in Q1 2022.
EBITDA was $1.9 million compared to $1.1 million in Q1 2022. During the Q1 of 2023, we enjoyed positive cash flow for operating activities of $2.8 million compared to $0.3 million in Q1 2022. As of March 31st, 2023, we have cash and cash equivalents of $8 million compared to $7.4 million at the end of 2022. We are now ready 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 pulled in the order they are received. Please stand by. The first question is from Tom Kerr of Zacks Investment Research. Please go ahead.
Good morning, everybody. The first question is on gross margin. 26% seems to almost exceed one of your long-term goals or near-term goals. Do you feel that's sustainable in coming quarters or coming years, and can it improve from there?
Yes. We think that we achieve this goal, and we are targeting this gross profit margin. We hope that we can improve our efficiency and even reach higher, although currently we are satisfied with this percentage.
Okay, thank you. On the capital, the accelerated investment plan, kind of where are we in terms of spending? Related to that, does that show up on the financial statements? Because capital expenditures were $305,000. Where are we on sort of the timeline of accelerated investment plan and, you know, where does that spending show up?
Thank you, Tom. Good morning. As I mentioned before, we commit ourselves already to most of the investment, and it's in the form of PO, so nothing is still yet on our books, but the planning is done. Most of the critical machine is already defined, and PO already issued. We start to get some of the machine earlier, and that's result some of our sales increase during Q1, and we can assume that linearly or in a... It will be ended by the end of 2025. This is the plan.
Okay. One more question. Any thoughts on paying the remaining debt balances since cash balances have become so high?
I didn't understand your question fully.
Plans to repay the remaining amount of long-term debt.
Yeah.
Okay.
Yeah. As you saw, we have a 6 million ILS balance of long-term debt. We have a plan for financing the accelerated investment plan. However, we'll consider repaying this amount during the current quarter and decide whether we stay with the long-term loan or repay it. We have unutilized credit lines, so that shouldn't. This would be a pretty easy decision.
Okay. Thank you. I'll get back in the queue.
Okay. Thank you, Tom.
The next question is from Michelle Wu. Please go ahead.
Hello. Hi. Congrats for a great quarter. My first question is, can you give some, like, color on the product, revenue mix? What is the percentage of the revenue is from the defense sector?
I didn't analyze it, but I can estimate it. It's approximately 60% is aerospace and defense.
Oh, okay. Great. Any, you know, any, like, updates on going forward? Do you have any on this sector, like in color only?
Sorry, I didn't get your last sentence.
Oh, yeah, just like what's, like the trend, do you see any trend on the defense sector?
We believe the defense sector will only grow and will not decline in the coming years.
Okay, great. Thank you very much. A follow-up question from the capital expenditure. You said, it will be fully invested until, like, 2025, right?
Yes.
Okay. It's sort of like a linear investment or for all those accelerated investment plan, right?
Yeah. As I said, we commit ourselves and issued PO for the balance of the equipment that is going to arrive step by step between now and the year 2025. Some of the equipment already arrived in Q1, 2023. It's partially reflected in our results.
Okay, great. Any update on the labor side? Do you have, you know, like, you'd be able to enough to acquire enough workers for you guys?
Yes. We decided that in the next month we will decide if we will continue to grow the growth only in the facility that we have here or we'll go to the other facility. It seems to me, and I cannot commit it to right now, that we'll give up the site in the north and we'll focus on one side because the market is very strong, and we would like to react to the market as fast as possible and we don't have time to build something that it will take longer. There is no final decision about it yet, but in the next weeks we will decide about it.
Okay. Do you have numbers on how many, you know, like, employees you have right now, like whereas last year? You know, how many added?
Yeah. We added approximately 50 employees during 2022, and we maintained the same amount of employees as we were in the end of 2022.
Okay, great. Thank you very much. Appreciate it.
Thank you, Michelle.
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 pull for more questions. The next question is a follow-up from Tom Kerr of Zacks Investment Research. Please go ahead.
Just a quick follow-up the, on the backlog or the components of backlog, is it still the majority of Flex-Rigid or did those components make up change?
Yes, it's the same mix.
Okay. That's all I have for today. Thank you.
Thank you.
There are no further questions at this time. Before I ask Mr. Yaffe to go ahead with his closing statement, I would like to remind the participants that a replay of this call will be available tomorrow on Eltek's website, www.nisteceltek.com.
Before we conclude our call, I wish to thank our employees for the continued to contribute to Eltek and our critical mission of inspiring innovation for our customers. I would also like to thanks all our customers, partners, investors and Eltek team for their continued support. Thank you all for joining us on today's call. Have a good day.
This concludes the Eltek Ltd. 2023 Q1 financial results conference call. Thank you for your participation. You may go ahead and disconnect.