Eltek Ltd. (NASDAQ:ELTK) faced a tough second quarter in 2026, posting a significant loss due to production hiccups and currency swings. Revenue dropped to $11.5 million from $12.5 million the previous year, despite strong demand and a solid backlog.
CEO Eli Yaffe pointed out that the main problem isn't demand but the company's struggle to turn backlog into production and shipments. He remarked, “The challenge we are facing is not demand, but our ability to consistently convert this demand and our backlog into production and shipments at the level we would like.”
Eltek ended the quarter with a gross loss of $1 million, a sharp decline from the $3 million gross profit a year prior. Still, it was an improvement over the $1.8 million loss in the first quarter of 2026, thanks to higher revenue and better selling prices for PCBs.
The operating loss hit $2.5 million, compared to a $1.5 million operating income the year before. Net loss was $2.7 million, or $0.41 per share, a stark contrast to a $400,000 net income, or $0.05 per share, in the second quarter of 2025. EBITDA loss was $1.9 million, down from a positive EBITDA of $1.9 million a year ago.
Chief Financial Officer Ron Freund attributed the drop in gross profitability to lower revenue volumes, production inefficiencies, and the U. S. dollar's depreciation against the Israeli shekel. Financial expenses fell to $700,000 from $1 million last year, mainly due to the dollar's depreciation, offset by interest income on cash balances.
During the earnings call, management highlighted the market's competitive nature, explaining that Eltek can't significantly raise prices without considering competitors. Freund emphasized the immediate goal of converting backlog into sales and boosting revenue beyond the first half's figures.
Yaffe disclosed that about a third of the backlog is tied to long-term purchase orders based on historical exchange rates, affecting profitability until fulfilled. Another third is linked to exchange rates around 3.2, while the last third, priced closer to the current rate of about 3.0, is the most profitable.
Eltek is working to expand manufacturing capacity with new plating lines and workforce enhancements. A new PCB plating line is undergoing acceptance testing, with formal customer qualification set for the third quarter. Another line is under construction in Europe, slated for installation in Israel by the end of 2026.
Yaffe noted that the supplier for the second line faces penalties due to delays. The company has also integrated about 15 foreign employees, aiming to recruit another 15 to boost production capacity and efficiency.
Raw material availability remains challenging, especially for fiberglass-based materials, which are also sought after by the AI sector. Eltek has secured enough materials to keep operations running, requiring close coordination with suppliers amid rising prices and quotas.
Beyond its defense business, Eltek is eyeing growth in the medical and high-end industrial markets. The company has secured medical sector certifications, positioning itself for future demand, while the high-end industrial sector continues to show strong demand.
Despite the quarterly net loss, Eltek generated $700,000 in cash from operations. As of June 30, the company had $11.5 million in cash and cash equivalents, with no debt. Yaffe expressed confidence that boosting production volumes, improving efficiency, and better material availability could help the company return to past profitability levels over time.
About Eltek: Eltek Ltd. manufactures and sells printed circuit boards (PCBs) in various regions, including Israel, Europe, North America, and India. The company specializes in custom-designed PCBs, including rigid, double-sided, and multi-layer boards, serving industries like medical technology, defense, aerospace, and telecommunications.
