HAIFA, Israel - Elbit Systems Ltd. ('Elbit Systems' or the 'Company') (NASDAQ: ESLT) (TASE: ESLT), the international high technology company, reported today its consolidated results for the quarter ended September 30, 2022.

* Backlog of orders at $14.7 billion; Revenues of $1.3 billion;

* Non-GAAP net income of $63 million;

* GAAP net income of $56 million;

* Non-GAAP net EPS of $1.40; GAAP net EPS of $1.26

In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive view of the Company's business results and trends. For a description of the Company's non-GAAP definitions see below, 'Non-GAAP financial data'. Unless otherwise stated, all financial data presented is US-GAAP financial data.

Management Comment:

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: 'The current environment presents opportunities and challenges for Elbit Systems. Elevated geopolitical tensions and growing defense budgets have created multiple opportunities and we are increasing investment in business development to realize the potential from these trends.

Our people are our most important asset and their contribution is critical to our long term success. This year and as part of our efforts to retain high performing employees, we have awarded stock price linked compensation plans and have incurred related costs. We have also increased inventories in recent quarters as part of our efforts to mitigate the impact of global supply chain disruptions and maintain timely deliveries to our customers. Our working assumption is that supply chain and labor inflation pressures will gradually subside from the second half of 2023.

We continue to invest in Elbit Systems' portfolio of advanced technological capabilities including unmanned systems, C4I, EW, maritime solutions and precision munitions. The significant orders received in 2022 have highlighted the relevance of our portfolio to our customers and support future growth prospects'.

Third quarter 2022 results:

Revenues in the third quarter of 2022 were $1,348.9 million, as compared to $1,363.6 million in the third quarter of 2021.

Non-GAAP(*) gross profit amounted to $337.9 million (25.0% of revenues) in the third quarter of 2022, as compared to $370.7 million (27.2% of revenues) in the third quarter of 2021. GAAP gross profit in the third quarter of 2022 was $326.0 million (24.2% of revenues), as compared to $363.2 million (26.6% of revenues) in the third quarter of 2021. The GAAP and Non-GAAP gross profit in the third quarter of 2022 includes expenses of approximately $13 million related to the effect of the significant increase in the Company's share price on employees' stock price linked compensation plans.

*see Non-GAAP financial data

Research and development expenses, net were 113.2 million (8.4% of revenues) in the third quarter of 2022, as compared to 101.5 million (7.4% of revenues) in the third quarter of 2021.

Marketing and selling expenses, net were $68.5 million (5.1% of revenues) in the third quarter of 2022, as compared to $84.1 million (6.2% of revenues) in the third quarter of 2021.

General and administrative expenses, net were $80.2 million (5.9% of revenues) in the third quarter of 2022, as compared to $67.3 million (4.9% of revenues) in the third quarter of 2021.

Other operating income, net were $9.4 million in the third quarter of 2022. Other operating income, net in the third quarter of 2022 was a result of a capital gain from sale of a building in Israel.

Non-GAAP(*) operating income was $84.3 million (6.3% of revenues) in the third quarter of 2022, as compared to $123.0 million (9.0% of revenues) in the third quarter of 2021. GAAP operating income in the third quarter of 2022 was $73.4 million (5.4% of revenues), as compared to $110.3 million (8.1% of revenues) in the third quarter of 2021. GAAP and Non-GAAP(*) operating income in the third quarter of 2022 was reduced by expenses of approximately $22 million related to the Company's stock price linked compensation plans.

Financial expenses, net were $16.4 million in the third quarter of 2022, as compared to $13.5 million in the third quarter of 2021.

Other income, net were $4.8 million in the third quarter of 2022, as compared to $0.3 million in the third quarter of 2021. Other income, net in the third quarter of 2022 resulted mainly from revaluation of holdings in an affiliated company.

Taxes on income were $7.9 million in the third quarter of 2022, as compared to $8.3 million in the third quarter of 2021.

Equity in net earnings of affiliated companies and partnerships were $2.3 million in the third quarter of 2022, as compared to $3.0 million in the third quarter of 2021.

Non-GAAP(*) net income attributable to the Company's shareholders in the third quarter of 2022 was $62.6 million (4.6% of revenues), as compared to $103.1 million (7.6% of revenues) in the third quarter of 2021. GAAP net income attributable to the Company's shareholders in the third quarter of 2022 was $56.2 million (4.2% of revenues), as compared to $91.9 million (6.7% of revenues) in the third quarter of 2021. Net income in the third quarter of 2022 was reduced by net expenses of approximately $20 million related to the Company's stock price linked compensation plans.

Non-GAAP(*) diluted net earnings per share attributable to the Company's shareholders were $1.40 for the third quarter of 2022, as compared to $2.33 for the third quarter of 2021. GAAP diluted earnings per share attributable to the Company's shareholders in the third quarter of 2022 were $1.26, as compared to $2.08 in the third quarter of 2021. Diluted net earnings per share in the third quarter of 2022, were reduced by $0.45 as a result of the expenses related to the Company's stock price linked compensation plans.

*see Non-GAAP financial data

The Company's backlog of orders as of September 30, 2022 totaled $14.7 billion. Approximately 75% of the current backlog is attributable to orders from outside Israel. Approximately 40% of the backlog is scheduled to be performed during the remainder of 2022 and 2023.

Cash flows provided by operating activities in the nine months ended September 30, 2022 were $44.6 million, as compared to $157.0 million in the nine months ended September 30, 2021. Cash flows in 2022 included an amount of approximately $76 million of a one-time tax payment related to the Company's implementation of the amendment to the law of Encouragement of Capital Investments allowing payment of reduced corporate tax for the release of exempt earnings from 'Approved Enterprises' and 'Privileged Enterprises' in Israel, as reported in our 2021 annual report.

Impact of the Covid-19 Pandemic on the Company:

The Coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization in March 2020. COVID-19 has had significant negative impacts on the worldwide economy, resulting in disruptions to supply chains and financial markets, significant travel restrictions, facility closures and shelter-in place orders in various locations. Such disruptions also led to global shortages of electronics and other components, increased costs and extended lead times. Elbit Systems is closely monitoring the evolution of the COVID-19 pandemic and its impacts on the Company's employees, customers and suppliers, as well as on the global economy.

As we last reported on August 16, 2022, we have been taking a number of actions to protect the safety of our employees as well as maintain business continuity and secure our supply chain. All of these actions remain ongoing.

We have implemented a series of cost control measures to help limit the financial impact of the pandemic on the Company, in parallel to the measures we are taking to maintain business continuity and deliveries to our customers. We also are working on efficiency initiatives with a number of our suppliers. We continue to evaluate our operations on an ongoing basis in order to adapt to the evolving business environment.

During 2021 and the first nine months of 2022 our defense activities, which account for most of our business, were not materially impacted by the pandemic, although some of our businesses experienced certain disruptions due to government directed safety measures, travel restrictions and supply chain delays.

We believe that as of September 30, 2022, Elbit Systems had a healthy balance sheet, adequate levels of cash and access to credit facilities that provide liquidity when necessary. We have given high priority to cash management and adequate cash reserves to run the business.

The extent of the impact of COVID-19 on the Company's performance depends on future developments including the duration and spread of the pandemic, the measures adopted by governments to limit the spread of the pandemic, including implementation of vaccinations, and resulting actions that may be taken by our customers and our supply chain, all of which contain uncertainties. As noted in our annual report on Form 20-F for the year ended December 31, 2021, the preparation of financial reports requires us to make judgments, assumptions and estimates that affect the amounts reported. For our financial results for the quarter ended September 30, 2022, we considered the economic impact of the COVID-19 pandemic on our critical and significant accounting estimates. The expected impact of the COVID-19 pandemic did not have a material effect on our judgments, assumptions and estimates reflected in the results. However, our future results may differ materially from our estimates. As events continue to evolve in connection with the COVID-19 pandemic, the estimates we use in future periods may change materially.

Non-GAAP financial data:

The following non-GAAP financial data is presented to enable investors to have additional information on the Company's business performance as well as a further basis for periodical comparisons and trends relating to the Company's financial results. The Company believes such data provides useful information to investors by facilitating more meaningful comparisons of the Company's financial results over time. Such non-GAAP information is used by the Company's management to make strategic decisions, forecast future results and evaluate the Company's current performance. However, investors are cautioned that, unlike financial measures prepared in accordance with GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies.

The non-GAAP financial data includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, companies generally factor out items such as those that have a non-recurring impact on the income statements, various non-cash items including significant exchange rate differences, significant effects of retroactive tax legislation, changes in accounting guidance, financial transactions and other items not considered to be part of regular ongoing business, which, in management's judgment, are items that are considered to be outside of the review of core operating results.

In the Company's non-GAAP presentation, the Company made certain adjustments, as indicated in the table below.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.

Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data:

See full release at: https://mayafiles.tase.co.il/rpdf/1489001-1490000/P1489125-00.pdf

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