Gilat Satellite Networks Ltd. (NASDAQ, TASE: GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ended September 30, 2019.

Key Financial Highlights:

  • Revenues for Q3 2019 increased to $63.4 million compared with $59.7 million for Q2 2019 and $62.8 million in Q3 2018.
  • Continued strong profitability:°  Q3 2019 GAAP operating income increased 17.1% to $7.0 million from $6.0 million in Q3 2018 and was up 43.1% from $4.9 million in Q2 2019. Non-GAAP operating income in Q3 2019 rose to $7.5 million, or by 15.4% from Q3 2018 and rose 19.4% sequentially.°  Q3 2019 GAAP net income totaled $6.3 million, or $0.11 per diluted share a decrease of 27.3% compared with $8.7 million, or $0.16 per diluted share, in Q3 2018, which included a one-time tax benefit of $4.1 million. Q3 2019 net income increased 84.7% from $3.4 million, or $0.06 per diluted share, in Q2 2019.  On a non-GAAP basis, Q3 2019 net income increased 34.1% to $6.8 million, or $0.12 per diluted share, compared with $5.1 million, or $0.09 per diluted share, in Q3 2018 and was up 41.6% from $4.8 million, or $0.09 per diluted share, in Q2 2019. °  Q3 2019 Adjusted EBITDA totaled $10.1 million, an increase of 10.6% year over year and 13.0% quarter over quarter.  Q3 2019 Adjusted EBITDA represented 15.9% of revenues versus 14.5% of revenues in Q3 2018 and 14.9% in Q2 2019.°  Updated management objectives for 2019: Reiterating GAAP operating income of between $23 million and $27 million, and Adjusted EBITDA of between $38 million and $42 million, while reducing the revenue range to between $260 million to $270 million. The adjustment in the revenue objectives is due to delay of several key orders, coupled with delivery constraints that have since been mostly resolved.

Yona Ovadia, CEO of Gilat, commented: "We achieved significant milestones in the Third Quarter, both on the financial and the business sides, as we continued to execute our strategy to build high quality, profitable revenues through our growth engines of Broadband, Mobile Cellular Backhaul and Mobility IFC.

"On the financial side we attained substantial progress as we continued to improve profitability. We have attained a record achievement of double-digit millions of dollars of Adjusted EBITDA, $10.1 million to be exact. This has been achieved only once before since we made growth in profitability one of the pillars of our strategy, and we have every intention to repeat it going forward.

"On the business side, I am excited to report that Gilat reached a landmark achievement with the selection of Gilat's platform by SES for the O3b mPOWER Medium Earth Orbit (MEO) Communications System. Gilat was selected due to our innovative ground segment, that significantly reduces cost per bit, best-in-class spectral efficiency, and a step function in modem performance. This win positions Gilat at the forefront of ground networks for Non-Geo Stationary Orbit (NGSO) constellations and as well as a prominent player for the new generation of HTS and VHTS GEO satellites.

"In Peru, our goal has always been the profitable recurring revenues from operations and sales of services, and indeed, further to last quarter’s achievement of moving to Operations in three awarded regions, I am pleased to share that this quarter we won a $10 million five-year project for 3G/4G backhaul services over the network that we built and just started to operate. We are pleased to see our vision materializing, and expect that this contract will significantly expand over time to additional multiple millions of dollars, as well as to selling additional services over our networks.

"In Australia we have reached an important milestone this quarter with NBN Co. with the launch of NBN’s business satellite services. The commercial launch of this flagship project initiates our managed service to NBN, delivering revenue of tens of millions of US dollars over a ten-year period.

"In addition, we have seen continued progress in our mobile and mobility growth areas. Particularly in cellular backhaul Gilat continues to be recognized as the global leader with the selection of the leading Japanese MNO, NTT DoCoMo. In Aero Mobility, we are encouraged by the clear direction of airlines to offer free wifi, as we already saw it starting to generate significant demand for Gilat equipment in this quarter. Both mobile and mobility continue to be major growth engines for Gilat.

"Lastly, in Q3, we also continued to strengthen our partnership with China Satcom with an agreement to upgrade to the most up-to-date, efficient, and high-performance communication network for aero and maritime mobility applications as well as fixed applications."

Mr. Ovadia concluded:

"In closing, we are pleased with our momentum in the market-place and in parallel with our continued improvement in our bottom line. We are engaged these days in planning our work plan for 2020. We will base it on the same guidelines as the existing growth engines, with continued if not increased investment in maintaining our product leadership, and in improvement of both the top line and bottom line."   

Key Recent Announcements:

  • Gilat Signs Significant Contract with SES to Develop and Deploy O3b mPOWER MEO Communications System
  • Global Eagle Places $5m Order with Gilat's Wavestream for In-Flight Connectivity Transceivers
  • Gilat and China Satcom Lay Foundation for Future Chinese Satellite Communication for Aero, Maritime, Land Mobility and Fixed Applications
  • NTT DOCOMO Awards Gilat an LTE Satellite Backhaul Project to Expand its LTE Footprint

Conference Call and Webcast Details:

Following the release, Yona Ovadia, Chief Executive Officer, and Adi Sfadia, Chief Financial Officer, will discuss Gilat’s third quarter 2019 results and participate in a question and answer session:

 Date: Tuesday, November 19, 2019
 Start: 09:30 AM EST / 16:30 IST
 Dial-in: US: 1-888-668-9141
  International: (972) 3-918-0609

A simultaneous Webcast of the conference call will be available on the Gilat website at www.gilat.com and through this link: www.veidan-stream.com/gilatq3-2019.html

The webcast will also be archived for a period of 30 days on the Company’s website and through the link above.

Conference Call Replay

Start:November 19, 2019 at 12:00 PM EST / 19:00 IST
End:November 22, 2019 at 12:00 PM EST / 19:00 IST
Dial-in:US: 1-888-326-9310
 International: (972) 3-925-5904

Non-GAAP MeasuresThe attached summary unaudited financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Non-GAAP presentations of net income, operating income, Adjusted EBITDA and earnings per share. The adjustments to the Company’s GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company’s underlying operational results, trends and performance. Non-GAAP financial measures mainly exclude the effect of stock based compensation, amortization of purchased intangibles, lease incentive amortization, litigation expenses, income related to trade secrets claims, re-organization costs, expenses for tax contingencies to be paid under an amnesty program and initial recognition of deferred tax asset with respect to carry-forward losses.

Adjusted EBITDA is presented to compare the Company’s performance to that of prior periods and evaluate the Company’s financial and operating results on a consistent basis from period to period. The Company also believes this measure, when viewed in combination with the Company’s financial results prepared in accordance with GAAP, provides useful information to investors to evaluate ongoing operating results and trends. Adjusted EBITDA, however, should not be considered as an alternative to operating income or net income for the period and may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Adjusted EBITDA is not a measure of financial performance under GAAP and may not be comparable to other similarly titled measures for other companies. Reconciliation between the Company's Operating income and Adjusted EBITDA is presented in the attached summary financial statements.

This news release also contains a forward-looking estimate of Adjusted EBITDA projected to be generated by Gilat in 2019. A forward-looking estimate of net income and reconciliations of the forward-looking estimates of Adjusted EBITDA to net income are not provided because the items necessary to estimate net income are not estimable at this time. Non-GAAP presentations of net income, operating income, Adjusted EBITDA and earnings per share should not be considered in isolation or as a substitute for any of the consolidated statements of operations prepared in accordance with GAAP, or as an indication of Gilat’s operating performance or liquidity.

About GilatGilat Satellite Networks Ltd. (NASDAQ: GILT, TASE: GILT) is a leading global provider of satellite-based broadband communications. With 30 years of experience, we design and manufacture cutting-edge ground segment equipment, and provide comprehensive solutions and end-to-end services, powered by our innovative technology. Delivering high value competitive solutions, our portfolio comprises of a cloud based VSAT network platform, high-speed modems, high performance on-the-move antennas and high efficiency, high power Solid State Amplifiers (SSPA) and Block Upconverters (BUC).

Gilat’s comprehensive solutions support multiple applications with a full portfolio of products to address key applications including broadband access, cellular backhaul, enterprise, in-flight connectivity, maritime, trains, defense and public safety, all while meeting the most stringent service level requirements. Gilat controlling shareholders are the FIMI Private Equity Funds. For more information, please visit: www.gilat.com

Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "intend", "expect", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of Gilat to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to Gilat's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for Gilat's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key OEM partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with Gilat's international operations and its location in Israel. We undertake no obligation to update or revise any forward-looking statements for any reason. For additional information regarding these and other risks and uncertainties associated with Gilat's business, reference is made to Gilat's reports filed from time to time with the Securities and Exchange Commission.

Contact:Gilat Satellite NetworksDoreet Oren, Director Corporate CommunicationsDoreetO@gilat.com

Comm-Partners LLCJune Filingeri, President+1-203-972-0186junefil@optonline.net

GILAT SATELLITE NETWORKS LTD.       
CONSOLIDATED STATEMENTS OF OPERATIONS       
U.S. dollars in thousands (except share and per share data)      
  Nine months ended  Three months ended
  September 30,  September 30,
 2019 2018 2019 2018
    
 Unaudited Unaudited
        
Revenues$185,178 $196,662  $63,384 $62,780 
Cost of revenues 116,369  128,639   40,130  38,586 
        
Gross profit 68,809  68,023   23,254  24,194 
        
Research and development expenses 24,088  25,280   7,596  8,550 
Less - grants 1,610  1,204   516  394 
Research and development expenses, net 22,478  24,076   7,080  8,156 
Selling and marketing expenses 16,332  17,209   5,044  5,493 
General and administrative expenses 13,666  12,963   4,139  4,574 
        
Total operating expenses 52,476  54,248   16,263  18,223 
        
Operating income 16,333  13,775   6,991  5,971 
        
Financial expenses, net 1,940  3,166   540  978 
        
Income before taxes on income 14,393  10,609   6,451  4,993 
        
Taxes on income (tax benefit) 1,876  (2,505)  163  (3,659)
        
Net income$ 12,517 $ 13,114  $ 6,288 $ 8,652 
        
Basic earnings per share$ 0.23 $ 0.24  $ 0.11 $ 0.16 
        
Diluted earnings per share$ 0.22 $ 0.24  $ 0.11 $ 0.16 
        
Weighted average number of shares used in computing earnings per share       
Basic 55,329,617  54,858,038   55,463,945  54,950,327 
Diluted 56,029,698  55,682,707   56,059,239  55,818,557 
        

            
GILAT SATELLITE NETWORKS LTD.           
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS        
FOR COMPARATIVE PURPOSES            
U.S. dollars in thousands (except share and per share data)           
 Three months ended Three months ended
 September 30, 2019 September 30, 2018
 GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP
    
 Unaudited Unaudited
            
Gross profit$23,254  68  $23,322 $24,194  268  $24,462
Operating expenses 16,263  (433)  15,830  18,223  (254)  17,969
Operating income 6,991  501   7,492  5,971- 522 - 6,493
Income before taxes on income 6,451  501   6,952  4,993  522   5,515
Net income 6,288  501   6,789  8,652  (3,589)  5,063
            
Earnings per share (basic and diluted)$ 0.11 $0.01  $ 0.12 $ 0.16 $(0.07) $ 0.09
            
            
Weighted average number of shares used in computing earnings per share           
Basic 55,463,945    55,463,945  54,950,327    54,950,327
Diluted 56,059,239    56,179,331  55,818,557    56,020,550
            
            
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, trade secrets litigation expenses and re-organiztion costs.
           
            
 Three months ended Three months ended
 September 30, 2019 September 30, 2018
   Unaudited     Unaudited  
            
GAAP net income  $6,288      $8,652   
            
Gross profit           
Non-cash stock-based compensation expenses   55       35   
Amortization of intangible assets related to acquisition transactions   13       233   
    68       268   
Operating expenses           
Non-cash stock-based compensation expenses   382       203   
Amortization of intangible assets related to acquisition transactions   51       51   
    433       254   
            
Tax benefit adjustment   -       (4,111)  
            
Non-GAAP net income  $6,789      $5,063   
            

            
GILAT SATELLITE NETWORKS LTD.           
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS          
FOR COMPARATIVE PURPOSES            
U.S. dollars in thousands (except share and per share data)           
 Nine months ended Nine months ended
 September 30, 2019 September 30, 2018
 GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP
    
 Unaudited Unaudited
            
Gross profit$68,809  706  $69,515 $68,023  2,698  $70,721
Operating expenses 52,476  (2,339)  50,137  54,248  (805)  53,443
Operating income 16,333  3,045   19,378  13,775  3,503   17,278
Income before taxes on income 14,393  3,045   17,438  10,609  3,503   14,112
Net income 12,517  3,045   15,562  13,114  (608)  12,506
            
Basic earnings per share$ 0.23 $0.05  $ 0.28 $ 0.24 $(0.01) $ 0.23
            
Diluted earnings per share$ 0.22 $0.06  $ 0.28 $ 0.24 $(0.02) $ 0.22
            
            
Weighted average number of shares used in computing earnings per share           
Basic 55,329,617    55,329,617  54,858,038    54,858,038
Diluted 56,029,698    56,180,242  55,682,707    55,896,940
            
            
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, trade secrets litigation expenses or income and re-organization costs.
            
   Nine months ended     Nine months ended  
   September 30, 2019     September 30, 2018  
   Unaudited     Unaudited  
            
GAAP net income  $12,517      $13,114   
            
Gross profit           
Non-cash stock-based compensation expenses   198       77   
Amortization of intangible assets related to acquisition transactions   479       2,621   
Re-organization costs   29       -   
    706       2,698   
Operating expenses           
Non-cash stock-based compensation expenses   1,532       653   
Amortization of intangible assets related to acquisition transactions   152       152   
Trade secrets litigation expenses   100       -   
Re-organization costs   555       -   
    2,339       805   
            
Tax benefit adjustment   -       (4,111)  
            
Non-GAAP net income  $15,562      $12,506   
            

       
GILAT SATELLITE NETWORKS LTD.      
SUPPLEMENTAL INFORMATION       
U.S. dollars in thousands       
        
        
ADJUSTED EBITDA:       
        
 Nine months endedThree months ended
 September 30, September 30,
 2019 2018 2019 2018
    
    
 Unaudited Unaudited
        
GAAP operating income$16,333 $13,775 $6,991 $5,971
Add:       
Non-cash stock-based compensation expenses 1,730  730  437  238
Re-organization costs 585  -  -  -
Trade secrets litigation expenses 100  -  -  -
Depreciation and amortization (*) 8,413  10,205  2,627  2,883
        
Adjusted EBITDA$ 27,161 $ 24,710 $ 10,055 $ 9,092
        
(*) includng amortization of lease incentive       
        
SEGMENT REVENUE:       
        
 Nine months ended Three months ended
 September 30, September 30,
 2019 2018 2019 2018
    
 Unaudited Unaudited
        
Fixed Networks$94,104 $108,786 $27,268 $34,943
Mobility Solutions 70,615  67,626  27,116  21,848
Terrestrial Infrastructure Projects 20,459  20,250  9,000  5,989
        
Total revenue$ 185,178 $ 196,662 $ 63,384 $ 62,780
        

    
GILAT SATELLITE NETWORKS LTD.   
CONSOLIDATED BALANCE SHEET   
U.S. dollars in thousands   
    
 September 30, December 31,
 2019 2018
 Unaudited Audited
    
ASSETS   
    
CURRENT ASSETS:   
Cash and cash equivalents$53,089  $67,381 
Restricted cash 30,916   32,305 
Restricted cash held by trustees 75   4,372 
Trade receivables, net 44,184   47,164 
Contract assets 21,392   47,760 
Inventories 27,512   21,109 
Other current assets 25,901   26,022 
    
  Total current assets 203,069   246,113 
    
LONG-TERM INVESTMENTS AND RECEIVABLES:   
Long-term restricted cash 145   146 
Severance pay funds 6,871   6,780 
Long term deferred tax assets 2,491   4,127 
Operating lease right-of-use assets 4,595   - 
Other long term receivables 13,519   7,276 
    
Total long-term investments and receivables 27,621   18,329 
    
PROPERTY AND EQUIPMENT, NET 82,976   84,403 
    
INTANGIBLE ASSETS, NET 1,640   2,434 
    
GOODWILL 43,468   43,468 
    
TOTAL ASSETS$358,774  $394,747 
    
GILAT SATELLITE NETWORKS LTD.   
CONSOLIDATED BALANCE SHEET    
U.S. dollars in thousands   
    
 September 30, December 31,
 2019 2018
 Unaudited Audited
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
    
CURRENT LIABILITIES:   
Current maturities of long-term loans$4,203  $4,458 
Trade payables 20,070   24,636 
Accrued expenses 57,906   67,533 
Advances from customers and deferred revenues 20,056   29,133 
Operating lease liabilities 1,628   - 
Other current liabilities 12,104   14,588 
    
  Total current liabilities 115,967   140,348 
    
LONG-TERM LIABILITIES:   
Accrued severance pay 7,085   6,649 
Long-term loans, net of current maturities 4,000   8,098 
Operating lease liabilities 2,975   - 
Other long-term liabilities 109   580 
    
  Total long-term liabilities 14,169   15,327 
    
SHAREHOLDERS' EQUITY:   
Share capital - ordinary shares of NIS 0.2 par value 2,642   2,625 
Additional paid-in capital 926,944   924,856 
Accumulated other comprehensive loss (5,572)  (5,380)
Accumulated deficit (695,376)  (683,029)
    
Total shareholders' equity 228,638   239,072 
    
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$358,774  $394,747 
    

        
GILAT SATELLITE NETWORKS LTD.       
CONSOLIDATED STATEMENTS OF CASH FLOWS       
U.S. dollars in thousands       
        
 Nine months endedThree months ended
 September 30, September 30,
 2019 2018 2019 2018
    
 Unaudited Unaudited
Cash flows from operating activities:       
Net income$12,517  $13,114  $6,288  $8,652 
Adjustments required to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization 8,247   10,205   2,565   2,883 
Capital loss from disposal of property and equipment -   96   -   96 
Stock-based compensation of options 1,730   730   437   238 
Accrued severance pay, net 345   45   (37)  (2)
Exchange rate differences on long-term loans -   (24)  -   (11)
Deferred income taxes, net 1,081   (4,415)  (304)  (4,386)
Decrease (increase) in trade receivables, net 141   11,416   (2,365)  (3,673)
Decrease (increase) in contract assets 25,408   10,793   25,640   (3,587)
Increase in other assets (including short-term, long-term and deferred charges) (1,419)  (10,659)  (1,390)  (1,508)
Decrease (increase) in inventories (7,685)  834   (1,548)  502 
Decrease in trade payables (4,515)  (12,249)  (8,448)  (615)
Decrease in accrued expenses (8,904)  (5,108)  (1,828)  (3,128)
Increase (decrease) in advance from customers (9,540)  11,129   (1,135)  16,109 
Decrease in advances from customers, held by trustees -   (1,478)  -   - 
Increase (decrease) in other current liabilities and other long term liabilities (2,659)  3,597   (708)  (1,978)
Net cash provided by operating activities 14,747   28,026   17,167   9,592 
        
Cash flows from investing activities:       
Purchase of property and equipment (5,649)  (7,905)  (2,062)  (2,891)
Net cash used in investing activities (5,649)  (7,905)  (2,062)  (2,891)
        
Cash flows from financing activities:       
Exercise of stock options 375   1,638   -   1,065 
Repayment of long-term loans (4,353)  (4,356)  (122)  (107)
Dividend payment (24,864)  -   -   - 
Net cash provided by (used in) financing activities (28,842)  (2,718)  (122)  958 
        
Effect of exchange rate changes on cash, cash equivalents and restricted cash (235)  (837)  (256)  (128)
        
Increase (decrease) in cash, cash equivalents and restricted cash (19,979)  16,566   14,727   7,531 
        
Cash, cash equivalents and restricted cash at the beginning of the period 104,204   86,757   69,498   95,792 
        
Cash, cash equivalents and restricted cash at the end of the period$ 84,225  $ 103,323  $ 84,225  $ 103,323 

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