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Gilat Reports Strong Growth in Q3 2019

GAAP Operating Income Increases 43.1% sequentially; Adjusted EBITDA reaches double digits totaling $10.1 million

Gilat wins coveted deal for SES O3b mPOWER MEO Communications System

PETAH TIKVA, Israel, Nov. 19, 2019 (GLOBE NEWSWIRE) -- 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 Measures
The 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 Gilat
Gilat 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 Networks
Doreet Oren, Director Corporate Communications
DoreetO@gilat.com

Comm-Partners LLC
June Filingeri, President
+1-203-972-0186
junefil@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 ended Three 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 ended Three 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