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Gilat Reports Strong Profitability in Q3 2018, Raises Objectives for 2018 Operating Profit and EBITDA

GAAP operating income of $6.0 million is up 79.6% year over year and Adjusted EBITDA of $9.1 million up 27.8% year over year;

Company raises 2018 objective of GAAP operating income to between $22 to $24 million (from $17 to 21 million), and Adjusted EBITDA to between $35 to $37 million (from $30 to $34 million)

PETAH TIKVA, Israel, Nov. 12, 2018 /PRNewswire/ -- Gilat Satellite Networks Ltd. (GILT) (GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ended September 30, 2018.

Gilat

 Key Financial Highlights:

  • Revenues for Q3 2018 were $62.8 million, compared with $69.9 million in Q3 2017.
  • Continued strong profitability:
  • Updated management objectives for 2018: GAAP operating income increased to between $22 to $24 million (from $17 to 21 million), and Adjusted EBITDA increased to between $35 to $37 million (from $30 to $34 million). Revenue range revised to between $265 to $275 million (from $285 to 305 million) due to continued delays in the Company's projects for FITEL in Peru, as well as exerting caution as it relates to the Company's two additional recently awarded regional telecommunications infrastructure projects in Peru. Recently, the losing party appealed the award and obtained a preliminary injunction against the award. Gilat has been informed by FITEL that it believes the injunction was improperly obtained and FITEL is opposing it. Gilat is not a party in either action and based on advice of counsel, firmly believes that the chances of success of the losing party's appeal are remote, yet decided to exert caution and reduce its revenue targets for 2018.

Yona Ovadia, CEO of Gilat, commented: 

"I am pleased to report that the third quarter of 2018 was another strong quarter for Gilat.  We continued to increase profitability, with noteworthy year-over-year growth in GAAP operating income and Adjusted EBITDA.  We also continued to benefit from our investment in our growth engines of cellular backhaul and In-Flight Connectivity (IFC) and in our focus on improving profitability.

"From a business perspective, Gilat was awarded multi-million-dollar projects around the globe. New projects were secured in Russia, China and Japan, for broadband and high throughput satellites in which Gilat will provide its multi-service ground segment.

"From a technological perspective, we reached a major milestone with our partners Global Eagle and Telesat for demonstrating the first-ever live in-flight connectivity with a LEO satellite as well as switchover between Telesat's GEO and LEO satellites.

"We also remain optimistic and committed to our opportunities in Peru, although we decided to exercise caution and reduce our revenue target for the full year due to the events in Peru mentioned above. We strongly expect, however, that we will overcome these challenges in the coming few months."

Mr. Ovadia concluded: "We are confident in our strategy and remain focused on our growth engines of cellular backhaul, IFC, and HTS/VHTS, as well as on balancing our investments in R&D to maintain product leadership while continuously improving profitability, as evidenced by the increase in our profit targets for the year."

Key Recent Announcements:  

  • JSAT Awards Gilat Multi-Million US Dollar Project for Mobility and Fixed Broadband Services in Japan
  • Gilat to Provide the Ground Network for China Satcom's ChinaSat-18
  • Global Eagle and Gilat Use Telesat's Phase 1 LEO Satellite to Demonstrate First Ever, Live In-flight Broadband Connectivity via LEO
  • Hispamar and Gilat Launch a Satellite-Based Broadband Service in Brazil to Promote High-Quality Internet Access
  • Gazprom Space Systems and Gilat Sign $18M Contract to Provide Broadband Connectivity Across Russia over New Yamal 601 Ka Satellite

Conference Call and Webcast Details:
Gilat management will host a conference call today, Monday, November 12, to discuss the third quarter results.  The details are as follows:

Conference Call and Webcast
Following the release, Yona Ovadia, Chief Executive Officer, and Adi Sfadia, Chief Financial Officer, will discuss Gilat's third quarter 2018 results and participate in a question and answer session: 

Date: Monday, November 12, 2018
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/gilatq3-2018.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 12, 2018 at 12:00 PM EST / 19:00 IST
End: November 17, 2018 at 12:00 PM EST / 19:00 IST
Dial-in:  US: 1-888-782-4291 
 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.

Adjusted EBITDA (operating income before depreciation, amortization, non-cash stock option expenses, costs related to acquisition transactions, restructuring cost, goodwill impairment, impairment of long lived assets, trade secrets litigation expenses and expenses under amnesty program) 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 2018. 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.

 

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,





2018


2017


2018


2017





Unaudited


Unaudited












Revenues



$      196,662


$        200,104


$            62,780


$              69,936

Cost of revenues



128,639


142,845


38,586


49,587












Gross profit



68,023


57,259


24,194


20,349












Research and development expenses


25,280


20,648


8,550


7,181

Less - grants



1,204


820


394


297

Research and development expenses, net


24,076


19,828


8,156


6,884

Selling and marketing expenses


17,209


17,187


5,493


5,837

General and administrative expenses


12,963


14,153


4,574


4,303

Litigation expenses



-


873


-


-












Total operating expenses



54,248


52,041


18,223


17,024












Operating income



13,775


5,218


5,971


3,325












Financial expenses, net 



(3,166)


(3,169)


(978)


(1,123)












Income before taxes on income


10,609


2,049


4,993


2,202












Taxes on income (tax benefit)


(2,505)


(1,349)


(3,659)


152












Net income



$       13,114


$           3,398


$              8,652


$                2,050












Earnings per share (basic and diluted)


$           0.24


$             0.06


$                0.16


$                  0.04












Weighted average number of shares used in 










computing earnings per share










Basic



54,858,038


54,667,795


54,950,327


54,703,658


Diluted



55,682,707


54,723,315


55,818,557


54,788,086

 

 

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, 2018


September 30, 2017



GAAP


Adjustments (1)


Non-GAAP


GAAP


Adjustments (1)


Non-GAAP



Unaudited


Unaudited














Gross profit

$                24,194


268


$                24,462


$                20,349


1,210


$                21,559

Operating expenses

18,223


(254)


17,969


17,024


(357)


16,667

Operating income

5,971


522


6,493


3,325


1,567


4,892

Income before taxes on income

4,993


522


5,515


2,202


1,567


3,769

Net income

$                 8,652


(3,589)


$                 5,063


$                 2,050


1,567


$                 3,617














Earnings per share (basic and diluted)

$                   0.16


$                           (0.07)


$                   0.09


$                   0.04


$                    0.03


$                   0.07



























Weighted average number of shares used in 






   computing earnings per share













    Basic

54,950,327




54,950,327


54,703,658




54,703,658


    Diluted

55,818,557




56,020,550


54,788,086




54,979,360














(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, tax expenses under amnesty program and first time recognition of deferred tax benefit.


















Three months ended






Three months ended







September 30, 2018






September 30, 2017







Unaudited






Unaudited
















GAAP net income


$                          8,652






$                     2,050
















Gross profit













Non-cash stock-based compensation expenses


35






15



Amortization of intangible assets related to acquisition transactions


233






1,195







268






1,210
















Operating expenses


203






193



Non-cash stock-based compensation expenses


51






164



Amortization of intangible assets related to acquisition transactions


254






357
















Tax on income




(4,111)






-
















Non-GAAP net income




$                          5,063






$                       3,617
















 

 

 

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, 2018


September 30, 2017



GAAP


Adjustments (1)


Non-GAAP


GAAP


Adjustments (1)


Non-GAAP



Unaudited


Unaudited














Gross profit

$                68,023


2,698


$                70,721


$                57,259


3,620


$                60,879

Operating expenses

54,248


(805)


53,443


52,041


(2,642)


49,399

Operating income

13,775


3,503


17,278


5,218


6,262


11,480

Income before taxes on income

10,609


3,503


14,112


2,049


6,499


8,548

Net income

$               13,114


(608)


$               12,506


$                 3,398


6,499


$                 9,897














Basic income per share

$                   0.24


$                     (0.01)


$                   0.23


$                   0.06


$                      0.12


$                   0.18














Diluted income per share

$                   0.24


$                     (0.02)


$                   0.22


$                   0.06


$                      0.12


$                   0.18



























Weighted average number of shares used in 












   computing earnings per share













    Basic

54,858,038




54,858,038


54,667,795




54,667,795


    Diluted

55,682,707




55,896,940


54,723,315




54,850,309














(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, tax expenses under amnesty program and first time recognition of deferred tax benefit.


















Nine months ended






Nine months ended







September 30, 2018






September 30, 2017







Unaudited






Unaudited
















GAAP net income




$                 13,114






$                   3,398
















Gross profit











Non-cash stock-based compensation expenses

77






38



Amortization of intangible assets related to acquisition transactions

2,621






3,582







2,628






3,620



Operating expenses











Non-cash stock-based compensation expenses

653






588



Amortization of intangible assets related to acquisition transactions

152






553



Trade secrets litigation expenses

-






873



Tax expenses under amnesty program

-






628







805






2,642
















Finance and taxes on income under amnesty program

-






237



Tax on income

(4,111)






-



Non-GAAP net income















$                 12,506






$                   9,897




 

 

GILAT SATELLITE NETWORKS LTD.

SUPPLEMENTAL INFORMATION

U.S. dollars in thousands























ADJUSTED EBITDA:

























Nine months ended



Three months ended





September 30,


September 30,





2018


2017


2018


2017





Unaudited


Unaudited












GAAP operating income


$                13,775


$                  5,218


$                  5,971


$                  3,325

Add:










Non-cash stock-based compensation expenses

730


626


238


208

Trade secrets litigation expenses


-


873


-


-

Tax expenses under amnesty program

-


628


-


-

Depreciation and amortization


10,205


9,884


2,883


3,580












Adjusted EBITDA


$               24,710


$               17,229


$                 9,092


$                 7,113


































SEGMENT REVENUE:

























Nine months ended



Three months ended





September 30,


September 30,





2018


2017


2018


2017





Unaudited


Unaudited












Fixed Networks



$              108,786


$                81,408


$                34,943


$                29,607

Mobility Solutions



67,626


55,797


21,848


18,888

Terrestrial Infrastructure Projects


20,250


62,899


5,989


21,441












Total revenue



$             196,662


$             200,104


$               62,780


$               69,936


 

 

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED BALANCE SHEET

U.S. dollars in thousands








September 30,


December 31,



2018


2017



Unaudited


Audited






ASSETS










CURRENT ASSETS:





Cash and cash equivalents


$                59,827


$                52,957

Restricted cash


38,566


29,288

Restricted cash held by trustees


4,790


4,325

Trade receivables, net


86,107


108,842

Inventories


26,619


28,853

Other current assets


33,342


21,686






   Total current assets


249,251


245,951






LONG-TERM INVESTMENTS:





Long-term restricted cash


140


187

Severance pay funds


7,173


8,188

Other long term receivables


5,537


1,071






Total long-term investments


12,850


9,446






PROPERTY AND EQUIPMENT, NET                          


82,999


82,246






INTANGIBLE ASSETS, NET


2,772


5,709






GOODWILL


43,468


43,468






TOTAL ASSETS


$              391,340


$              386,820


 

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED BALANCE SHEET

U.S. dollars in thousands



September 30,


December 31,



2018


2017



Unaudited


Audited






LIABILITIES AND EQUITY










CURRENT LIABILITIES:





Current maturities of long-term loans


$                  4,465


$                  4,479

Trade payables 


21,343


33,715

Accrued expenses 


64,418


70,534

Advances from customers and deferred revenues


31,720


16,721

Advances from customers, held by trustees


-


1,416

Other current liabilities


19,947


20,044






   Total current liabilities


141,893


146,909






LONG-TERM LIABILITIES:





Accrued severance pay


7,029


7,999

Long-term loans, net of current maturities


8,216


12,582

Other long-term liabilities


653


1,008






   Total long-term liabilities


15,898


21,589






EQUITY:





Share capital - ordinary shares of NIS 0.2 par value 

2,619


2,601

Additional paid-in capital


924,072


921,726

Accumulated other comprehensive loss


(4,818)


(3,046)

Accumulated deficit


(688,324)


(702,959)






Total equity


233,549


218,322






TOTAL LIABILITIES AND EQUITY


$              391,340


$              386,820


 

 

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (*)

U.S. dollars in thousands











Nine months ended



Three months ended




September 30,


September 30,




2018


2017


2018


2017




Unaudited


Unaudited

Cash flows from operating activities:









Net income


$                13,114


$                  3,398


$                  8,652


$                  2,050

Adjustments required to reconcile net income 









 to net cash provided by (used in) operating activities:









Depreciation and amortization


10,205


9,884


2,883


3,580

Capital loss from disposal of property and equipment


96


135


96


90

Stock-based compensation of options and RSU's


730


626


238


208

Accrued severance pay, net


45


129


(2)


23

Exchange rate differences on long-term loans


(24)


151


(11)


38

Deferred income taxes, net


(4,415)


(300)


(4,386)


(141)

Decrease (increase) in trade receivables, net


22,209


2,833


(7,260)


(2,215)

Increase (decrease) in other assets (including short-term, long-term









   and deferred charges)


(10,659)


(3,840)


(1,508)


2,795

Decrease (increase) in inventories


834


(9,229)


502


(5,671)

Decrease in trade payables


(12,249)


(1,082)


(615)


(1,619)

Increase (decrease) in accrued expenses


(5,108)


14,655


(3,128)


3,237

Increase (decrease) in advance from customers


11,129


(11,714)


16,109


(6,004)

Increase (decrease) in advances from customers, held 









   by trustees


(1,478)


(2,340)


-


1,002

Increase (decrease) in other current liabilities and other long term liabilities


3,597


358


(1,978)


2,263

Net cash provided by (used in) operating activities


28,026


3,664


9,592


(364)











Cash flows from investing activities:









Purchase of property and equipment


(7,905)


(3,408)


(2,891)


(1,236)

Net cash used in investing activities


(7,905)


(3,408)


(2,891)


(1,236)











Cash flows from financing activities:









Issuance of restricted stock units and exercise of stock options


1,638


569


1,065


76

Repayment of long-term loans


(4,356)


(4,528)


(107)


(145)

Net cash provided by (used in) financing activities


(2,718)


(3,959)


958


(69)











Effect of exchange rate changes on cash, cash equivalents and restricted cash


(837)


255


(128)


364











Increase (decrease) in cash, cash equivalents and restricted cash


16,566


(3,448)


7,531


(1,305)











Cash, cash equivalents and restricted cash at the beginning of the period


86,757


111,633


95,792


109,490











Cash, cash equivalents and restricted cash at the end of the period


$             103,323


$             108,185


$             103,323


$             108,185









































(*) In November 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash", 

which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when 

reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual and interim periods 

beginning after December 15, 2017. The Company adopted this standard during the first quarter of 2018 using the retrospective transition method, 

as required by the new standard.











The following table provides a reconciliation of cash and cash equivalents, restricted cash, restricted cash held by trustees and long term restricted cash reported within

the consolidated balance sheets that sum to the total of such amounts in the consolidated statements of cash flows:














September 30,








2018


2017








Unaudited















Cash and cash equivalents


$               59,827


$               77,234





Restricted cash


38,566


24,275





Restricted cash held by trustees


4,790


6,503





Long term restricted cash included in other assets


140


173





Cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows

$             103,323


$             108,185








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

 

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