Gilat Reports Third Quarter 2020 Results

Rhea-AI Summary

Gilat Satellite Networks Ltd. reported a significant decline in its Q3 2020 financial performance. Revenues were $37.3 million, down from $63.4 million in Q3 2019. The GAAP operating loss reached $10.9 million, impacted by $8.2 million in merger-related expenses. Net loss amounted to $11.6 million, or $0.21 per share. However, the company plans to distribute $55 million in dividends, and reported an increase in its backlog due to new contracts in Cellular Backhaul and partnerships in NGSO. The company remains optimistic about a recovery and upcoming financial results.

Positive

• Plans to distribute $55 million in dividends to shareholders.
• Increased backlog due to new contracts including $20 million from a Tier-1 MNO.
• Progress in partnerships, particularly with SES for O3B mPOWER and expansion of high-speed modems.

Negative

• Revenues fell to $37.3 million from $63.4 million in Q3 2019.
• GAAP operating loss of $10.9 million, compared to operating income of $7.0 million in the same quarter last year.
• GAAP net loss of $11.6 million, versus net income of $6.3 million in Q3 2019.

PETAH TIKVA, Israel, Nov. 10, 2020 (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, 2020.

Third Quarter Key Financial Highlights

• Revenues were $37.3 million; compared to $63.4 million in Q3 2019 and similar to that of the previous quarter.  
• GAAP operating loss was $10.9 million compared to operating income of $7.0 million in Q3 2019 and an operating loss of $3.5 million in the previous quarter. The GAAP operating loss in the quarter includes $8.2 million in expenses related to the Comtech merger and litigation and their effects.
• Non-GAAP operating loss in the quarter was $1.9 million compared with operating income of $7.5 million in Q3 2019 and compared to an operating loss of $2.6 million in the previous quarter.
• GAAP net loss was $11.6 million, or loss of $0.21 per share, compared with net income of $6.3 million, or income of $0.11 per diluted share in Q3 2019; GAAP net loss in the previous quarter was $4.2 million, or loss of $0.08 per share.
• Non-GAAP net loss was $2.6 million, or $0.05 per diluted share, compared with net income of $6.8 million, or $0.12 per diluted share, in Q3 2019, and compared with net loss of $3.3 million, or $0.06 per share, as reported in the prior quarter.
• Adjusted EBITDA was $0.6 million compared with adjusted EBITDA of $10.1 million in Q3 2019, and adjusted EBITDA of $0.1 million in the previous quarter.
• Gilat plans to distribute $55 million as a cash dividend, out of which $20 million was declared and will be paid on December 2^nd, 2020 and an additional $35 million to be declared subject to court approval.
• Income from the merger termination and litigation settlement paid by Comtech will be recorded in Q4 2020.

Adi Sfadia, Gilat's Interim CEO, commented, “Albeit our third quarter results were still negatively impacted by the ongoing pandemic’s effect and even more so by the litigation with Comtech, I am very optimistic as we continue to see a recovery in most of our areas of operations. During this quarter we made several significant achievements in our strategic growth engines of Cellular Backhaul, NGSO, and in our business in Peru which have resulted in significant increase in our backlog.

"Gilat continues to lead the market of Cellular Backhaul and we continue to reap the benefits of our cellular backhaul managed service strategy that allows us to enjoy larger contracts with recurring revenue. As an example, in North America we had two such major achievements this quarter. Gilat was awarded $20 Million for a three-year managed-service contract-renewal and expansion from a Tier-1 MNO in the United States and a three-year managed service contract by Southern Linc, for coverage to remote areas as well as emergency response.

"In NGSO and VHTS, we are progressing according to schedule with our partner SES to provide our next generation innovative baseband platform for O3B mPOWER. Throughout the last year, we have been working closely with SES with the joint goal of bringing to market unparalleled customer experience in all target verticals.

"Further, we just announced that SES and Gilat expanded the O3b mPower partnership with a multi-million-dollar follow-on order for high-speed modems. The modems will deliver multi Gbps throughput, targeting high-end services over the O3b mPOWER MEO constellation.

"Lastly, in Peru, we were awarded this quarter a large contract by IPT, a consortium consisting of Telefonica and Facebook among others."

Mr. Sfadia concluded:

"I am pleased with our business accomplishments and with the healthy pipeline of significant and large opportunities and believe that these accomplishments will enable us to demonstrate a sequentially improved fourth quarter, both in terms of revenues and profitability."

Key Recent Announcements

• SES and Gilat Expand Partnership with Multi-Million-Dollar Follow-on Order for High-Speed Modems
• Gilat Hires BG (Res.) Eyal Zelinger as Global Defense Vice President and General Manager
• Gilat Plans to Distribute $55 Million in Dividends to Shareholders
• Gilat Successfully Demonstrates Carrying 5G Traffic with Outstanding Performance over Thaicom's GEO HTS Satellite
• US Department of Defense Awards Gilat Multi-Million-Dollar Orders for Military Communications Program
• Gilat Awarded $20 Million Cellular Backhaul Managed Service Contract Renewal and Expansion from Tier-1 MNO in the United States
• Gilat Satellite Networks Chosen by Southern Linc for 4G Cellular Backhaul Services
• Comtech Telecommunications Corp. and Gilat Satellite Networks Ltd. Terminate Merger Agreement and Settle Litigation

Conference call details
Gilat’s management will discuss its third quarter 2020 results and business achievements and participate in a question and answer session:

Date:	Tuesday, November 10, 2020
Start:	09:30 AM EST / 16:30 IST
Dial-in:	US: 1-866-744-5399
	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/gilatq3-2020.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 10, 2020 at 12:00 PM EST / 19:00 IST
End:	November 13, 2020 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, restructuring and reorganization costs, merger, acquisition and related litigation costs 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.

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, risks associated with the outbreak and global spread of the coronavirus (COVID-19) pandemic; 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. 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. We undertake no obligation to update or revise any forward-looking statements for any reason.

Contact:
Gilat Satellite Networks
Doreet Oren, Director Corporate Communications
DoreetO@gilat.com

Ehud Helft
GK Investor & Public Relations
gilat@gkir.com
+1 646 688 3559

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
				2020				2019				2020				2019
			Unaudited								Unaudited
Revenues			$	123,258			$	185,178			$	37,270			$	63,384
Cost of revenues				95,341				116,369				27,827				40,130
Gross profit				27,917				68,809				9,443				23,254
Research and development expenses				20,215				24,088				6,442				7,596
Less - grants				932				1,610				460				516
Research and development expenses, net				19,283				22,478				5,982				7,080
Selling and marketing expenses				12,337				16,332				3,687				5,044
General and administrative expenses				10,269				13,666				2,478				4,139
Merger, acquisition and related litigation				11,149				-				8,198				-
Total operating expenses				53,038				52,476				20,345				16,263
Operating income (loss)				(25,121	)			16,333				(10,902	)			6,991
Financial expenses, net				(1,715	)			(1,940	)			(286	)			(540	)
Income (loss) before taxes on income				(26,836	)			14,393				(11,188	)			6,451
Taxes on income				695				1,876				363				163
Net income (loss)			$	(27,531	)		$	12,517			$	(11,551	)		$	6,288
Basic earnings (loss) per share			$	(0.50	)		$	0.23			$	(0.21	)		$	0.11
Diluted earnings (loss) per share			$	(0.50	)		$	0.22			$	(0.21	)		$	0.11
Weighted average number of shares used in
	computing earnings (loss) per share
	Basic			55,506,266				55,329,617				55,520,197				55,463,945
	Diluted			55,506,266				56,029,698				55,520,197				56,059,239

 

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, 2020												September 30, 2019
		GAAP				Adjustments (1)				Non-GAAP				GAAP			Adjustments (1)				Non-GAAP
		Unaudited												Unaudited
Gross profit		$	9,443				28			$	9,471			$	23,254			68			$	23,322
Operating expenses			20,345				(8,950	)			11,395				16,263			(433	)			15,830
Operating income (loss)			(10,902	)			8,978				(1,924	)			6,991			501				7,492
Net income (loss)			(11,551	)			8,978				(2,573	)			6,288			501				6,789
Earnings (loss) per share (basic and diluted)		$	(0.21	)		$	0.16			$	(0.05	)		$	0.11		$	0.01			$	0.12
Weighted average number of shares used in
computing earnings per share
	Basic		55,520,197								55,520,197				55,463,945							55,463,945
	Diluted		55,520,197								55,520,197				56,059,239							56,179,331
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions,    Merger, acquisition and relatedlitigation and restructuring and re-organization costs.
		Three months ended												Three months ended
		September 30, 2020												September 30, 2019
						Unaudited											Unaudited
GAAP net income (loss)						$	(11,551	)									$	6,288
Gross profit
Non-cash stock-based compensation expenses							21											55
Amortization of intangible assets related to acquisition transactions							7											13
							28											68
Operating expenses
Non-cash stock-based compensation expenses							259											382
Amortization of intangible assets related to acquisition transactions							49											51
Merger, acquisition and related litigation							8,198											-
Restructuring and re-organization costs							444											-
							8,950											433
Non-GAAP net income (loss)						$	(2,573	)									$	6,789

 

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, 2020												September 30, 2019
		GAAP				Adjustments (1)				Non-GAAP				GAAP			Adjustments (1)				Non-GAAP
		Unaudited												Unaudited
Gross profit		$	27,917				144			$	28,061			$	68,809			706			$	69,515
Operating expenses			53,038				(12,887	)			40,151				52,476			(2,339	)			50,137
Operating income (loss)			(25,121	)			13,031				(12,090	)			16,333			3,045				19,378
Net income (loss)			(27,531	)			13,031				(14,500	)			12,517			3,045				15,562
Basic earnings (loss) per share		$	(0.50	)		$	0.24			$	(0.26	)		$	0.23		$	0.05			$	0.28
Diluted earnings (loss) per share		$	(0.50	)		$	0.24			$	(0.26	)		$	0.22		$	0.06			$	0.28
Weighted average number of shares used in
computing earnings per share
	Basic		55,506,266								55,506,266				55,329,617							55,329,617
	Diluted		55,506,266								55,506,266				56,029,698							56,180,242
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions,    Merger, acquisition and related litigation, trade secrets and other litigation expenses and restructuring and re-organization costs.
		Nine months ended												Nine months ended
		September 30, 2020												September 30, 2019
						Unaudited											Unaudited
GAAP net income (loss)						$	(27,531	)									$	12,517
Gross profit
Non-cash stock-based compensation expenses							127											198
Amortization of intangible assets related to acquisition transactions							17											479
Restructuring and re-organization costs							-											29
							144											706
Operating expenses
Non-cash stock-based compensation expenses							860											1,532
Amortization of intangible assets related to acquisition transactions							150											152
Trade secrets and other litigation expenses							11											100
Merger, acquisition and related litigation							11,149											-
Restructuring and re-organization costs							717											555
							12,887											2,339
Non-GAAP net income (loss)						$	(14,500	)									$	15,562

 

GILAT SATELLITE NETWORKS LTD.
SUPPLEMENTAL INFORMATION
U.S. dollars in thousands
ADJUSTED EBITDA:
		Nine months ended							Three months ended
		September 30,							September 30,
			2020				2019			2020				2019
		Unaudited							Unaudited
GAAP operating income (loss)		$	(25,121	)		$	16,333		$	(10,902	)		$	6,991
Add:
Non-cash stock-based compensation expenses			987				1,730			280				437
Trade secrets and other litigation expenses			11				100			-				-
Restructuring and re-organization costs			717				585			444				-
Merger, acquisition and related litigation			11,149				-			8,198				-
Depreciation and amortization (*)			7,924				8,413			2,542				2,627
Adjusted EBITDA		$	(4,333	)		$	27,161		$	562			$	10,055
(*) Including amortization of lease incentive
SEGMENT REVENUE:
		Nine months ended							Three months ended
		September 30,							September 30,
			2020				2019			2020				2019
		Unaudited							Unaudited
Fixed Networks		$	67,587			$	94,104		$	22,797			$	27,268
Mobility Solutions			42,417				70,615			9,210				27,116
Terrestrial Infrastructure Projects			13,254				20,459			5,263				9,000
Total revenue		$	123,258			$	185,178		$	37,270			$	63,384

 

GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
		September 30,				December 31,
			2020				2019
		Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	51,574			$	74,778
Restricted cash			25,628				27,067
Trade receivables, net			26,199				47,731
Contract assets			38,102				23,698
Inventories			31,816				27,203
Other current assets			16,558				23,007
Total current assets			189,877				223,484
LONG-TERM ASSETS:
Long-term restricted cash			40				124
Severance pay funds			6,227				6,831
Deferred taxes			18,329				18,455
Operating lease right-of-use assets			5,665				5,211
Other long term receivables			7,796				10,156
Total long-term assets			38,057				40,777
PROPERTY AND EQUIPMENT, NET			77,618				82,584
INTANGIBLE ASSETS, NET			1,192				1,523
GOODWILL			43,468				43,468
TOTAL ASSETS		$	350,212			$	391,836
GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED BALANCE SHEETS (Cont.)
U.S. dollars in thousands
		September 30,				December 31,
			2020				2019
		Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans		$	4,000			$	4,096
Trade payables			17,302				20,725
Accrued expenses			54,075				54,676
Advances from customers and deferred revenues			25,908				27,220
Operating lease liabilities			1,940				1,977
Other current liabilities			10,406				12,261
Total current liabilities			113,631				120,955
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities			-				4,000
Accrued severance pay			6,493				7,061
Long-term advances from customers			-				2,866
Operating lease liabilities			3,754				3,258
Other long-term liabilities			1,069				108
Total long-term liabilities			11,316				17,293
SHAREHOLDERS' EQUITY:
Share capital - ordinary shares of NIS 0.2 par value			2,644				2,643
Additional paid-in capital			928,337				927,348
Accumulated other comprehensive loss			(6,830	)			(5,048	)
Accumulated deficit			(698,886	)			(671,355	)
Total shareholders' equity			225,265				253,588
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	350,212			$	391,836

 

GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
			Nine months ended								Three months ended
			September 30,								September 30,
				2020				2019				2020				2019
			Unaudited								Unaudited
Cash flows from operating activities:
Net income (loss)			$	(27,531	)		$	12,517			$	(11,551	)		$	6,288
Adjustments required to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization				7,757				8,247				2,486				2,565
Capital loss from disposal of property and equipment				34				-				11				-
Stock-based compensation of options				987				1,730				280				437
Accrued severance pay, net				37				345				11				(37	)
Deferred income taxes, net				101				1,081				(39	)			(304	)
Decrease (increase) in trade receivables, net				20,852				141				2,488				(2,365	)
Decrease (increase) in contract assets				(14,404	)			25,408				(6,042	)			25,640
Decrease (increase) in other assets (including short-term, long-term
and deferred charges)				7,919				(1,419	)			1,209				(1,390	)
Decrease (increase) in inventories				(5,150	)			(7,685	)			548				(1,548	)
Decrease in trade payables				(3,335	)			(4,515	)			(2,825	)			(8,448	)
Increase (decrease) in accrued expenses				(193	)			(8,904	)			5,616				(1,828	)
Increase (decrease) in advance from customers				(4,116	)			(9,540	)			1,609				(1,135	)
Decrease in current and non current liabilities				(219	)			(2,659	)			(904	)			(708	)
Net cash provided by (used in) operating activities				(17,261	)			14,747				(7,103	)			17,167
Cash flows from investing activities:
Purchase of property and equipment				(2,740	)			(5,649	)			(861	)			(2,062	)
Net cash used in investing activities				(2,740	)			(5,649	)			(861	)			(2,062	)
Cash flows from financing activities:
Exercise of stock options				-				375				-				-
Dividend payment				-				(24,864	)			-				-
Repayment of long-term loans				(4,096	)			(4,353	)			-				(122	)
Net cash used in financing activities				(4,096	)			(28,842	)			-				(122	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash				(630	)			(235	)			(91	)			(256	)
Increase (decrease) in cash, cash equivalents and restricted cash				(24,727	)			(19,979	)			(8,055	)			14,727
Cash, cash equivalents and restricted cash at the beginning of the period				101,969				104,204				85,297				69,498
Cash, cash equivalents and restricted cash at the end of the period			$	77,242			$	84,225			$	77,242			$	84,225

FAQ

What were Gilat's revenues for Q3 2020?

Gilat reported revenues of $37.3 million for Q3 2020.

What was Gilat's net loss for Q3 2020?

Gilat's net loss for Q3 2020 was $11.6 million, or $0.21 per share.

What impact did merger-related expenses have on Gilat's operating loss in Q3 2020?

Gilat's GAAP operating loss included $8.2 million in expenses related to the Comtech merger.

How much dividend is Gilat planning to distribute?

Gilat plans to distribute $55 million in dividends, with $20 million already declared.

What positive developments did Gilat highlight for Q3 2020?

Gilat highlighted a significant increase in backlog and several new contracts in Cellular Backhaul.