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Gilat Reports Continued Improvement in Profitability in Q2 2017 and Raises 2017 Adjusted EBITDA Objective to $22 to $26 Million

Company achieves GAAP net income of $2.1 million and Adjusted EBITDA of $5.9 million

PETAH TIKVA, Israel, Aug. 08, 2017 (GLOBE NEWSWIRE) -- Gilat Satellite Networks Ltd. (NASDAQ:GILT) (TASE:GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the second quarter ended June 30, 2017.

/EIN News/ -- Key Financial Highlights:

• Revenues for Q2 2017 were $66.2 million compared with $63.9 million in Q1 2017 and $67.9 million in Q2 2016.

• Profitability showed significant improvement, both quarter-over-quarter and year-over-year:

  • GAAP operating profit improved substantially to $1.9 million in Q2 2017 from $18 thousand in Q1 2017, and compared with an operating loss of $2.5 million in Q2 2016.

  • Non-GAAP operating income grew to $4.1 million from $2.5 million in Q1 2017 and $0.5 million in Q2 2016.   

  • The Company achieved GAAP net income of $2.1 million, or $0.04 per diluted share in Q2 2017, compared with a loss of $0.8 million, or $0.01 per diluted share, in Q1 2017, and a loss of $3.7 million, or $0.07 per diluted share, in Q2 2016.

  • Non-GAAP net income reached $4.6 million, or $0.08 per diluted share, compared with $1.7 million, or $0.03 per diluted share in Q1 2017, and a non-GAAP loss of $0.6 million, or $0.01 per diluted share, in Q2 2016. 

  • Adjusted EBITDA increased to $5.9 million, or 8.9% of revenues, compared with $4.2 million, or 6.6% of revenues, in Q1 2017, and $2.4 million, or 3.5% of revenues, in Q2 2016.

• Updated management objectives for 2017: revenue range narrowed to between $280 to $290 million, GAAP operating income raised to between $7 and $11 million, and Adjusted EBITDA raised to between $22 and $26 million.

Yona Ovadia, CEO of Gilat, commented: “I am very pleased to report another quarter of strong progress for Gilat. The Gilat management team has maintained an ongoing focus on improving profitability and optimizing our growth engines. That has resulted in significant improvement in our profitability in the second quarter with a substantial step-up in our operating income as well as the achievement of GAAP net income, along with a major increase in our Adjusted EBITDA, which increased 39% from the first quarter of 2017 and 149% from the second quarter last year.

“With our increased profitability and the growing traction of our new strategy, I am pleased to say that we have raised our profitability objectives for 2017, including moving up the range for Adjusted EBITDA to $22 to $26 million from the previous range of $20 to $24 million.”

“The principal drivers of this profitability improvement in the second quarter were a substantial increase in revenues from our mobility growth engine, mainly our solutions for In-Flight Connectivity (IFC). This demonstrates the earnings power and potential of our strategic growth engines, which also include our cellular backhaul over satellite solutions for the mobile market.

“In the second quarter, we continued to see progress with our growth engines. In Mobility, we are pleased that Gogo is now installing our modems in an accelerated fashion on commercial flights with a plan to reach over 1,800 aircrafts across more than 13 airlines. In addition, we continue to mature other opportunities in this market.

“We are also pleased to see a growing market for consumer broadband in Russia/CIS that is enabled by our innovative technology, the Scorpio VSAT, which was selected by the leading Russian DTH providers, now NTV-Plus in addition to Tricolor. 

“Furthermore, in the Mobile growth engine, we continue to develop our telco strategy of providing leading LTE over satellite cellular backhaul solutions to the industry. We are optimistic that opportunities in our pipeline will soon mature.

“Lastly, the win of a significant deal with Telebras in Brazil points to the start of a potential turnaround in our business in LATAM, and we are focused on accelerating this trend.

Mr. Ovadia concluded: “We are pleased to report the continued strong progress of Gilat in the second quarter as we continue to focus on improving profitability while developing our Mobile and Mobility growth engines. As our management objectives for full year 2017 indicate, we are optimistic about the rest of the year.”

Key Recent Announcements:

  • Gilat Propels the Russian DTH Market into Broadband Services
  • Telebras, Brazil Awards Gilat Contract of Over USD 11 Million
  • Intelsat and Gilat Unveil Mobile Reach Solar 3G Solution for Mobile Network Operators that Need to Expand in Remote Areas

Conference Call and Webcast Details:

Gilat management will host a conference call today, Tuesday, August 8, to discuss the second quarter results.  The details are as follows:

Conference Call and Webcast

Date: Tuesday, August 8, 2017
Start:  09:30 AM EDT / 16:30 IDT 
Dial-in: US: 1-888-407-2553
  International: (972) 3-918-0610

A simultaneous Webcast of the conference call will be available on the Gilat website at www.gilat.com and through this link: http://veidan-stream.com/gilatq2-2017.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: August 8, 2017 at 12:00 PM EDT / 19:00 IDT
End: August 11, 2017 at 12:00 PM EDT / 19:00 IDT
Dial-in:  US: 1-888-782-4291
  International: (972) 3-925-5918

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 tax 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 2017. 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.   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
U.S. dollars in thousands (except share and per share data)  
        Six months ended   Three months ended  
        June 30, 
  June 30, 
 
          2017       2016       2017       2016    
        Unaudited   Unaudited  
                       
Revenues     $ 130,168     $ 120,563     $ 66,237     $ 67,898    
Cost of revenues       93,258       92,984       46,668       52,717    
                       
Gross profit         36,910         27,579         19,569         15,181    
                       
Research and development expenses     13,467       12,593       6,712       6,705    
Less - grants       523       638       476       552    
Research and development, net       12,944       11,955       6,236       6,153    
Selling and marketing expenses       11,350       10,976       5,555       5,853    
General and administrative expenses     10,723       10,152       5,903       5,714    
                       
Total operating expenses         35,017         33,083         17,694         17,720    
                       
Operating income (loss)         1,893         (5,504 )       1,875         (2,539 )  
                       
Financial expenses, net       (2,046 )     (1,603 )     (1,242 )     (860 )  
                       
Income (loss) before taxes on income       (153 )       (7,107 )       633         (3,399 )  
                       
Taxes on income (tax benefit)       (1,501 )     569       (1,499 )     251    
                       
Net income (loss)     $    1,348     $    (7,676 )   $    2,132     $    (3,650 )  
                       
Earnings (loss) per share (basic and diluted)   $    0.02     $    (0.16 )   $    0.04     $    (0.07 )  
                       
Weighted average number of shares used in                   
  computing earnings (loss) per share                  
  Basic       54,649,863       49,383,450       54,676,042       54,384,521    
  Diluted       54,690,930       49,383,450       54,701,316       54,384,521    
                       

 

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   
              June 30, 2017   June 30, 2016  
              GAAP   Adjustments (1)   Non-GAAP   GAAP   Adjustments (1)   Non-GAAP  
              Unaudited   Unaudited  
                                     
Gross profit           $ 19,569     1,205     $ 20,774   $ 15,181       1,225     $ 16,406    
Operating expenses           17,694     (1,049 )     16,645     17,720       (1,839 )     15,881    
Operating income (loss)           1,875     2,254       4,129     (2,539 )     3,064       525    
Income (loss) before taxes on income         633     2,491       3,124     (3,399 )     3,064       (335 )  
Net income (loss)           $    2,132       2,491     $    4,623   $    (3,650 )       3,064     $    (586 )  
                                     
Income (loss) per share (basic and diluted)       $    0.04     0.04     $    0.08   $    (0.07 )     0.06     $    (0.01 )  
                                     
Weighted average number of shares used in                              
computing income (loss) per share                              
  Basic             54,676,042         54,676,042     54,384,521           54,384,521    
  Diluted             54,701,316         54,735,130     54,384,521           54,384,521    
                                     
                                     
  (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 tax expenses under amnesty program.
 
                     
                                     
                   Three months ended             Three months ended       
                  June 30, 2017           June 30, 2016      
                  Unaudited           Unaudited      
                                     
GAAP net income (loss)             $ 2,132             $ (3,650 )      
Gross profit                                  
Non-cash stock-based compensation expenses             11               32        
Amortization of intangible assets related to acquisition transactions         1,194               1,193        
                    1,205               1,225        
Operating expenses                                
Non-cash stock-based compensation expenses             203               270        
Amortization of intangible assets related to acquisition transactions         193               195        
Trade secrets litigation expenses               25               1,374        
Tax expenses under amnesty program             628               -        
                    1,049               1,839        
                                     
Finance and taxes on income                                
Tax expenses under amnesty program             237               -        
                                     
Non GAAP income (loss)             $ 4,623             $ (586 )      
                                     

 

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)   
                Six months ended      Six months ended   
              30 June 2017 
    30 June 2016
 
              GAAP   Adjustments (1)   Non-GAAP   GAAP   Adjustments (1)   Non-GAAP  
              Unaudited   Unaudited  
                                     
Gross profit           $ 36,910       2,410     $ 39,320   $ 27,579       2,409     $ 29,988    
Operating expenses           35,017       (2,285 )     32,732     33,083       (2,470 )     30,613    
Operating income (loss)     1,893       4,695       6,588     (5,504 )     4,879       (625 )  
Income (loss) before taxes on income     (153 )     4,932       4,779     (7,107 )     4,879       (2,228 )  
Net income (loss)   $    1,348         4,932     $    6,280   $    (7,676 )       4,879     $    (2,797 )  
                           
Income (loss) per share (basic and diluted)   $    0.02         0.09     $    0.11   $    (0.16 )       0.10     $    (0.06 )  
                           
                             
Weighted average number of shares used in                          
computing net income (loss) per share                          
  Basic       54,649,863             54,649,863       49,383,450             49,383,450    
  Diluted       54,690,930             54,785,783       49,383,450             49,383,450    
             
         
  (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 tax expenses under amnesty program.
 
       
         
                   Six months ended             Six months ended       
                  30 June 2017           30 June 2016      
                   Unaudited             Unaudited       
                                     
GAAP net income (loss)             $ 1,348             $ (7,676 )      
Gross profit                                  
Non-cash stock-based compensation expenses             22               21        
Amortization of intangible assets related to acquisition transactions         2,388               2,388        
                    2,410               2,409        
Operating expenses                                
Non-cash stock-based compensation expenses             396               482        
Amortization of intangible assets related to acquisition transactions:         388               388        
Trade secrets litigation expenses             873               1,600        
Tax expenses under amnesty program             628               -        
                    2,285               2,470        
                                     
Finance and taxes on income                              
Tax expenses under amnesty program             237               -        
                                     
Non GAAP income (loss)             $ 6,280             $ (2,797 )      
                                     

 

GILAT SATELLITE NETWORKS LTD.  
CONDENSED ADJUSTED EBITDA  
U.S. dollars in thousands  
        Six months ended   Three months ended  
         June 30, 
  June 30, 
 
          2017     2016       2017     2016    
        Unaudited   Unaudited  
                       
GAAP operating income (loss)   $ 1,893   $ (5,504 )   $ 1,875   $ (2,539 )  
Add:                    
Non-cash stock-based compensation expenses   418     503       214     302    
Trade secrets litigation expenses   873     1,600       25     1,374    
Tax expenses under amnesty program   628     -       628     -    
Depreciation and amortization     6,304     6,525       3,139     3,224    
                       
Adjusted EBITDA     $   10,116   $   3,124     $    5,881   $    2,361    

 

  GILAT SATELLITE NETWORKS LTD.  
  CONDENSED CONSOLIDATED BALANCE SHEET  
  U.S. dollars in thousands  
             
      June 30,   December 31,  
        2017       2016    
      Unaudited   Audited  
             
  ASSETS          
             
  CURRENT ASSETS:          
  Cash and cash equivalents   $ 78,831     $ 40,133    
  Restricted cash     24,379       62,229    
  Restricted cash held by trustees     6,110       9,058    
  Trade receivables, net     84,219       89,377    
  Inventories     24,471       21,469    
  Other current assets     24,371       17,017    
             
  Total current assets     242,381       239,283    
             
  LONG-TERM INVESTMENTS:          
  Severance pay funds     8,346       7,791    
  Other long term receivables     394       436    
             
  Total long-term investments and receivables     8,740       8,227    
             
  PROPERTY AND EQUIPMENT, NET     80,048       80,837    
             
  INTANGIBLE ASSETS, NET     8,497       11,383    
             
  GOODWILL     43,468       43,468    
             
  TOTAL ASSETS   $ 383,134     $ 383,198    
             
     
  GILAT SATELLITE NETWORKS LTD.
 
  CONDENSED CONSOLIDATED BALANCE SHEET
 
  U.S. dollars in thousands
 
      June 30,   December 31,  
        2017       2016    
      Unaudited   Audited  
             
  LIABILITIES AND EQUITY          
             
  CURRENT LIABILITIES:          
  Current maturities of long-term loans     4,496       4,617    
  Trade payables     30,197       29,625    
  Accrued expenses     64,648       53,429    
  Advances from customers and deferred revenues     29,294       37,659    
  Advances from customers, held by trustees     4,188       7,498    
  Other current liabilities     16,228       13,846    
             
    Total current liabilities     149,051       146,674    
             
  LONG-TERM LIABILITIES:          
  Accrued severance pay     8,146       7,485    
  Long-term loans, net of current maturities     12,782       16,932    
  Other long-term liabilities     494       2,281    
             
    Total long-term liabilities     21,422       26,698    
             
  EQUITY:          
  Share capital - ordinary shares of NIS 0.2 par value     2,598       2,593    
  Additional paid-in capital     921,123       920,162    
  Accumulated other comprehensive loss     (2,648 )     (3,224 )  
  Accumulated deficit     (708,412 )     (709,705 )  
             
  Total equity     212,661       209,826    
             
  TOTAL LIABILITIES AND EQUITY   $ 383,134     $ 383,198    
             

 

GILAT SATELLITE NETWORKS LTD.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
U.S. dollars in thousands  
                     
      Six months ended   Three months ended  
       June 30, 
   June 30, 
 
        2017       2016       2017       2016    
      Unaudited   Unaudited  
Cash flows from operating activities:                  
Net income (loss)   $ 1,348     $ (7,676 )   $ 2,132     $ (3,650 )  
Adjustments required to reconcile net income (loss)                  
 to net cash provided by (used in) operating activities:                  
Depreciation and amortization     6,304       6,525       3,139       3,224    
Stock-based compensation of options and RSU's     418       503       214       302    
Accrued severance pay, net     106       (97 )     167       26    
Accrued interest and exchange rate differences on short and long-term restricted cash, net     10       (1,560 )     151       (1,151 )  
Exchange rate differences on long-term loans     113       48       88       (42 )  
Deferred income taxes, net     (159 )     -       (143 )     -    
Decrease in trade receivables, net     5,048       3,994       12,003       5,388    
Decrease (increase) in other assets (including short-term, long-term and deferred charges)     (6,519 )     (1,072 )     (3,265 )     1,082    
Decrease (increase) in inventories     (3,558 )     (2,459 )     (246 )     226    
Decrease in restricted cash directly related to operating activities, net     37,979       21,574       100       15,270    
Increase (decrease) in trade payables     537       3,192       929       (897 )  
Increase in accrued expenses     11,418       14,483       3,925       7,075    
Decrease in advances from customers     (5,710 )     (36,285 )     (2,612 )     (24,462 )  
Increase (decrease) in advances from customers, held by trustees     (3,342 )     (2,012 )     1,070       2,051    
Increase (decrease) in other current liabilities and other long term liabilities     (1,904 )     697       434       (524 )  
Net cash provided by (used in) operating activities     42,089       (145 )     18,086       3,918    
                     
Cash flows from investing activities:                  
Purchase of property and equipment     (2,173 )     (2,032 )     (961 )     (928 )  
Investment in restricted cash held by trustees     (5,309 )     (5,428 )     (5,309 )     (5,428 )  
Proceeds from restricted cash held by trustees     8,000       8,158       2,644       4,483    
Investment in restricted cash (including long-term)     (646 )     (186 )     (621 )     (7 )  
Proceeds from restricted cash (including long-term)     667       7,426       -       79    
Net cash provided by (used in) investing activities       539         7,938       (4,247 )       (1,801 )  
                     
Cash flows from financing activities:                  
Capital lease payments     -       (307 )     -       (256 )  
Issuance of shares in a rights offering     -       35,095       -       19,852    
Issuance of restricted stock units and exercise of stock options     493       346       227       10    
Short term bank credit, net     -       (7,000 )     -       (4,250 )  
Repayment of long-term loans     (4,383 )     (4,277 )     (142 )     (138 )  
Net cash provided by (used in) financing activities     (3,890 )     23,857       85       15,218    
                     
Effect of exchange rate changes on cash and cash equivalents       (40 )       675         (169 )       265    
                     
Increase in cash and cash equivalents     38,698       32,325       13,755       17,600    
                     
Cash and cash equivalents at the beginning of the period     40,133       18,435       65,076       33,160    
                     
Cash and cash equivalents at the end of the period   $  78,831     $  50,760     $  78,831     $ 50,760    
                     

  

Contact:
Gilat Satellite Networks
Doreet Oren
DoreetO@gilat.com

Comm-Partners LLC
June Filingeri, President
203-972-0186
junefil@optonline.net

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