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Gilat Announces Third Quarter 2013 Results

Gilat Satellite Networks Logo

PETAH TIKVA, Israel, Nov. 13, 2013 (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 third quarter ended September 30, 2013.

Key Financial Updates:

  • Revenue for Q3 2013 of $71.3 million
  • EBITDA for Q3 2013 of $2.1 million
  • Expenses reduced by around $9 million per year during Q4 2013 with effects to be realized starting in Q1 2014
  • Management objectives for 2013 lowered to approximately $310 million in revenue and EBITDA of 6% primarily due to delayed deals in our Commercial Division and in Peru

Revenues for the third quarter of 2013 were $71.3 million, compared to $89.0 million for the same period in 2012.

On a non-GAAP basis, operating loss for the third quarter of 2013 was $1.3 million compared to an operating income of $5.7 million in the third quarter of 2012. On a non-GAAP basis, net loss for the period was $1.9 million, or $0.04 per diluted share, compared to net income of $5.8 million, or $0.13 per diluted share, in the comparable period in 2012.

EBITDA for the third quarter of 2013 reached $2.1 million as compared with $9.8 million in the comparable period in 2012.

In August, the Company announced that it entered into a definitive agreement to sell Spacenet to SageNet, subject to regulatory approval and the satisfaction of customary closing conditions. The Company received the required FCC regulatory approval last week and notified SageNet that all conditions for closing have been met. The Company has been notified by SageNet that it is not willing to proceed to closing at this time based on several assertions. While the Company rejects all of SageNet's assertions and believes them to be unfounded, it is in continuing discussions with SageNet concerning their assertions. At this time the closing has been delayed.

"The shortfall in Q3 was mainly attributed to two deals which were delayed in our Commercial Division, reduced revenue from Compartel in Colombia and a delayed project implementation in our Services Division," said Erez Antebi, CEO of Gilat.

"We have taken immediate action to cut costs reducing our global headcount and fixed expenses by approximately $9 million annually," continued Antebi. "We expect to see most of the impact of the reductions beginning in the first quarter of 2014. It is important to note that we have taken care not to reduce our sales teams or our research and development investments in our strategic growth areas."

"Going forward, we believe we are well positioned for success," concluded Antebi. "While this has been a difficult quarter, we have taken the appropriate measures to significantly cut costs and further streamline the company. We continue to close deals in our Commercial Division with new and existing customers. Our Defense Division is stable and we see growing interest and need for our products. We are confident in the road ahead and believe that with the steps we have taken, the Company is better positioned to succeed going forward."

Resources:
Third Quarter 2013 Financial Statements

Key Recent Announcements:

  • Gilat Receives Award Letter from Entel S.A. for Project Valued at Over $12 Million
  • Gilat Announces a Favorable Judgment in 2009 Claim
  • Gilat Announces the Release of the Wavestream Ka-Band Matchbox Mini BUC
  • Gilat Announces Sale of Spacenet Subsidiary

Conference Call and Webcast Details:

Gilat management will host a conference call today at 13:30 GMT/ 09:30 EST/ 16:30 IST (Israel Standard Time) to discuss the results. International participants are invited to access the call at (972) 3-918-0610, and US-based participants are invited to access the call by dialing (888) 668-9141. A replay of the conference call will be available beginning at approximately 16:00 GMT/ 12:00 EST/ 19:00 IST today, until 16:00 GMT/ 12:00 EST/ 19:00 IST November 15, 2013. International participants are invited to access the replay at (972) 3-925-5918, and US-based participants are invited to access the replay by dialing (888) 326-9310. A replay of the call may also be accessed as a webcast via Gilat's website at www.gilat.com and will be archived for 30 days.

Notes:

(1) The attached summary financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The attached summary financial statements are unaudited. To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Gilat's EBITDA before the impact of non-cash share-based payment charges, depreciation and amortization, other income and other costs related to acquisition transactions. Non-GAAP presentations of net income, EBITDA and earnings per share are provided to enhance the understanding of the Company's historical financial performance and comparability between periods.

(2) Operating income before depreciation, amortization, non-cash stock option expenses as per ASC 718 (formerly SFAS 123(R)) and other costs related to acquisition transactions ('EBITDA') is presented because it is a measure commonly used and is presented solely in order to improve the understanding of the Company's operating results and to provide further perspective on these results. EBITDA, however, should not be considered as an alternative to operating income or net income for the period as an indicator of the operating performance of the Company.

Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Reconciliation between the Company's Operating income and EBITDA is presented in the attached summary financial statements.

About Gilat Satellite Networks Ltd.

Gilat Satellite Networks Ltd (Nasdaq:GILT) (TASE:GILT) is a leading provider of products and services for satellite-based broadband communications. Gilat develops and markets a wide range of high-performance satellite ground segment equipment and VSATs, with an increasing focus on the consumer and Ka-band market. In addition, Gilat enables mobile SOTM (Satellite-on-the-Move) solutions providing low-profile antennas, next generation solid-state power amplifiers and modems. Gilat also provides managed network and satellite-based services for rural telephony and Internet access via its subsidiaries in the United States, Peru and Colombia.

With over 25 years of experience, and over a million products shipped to more than 85 countries, Gilat has provided enterprises, service providers and operators with efficient and reliable satellite-based connectivity solutions, including cellular backhaul, banking, retail, e-government and rural communication networks. Gilat also enables leading defense, public security and news organizations to implement advanced, on-the-move tactical communications on board their land, air and sea fleets using Gilat's high-performance SOTM solutions. For more information, please visit us at 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. 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 BALANCE SHEETS
US dollars in thousands
September 30, December 31,
2013 2012
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 53,914 66,968
Restricted cash 1,869 3,794
Restricted cash held by trustees 4,544 1,664
Trade receivables, net 59,194 60,991
Inventories 31,560 24,973
Other current assets 24,820 29,140
Total current assets 175,901 187,530
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term restricted cash 1,184 1,151
Severance pay funds 9,805 9,703
Long-term trade receivables, receivables in respect of capital leases and other receivables 20,332 19,781
Total long-term investments and receivables 31,321 30,635
PROPERTY AND EQUIPMENT, NET 91,233 94,727
INTANGIBLE ASSETS, NET 30,787 35,991
GOODWILL 65,760 65,760
TOTAL ASSETS 395,002 414,643
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
US dollars in thousands
September 30, December 31,
2013 2012
Unaudited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit 3,426 3,517
Current maturities of long-term loans 4,621 7,963
Trade payables 28,233 23,240
Accrued expenses 19,775 24,353
Short-term advances from customer, held by trustees -- 4,448
Other current liabilities 41,893 40,336
Total current liabilities 97,948 103,857
LONG-TERM LIABILITIES:
Accrued severance pay 9,614 9,513
Long-term loans, net of current maturities 31,376 40,747
Other long-term liabilities 23,334 18,569
Total long-term liabilities 64,324 68,829
COMMITMENTS AND CONTINGENCIES
EQUITY:
Share capital - ordinary shares of NIS 0.2 par value 1,929 1,909
Additional paid-in capital 872,244 869,822
Accumulated other comprehensive income 1,571 2,864
Accumulated deficit (643,014) (632,638)
Total equity 232,730 241,957
TOTAL LIABILITIES AND EQUITY 395,002 414,643
GILAT SATELLITE NETWORKS LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS
FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)
Three months
ended
Three months ended
30 September 2013 30 September 2012

GAAP

Adjustments (1)
Non-GAAP
GAAP

Adjustments (1)
Non-GAAP
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues 71,303 -- 71,303 89,009 -- 89,009
Cost of revenues 50,904 (1,305) 49,599 60,588 (1,661) 58,927
Gross profit 20,399 1,305 21,704 28,421 1,661 30,082
29% 30% 32% 34%
Research and development expenses:
Expenses incurred 7,088 (128) 6,960 7,699 (114) 7,585
Less - grants 585 -- 585 661 -- 661
6,503 (128) 6,375 7,038 (114) 6,924
Selling and marketing expenses 9,159 (360) 8,799 9,346 (345) 9,001
General and administrative expenses 8,185 (377) 7,808 8,840 (384) 8,456
Operating income (loss) (3,448) 2,170 (1,278) 3,197 2,504 5,701
Financial expenses, net (1,579) -- (1,579) (412) -- (412)
Income (loss) before taxes on income (5,027) 2,170 (2,857) 2,785 2,504 5,289
Tax benefit (983) -- (983) (536) -- (536)
Net income (loss) (4,044) 2,170 (1,874) 3,321 2,504 5,825
Basic net earnings (loss) per share (0.10) (0.04) 0.08 0.14
Diluted net earnings (loss) per share (0.10) (0.04) 0.08 0.13
Weighted average number of shares used in computing net earnings (loss) per share
Basic 42,048 42,048 41,462 41,462
Diluted 42,048 42,048 42,302 43,807
(1) Adjustments reflect the effect of non-cash stock based compensation as per ASC 718 and amortization of intangible assets related to acquisition transactions.
Three months ended Three months ended
30 September 2013 30 September 2012
Unaudited Unaudited
Non-cash stock-based compensation expenses:
Cost of revenues 57 88
Research and development 128 114
Selling and marketing 129 116
General and administrative 377 384
691 702
Amortization of intangible assets related to acquisition transactions:
Cost of revenues 1,248 1,573
Selling and marketing 231 229
1,479 1,802
GILAT SATELLITE NETWORKS LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS
FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)
Nine months ended Nine months ended
30 September 2013 30 September 2012
GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues 234,336 -- 234,336 250,935 -- 250,935
Cost of revenues 164,274 (3,888) 160,386 170,796 (4,948) 165,848
Gross profit 70,062 3,888 73,950 80,139 4,948 85,087
30% 32% 32% 34%
Research and development expenses:
Expenses incurred 21,864 (339) 21,525 24,274 (243) 24,031
Less - grants 1,449 -- 1,449 2,345 -- 2,345
20,415 (339) 20,076 21,929 (243) 21,686
Selling and marketing expenses 30,181 (1,014) 29,167 30,097 (973) 29,124
General and administrative expenses 24,746 (1,057) 23,689 25,114 (1,020) 24,094
Operating income (loss) (5,280) 6,298 1,018 2,999 7,184 10,183
Financial expenses, net (5,028) -- (5,028) (2,427) -- (2,427)
Income (loss) before taxes on income (10,308) 6,298 (4,010) 572 7,184 7,756
Taxes on income (Tax benefit) 68 -- 68 (538) -- (538)
Net income (loss) (10,376) 6,298 (4,078) 1,110 7,184 8,294
Basic net earnings (loss) per share (0.25) (0.10) 0.03 0.20
Diluted net earnings (loss) per share (0.25) (0.10) 0.03 0.19
Weighted average number of shares used in computing net earnings (loss) per share
Basic 41,915 41,915 41,346 41,346
Diluted 41,915 41,915 42,224 43,355
(1) Adjustments reflect the effect of non-cash stock based compensation as per ASC 718 and amortization of intangible assets related to acquisition transactions.
Nine months ended Nine months ended
30 September 2013 30 September 2012
Unaudited Unaudited
Non-cash stock-based compensation expenses:
Cost of revenues 143 230
Research and development 339 243
Selling and marketing 325 285
General and administrative 1,057 1,020
1,864 1,778
Amortization of intangible assets related to acquisition transactions:
Cost of revenues 3,745 4,718
Selling and marketing 689 688
4,434 5,406
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
Nine months ended Three months ended
September 30, September 30,
2013 2012 2013 2012
Unaudited Unaudited Unaudited Unaudited
Revenues 234,336 250,935 71,303 89,009
Cost of revenues 164,274 170,796 50,904 60,588
Gross profit 70,062 80,139 20,399 28,421
Research and development expenses:
Expenses incurred 21,864 24,274 7,088 7,699
Less - grants 1,449 2,345 585 661
20,415 21,929 6,503 7,038
Selling and marketing expenses 30,181 30,097 9,159 9,346
General and administrative expenses 24,746 25,114 8,185 8,840
Operating income (loss) (5,280) 2,999 (3,448) 3,197
Financial expenses, net (5,028) (2,427) (1,579) (412)
Income (loss) before taxes on income (10,308) 572 (5,027) 2,785
Taxes on income (Tax benefit) 68 (538) (983) (536)
Net income (loss) (10,376) 1,110 (4,044) 3,321
Basic net earnings (loss) per share (0.25) 0.03 (0.10) 0.08
Diluted net earnings (loss) per share (0.25) 0.03 (0.10) 0.08
Weighted average number of shares used in computing net earnings (loss) per share
Basic 41,915 41,346 42,048 41,462
Diluted 41,915 42,224 42,048 42,302
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
Nine months ended Three months ended
September 30, September 30,
2013 2012 2013 2012
Unaudited Unaudited Unaudited Unaudited
Cash flows from operating activities:
Net income (loss) (10,376) 1,110 (4,044) 3,321
Adjustments required to reconcile net income (loss) to net cash generated from (used in) operating activities:
Depreciation and amortization 16,033 16,591 4,825 5,893
Stock-based compensation 1,864 1,778 691 702
Accrued severance pay, net (1) 238 (65) (73)
Accrued interest and exchange rate differences on short and long-term restricted cash, net 1,382 (95) 990 (26)
Exchange rate differences on long-term loans 92 9 138 133
Capital loss from disposal of property and equipment 36 47 23 50
Deferred income taxes (871) (1,079) (826) (749)
Decrease (increase) in trade receivables, net 1,470 (10,624) 3,695 (3,510)
Decrease (increase) in other assets (including short-term, long-term and deferred charges) 678 (2,326) (3,436) 3,102
Decrease (increase) in inventories (8,219) 2,447 (2,755) 2,842
Increase (decrease) in trade payables 5,015 833 1,478 (4,576)
Increase (decrease) in accrued expenses (4,578) (2,631) (1,923) 3,516
Increase (decrease) in advances from customer, held by trustees, net (4,448) 2,936 (525) (2,066)
Increase (decrease) in other accounts payable and other long term liabilities (5,054) (5,744) 629 (25)
Net cash generated from (used in) operating activities (6,977) 3,490 (1,105) 8,534
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
Nine months ended Three months ended
September 30, September 30,
2013 2012 2013 2012
Unaudited Unaudited Unaudited Unaudited
Cash flows from investing activities:
Purchase of property and equipment (3,719) (3,428) (1,488) (1,262)
Investment in restricted cash held by trustees (14,455) (28,701) (3,219) (11,081)
Proceeds from restricted cash held by trustees 10,283 22,516 512 13,441
Investment in restricted cash (including long-term) (30,173) (15,417) (12,173) (6,303)
Proceeds from restricted cash (including long-term) 31,958 20,877 12,619 6,253
Purchase of intangible assets (118) (82) -- (10)
Net cash generated from (used in) investing activities (6,224) (4,235) (3,749) 1,038
Cash flows from financing activities:
Issuance of restricted stock units and exercise of stock options 579 18 17 6
Payment of obligation related to the purchase of intangible assets (500) -- -- --
Proceeds from financing contract 14,472 -- -- --
Short-term bank credit, net (92) 1,190 366 (11)
Proceeds from long-term loans -- 10,000 -- --
Repayment according to financing contract (1,288) -- (634) --
Repayment of long-term loans (12,804) (5,435) (6,829) (1,012)
Net cash generated from (used in) financing activities 367 5,773 (7,080) (1,017)
Effect of exchange rate changes on cash and cash equivalents (220) (233) 7 (69)
Increase (decrease) in cash and cash equivalents (13,054) 4,795 (11,927) 8,486
Cash and cash equivalents at the beginning of the period 66,968 56,231 65,841 52,540
Cash and cash equivalents at the end of the period 53,914 61,026 53,914 61,026
GILAT SATELLITE NETWORKS LTD.
CONDENSED EBITDA
US dollars in thousands
Nine months ended Three months ended
September 30, September 30,
2013 2012 2013 2012
Unaudited Unaudited Unaudited Unaudited
Operating income (loss) (5,280) 2,999 (3,448) 3,197
Add:
Non-cash stock-based compensation expenses 1,864 1,778 691 702
Depreciation and amortization 16,033 16,591 4,825 5,893
EBITDA 12,617 21,368 2,068 9,792

CONTACT: Phil Carlson / Josh Dver, KCSA pcarlson@kcsa.com / jdver@kcsa.com 1 (212) 896 1233 / 1239 David Leichner, Gilat Satellite Networks Ltd. davidle@gilat.com (972) 3 925 2009

Source:Gilat Satellite Networks Ltd.

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