×

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

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

Source:Gilat Satellite Networks Ltd.