Gilat Reports Strong Profitability in Q3 2018, Raises Objectives for 2018 Operating Profit and EBITDA
PETAH TIKVA, Israel, Nov. 12, 2018 /PRNewswire/ -- 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, 2018.
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Key Financial Highlights:
-- Revenues for Q3 2018 were $62.8 million, compared with $69.9 million in
Q3 2017.
-- Continued strong profitability:
-- Q3 2018 GAAP operating income increased to $6.0 million, up 79.6%
from Q3 2017.
-- Q3 2018 Non-GAAP operating income rose to $6.5 million, up 32.7%
year over year.
-- Q3 2018 GAAP net income was $8.7 million, or $0.16 per diluted share
(including a one-time tax benefit of $4.1 million related to the
Company's US subsidiary), compared with $2.1 million, or $0.04 per
diluted share, in Q3 2017.
-- Q3 2018 non-GAAP net income was $5.1 million, or $0.09 per diluted
share, versus $3.6 million, or $0.07 per diluted share, in Q3 2017.
-- Q3 2018 Adjusted EBITDA increased 27.8% from Q3 2017 to $9.1
million, or 14.5 % of revenues.
-- 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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SOURCE Gilat Satellite Networks
