Gilat Reports Continued Profitability Growth in Q2 2019

PETAH TIKVA, Israel, Aug. 6, 2019 /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 second quarter ended June 30, 2019.

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Key Financial Highlights:

    --  Revenues for Q2 2019 totaled $59.7 million compared with $66.5 million
        for Q2 2018.
    --  Continued strong profitability:
        --  Q2 2019 GAAP operating income increased 17.9% to $4.9 million from
            $4.1 million in Q2 2018. Q2 2019 Non-GAAP operating income rose to
            $6.3 million, or by 10.8% from Q2 2018.
        --  Q2 2019 GAAP net income increased 58.3% to $3.4 million, or $0.06
            per diluted share, compared with $2.2 million, or $0.04 per diluted
            share in Q2 2018. Q2 2019 non-GAAP net income increased 30.7% to
            $4.8 million, or $0.09 per diluted share, compared with $3.7
            million, or $0.07 per diluted share, in Q2 2018.
        --  Q2 2019 Adjusted EBITDA increased 10% year over year to $8.9
            million, or 14.9% of revenues.
    --  Reiterated management objectives for 2019: revenue range between $275
        million to $295 million, GAAP operating income of between $23 million
        and $27 million, and Adjusted EBITDA between $38 million and $42
        million.

Yona Ovadia, CEO of Gilat, commented:

"I am pleased to report that aside from Gilat's continued positive results and solid profitability in the second quarter, this has been a strong quarter as we executed our strategy to build high quality revenues through our growth engines of Broadband, Mobile Cellular Backhaul and Mobility IFC.

"We achieved two major milestones in the quarter that will be important drivers of our future growth.

"The first is in the area of Inflight Connectivity. We have now entered into the Business Aviation market with a multi-million-dollar award from an Aviation Service Provider for our tail-mount antenna. This milestone not only complements our leading IFC position in Commercial Aviation, it also expands our IFC product portfolio with an airborne tail-mount antenna in addition to our leading airborne modem.

"Second, we have reached a critical milestone in Peru with approval to enter the operational phase of the three-region telecom project awarded in 2015 by Fitel. Entering this phase enables Gilat to unlock access to revenue of approximately $12 million per annum of operations fees, for a period of ten years, as well as to start selling services over the network which yield higher margins. In fact, we already have efforts underway to sell network services over the infrastructure we have built and recently started to operate. We expect to report progress with these efforts in the coming weeks and months.

"In addition, we were awarded a three-year multi-million-dollar broadband expansion project further to our managed services cellular backhaul project with Globe Telecom, the leading telco in the Philippines. This expansion demonstrates once again our conviction that the declining price of satellite capacity along with strong ground segment equipment, provides Telcos worldwide an additional legitimate cost-effective tool for quality broadband to their customers."

Mr. Ovadia concluded: "Overall, Gilat achieved important milestones in the second quarter, particularly in our Peru projects and our IFC business, while attaining solid profitability. We plan to press forward with these and our other growth engines for the remainder of 2019, and to focus on further improving profitability."

Key Recent Announcements:

    --  Gilat will Provide Aero Antennas with Initial Agreement for Tens of
        Millions of Dollars to a Tier-1 Business Aviation Service Provider
    --  Gilat Awarded Over $7 Million Dollar Contract for US Army's WIN-T
        (Warfighter Information Network-Tactical) Program
    --  Gilat Achieves Critical Milestone in Peru with Approval to Enter
        Operational Phase, Unlocking Access to Revenue of ~$12M per Annum from
        Telecom Project Awarded in 2015
    --  Globe Awards Gilat a Three-Year Multi-Million US Dollar Contract for
        Delivering Satellite Based WiFi in Addition to Cellular Backhaul
        Services

Conference Call and Webcast Details:

Following the issuance of this release, Yona Ovadia, Chief Executive Officer, and Adi Sfadia, Chief Financial Officer, will discuss Gilat's second quarter 2019 results and participate in a question and answer session:

Date: Tuesday, August 6

Start: 09:30 AM EDT / 16:30 IDT

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: http://veidan-stream.com/gilatq2-2019.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 6, 2019 at 12:00 PM EDT / 19:00 IDT

End: August 9, 2019 at 12:00 PM EDT / 19:00 IDT

Dial-in: US: 1-888-326-9310

International: (972) 3-925-5900

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, re-organization costs, expenses for tax contingencies to be paid under an amnesty program 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.

This news release also contains a forward-looking estimate of Adjusted EBITDA projected to be generated by Gilat in 2019. 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.

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



     
              GILAT SATELLITE NETWORKS LTD.



     
              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,



                                                                                                      2019                           2018                       2019                        2018



                                                                                            
        
              Unaudited                       
           
            Unaudited






     Revenues                                                                     $121,794                   $133,882                     $59,685                      $66,508


      Cost of revenues                                                                            76,239                         90,053                     37,700                      44,066





                 Gross profit                                                                     45,555                         43,829                     21,985                      22,442





      Research and development
       expenses                                                                                  16,492                         16,730                      7,635                       8,284


      Less -grants                                                                                 1,094                            810                        539                         343


      Research and development
       expenses, net                                                                             15,398                         15,920                      7,096                       7,941


      Selling and marketing
       expenses                                                                                  11,288                         11,716                      5,417                       6,303


      General and administrative
       expenses                                                                                   9,527                          8,389                      4,585                       4,054





                 Total operating
                  expenses                                                                        36,213                         36,025                     17,098                      18,298





                 Operating income                                                                  9,342                          7,804                      4,887                       4,144




      Financial expenses,
       net                                                                                       (1,400)                       (2,188)                     (579)                    (1,605)





                 Income before taxes on income                                                    7,942                          5,616                      4,308                       2,539





      Taxes on income                                                                              1,713                          1,154                        903                         388





                 Net income                                                          $6,229                     $4,462                      $3,405                       $2,151





                 Basic and Diluted earnings
                  per share                                                  $0.11                    $0.08                          $0.06                      $0.04





                 Weighted average number of
                  shares used in
                      
              computing
                                earnings per share





     Basic                                                                                   55,321,858                     54,811,893                 55,446,127                  54,858,330



                                                                                              56,074,361                     55,614,782                 56,189,217                  55,639,202


     Diluted



     
                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, 2019                      
          
           June 30, 2018



                                                                                                                                                     
         
         GAAP             Adjustments(1)           
         
                Non-GAAP                        
     
      GAAP              
        
        Adjustments (1)                        
     
     Non-GAAP



                                                                                                                                                                                                      
          
           Unaudited

                                                                                                                                                       
         
         Unaudited






     Gross profit                                                                                                                                                $21,985                     312                                                    $22,297              $22,442                                               1,230                 $23,672



     Operating expenses                                                                                                                                           17,098                 (1,077)                                                    16,021               18,298                                               (288)                 18,010



     Operating income                                                                                                                                              4,887                   1,389                                                      6,276                4,144                                               1,518                   5,662


      Income before taxes on income                                                                                                                                 4,308                   1,389                                                      5,697                2,539                                               1,518                   4,057



     Net income                                                                                                                                                    3,405                   1,389                                                      4,794                2,151                                               1,518                   3,669





      Earnings per share (basic and
       diluted)                                                                                                                                                     $0.06                   $0.03                                                      $0.09                $0.04                                               $0.03                   $0.07

                                                                                                                                                                                                                                                                                                                                                     ===






     Weighted average number of shares used in


     
              computing earnings per share




                                                                                                                                            Basic                55,446,127                                                                        55,446,127           54,858,330                                                                 54,858,330



                                                                                                                                           Diluted               56,189,217                                                                        56,337,558           55,639,202                                                                 55,854,231








     (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 re-organization costs.




                                                                                                                                                                                                                         Three months ended                                        
        
        Three months ended


                                                                                                                                                                                                         
         
                June 30, 2019                                             
        
        June 30, 2018


                                                                                                                                                                                                                                            
     
     Unaudited                                                       
     
     Unaudited






     GAAP net income                                                                                                                                                                                                                               $3,405                                                                  $2,151





     Gross profit



     Non-cash stock-based 
              compensation expenses                                                                                                                                 49                                                                    36



     Amortization of intangible 
              assets related to acquisition transactions                                                                                                                                                              234                                                                   1,194


     Re-organization costs


                                                                                                                                                                         29



                                                                                                                                                                                                                                                         312                                                                   1,230




     Operating expenses



     Non-cash stock-based compensation expenses                                                                                                                                                                                                    373                                                                     238



     Amortization of intangible assets related to acquisition transactions                                                                                                                                                                          49                                                                      50



     Trade secrets litigation expenses                                                                                                                                                                                                             100



     Re-organization costs                                                                                                                                                                                                                         555



                                                                                                                                                                                                                                                       1,077                                                                     288






     Non-GAAP net income                                                                                                                                                                                                                        $4,794                                                                  $3,669



     
                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


                                                                                                                                                                    
              
                June 30, 2019                                                       
            
              June 30, 2018



                                                                                                                             
              
                GAAP                       
              
                Adjustments (1)                          
     
     Non-GAAP                    
            
             GAAP             
      
     Adjustments (1)        
     
     Non-GAAP



                                                                                                                                                                      
              
                Unaudited                                                           
            
              Unaudited






     Gross profit                                                                         $45,555                      638                                             $46,193                                                           $43,829                            2,430                              $46,259



     Operating expenses                                                                                                                                          36,213                                                           (1,906)                          34,307                               36,025                           (551)               35,474



     Operating income                                                                                                                                             9,342                                                             2,544                           11,886                                7,804                           2,981                10,785



     Income before taxes on income                                                                                                                                7,942                                                             2,544                           10,486                                5,616                           2,981                 8,597



     Net income                                                                                                                                                   6,229                                                             2,544                            8,773                                4,462                           2,981                 7,443

                                                                                                                                                                                                                                                                                                                                                              ===




     Basic earnings per share                                                               $0.11                    $0.05                                               $0.16                                                             $0.08                            $0.06                                $0.14






     Diluted earnings per share                                                             $0.11                    $0.05                                               $0.16                                                             $0.08                            $0.05                                $0.13








     Weighted average number of shares used in computing earnings per share


                                                                                     
         Basic                                                                   55,321,858                                                                                        55,321,858                           54,811,893                                           54,811,893



                                                                                           Diluted                                                                 56,074,361                                                                                        56,240,141                           55,614,782                                           55,835,134







                                                                                       (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 or income and re-organization costs.

                   
        
        Six months ended   
        
        Six months ended


                     
        
       June 30, 2019       
        
       June 30, 2018



                      
        
        Unaudited          
        
        Unaudited





     GAAP net
      income                             $6,229                        $4,462




     Gross
      profit


     Non-cash
      stock-
      based
      compensation
      expenses                              143                            42


      Amortization
      of
      intangible
      assets
      related
      to
      acquisition
      transactions                          466                         2,388


     Re-
      organization
      costs                                  29



                                            638                         2,430



     Operating
      expenses


     Non-cash
      stock-
      based
      compensation
      expenses                            1,150                           450


      Amortization
      of
      intangible
      assets
      related
      to
      acquisition
      transactions                          101                           101


     Trade
      secrets
      litigation
      expenses                              100


     Re-
      organization
      costs                                 555



                                          1,906                           551





     Finance
      and taxes
      on income
      under
      amnesty
      program                                                            183


     Tax
      benefit
      adjustment                        (4,111)





     Non-GAAP
      net
      income                             $8,773                        $7,443



     
                GILAT SATELLITE NETWORKS LTD.



     
                SUPPLEMENTAL INFORMATION



     
                U.S. dollars in thousands



     
                ADJUSTED EBITDA:


                                                                         Six months ended                                Three months ende
              d


                                                            
           
        June 30,                
      
                June 30,



                                                                   2019                    2018            2019                           2018



                                                            
           
        Unaudited                
      
                Unaudited



      GAAP operating
       income                                        $9,342       $7,804                  $4,887          $4,144



     Add:


      Non-cash stock-
       based compensation
       expenses                                       1,293          492                     422             274


      Re-organization
       costs                                            584                                 584


      Trade secrets
       litigation expenses                              100                                 100


      Depreciation and
       amortization (*)                                        5,786                   7,322           2,909                          3,672





                   Adjusted EBITDA                  $17,105      $15,618                  $8,902          $8,090






     (*) includng amortization of lease incentive





     
                SEGMENT REVENUE:


                                                                         Six months ended                                               Three months ended


                                                            
           
        June 30,                
      
                June 30,



                                                                   2019                    2018            2019                           2018



                                                            
           
        Unaudited                
      
                Unaudited



      Fixed Networks                                $66,836      $73,843                 $30,408         $36,228


      Mobility Solutions                                      43,499                  45,778          22,587                         25,021


      Terrestrial
       Infrastructure
       Projects                                               11,459                  14,261           6,690                          5,259





                   Total revenue                   $121,794     $133,882                 $59,685         $66,508


                     GILAT
                      SATELLITE
                      NETWORKS
                      LTD.


                      CONSOLIDATED
                      BALANCE
                      SHEET


                     U.S.
                      dollars in
                      thousands


                                            
      
      June 30,      
       
       December 31,



                                                           2019                     2018



                                           
      
      Unaudited        
       
       Audited





                     ASSETS




                     CURRENT
                      ASSETS:


        Cash and
         cash
         equivalents                                    $39,904                  $67,381


        Restricted
         cash                                            27,094                   32,305


        Restricted
         cash held
         by
         trustees                                         2,353                    4,372


        Trade
         receivables,
         net                                             45,553                   47,164


        Contract
         assets                                          47,119                   47,760


        Inventories                                      26,224                   21,109


        Other
         current
         assets                                          25,777                   26,022





                        Total
                         current
                         assets                         214,024                  246,113





                     LONG-TERM
                      INVESTMENTS
                      AND
                      RECEIVABLES:


        Long-term
         restricted
         cash                                               147                      146


        Severance
         pay funds                                        6,770                    6,780


        Long term
         deferred
         tax assets                                       2,809                    4,127


        Operating
         lease
         right-of-
         use assets                                       4,721


        Other long
         term
         receivables                                      9,371                    7,276





                     Total long-
                      term
                      investments
                      and
                      receivables                        23,818                   18,329





                     PROPERTY
                      AND
                      EQUIPMENT,
                      NET                                82,466                   84,403





                     INTANGIBLE
                      ASSETS,
                      NET                                 1,757                    2,434





                     GOODWILL                            43,468                   43,468





                                   TOTAL
                                    ASSETS             $365,533                 $394,747

    ---


                     GILAT SATELLITE
                      NETWORKS LTD.


                     CONSOLIDATED BALANCE
                      SHEET (Cont.)


                     U.S. dollars in
                      thousands




                                                          June 30,  December 31,



                                                               2019          2018



                                                          Unaudited    Audited





                     LIABILITIES AND
                      SHAREHOLDERS' EQUITY




                     CURRENT LIABILITIES:


        Current maturities of
         long-term loans                                     $4,325        $4,458


        Trade payables                                       28,569        24,636


        Accrued expenses                                     59,012        67,533


        Advances from customers
         and deferred revenues                               20,403        29,133


        Operating lease right-
         of-use liabilities                                   1,659


        Other current
         liabilities                                         13,650        14,588





                        Total current
                         liabilities                        127,618       140,348





                     LONG-TERM LIABILITIES:


        Accrued severance pay                                 7,020         6,649


        Long-term loans, net
         of current maturities                                4,000         8,098


        Operating lease right-
         of-use liabilities                                   3,093


        Other long-term
         liabilities                                            646           580





                        Total long-term
                         liabilities                         14,759        15,327





                     SHAREHOLDERS' EQUITY:


        Share capital -
         ordinary shares of NIS
         0.2 par value                                        2,640         2,625


        Additional paid-in
         capital                                            926,509       924,856


        Accumulated other
         comprehensive loss                                 (4,329)      (5,380)


        Accumulated deficit                               (701,664)    (683,029)





                     Total shareholders'
                      equity                                223,156       239,072





                                    TOTAL LIABILITIES AND
                                     SHAREHOLDERS' EQUITY  $365,533      $394,747

    ---



       
                GILAT SATELLITE NETWORKS LTD.



       
                CONSOLIDATED STATEMENTS OF CASH FLOWS



       
                U.S. dollars in thousands




                                                                                                       Six months ended                 Three months ended


                                                                                                                  June 30, June 30,



                                                                                                                      2019                              2018         2019         2018



                                                                                                   
     
        Unaudited                 
     
         Unaudited




       
                
                  Cash flows from operating activities:

    ---


       
                Net income                                                                                   $6,229                            $4,462       $3,405       $2,151



       
                Adjustments required to reconcile net income



       
                 to net cash provided by operating activities:



       Depreciation and amortization                                                                              5,681                             7,322        2,859        3,672



       Stock-based compensation of options                                                                        1,293                               492          422          274



       Accrued severance pay, net                                                                                   382                                47           97         (41)



       Exchange rate differences on long-term loans                                                                                                 (13)                    (43)



       Deferred income taxes, net                                                                                 1,385                              (29)         702         (41)



       Decrease (increase) in trade receivables, net                                                              2,506                            15,089      (5,325)     (3,221)



       Decrease (increase) in contract assets                                                                     (232)                           14,380          198      (2,819)



       Decrease (increase) in other assets (including short-term, long-term



          and deferred charges)                                                                                    (29)                          (9,151)          50      (9,865)



       Decrease (increase) in inventories                                                                       (6,137)                              332      (2,478)       1,777



       Increase (decrease) in trade payables                                                                      3,933                          (11,634)       4,855      (3,362)



       Increase (decrease) in accrued expenses                                                                  (7,076)                          (1,980)     (4,907)          27



       Decrease in advance from customers                                                                       (8,405)                          (4,980)     (5,318)        (78)



       Decrease in advances from customers, held



          by trustees                                                                                                                            (1,478)



       Increase (decrease) in other current liabilities and other long term liabilities                         (1,950)                            5,575      (2,813)       4,011



       
                Net cash provided by (used in) operating activities                                         (2,420)                           18,434      (8,253)     (7,558)






       
                
                  Cash flows from investing activities:

    ---


       Purchase of property and equipment                                                                       (3,587)                          (5,014)     (1,573)     (2,153)



       
                Net cash used in investing activities                                                       (3,587)                          (5,014)     (1,573)     (2,153)






       
                
                  Cash flows from financing activities:

    ---


       Exercise of stock options                                                                                    375                               573           37          267



       Repayment of long-term loans                                                                             (4,231)                          (4,249)       (108)       (249)



       Dividend payment                                                                                        (24,864)                                     (24,864)



       
                Net cash provided by (used in) financing activities                                        (28,720)                          (3,676)    (24,935)          18






       
                Effect of exchange rate changes on cash, cash equivalents and restricted cash                    21                             (709)        (76)     (1,005)






       
                Increase (decrease) in cash, cash equivalents and restricted cash                          (34,706)                            9,035     (34,837)    (10,698)





       
                Cash, cash equivalents and restricted cash at the beginning of the period                   104,204                            86,757      104,335      106,490






       
                Cash, cash equivalents and restricted cash at the end of the period                         $69,498                           $95,792      $69,498      $95,792

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SOURCE Gilat Satellite Networks