Gilat Reports First Quarter 2021 Results

Gilat Satellite Networks Ltd. (NASDAQ: GILT, TASE: GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the first quarter of 2021.

First Quarter Financial Highlights

• Revenues of $44.7 million versus $47.7 million in Q1 2020 and up from $42.6 million in the previous quarter;
• GAAP operating loss of $3.7 million versus operating loss of $10.8 million in Q1 2020 and an operating income of $62.7 million in Q4 2020; GAAP operating income in Q4 2020 included income related to the legal settlement with Comtech, net of related expenses, of $64.8 million;
• Non-GAAP operating loss of $3.8 million, compared with operating loss of $7.6 million in Q1 2020, and an operating loss of $1.6 million in the previous quarter;
• GAAP net loss of $5.1 million, or loss of $0.09 per diluted share, compared with net loss of $11.8 million, or loss of $0.21 per diluted share in Q1 2020 and net income in the previous quarter of $62.4 million, or income of $1.12 per share; GAAP net income in the previous quarter included $64.8 million income related to the settlement with Comtech, net of related expenses;
• Non-GAAP net loss of $5.2 million, or loss of $0.09 per diluted share, compared with net loss of $8.6 million, or loss of $0.15 per diluted share in Q1 2020, and compared with a net loss of $1.9 million, or loss of $0.03 per share, as reported in the previous quarter;  
• Adjusted EBITDA loss of $1.4 million compared with adjusted EBITDA loss of $5.0 million in Q1 2020; and adjusted EBITDA of $1.1 million in the previous quarter;

Management Commentary

Adi Sfadia, Gilat's CEO, commented: “We continue to see strong momentum across all our business units, with the exception of the IFC market segment, which is yet to show a recovery. We believe that this growth trend will continue during 2021 and expect to show sequential quarterly growth throughout the year and increasing profitability. Looking further out, 2022 is expected to show significant improvement both in revenue and profitability with the pick-up in IFC, Cellular Backhaul and NGSO.

"As a testament to the strong momentum we are seeing, I am very pleased to report that we entered a mega strategic agreement valued at tens of millions of dollars, including a potential for significant project expansions, with a large government corporation in Asia Pacific. I believe that we will see additional large strategic transactions in the near future.

“In light of the many opportunities we see ahead of us, we are investing significant R&D efforts in order to capture these opportunities and accelerate our future growth. We expect that NGSO, IFC and Cellular Backhaul will be the main market segments that will drive this growth during 2021 and beyond, and we also see strong potential for the defense business to support our growth in a more meaningful way than it has done in the past.

"We made positive progress during the first quarter in our strategic growth areas of NGSO and Cellular Backhaul. We received additional orders for a LEO constellation, where our gateway Solid State Power Amplifiers (SSPAs) have been selected as the solution of choice. On the Cellular Backhaul front, we received a multi-million-dollar expansion and follow-on orders from Tier-1 mobile operators around the globe including in Japan, Australia, Europe and South America.

"In addition, we have made great progress in Peru with the government's acceptance for the operational phase in the Cusco region, bringing us significantly closer to our goal of recurring revenue of over $50M in Peru."

Key Recent Announcements

• Gilat Enters Strategic Agreement Valued at Tens of Millions of Dollars with a Large Government Corporation in Asia Pacific
• Gilat Achieves Critical Milestone in Peru with Approval to Enter Operational Phase, Unlocking Access to Recurring Revenue of Multi Million Dollars per Annum
• Tier-1 Telco in Latin America Awards Gilat Over $3M to Provide Broadband Connectivity in Support of Bridging the Digital Divide
• Gilat Receives Over $5M for Cellular Backhaul Expansion from Tier-1 Mobile Network Carrier in Japan
• Gilat Awarded Over $20 Million in Orders for Support of Low Earth Orbit Constellation
• SES Selected Gilat to Enable Tier-1 4G/LTE MNO in Brazil to Provide Broadband Connectivity for Education
• Telespazio Selects Gilat to Supply Enterprise Connectivity in Brazil for a Multinational Leading Energy Company
• Gilat Announces Appointment of Isaac Angel as Chairman of the Board
• Gilat’s In-Flight Connectivity High-Power Transceiver Successfully Tested by Global Eagle Entertainment for DO-160G Certification
• Gilat Launches Next Generation VSAT Family Supporting 5G Networks and LEO/MEO Constellations

Conference Call Details

Gilat’s management will discuss its first quarter 2021 results and business achievements and participate in a questions and answers session:

Date:	Tuesday, May 4, 2021
Start:	9:30 AM ET / 4:30 PM IT
Dial-in:	US: 1-866-744-5399
	International: [phone]

 

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/gilatq1-2021.html

The webcast will also be archived for a period of 30 days on the Company’s website and through the link above.

Non-GAAP MeasuresThe 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, restructuring and reorganization costs, merger, acquisition and related litigation expense (income), net 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.

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 GilatGilat 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, risks associated with the outbreak and global spread of the coronavirus (COVID-19) pandemic; 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. We undertake no obligation to update or revise any forward-looking statements for any reason.

Contact:Gilat Satellite NetworksDoreet Oren, Director Corporate [e-mail]

Ehud HelftGK Investor & Public [e-mail][phone]

GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
	Three months ended
	March 31,
		2021				2020
	Unaudited
Revenues	$	44,713			$	47,673
Cost of revenues		32,356				38,787
Gross profit		12,357				8,886
Research and development expenses		8,111				7,634
Less - grants		184				272
Research and development expenses, net		7,927				7,362
Selling and marketing expenses		5,004				5,066
General and administrative expenses		3,083				4,818
Merger, acquisition and related litigation expenses		-				2,405
Total operating expenses		16,014				19,651
Operating loss		(3,657	)			(10,765	)
Financial expenses, net		(1,192	)			(972	)
Loss before taxes on income		(4,849	)			(11,737	)
Taxes on income		247				18
Net loss	$	(5,096	)		$	(11,755	)
Basic loss per share	$	(0.09	)		$	(0.21	)
Diluted loss per share	$	(0.09	)		$	(0.21	)
Weighted average number of shares used in computing loss per share
Basic		56,031,343				55,493,258
Diluted		56,031,343				55,493,258

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
	March 31, 2021												March 31, 2020
	GAAP				Adjustments				Non-GAAP				GAAP					Adjustments				Non-GAAP
	Unaudited												Unaudited
Gross profit	$	12,357				66			$	12,423			$	8,886					62			$	8,948
Operating expenses		16,014				169				16,183				19,651					(3,106	)			16,545
Operating loss		(3,657	)			(103	)			(3,760	)			(10,765	)				3,168				(7,597	)
Loss before taxes on income		(4,849	)			(103	)			(4,952	)			(11,737	)				3,168				(8,569	)
Net loss		(5,096	)			(103	)			(5,199	)			(11,755	)				3,168				(8,587	)
Basic loss per share	$	(0.09	)		$	-			$	(0.09	)		$	(0.21	)			$	0.06			$	(0.15	)
Diluted loss per share	$	(0.09	)		$	-			$	(0.09	)		$	(0.21	)			$	0.06			$	(0.15	)
Weighted average number of shares used in computing loss per share
Basic		56,031,343								56,031,343				55,493,258									55,493,258
Diluted		56,031,343								56,031,343				55,493,258									55,493,258
	Three months ended												Three months ended
					March 31, 2021													March 31, 2020
					Unaudited													Unaudited
GAAP net loss					$	(5,096	)											$	(11,755	)
Gross profit
Non-cash stock-based compensation expenses						61													57
Amortization of intangible assets related to acquisition transactions						5													5
						66													62
Operating expenses (income)
Non-cash stock-based compensation expenses						(220	)												366
Amortization of intangible assets related to acquisition transactions						51													51
Trade secrets and other litigation expenses						-													11
Merger, acquisition and related litigation expenses						-													2,405
Restructuring and re-organization costs						-													273
						(169	)												3,106
Non-GAAP net loss					$	(5,199	)											$	(8,587	)

GILAT SATELLITE NETWORKS LTD.
SUPPLEMENTAL INFORMATION
U.S. dollars in thousands
ADJUSTED EBITDA:
	Three months ended
	March 31,
		2021				2020
	Unaudited
GAAP operating loss	$	(3,657	)		$	(10,765	)
Add (deduct):
Non-cash stock-based compensation expenses		(159	)			423
Trade secrets and other litigation expenses		-				11
Restructuring and re-organization costs		-				273
Merger, acquisition and related litigation expenses		-				2,405
Depreciation and amortization (*)		2,385				2,664
Adjusted EBITDA	$	(1,431	)		$	(4,989	)
(*) Including amortization of lease incentive
SEGMENT REVENUE:
	Three months ended
	March 31,
		2021				2020
	Unaudited
Fixed Networks	$	25,302			$	23,011
Mobility Solutions		11,079				19,201
Terrestrial Infrastructure Projects		8,332				5,461
Total revenue	$	44,713			$	47,673

GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
	March 31,				December 31,
	2021				2020
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	48,905			$	88,754
Restricted cash		26,642				27,162
Trade receivables, net		27,820				27,976
Contract assets		46,060				41,573
Inventories		33,339				31,304
Other current assets		18,832				16,637
Total current assets		201,598				233,406
LONG-TERM ASSETS:
Long-term restricted cash		12				42
Severance pay funds		6,414				6,665
Deferred taxes		18,778				19,295
Operating lease right-of-use assets		4,478				4,879
Other long term receivables		8,339				7,797
Total long-term assets		38,021				38,678
PROPERTY AND EQUIPMENT, NET		76,612				77,172
INTANGIBLE ASSETS, NET		971				1,082
GOODWILL		43,468				43,468
TOTAL ASSETS	$	360,670			$	393,806
GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED BALANCE SHEETS (Cont.)
U.S. dollars in thousands
	March 31,				December 31,
	2021				2020
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans	$	-			$	4,000
Trade payables		21,428				20,487
Accrued expenses		47,465				46,387
Advances from customers and deferred revenues		35,404				26,244
Operating lease liabilities		1,678				1,911
Dividend payable		-				35,003
Other current liabilities		16,161				13,322
Total current liabilities		122,136				147,354
LONG-TERM LIABILITIES:
Accrued severance pay		6,875				7,136
Long-term advances from customers		307				1,890
Operating lease liabilities		2,847				2,985
Other long-term liabilities		396				631
Total long-term liabilities		10,425				12,642
SHAREHOLDERS' EQUITY:
Share capital - ordinary shares of NIS 0.2 par value		2,704				2,647
Additional paid-in capital		928,410				928,626
Accumulated other comprehensive loss		(6,463	)			(6,017	)
Accumulated deficit		(696,542	)			(691,446	)
Total shareholders' equity		228,109				233,810
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	360,670			$	393,806

GILAT SATELLITE NETWORKS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
	Three months ended
	March 31,
		2021				2020
	Unaudited
Cash flows from operating activities:
Net loss	$	(5,096	)		$	(11,755	)
Adjustments required to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization		2,330				2,604
Capital loss from disposal of property and equipment		-				(33	)
Stock-based compensation of options		(159	)			423
Accrued severance pay, net		(10	)			43
Deferred income taxes, net		518				634
Decrease (increase) in trade receivables, net		(1,933	)			13,607
Increase in contract assets		(4,487	)			(4,851	)
Decrease (increase) in other assets (including short-term, long-term
and deferred charges)		(220	)			1,673
Increase in inventories		(2,212	)			(6,635	)
Increase in trade payables		950				2,375
Increase (decrease) in accrued expenses		969				(1,652	)
Increase (decrease) in advance from customer and deferred revenues		7,688				(2,827	)
Increase in current and non current liabilities		2,003				2,811
Net cash provided by (used in) operating activities		341				(3,583	)
Cash flows from investing activities:
Purchase of property and equipment		(1,483	)			(951	)
Net cash used in investing activities		(1,483	)			(951	)
Cash flows from financing activities:
Dividend payment		(35,003	)			-
Repayment of long-term loans		(4,000	)			(4,096	)
Net cash used in financing activities		(39,003	)			(4,096	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(254	)			(695	)
Decrease in cash, cash equivalents and restricted cash		(40,399	)			(9,325	)
Cash, cash equivalents and restricted cash at the beginning of the period		115,958				101,969
Cash, cash equivalents and restricted cash at the end of the period	$	75,559			$	92,644