Gilat Announces Third Quarter 2016 Results

PETAH TIKVA, Israel, Nov. 15, 2016 (GLOBE NEWSWIRE) -- Gilat Satellite Networks Ltd. (NASDAQ:GILT) (TASE:GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ended September 30, 2016.

Key Financial Highlights:

  • Revenues for Q3 2016 increased 95% to $78.6 million from $40.3 million in the comparable period of 2015. Revenues rose 16% compared with Q2 2016.
  • The Company noted that operating profitability significantly improved in Q3 2016:
    • On a GAAP basis, the operating loss decreased to $0.2 million compared to an operating loss of $29.1 million in Q3 2015, and an operating loss of $2.5 million in Q2 2016.
    • Non-GAAP operating profit increased to $3.3 million in the third quarter of 2016 compared to an operating loss of $5.5 million in Q3 2015 and a $0.5 million operating profit in Q2 2016.
  • On a GAAP basis, the loss for Q3 2016 decreased to $2.2 million compared to a loss of $32.4 million in Q3 2015 and a loss of $3.7 million in Q2 2016.
  • On a non-GAAP basis, net income for Q3 2016 increased to $1.4 million compared to a loss of $8.6 million in Q3 2015 and a loss of $0.6 million in Q2 2016.
  • Adjusted EBITDA for Q3 2016 increased to $5.2 million from an Adjusted EBITDA loss of $3.1 million in Q3 2015 and Adjusted EBITDA of $2.4 million in Q2 2016.
  • Management objectives for 2016: revenues between $290 to $310 million and Adjusted EBITDA of between $18 to $24 million. In 2015, revenues totaled $197.5 million and Adjusted EBITDA was $6.1million.

The Company noted that the significant improvement in profitability during the third quarter was achieved despite an accrual for bad debt of approximately $4.6 million attributable to the Company's governmental customer in Venezuela arising from the worsening economic situation and the recent credit downgrade in that country.

“Two major growth engines are especially exciting for Gilat this quarter,” said Yona Ovadia, CEO of Gilat. “Satellite-based 4G cellular backhaul and mobility, both in In-Flight Connectivity (IFC) and on-the-move connectivity for trains.  We have made important progress in both markets. Especially noteworthy are our recent announcements of the LTE cellular backhaul with Sprint and the broadband connectivity for Spain’s Renfe high speed trains:

-  Sprint is our first such deal in the U.S. and the third with a tier-1 telecom, representing a major endorsement of our technology, which makes satellite connectivity competitive with terrestrial solutions, even in metro edge and other urban areas.

-  Gilat’s On-the-Move antenna was chosen to enable Internet broadband connectivity to passengers on Renfe’s high-speed trains throughout Spain. This represents another major milestone for us in the mobility for trains market, where Gilat is the established leader.

"On the technology side, Gilat is committed to continued innovation in support of our strategy of broadband-for-all. This quarter Gilat announced the first-to-market all-outdoor, easy-to-install VSAT-in-a-Box for high speed consumer broadband, that addresses the consumer broadband market, as well as our ground-breaking small-cell-over-satellite solution that expands 3G and 4G cellular coverage to rural areas.

"We are focused on all five of our strategic growth pillars, as well as our journey to improve profitability, and we are pleased to see progress in both,” concluded Yona Ovadia, CEO of Gilat.

Key Recent Announcements:

  • Gilat’s Satellite On-the-Move Antenna Selected to Deliver Broadband Connectivity for Spain’s High-Speed Trains
  • Gilat First to Deliver Layer 2 with GTP Acceleration to Provide True LTE Speeds over Satellite for Large-Scale Networks
  • Gilat Satellite Networks Joins Telecom Infra Project, Founded by Facebook, Deutsche Telekom, SK Telecom and Others
  • Gilat Unveils Revolutionary Small-Cell-Over-Satellite Solution for 3G and 4G Coverage
  • Gilat’s Satellite-based Cellular Backhaul Solution Selected by Sprint to Extend LTE Services to Metro Edge and Rural Areas in the US
  • Gilat First to Market with a Complete VSAT-in-a-Box for High-Speed Consumer Broadband
  • Optus Selects Gilat’s Cellular Solution to Extend 3G Coverage to Rural Areas in Australia
  • Intelsat General Reports Unprecedented Performance Using Gilat’s Small Airborne Flat-Panel Antenna

Conference Call and Webcast Details:
Gilat management will host a conference call today, November 15, at 14:30 GMT / 09:30 AM EST / 16:30 IST to discuss the third quarter results. International participants are invited to access the call at (972) 3-918-0609, and US-based participants are invited to access the call by dialing (1) 888-668-9141.

A simultaneous Webcast of the conference call will be available on the Gilat website at www.gilat.com and through this link: http://www.veidan-stream.com/?con=Gilat_Satellite_Networks_Q3_2016_Results

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
A replay of the conference call will be available beginning approximately 17:00 GMT/ 12:00 PM EST/ 19:00 IST today, until 17:00 GMT/ 12:00 PM EST/ 19:00 IST on November 17, 2016.

International participants are invited to access the replay of the call at (972)3-925-5904, and US-based participants are invited to access the call by dialing (1)888-782-4291.

A replay of the call may also be accessed as a webcast via Gilat’s website at www.gilat.com and will be archived for 30 days.

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. Gilat is presenting Adjusted EBITDA (operating income before depreciation, amortization, non-cash stock option expenses and other costs related to acquisition transactions, restructuring cost, goodwill impairment and trade secrets litigation expenses) for the first time due to a significant increase in litigation expense relating to an ongoing trade secrets litigation in the U.S. against former employees, which commenced in 2015. Adjusted EBITDA excludes the abovementioned litigation expense of $2.0 million in Q3 2016 and $0.3 million in Q3 2015 and $1.4 million in Q2 2016.

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

With over 25 years of experience, and over a million products shipped to more than 90 countries, Gilat has provided enterprises, service providers and operators with efficient and reliable satellite-based connectivity solutions, including cellular backhaul, banking, retail, e-government and rural communication networks. Gilat also enables leading defense, public security and news organizations to implement advanced, on-the-move tactical communications on board their land, air and sea fleets using Gilat's high-performance SOTM solutions. Gilat controlling shareholders are the FIMI Private Equity Funds. For more information, please visit us at www.gilat.com

Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "intend", "expect", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of Gilat to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to Gilat's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for Gilat's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key OEM partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with Gilat's international operations and its location in Israel. 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)
 
   Nine months ended  Three months ended 
  September 30, 
 September 30,
 
   2016   2015   2016   2015  
  Unaudited Unaudited Unaudited Unaudited 
          
Revenues $  199,206  $  129,861  $  78,643  $  40,347  
Cost of revenues    147,914     96,137     54,930     30,865  
Gross profit    51,292      33,724      23,713      9,482   
          
Research and development expenses    19,374     19,243     6,781     6,115  
Less - grants    1,008     563     370     151  
Research and development, net    18,366     18,680     6,411     5,964  
Selling and marketing expenses    17,224     18,725     6,248     6,050  
General and administrative expenses    21,435     15,226     11,283     5,164  
Restructuring Costs    -      986     -      986  
Goodwill Impairment    -      20,402     -      20,402  
Total operating expenses    57,025      74,019      23,942      38,566   
Operating loss    (5,733)    (40,295)    (229)    (29,084) 
Financial expenses, net     (3,175)    (5,850)    (1,572)    (2,940) 
Loss before taxes     (8,908)    (46,145)    (1,801)    (32,024) 
Taxes on income    967     740     398     173  
Loss from continuing operations    (9,875)    (46,885)    (2,199)    (32,197) 
Loss from discontinued operations    -       (200)    -       (200) 
Loss $   (9,875) $   (47,085) $   (2,199) $   (32,397) 
          
Loss per share from continuing operations (basic and diluted)   (0.19)    (1.08)    (0.04)    (0.73) 
Loss per share from discontinued operations (basic and diluted)   -      (0.00)    -      (0.00) 
Loss per share (basic and diluted) $   (0.19) $   (1.08) $   (0.04) $   (0.73) 
          
Weighted average number of shares used in computing loss per share (basic and diluted)  51,096,829    43,436,470    54,523,585    44,030,805   
  


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, 2016 September 30, 2015 
  GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP 
  Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 
              
Gross profit $  23,713     1,204  $  24,917  $  9,482     1,278  $  10,760  
Operating expenses    23,942     (2,357)    21,585     38,566     (22,319)    16,247  
Operating income (loss)    (229)    3,561     3,332     (29,084)    23,597     (5,487) 
Income (loss) before taxes on income    (1,801)    3,561     1,760     (32,024)    23,597     (8,427) 
Net income (loss) from continuing operations    (2,199)    3,561     1,362     (32,197)    23,597     (8,600) 
Loss from discontinued operations    -      -      -      (200)    200     -   
Net income (loss)    (2,199)    3,561      1,362      (32,397)    23,797      (8,600) 
              
Net income (loss) per share from continuing operations (basic and diluted)   (0.04)    0.06     0.02     (0.73)    0.53     (0.20) 
Net income (loss) per share from discontinued operations (basic and diluted)   -      -      -      (0.00)    (0.00)    -   
Net income (loss) per share (basic and diluted) $   (0.04)    0.06   $   0.02   $   (0.73)  0.53   $   (0.20) 
              
              
Weighted average number of shares used in computing income (loss) per share (basic and diluted)             
Basic  54,523,585      54,523,585    44,030,805      44,030,805   
Diluted  54,523,585      54,614,252    44,030,805      44,030,805   
              
              
              
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, goodwill impairment, trade secrets litigation expenses, restructuring costs and loss from discontinued operations. 
              
   Three months ended  Three months ended 
  September 30, 2016 September 30, 2015 
    Unaudited     Unaudited   
              
GAAP loss   $  (2,199)     $  (32,397)   
Gross profit:             
Non-cash stock-based compensation expenses      9         59    
Amortization of intangible assets related to acquisition transactions      1,195         1,219    
       1,204         1,278    
Operating expenses:             
Non-cash stock-based compensation expenses      180         443    
Amortization of intangible assets related to acquisition transactions      194         190    
Goodwill impairment      -          20,402    
Trade secrets litigation expenses      1,983         298    
Restructuring costs      -          986    
Loss from discontinued operations      -          200    
       2,357         22,519    
              
Non GAAP net income (loss)   $  1,362      $  (8,600)   
  


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, 2016 September 30, 2015 
  GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP 
  Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 
              
Gross profit $  51,292     3,614  $  54,906  $  33,724     3,759  $  37,483  
Operating expenses    57,025     (4,826)    52,199     74,019     (24,211)    49,808  
Operating income (loss)    (5,733)    8,440     2,707     (40,295)    27,970     (12,325) 
Loss before taxes on income    (8,908)    8,440     (468)    (46,145)    27,970     (18,175) 
Loss from continuing operations    (9,875)    8,440     (1,435)    (46,885)    27,970     (18,915) 
Loss from discontinued operations    -      -      -      (200)    200     -   
Loss    (9,875)    8,440      (1,435)    (47,085)    28,170      (18,915) 
              
Loss per share from continuing operations (basic and diluted)    (0.19)    0.16     (0.03)    (1.08)    0.64     (0.44) 
Loss per share from discontinued operations (basic and diluted)    -      -      -      (0.00)    (0.00)    -   
Loss per share (basic and diluted) $   (0.19)    0.16   $   (0.03) $   (1.08)  0.64   $   (0.44) 
              
              
Weighted average number of shares used in computing loss per share (basic and diluted)  51,096,829      51,096,829    43,436,470      43,436,470   
              
              
              
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, goodwill impairment, trade secrets litigation expenses, restructuring costs and loss from discontinued operations. 
              
     Nine months ended       Nine months ended    
    September 30, 2016      September 30, 2015    
     Unaudited       Unaudited    
              
GAAP loss   $  (9,875)     $  (47,085)   
Gross profit:             
Non-cash stock-based compensation expenses      32         165    
Amortization of intangible assets related to acquisition transactions      3,582         3,594    
       3,614         3,759    
Operating expenses:             
Non-cash stock-based compensation expenses      660         1,500    
Amortization of intangible assets related to acquisition transactions      583         615    
Goodwill impairment      -          20,402    
Trade secrets litigation expenses      3,583         708    
Restructuring costs      -          986    
Loss from discontinued operations      -          200    
       4,826         24,411    
              
Non GAAP loss   $  (1,435)     $  (18,915)   
  


GILAT SATELLITE NETWORKS LTD.
 
CONDENSED EBITDA 
U.S. dollars in thousands 
   Nine months ended Three months ended  
  September 30, September 30, 
   2016   2015   2016   2015  
  Unaudited Unaudited Unaudited Unaudited 
          
GAAP operating loss $  (5,733) $  (40,295) $  (229) $  (29,084) 
Add:         
Non-cash stock-based compensation expenses    692     1,665     189     502  
Restructuring costs    -      986     -      986  
Goodwill impairment    -      20,402     -      20,402  
Trade secrets litigation expenses    3,583     708     1,983     298  
Depreciation and amortization    9,831     11,459     3,306     3,760  
Adjusted EBITDA $   8,373   $   (5,075) $   5,249   $   (3,136) 
  


GILAT SATELLITE NETWORKS LTD. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
U.S. dollars in thousands 
      
  September 30, December 31, 
   2016   2015  
  Unaudited Audited 
      
ASSETS     
      
CURRENT ASSETS:     
Cash and cash equivalents $  53,439  $  18,435  
Restricted cash    65,537     100,779  
Restricted cash held by trustees    6,970     8,524  
Trade receivables, net    41,955     50,984  
Inventories    23,064     25,358  
Other current assets    14,390     16,223  
Total current assets    205,355     220,303  
      
LONG-TERM INVESTMENTS AND RECEIVABLES:     
Long-term restricted cash    202     179  
Severance pay funds    7,925     7,545  
Other long term receivables    224     221  
Total long-term investments and receivables    8,351     7,945  
      
PROPERTY AND EQUIPMENT, NET    80,748     81,963  
      
INTANGIBLE ASSETS, NET    12,825     17,154  
      
GOODWILL    43,468     43,468  
      
TOTAL ASSETS $  350,747  $  370,833  
      
GILAT SATELLITE NETWORKS LTD. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
U.S. dollars in thousands 
  September 30, December 31, 
   2016   2015  
  Unaudited Audited 
      
LIABILITIES AND EQUITY     
      
CURRENT LIABILITIES:     
Short-term bank credit and loans $  -   $  7,000  
Current maturities of long-term loans    4,562     4,542  
Trade payables     21,044     17,210  
Accrued expenses     49,680     23,481  
Advances from customers    16,192     82,813  
Advances from customers held by trustees    6,871     8,515  
Other current liabilities    19,074     16,213  
Total current liabilities    117,423     159,774  
      
LONG-TERM LIABILITIES:     
Accrued severance pay    7,684     7,506  
Long-term loans, net of current maturities    17,112     21,493  
Other long-term liabilities    2,840     3,978  
Total long-term liabilities    27,636     32,977  
      
EQUITY:     
Share capital - ordinary shares of NIS 0.2 par value     2,592     2,048  
Additional paid-in capital    919,893     884,126  
Accumulated other comprehensive loss    (2,557)    (3,727) 
Accumulated deficit    (714,240)    (704,365) 
Total equity    205,688     178,082  
      
TOTAL LIABILITIES AND EQUITY $  350,747  $  370,833  
  


GILAT SATELLITE NETWORKS LTD. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
U.S. dollars in thousands 
  
   Nine months ended  Three months ended 
  September 30, September 30, 
   2016   2015   2016   2015  
  Unaudited Unaudited Unaudited Unaudited 
Cash Flows from continuing operations         
Cash Flows from Operating Activities:         
Loss $  (9,875) $  (47,085) $  (2,199) $  (32,397) 
Loss from discontinued operations    -      (200)    -      (200) 
Loss from continuing operations    (9,875)    (46,885)    (2,199)    (32,197) 
Adjustments required to reconcile loss to cash provided by (used in) operating activities:         
Depreciation and amortization    9,831     11,459     3,306     3,760  
Goodwill impairment     -      20,402     -      20,402  
Stock-based compensation    692     1,665     189     502  
Accrued severance pay, net    (202)    (274)    (105)    (4) 
Accrued interest and exchange rate differences on short and long-term restricted cash, net    (1,454)    207     106     120  
Exchange rate differences on long-term loans    56     (221)    8     5  
Deferred income taxes    5     11     5     49  
Decrease in trade receivables, net    10,109     16,730     6,115     10,395  
Decrease in other assets (including short-term, long-term and deferred charges)    1,119     983     2,191     919  
Decrease (increase) in inventories    865     (4,911)    3,324     (2,094) 
Decrease (increase) in restricted cash directly related to operating activities    28,482     (52,736)    6,908     1,582  
Increase (decrease) in trade payables    3,847     (7,647)    655     (2,346) 
Increase (decrease) in accrued expenses    26,014     (509)    11,531     1,251  
Increase (decrease) in advance from customers    (66,642)    55,616     (30,357)    (1,716) 
Increase (decrease) in advances from customers, held by trustees    (1,028)    (8,411)    984     (4,253) 
Increase (decrease) in other current liabilities and other long term liabilities    1,630     (406)    933     (2,148) 
Cash provided by (used in) Operating Activities    3,449      (14,927)    3,594      (5,773) 
     
Cash Flows from Investing Activities:         
Purchase of property and equipment    (2,822)    (3,109)    (790)    (1,270) 
Investment in restricted cash held by trustees    (10,925)    (6,109)    (5,497)    -   
Proceeds from restricted cash held by trustees    13,473     18,649     5,315     3,997  
Investment in restricted cash (including long-term)    (204)    (22,411)    (18)    (1,209) 
Proceeds from restricted cash (including long-term)    7,441     32,559     15     4,283  
Cash provided by (used in) Investing Activities    6,963      19,579      (975)    5,801   
    
Cash Flows from Financing Activities:   
Capital lease payments    (307)    (408)    -      (204) 
Issuance of shares in a rights offering    35,095     -      -      -   
Issuance of restricted stock units and exercise of stock options    527     5,595     181     1,890  
Payment of obligation related to the purchase of intangible assets    -      (500)    -      (500) 
Short term bank credit, net    (7,000)    (3,811)    -      1,758  
Repayment of long-term loans    (4,416)    (4,409)    (139)    (137) 
Cash provided by (used in) Financing Activities    23,899      (3,533)    42      2,807   
          
Effect of exchange rate changes on cash and cash equivalents   693      (1,122)    18      (708) 
          
Increase (decrease) in cash and cash equivalents    35,004      (3)    2,679      2,127   
          
Cash and cash equivalents at the beginning of the period    18,435      27,726      50,760      25,596   
          
Cash and cash equivalents at the end of the period $   53,439   $   27,723   $   53,439   $   27,723   


Contact:
Gilat Satellite Networks
Doreet Oren
DoreetO@gilat.com

Comm-Partners LLC
June Filingeri, President
203-972-0186
junefil@optonline.net

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