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Gilat Reports Fourth Quarter and Full Year 2020 Results

·19-min read

Fourth Quarter GAAP Net Profit of $62.4 million and Adjusted EBITDA of $1.1 million
Net Profit includes termination fees, net of costs

Dov Baharav, Chairman of the Board, Announced His Plans to Step Down During 2021

PETAH TIKVA, Israel, Feb. 16, 2021 (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 fourth quarter and full year ended December 31, 2020.

Fourth Quarter Financial Highlights

  • Revenues of $42.6 million versus $78.3 million in Q4 2019 and improved from $37.3 million in the previous quarter;

  • GAAP operating income of $62.7 million versus $9.2 million in Q4 2019 and an operating loss of $10.9 million in Q3 2020; GAAP operating income includes income related to the settlement with Comtech, net of related expenses, of $64.8 million;

  • Non-GAAP operating loss of $1.6 million, compared with operating income of $9.9 million in Q4 2019, improved compared with an operating loss of $1.9 million in the previous quarter;

  • GAAP net income of $62.4 million, or income of $1.12 per diluted share, compared with net income of $24.0 million, or income of $0.43 per diluted share in Q4 2019 and net loss in the previous quarter of $11.6 million, or loss of $0.21 per share; GAAP net income includes $64.8 million income related to the settlement with Comtech, net of related expenses, while GAAP net income in Q4 2019 includes a $15.5 million tax benefit;

  • Non-GAAP net loss of $1.9 million, or loss of $0.03 per diluted share, compared with net income of $9.1 million, or income of $0.16 per diluted share in Q4 2019, and an improvement compared with a net loss of $2.6 million, or loss of $0.05 per share, as reported in the previous quarter;

  • Adjusted EBITDA of $1.1 million compared with adjusted EBITDA of $13.1 million in Q4 2019; and improved compared with adjusted EBITDA of $0.6 million in the previous quarter;

  • Received $70 million in merger cancellation fees from Comtech;

  • Cash dividend of $20 million paid to shareholders during the quarter; additional cash dividend of $35 million declared in the quarter and paid in January 2021;

Full year 2020 Financial Highlights

  • Revenue of $165.9 million, compared with $263.5 million in 2019;

  • GAAP operating income of $37.6 million compared to $25.6 million in 2019; GAAP operating income includes income of $53.6 million related to the settlement with Comtech, net of related expenses;

  • Non-GAAP operating loss of $13.7 million compared with non-GAAP operating income of $29.2 million in 2019;

  • GAAP net income of $34.9 million or $0.63 per diluted share compared with $36.5 million in 2019 or $0.65 per diluted share; GAAP net income includes income of $53.6 million related to the settlement with Comtech, net of related expenses, while GAAP net income in 2019 includes a $15.5 million tax benefit;

  • Non-GAAP net loss of $16.4 million or loss of $0.30 per diluted share compared to non-GAAP net income of $24.7 million or income of $0.44 per diluted share in 2019;

  • Adjusted EBITDA was $3.3 million loss compared with adjusted EBITDA of $40.2 million in 2019;

Management Commentary

Adi Sfadia, Gilat's CEO, commented: “During 2020, and specifically during the second half of the year, we made major technological achievements and closed some very significant deals, all of which position us very well for 2021 and onward. In particular, we saw wins in most of our growth areas, mainly Cellular Backhaul and NGSO.

"We won multiple managed service deals providing us with significant recurring revenue. In 5G backhaul - another growth engine for us, we are making solid headway and during the year, we successfully demonstrated the transport of 5G traffic with outstanding performance over Thaicom's GEO HTS satellite. We also solidified our position, as a front-runner in providing the ground-segment for NGSO constellations, with an award in the fourth quarter with a potential of over $50M in support of a LEO constellation.

“In addition, given that IFC is and will continue to play a major role in attracting air travelling customers, I am confident that as air travel resumes its recovery, we will see a significant rise in demand for our IFC products and solutions.”

Mr. Sfadia concluded, “I am very encouraged by our strong bookings in the second half of 2020 which have continued into 2021, as well as the enormous investments targeting our industry. Despite my belief that the pandemic may still effect our 2021 operation to some extent, I am confident that our 2021 operating results will be materially better than those of 2020.”

Dov Baharav stated: “Today I announced my plan to step down from my position as chairman of Gilat's Board of Directors during 2021 and retire, following a seven year tenure. I will retain my position until a new Chariman is appointed. I conclude my period with great pride and with a feeling of satisfaction. In the last seven years the company reached extraordinary technological and business achievements, and is extremely well positioned to take advantage of the robust opportunities we are currently seeing in the market."

Key Recent Announcements

  • Gilat Shipped Initial Aero Modems Out of a Multi-Million-Dollar Potential in China

  • CORPAC Awards Gilat Multi-Million-Dollar Contract to Provide Mission Critical Telecom Systems for Peru's Airports

  • Gilat Awarded Contract with a Potential of Over $50 Million to Supply Wavestream’s Gateway Solid State Power Amplifiers for Low Earth Orbit Constellation

  • Gilat’s Proven ESA Technology Successfully Demonstrated over Inmarsat's Global Xpress

  • AXESS Awards Gilat Multi-Million Dollars to Expand Cellular Coverage for Two Key Mobile Operators in Mexico

  • Globe Awards Gilat Multi-Million US Dollar Managed Service Contract for Significant Expansion of Cellular Backhaul Project

  • Gilat Declares $35 Million Cash Dividend to Shareholders

  • Hispasat Awards Gilat a Multi-Million Dollar Order for Cellular Backhaul over Satellite to Extend Altan La Red Compartida Service to Rural Mexico

  • Gilat Equips Hundreds of Boats, Vessels and Cruise Ships with Satellite Communication

  • Gilat Receives Multi-Million-Dollar Order for a US Department of Defense Tactical Communications Program

  • United States Government Awards Gilat Additional Multi-Million-Dollar Contract for Military Communications Program

Conference Call Details

Gilat’s management will discuss its fourth quarter and full year 2020 results and business achievements and participate in a question and answer session:

Date:

Tuesday, February 16, 2021

Start:

09:30 AM EST / 16:30 IST

Dial-in:

US: 1-866-744-5399

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/gilatq4-2020.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:

February 16, 2021 at 12:00 PM EST / 19:00 IST

End:

February 19, 2021 at 12:00 PM EST / 19:00 IST

Dial-in:

US: 1-888-326-9310; 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. Non-GAAP financial measures mainly exclude the effect of stock based compensation, amortization of purchased intangibles, lease incentive amortization, trade secrets and other litigation expenses, 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 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, 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 Networks
Doreet Oren, Director Corporate Communications
DoreetO@gilat.com

Ehud Helft
GK Investor & Public Relations
gilat@gkir.com
+1 646 688 3559

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

Twelve months ended

Three months ended

December 31,

December 31,

2020

2019

2020

2019

Unaudited

Audited

Unaudited

Revenues

$

165,885

$

263,492

$

42,627

$

78,314

Cost of revenues

124,670

167,615

29,329

51,246

Gross profit

41,215

95,877

13,298

27,068

Research and development expenses

27,689

32,208

7,474

8,120

Less - grants

1,386

2,024

454

414

Research and development expenses, net

26,303

30,184

7,020

7,706

Selling and marketing expenses

16,871

21,488

4,534

5,156

General and administrative expenses

14,063

18,515

3,794

4,849

Merger, acquisition and related litigation expenses (income), net

(53,633

)

118

(64,782

)

118

Total operating expenses (income)

3,604

70,305

(49,434

)

17,829

Operating income

37,611

25,572

62,732

9,239

Financial expenses, net

1,907

2,617

192

677

Income before taxes on income

35,704

22,955

62,540

8,562

Taxes on income (tax benefit)

793

(13,583

)

98

(15,459

)

Net income

$

34,911

$

36,538

$

62,442

$

24,021

Basic earnings per share

$

0.63

$

0.66

$

1.12

$

0.43

Diluted earnings per share

$

0.63

$

0.65

$

1.12

$

0.43

Weighted average number of shares used in

computing earnings per share

Basic

55,516,113

55,368,703

55,545,654

55,485,961

Diluted

55,583,474

56,030,976

55,815,099

56,034,744

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

December 31, 2020

December 31, 2019

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Unaudited

Unaudited

Gross profit

$

13,298

42

$

13,340

$

27,068

70

$

27,138

Operating expenses (income)

(49,434

)

64,389

14,955

17,829

(550

)

17,279

Operating income (loss)

62,732

(64,347

)

(1,615

)

9,239

620

9,859

Income (loss) before taxes on income

62,540

(64,347

)

(1,807

)

8,562

620

9,182

Net income (loss)

62,442

(64,347

)

(1,905

)

24,021

(14,908

)

9,113

Basic earnings (loss) per share

$

1.12

$

(1.15

)

$

(0.03

)

$

0.43

$

(0.27

)

$

0.16

Diluted earnings (loss) per share

$

1.12

$

(1.15

)

$

(0.03

)

$

0.43

$

(0.27

)

$

0.16

Weighted average number of shares used in

computing earnings per share

Basic

55,545,654

55,545,654

55,485,961

55,485,961

Diluted

55,815,099

55,545,654

56,034,744

56,122,960

Three months ended

Three months ended

December 31, 2020

December 31, 2019

Unaudited

Unaudited

GAAP net income

$

62,442

$

24,021

Gross profit

Non-cash stock-based compensation expenses

39

58

Amortization of intangible assets related to acquisition transactions

3

12

42

70

Operating expenses (income)

Non-cash stock-based compensation expenses

254

347

Amortization of intangible assets related to acquisition transactions

54

49

Trade secrets and other litigation expenses

85

36

Merger, acquisition and related litigation expenses (income), net

(64,782

)

118

(64,389

)

550

Tax benefit

-

(15,528

)

Non-GAAP net income (loss)

$

(1,905

)

$

9,113

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)

Twelve months ended

Twelve months ended

December 31, 2020

December 31, 2019

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Unaudited

Audited

Unaudited

Gross profit

$

41,215

186

$

41,401

$

95,877

776

$

96,653

Operating expenses

3,604

51,502

55,106

70,305

(2,890

)

67,415

Operating income (loss)

37,611

(51,316

)

(13,705

)

25,572

3,666

29,238

Income (loss) before taxes on income

35,704

(51,316

)

(15,612

)

22,955

3,666

26,621

Net income (loss)

34,911

(51,316

)

(16,405

)

36,538

(11,862

)

24,676

Basic earnings (loss) per share

$

0.63

$

(0.93

)

$

(0.30

)

$

0.66

$

(0.21

)

$

0.45

Diluted earnings (loss) per share

$

0.63

$

(0.93

)

$

(0.30

)

$

0.65

$

(0.21

)

$

0.44

Weighted average number of shares used in

computing earnings per share

Basic

55,516,113

55,516,113

55,368,703

55,368,703

Diluted

55,583,474

55,516,113

56,030,976

56,165,945

Twelve months ended

Twelve months ended

December 31, 2020

December 31, 2019

Unaudited

Unaudited

GAAP net income

$

34,911

$

36,538

Gross profit

Non-cash stock-based compensation expenses

166

257

Amortization of intangible assets related to acquisition transactions

20

490

Restructuring and re-organization costs

-

29

186

776

Operating expenses (income)

Non-cash stock-based compensation expenses

1,114

1,878

Amortization of intangible assets related to acquisition transactions

204

203

Trade secrets and other litigation expenses

96

136

Merger, acquisition and related litigation expenses (income), net

(53,633

)

118

Restructuring and re-organization costs

717

555

(51,502

)

2,890

Tax benefit

-

(15,528

)

Non-GAAP net income (loss)

$

(16,405

)

$

24,676

GILAT SATELLITE NETWORKS LTD.

SUPPLEMENTAL INFORMATION

U.S. dollars in thousands

ADJUSTED EBITDA:

Twelve months ended

Three months ended

December 31,

December 31,

2020

2019

2020

2019

Unaudited

Unaudited

GAAP operating income

$

37,611

$

25,572

$

62,732

$

9,239

Add (deduct):

Non-cash stock-based compensation expenses

1,280

2,135

293

405

Trade secrets and other litigation expenses

96

136

85

36

Restructuring and re-organization costs

717

584

-

-

Merger, acquisition and related litigation expenses (income), net

(53,633

)

118

(64,782

)

118

Depreciation and amortization (*)

10,653

11,676

2,729

3,263

Adjusted EBITDA

$

(3,276

)

$

40,221

$

1,057

$

13,061

(*) Including amortization of lease incentive

SEGMENT REVENUE:

Twelve months ended

Three months ended

December 31,

December 31,

2020

2019

2020

2019

Unaudited

Audited

Unaudited

Fixed Networks

$

92,671

$

127,265

$

25,085

$

33,161

Mobility Solutions

54,169

104,665

11,751

34,050

Terrestrial Infrastructure Projects

19,045

31,562

5,791

11,103

Total revenue

$

165,885

$

263,492

$

42,627

$

78,314

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

December 31,

December 31,

2020

2019

Unaudited

Audited

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

88,754

$

74,778

Restricted cash

27,162

27,067

Trade receivables, net

27,976

47,731

Contract assets

41,573

23,698

Inventories

31,304

27,203

Other current assets

16,637

23,007

Total current assets

233,406

223,484

LONG-TERM ASSETS:

Long-term restricted cash

42

124

Severance pay funds

6,665

6,831

Deferred taxes

19,295

18,455

Operating lease right-of-use assets

4,879

5,211

Other long term receivables

7,797

10,156

Total long-term assets

38,678

40,777

PROPERTY AND EQUIPMENT, NET

77,172

82,584

INTANGIBLE ASSETS, NET

1,082

1,523

GOODWILL

43,468

43,468

TOTAL ASSETS

$

393,806

$

391,836

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED BALANCE SHEETS (Cont.)

U.S. dollars in thousands

December 31,

December 31,

2020

2019

Unaudited

Audited

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term loans

$

4,000

$

4,096

Trade payables

20,487

20,725

Accrued expenses

46,387

54,676

Advances from customers and deferred revenues

26,244

27,220

Operating lease liabilities

1,911

1,977

Dividend payable

35,003

-

Other current liabilities

13,322

12,261

Total current liabilities

147,354

120,955

LONG-TERM LIABILITIES:

Long-term loans, net of current maturities

-

4,000

Accrued severance pay

7,136

7,061

Long-term advances from customers

1,890

2,866

Operating lease liabilities

2,985

3,258

Other long-term liabilities

631

108

Total long-term liabilities

12,642

17,293

SHAREHOLDERS' EQUITY:

Share capital - ordinary shares of NIS 0.2 par value

2,647

2,643

Additional paid-in capital

928,627

927,348

Accumulated other comprehensive loss

(6,017

)

(5,048

)

Accumulated deficit

(691,447

)

(671,355

)

Total shareholders' equity

233,810

253,588

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

393,806

$

391,836

GILAT SATELLITE NETWORKS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

Twelve months ended

Three months ended

December 31,

December 31,

2020

2019

2020

2019

Unaudited

Unaudited

Cash flows from operating activities:

Net income

$

34,911

$

36,538

$

62,442

$

24,021

Adjustments required to reconcile net income

to net cash provided by operating activities:

Depreciation and amortization

10,291

10,978

2,534

2,730

Capital loss from disposal of property and equipment

181

461

147

461

Stock-based compensation of options

1,280

2,135

293

405

Accrued severance pay, net

242

361

205

16

Exchange rate differences on long-term loans

-

(12

)

-

(12

)

Deferred income taxes, net

(865

)

(12,555

)

(966

)

(13,636

)

Decrease (increase) in trade receivables, net

19,332

(1,323

)

(1,520

)

(1,464

)

Decrease (increase) in contract assets

(17,875

)

24,062

(3,471

)

(1,346

)

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

and deferred charges)

8,940

(817

)

1,021

603

Decrease (increase) in inventories

(5,050

)

(8,076

)

100

(391

)

Decrease (increase) in trade payables

(157

)

(3,884

)

3,178

631

Decrease in accrued expenses

(7,549

)

(11,671

)

(7,356

)

(2,767

)

Increase (decrease) in advance from customers

(1,898

)

1,112

2,218

10,019

Increase (decrease) in current and non current liabilities

1,377

(2,527

)

1,596

765

Net cash provided by operating activities

43,160

34,782

60,421

20,035

Cash flows from investing activities:

Purchase of property and equipment

(4,716

)

(7,982

)

(1,976

)

(2,333

)

Net cash used in investing activities

(4,716

)

(7,982

)

(1,976

)

(2,333

)

Cash flows from financing activities:

Exercise of stock options

-

375

-

-

Dividend payment

(19,999

)

(24,864

)

(19,999

)

-

Repayment of long-term loans

(4,096

)

(4,447

)

-

(94

)

Net cash used in financing activities

(24,095

)

(28,936

)

(19,999

)

(94

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(360

)

(99

)

270

136

Increase (decrease) in cash, cash equivalents and restricted cash

13,989

(2,235

)

38,716

17,744

Cash, cash equivalents and restricted cash at the beginning of the period

101,969

104,204

77,242

84,225

Cash, cash equivalents and restricted cash at the end of the period

$

115,958

$

101,969

$

115,958

$

101,969