Gilat Satellite Networks (GILT) 9 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Gilat’s First Quarter 2023 Results Conference Call. All participants are at present in listen-only mode.

Following management’s formal presentation, instruction will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, May 9, 2023.

have the should press you now, all company’s received release. By

view please have Investor Investor or news not www.gilat.com. you company’s contact of Relations in the section received X-XXX-XXX-XXXX Global If EK it, Gilat’s website, the at Relations at it team

I like over call to Ehud to begin? to Relations. Mr. hand Global of EK Investor like Helft, would Mr. now the Helft would you

call joining and morning noon Yeah, X, A beginning XXXX afternoon, us for today of Gilat on good you quarter available for a for and as this good results Eastern of a XX Thank conference webcast. recording be May call period first Gilat’s everyone. days. webcast website Time will today, approximately at

Act the that earnings with within the not forward-looking forward-looking statements such Also, Reform the many XXXX. made All involve that statements beyond historical deemed of materially which uncertainties actual from and to please call and may note in a results including operating financial anticipated facts cause release read investors that the forward-looking results, reminder are which statements of statements of this meaning of contingencies, future to are earnings on be are differ Gilat, risks, Securities Litigation may regarding Gilat’s control results. Private statements, urged

expressly reports of Commission. and under about found in obligation Gilat any information result events the can to filed information, be new forward-looking More the disclaims with Securities a update so. no as future company obligation otherwise, statements, factors is or alter Gilat’s to Exchange whether these risk detailed or do and

introductions. to turn me let that, With

to Gilat’s call CFO. Benyamini, like would the to turn Sfadia. call I Sfadia, over CEO; Mr. and Gil today Gilat’s On Mr. are now the Adi Adi

for day today our well good and you XXXX join want quarter for everyone. us thank started first XXXX for very call. Gilat. to Ehud, I earnings to you, Thank

revenue quarter growth. quarter first year-over-year which solid showed of The in we XXXX was another

our in areas of reaching the multi-year year. more across year. than gross million, of multiple the EBITDA that, quarter Our last to was quarter total margins, EBITDA business Adding high and same in last to same margins XX% growth the adjusted adjusted $X.X broad, profit improvement with compared XX% significant of tripled a the

As very results quarter. pleased I’m you can the imagine, first the of with

Looking profitability ahead, increasing we our for expectation are year. the

adjusted expect million the profit to out million very at strong be for We $XX $XX operating keeping GAAP and between between while to EBITDA million. between of $XX and million to million a turning level is $XX million, of revenues of profitable $XXX the year XXXX $XXX to guidance same Gilat.

of highlight quarter: I’m our quarter significantly for the defense Inc., the pleased continue development with signed electronically supply a integrator potential IFC offering, defense Department agreement we steered activities the of to of DataPath U.S. antenna; with we with strategy satellite we this Defense. X a acquire of be progress signed to the partner tens to and of U.S. third, to major agreement to boost millions dollars leading strategic an service make on for of focusing the second, our great and provider this this choice achieved operators: first,

and focused with dollars the new some of during first of be relationship The operators, tens strategic We Intelsat, quarter XXXX. achievement millions to I’ll of opportunities. our orders business for satellite expanded communication focus era of of receiving and continue additional now and strengthen primarily satellite on SES the Gilat.

kites in During efficient next Spain, platform global satellite for Amazonas quarter, new for chose operator Nexus Hispasat based the the its is and leading highly Gilat’s generation first flexible satellite.

additional SkyEdge IV, operators market as we next the to Gilat’s great generation testament In choosing of experienced further acceptance platform.

multi-orbit SES to SES-XX. already VHTS mPOWER quality new designed partnership operators include growing classic SES of with to for IV, of is in was sales constellation the software-defined also IV existing no OXb the with being which the SkyEdge and a to platform and expanded value SkyEdge multiple applications, the addition strategic need of choice that see have pipeline meet satellite particularly for We in the

Gilat, is and the Intelsat strengthening backhaul. Furthermore multi-service as such and Gilat’s strategic its platforms partnership of in-flight and with joint terminals connectivity capabilities cellular

a As last IS-XXe, throughput chosen was SkyEdge was reminder, high IV for launched which satellite Intelsat month.

a significant products for strategic engine. In track, on The growth large with segment potential we market line, project are significant our IFC NGSO reported and we constellation. previously SSPA remains

business mentioned will the for an the terminal of for enable a with provider. of I with connectivity to segment tens excited product the ESA as and leading major of dollars IFC new project earlier, us service As win to jets, presence share millions potential The government for I’m ESA to such as IFC aviation. as military increase additional and our well enter market IFC with

Furthermore, important is ESA growth to point growing market. projects With we an turning and potential IFC the for we’re on several our this with for that and collaborating ESA project partners ESA engine transceivers new promising both and as enter client.

network additional, a IV our both together. advantage continue In great to II-c global and include to its partners upward investments. on SkyEdge their expand while working to Intelsat protecting IFC compatibility, SkyEdge past demonstrates This

Gilat’s the aircraft. Nexus coverage IS-XXe, serve satellites, multiple We to further will as expect EXXB. up additional Intelsat on expansion broaden Intelsat increased and IFC picks and even platforms operate Intelsat global IS-XX including into capacity

major the business quarter, U.S. strategic defense as of our market. and the signed government other into milestone our initiative first a satellite increase government in acquisition DoD an a It’s defense During to markets. The Defense agreement as the to is well important sectors, international acquire growing into U.S. presence and extension the step Gilat’s Inc. integrator. in an we for DataPath

pleased airline the the of mainly assume to The up to the progressing fixed Gilat of the are $XX the the including U.S. subject total is well approvals, enterprise to regulatory part $XX that value million in component million an be made up the to of will that and airline Gilat. we most will price our with approximately component, the price acquisition, $XX portion purchase transaction acquisition closing mainly together the of in of certain approval up [ph] and are million, as of reminder I’m banks to of of paid debt

revenues sector closing quarter million following the to by the a XXXX. acquisition, our which of of third $XX yearly defense expect basis expected We the in on increase the approximately is in

addition, our the further this In for launched expect we quarter offering. new products market to we X defense enhance that

First solution is the industry to existing by hot ability disrupt swappable solution technology. endurance. amplifier software to high modular power new its designed based on the replace A

of full evaluating pursue few a in for programs. already of SSPA [ph] is software certified order program, per year coming millions and dollars the U.S.D additional DoD value U.S. ability significant once years the this commercial we The expect and to

the as government past we’ve market of for IV. model new II-c, such Gilat’s military This The investment second to addition SkyEdge SkyEdge is new customers, model already can protect satellite with our and and the platform. training also portfolio adopted operate

In our presence growth to of global with backhaul dollar cellular strategic engine, expand multimillion we orders. continue our

to this America, leading as have chosen mobile receive as from including well technology Australia, from and the cellular in orders We network Gilat backhaul, Africa. Latin satellite for lead quarter operators continue as operators who

two stood out In deals during the market, quarter. enterprise the

to order response technology is across backup deploying service service of satellite network. This communication the this to we to was to dollar Latin and national Asia, quarter Ica a of country Peru, allow project expand provide Gilat In made second, the in to with shift robustness will world accepting over reliability leading And ensure our in trade the millions region. to dollars of fifth advanced the us continuity. company Pronatel received the that customers. network in operation progress to the America, network a First, expand services in for multimillion an disaster financial

in about million first report Gilat arbitration arbitrations as initial for Peru a total that and this and XXXX XXXX amount the approximately in the once received Peruvian pleased against I’m of $X.X $XX the payment January Furthermore, of of to Ministry million. Pronatel XX year, in for Communication

is of I but conclude, bookings, been best of in primarily and a Gilat and of to is the Revenue the strengthening position ISP the tens solely, growing that healthy ESA project is of level. This long terminal in a time. due and To strongly believe at our growing significantly It with not position. in build pipeline DataPath on market with dollars. potential very agreement to of millions relationship embarking with the satellite backlog the to with acquire today operators the has defense

of as XX% ahead, $XXX at looking we track revenue for midpoint. our million year-over-year Just $XXX expectation revenue important, are with the between XXXX well in growth representing million, on to of

the opportunities year-over-year forward profitability additional year our and adjusted EBITDA expectation, as million million, of large as between increasing well successful $XX to at GAAP the project. income growth We’re many million midpoint. between to and materializing of of XX% to $XX looking of million $XX $XX representing capturing I’m discussed operating

Gil And Benyamini, our with Gil? to that, I CFO. hand over

We internally measures our remind operating to Good non-GAAP financial financial Thank understand comparable operating future to afternoon that to evaluate you, business performance. decisions. consistent morning to good investors non-GAAP presented We non-GAAP on regularly believe understand measures everyone and Adi. like provide and GAAP make basis. that and and would these supplemental both everyone. use our results financial manage current measures and to our are I help and

expenses, our acquisition claim, exclude income measures expense non-GAAP item. costs, historical intangibles, table impairment health excludes of tax earnings. income information in of the data and expenses, litigation restructuring income related of for tax effect and adjustments, deferred The litigation, release assets, amortization changes incentive tax income compensation, effect our related of mainly tax or other expenses, related highlights draft Non-GAAP and assets to one-time reorganization on this the or secrets of reconciliation release press one-time financial presented trade lease this merger amortization, stock-based purchased sale to and

reached a our pleased to a improvement of and and Non-GAAP gross revenue Overall, Adi XXXX. multi-year XX% $X.X first the will was I in over we’re mentioned QX move high with of growth for XXXX. year-over-year as year. our margin We XX earlier, XX% very a EBITDA now at more highlights at reported the strong financial quarter start last in adjusted than significant million profitability.

targets we year today and our on track with later. I’ll We’re operating increased profit and cover revenue which adjusted well also our EBITDA GAAP the guidance, for

driven Network VHTS than of quarter last million, XX% year, the Satellite were were million. and was segment, cellular growth the mainly In our IFC The improvement in for terms financial of the results, and vertical. the first revenues backhaul from higher first NGSO, quarter $XX.X by which $XX

$XX.X revenues the the Satellite of segment quarter $XX.X to the QX breakdown revenue segment from increase strategic terms from to same year. the and resulted quarter Maritime deals In large markets. were Significant million delivered this by XXXX customers in mainly our the IFC compared million in Network last

Services and QX segment QX million the Infrastructure last XXXX to $XX.X million $XX.X same segment XXXX compared in of compared $XX.X were the revenues $XX.X were last million of Solutions million to quarter year. the year. the revenues in Integrated quarter same Network

I GAAP would now like both results. to and summarize non-GAAP quarter first our

XX% the an annual Our trailing and in quarters that gross the in the X to higher light GAAP improved particularly XXXX. recognized XX% the compared quarter the trailing the XX.X% profitability was QX improvement be X and X The the gross gross between this XX.X% in profitability margin services guidance. in on of to and recommended Please year. to of margin a ended March that mix. It’s was same to revenue and trailing the last as to XX, quarter, may of to quarters according fluctuate quarters outcome aware quarters and in analyze the in revenue. The revenues margin margins due product compared level mix our favorable XXXX and volume

a included the in is in in million, in offset GAAP operating of much numbers relatively $XX.X of of the Ministry in same and of total approximately arbitrations and in of expenses and for million expenses $XX first against Pronatel $X similar level the for year. XXXX payment a only the quarter the increase a GAAP received at first the approximately XXXX amount last We’ve those were in Communications in operating the the X of Peru won XXXX QX which million quarter quarter.

loss diluted share of per an million net net to or quarter last income or loss in first GAAP the year. year. operating GAAP of improved million quarter compared $X.XX. in per million the share This the operating a loss same compared earnings for same last is income of $X $X.XX the $X.X in GAAP of to quarter a was $X.X quarter $X million

mainly XX% due business growth. last to in to our Moving in gross quarter the million were was $XX.X our increase non-GAAP compared in improved Non-GAAP to R&D last quarter million non-GAAP same operating to in in margin The year. long-term results, year. expenses XXXX QX the expenses XX% to XXXX an compared the QX same support with $XX.X increase

to improved operating $X.XX. or the was Non-GAAP Non-GAAP first of for $X.X the share with operating loss income with income in million $X.X year. net in loss $X.X Adjusted same the quarter of year. earnings million to the quarter compared year. the compared $X.XX an in same XX last This $X.X of million is million per diluted $X.X per $X.X share quarter compared improvement an million net in loss quarter adjustment quarter a last of million the or over of last was EBITDA EBITDA same quarter for

not XXXX, $XX.X $XX.X debt. our cash sheet, were December million XXXX. any on as million equivalents, compared our compared cash balance XXXX to $XX.X and XX, total including Moving March of We cash of did to as March and XX, hold to XX, million restricted

$X.X first activities million of XXXX. operating we In in quarter generated terms cash the of during flow,

receivables were XX impacted days. in The partially construction higher previous in by revenues collection were due to DSOs, decrease in DSO, which terrestrial our Peru, than by higher which exclude in projects decrease receivables quarter. increase of the revenues, days quarter’s and network XX was offset

XX, about XXXX. million the totaled $XXX $XXX of XXXX compared equity million as of December shareholders’ at Our with end March

I EBITDA as we mentioned, already have our for year. and GAAP the income increased ahead, Looking operating guidance

between at remain adjusted of at representing $XXX year-over-year to between to representing revenues the at million to income of a growth expectations year-over-year representing between EBITDA million $XX million XX% for XXXX $XX midpoint; and million, $XXX XX% year-over-year the $XX $XX million, growth with XX% the of operating of of million GAAP growth midpoint; of midpoint. Our strong

That happy like the would now I Operator? and concludes to my call financial review. to open your we’re take questions.

this at [Operator we the gentlemen, and from ahead. of go Space. The Quilty Quilty first question question-and-answer time session. begin Ladies you. Chris will Thank Please is Instructions]

which to quarter, Great the seemed to be just on revenue Satellite guys. follow-up business, strength. Thanks, real I wanted here. Networks

of feel Maritime, good I the of in sort we think of mentioned you you balance through view year? that list large an and the or programs a sort as there upward there that Should couple think. IFC one-time were a do about trajectory I of

both in Hi, deal in in said we strong very XXXX. had also a and Chris. Adi. quarter record is in that last backhaul during a this now and the in outcome revenues. we time This both cellular IFC And order IFC had seeing Indeed, we’re cellular We backhaul quarter.

year. strong revenues backhaul So and IFC we’ll both see the continued cellular during from

We Maritime as have not It revenues, time to engine. but growth high end. also take it’s will be a significant

operators see the In satellite satellites addition, a VHTS for and and related drives in we related from profitability. lot revenues altogether not quarter backhaul, growth growth so NGSO the business or this and cellular IFC of the to in

to a of do more turn with happen the one I launch? on seeing How Great. QX. impact that service with you mPOWER in more pole think now SES OXb line expect in And shipments does service in and expects to terms that or you you of sales? launch advance Are terminal in

I think a it’s combination.

SES needs satellite modems, be especially to of to side. launch, customers. need guess, operator is when the the revenues once we And equipment, service so lot ready with more deploy know deploy and for see I they to services a the start on will I they launched, First, gateway

And where on mPOWER? gateway are the with you rollout

types two is there and of one local regional one. gateways, the Progressing,

each the and between new are local every the ones on over it’s brings so ones regional the already the deployed the and there. depend business SES expectation So vary from business for it country,

Was related have little QX? you out up orders bit Okay. or I issue that in in that the timing going big noticed a a QX. inventories were do

of I a think combination two. the it’s

I in inventory starting seeing last, the increase that are months buy XX XX lead think to we First, we after of said the for because the months, time. now we’re

So warehouses. we’re that want and revenues are quarters. starting do the to projects in There see inventory our see add? coming the bought several something to inventory coming few to we to we Gil, you

inventory of supply that the that actual of reflects management say the And part as can delivery to due our issues is based general the And chain the growth our Adi growing dealt business. with. also mitigation we’ve on it in I Yes, forecast. is said

Great.

better as question like that both should rate look sequential year-over-year, Is I is more a it fair seasonal to through the are a pretty assume we year run you this of balance OpEx, big of whatnot the basis the issues have up the it SG&A but OpEx? a or any flattish just it’s basis. know, were you lot Or While a on for? and for on a looks R&D there on percent

sales expect marketing take yearly on think, year, and or to do but I flattish should Yeah, the on basis give of throughout G&A, be and a it’s grow. a delve R&D we

We large we projects to that need have several deliver.

awards project will continue We additional headcount. require are of us that recruit getting and to

of reference, Israel expect to have R&D our our what be accelerate as a R&D just I we and it’s guidance. to able open tens and just customers, in already in in So promised grow, to deliver we to positions [ph] both factored development and worldwide

and bit that looking, fair Great. acquisition Solutions? into forward all it Integrated those to Final question a I when DataPath the revenues will guess get closes, is assume little but folded

segment. it’ll we’ll and decided on divide the discussion It’s in still guess, close I under the questions. haven’t we’ll Good that. once yet, acquisition, here how be to we reflect

Wavestream those integrating business to maybe there two? I between guess here U.S. or any mean, How opportunity facilities you – have or overhead follow I And that, in on already the for the is will the anything

the But increased in that because everyone mean and management, and no to going are that fact it’s that. a no of relevant haven’t we from two resources, our Facilities doubt we’ll very location. of we headcount bit try did day-to-day share intention have optimize challenging, headcount when mainly to different is be our lean perspective, a because reducing we overhead

I of that is only relevant, think, DataPath Networks. Satellite optimize Wavestream; and we’ll We’re based on a there synergies doing that. it And DataPath between and lot on and

see when most the into on the we that we the can think that top-line defense I is our revenues market. synergy drive

Got contract. guys the certain product If I design to Obviously announcement out, but and to you. arrived. I indicated up IFC recall, to there that there? built product to couple question. last operational around that primarily opportunity, forgot some you make point, a had line at years opportunity big antenna the one big flat and looking NRE were a panel you had has that a customer a important bring obviously R&D until investments fair to going incremental you weren’t or in you that that saw to it specs, you’ll really Is direct have involved ago, some assume is

this it’s be a combination months year. and for delivered it’s certification factored gave. and a to of revenues, door NRE potential It’s in for ESA large increasing the and us development of and investment market amount then very that in It’s units about already Everything is our the opened growing for guidance R&D XX significant segment. cycle, future us we the every

And KA? Great. this a me or is KU remind a

KU. is a This

Great. Thank you.

you. Thank

Gunther Please is from The ahead. from next Group. question go Karger Discovery

excellent is could Yes. area? on I globally, material defense congratulations And with specific positive you question any one, two the for new make Intelsat. have between any regarding Will Thank negative globally defense the impact in Question on any questions. business second quarter. comment SES if again that projects had the or you, and Gilat? and merger upcoming

again. Gunther, Hi, you from hear to nice

will a even SES be us. larger both I and for customer significant strategic think merger customer. combined is So a Intelsat company Such

I really do the will on say business to to it’s such long-term. what our think move

in The decisions. is on mid-term, both expect of of I think roadmap. the don’t them. our with purchasing We the closely short- any work and product part change their I

the always the other this we We the customer all have from few on see have expectation of one them end, always In in easier a lot to a large one But backlog end, quarters fronts. to next positive to in year. it’s ways. as we lot risk. on it’s customer with the many additional of interact and general, process a At deliver

short story consider a on make effect we long to a this Gilat. So positive

program is very we’re question large, For we announce in several your be on to. going able defense are of participating at lot the are hope, more give that second information then this and cannot in of June, RFP, them but see where some we’ll we’ll program, there awards, large them. to and a point about a I we

regard of also homeland Thank the you, the anything security recovery And meant defense in type include and to that Adi. with I disasters programs, question, area? to

ago a the recovery, even And in not usually Philippines see program those disaster so we program, especially and that Asia. we we announced We in several Yeah, countries. a do that, month in business saw other million of believe, lot I back dollars, projects. huge tracking like a are it’s

like that. considered are to cellular solutions like and several be them on backhaul of wheels Some

Thank you, and continue good luck.

Gunther. Thank you,

The next Please is question Metta] of ahead. Laft from [Alon [ph]. go

hear you me? can Hi,

you? are how Alon, Hi,

to Good. Thank for the you you. Thank questions. having ask option

the revenues guide, be include First of is is QC closed? not? does $XXX $XXX not, what And assuming portion about the that, deal the increasing? it mean, all, it should million, if any to million is it or why that DataPath the I prospect of so, for If

So the deal and close, acquisition guidance, I $XX can. pre-DataPath our will in we’ll but numbers are per around expect the million update once general,

can million So now $X,XXX per quarter. divide in you quarter around it

about some should contribute to very the expansion specific it early mean, what about that to Thank support the should but maybe I at margin look increasing large are the and cost to going jumped months, gross that you And what Okay. we explanation, forward? you XX you. gross margin items detailed explanation said extent then the margin, there, the more

recognize than said deliveries of growth higher last mainly bit has So, as with fluctuation this margins before which IFC market, average. we In basis the higher meaning that margin. change because quarter, the comparing to deal QX the of products from Gilat’s due comes of the of this and growth a is problematic, favorable I revenues. a quarterly analyzing maybe year most on And to way was the mix or the

in of IV, new the we impacting time we in in higher discussed it our you’ll margins believe have that SkyEdge of over volume. last do grow margins our with steady And growth product we the gross the deploys forward, the platform, that reach in growth can And software the component. term. that believe call see mix. XX% Looking as longer area the we will And as we our in

of to the fifth addition of Peru, project. as Adi got in mentioned, that, In submission the we business the

sixth construction the and last on revenues and growth project associated we’re construction are margins. lower Now with

So next as this expected in we’ll only with will – then these to to the revenues average be higher operations, the and gross push that year, are it’ll margin the move and as well.

Thank you. What expenses that should is we capital assume about Peru the once done?

So, CapEx. Peru expenses not are

So the should level be our around same level last year. CapEx of

it’s understand say would think level I especially service projects, depends really of that Gilat, to I important projects. that, managed the CapEx on it

need them regular create can of in fluctuation Peru, this and of service. to later run rate without beginning a the invest see manage the in lot we revenues, Some are on The to capital. at hundred it from between millions, It’s be few depend potential to $X really project. million. on on up It And the million project. $X can project several the managed depend the services to and $Xmillion, then and the

something going Understood. we expect we’ve large it rate, About seen that Is tax should a this quarter. in also rate forward? tax

rates, I countries. of comprised think of all, the that the of many Gilat taxes tax first

regimes. has it of several so, impact tax And

earnings releasing quarter that because quarter, I tax quarter this onetime Israel. quite of But this had quite in looking Last rate at normal. is this we in expense think the draft one normal. is tax the

I see.

assume? we kind rate what should So effective tax of

we we forward. that tax quarter’s it rely can should this assume on looking say will I

segments. angles Intelsat I should different, about mean, to project deployed have, same with different data also. about spoke there be between of Okay. or the is extent initiative maybe spoke a the it’s overlap project which what an bit Airlines, to the color, Alaska you a question, Last they

terminal with in, ground Intelsat. equipment not First Intelsat, buy us they the modems with customer the and every In usually of bring installed aircraft. all, that to new the to their increase deal need on be is for they

[ph]. drive So other by business for is announce main but ESA terminal, the from Gilat, vendor vendors, their to the will Sincom terminals not more related dealer they Intelsat

much. very Thank you Okay.

Thank you, Alon.

question next Discovery a Karger from ahead. The question of go follow-up Group. is Gunther Please

there Yes. to Airways, Thank any you my the and for regard China projects? speed high With the regarding delay is the taking projects question. IFC China rail further

Yeah.

I service project, would long we in deployment a connectivity, dead speed China. the which in-flight On, mainly providers ago. that rail no. time cooperating say with On project the are this has also is

do So get airlines, if Intelsat use also will pay We our they from have Chinese China. will equipment. installed our, an award

some are there also providers. with local opportunities So

you, good Thank and Adi, luck.

Thank Gunther. you,

are questions Instructions] this like your Benyamini, statement. further no There time. [Operator at to Mr. would concluding you make

in next want for you all speak to attention. call Thank time for have to soon this you and I thank see or great very and to day. We your us on and hope joining you a our call. you much

conference concludes Thank This for Gilat’s participation. you results you. first quarter Thank XXXX call. your

and ahead disconnect. may go You