Gilat Satellite Networks Ltd. (GILT)

Q1 2012 Earnings Conference Call

May 23, 2012, 09:30 a.m. ET

Executives

Rob Fink - IR, KCSA

Erez Antebi - CEO

Yaniv Reinhold - CFO

Analysts

Andrew Uerkwitz - Oppenheimer

Louis DiPalma - William Blair

Presentation

Operator

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» Gilat Satellite Networks, CEO Discusses Q1 2011 Results - Earnings Conference Call Transcript

Welcome to the Gilat Satellite Networks First Quarter 2012 Results Conference Call. All participants are at present in listen-only mode. Following management’s formal presentation instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded May 23, 2012.

I’d now like to turn the call over to Rob Fink of KCSA to read the Safe Harbor statement. Please go ahead.

Rob Fink

Thank you. Good morning and good afternoon everyone. Thank you for joining today for Gilat’s first quarter 2012 results conference call. A recording of this call will be available beginning at approximately Eastern Time today at May 23, and run until May 25, 2012 at noon. Gilat’s earnings press release and website provide details on access of archived call.

Investors are urged to read the forward-looking statements in the company’s earnings releases which state that statements made on this earnings call which are not historical fact maybe deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements including statements regarding future financial operating results involve risks, uncertainties and contain views many of which are beyond the control of Gilat and which may cause actual results to differ materially from anticipated results. Gilat is under no obligation to update or alter these forward-looking statements that are as a result of new information, future events or otherwise, company expressly disclaims any obligation to do so. More detailed information about the risk factors can be found in the company’s report filed with the Securities and Exchange Commission.

With that said on the call today is Erez Antebi, Gilat’s CEO; and Yaniv Reinhold, Chief Financial Officer. I’d now like to turn the call over to Erez. Erez the call is yours.

Erez Antebi

Thank you, Rob. Good day everyone. I’d like to begin by providing a high level overview of the first quarter and then offer a more detail review of some of the business initiatives we are focusing on. I will then turn the call over to Yaniv, who will walk you through the quarter’s financial results; I’ll then summarize and open the call for questions.

The first quarter was highlighted by several key contract win, particularly in our commercial business. our financial performance which was somewhat softer this quarter was impacted by the implementation timing of specific contract in our Services division as well as lower than expected revenues in our Defense business. Despite the shortfall, we remain confident in our business and are reaffirming our annual management objective.

Revenues in the first quarter decreased to $76.6 million compared to $80 million in the same period last year. On a non-GAAP basis, our operating loss was $0.3 million in the first quarter of 2012 compared to an operating income of $3.9 million in the comparable quarter of 2011. Yaniv will provide you with more details on our quarterly results later in the call.

Operationally, we continue to implement the organizational changes we discussed on our last call which separated our business into three divisions; Commercial, Defense and Services. Within these three business divisions, we continue to work to improve efficiencies and reduce operational expenses. As an example, in the Defense division we continue to integrate Wavestream and VSAT antenna systems into Gilat. By consolidating operational systems and IT infrastructure, we believe we can recognize further synergies within the business. We expect overtime that leveraging this structure will allow us to better deploy resources and drive revenue growth into 2012 and beyond.

With this as a backdrop, I’d like to discuss some of our business highlight starting with our Commercial division. This business has continued to perform well with several important contract win since the beginning of the year. The first one I’d like to talk about is O3b network, as this simplifies our positioning within the growing Ka-band market. As we advanced with this partnership we look forward to paving the way for commercialization of Ka-band as a strong alternative for fiber technology and we expect we ought to be a leader in this next generation VSAT technology.

More recently, we announced the completion of a major project for Rostelecom’s RTComm for the deployment of over 1600 sites for satellite web connectivity to support Russia’s Presidential election. While we have a major contract with RTComm for Ka-band satellite equipment over the coming years this arrangement shows the breadth of our capabilities and depth of pure partnership.

Turning our attention to Latin America. We continue to experience strong business in this region, in Mexico for example, the largest commercial television broadcaster Grupo Televisa has selected our SkyEdge II VSAT network for their private communication network across Mexico. Gilat network will enable the transmission of multicast content such as ads and public messages to remote station which is then inserted to the regional broadcast.

In Southeast Asia we announced the signing of a contract with a local Tier 1 mobile network operator for over 100 bytes supporting their 2G and 3G cellular backhaul network. We also signed an agreement with JSC NURSAT, one of Kazakhstan’s leading satellite service provider for the deployment of a broadband IP network for their corporate customer base.

A strong contributor to the commercial division performance this quarter is our ongoing NBN project in Australia. As of to-date we have 1200 installed and operational across Australia with the local Gilat team managing the remote installation and network operation. The project is progressing very well with an average of 1500 sites deployed per month.

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