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Gilat Satellite Networks Ltd. (



Q4 2010 Earnings Conference Call

February 22, 2011, 9:30 am ET


Marybeth Csaby – IR, KCSA

Amiram Levinberg – CEO and Chairman

Ari Krashin – CFO


Louie DiPalma – William Blair

Chris Quilty – Raymond James

Gunther Karger – Discovery Group

Lione Rockman [ph] – ASCA Group [ph]


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Ladies and gentlemen, thank you for standing by. Welcome to Gilat’s Fourth Quarter 2010 Results Conference Call. All participants are 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 February 22


, 2011. I would now like to turn over the call to Marybeth Csaby to read the Safe Harbor from KCSA. Marybeth, please go ahead.

Marybeth Csaby

Good morning and good afternoon everyone. Thank you for joining us today for Gilat’s fourth quarter and full-year 2010 results conference call. A recording of the call will be available beginning at approximately 12 PM Eastern Time today, February 22


, 2011, until February 24


, 2011, at 12 PM. Our earnings press release and Website provides details on accessing the archived call.

Investors are urged to read the forward-looking statements in our earnings release, which say that statements made on this call which are not historical facts may be 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 contingencies, 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 our forward-looking statements, whether as a result of new information, future events or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our reports filed with the Securities and Exchange Commission.

That said, on the call today is Amiram Levinberg, Gilat’s Chairman of the Board and Chief Executive Officer; and Ari Krashin, Chief Financial Officer. Amiram, please go ahead.

Amiram Levinberg

Thank you, Marybeth and good day everyone. I apologize for the confusion in the telephone numbers for those who are trying to call from the U.S. So, sorry for that and that’s the reason for the delay in the start of this call. Anyway, Marybeth, welcome and I would like to welcome the KCSA team, is our newly appointed Investor Relations consultant in the USA.

I would begin today’s call with a snapshot of our fourth quarter and annual results, followed by a more detailed review of our business during the quarter. After the business review, I will take you through the financial results. I will summarize 2010 and share with you our objective for the coming year, and then we will open the floor for questions.

Moving to the financial indicators’ summary, revenues for the fourth quarter of 2010 were approximately $66 million, an increase over the previous quarter and the comparable quarter of 2009, which were $58 million and $57 million respectively. For the full year 2010, we achieved revenues of $233 million compared to $222 million in 2009.

Net income for the year 2010 was $30.6 million compared to net income of $1.9 million in 2009. This is mainly due to two events during the year, the first is the settlement of litigation related to the termination of the 2008 merger agreement, and the second is the sale of our shares in Axolotl. On a non-GAAP basis, our net income for the year 2010 was $0.7 million compared to a non-GAAP net income of $0.4 million in 2009.

Our backlog grew from $180 million at the end of 2009 to approximately $232 million at the end of 2010. Ari will discuss the quarterly and annual results in more details later in the call.

Let us now look at our businesses. During the quarter and year, we saw improvements in our overall business and progress advancing our strategy. In fact, this quarter was recorded the strongest bookings in year. The Wavestream acquisition closed during the quarter and earlier in the year, we acquired RaySat Antenna Systems. Both of these acquisitions are important to our strategy to increase our presence in the Homeland Security and Defense markets.

Now, I will provide a breakdown of the performance of each of our businesses, starting with our VSAT business. The VSAT business both in the U.S. and in the international markets did well during the fourth quarter and the full year improved compared to 2009. Last year, Spacenet’s bookings grew with the largest contributor to this growth being the gaming industry. 2010 included a deployment by the three major players in this field, GTECH, Scientific Games and Intralot.

During the fourth quarter, Spacenet signed additional contracts for a lottery network to be deployed in Texas and in expansion in Maryland. We released an announcement a few weeks ago about our successes in the gaming industry, including cellular recent wins. These contracts typically have both equipment and service components. So, we entered 2011 with a healthy backlog for Spacenet.

Once installation is complete, Spacenet will manage over 84,000 gaming sites in North America, more than half of our total sites under Spacenet service. Outside of lottery contracts, in the fourth quarter, we continue to add hybrid network services, mainly based on our award-winning Prysm Pro solution. One example is Sonoco, a long-time Spacenet customer, which upgraded to Prysm Pro during the quarter. Spacenet has been providing Sonoco a mix of VSATs in our previous generation hybrid solutions.

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