Gilat Satellite Networks Ltd. Q1 2010 Earnings Call Transcript

Gilat Satellite Networks Ltd. Q1 2010 Earnings Call Transcript
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Gilat Satellite Networks Ltd. (GILT)

Q1 2010 Earnings Call

May 11, 2010 9:30 AM ET

Executives

Tom Watts – Watts Capital Partners, Investor Relations

Amiram Levinberg – Chairman and CEO

Ari Krashin – Chief Financial Officer

Analysts

John Weidemoyer – William Blair

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to Gilat

s First Quarter 2010 Results Conference Call. All participants are present in a listen-only mode. Following the management

s formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions)

Please note that following some technical difficulties during last call

s Q&A session, we

ve added a second U.S. dial-in number for this conference call. (Operator Instructions)

As a reminder, this conference is being recorded May 11, 2010. I would now like to turn the call over to Tom Watts from Watts Capital Partners to read the Safe Harbor statement. Tom, please go ahead.

Tom Watts

Thank you. Good morning and good afternoon. Thank you for joining us today for Gilat

s first quarter 2010 results conference call. A recording of the call will be available beginning at approximately 12 PM Eastern Time today May 11th until May 13, 2010 at 12 PM. Our earnings press release and website provide 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 earnings 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. We expressly disclaim any obligation to do so. More detailed information about risk factors can be found on our reports filed with the Securities and Exchange Commission.

That said, on the call this morning 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, Tom. Good day, everyone. I would like to begin today

s call with a snapshot of our first quarter results, followed by a more detailed review of our business during the quarter. Following the quarterly review, Ari will take you through the detailed financial results. We will then open the call for questions.

In the first quarter, revenues increased slightly compared to the previous quarter and we finished the quarter with a small profit. Revenues declined compared to the comparable quarter in 2009, though we experienced stronger bookings compared to the first quarter of 2009.

The quarter was highlighted by a definitive agreement we entered into to acquire Raysat Antenna Systems. For those of you who are not familiar with Raysat Antenna Systems, this is a leading vendor of low profile two-way antenna solutions for Satellite Communications On The Move.

The antennas are typically used by government agencies at various levels such as for emergency response, military units and homeland security, and for commercial applications such as uploading (inaudible) for satellite communications.

The acquisition is expected to close at the beginning of the third quarter, subject to regulatory approval and other customary closing conditions. This move represents an important milestone in our strategy to enter the military and defense markets for both the U.S. DoD and for international defense agencies.

This quarter, we also announced organizational changes, which reflect a decision to unify some of the business units of the company in order to better leverage our internal synergies.

We have combined the Gilat

s corporate unit with our equipment business, Gilat Network Systems, GNS and with our Spacenet Rural business unit to create a stronger, more integrated entity. Our U.S.-based business Spacenet Inc. will continue to operate as a wholly owned subsidiary.

As part of these changes, Jaron Lotan joined us to serve us as our Chief Operating Officer. Jaron oversees our day-to-day business and he

s responsible for activities such as sales, operations and customer services, while I

m directing and overseeing the company

s long-term strategy and corporate function.

Jaron brings to Gilat extensive management experience with NASDAQ companies, including having served as President and Chief Executive Officer for Tecnomatix, which ultimately became part of Siemens (inaudible) and having held several executive positions at Orbotech. I wish Jaron all the best in his new position.

During the quarter, we announced several new projects and activities in Africa, Asia and in the Americas for a variety of applications, including enterprise, gaming, government and defense applications. Significant from humanitarian aspect is that Spacenet donated emergency communications to the International Red Cross as part of relief efforts in Haiti.

The contribution helped disaster recovery efforts by enabling reliable and secure communications to the affected zones. We are proud to be able to provide help in times of need during recovery from this terrible tragedy.

For those of you with the presentation in front of you, you can see the photo of one of the sites in the midst of the destruction and rubble, which captures the environment in which we operated in Haiti.

Moving to the financial indicator summary slide, revenues for the first quarter of 2010 were $57.1 million, a decline compared to the first quarter of 2009. Despite this, we were able to increase our gross margins this quarter to 34.3%, compared to 29.6% in the first quarter of 2009.

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