Gilat Satellite Networks CEO Discusses Q2 2012 Results - Earnings Call Transcript

Gilat Satellite Networks (GILT)

Q22012 Earnings Call

August 15, 2012 9:30 am ET

Executives

Philip Carlson - Investor Relations, KCSA Strategic Communications

Erez Antebi - Chief Executive Officer

Yaniv Reinhold - Chief Financial Officer

Analysts

James Breen - William Blair

Andrew Uerkwitz - Oppenheimer

Gunther Krager - Discovery Group

Mike Cikos - Sidoti & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Gilat Satellite Networks second quarter 2012 results conference call. All participants are at present in listen-only mode. Following the management's formal presentation, instructions will be given for the question and answer session. (Operator Instructions)

As a reminder, this conference is being recorded, August 15, 2012. I would now like to turn the call over to Philip Carlson of KCSA to read the safe harbor statement. Philip, please go ahead.

Philip Carlson

Thank you. Good morning and good afternoon, everyone. Thank you for joining us today for Gilat's second quarter 2012 results conference call. A recording of this call will be available beginning at approximately noon, Eastern Time today, August 15, until August 17, 2012 at noon.

Our earnings press release on the website provides details on accessing the archived call. Investors are urged to read the forward-looking statements in our earnings releases which state 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 and 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 Erez Antebi, Gilat's Chief Executive Officer and Yaniv Reinhold, Chief Financial Officer. Erez, please go ahead.

Erez Antebi

Thank you, Phil, and good day everyone. I would like to begin by providing a high level overview of the second quarter and then offer additional insight on some of the strong progress we have made this quarter. Following my comments, Yaniv will discuss our financial results for the quarter. I will then summarize and open the call for questions.

The second quarter was a solid one for Gilat, a marked improvement over the first quarter of the year and we are optimistic about our prospects going forward. Our financial performance was strong with revenues increasing 11.4% from $76.6 million in the first quarter to $85.3 million this quarter with EBITDA reaching $8.6 million or 10.1% of revenue.

Operationally, our organizational changes continue to bear fruit as we work to improve efficiencies and reduce operational expenses. On a non-GAAP basis, our operating income was $4.8 million in the second quarter of 2012 compared to an operating loss of $0.3 million in the first quarter of this year. I am also pleased to report that I the second quarter we generated cash from operations o f$3.2 million. Yaniv will provide you with more details on our quarterly results later in the call.

I will now discuss some of our business highlights for the quarter, starting with our commercial division. Our commercial division continued to perform well and revenues are on track for the year. We have seen in this quarter a stronger than expected rate of implementation at NBN Co in Australia.

As a reminder, last year we signed and an agreement with Optus Networks to provide hubs, VSATs, site installation and network operation for the Australian government, NBN Co interim satellite service. We are pleased to announce that Gilat has successfully completed the deployment of the first 10,000 VSATs.

The project is moving forward, ahead of schedule as increased demand is driving a faster than expected network rollout. As such, while the initial commitment was for a network of 20,000 VSATs, the network may grow to as much as 48,000 sites by late 2015. Our customer is very satisfied with the implementations and support it has received to date.

Building on previous success and credibility in various market segments, we continued to focus our efforts on supplying products and solutions in vertical markets such as oil and gas and cellular. We also continue to provide both new and existing customers with enterprise solutions.

For example, in the Americas, we continue to expand upon our relationship with Cable and Wireless Panama, Panama's largest telecommunications operator. Cable and Wireless has been our partner since 2005 and they recently signed a network expansion that includes solar powered VSAT as well as installation maintenance and operation of the SkyEdge II Hub equipment and Voice over IP gateway.

Another example comes from Argentina's Servicio Satelital which chose our SkyEdge II Hub and broadband satellite platform to upgrade its existing network and provide additional support to hundreds of new sites with broadband internet and data connectivity.

Our KA-band initiative are also well underway and our pipeline growing nicely. These initiatives are starting to take form and we expect to see KA revenue growth from 2013 onwards. In preparation for the planned KA satellite launches in the second half of this year and beyond, we continue to make great strides technologically with our VSAT equipment.

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