Gilat Announces Third Quarter 2013 Results

PETAH TIKVA, Israel, Nov. 13, 2013 (GLOBE NEWSWIRE) -- Gilat Satellite Networks Ltd. (Nasdaq:GILT) (TASE:GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ended September 30, 2013.

Key Financial Updates:
  • Revenue for Q3 2013 of $71.3 million
  • EBITDA for Q3 2013 of $2.1 million
  • Expenses reduced by around $9 million per year during Q4 2013 with effects to be realized starting in Q1 2014
  • Management objectives for 2013 lowered to approximately $310 million in revenue and EBITDA of 6% primarily due to delayed deals in our Commercial Division and in Peru

Revenues for the third quarter of 2013 were $71.3 million, compared to $89.0 million for the same period in 2012.

On a non-GAAP basis, operating loss for the third quarter of 2013 was $1.3 million compared to an operating income of $5.7 million in the third quarter of 2012. On a non-GAAP basis, net loss for the period was $1.9 million, or $0.04 per diluted share, compared to net income of $5.8 million, or $0.13 per diluted share, in the comparable period in 2012.

EBITDA for the third quarter of 2013 reached $2.1 million as compared with $9.8 million in the comparable period in 2012.

In August, the Company announced that it entered into a definitive agreement to sell Spacenet to SageNet, subject to regulatory approval and the satisfaction of customary closing conditions. The Company received the required FCC regulatory approval last week and notified SageNet that all conditions for closing have been met. The Company has been notified by SageNet that it is not willing to proceed to closing at this time based on several assertions. While the Company rejects all of SageNet's assertions and believes them to be unfounded, it is in continuing discussions with SageNet concerning their assertions. At this time the closing has been delayed.

"The shortfall in Q3 was mainly attributed to two deals which were delayed in our Commercial Division, reduced revenue from Compartel in Colombia and a delayed project implementation in our Services Division," said Erez Antebi, CEO of Gilat.

"We have taken immediate action to cut costs reducing our global headcount and fixed expenses by approximately $9 million annually," continued Antebi. "We expect to see most of the impact of the reductions beginning in the first quarter of 2014. It is important to note that we have taken care not to reduce our sales teams or our research and development investments in our strategic growth areas."

"Going forward, we believe we are well positioned for success," concluded Antebi. "While this has been a difficult quarter, we have taken the appropriate measures to significantly cut costs and further streamline the company. We continue to close deals in our Commercial Division with new and existing customers. Our Defense Division is stable and we see growing interest and need for our products. We are confident in the road ahead and believe that with the steps we have taken, the Company is better positioned to succeed going forward."

Resources: Third Quarter 2013 Financial Statements

Key Recent Announcements:
  • Gilat Receives Award Letter from Entel S.A. for Project Valued at Over $12 Million
  • Gilat Announces a Favorable Judgment in 2009 Claim
  • Gilat Announces the Release of the Wavestream Ka-Band Matchbox Mini BUC
  • Gilat Announces Sale of Spacenet Subsidiary

Conference Call and Webcast Details:

Gilat management will host a conference call today at 13:30 GMT/ 09:30 EST/ 16:30 IST (Israel Standard Time) to discuss the results. International participants are invited to access the call at (972) 3-918-0610, and US-based participants are invited to access the call by dialing (888) 668-9141. A replay of the conference call will be available beginning at approximately 16:00 GMT/ 12:00 EST/ 19:00 IST today, until 16:00 GMT/ 12:00 EST/ 19:00 IST November 15, 2013. International participants are invited to access the replay at (972) 3-925-5918, and US-based participants are invited to access the replay by dialing (888) 326-9310. A replay of the call may also be accessed as a webcast via Gilat's website at www.gilat.com and will be archived for 30 days.

Notes:

(1) The attached summary financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The attached summary financial statements are unaudited. To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Gilat's EBITDA before the impact of non-cash share-based payment charges, depreciation and amortization, other income and other costs related to acquisition transactions. Non-GAAP presentations of net income, EBITDA and earnings per share are provided to enhance the understanding of the Company's historical financial performance and comparability between periods.

(2) Operating income before depreciation, amortization, non-cash stock option expenses as per ASC 718 (formerly SFAS 123(R)) and other costs related to acquisition transactions ('EBITDA') is presented because it is a measure commonly used and is presented solely in order to improve the understanding of the Company's operating results and to provide further perspective on these results. EBITDA, however, should not be considered as an alternative to operating income or net income for the period as an indicator of the operating performance of the Company.

Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Reconciliation between the Company's Operating income and EBITDA is presented in the attached summary financial statements.

About Gilat Satellite Networks Ltd.

Gilat Satellite Networks Ltd (Nasdaq:GILT) (TASE:GILT) is a leading provider of products and services for satellite-based broadband communications. Gilat develops and markets a wide range of high-performance satellite ground segment equipment and VSATs, with an increasing focus on the consumer and Ka-band market. In addition, Gilat enables mobile SOTM (Satellite-on-the-Move) solutions providing low-profile antennas, next generation solid-state power amplifiers and modems. Gilat also provides managed network and satellite-based services for rural telephony and Internet access via its subsidiaries in the United States, Peru and Colombia.

With over 25 years of experience, and over a million products shipped to more than 85 countries, Gilat has provided enterprises, service providers and operators with efficient and reliable satellite-based connectivity solutions, including cellular backhaul, banking, retail, e-government and rural communication networks. Gilat also enables leading defense, public security and news organizations to implement advanced, on-the-move tactical communications on board their land, air and sea fleets using Gilat's high-performance SOTM solutions. For more information, please visit us at www.gilat.com

Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "intend", "expect", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of Gilat to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to Gilat's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for Gilat's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key OEM partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with Gilat's international operations and its location in Israel. For additional information regarding these and other risks and uncertainties associated with Gilat's business, reference is made to Gilat's reports filed from time to time with the Securities and Exchange Commission.
GILAT SATELLITE NETWORKS LTD.    
CONDENSED CONSOLIDATED BALANCE SHEETS    
US dollars in thousands    
     
  September 30, December 31,
  2013 2012
  Unaudited  
     
ASSETS    
     
CURRENT ASSETS:    
Cash and cash equivalents  53,914  66,968
Restricted cash  1,869  3,794
Restricted cash held by trustees  4,544  1,664
Trade receivables, net  59,194  60,991
Inventories  31,560  24,973
Other current assets  24,820  29,140
Total current assets  175,901  187,530
     
LONG-TERM INVESTMENTS AND RECEIVABLES:    
Long-term restricted cash  1,184  1,151
Severance pay funds  9,805  9,703
Long-term trade receivables, receivables in respect of capital leases and other receivables  20,332  19,781
Total long-term investments and receivables  31,321  30,635
     
PROPERTY AND EQUIPMENT, NET  91,233  94,727
     
INTANGIBLE ASSETS, NET  30,787  35,991
     
GOODWILL  65,760  65,760
     
TOTAL ASSETS  395,002  414,643
     
     
GILAT SATELLITE NETWORKS LTD.    
CONDENSED CONSOLIDATED BALANCE SHEETS    
US dollars in thousands    
  September 30, December 31,
  2013 2012
  Unaudited  
     
LIABILITIES AND EQUITY    
     
CURRENT LIABILITIES:    
Short-term bank credit  3,426  3,517
Current maturities of long-term loans  4,621  7,963
Trade payables   28,233  23,240
Accrued expenses   19,775  24,353
Short-term advances from customer, held by trustees  --   4,448
Other current liabilities  41,893  40,336
Total current liabilities  97,948  103,857
     
LONG-TERM LIABILITIES:    
Accrued severance pay  9,614  9,513
Long-term loans, net of current maturities  31,376  40,747
Other long-term liabilities  23,334  18,569
Total long-term liabilities  64,324  68,829
     
COMMITMENTS AND CONTINGENCIES    
     
EQUITY:    
Share capital - ordinary shares of NIS 0.2 par value   1,929  1,909
Additional paid-in capital  872,244  869,822
Accumulated other comprehensive income  1,571  2,864
Accumulated deficit  (643,014)  (632,638)
     
Total equity  232,730  241,957
     
TOTAL LIABILITIES AND EQUITY  395,002  414,643
             
             
GILAT SATELLITE NETWORKS LTD.            
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS
FOR COMPARATIVE PURPOSES             
U.S. dollars in thousands (except per share data)
     Three months ended       Three months ended   
    30 September 2013     30 September 2012  
  GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP
  Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
             
Revenues  71,303  --   71,303  89,009  --   89,009
Cost of revenues  50,904  (1,305)  49,599  60,588  (1,661)  58,927
Gross profit  20,399  1,305  21,704  28,421  1,661  30,082
  29%   30% 32%   34%
Research and development expenses:            
Expenses incurred  7,088  (128)  6,960  7,699  (114)  7,585
Less - grants  585  --   585  661  --   661
   6,503  (128)  6,375  7,038  (114)  6,924
Selling and marketing expenses  9,159  (360)  8,799  9,346  (345)  9,001
General and administrative expenses  8,185  (377)  7,808  8,840  (384)  8,456
Operating income (loss)  (3,448)  2,170  (1,278)  3,197  2,504  5,701
Financial expenses, net   (1,579)  --   (1,579)  (412)  --   (412)
Income (loss) before taxes on income  (5,027)  2,170  (2,857)  2,785  2,504  5,289
Tax benefit  (983)  --   (983)  (536)  --   (536)
Net income (loss)  (4,044)  2,170  (1,874)  3,321  2,504  5,825
             
Basic net earnings (loss) per share  (0.10)    (0.04)  0.08    0.14
Diluted net earnings (loss) per share  (0.10)    (0.04)  0.08    0.13
             
Weighted average number of shares used in computing net earnings (loss) per share             
 Basic  42,048    42,048  41,462    41,462
 Diluted  42,048    42,048  42,302    43,807
             
(1) Adjustments reflect the effect of non-cash stock based compensation as per ASC 718 and amortization of intangible assets related to acquisition transactions.
             
     Three months ended       Three months ended   
    30 September 2013     30 September 2012  
    Unaudited     Unaudited  
Non-cash stock-based compensation expenses:            
Cost of revenues    57      88  
Research and development    128      114  
Selling and marketing    129      116  
General and administrative    377      384  
     691      702  
             
Amortization of intangible assets related to acquisition transactions:            
Cost of revenues    1,248      1,573  
Selling and marketing    231      229  
     1,479      1,802  
             
             
GILAT SATELLITE NETWORKS LTD.            
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS
FOR COMPARATIVE PURPOSES             
U.S. dollars in thousands (except per share data)
     Nine months ended       Nine months ended   
    30 September 2013     30 September 2012  
  GAAP Adjustments (1) Non-GAAP GAAP Adjustments (1) Non-GAAP
  Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
             
Revenues  234,336  --   234,336  250,935  --   250,935
Cost of revenues  164,274  (3,888)  160,386  170,796  (4,948)  165,848
Gross profit  70,062  3,888  73,950  80,139  4,948  85,087
  30%   32% 32%   34%
Research and development expenses:            
Expenses incurred  21,864  (339)  21,525  24,274  (243)  24,031
Less - grants  1,449  --   1,449  2,345  --   2,345
   20,415  (339)  20,076  21,929  (243)  21,686
Selling and marketing expenses  30,181  (1,014)  29,167  30,097  (973)  29,124
General and administrative expenses  24,746  (1,057)  23,689  25,114  (1,020)  24,094
Operating income (loss)  (5,280)  6,298  1,018  2,999  7,184  10,183
Financial expenses, net   (5,028)  --   (5,028)  (2,427)  --   (2,427)
Income (loss) before taxes on income  (10,308)  6,298  (4,010)  572  7,184  7,756
Taxes on income (Tax benefit)  68  --   68  (538)  --   (538)
Net income (loss)  (10,376)  6,298  (4,078)  1,110  7,184  8,294
             
Basic net earnings (loss) per share  (0.25)    (0.10)  0.03    0.20
Diluted net earnings (loss) per share  (0.25)    (0.10)  0.03    0.19
             
Weighted average number of shares used in computing net earnings (loss) per share             
Basic  41,915    41,915  41,346    41,346
Diluted  41,915    41,915  42,224    43,355
             
(1) Adjustments reflect the effect of non-cash stock based compensation as per ASC 718 and amortization of intangible assets related to acquisition transactions.
             
     Nine months ended       Nine months ended   
    30 September 2013     30 September 2012  
    Unaudited     Unaudited  
Non-cash stock-based compensation expenses:            
Cost of revenues    143      230  
Research and development    339      243  
Selling and marketing    325      285  
General and administrative    1,057      1,020  
     1,864      1,778  
             
Amortization of intangible assets related to acquisition transactions:          
Cost of revenues    3,745      4,718  
Selling and marketing    689      688  
     4,434      5,406  
         
         
GILAT SATELLITE NETWORKS LTD.        
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      
U.S. dollars in thousands (except per share data)        
  Nine months ended Three months ended
  September 30, September 30,
  2013 2012 2013 2012
  Unaudited Unaudited Unaudited Unaudited
         
Revenues  234,336  250,935  71,303  89,009
Cost of revenues  164,274  170,796  50,904  60,588
Gross profit  70,062  80,139  20,399  28,421
Research and development expenses:        
Expenses incurred  21,864  24,274  7,088  7,699
Less - grants  1,449  2,345  585  661
   20,415  21,929  6,503  7,038
Selling and marketing expenses  30,181  30,097  9,159  9,346
General and administrative expenses  24,746  25,114  8,185  8,840
Operating income (loss)  (5,280)  2,999  (3,448)  3,197
Financial expenses, net   (5,028)  (2,427)  (1,579)  (412)
Income (loss) before taxes on income  (10,308)  572  (5,027)  2,785
Taxes on income (Tax benefit)  68  (538)  (983)  (536)
Net income (loss)  (10,376)  1,110  (4,044)  3,321
         
Basic net earnings (loss) per share  (0.25)  0.03  (0.10)  0.08
Diluted net earnings (loss) per share  (0.25)  0.03  (0.10)  0.08
         
Weighted average number of shares used in computing net earnings (loss) per share         
Basic 41,915 41,346 42,048 41,462
Diluted 41,915 42,224 42,048 42,302
         
         
GILAT SATELLITE NETWORKS LTD.        
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      
US dollars in thousands        
         
  Nine months ended Three months ended
  September 30, September 30,
  2013 2012 2013 2012
  Unaudited Unaudited Unaudited Unaudited
         
Cash flows from operating activities:        
Net income (loss)  (10,376)  1,110  (4,044)  3,321
Adjustments required to reconcile net income (loss) to net cash generated from (used in) operating activities:      
Depreciation and amortization  16,033  16,591  4,825  5,893
Stock-based compensation  1,864  1,778  691  702
Accrued severance pay, net  (1)  238  (65)  (73)
Accrued interest and exchange rate differences on short and long-term restricted cash, net  1,382  (95)  990  (26)
Exchange rate differences on long-term loans  92  9  138  133
Capital loss from disposal of property and equipment  36  47  23  50
Deferred income taxes  (871)  (1,079)  (826)  (749)
Decrease (increase) in trade receivables, net  1,470  (10,624)  3,695  (3,510)
Decrease (increase) in other assets (including short-term, long-term and deferred charges)  678  (2,326)  (3,436)  3,102
Decrease (increase) in inventories  (8,219)  2,447  (2,755)  2,842
Increase (decrease) in trade payables  5,015  833  1,478  (4,576)
Increase (decrease) in accrued expenses  (4,578)  (2,631)  (1,923)  3,516
Increase (decrease) in advances from customer, held  by trustees, net   (4,448)  2,936  (525)  (2,066)
Increase (decrease) in other accounts payable and other long term liabilities  (5,054)  (5,744)  629  (25)
Net cash generated from (used in) operating activities  (6,977)  3,490  (1,105)  8,534
         
         
GILAT SATELLITE NETWORKS LTD.        
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      
US dollars in thousands        
         
  Nine months ended Three months ended
  September 30, September 30,
  2013 2012 2013 2012
  Unaudited Unaudited Unaudited Unaudited
Cash flows from investing activities:        
Purchase of property and equipment  (3,719)  (3,428)  (1,488)  (1,262)
Investment in restricted cash held by trustees  (14,455)  (28,701)  (3,219)  (11,081)
Proceeds from restricted cash held by trustees  10,283  22,516  512  13,441
Investment in restricted cash (including long-term)  (30,173)  (15,417)  (12,173)  (6,303)
Proceeds from restricted cash (including long-term)  31,958  20,877  12,619  6,253
Purchase of intangible assets  (118)  (82)  --   (10)
Net cash generated from (used in) investing activities  (6,224)  (4,235)  (3,749)  1,038
         
         
Cash flows from financing activities:        
Issuance of restricted stock units and exercise of stock options  579  18  17  6
Payment of obligation related to the purchase of intangible assets  (500)  --   --   -- 
Proceeds from financing contract  14,472  --   --   -- 
Short-term bank credit, net  (92)  1,190  366  (11)
Proceeds from long-term loans  --   10,000  --   -- 
Repayment according to financing contract  (1,288)  --   (634)  -- 
Repayment of long-term loans  (12,804)  (5,435)  (6,829)  (1,012)
Net cash generated from (used in) financing activities  367  5,773  (7,080)  (1,017)
         
Effect of exchange rate changes on cash and cash equivalents  (220)  (233)  7  (69)
         
Increase (decrease) in cash and cash equivalents  (13,054)  4,795  (11,927)  8,486
         
Cash and cash equivalents at the beginning of the period  66,968  56,231  65,841  52,540
         
Cash and cash equivalents at the end of the period  53,914  61,026  53,914  61,026
       
       
GILAT SATELLITE NETWORKS LTD.      
CONDENSED EBITDA        
US dollars in thousands        
  Nine months ended Three months ended
  September 30, September 30,
  2013 2012 2013 2012
  Unaudited Unaudited Unaudited Unaudited
         
Operating income (loss)  (5,280)  2,999  (3,448)  3,197
Add:        
Non-cash stock-based compensation expenses  1,864  1,778  691  702
Depreciation and amortization  16,033  16,591  4,825  5,893
EBITDA  12,617  21,368  2,068  9,792
CONTACT: Phil Carlson / Josh Dver, KCSA         pcarlson@kcsa.com / jdver@kcsa.com         1 (212) 896 1233 / 1239                  David Leichner, Gilat Satellite Networks Ltd.         davidle@gilat.com         (972) 3 925 2009

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