Q3 2020 Gilat Satellite Networks Ltd Earnings Call
[laughter].
[music].
Ladies and gentlemen, thank you for standing by welcome to <unk> third quarter 2020 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 assistance during the conference. Please press Star Zero as a reminder, this conference is being recorded November 10th Twentytwenty. If you have not received it. Please contact you watch Investor relations team at GK, Investor and public relations at one six.
Arssix Sixeighty 559 or view it in the news section of the company's website www Dot dot dot com.
I would now like to hand over the call to Mr. Hotel.
Okay Investor Relations Mr., how would you like to begin.
Yeah, Good morning, and good afternoon, everyone. Thank you for joining us today for Gilats second quarter 24 on your conference calls.
Anybody on this call it will be it.
Beginning in approximately nine eastern time today November.
And im on being able to find.
In November 13.
Webcast will be archived on gas websites were up there the city.
Okay.
Also please note that consistent trained.
Read the forward looking statements and you're not earning release.
For the reminder, that statements made on this earnings call.
[laughter] and May deemed forward looking statements with the meaning of the private Securities Litigation Reform Act of 1995.
Such forward looking statements, including said regarding future financial and operating results involve risks uncertainties and contingencies.
All of which are beyond the control and which may cause actual results or daschle materially from anticipated results.
He is under no obligation to update or I said these forward looking statements whether as.
Your information future events or otherwise on the company expressly disclaims any obligation to do so.
Oh, good information about the risk factors can be found in the that's reported Friday.
Securities and Exchange Commission.
With that let me turn to introduction on the call today Ami study.
Yeah, Yes, interim CEO and this is the small talk on the last interim CFO.
I would now like to down according to I'd like to begin.
Thank you were going and good day everyone.
Thank you for joining us today.
As you're more quarterly update.
Not able to hold over the past year due to the pending acquisition agreement with content.
Last month in October.
We reported that the merger agreement, Wisconsin sign on January 29, 2020 was dominated and a settlement was reached on all pending litigation for payment of $70 million to be lost by comp.
We recently announced our plan to show a $65 million dividend with our shareholders derived mainly from the lease termination fee a cash dividend of $20 million was declared and will be paid on December 2nd 2020, and an additional $75 million will be.
Subject to court approval.
Moving ahead, we are continuing and were forced to implement our strategy, which we believe will generate long term value for our shareholders.
I'd like to briefly summarize the strategy for those or you are new to our story and to remind those of you that have not met dose for white good.
<unk> is a leading global provider will satellite based broadband communications, we have over 30 years of experience designing and manufacturing cutting edge com segments equipments and provide comprehensive solutions and when some services followed by our innovative technology Oh.
Oh man Gos and Joseph similar become overstock alike in flight connectivity life C and the girl segment for non geostationary orbit satellites, orencia, so and very high throughput satellites or VX, yes for sure.
Colin you spoke of our fixed network segment.
Customers include the one mobile network operators.
Usually requiring satellite backhauling to extend their networks to all areas and and other remote locations such as silent highways in parks well terrestrial coverage is prohibitively expensive to lay out. In addition, we are increasingly.
Seeing the need for several medical overstocked delightful emergency response and as a backup.
Domestic airlines.
This quarter, we launched several important and strategic managed service deals and so back on which we believe will continue to be a strong profitable growth engines for the foreseeable future.
In addition, our networks.
Six networks segment includes our broadband solutions for enterprise and consumer.
Including our services into.
Turning to life C, which is part of our mobility solutions segment.
Our largest customer in these segments are going one of the largest I have seen service provider in the world and only when one of the largest global system integrators.
Over 19, as a devastating impact on travel and aviation in general I have seen is expected to grow in importance as the industry recovers.
And passenger require high speed Internet connections.
Mobility solutions segment includes all saw on the Moon products and solutions for the fast moving time and train.
In addition to the mobility solutions segment includes our US subsidiary, Wavestream, which designs and manufactures high speed Oh, Paul Highpower solid state power amplifiers for ground seeing an airborne satellite communication systems waste wasting it focuses on providing solutions for IC defense applications.
In Ngs so gateway.
Another important focus is dance you saw in the finished year solutions all major win last year to provide the girl segment for the SCS also may be MPAR satellite constellation has put us at the forefront of the baseband providers for Ngs. So.
In addition, our business philosophy is providing terrestrial telecommunication infrastructure projects in the whole four point until they get government owned company as well as well as operating parts of the network and selling additional services in support of the boom ILUVIEN population.
Good one sections phase of this networks is reported under our terrestrial infrastructure project segments, while the operational phase and the additional services provider on top of the networks are reported under this or fixed networks segment.
Our targeting the whole storage or other type of $60 million in Ireland, killing revenues, which we believe can be reached by the end of 2022 as of today, we have in our backlog or run rate to really service revenues in goal of more than $30 million.
There is no question that the COVID-19 pandemic has and.
And continues to affect our 2020 results.
Primarily in the mobility segment would you still dominate.
Dominated by the IC market.
Having said that during the second quarter, we began to see recovery in most of our other business areas.
Demonstrated by a solid increase in our backlog.
Thanks to our cost cutting initiatives, we've been able to show a slight improvement in our adjusted EBITA in.
In the current quarter adjusted EBITDA stood at about $600000 compared with the previous quarters adjusted EBITDA.
About $100000.
In the fourth quarter I expect that we will show an improvement both <unk>.
And the revenue level and profitability compared with this quarter.
Summarizing our financial performance in the third quarter revenue totaled $37.3 million GAAP operating loss totaled $10.9 million and adjusted EBITDA was about $600000.
Well smart will elaborate on our financial performance in a few minutes.
I will now move on to review, our third quarter business as Jim and I were starting as the mobility segment and I've seen business.
Even though the COVID-19 pandemic has impacted the global aviation market you lot does not change its overall mobility strategy, we expect that the porn industry recovery I asked it would be even more important as passengers.
Well the pandemic came to rely heavily on always connected experience, we continue to demand reliable high speed Internet connections.
In addition, we believe that the introduction of why splits we why fight with significantly increased take up rates and will provide a strong tailwinds to the industry as well.
We are working closely with our customers and partners to enable them to meet the expected increasing bandwidth requirements and passenger connectivity the miss.
In China, we announced the sum is an important milestone as a driver of opening up the Chinese K band for in flight Entertainment and connectivity market for multimillion multibillion dollar market opened new opportunities. The announcement was made with our partner, China, Satcom and STS leading Chinese sub system.
Great well received the STC certification for Inflight entertainment and connectivity earlier this year.
He loved to have already received initial orders out of the multi million dollar potential for next year they'll modem.
The non geostationary orbit satellite constellation and the very high throughput satellite continued to be a major strategic focus area for the last.
We are on track with the platform development for the MPO Romeo constellation well.
Working closely with SCS, one additional program needs.
Recently, we extended the LCB MPAR partnership with SCS under a multimillion dollar follow on order for high speed modems. The motors will deliver multi gigabit throughput targeting a high end services over the constellation. Furthermore, we believe that we are well positioned to win additional.
Ngs, so business as opportunities mature.
Only owned subsidiary Weston is a trusted supplier the U.S. department of defense, providing high quality media clinical indication Boardex industrial quarter Western received further multi million dollar order from.
The us department of defense, demonstrating the continued facing waste and ability to execute at a high level and support the need for years to come.
You still OPEC was one of our strategic growth engines, we are continuing to access and have maintained our global market leadership.
According to a 2020 report by market analyst NSR.
Leads was 44% market share in modem shipments.
Superiority is for US it was impressive fiveg technical achievements.
As a matter of fact this quarter, we successfully demonstrated fiveg traffic gearing with outstanding performance overtime, just HTS satellites.
User experience was recorded using electrical company countless visa.
This successful tests, we have declared gilats cellular backhaul solution operational and ready for implementation in the Fiveg architecture.
The last strategy of providing the cellular backhaul over satellite solution as a managed service has proven successful in these beneficial for both the MINOSA and good luck and when those are free to focus on the core competencies, while leaving the complexity of the satellite communication to the Saturn I think still.
Philip on the other hand provides an end to end service and joining a larger contract with recurring revenue.
I am pleased to report that this quarter. We launched was several multi million dollar managed service deals, which included new terminals as well as substantial contract renewals extensions and expansions.
In North America, we have two major achievement. This quarter Gilat was awarded $20 million for three as a managed service contract renewal and expansion from tier one and minerals in the United States with this because them in those sold vendor to provide end to end services for LP Backhauling and disaster recovery.
While replacing existing satellite technologies.
This contract is a testament to the M&A those appreciation of Gilats proven service and technological capabilities.
In addition, we were awarded a three of the managed service contract by South and link for coverage to remote areas as well as emergency response.
On top of securing a new am I know in the United States.
This achievement further validated platform technologies superiority and testified to all in this.
We need a shift in seller back then.
I would like to show us that we extended another sale of equity managed service contracts with the leading Gemino in Mexico.
And have added to the pipeline over this you know such deals worldwide and hope to announce additional success in the near future.
We also closed several important cellular backhaul equipment among others, one always am in Africa, mobile networks, which extended gilad contracts.
Africa largest still our backhaul network over satellite.
And then other contact whiskey sell Kazakhstan's largest mobile network operator.
In the area of broadband connectivity, we continue this quarter to strengthens our presence in Latin America is important wins into one Argentina.
In in Argentina.
We were selected by Telefonica International also services, a subsidiary of Telefonica group to deliver broadband services to all areas.
No we were awarded the steel service deals for a nationwide enterprise.
Both of these projects, particularly challenging due to the pandemic and get us local team and partner excels in time to deployment in difficult overall savings.
As we have reported in the past our business into a hole in the first three regions awarded in early 2016 move.
Moving to operational phase and have now delivering services to half a million people.
Also we are in an.
Except as process regarding the fourth region that was awarded in late 2015, we expect to finish the acceptance momentum than the end of Q1, 2021, which will allow us to enter the operational phase and enable us to start recognizing the related recurring service revenue.
We are progressing with the additional two regions, which were awarded in 2018 slightly slower than expected due to the pandemic recession into.
This quarter Gilats was awarded a substantial five years, especially on contract by IP, The consortium, consisting of Telefonica and Facebook among others.
Vesting signing event, Mrs Mcdowell, Vice Minister of communication said and I quote.
The expansion of these services will benefit the around half a million people you're not accepted the challenge to work on a regional projects in an extremely difficult area and we should raise is impeccable. This.
This milestone towards that investment in private entities generating the expected value for the citizens, especially during the current worldwide pandemic, we need internet access to stay connected.
We believe that further to this expansion, which includes hazard hundreds of additional sites then we see significant potential.
To increase and expand to additional regions as well as to extend the deal over time. This does demonstrate our ability to execute our vision of profitable recurring revenue into it.
In closing I'm pleased to share with you that even though the industry continues to deal with the COVID-19 pandemic with very significant achievement this quarter, which will support our long term growth as.
As we move into Q4, we are beginning to see the light at the end of the tunnel and are cautiously optimistic. However, we are watching the pandemic closely and the second wave hits many parts of the world.
We like others have led to conduct business with the pandemic and I'm pleased with our accomplishments and was as the pipeline of significant and large opportunities on.
On a personal note I am optimistic about the great future for Gilad I'm fully committed supported by my dedicated management team and talented employees to bring it up back to growth and profitability and to service our success from before the pandemic.
The smart reality.
So please go ahead.
Good morning, and good afternoon to everyone I.
I would like to remind everyone that our financial results are presented both on a GAAP and non-GAAP basis.
We regularly use supplemental non-GAAP financial measures internally to understand manage any value.
Business and to make operating decisions we.
We believe these non-GAAP financial measures provide consistent and compelling measures to help investors understand our current and future operating performance.
Non-GAAP financial measures, mainly exclude the effect of stock based compensation amortization of purchased intangibles.
Modulation of lease incentives.
Asian expenses or income related to trade secret claim reorganization costs merger acquisition related litigation expenses and initial recognition of deferred tax assets with respect to K forward losses.
Reconciliation table in our press release highlights this data and our non-GAAP information presented is X.
Excludes these items.
I will now to our financial highlights for the third quarter of 2012.
Revenue for the third quarter of Twentytwenty with $37.3 million compared to $63.4 million in the third quarter of 2019.
This mainly reflects the impact of COVID-19 on revenue from our eyes from IC.
The solution segments, however, compared to previous quarter of Twentytwenty revenues was similar at $38.3 million declining by only around $1 million.
Six networks segments revenue.
$22.8 million compared to $27.3 million in the same quarter last year.
The decrease is mainly due to lower revenue from our EMEA region.
We saw a slight improvement compared with the profit quarter with six networks revenues were $21.8 million.
Mobility solutions segment revenues were $9.2 million compared to $27.1 million in the same quarter last year and $14 million in the previous quarter.
The decrease reflects the effect of profit 19 on the IC market.
Terrestrial infrastructure project segment revenues, which include the construction revenue for projects footprint is telling too was $5.3 million compared to $9 million in the same quarter last year and $2.5 million in the previous quarter.
As Weve discussed previously during the construction phase, which from from the judge will vary quarter to quarter, depending on the percentage of the project completion.
Our progress in the last two quarters has been slightly slower than expected due to the pandemic restrictions.
Our GAAP gross margin in the third quarter Twentytwenty was 25% of revenues compared to 37% in the same quarter last year.
The decrease in our gross margin is mainly attributable to a less favorable revenue mix as well as the lower revenue levels.
Our gross margin in the previous quarter was 25.
Total operating expenses on a GAAP basis for the third quarter were $20.3 million compared to $16.3 million in the same quarter last year and $13 million in the previous quarter.
In the current quarter, we had expenses related to the Comtech legend mitigation amounting to $8.2 million.
GAAP operating loss was $10.9 million compared to operating profit of $7 million in the same quarter last year and operating loss of $3.5 million in the previous quarter.
Excluding expenses related to the Comtech and litigation GAAP operating loss in the quarter was $2.7 million.
GAAP net loss in the third quarter was $11.6 million or 21 cents per share compared with net income of $6.3 million or.
11 cents per diluted share in the same quarter last year.
Net loss for the previous quarter was $4.2 million or eight cents per share.
Now looking at our results on a non-GAAP basis.
Operating loss was $1.9 million compared with an operating income in the same quarter last year of $7.5 million.
We saw an improvement compared with the previous quarter's operating loss of $2.6 million.
I would like to note that we have put significant effort in matching ongoing operating expenses with the reduced revenue and operating expenses were $11.4 million reduced from $16.8 million in the third quarter of last year and $12.2 million.
In the previous quarter.
Net loss in the third quarter was $2.6 million or five cents per share in the same quarter last year, we reported net income of $6.8 million or 16 cents per diluted share.
We improved versus the previous quarter in which we reported a net loss of $3.3 million or six cents per share.
Adjusted EBITDA for the third quarter, Twentytwenty was 600000 $2 million compared with $10.1 million in the third quarter of last year.
We saw an improvement compared with the previous quarter, which adjusted EBITDA was $100000.
As of September Thirtyth, Twentytwenty, our total cash and cash equivalents.
Good evening restricted cash were $77.2 million, a decrease of $8.1 million from the previous quarter.
I note that we received an additional $70 million in cash a termination fee for the comp technologist cancellation during October 2020.
We recently announced our plans to distribute dividends to our shareholders in a total amount of $55 million out of which 20 million when declared and will be paid on December 2nd Twentytwenty, an additional $35 million is expected to be declared.
Subject to court approval at the beginning of Twentytwenty one.
Dsos, which include our fixed networks and mobility solutions segment.
Exclude receivables and revenue of our terrestrial infrastructure project segment increased to 84 days compared to 79 days in the previous quarter.
Our shareholders equity at the end of the quarter totaled $225.3 million compared with $236.9 million at the end of the previous quarter.
That concludes our review thank you for your attention.
I'd like now to open the call for questions operator please.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two.
You're using speaker equipment kind of lift the handset before pressing the numbers questions will be Paul in the order. They are received please standby while we poll for your questions.
The first question is from.
Answer Karger from Discovery Group. Please go ahead.
Yes. Thank you first for Q4.
Signing reports given the.
Pandemic circumstances.
Question.
[music].
With regard to Gogo.
Yes.
Ongoing sale of its commercial division to Intelsat.
That's for the seller in the 10-K U equipment so what.
What is the impact.
Any on the.
On on Kellogg for that for me.
And with that sale to close I have.
With respect.
Maybe some expansion of of service so I would welcome any comment on that.
Yes.
Indeed, we are seeing several consolidations in the market.
And Gogo acquisition, Gogo CA acquisition by Intel by intercept is one of them.
We are working closely with Gogo and.
Closely with into the South and we think that the.
The combination of the two carries a significant potential for Gilad first of all we consider both of them as partners and we believe that there is a boy for extending the cooperation of Gilad. Please.
Those two companies.
Yes, that's one of the reasons into sub acquired Gogo Gogo will use.
Can you capacity and that means more deployments for good luck.
And then later on modems.
Generally we see to that positive.
Development Formula.
Thank you a follow up question, if if if if I may the.
On the military side defense just recently appointed ahead.
Ahead of them.
Rejuvenated Department, that's got a lot to deal with that sort of business could you offer any comment as to what areas or what.
Waterflooding so ongoing at this time, Melissa, let's say it was that.
Business.
That's a good question as you know.
In the past few years.
The defense business was relatively small business for us, but mainly tactical equipment.
He resigned 10 hours and amplifiers that.
We develop and manufacture in waste stream.
What we see today is that we see increase in opportunities in the market and we saw it.
The time is right to strengthening our team and we hire the new App.
They had those defense business to make sure that we can capture those opportunities. So it's too early to say because it's just starting the work as we speak but we believe that with them, we'll be able to capture much more opportunities that we used to capture in the past.
Thank you very much and good luck. Thank you got to.
The next question is from Val Shine of Hebrew University. Please go ahead.
Yes Hello.
Good morning.
And can you say something about the what is your competitive advantage.
And what are your goals.
Goals for the Chinese.
Chinese market you all there.
Used in markets and whether you need.
That's an amount of gas for our future growth.
So in one question you capture.
30 minutes answer, but I'll try to be.
Sure first of all.
Our competitive advantages.
We believe that our technology technology and our presence worldwide. We have a pleasant thing a lot of countries worldwide, we invest heavily in.
In R&D.
And our ability to provide not only equipment, but also services, including managed service.
And position us very well in the growth areas that we invest in.
As for.
The cash that we need for future expansion.
We have I think.
After we.
Include.
70 million.
Payments from Comtech and $55 million dividend I think we have about $85 million to $90 million in cash and equivalents so is sufficient.
Let me add to support our future growth.
Made to be organic or inorganic growth.
Can you repeat the sales questions that you asked.
Yes, that's right these markets.
I I asked it before the competition aspect, though.
Chinese market and ER and the growing companies that deal with Ziggo it kind of their technology.
So.
The Chinese market is.
It's not a simple market.
Walking.
Several years in China.
We delivered.
Basement for China's 16.
And we recently announced a our achievement.
With China saw an Sps of deploying our own more than in.
I think it's fair.
Yes.
Commercial more than the sliding China, using a China Soc to 16 carry a bed.
[noise] itself.
Israeli company.
In China.
Nope.
Not that the Chinese are not doing business with the U.S., but sometimes itself to be a non.
This company as there are several large opportunities in the coming future China South is going to launch several new satellite and we think that we are well positioned to win them and we are.
I think the other three RFP to be issued probably at the second half of 2000.
21, I think today that the most.
Important the activity that we are doing is mainly concentrate on the in flight entertainment and connectivity opportunities in China.
Thank you very much.
The next question is from a soft borrow.
Hi, Mark. Please go ahead.
Hey, guys first of all welcome back.
On the conference call.
If we could start off with.
Questions on each of the operating segments just to kind of keep it clean. So let's just networks are seeing that revenues are stabilizing and even recovering from Q3 2000 levels, which is pretty encouraging.
Sandy that stabilization or maybe initial signs of recovery attributable to just attribute this give or take yes, I don't actually need a dollar sign.
Number one traditional satellite equipment you guys. So.
But to the satellite.
Cellular backhaul business and.
And number three the flotel services revenues, because only do the comps on a year over year basis, we should see even an incremental gain from Intel so kind of break it down for us where the where the positive trajectory is coming from since two Q and then some of the other moving parts.
So and while the smartest gathering the information you asked.
I'll give a high level bridge.
What we saw.
In the market this quarter is a very.
Decent recovery and in the fixed networks.
Especially in terms of booking and there is timing.
Sure between booking and revenue usually it's between three to six months.
Sometimes we deliver the day after but most of the cases, if you buy ups and other equipment, it's the time to manufacture ship and install and get the the acceptance.
So I believe that the achievements, we have made and announced this quarter, especially in cellular backhaul, which was.
It was close to 40 or 50% of our bookings this quarter.
We will see in the coming few quarters, especially.
Yes. It is.
Managed service and.
You will see it over.
He is a period.
In Peru, we are progressing as planned with.
Services.
On a daily and in addition, as I said in my script, we were awarded extension.
Significant extension or expansion of the IP agreement, which is a contract of.
Tens of millions of dollars.
A period of five years.
Providing.
The.
Connectivity for IBT, which will use it for fall G. backhauling.
And this is just the beginning of those services because right now we can sell them all in.
He just soon we'll be able to provide this also in Costco the fourth region.
We expect to move to operational phase early.
Next year and.
Anytime and Amazon off the 15 to six regions that we were awarded in 18.
Probably early in 2022, so the potential over there is the is very high and the additional costs from those revenues are relatively low because we are selling.
The existing capacity of their networks. In addition, there are several other large opportunities in below.
We hope to capture in 2021, one of them is.
It get the award from one a tale of.
Services of the second half of the network.
No we are not obliged to maintain.
If you look at the shake.
Segment.
Huh.
In general Andy changes.
Quarter over quarter, and it's important to know that.
Quarter over quarter, the revenue mix changes a lot.
You too different large deals but in general.
Cellular backhaul is around 30% of the revenue there.
The payroll services revenue right now are around 20% to 25% and we expect them to.
Right as we enter into the operational phase of the different regions.
And the broadband which is the rest is is around 45% of those revenue.
And that's actually extremely helpful.
Revenue was actually down even when I did the math in my head here, even a little bit better than what we had modeled pretty cold in right you weren't expecting to get.
Maybe 25% of the networks that right just going better than you had expected in terms of services coming online.
You're talking about the terrestrial no I think it's as expected except I think that.
The IP key deal.
Is very very.
Good beneficial deal that.
It may be higher than expected, but except for that when looking at the pool regional projects. It's on.
Better than expected I think it's more or less in line with Eva.
Even maybe a bit slower because of the coffee 90.
I will remind you that in the water is traditional still valid for almost a seven or eight months.
Who is significantly affected by the calls returned.
Yes, there is still.
Some areas.
Loosely close and it's.
It's.
Telephone company has the ability to.
To move from.
Region to region and installed provide service, but it's not as easy as it should be.
Yeah, what I was referring to is just not on the construction business right I'm just talking about the services revenue yes.
That was services revenue is right just to be clear, yes out of the six strength, yes, yes, okay.
Okay cool so that color is very helpful.
Many of the satellite players legacy satellite players have come under financial pressure. This has been a long term trend bunch of negative trends, but carbonite in really worse in the situation for the more leveraged companies.
One major company or actually declared bankruptcy.
What kind of impact are you guys seeing are you seeing a shrink.
Capex, how should we expect.
You know.
Now moving forward are they even maybe potentially opportunities here any color.
So in the you know the service providers, especially the big ones in the satellite operators.
Highly leveraged companies.
We saw at the beginning of the years.
Chapter 11 trend when speed cost and global Eagle and into the southern others went into the chapter 11, most of them are on the way out I know that the speed cost.
And receive the all on it.
So we see the equity injection from a their creditors and global Eagle moved to be owned by the Lynn The first lien credit those into the South received court approval to invest $400 million from the creditors.
In order to acquire Gogo CA, So I think all of them will move out.
I think that no doubt the wars effect, especially was based cost where we're doing a lot of business with them in Australia.
Right No nbn.
Acquired speakers to strata and we saw we are going to do the business directly with them. So we believe that the there is nowhere business that was lost.
Some.
Delayed and we'll see.
The orders are coming probably if not this quarter than early 2021.
So I guess kind of on the same question because it's also going to apply to the NGL business moving forward.
[music].
You guys compete to a certain extent.
With.
What did you just additional satellite players on equipment right. So.
Maybe any lack of competition you know.
Kind of impact you may begin.
During the third.
Certain products.
I'm not sure I fully understand.
Questions in some cases.
With satellite operator, we compete on on equipment only satellite operators.
On their own equipment, it's only a viastat two usually doesn't sell the equipment to extend the loan. So it's not really a competition, it's mainly competition for all customers.
And the U.S networks and with them, we do compete here and there and.
Nothing Smith.
Side that.
We do compete with some of them.
We solve our customers on on services, but our services today is strictly to everyone knows and we try to limit to limited.
The managed services, we're providing to them a nose and when needed we buy the capacity from the Saltillo satellite operators. So we have a.
Customers have vendor relationship so I think that.
We are managing the relationship as well.
Okay, great Yeah.
How is this financial situation in Peru.
On the balance sheet the way receivables look.
In terms of the you know the GAAP accounting, but.
You got to feel comfortable with the situation or.
In Peru with the government.
Taking a closer look.
Fiscal situation, but any color there would be helpful.
Yep.
The relationship of Gilad and the government of village.
Very good we are doing project was the government in the last 20 years I think we had more than 15 projects already xcel paying on time and in dollars. So we don't have the exchange.
Exchange rate risk in most of the cases.
Helping in advance.
Today in some of the regions. We are in a situation that we are.
In order to achieve milestones, we are more or less than that we should based on the contract and in those kind of cases, so sometimes we need.
Two final finance it on our own we expect a very large payments from the government once they accept Cusco.
It's close to.
$20 million into payments depend on what the what the type of the network.
Network. They accept as there are delays in accepting the networks, mainly because of the profit they can send pip.
People at two.
Test and accept relevant sites.
Today, we are in the progress with them and.
We believe that by the end of Q1 will be able to get the two acceptance both for the transport and told the access networks.
So we are aiming to get payment if not by the end of this.
Quarter Q4.
Then by Q1 2000 and.
Slide 21.
Okay, Great that's very helpful.
Ah Okay that's enough on.
Six networks.
On the mobility business.
I know that visibility is still low here, but number one.
Revenue came down $14.9 million this quarter.
To what extent.
Bottoms up number one.
And then number two.
Mentioned that you expect obviously the business to return to a certain level, we were talking about maybe to K 2000 airplanes.
Being fitted whether it be retrofitted or fresh new airplanes being equipped with in flight connectivity.
How quickly do you think we come back here, even if even if the airline you go back to normal business, maybe late 2021, who knows when.
How what's kind of the turnaround time between when business starts to normalize.
In terms of air traffic and then when we start to see.
The pickup in demand for modems.
That's a that's a good question.
We we are not going to give guidance for Q4 was a revenues I think its a.
The revenue in Q3 was lower mainly because at the beginning of the year we deliver.
Delivered the order that we had in the backlog.
No most of the service providers and integrators or not.
Buying equipment.
Until that we'll see.
That.
Asian markets return.
The question when it will return you know I don't think anyone knows the answer.
I think everyone thinks that the earliest will be probably mid next year as some things that.
And maybe 2020.
Dual or even later it depends what is the.
Aspirational, which one that you talk to.
We think that.
Let's say a variation will be done we believe that in the same quarter or the quarter. After all the service providers will return to a.
Hi equipment and installing increased.
Okay deployment weve.
We believe that the adoption of the wider adoption of free wife I will.
The significant opportunity for glass and the market and there is a lot of potential over there.
And for my discussions with analysts and CEO of those service providers.
They say that they can predict when they everything will return to normal but they believe that within the three to five years times. They will manage five to 10 times. The capacity. So you can use to manage before the pandemic.
This alone is the enormous opportunity for he lot in equipment and services.
Okay, I guess last question.
We had spoken in the past you could just remind me in the press release or whatever.
On the situation of the.
Of the antennas.
We had spoken about you guys signing.
Business Aviation deal, obviously, we can put that on ice or I don't know about but in general and in the future commercial and.
Yes. So we are the antenna for business Association, but the project was cancelled the thing a year ago, and we announced it.
We announced several several development development with the east.
He saw high antenna in the past few months.
We are progressing but I must be honest very slowly because the fact that.
Service providers and the airlines.
Willing to invest right now that means that the opportunity, we'll take significantly more time than we.
Regionally the expected.
So.
It will take time, its not counting for two more morning, and even you know once they will decide to invest pizza cyclo several years until you fit tailored to their needs get all the certifications. So it's not the opportunity for the near future.
Okay. So with that first of all thank you very much for the night clear Rod.
Your answer is.
That's the luck I look forward to talking elastomer. Thank you very much.
The next question is from Kerry Steiner please.
Please go ahead.
Hi, Andy.
I wanted to ask you regarding your cash balance.
So you have a lot of cash on hand, and your stock price is very undervalued. So.
So are you thinking of.
Making a buyback plan.
So.
One by one I would say, we just stick.
Now that we want to share a $55 million dividend.
20 million was declared and going to be paid in three weeks time and other 35 will be declared once we get the approval from core to capital reduction.
Because we don't have a.
Significant.
Distributable.
Profit.
Because the.
Termination fee profit will be recorded in Q4, and we wanted to share the dividend as soon as possible and not wait to after we report our yearly results towards the end of Q1 so.
$35 million is already there.
We remain with 85 million.
And in the future we fully think it's appropriate we will.
Discuss it.
The board and.
If we decided to go with it we will announce right now it's not on the table.
Okay and.
When should we expect.
Turning to profitability is it.
Next year like can you give some timelines about it.
So.
It's a bit too early to give guidance for 2021, although I can say that we are definitely going to see.
Gross on top line and on on bottom line, we show a minimal and adjusted EBITDA. This quarter will so we will show quarter over quarter progress.
In Q4, and later on in Q1, and 2021 will be profitable again, we own.
Cautiously optimistic because we see that the world.
Is that.
Starting to.
To digest, the situation and do business, although these coffees and although we can't.
Well and meet face to face with customers we can't.
Do installation on our own and we doing doing it remotely in most of the cases, so we see the acceptance.
Is there to do business.
Profitability and significant profitability, we'll see once we will.
See the topline return to where.
The levers we used to see before the pandemic and they I see.
Return.
I think that the 2021 will be a significantly better year.
Then 2020 and we'll show.
Is this in double digit EBITDA, but it's too early to say more than that.
Okay. Thank you and good luck. Thank you very much.
The next question is a follow up question from Gunther Karger of Discovery Group. Please go ahead.
Yes, Thank you for taking the additional question.
Well actually I'm, a those are gravitating rapidly toward their fiveg or.
Ah network systems or the emerging.
Hi, all T. Internet of things is coming into play as well. So my question is as they all see access.
Accelerates and start generating a bandwidth demand.
In addition to that standard.
No that was operators wireless haven't any a positive.
Influence on July business.
So.
I'll start with the Fiveg no doubt fiveg will be a significant growth engine in the future.
But I need to be honest five g.'s.
A material revenues I will say it will take two to three years to to see it in the in the PNM from the simple fact that the you first start with the.
Cities, where do you ever terrestrial connection and later on use.
Deploying who will say well areas.
We will see in in the interim period is that Fiveg will drag a lot of fourg deployments because a lot of.
Am I know who is going to deploy.
Deploy fiveg will be required in several cases.
And by the license to deploy fourg in the whole areas and fastest way and the easiest and the cheapest way to do it is with Gilad equipment and.
As I said the based on the analyst.
The report and so we have about 44% market share in the solar backlog, but if you were.
Look at the details and just look at the Fourg I think we have more than 80% of the market share. So I think we are well positioned to to capture a lot of the fourg business in the coming few years.
Up until Fiveg will be ready for the <unk>.
If a satellite to fill all back on.
We recently announced our.
Shipment with Tyco.
Which we demonstrate.
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Together with them.
Absolutely.
I would be most of the applications royalties narrowband and not broadbent.
And we are looking at Lisa area also I can tell you that today, we are investing and.
Denial being we do have some business in aiotv.
Actually in aggregation places like.
Calling for loyalty devices.
We'll see more of this in the coming future.
Thank you are there.
You got to.
[noise] if there are any additional questions. Please press star one if you wish to cancel your request. Please press star two please stand by while we poll for more questions.
Yes.
There are no further questions at this time before I ask for Smart Halpern to go ahead with her concluding statement I would like to remind participants that a replay of this call is scheduled to begin two hours. After the conference in the U.S. Please call 1888.
Three to 6931 zero in Israel. Please call 039 to five five 904 internationally. Please call 97239 to five 590 for most not would you like to make your concluding statement.
I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon or speak to you in our next call anyone who would like to speak to US is invited to contact our investor Relations team. Thank you very much and have a great day.
Thank you. This concludes Gilats third quarter 2020 results conference call. Thank you for your participation you May go ahead and disconnect.
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