Q2 2021 Gilat Satellite Networks Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by the conference will begin shortly.
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Ladies and gentlemen, thank you for standing by welcome to the <unk> second quarter 'twenty 'twenty..1 results conference call. All participants are present in listen only mode.
Following managements formal presentation instructions will be given for the question and answer session for operator assistance. During the conference. Please press Star Zero as a reminder of this conference is being recorded August 10th 'twenty 'twenty 1.
By now you should have all received the Companys press release, if you have not received it. Please contact the lots of Investor relations team at GK Investor and public relations at 1.6 for 66883.559 or view it in the news section of the company's website Www Darkey lot Dot Com I would now.
Like the hand over the call to Mr. Ehud Helft GK Investor Relations. Mr helped would you like to begin please.
Thank you operator, good morning, and good afternoon, everyone. Thank you for joining us today for the last second quarter results conference call and webcast.
The recording of this call will be available at the beginning of approximately noon eastern time today August 10.
First on the that's website for a few of the 30 days.
Also please note that investors are urged to read the forward looking statements and get out of anybody's.
They are reminded that the statements made on this earnings call. It on all of 2 sort of kind of ex maybe deemed forward looking statements within the meaning of the.
Private Securities Litigation Reform Act of 1995.
All such forward looking statements, including statements regarding future financial operating results involve risks uncertainties and contingencies.
Many of which are beyond the control of the lot and which may cause actual results to differ materially from those anticipated results.
<unk> is under no obligation to update the well after these.
These forward looking statements what of and resulting from new information future events or otherwise and the company expressly disclaims any obligation to do this.
More detailed information on why the risk factors can be found on the that support funds with the Securities and Exchange Commission.
And with the let me turn to interactions on.
On the call today are in instead of at this idea.
T O and leasing of smartphone Gilad CFO.
At the turn the call over to of D. D. What range of the game.
Thank you and the wood and good day, everyone I would like to thank you for joining us today for our second quarter of 2021 earnings call.
I'm very pleased with our results this quarter, which demonstrate the soybean improvement and the return to profitability you know of business. We showed strong revenue growth of 49% yields of it.
The 7% quarter over quarter the.
For the improvement was throughout our income statement with improved gross margins and the return to profitability on non-GAAP basis with positive EBITDA of $200000 kind of adjusted EBITDA of $2.5 million or per.
For months was driven by the filter back on and just so enterprise was built in defense of the market, which have shown significant progress and we expect this momentum to continue for the foreseeable future.
We also made significant progress in the mobility market and in the operation into the whole securing significant deals.
Looking ahead through 2021, we expect to continue our growth strength in both revenues and profitability. We expect the fill a lot of backhaul and just so in the operation into the who will be the main growth drivers for the remainder of 2021 and beyond.
However, looking further out into 2022, we believe that it will be the ear of significant growth for our company as the NGL. So Paul just throws on materialize in on mobility segment growth was maritime in defense of opportunities and the expected recovery of IFC.
In order to materials and the significant opportunities. We see ahead, we are investing increase airports in R&D to better support the future growth.
The focus on some of the business achievement in the highlights for the quarter.
Mobility is the major focus area in Los Angeles for Gilead recently secured the multimillion dollar agreement with this yes for the next generation mobility Bloxom did here of the breakthrough in solidifying our leadership in the mobility market, enabling supply of an issue of maritime services to some of the world's top cruise line of.
And the maritime service provider.
Glenn the comparison will be delivered by our multi orbit blood from utilizing the also the be embark on installation and other S. Yes, Gil satellite, including Ses 17.
On the IFC market, we are seeing initial seasonal recovery.
This remains a highly strategic market for Gila and we view of the short term impact from the pandemic over the past few quarters as temporary issue.
However, we do believe it will still take some time for the IFC industry to return to pre COVID-19 levels and for.
He loved the IFC segment do we call the 2 each full potential.
And of the Defense segment, we are seeing growing global opportunities as we mentioned last quarter. We closed several important multimillion dollar deals in both Latin America in Asia for the more we were awarded a $5 million contact contract by tier 1 U S derm and I'll provide the 2 pollo of tactical Satcom terminals for military sales.
The white digitally.
This is in addition to our ongoing to settle the supply of high quality mirrored the communication product to the U S Department of defense in the U S Army and from our U S subsidiary wasting.
And for whom we received the $13 million of award from point of sale.
To provide public free Wifi services across hundreds of sites in the region of a good job, but we must clunk of illegal in Cusco the.
2 of the project is potential for further expansion to thousands of additional sites and extensions for additionally, as well.
We are making significant progress with our strategy to deliver services over the network and as such expect to meet our previously stated goal of $50 million.
In annual recurring revenue for them too.
The non-GAAP stationary I'll be satellite constellation and the very high throughput satellite segment continued to be of major strategic focus area on gross engine for Gila.
As the leading provider for this market, we see solid growth potential comprising of hundreds of millions of dollars in market opportunities for which we are making very significant progress in several of phones.
We continue to receive a multimillion dollar orders from a leading satellite the opioid for support of low Earth orbit constellation. It was reported in the best of subsidiary waste stream was chosen to supply gateway solid state power amplifiers for this project. We also continue the development of the ground segment for the L.
She is also the be ample of satellite constellation and expect to start seeing significant revenue from this project in the coming quarters.
There's still a lot of medical segment continue to be of strategic importance to us we saw significant expansion in the fall on all of those doing the quota for Mark do you want the immuno globally.
This is a testament to the great values of our customers using our solution.
Continued to expand the networks.
I would like to highlight all of leaving them of no customer in Latin America, we expanded the multimillion dollar of Iot project for additional coverage provided by <unk> to a lot of backhaul solution the mobile operators.
And it's a recapture of our Iot network to address the critical need for enable better communication between the field and the office on the 5 G front, if the market adoption of 5 G is going we see strong potential for get out to extend its leadership.
This is this will initially be with the drive towards additional soldier deployment and is the next step with 5 G as it spread to other areas.
In North America, we closed the deal of estimated a total of $5 million with Pacific does the board to provide broadband coverage in Alaska for everyone everywhere.
This strategic agreement will utilize the gila or the multi application platform to provide both fixed and mobility applications.
In the in the Enterprise segment. We also closed important deals in Latin America, including 1 with Telefonica.
In summary, as you can see it hasn't been very active and successful quarter for Gila and I'm, particularly satisfied with a solid strategic and financial performance over the past quarter.
The strength was driven by cellular backhaul and yourself and defense markets, enabling very strong revenue growth and a return to profitability on a non-GAAP and EBITDA level. Following the COVID-19 downturn, although the paucity of.
The other what more we want new service projects in the whole.
Which will bring us the recurring revenues in the future, that's where the new contract in defense and Maritime markets. We expect on momentum to continue for the reminder of the 2021, providing continued growth in both revenues and profit.
Looking further out into 2022 and beyond we expect significant growth primarily in the following the market segments.
On the engine. So the HTS segment, we see opportunities of hundreds of millions of dollars for which we are making very significant progress.
For the mobility segment, we expect the strength of the leadership with the Ses Award for them.
The ability and maybe the platform as well as we've expected the recovery of the IFC market because the other travel picks up.
In the fill a backward over the satellite segment.
The global leaders in for GNL D and as such we expect to enjoy the growing opportunity as markets of the 5 G for which we have proven technology in the defense segment. We believe the dog gained momentum with global wins this quarter instead of a potential of tens of millions of dollars.
I'm excited with all the potential and look forward to reporting on our progress over the coming quarters the news.
And with that I'd like to hand over to the Smith well.
We are now ready for your report. Please go ahead.
Thank you Heidi good morning, and good afternoon to everyone.
To remind everyone.
Financial results are presented both on the GAAP.
GAAP and non-GAAP basis.
We regularly use supplemental non-GAAP financial measures internally to understand manage and evaluate the business and to make operating decisions.
We believe these non-GAAP financial measures provide consistent and comparable measures.
All of investors understand our current and future operating performance.
These non-GAAP financial measures should be considered in addition to and nothing new of comparable GAAP financial measures.
Non-GAAP financial measures, mainly exclude the effect of stock based compensation amortization of purchased intangibles amortization of lease incentive.
The litigation expenses or income related to trade secret screening.
Reorganization costs merger acquisition and related litigation costs and settlement and the Nisha recognition of deferred tax.
Is it with respect of came forward.
The reconciliation table in our press release highlights this data and our non-GAAP information presented exclude these items in accordance with the Reg G requirements.
I will now move to us.
The highlights for the second quarter of 'twenty 'twenty 1.
Overall as of D mentioned earlier, we are pleased with the results.
Our quarterly results showed continued sequential improvement and strong year over year improvement in both revenue and profitability, notably the very happy to have returned to profitability on the non-GAAP basis in the quarter, which we expect to maintaining true in the coming quarters.
The trends indicate the twin of moving in the right direction and even while the Covid pandemic remains in the background. There is of clears to validation of our end markets.
The improvement does not yet have the the significant contribution of the in flight connectivity or IFC vertical which remains weak.
Jim in terms of our financial results revenues for the second quarter were $56.9 million up 49% when compared to $38.3 million in the second quarter of 2020, and up 27% compared to $44.7 million in the previous.
This quarter.
The increase was driven by revenue growth from enterprise broadband cellular backhaul N G. So and even market.
In terms of the revenue breakdown by segment fixed networks segment revenues were $38 million compared to 21.8 million from the same quarter last year. We also saw an improvement compared with the previous quarter with fixed networks revenues were 25 points be millions of dollars.
These results demonstrate the significant improvement in the business.
Are you seeing in this segment and we expect that it will show continued improvement in the second half of 'twenty 'twenty 1.
Mobility solutions segment revenues were $19.9 million compared to $14 million in the same quarter last year.
But the previous quarter, we saw on increased from $11.1 million.
Movement in the segment is driven by revenues from N G. So in different markets, well I still remains weak.
Sales in such infrastructure projects segment revenues, which include the construction of revenues for our projects in Peru for putting the talent was $6.2 million compared to $2.5 million in the same quarter last year.
$8.3 million in the previous quarter.
To summarize the quarterly GAAP results, our GAAP gross margin improved to 29% compared to 25 per cent in the same quarter last year and 28% in the previous quarter.
GAAP operating loss improved to 300, thousands of dollars compared to operating loss of $3.5 million in the same quarter last year and operating loss of $3.7 million in the previous quarter.
GAAP net loss in the second quarter improved 100, thousands of dollars or zero cents per share compared with the net loss of $4.2 million for lots of 8 cents per share in the same quarter last year in the previous quarter, where the GAAP net loss of $5.1 million for.
Lots of 9 cents per share.
Now looking at the quarterly results on the non-GAAP basis.
Non-GAAP gross margin improved to 29 per cent compared to 25 per cent in the same quarter last year and 28 percentage in the previous quarter.
I'm very encouraged as I said before my return to profitability on the non-GAAP basis, while we continue to invest significantly in R&D.
Non-GAAP operating income for the quarter was 200 thousands of dollars compared with an operating loss in the same quarter last year of.
$2.6 million in the.
Previous quarter, the operating loss was $3.8 million.
Note that we had $16.6 million non-GAAP operating expenses in the quarter compared with $12.2 million in the second quarter of last year and $16.2 million in the previous quarter. The second quarter of last year included temporary cost reductions, which mainly consisted of reduction of.
Of our global work force to 80% work scope will be.
He turned all of our employees to 100% work scope from December 2020.
We continue to invest significant efforts in the R&D to ensure timely delivery of the existing large projects. We've been awarded mainly in the Leo and MEO constellations and also to get your other opportunities. We see ahead of us.
Non-GAAP net income in the quarter was 400 thousands of dollars or 1 cents per share.
In the same quarter last year, we reported net loss of $3.3 million or 6 cents per share in the previous quarter, we reported a net loss of $5.2 million or 9 cents per share.
Adjusted EBITDA for the quarter improved $2.5 million compared with an adjusted EBITDA of 100 thousands of dollars in the same quarter of last year in the previous quarter, We reported an adjusted EBITDA loss of 1 point for me in dollars.
Moving to our balance sheet.
As of June 30 of 2021 hour of total cash and equivalents and short term deposits, including restricted cash were $82 million compared with $75.6 million at the end of the previous quarter.
In terms of cash flow, we generated $8.4 million from operating activities.
Dsos, which include our fixed networks and mobility solutions segments and exclude the receivables on revenues of our terrestrial infrastructure projects segment decreased 65 days compared to 77 days in the previous quarter.
With regards to on inventory as you probably know 1 heard there is a global shortage of electronic component and material, which has been ongoing now early 2021, and he is affecting us and numerous other companies.
However, given our careful planning and prudent inventory management, we have been able to manage the impact thus far and we continue to work hard and are leveraging our strong cash position to ensure we have sufficient inventory available to meet the demand for our solutions.
Shareholders' equity at the end of the second quarter total $228.7 million compared with $228.1 million at the end of the previous quarter.
Looking at.
All in all we are encouraged me the continued sequential improvement you know where results on both the top and bottom line and the dimensions. We view 2021 is the year of recovery in which we emerge from the COVID-19 crisis.
We look forward to a year of continued revenue growth and it's true.
Profitability in 'twenty, 'twenty, 1 and much more so from 2022.
That concludes my financial review I would now like 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 1 if you wish to cancel your request. Please press star 2 if you are using speaker equipment kind of of the handset before pressing the numbers of questions will be pulled in the order. They are of seats. Please standby, while we poll.
For your questions.
Yeah.
I repeat if you have a question please press star 1.
The first question is from Chris.
Chris Quilty of Quilty analytics. Please go ahead.
Thank you and congratulations on the good results of course.
For the oppose Matt.
Matt on the last point, you mentioned around the chip shortages.
Seeing improvements or is the situation getting worse, there and how should we think about that in terms of either restricted sales capability or impact on margins for the balance of the year.
I agree.
Thank you for the question right now.
We mainly are in control of those GA dates we do see in back of the lead times of our our equipment and that's why we are managing that day.
Ordering ahead of time, sometimes we need to order a year in advance.
I do not expect it to have material impact on our margins or on our results.
As we manage it correctly, however, I do expect that the inventory levels well a slightly.
Likely grow because of those sort of shortages.
Fortunately you out of the cash to the front that and I guess on a similar angle with the resurgence of the Delta variant are you seeing any impact on your business.
In terms of trends either.
Globally, you know by region or by market activity.
Hi, Chris this is.
The the does the aversion variant.
Yes.
I think you know 2 months ago are we sort of the Covid is behind US what is the result of a vaccine on day.
Vaccination rates and now we see that.
No real fall of form.
The finishing this.
Episode.
We started to meet some customers on Norway. It seems like due to the restriction is laying the worldwide.
To reduce our traveling significantly again, but from business perspective more of less its the same in the last 6 months, we don't see additional the.
The effect, but again.
From the.
The last 15 months of it.
Every month, you learn something new but the right now it's the same situation as the draws in the last 6 months.
Right.
On the follow up on I think you had stated in the script that you expect Peru to be the primary growth driver on the back half of the year.
Is that expected to come on the the terrestrial side or services and will that have any kind of a material impact on the gross margins that you report in the back half of the year relative to the first half.
The growth should come.
From the services, mainly from the 70 shows most of them on the history out of network that we all of the building and it's going to a increase of.
Margin of.
Especially in the whole the affair.
On the.
Consolidated the P&L.
The <unk> will be the you know it depends on the odds of a new mix not only on growth, but if we take the award of a stand alone but on margin.
You should increase significantly with the winning additional salary expense and I guess that it will also increase the overall gross margin.
Right and.
Congrats on the new defense wins can you.
Help us understand are those wins that you're seeing in the defense segment generally new program starts or are these.
Programs, where you're going in and taking away business competitively.
It's a combination of on both in the U S. But all of some portion of our programs that will continue to get the although some cases at the new projects on the existing Blue gums, along the you know if we consider it boils on the.
A huge budget basket under the the deal a day, but.
But we do see more and more business outside of the U S are especially for the broadband a solution a gateway.
And then the such for non U S Eh God of trees.
And we do see some new programs in the deal day that we are now.
Trying to find a way of Wayne.
Yeah.
Great.
I know you don't typically provide book to bill per se, but can you give us a sense of what the order trend is looking like either in the quarter or year to date and I would guess generally the top level and specifically with regard to IFC, whether you're seeing any early lead.
There of order activity picking up.
In the last few quarters on the average.
The book to revenue ratio was higher than the 1 which I think it's a it's good situation.
On the iOS on IFC, we are seeing.
The initial phase of all of those for both as the SBA is the box on the amplifiers and they also for the baseband, but it's it's the beginning of meal.
We hope at the beginning of Oh, the trend are to be honest the the delta of volume now.
Probably will the delay again the heater.
Hi, everybody a quarter of 2 until people will understand.
Well, it's going to take us.
And are you changing your strategy at all with regard to the IFC market, obviously, intelsat the former Gogo of large anchor customer, but in terms of your approach to the airline customers are you working for.
Merrily true partners or directly and has anything changed post COVID-19 with the the opportunities out there.
So as soon as the start of the G haven't changed.
And then we do talk with the end users, but we are primarily focused on supporting all of a policy.
Hmm.
A honeywell Gogo.
New who are global.
The global Eagle.
Supporting the daily quiet Eh.
We do participate in some of the new other space.
The service.
So we sort of ideas are issued in the last few of modest and probably will issue of additional in the next few quarters, but we have no intention to go directly to the to the airlines.
Great and a final question on the N G. S. L market, obviously, Oh C. S. With empower is the big growth driver going into 'twenty 'twenty 2 but.
Are there additional opportunities out there obviously telesat in the Amazon being you know the the largest potential opportunities but are there other.
The.
No.
<unk> constellations or competitive wins that you see in the next say 12 months of 24 months.
Without naming names we are walking with I.
I think except the Spacex were walking.
With all of the old trying to work with all the the big satellite operators.
A lot of new initiatives started stops debt.
The raising of lot of money is the always IPO private money on the spot and we have discussions with them as well.
I do believe that day, we'll see.
The success in getting awards in the next few quarters.
Great Congratulations thank you Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Oh, yes.
Morning on congratulations on continued excellent results quite a few of them too.
Regarding the other defense military business I know the.
Let's say a year ago, so that the business was relatively minor.
Since then I've known.
So the increasing number of wins.
Wins.
At the present time, what percentage of total business, it's representative of the defense and military worldwide.
In the few quarters ago are the defense business was relatively minor.
No and we I was saying I think in the last 2 or 3 quarters of it we're seeing more and more traction from the.
The first the worldwide, we had the civil war of the things that the second quarter of this quarter was the the strongest 1.
Sales of the revenue is not a data the wing and provide but we do see a increased portion of our defense sales.
Revenues.
It's becoming a trend, although I can't say the quarterly quarter over quarter of thread I remind that we wanted to sort of business is the.
Yes.
Vary from quarter to quarter in both the topline and margin will depend on the revenue mix, but we do see a little more and more business from the defense are coming in.
Yeah. Thank you all day, thank you Duncan.
Yeah.
If there are any additional questions. Please press star 1.
If you wish to cancel your request. Please press star 2 please standby, while we poll for more questions.
There are no further questions at this time, the South Park would you like to make your concluding statement.
Yes. Thank you.
I want to thank everyone for joining us on the skull and for your time and attention and we hope to see you soon or speak to you in the next call. Thank.
Thank you very much and have a great day.
Thank you. This concludes the <unk> second quarter 2021results conference call. Thank you for your participation you May go ahead and disconnect.
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