Q3 2022 Gilat Satellite Networks Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by welcome.
Can you walks third quarter 2022 results conference call. All participants are present in listen only mode. Following the management's 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, this conference is being recorded November 14.
2022 by now you should have all received the Companys press release, if you have not received it please contact <unk> Investor Relations team at 8-K Global Investor Relations at 16466883559 or view it in the news section of the company's web.
Site Www Dot dot dot com I would now like to hand over the call to Mr. A hotel of E. K Global Investor Relations. Mr. Al would you like to begin please.
Thank you operator, good morning, and good afternoon, everyone. Thank you for joining US today. This will be that first quarter 2022 results conference call and webcast.
Starting of this call will be available beginning at approximately noon eastern time today November 14th.
Customer websites.
Saturday.
Please note that investment.
Read the forward looking statements.
With a reminder that statements made on this earnings call or.
Not historic context, maybe deemed forward looking statements.
Okay.
<unk> Reform Act of 1995.
Mark touched on one of these statements, including statements regarding future financial operating results.
Risks uncertainties and contingencies, many of which are beyond the control of <unk> and which may cause actual result, actual maturity from anticipated results.
Do you like is under no obligation to update or alter these.
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All of these information about risk factors can be found in reports filed with Securities and Exchange Commission.
And with that let me turn.
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I would now like to tell them. According to at this idea.
Going to the view.
Thank you and good day to everyone I would like to thank you for joining us today for our third quarter of 2022 earnings call.
We are pleased with the results of the third quarter.
I'm, particularly happy with the solid improvement in profitability across the board as well as the growth in our revenues and bottom line.
Third quarter revenues were 64 million or 21% above the same quarter of last year.
non-GAAP gross margin operating income margin and net income margin.
38, 3%, seven 2% and five 1%, respectively, all improved versus the same quarter of last year.
Adjusted EBITDA improved to seven 3 million, 88% above our adjusted EBITDA was $6 $9 million in the same quarter last year.
Adjusted EBITDA margin was 12% versus 8% in the same quarter a year ago.
Looking ahead, we increased and narrowed our profitability expectations for 2022, which is doing out to be a strong year of recovery and growth formula.
Our revenue expectation of adjusted to between $240 million to $245 million representing year over year growth.
Growth of 13% at the midpoint.
GAAP operating income expectations are enabled and adjusted upwards to between $8 million to $10 million and adjusted EBITDA expectation of and they've all been adjusted upwards to between $23 million to $25 million.
Presenting yogurt is gross or 56% at midpoint.
I will now focus on some of our business achievements and discuss some of the recent highlights.
The new era of satellite communications continues to be a play mainly focus bogey that we.
We are continuing to expand our strategic relationship with the satellite operators I am pleased to say that we are seeing a growing interest and strong market traction for our next generation glass glass platform disguise for their needs for multi orbit multi service software defined platform with work in harmony with the newest small software.
Five satellites that are currently being launched is a must to provide the communication needs of today and tomorrow.
We continue working closely with our partner SCS and are well positioned for upcoming also gonna be empower launch and see additional opportunities for further expansions.
We see solid growth potential in this new era of a satellite communication and we are on track to meet our goal of capturing a strong position in this new Omega market.
The girl segment market alone is estimated to be a multibillion dollar market opportunity over the next few years according to industry analyst NSO.
I'd just be a product line, we are on track with our previously reported major projects with the potential of hundreds of millions of dollars for large NGL so constellation.
So the mobility business continue to pick up formula as we received a multimillion dollar orders from key customers for both our skies for platform and our SBA product line I'm.
I'm excited to share a new win for Skype for to enable maritime applications.
The service provider joined the growing list of industry leaders, we've chosen to adopt our platform due to its high performance multi orbit and Robyn capabilities.
Is that is making further headway in the IFC market segment with orders of over 12 million Daus for many large global aerospace system integrator, who for years has continued to rely on the landscape and aerospace the assembly of the transceiver products to enable the in flight connectivity.
With this new orders is.
Is growing its lead in the IFC market.
You can sell a lot of eco segment.
He used to lead with orders of millions of dollars from both new customers and network expansions from existing customers.
We saw growing interest in Africa from a new customer with whom we signed a multiyear multimillion dollar contracts in the quarter to deliver connectivity to remote area in Africa.
Our technology is ready and proven to facilitate the market transition to five <unk>, saying that we continue to see great potential in the <unk> market and expect to further increase our presence with additional business wins.
The strengthening our leadership in this market even further.
As a subsidized market become ready over the coming years for the transition from 42 five G. We are optimistic that this will create additional new business opportunities for gilead.
In the enterprise segment, we were awarded several contract wins.
A dog in several sectors, including utilities and banking.
Celerity allows us a large service provider in Brazil chose <unk> for project with both but robust Brazil's largest oil and gas company and a leading financial services company in Europe , a leading global communication integrator chose gigawatts the skies to see platform to empower the Tijuana utility company too.
Alright, all whether Iot telemetry for mission critical input infrastructure.
Hundreds of them the most sites on the night National distribution network.
Does that cause you to be active in the defense market with growing pipeline. This quarter, we closed a multiyear multimillion dollar strategic agreement with a major defense company and the world leading UAV manufacture.
We will provide these lead generation BRL 60 terminal for unmanned aerial vehicles. In addition, we closed the deal with the New U S service provider, we support mission critical application for the United State National warning system.
Therefore, we'll support thousands of federal state and local agencies to enable emergency services.
Furthermore, they use integrator select.
Newly launched defense hub network SSP as for U S Army Satcom project.
With these achievements we accept follow on orders of millions of dollars in the coming years and the ability to pursue other U S Army program.
An addressable market of more than $100 million.
I am pleased with the progress we are making in the defense and government sector as we increase our investment and focus in this area, we expect to grow our market share over the next few years.
In this quarter, we completed the construction of the acre region.
Equally the fifth region Gilad completes out of the six regions awarded we are now waiting for supervision approval and acceptance of the network.
Order to move to the operational phase and initiate.
The Internet service services to schools Health Center and others. This is an important step towards our goal of actually getting revenue stream infill. We also received a multimillion dollar award for months I mean, one of the largest copper and zinc mines in the world.
The project consists of connectivity and services to thousands of students in the municipality of San Marcos and Louisville area and some in our mining business.
In summary, we are very pleased with the development and our financial results in the South Dakota.
Our end markets continue to improve and grow the new era of satellite communication is developing quickly and we are increasingly capturing a strong market position in the ground segment of this growing market.
In terms of financial results, we are very pleased with our performance in the quarter.
Core revenues growth of 21% deal of disease as well as significant improvements in profitability across the book, we focus on deals with higher margins and higher profitability as reflected in our gross margin operating income margin and net income margins, which all significantly higher than the last than then.
As of Q3 last year as well as those of the previous quarter.
We have lowered the revenue guidance and adjusted it's slightly downward now expecting revenues to be between $240 million to $245 million, which is 13% deal that didn't close at midpoint.
Slight adjustment downwards was primarily due to some large orders that were received later than we expected in the quarter, which will be delivered next year continue to sort of supply chain disruption and slower progress than expected on construction and implementation phases in some of our projects and Phil.
Nonetheless, since we delivered higher margin deals, we have experienced higher levels of profitability, which is more than compensated and allowed us to know and adjust upward the adjusted EBITDA guidance range to 23% to $25 million.
All in all as you can see we are increasingly optimistic about both our near and longer term prospects and we look forward to realizing the growth opportunity ahead of us and with that I'd like to go over to <unk> CFO . Gil go ahead. Thank you Heidi good morning, and good afternoon to everyone I would like to remind everyone to talk.
Financial results are presented both on GAAP and non-GAAP basis regularly used supplemental non-GAAP financial measures internally to understand manage and evaluate our business and to make operating decisions.
We believe these non-GAAP financial measures provide consistent and comparable 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 intangible lease incentive amortization litigation expenses income related to trade secret claims restructuring and reorganization costs merger acquisition.
And related litigation expenses impairment of held for sale asset other expenses.
Come tax effects on adjustments and one time changes of deferred tax assets. The reconciliation table in our press release highlights this data and our non-GAAP information presented excluding these items I will now move to our financial highlights for the third quarter of 2022.
Overall as I mentioned earlier, we're pleased with the continued improvement in our results and especially the strong improvement in our profitability. The results show continued growth in revenue and strong improvement in our gross operating and net margins.
Our performance demonstrates the solid improvements they remain global macroeconomic headwinds, including ongoing electronic component supply constraints as well as price increases across the board I'm pleased to say, however that our performance in the quarter and year to date shows that we've been able to mitigate most of these issues without a significant impact on us.
Profitability.
In terms of financial results revenue for the third quarter was $16 4 million, 21% higher of those of the third quarter of last year, which were $49 $8 million.
In terms of revenue breakdown by segment Q3, 'twenty two revenues of the satellite networks segment, which provides advanced broadband satellite communication networks and associated professional services turnkey solutions and managed services and cellular backhaul enterprise <unk> IFC and defense market were $32 four.
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Compared to $23 $2 million in the same quarter last year. The reason for the increase was mainly due to the large strategic deals delivered in Q3 22.
Q3, 22 revenues of the integrated solutions segment.
Revise equipment products systems and solutions for mission critical defense broadcast.
Advanced on the moving on the pole satellite communication solutions, including for Airborne and ground mobile were $15 7 million.
Compared to $14 7 million to the same quarter last year the improvement in the segments was primarily driven by higher revenues from the <unk> and in flight connectivity market.
Q3, 22 revenues of the network infrastructure and services segment, which provides mainly terrestrial and satellite network construction and operation services were $12 3 million compared to $11 9 million in the same quarter last year.
The improvement was mainly due to higher recurring revenues during the operating phase of the project.
Partially offset by a decrease in revenues during the construction phase.
I would now like to summarize our third quarter GAAP and non-GAAP results. Our GAAP gross margin in Q3, 22 improved to 38, 2% compared to 35, 1% in the same quarter last year.
The strong improvement in our gross margin was due to the favorable product and services mix recognized this quarter and a higher volume of revenue.
GAAP operating expenses in Q3, 22 were $19 6 million in the quarter compared compared with $16 7 million in the same quarter last year.
The increase is mainly due to investments in R&D effort to support our current and future growth and also due to a coffee grants received in Q3 21.
GAAP operating income for the quarter improved to $3 4 million compared with 0.8 million in the same quarter last year.
GAAP net income in the third quarter was $2 1 million.
Or a diluted income per share of <unk>. This is compared to a breakeven net income and diluted income per share in the same quarter last year.
Moving to non-GAAP results, our non-GAAP gross margin in Q3, 22 improved to 38, 3% compared to 35, 3% in the same quarter last year the.
The strong improvement in our gross margin was due to favorable deal mix recognized this quarter and higher volume of revenues.
non-GAAP operating expenses in Q3, 22 were $18 7 million compared to $16 2 million in the same quarter last year.
As we said in the last few quarters, we are increasing our R&D investment in order to support the opportunities in front of US. We expect this investment to grow in the coming few quarters.
non-GAAP operating income for the quarter improved to $4 4 million compared to an operating income of $1 3 million in the same quarter last year non.
non-GAAP net income in the third quarter was $3 million or diluted income per share of <unk>. This is compared with a net income of zero point $6 million.
Or income of <unk> <unk> per share in the same quarter last year.
Adjusted EBITDA for the quarter improved to $7 3 million compared with an adjusted EBITDA of $3 9 million.
Quarter last year.
Moving to our balance sheet as of <unk>.
Timber 30, and 2022, our total cash and cash equivalents, including short term deposits and restricted cash were $69 9 million.
Compared with 70.
$71 4 million on June 32022, we do not hold any debt in terms of cash flow, we generated $4 $7 million from operating activities during the third quarter of 2022.
Dsos, which exclude receivables and revenues of our terrestrial network construction projects in Peru were 89 days slightly lower than previous quarter, DSO, which were 95 days. The decrease is mainly due to increase in revenue, whereas receivables remained in the similar level our share.
Holders' equity as of September 32022 totaled about $249 million compared with $246 million in June 32022.
Looking ahead as I already mentioned, we adjusted and narrowed the range of our 2022 revenue guidance with expectations of between 240 and $245 million representing year over year growth of approximately 13% at the midpoint.
Also increased and narrowed the adjusted EBITDA range to between 23% to $25 million representing year over year growth of approximately 56% percent at the midpoint.
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 one if you wish to cancel your request. Please press star two you are using speaker equipment kindly lift the handset before pressing the numbers your questions will be pulled in the.
Order DRC, please standby, while we poll for your questions.
The first question is from.
Gunther Karger from Discovery group.
Please go ahead.
Yeah, so congratulations on the excellent quarter.
Yeah, So far a question regarding the defense business.
Obviously, that's been rather minimal and lately I've noticed some increase.
And business acquisitions in the sector.
What percentage of the total revenue.
Rather than U S.
Presently they are.
Defense military business and what do you expect it to rise to over the last year.
I got the nice to hear from you again.
And thank you for the well.
Congratulations.
Indeed defensive business was not in our focus in the last few years.
In the last Ah at all so it's become more and more in our focus we are investing both in R&D and sales and marketing to promote and refresh our product portfolio.
Yes, it's not a big portion of our revenues.
You know, it's not a number that we are disclosing right now but that we.
We expect our defense to become a significant growth engine for good luck.
In the next two to three years. It is important to say that in defense and I'm sure the.
You are aware the selling cycles are long.
And it takes time for investment.
<unk> become a thoughtful but we are sure that the defense can become a significant part of the revenue growth in the next two to three years.
Thank God.
Follow up item on that.
And finally in defense and military.
Technology is trending towards the unmanned Oh.
Type of operation So I believe that's accelerating.
That's one part and then the other part is the I'll call them the unrest with regard to the Ukraine War FTE.
Ukraine or accelerating this trend or Oh Wow, what's your comment on that.
So I agree with the first comment that.
<unk> solution requires a satellite.
Communication and we are seeing are these trend as well in the opportunities in the market.
So your crane.
I'll close with satellite communication supported.
Ukraine doing there the wall.
But we doesn't really.
What we do feel is increased.
Demand for the <unk>.
Alice Skus in all this is regarding satellite communication for the defense sector. So we believe this is Bob.
We'll be part of our growth potential in the next.
Few quarters.
I think you are their best wishes for the coming new year. Thank you very much.
Yeah.
Is there any additional questions. Please press star one if you wish to cancel your request please.
Please press star two at least.
And by while we poll for more questions.
Okay.
The next question is from Martin Levine of <unk> Associates. Please go ahead.
Okay.
Hello. This is Martin 11, I'm, calling from the United States and I'm curious about that.
I think you have projects underway in numerous different countries I'm curious about the top five countries that you're dealing with at this time.
Financing is still nice to meet you.
The top five countries, where we are.
We are a business worldwide and.
Yeah.
In general our lead.
Yeah.
We're not focused on one or two countries every quarter is different.
Trent.
No.
All of those come from different countries are top five I can say that we have significantly business in the United States, we are significantly business in Peru.
We have a.
Decent business in Japan, and Australia, but at Sam.
It's vary between the quarters and those are the main that we see as Lee.
Repeatedly almost every quarterly U S who jump on it other than that every quarter. The most of the oldest class one different countries.
Okay, great. Thank you so much.
I also congratulate you on that.
Wonderful year, so far and look forward to hearing your results in the coming year. So thank you very much.
Thank you very much.
Yeah.
The next question is from Caleb Henry.
Quilty analytics. Please go ahead.
Okay.
Hi.
So a question for me.
Wondering if there are any updates that Gil I can offer on the electronically steered antenna.
Being developed for the aviation market I recall last you mentioned that there was youre waiting for sort of an anchor customer to help develop that has there been any progress on that front or any plans to further that technology.
Hi, Caleb.
Yes, indeed in the electronically steered them Dana we are waiting for the anchor customer in order to accelerate the development of D. And then they'll need to be diet very.
Closely with the customer and these needs.
Having said that we.
We have several opportunities and we progress with the development both for Es.
He has santana fully IFC and also full M electronically steered antennas for Lam.
Full a mill.
<unk> and defense.
Defense use.
I hope that we'll be able to to get there.
Would we expect and we'll announce.
And now it's at <unk>.
Once it would be relevant.
Yeah.
Okay, but defense antenna does that have a similar stipulation in other words do you would need a defense customer to basically anchor it in sort of guide the development or is that something that you could create independently and then go to the marketplace.
Our plan is to to.
To build a product that will be available off the shelf, but we figure that.
Every customer we have.
So there are specific actions that will need to adjust the antenna falling but it won't be a major.
Adjustments as we expect it to be in the IFC.
Okay alright, thank you.
Yes.
There are no further questions at this time, Mr. Opinion me would you like to make your concluding statement.
I want to thank you all for joining us today on this call and for your time and attention and we hope to see soon or speak to you in our next call. Thank you very much and have a great day.
Thank you. This concludes you lots third quarter 2022 results conference call. Thank you for your participation you May go ahead and disconnect.
Yeah.
Okay.
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