Q4 2022 Gilat Satellite Networks Ltd Earnings Call
Speaker 2: Ladies and gentlemen, thank you for standing by. The conference will begin shortly.
Speaker 1: That that.
Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome to Gilaas 4th quarter 2022 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.
Speaker 2: For operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded February 14, 2023. By now, you should have all received the company's press release. If you have not received it, please contact Guillot's Investor Relations team at EK Global Investor Relations at 1-8-1-1.
Speaker 2: 646-688-3559 or view it in the news section of the company's website www.gilat.com. I would now like to hand over the call to Mr. Ehud Helft of EK Global Investor Relations. Mr. Helft, would you like to begin please?
Speaker 3: Good morning, good afternoon everyone. Thank you for joining us today for Gila's fourth quarter 2022 is at conference call and webcast.
Speaker 3: A recording of this call will be available beginning at approximately noon Eastern Time today, February 14, is a webcast on Gilad website for a period of 30 days.
Speaker 3: Also, please note that investors are urged to read the forward-looking statements in Gila's earnings release with the reminder that statements made on this earnings call that are not circle facts may be deemed forward-looking statements within the meaning of the private security's educational form act of 1995.
Speaker 3: All such forward-looking statements, including statements regarding future financial operating results involve risk uncertainties and contingencies, many of which are beyond the control of the law and which may cause after results to die for a maternity from anticipated results.
Speaker 3: GILAT is under no obligation to update or alter these four looking statements, whether as a result of new information, future events or otherwise. And the company explicitly disclaim any obligation to do so.
Speaker 3: More detailed information about risk factors can be found in GILOT's report filed with the Security and Exchange Commission.
Speaker 3: With that, let me turn to introduction. On the call today, Mr. Adi Fadja, Gillaz CEO , and Mr. Gibbini Mini Gillaz CFO . So now I'd like to turn over the call to Adi Fadja. Adi, very begin. Thank you, Your Horde and good day to everyone.
Speaker 4: I would like to thank you for joining us today for our fourth quarter of 2022 and full year earnings.
Speaker 4: We are pleased with the results reporting fourth quarter revenues of $73 million, bringing us to a full year revenue of about $240 million, which is year over year growth of 12%.
Speaker 4: Most importantly, we are particularly happy with the solid improvement in profitability across the board with four squatter adjusted EBDA of more than ten million dollars, bringing us to a full year adjusted EBDA of more than twenty-five million dollars, which represents significant year of the real growth of 64 percent.
Speaker 4: Today we are introducing our 2023 guidance.
Speaker 4: Following our solid growth in 2022, we expect continued revenue growth with further significant increase in profitability in 2023. We expect revenue of between 260 to 280 million dollars representing euro-variable growth of 13 percent at the midpoint.
Speaker 4: GAAP operating income of between 15 to 19 million dollars representing Euro-Verieur growth of 70% at the midpoint and adjusted EBITDA of between 30 to 34 million dollars representing Euro-Verieur growth of 27% at the midpoint.
Speaker 4: I will now focus on some of the business achievements and discuss some of the recent highlights.
Speaker 4: The new era of satellite communication continues to be a major focus area for us as we are strengthening our strategic partnership with the satellite operators. Furthermore, it is most rewarding to see growing market acceptation and interest in GILAR Visible faces with pleasurable production facilities and
Speaker 4: A satellite operator should continue to launch smart software to define satellites and NGSO constellations.
Speaker 4: I am pleased to report that ISPASAT, the leading global Spanish operator, selected Gilad's Sky
Speaker 4: This will enable his per status or the highest performing satellite base fixed data and mobility services.
Speaker 4: We see a potential of multi-million dollar orders as a result of this strategic partnership expansion.
Speaker 4: This is another testament to the elastic ability of Gilad's platform to work in harmony with the newest smart software-defined satellites.
Speaker 4: We continue working closely with our partner SCS and a well-position for the upcoming O3B Empire Service Launch and see additional opportunities for further attentionoliBear over?
Speaker 4: In our SSPA product line we are on track with previously reported major projects with potential of hundreds of millions of dollars for large NGSO constellations.
Speaker 4: On this major NGS development project, we demonstrate our product performance to the customers in thiastic satisfaction. In addition, we received an additional multi-million dollar order from a leading satellite operator to deploy our SSPA product line in support of low Earth orbit constellations.
Speaker 4: We continue to see a great growth potential in this VHDS and NGSO market.
Speaker 4: The ground segment market alone consists of basement equipment, SSPAs and antennas is estimated by industry analysts out to be a multi-billion dollar market. We see a solid, gross potential in this new era of satellite communication.
Speaker 4: and a whole track to meet our goal of capturing the strong position in this mega market. In the mobility market, we will very successful this quarter in three fronts.
Speaker 4: In in-flight connectivity segment we had strong water with about 20 million dollar of orders for both our basement and transceiver water clients.
Speaker 4: Interest are continued to expand the global ISC network.
Speaker 4: This network will include both Skyge4 and Skyge2C working together demonstrating a great advantage to our partners on upward compatibility while protecting the past investments.
Speaker 4: Furthermore, we received orders from a large global aerospace system integrator who continue to rely on transceivers for real flight connectivity.
Speaker 4: In the maritime segment, we are continuing our close and productive partnership with SCF. In Q4, we introduced a premium maritime service to cruise lines with SkyGE4. The service will operate over both the Geostartelite and Mio constellation. And finally, for ground mobility, we received the multi-million dollar order.
Speaker 4: for South-Klum expansion on trains in Asia Pacific. Gilad's on-the-move antenna terminals were chosen to provide Internet to train passengers as they travel across the region.
Speaker 4: GILAR technology is ready and proven to facilitate the market transition to 5G. Furthermore, we continue to lead the 4G market segment with more than 75% market share.
Speaker 4: We see great potential in the 4G market, expect to increase our presence with additional business wins, thus strengthening our leadership in this market even further. To this point, Bois, SCS and Interstat have chosen Gilad's platform as the lead technology for several of their global projects.
Speaker 4: In Q4 we enlarge our reach and extended contract receiving multimillion dollars of orders for equipment and expansion of managed service contract in Asia and Latin America.
Speaker 4: In addition, we supported our long-time partner, Team Brazil, in achieving their goal to be the first network operator providing coverage to all 100% of Brazilian cities.
Speaker 4: Gilad completed connectivity to over 1,500 rural sites, empowering teams to provide 4G coverage to all Brazilians 5,570 municipalities.
Speaker 4: We are growing our enterprise business with IOT mission critical connectivity infrastructure for a tier 1 utility company in Europe .
Speaker 4: Furthermore, our enterprise customers worldwide continue to depend on us to enhance their business. For example, we received an order of thousands of v-shirts from a service provider in India.
Speaker 4: We continue to be active in the defense and government segment and have growing pipeline. Doing Q4 we received an important multimillion dollar order and we see a nice potential going forward. I am pleased with the progress we are making in this segment as we continue to be on track with this multi-air process.
Speaker 4: We have increased our investment and focusing this area and expect to grow our market share over the next few years.
Speaker 4: In Peru, we are successful in delivering high quality service and working smoothly in providing high level of service despite the difficult political and local environment.
Speaker 4: Our fifth project, the EECA Network, is already operative and is still subject for Pornantel's approval to accept the network and to allow us to provide services to our customers.
Speaker 4: We are expecting to grow our social inclusion involvement in Peru further to a $7 million award we received during the quarter from Antamina, one of the largest copper and zinc mines in the world. We are progressing with the implementation of this social inclusion e-learning project and are expecting to provide service to the students during 2023.
Speaker 4: Furthermore, we have received the digital orders from the Ministry of Education that have been using our services for over a decade.
Speaker 4: Despite political turmoil and challenging local environment, which include strikes, blockages and lockdowns, lockdowns, we were able to continue with the services and business and we are expecting a political, terrible change to resume important future government projects.
Speaker 4: To summarize, in 2022 we had a strong Q4 bring it to a closure for an ex-Gelentier. We demonstrate 12% yearly growth in revenue and we significantly accelerated our profitability with 64% yield of the rate increase.
Speaker 4: We continue to see growing traction on our products and services among new customers as well as existing ones. Doing the year we launched CH4 on each generation platform and achieved remarkable market acceptance from the leading satellite operators. With this leading technology we intend to capture the lion's share of the...
Speaker 4: of this multi-billion dollar market. Already in 2022 we delivered Skygeful System to over 20 gate to a worldwide enabling hundreds of gigabyte per second of capacity and have already secured tens of millions of dollars worth of contacts awards.
Speaker 4: I am pleased with the great progress in the mobility market. The ISC sector has recovered and is fast growing. We enjoyed the record here in order of tens of millions of dollars from interest for the worldwide aeronautwork and from a leading global aerospace system integrators for our transceivers.
Speaker 4: In the maritime sector, we secured the new wind for SkyH4 to enable maritime application and we are making excellent progress with SCS on cruise premium maritime service.
Speaker 4: In several backhauls we also had a record year, with tens of millions of doors coming from existing partners and new mobile operators. And in defence we are making progress with important wins and growing pipelines.
Speaker 4: I would like to take this opportunity to thank our chairman of the Board of Director of Mr. Isaac Angel for his great contribution over the past two years and to wish him success as he retires from our bond.
Speaker 4: The board is appointed Mr. Ami Bam as chairman of the board, effective upon Mr. Angels departure. On behalf of Gillette, I would like to welcome Mr. Bam.
Speaker 4: who has been an invaluable board member for the last ten years and I must please that we will now gain even more from his vast experience.
Speaker 4: Looking ahead, we expect to go all both our top and bottom line in 2023 as a satellite communication sector strongly gain traction. We are increasingly optimistic.
Speaker 4: and as our guidance demonstrates, we expect to maintain our strong momentum. We are entering 2023 with a very strong backlog and a good pipeline, and therefore expect further growth in all of our strategic markets.
Speaker 4: market and I look forward to a strong 2023 and with that I end over to Gilbini Amini RCFO. Gil, please go ahead. Thank you Adi, good morning and good afternoon to everyone. I would like to remind everyone that our financial results are presented both on gap and non-gap basis. We regularly use supplemental non- GAAP financial measures.
Speaker 4: a motivation of purchased intangibles, less incentive, a motivation, litigation expenses, income related to trade secrets claims, restructuring and reorganization costs, merger, acquisition, and related litigation income or expenses, impairment of health for sale asset, other expenses, income tax effect on adjustments.
Speaker 4: one-time changes of deferred tax assets and one-time tax expense related to the release of historical tax-strapped earnings.
Speaker 4: The reconciliation table in our press release highlights this data and our non-GAAP information presented excluded these items.
Speaker 4: I will now move to our financial highlights for the fourth quarter of 2022, followed by our full year 2022 highlights.
Speaker 4: Overall, as I mentioned earlier, we are very pleased with the continued improvement in our results and especially the strong improvement in our full calendar year revenue and profitability year over year.
Speaker 4: I'm pleased to say that despite the macroeconomic headwinds and global supply chain issues, our performance in the quarter and the full calendar year shows that we've been able to mitigate most of these issues without significant impact on our profitability. Window 2023 contains some potential macro challenges ahead.
Speaker 4: which was $67 million. For the year, revenues were $239.8 million, up 12% versus $215 million in 2021.
Speaker 4: The improvements were driven by growth in all of our segments and mainly from VHTS and NGSCO, IFC and CERLABACOL verticals.
Speaker 4: In terms of the revenue breakdown by segments, Q4 or 22 revenues of the satellite network segment was 36.4 million dollars compared to 32.3 million dollars in the same quarter last year.
Speaker 4: Q422 revenues of the integrated solution segment were $16.3 million, relatively similar to the same quarter last year.
Speaker 4: and Q422 revenues of the Network's Infrastructure and Services segment were 19.9 million dollars compared to 18.3 million dollars in the same quarter last year.
Speaker 4: The improvement was mainly due to the high recurring revenues during the operating phase of the project, partially offset by the increase in the revenues of the construction phase, which is expected as we are close to finishing the construction phase and to moving to the operating phase in the last two projects.
Speaker 4: I would now like to summarize our fourth quarter gap and non-gap results. Our gap growth margin in Q422 improved to 38.2% compared to 36.8% in the same quarter last year. The improvement in our growth margin was due to the favorable product and services mix, recognized this quarter and a high volume of revenue.
Speaker 4: Gap operating expenses in Q422 were $21.6 million in the quarter compared with $19.3 million in the same quarter last year. The increase is mainly due to higher R&D expenses incurred in order to support our current and future growth. Gap operating income for the quarter improved to $6.1 million compared to $5.4 million.
Speaker 4: tax provision of 12.9 million dollars that was recorded with respect to historical dropped earnings.
Speaker 4: Those earnings are exempt from taxes until distributed as dividends. Once distributed, the company should pay the related corporate taxes that were exempt. The company chose to take advantage of the temporary Israeli tax relief that expired in November 22 and to pay significantly reduced tax rate to allow in the future certain actions such as distribution of dividends.
Speaker 4: shares buyback or acquisitions of foreign companies without paying an additional substantial corporate tax.
Speaker 4: Gap net income in the fourth quarter excluding this one-time provision was $6.9 million and this is compared to a gap net income of $2.1 million in the same quarter last year.
Speaker 4: Moving to non-GAAP results, our non-GAAP gross margin in Q422 improved to 38.3% compared to 37% in the same quarter last year. non-GAAP operating expenses in Q422 were $20.7 million compared with $18.2 million in the same quarter last year.
Speaker 4: income per share of 14 cents. This is compared with a net income of 5.6 million dollars or income per share of 10 cents in the same photo last year.
Speaker 4: Adjusted EBDA for the quarter was $10.1 million, compared with an adjusted EBDA of $10.4 million in the same quarter last year. And for the year, the adjusted EBDA was $25.2 million, compared with an adjusted EBDA of $15.4 million in 2021.
Speaker 4: Moving to our balance sheet. As of December 31st, 22 are total cash and cash equivalents, including short-term deposit and restricted cash, were $87.1 million, compared with $69.9 million on September 30th, 22 and compared to $86.6 million in December 31st, 2021.
Speaker 4: We do not hold any debt. In terms of cash flow, we generated $16.8 million from operating activities during the fourth quarter of 2022.
Speaker 4: DSOs, which excludes receivables and revenues of our terrestrial network construction projects in Peru, were 72 days lower than the previous quarter DSOs, which were of 89 days. The decrease was impacted by both increase in revenues as well as decrease in receivables due to higher collection in the last quarter. Our shareholder's equity as of December 31, 2022 totaled about $245,000.
Speaker 4: gap operating income of between 15 to 19 million dollars representing euro-vary growth of 70% at the midpoint and adjusted EBDA of between 30 to 34 million dollars representing euro-vary growth of 27% at the midpoint.
Speaker 4: That concludes my financial review. I would now like to open the call for questions. Operator, please.
Speaker 2: 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. If you are using speaker equipment, kindly lift a handset before pressing the numbers. Your questions will be pulled in the order they are received.
Speaker 2: Please then buy while we pull for your questions. The first question is from Chris Quilty.
Speaker 2: from Quilty Analytics. Please go ahead.
Speaker 5: Thanks guys and congratulations on the numbers. I think in your commentary you mentioned a record year in the cellular backhaul market. Was that in terms of revenues or orders or market share or how did you measure that? The record deals were in terms of orders..
Speaker 6: So it's either a few weeks or maybe a shift of a quarter.
Speaker 5: Good. And so maybe that brings up a question on inventory. You know, the inventory levels have been a little bit elevated over the last year. So should we expect those to stay at the level or, you know, supply chain issues start to clear should they come down? So indeed that inventory.
Speaker 6: went significantly up in the last 18 months, but it was intentional because of supply chain, we took a decision to buy to inventory and order for 24 months ahead. Now we are starting to see a bit of ease on the supply chain.
Speaker 5: Back up maybe on the segment level, obviously good revenue growth in aggregate. But should we expect that to show up in one particular segment over another, whether satellite networks, integrated solutions, or the network infrastructure? I would expect the growth going further to be...
Speaker 6: Construction of the network towards the end of the year, maybe it will slip to early next year and with that around 15 to 20 million dollars of construction in the early year will disappear.
Speaker 5: I understand. And if I remember, you were hoping to get that fifth region completed by the end of this year, but just due to the political situation that's probably first quarter, second quarter, and then the sixth region by the end of the year. We already finished the E.K. region at the beginning of Q4, but from...
Speaker 6: Due to the political turmoil in Peru and since it's a government project, it takes a much more time to accept the network. It used to take. We do expect them to accept the network doing the coming quarter, maybe in April . But we are still under audit.
Speaker 6: Most of the audit already finished as always there are some Reject that we need to fix but it's immaterial and we believe that we'll accept the network in the next two to three months
Speaker 5: Great. And just a question on any changes in the CAPEX spending and when we think about cash flow for next year, should we think about it as being sort of in line with the revenue growth or do you expect to get some balance sheet leverage on a go-forward basis?
Speaker 4: So our CAPEX has been increasing in the last year mainly due to investments in CAPEX in Peru in projects that we buy the CAPEX and in the next periods we enjoy revenues. We believe that CAPEX level shouldn't
Speaker 5: of course. That will do it for now. Thank you. Thank you, Chris.
Speaker 5: Thank you, Chris.
Speaker 2: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions if the...
Speaker 2: Next call. It's Erbina Meeney. There is an additional question. Would you like to take it?
Speaker 2: Mr. Binghamini, there is an additional question. Would you like to take it? Sure.
Speaker 2: The next question is from Gunther Karger of Discovery Group. Please go ahead.
Speaker 7: Yes, thank you. I don't have a question. I have a statement of how to observe the company for quite a number of years and I must congratulate Arty and his management for excellent performance in a quarter and a year and in particular vastly improved to medications.
Speaker 7: I think you're on your way. Thank you so much. Thank you, Gante.
Speaker 4: Okay, so I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon. We'll speak to you in our next call. Thank you very much and have a great day.
Speaker 2: Thank you. This concludes GULOT's fourth quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
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