Earnings Release • Nov 15, 2016
Earnings Release
Open in ViewerOpens in native device viewer
Washington, D.C. 20549
Report on Foreign Issuer
Pursuant to Rule 13a – 16 or 15d – 16 of the Securities Exchange Act of 1934
For the Month of November, 2016
(Translation of Registrant's Name into English)
Gilat House, Yegia Kapayim Street Daniv Park, Kiryat Arye, Petah Tikva, Israel (Address of Principal Corporate Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
Attached hereto is Registrant's press release dated November 15, 2016, announcing Gilat's Third Quarter 2016 results.
We consent to the incorporation by reference of the GAAP financial information included herein, in the Registration Statements on Form F-3 (Registration No. 333-195680) and the Registration Statements on Form S-8 (Registration Nos. 333-113932, 333-123410, 333-132649, 333-158476, 333-180552, 333-187021, 333-204867 and 333-210820).
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Gilat Satellite Networks Ltd. (Registrant)
Dated November 15, 2016 By: /s/ Yael Shofar
Yael Shofar General Counsel
Third Quarter revenues rise 16% over the previous quarter with significantly improved operating profitability
Petah Tikva, Israel – November 15, 2016 – Gilat Satellite Networks Ltd. (NASDAQ, TASE: GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ended September 30, 2016.
The Company noted that the significant improvement in profitability during the third quarter was achieved despite an accrual for bad debt of approximately \$4.6 million attributable to the Company's governmental customer in Venezuela arising from the worsening economic situation and the recent credit downgrade in that country.

"Two major growth engines are especially exciting for Gilat this quarter," said Yona Ovadia, CEO of Gilat. "Satellite-based 4G cellular backhaul and mobility, both in In-Flight Connectivity (IFC) and on-the-move connectivity for trains. We have made important progress in both markets. Especially noteworthy are our recent announcements of the LTE cellular backhaul with Sprint and the broadband connectivity for Spain's Renfe high speed trains:
"On the technology side, Gilat is committed to continued innovation in support of our strategy of broadband-for-all. This quarter Gilat announced the first-to-market all-outdoor, easy-to-install VSAT-in-a-Box for high speed consumer broadband, that addresses the consumer broadband market, as well as our ground-breaking small-cell-over-satellite solution that expands 3G and 4G cellular coverage to rural areas.
"We are focused on all five of our strategic growth pillars, as well as our journey to improve profitability, and we are pleased to see progress in both," concluded Yona Ovadia, CEO of Gilat.
Gilat management will host a conference call today, November 15, at 14:30 GMT / 09:30 AM EST / 16:30 IST to discuss the third quarter results. International participants are invited to access the call at (972) 3-918-0609, and US-based participants are invited to access the call by dialing (1) 888-668-9141.

A simultaneous Webcast of the conference call will be available on the Gilat website at www.gilat.com and through this link: http://www.veidan-stream.com/? con=Gilat_Satellite_Networks_Q3_2016_Results
The webcast will also be archived for a period of 30 days on the Company's website and through the link above.
A replay of the conference call will be available beginning approximately 17:00 GMT/ 12:00 PM EST/ 19:00 IST today, until 17:00 GMT/ 12:00 PM EST/ 19:00 IST on November 17, 2016.
International participants are invited to access the replay of the call at (972)3-925-5904, and US-based participants are invited to access the call by dialing (1)888-782-4291.
A replay of the call may also be accessed as a webcast via Gilat's website at www.gilat.com and will be archived for 30 days.
The attached summary unaudited financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Non-GAAP presentations of net income, operating income, Adjusted EBITDA and earnings per share. The adjustments to the company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the company's underlying operational results, trends and performance. Gilat is presenting Adjusted EBITDA (operating income before depreciation, amortization, non-cash stock option expenses and other costs related to acquisition transactions, restructuring cost, goodwill impairment and trade secrets litigation expenses) for the first time due to a significant increase in litigation expense relating to an ongoing trade secrets litigation in the U.S. against former employees, which commenced in 2015. Adjusted EBITDA excludes the abovementioned litigation expense of \$2.0 million in Q3 2016 and \$0.3 million in Q3 2015 and \$1.4 million in Q2 2016.
Adjusted EBITDA is presented to compare the company's performance to that of prior periods and evaluate the company's financial and operating results on a consistent basis from period to period. The company also believes this measure, when viewed in combination with the company's financial results prepared in accordance with GAAP, provides useful information to investors to evaluate ongoing operating results and trends. Adjusted EBITDA, however, should not be considered as an alternative to operating income or net income for the period and may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. Reconciliation between the Company's Operating income and Adjusted EBITDA is presented in the attached summary financial statements.
Non-GAAP presentations of net income, operating income, Adjusted EBITDA and earnings per share should not be considered in isolation or as a substitute for any of the consolidated statements of operations prepared in accordance with GAAP, or as an indication of Gilat's operating performance or liquidity.
Gilat Satellite Networks Ltd (NASDAQ, TASE: GILT) is a leading provider of products and services for satellite-based broadband communications. Gilat develops and markets a wide range of high-performance satellite ground segment equipment and VSATs, with an increasing focus on the consumer and Ka-band market. In addition, Gilat enables mobile SOTM (Satellite-on-the-Move) solutions providing low-profile antennas, next generation solid-state power amplifiers and modems. Gilat also provides managed network and satellite-based services for rural telephony and Internet access via its subsidiaries in Peru and Colombia.
With over 25 years of experience, and over a million products shipped to more than 90 countries, Gilat has provided enterprises, service providers and operators with efficient and reliable satellite-based connectivity solutions, including cellular backhaul, banking, retail, e-government and rural communication networks. Gilat also enables leading defense, public security and news organizations to implement advanced, on-the-move tactical communications on board their land, air and sea fleets using Gilat's high-performance SOTM solutions. Gilat controlling shareholders are the FIMI Private Equity Funds. For more information, please visit us at www.gilat.com
Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "intend", "expect", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of Gilat to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to Gilat's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for Gilat's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key OEM partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with Gilat's international operations and its location in Israel. We undertake no obligation to update or revise any forward-looking statements for any reason. For additional information regarding these and other risks and uncertainties associated with Gilat's business, reference is made to Gilat's reports filed from time to time with the Securities and Exchange Commission.
Contact: Gilat Satellite Networks Doreet Oren [email protected]
Comm-Partners LLC June Filingeri, President 203-972-0186 [email protected]

U.S. dollars in thousands (except share and per share data)
| Nine months ended September 30, |
Three months ended September 30, |
|||||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||
| Revenues | \$ 199,206 |
\$ | 129,861 | \$ | 78,643 | \$ | 40,347 | |
| Cost of revenues | 147,914 | 96,137 | 54,930 | 30,865 | ||||
| Gross profit | 51,292 | 33,724 | 23,713 | 9,482 | ||||
| Research and development expenses | 19,374 | 19,243 | 6,781 | 6,115 | ||||
| Less - grants | 1,008 | 563 | 370 | 151 | ||||
| Research and development, net | 18,366 | 18,680 | 6,411 | 5,964 | ||||
| Selling and marketing expenses | 17,224 | 18,725 | 6,248 | 6,050 | ||||
| General and administrative expenses | 21,435 | 15,226 | 11,283 | 5,164 | ||||
| Restructuring Costs | - | 986 | - | 986 | ||||
| Goodwill Impairment | - | 20,402 | - | 20,402 | ||||
| Total operating expenses | 57,025 | 74,019 | 23,942 | 38,566 | ||||
| Operating loss | (5,733) | (40,295) | (229) | (29,084) | ||||
| Financial expenses, net | (3,175) | (5,850) | (1,572) | (2,940) | ||||
| Loss before taxes | (8,908) | (46,145) | (1,801) | (32,024) | ||||
| Taxes on income | 967 | 740 | 398 | 173 | ||||
| Loss from continuing operations | (9,875) | (46,885) | (2,199) | (32,197) | ||||
| Loss from discontinued operations | - | (200) | - | (200) | ||||
| Loss | \$ (9,875) |
\$ | (47,085) | \$ | (2,199) | \$ | (32,397) | |
| Loss per share from continuing operations (basic and diluted) | (0.19) | (1.08) | (0.04) | (0.73) | ||||
| Loss per share from discontinued operations (basic and diluted) | - | (0.00) | - | (0.00) | ||||
| Loss per share (basic and diluted) | \$ (0.19) |
\$ | (1.08) | \$ | (0.04) | \$ | (0.73) | |
| Weighted average number of shares used in | ||||||||
| computing loss per share (basic and diluted) | 51,096,829 | 43,436,470 | 54,523,585 | 44,030,805 |
U.S. dollars in thousands (except share and per share data)
| Three months ended September 30, 2016 |
Three months ended September 30, 2015 |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Adjustments (1) | Non-GAAP | GAAP | Adjustments (1) | Non-GAAP | |||||||
| Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | |||||||
| Gross profit | \$ | 23,713 | 1,204 | \$ | 24,917 | \$ | 9,482 | 1,278 | \$ | 10,760 | ||
| Operating expenses | 23,942 | (2,357) | 21,585 | 38,566 | (22,319) | 16,247 | ||||||
| Operating income (loss) | (229) | 3,561 | 3,332 | (29,084) | 23,597 | (5,487) | ||||||
| Income (loss) before taxes on income | (1,801) | 3,561 | 1,760 | (32,024) | 23,597 | (8,427) | ||||||
| Net income (loss) from continuing operations | (2,199) | 3,561 | 1,362 | (32,197) | 23,597 | (8,600) | ||||||
| Loss from discontinued operations | - | - | - | (200) | 200 | - | ||||||
| Net income (loss) | (2,199) | 3,561 | 1,362 | (32,397) | 23,797 | (8,600) | ||||||
| Net income (loss) per share from continuing operations (basic | ||||||||||||
| and diluted) | (0.04) | 0.06 | 0.02 | (0.73) | 0.53 | (0.20) | ||||||
| Net income (loss) per share from discontinued operations (basic | ||||||||||||
| and diluted) | - | - | - | (0.00) | (0.00) | - | ||||||
| Net income (loss) per share (basic and diluted) | \$ | (0.04) | 0.06 | \$ | 0.02 | \$ | (0.73) | 0.53 | \$ | (0.20) | ||
| Weighted average number of shares used in | ||||||||||||
| computing income (loss) per share (basic and diluted) | ||||||||||||
| Basic | 54,523,585 | 54,523,585 | 44,030,805 | 44,030,805 | ||||||||
| Diluted | 54,523,585 | 54,614,252 | 44,030,805 | 44,030,805 |
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, goodwill impairment, trade secrets litigation expenses, restructuring costs and loss from discontinued operations.
| Three months ended September 30, 2016 Unaudited |
Three months ended September 30, 2015 Unaudited |
||
|---|---|---|---|
| GAAP loss | \$ | (2,199) | \$ (32,397) |
| Gross profit: | |||
| Non-cash stock-based compensation expenses | 9 | 59 | |
| Amortization of intangible assets related to acquisition | |||
| transactions | 1,195 | 1,219 | |
| 1,204 | 1,278 | ||
| Operating expenses: | |||
| Non-cash stock-based compensation expenses | 180 | 443 | |
| Amortization of intangible assets related to acquisition | |||
| transactions | 194 | 190 | |
| Goodwill impairment | - | 20,402 | |
| Trade secrets litigation expenses | 1,983 | 298 | |
| Restructuring costs | - | 986 | |
| Loss from discontinued operations | - | 200 | |
| 2,357 | 22,519 | ||
| Non GAAP net income (loss) | \$ | 1,362 | \$ (8,600) |
U.S. dollars in thousands (except share and per share data)
| Nine months ended September 30, 2016 |
Nine months ended September 30, 2015 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Adjustments (1) | Non-GAAP | GAAP | Adjustments (1) | Non-GAAP | ||||||
| Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | ||||||
| Gross profit | \$ | 51,292 | 3,614 | \$ | 54,906 | \$ | 33,724 | 3,759 | \$ | 37,483 | |
| Operating expenses | 57,025 | (4,826) | 52,199 | 74,019 | (24,211) | 49,808 | |||||
| Operating income (loss) | (5,733) | 8,440 | 2,707 | (40,295) | 27,970 | (12,325) | |||||
| Loss before taxes on income | (8,908) | 8,440 | (468) | (46,145) | 27,970 | (18,175) | |||||
| Loss from continuing operations | (9,875) | 8,440 | (1,435) | (46,885) | 27,970 | (18,915) | |||||
| Loss from discontinued operations | - | - | - | (200) | 200 | - | |||||
| Loss | (9,875) | 8,440 | (1,435) | (47,085) | 28,170 | (18,915) | |||||
| Loss per share from continuing operations (basic and | |||||||||||
| diluted) | (0.19) | 0.16 | (0.03) | (1.08) | 0.64 | (0.44) | |||||
| Loss per share from discontinued operations (basic | |||||||||||
| and diluted) | - | - | - | (0.00) | (0.00) | - | |||||
| Loss per share (basic and diluted) | \$ | (0.19) | 0.16 | \$ | (0.03) | \$ | (1.08) | 0.64 | \$ | (0.44) | |
| Weighted average number of shares used in | |||||||||||
| computing loss per share (basic and diluted) | 51,096,829 | 51,096,829 | 43,436,470 | 43,436,470 |
(1) Adjustments reflect the effect of non-cash stock-based compensation as per ASC 718, amortization of intangible assets related to shares acquisition transactions, goodwill impairment, trade secrets litigation expenses, restructuring costs and loss from discontinued operations.
| Nine months ended September 30, 2016 Unaudited |
Nine months ended September 30, 2015 Unaudited |
||||
|---|---|---|---|---|---|
| GAAP loss | \$ (9,875) |
\$ (47,085) |
|||
| Gross profit: | |||||
| Non-cash stock-based compensation expenses | 32 | 165 | |||
| Amortization of intangible assets related to | |||||
| acquisition transactions | 3,582 | 3,594 | |||
| 3,614 | 3,759 | ||||
| Operating expenses: | |||||
| Non-cash stock-based compensation expenses | 660 | 1,500 | |||
| Amortization of intangible assets related to | |||||
| acquisition transactions | 583 | 615 | |||
| Goodwill impairment | - | 20,402 | |||
| Trade secrets litigation expenses | 3,583 | 708 | |||
| Restructuring costs | - | 986 | |||
| Loss from discontinued operations | - | 200 | |||
| 4,826 | 24,411 | ||||
| Non GAAP loss | \$ (1,435) |
\$ (18,915) |
| Nine months ended September 30, |
Three months ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||||||
| Unaudited | Unaudited | Unaudited | Unaudited | ||||||
| GAAP operating loss | \$ | (5,733) | \$ | (40,295) | \$ | (229) | \$ | (29,084) | |
| Add: | |||||||||
| Non-cash stock-based compensation expenses | 692 | 1,665 | 189 | 502 | |||||
| Restructuring costs | - | 986 | - | 986 | |||||
| Goodwill impairment | - | 20,402 | - | 20,402 | |||||
| Trade secrets litigation expenses | 3,583 | 708 | 1,983 | 298 | |||||
| Depreciation and amortization | 9,831 | 11,459 | 3,306 | 3,760 | |||||
| Adjusted EBITDA | \$ | 8,373 | \$ | (5,075) | \$ | 5,249 | \$ | (3,136) |
| September 30, 2016 |
December 31, 2015 |
|||
|---|---|---|---|---|
| Unaudited | Audited | |||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | \$ 53,439 |
\$ | 18,435 | |
| Restricted cash | 65,537 | 100,779 | ||
| Restricted cash held by trustees | 6,970 | 8,524 | ||
| Trade receivables, net | 41,955 | 50,984 | ||
| Inventories | 23,064 | 25,358 | ||
| Other current assets | 14,390 | 16,223 | ||
| Total current assets | 205,355 | 220,303 | ||
| LONG-TERM INVESTMENTS AND RECEIVABLES: | ||||
| Long-term restricted cash | 202 | 179 | ||
| Severance pay funds | 7,925 | 7,545 | ||
| Other long term receivables | 224 | 221 | ||
| Total long-term investments and receivables | 8,351 | 7,945 | ||
| PROPERTY AND EQUIPMENT, NET | 80,748 | 81,963 | ||
| INTANGIBLE ASSETS, NET | 12,825 | 17,154 | ||
| GOODWILL | 43,468 | 43,468 | ||
| TOTAL ASSETS | \$ 350,747 |
\$ | 370,833 |
| September 30, | December 31, 2015 Audited |
||
|---|---|---|---|
| 2016 | |||
| Unaudited | |||
| LIABILITIES AND EQUITY | |||
| CURRENT LIABILITIES: | |||
| Short -term bank credit and loans |
\$ - |
\$ 7,000 |
|
| Current maturities of long -term loans |
4,562 | 4,542 | |
| Trade payables | 21,044 | 17,210 | |
| Accrued expenses | 49,680 | 23,481 | |
| Advances from customers | 16,192 | 82,813 | |
| Advances from customers held by trustees | 6,871 | 8,515 | |
| Other current liabilities | 19,074 | 16,213 | |
| Total current liabilities | 117,423 | 159,774 | |
| LONG -TERM LIABILITIES: |
|||
| Accrued severance pay | 7,684 | 7,506 | |
| Long -term loans, net of current maturities |
17,112 | 21,493 | |
| Other long -term liabilities |
2,840 | 3,978 | |
| Total long -term liabilities |
27,636 | 32,977 | |
| EQUITY: | |||
| Share capital - ordinary shares of NIS 0.2 par value |
2,592 | 2,048 | |
| Additional paid -in capital |
919,893 | 884,126 | |
| Accumulated other comprehensive loss | (2,557 ) |
(3,727 ) |
|
| Accumulated deficit | (714,240 ) |
(704,365 ) |
|
| Total equity | 205,688 | 178,082 | |
| TOTAL LIABILITIES AND EQUITY | \$ 350,747 |
\$ 370,833 |
U.S. dollars in thousands
| Nine months ended September 30, |
Three months ended September 30, |
||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Unaudited | Unaudited | Unaudited | Unaudited | ||
| Cash Flows from continuing operations | |||||
| Cash Flows from Operating Activities: | |||||
| Loss | \$ (9,875) |
\$ (47,085) |
\$ (2,199) |
\$ (32,397) |
|
| Loss from discontinued operations | - | (200) | - | (200) | |
| Loss from continuing operations | (9,875) | (46,885) | (2,199) | (32,197) | |
| Adjustments required to reconcile loss | |||||
| to cash provided by (used in) operating activities: | |||||
| Depreciation and amortization | 9,831 | 11,459 | 3,306 | 3,760 | |
| Goodwill impairment | - | 20,402 | - | 20,402 | |
| Stock-based compensation | 692 | 1,665 | 189 | 502 | |
| Accrued severance pay, net | (202) | (274) | (105) | (4) | |
| Accrued interest and exchange rate differences on | |||||
| short and long-term restricted cash, net | (1,454) | 207 | 106 | 120 | |
| Exchange rate differences on long-term loans | 56 | (221) | 8 | 5 | |
| Deferred income taxes | 5 | 11 | 5 | 49 | |
| Decrease in trade receivables, net | 10,109 | 16,730 | 6,115 | 10,395 | |
| Decrease in other assets (including short-term, long-term | |||||
| and deferred charges) | 1,119 | 983 | 2,191 | 919 | |
| Decrease (increase) in inventories | 865 | (4,911) | 3,324 | (2,094) | |
| Decrease (increase) in restricted cash directly related to operating activities | 28,482 | (52,736) | 6,908 | 1,582 | |
| Increase (decrease) in trade payables | 3,847 | (7,647) | 655 | (2,346) | |
| Increase (decrease) in accrued expenses | 26,014 | (509) | 11,531 | 1,251 | |
| Increase (decrease) in advance from customers | (66,642) | 55,616 | (30,357) | (1,716) | |
| Increase (decrease) in advances from customers, held | |||||
| by trustees | (1,028) | (8,411) | 984 | (4,253) | |
| Increase (decrease) in other current liabilities and other long term liabilities | 1,630 | (406) | 933 | (2,148) | |
| Cash provided by (used in) Operating Activities | 3,449 | (14,927) | 3,594 | (5,773) | |
| Cash Flows from Investing Activities: | |||||
| Purchase of property and equipment | (2,822) | (3,109) | (790) | (1,270) | |
| Investment in restricted cash held by trustees | (10,925) | (6,109) | (5,497) | - | |
| Proceeds from restricted cash held by trustees | 13,473 | 18,649 | 5,315 | 3,997 | |
| Investment in restricted cash (including long-term) | (204) | (22,411) | (18) | (1,209) | |
| Proceeds from restricted cash (including long-term) | 7,441 | 32,559 | 15 | 4,283 | |
| Cash provided by (used in) Investing Activities | 6,963 | 19,579 | (975) | 5,801 | |
| Cash Flows from Financing Activities: Capital lease payments |
|||||
| Issuance of shares in a rights offering | (307) 35,095 |
(408) - |
- - |
(204) - |
|
| Issuance of restricted stock units and exercise of stock options | 527 | 5,595 | 181 | 1,890 | |
| Payment of obligation related to the purchase of intangible assets | - | (500) | - | (500) | |
| Short term bank credit, net | (7,000) | (3,811) | - | 1,758 | |
| Repayment of long-term loans | (4,416) | (4,409) | (139) | (137) | |
| 23,899 | (3,533) | 42 | 2,807 | ||
| Cash provided by (used in) Financing Activities | |||||
| Effect of exchange rate changes on cash and cash equivalents | 693 | (1,122) | 18 | (708) | |
| Increase (decrease) in cash and cash equivalents | 35,004 | (3) | 2,679 | 2,127 | |
| Cash and cash equivalents at the beginning of the period | 18,435 | 27,726 | 50,760 | 25,596 | |
| Cash and cash equivalents at the end of the period | \$ 53,439 |
\$ 27,723 |
\$ 53,439 |
\$ 27,723 |
|
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.