Revenues for the second quarter of 2006 were $61.0 million, up from $51.4 million in the same period of 2005. Net income for the second quarter of 2006 was $2.1 million or $0.09 per diluted share, compared to a net loss of $1.1 million or $0.05 per diluted share in the second quarter of 2005. Non-GAAP net income (1) for the second quarter of 2006 was $3.1 million, or $0.12 per diluted share, versus a net loss of $1.1 million or $0.05 per diluted share in the same quarter of 2005. EBITDA (2) for the second quarter of 2006 was $9.5 million, increased from $5.2 million in the comparable period of 2005.
“We are pleased to see strong growth in the second quarter. These results were driven by growing sales in our core markets. We were also successful in achieving first orders in new market segments including, business continuity with Cisco and backhaul solutions for cellular and enterprise operators.”
Revenues for the six month period ended June 30, 2006 were $119.6 million, increased from $104.4 million in the comparable period of 2005. Net income for the six month period ended June 30, 2006 was $3.3 million or $0.14 per diluted share, compared to a net loss of $3.0 million or $0.13 per diluted share in the same period of 2005. Non-GAAP net income for the six month period ended June 30, 2006 was $5.7 million, or $0.24 per diluted share, versus a net loss of $3.0 million or $0.13 per diluted share in the comparable period of 2005. EBITDA for the six month period ended June 30, 2006 was $18.2 million, increased from $9.9 million in the comparable period of 2005.
Non-GAAP net income, earnings per share and EBITDA for the three and six month period of 2006 exclude non cash stock option expenses in an amount of $1.0 million and $2.4 million respectively, which are not included in the comparable periods of 2005.
Gilat's Chief Executive Officer and Chairman of the Board Amiram Levinberg said, "We are pleased to see strong growth in the second quarter. These results were driven by growing sales in our core markets. We were also successful in achieving first orders in new market segments including, business continuity with Cisco and backhaul solutions for cellular and enterprise operators."
Recent Announcements
-- Gilat completed deployment of a SkyEdge network to Telecomunicacoes de Sao Paulo (TELESP), the largest subsidiary of Brazil's Telefonica Group -- responsible for fixed telephony and data services in the district. With the deployment of the SkyEdge network, TELESP was the first company to fulfill the Universal Service Obligation (USO) established by The Brazilian National Telecommunications Agency (ANATEL) for 2005. SkyEdge enables TELESP to provide public communication services to tens of thousands of citizens in schools, small businesses and public call offices throughout Sao Paulo state.
-- Gilat provided communications equipment and services to Angola Telecom, one of the largest operators in Sub-Saharan Africa. The contract includes an integrated redundant satellite solution to expand the existing fixed and cellular backhaul infrastructure. This will include efficient satellite modems equipped with higher-level modulation and advanced forward error correction that reduce satellite transmission costs.
-- Gilat's SkyEdge hub met the Cisco Technology Developer Program criteria for interoperability with the Cisco VSAT NM. The Cisco VSAT NM provides Cisco integrated services router customers with the ability to maintain highly secure voice, video, data and wireless communications over high-speed satellite links. Spacenet and Satlynx are the first SkyEdge service operators to offer satellite services compatible with the Cisco VSAT NM.
-- Impsat, one of Latin America's largest providers of private telecommunications networks and Internet services, will utilize a SkyEdge hub and VSAT terminals to provide services to enterprises throughout Argentina with a wide range of data networking applications, including broadband Internet access and VoIP.
-- Comsat International purchased two SkyEdge satellite hubs and nearly 5,000 VSAT terminals to provide broadband connectivity services for Caixa Economica Federal in Brazil. Comsat is Brazil's second-largest satellite service provider and Caixa is one of Brazil's largest public banks and is the institution responsible for managing the country's lottery.
-- Gilat announced industry veteran Andreas Georghiou has joined Spacenet as its new Chief Executive Officer and Glenn Katz to serve as the Company's President. In addition, David Myers recently joined Spacenet as Senior Vice President of Marketing and Business Development. Together, these moves complete the process of assembling a new Spacenet executive team with the skills, experience and focus to successfully grow the business and drive new market opportunities.
-- Gilat supplied Optus with an additional SkyEdge hub and several thousand VSATs for delivery of broadband services to sites across rural and remote Australia and New Zealand. Optus is one of Australia's leading integrated telecommunications companies. This network expansion supports the Australian government's program to subsidize the deployment of rural broadband services.
About Gilat Satellite Networks Ltd.
Gilat Satellite Networks Ltd. (Nasdaq:GILT) is a leading provider of products and services for satellite-based communications networks. The Company operates under three business units: (i) Gilat Network Systems ("GNS"), which is a provider of network systems and associated professional services to service providers and operators worldwide; (ii) Spacenet Inc., which provides managed services in North America for businesses and governments through its Connexstar service brand and for consumers through its StarBand service brand; (iii) Spacenet Rural Communications, which offers rural telephony and Internet access solutions to remote areas primarily in Latin America.
Gilat was founded in 1987 and has shipped over 600,000 Very Small Aperture Terminals (VSATs) to more than 85 countries across six continents. Gilat's headquarters is located in Petah Tikva, Israel. The Company has 14 local offices and three service facilities worldwide. Gilat markets the SkyEdge(TM) Product Family which includes the SkyEdge(TM) Pro, SkyEdge(TM) IP, SkyEdge(TM) Call, SkyEdge(TM) DVB-RCS and SkyEdge(TM) Gateway. In addition, the Company markets numerous other legacy products. Visit Gilat at www.gilat.com.
Safe Harbor:
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. 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.
Notes:
1) The attached summary financial statements were prepared in accordance with U.S. GAAP. The attached summary financial statements for Q2 2006 are unaudited. To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Gilat's net income, EBITDA and earnings per diluted share, before the share-based payment charge, which is the non-cash stock option expense as per SFAS 123 (R). This non-GAAP presentation of net income, EBITDA and earnings per share is provided to enhance the understanding of the Company's historical financial performance and comparability between periods.
2) Operating income (loss) before depreciation, amortization, non cash stock option expenses as per SFAS 123(R) and exceptional items, ('EBITDA') is presented because it is a measure commonly used and is presented solely in order to improve the understanding of the Company's operating results and to provide further perspective on these results. EBITDA, however, should not be considered as an alternative to operating income (loss) or net income (loss) for the period as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. 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. EBITDA may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Reconciliation between the Company's Operating income (loss) and EBIDTA is presented in the attached summary financial statements.
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
US dollars in thousands
June 30, December 31,
--------- ------------
2006 2005
--------- ------------
Unaudited Unaudited
--------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 91,321 74,929
Short-term bank deposits 3,301
Short-term restricted cash 7,709 15,844
Restricted cash held by trustees 7,942 6,638
Trade receivables (net of allowance for
doubtful accounts) 39,197 33,683
Inventories 27,037 23,253
Other current assets 35,259 27,215
--------- ------------
Total current assets 208,465 184,863
-------------------- --------- ------------
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term restricted cash 6,201 6,699
Long-term restricted cash held by trustees 13,141 13,692
Severance pay fund 9,120 8,467
Long-term trade receivables, receivables in
respect of capital leases
and other receivables 18,980 22,757
--------- ------------
47,442 51,615
--------- ------------
PROPERTY AND EQUIPMENT, NET 124,268 124,245
--------- ------------
INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 12,071 12,254
--------- ------------
TOTAL ASSETS 392,246 372,977
------------ ========= ============
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
US dollars in thousands
June 30, December 31,
--------- ------------
2006 2005
--------- ------------
Unaudited Unaudited
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit 332 8,172
Current maturities of long-term loans 6,932 7,712
Trade payables 28,160 24,180
Accrued expenses 22,161 22,418
Short-term advances from customer held by
trustees 15,064 15,502
Other accounts payable 56,432 36,672
--------- ------------
Total current liabilities 129,081 114,656
------------------------- --------- ------------
LONG-TERM LIABILITIES:
Accrued severance pay 9,565 8,396
Long-term advances from customer
held by trustees 22,684 27,835
Long-term loans, net 27,265 29,143
Long-term convertible loan from a related party,
net 66,942 66,602
Accrued interest related to restructured debt 3,479 3,850
Other long-term liabilities 22,805 20,657
Excess of losses over investment in affiliates 7
Convertible subordinated notes 16,333 16,333
--------- ------------
Total long-term liabilities 169,073 172,823
--------------------------- --------- ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Share capital - Ordinary shares of
NIS 0.2 par value 1,014 995
Additional paid in capital 743,398 738,724
Accumulated other comprehensive income 618 16
Accumulated deficit (650,938) (654,237)
--------- ------------
Total shareholders' equity 94,092 85,498
-------------------------- --------- ------------
Total liabilities and shareholders' equity 392,246 372,977
------------------------------------------ ========= ============
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
Six months ended Three months ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Revenues 119,568 104,408 60,979 51,370
Cost of Revenues 75,837 68,530 38,964 33,371
--------- --------- --------- ---------
Gross profit 43,731 35,878 22,015 17,999
--------- --------- --------- ---------
Research and development
expenses:
Expenses incurred 7,344 8,900 3,681 4,068
Less - grants 623 2,260 526 1,491
--------- --------- --------- ---------
6,721 6,640 3,155 2,577
--------- --------- --------- ---------
Selling, general and
administrative expenses 31,489 29,568 15,563 15,062
--------- --------- --------- ---------
Operating income (loss) 5,521 (330) 3,297 360
--------- --------- --------- ---------
Financial expenses (1,623) (999) (787) (827)
Other income (expenses) 17 208 (7) 367
--------- --------- --------- ---------
Income (loss) before taxes on
income 3,915 (1,121) 2,503 (100)
--------- --------- --------- ---------
Taxes on income 616 2,279 424 958
--------- --------- --------- ---------
Income (loss) after taxes on
income 3,299 (3,400) 2,079 (1,058)
--------- --------- --------- ---------
Equity in profits of
affiliated companies - 400 - -
--------- --------- --------- ---------
Net income (loss) 3,299 (3,000) 2,079 (1,058)
========= ========= ========= =========
Basic net earnings (loss) per
share 0.15 (0.13) 0.09 (0.05)
========= ========= ========= =========
Diluted net earnings (loss)
per share 0.14 (0.13) 0.09 (0.05)
========= ========= ========= =========
Shares used in basic net
earnings (loss) per share
computation 22,702 22,350 22,807 22,377
========= ========= ========= =========
Shares used in diluted net
earnings (loss) per share
computation 23,103 22,350 23,423 22,377
========= ========= ========= =========
GILAT SATELLITE NETWORKS LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENT OF INCOME
FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)
Six months ended
June 30, 2006
-------------------------------
Adjustments
GAAP (1) Non-GAAP
--------- ----------- ---------
Unaudited Unaudited Unaudited
--------- ----------- ---------
Revenues 119,568 119,568
Cost of Revenues 75,837 (108) 75,729
--------- ----------- ---------
Gross profit 43,731 108 43,839
--------- ----------- ---------
Research and development expenses:
Expenses incurred 7,344 (94) 7,250
Less - grants 623 623
--------- ----------- ---------
6,721 (94) 6,627
--------- ----------- ---------
Selling, general and administrative
expenses 31,489 (2,236) 29,253
--------- ----------- ---------
Operating income 5,521 2,438 7,959
--------- ----------- ---------
Financial expenses (1,623) (1,623)
Other income (expenses) 17 17
--------- ----------- ---------
Income before taxes on income 3,915 2,438 6,353
--------- ----------- ---------
Taxes on income 616 616
--------- ----------- ---------
Net income 3,299 2,438 5,737
========= =========== =========
Basic net earnings per share 0.15 0.25
========= =========
Diluted net earnings per share 0.14 0.24
========= =========
Shares used in basic net earnings per
share computation 22,702 22,702
========= =========
Shares used in diluted net earnings per
share computation 23,103 28,853
========= =========
Three months ended
June 30, 2006
-------------------------------
Adjustments
GAAP (1) Non-GAAP
--------- ----------- ---------
Unaudited Unaudited Unaudited
--------- ----------- ---------
Revenues 60,979 60,979
Cost of Revenues 38,964 (44) 38,920
--------- ----------- ---------
Gross profit 22,015 44 22,059
--------- ----------- ---------
Research and development expenses:
Expenses incurred 3,681 (38) 3,643
Less - grants 526 526
--------- ----------- ---------
3,155 (38) 3,117
--------- ----------- ---------
Selling, general and administrative
expenses 15,563 (908) 14,655
--------- ----------- ---------
Operating income 3,297 990 4,287
--------- ----------- ---------
Financial expenses (787) (787)
Other income (expenses) (7) (7)
--------- ----------- ---------
Income before taxes on income 2,503 990 3,493
--------- ----------- ---------
Taxes on income 424 424
--------- ----------- ---------
Net income 2,079 990 3,069
========= =========== =========
Basic net earnings per share 0.09 0.13
========= =========
Diluted net earnings per share 0.09 0.12
========= =========
Shares used in basic net earnings per
share computation 22,807 22,807
========= =========
Shares used in diluted net earnings per
share computation 23,423 34,816
========= =========
(1) Adjustments reflect the effect of non-cash stock options expenses
as per SFAS123(R).
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
Six months ended Three months ended
------------------- -------------------
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Cash flows from operating
activities:
-------------------------
Net income (loss) 3,299 (3,000) 2,079 (1,058)
Adjustments required to
reconcile net income (loss)
to net cash provided by (used
in) operating activities:
Depreciation and amortization 10,212 10,207 5,190 4,832
Deferred Stock compensation
relating to options 2,438 111 990 69
York - options fair value 340 - 179 -
Equity in losses of affiliated
companies - (400) - -
Accrued severance pay, net 516 (348) 99 (56)
Interest accrued on short and
long-term restricted cash (143) (229) (65) (67)
Exchange differences on long-
term loans 477 (822) 316 (465)
Exchange differences on loans
to employees (128) 190 (262) 190
Capital loss from disposal of
property and equipment 48 298 6 40
Deferred income taxes, net (517) (185) (106) (176)
Decrease (increase) in trade
receivables (5,472) 1,318 (4,240) 3,604
Decrease (increase) in
Receivables in respect of
capital leases,
prepaid expenses and other
accounts receivable
(including long-term) (4,036) 5,054 (2,270) 2,410
Decrease (increase) in
inventories (10,962) 1,254 (6,008) 367
Increase (decrease) in trade
payables 3,913 (5,199) 2,400 (2,468)
Increase (decrease) in accrued
expenses (634) (3,416) (1,582) 392
Increase (decrease) in other
accounts payable (including
long-term) 22,010 (741) 20,379 (222)
Decrease in advances from
customer held
by trustees, net (including
long-term) (5,589) (4,612) (3,727) (2,789)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 15,772 (520) 13,378 4,603
--------- --------- --------- ---------
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
Six months ended Three months ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Cash flows from investing
activities:
-------------------------
Purchase of property and
equipment (2,498) (2,211) (1,279) (895)
Proceeds from short-term bank
deposits 3,300 - - -
Proceeds from disposal of fixed
assets - 8 - -
Loans to employees - Net 254 (3,727) 180 25
Investment in restricted cash
held by trustees (1,838) (2,038) - (539)
Proceeds from restricted cash
held by trustees 1,228 7,110 23 2,627
Investment in restricted cash
(including long-term) (3,253) (10,582) (1,542) (10,111)
Investment in other assets (6) (44) - (28)
Proceeds from restricted cash
(including long-term) 11,888 2,824 3,727 1,088
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities 9,075 (8,660) 1,109 (7,833)
--------- --------- --------- ---------
Cash flows from financing
activities:
-------------------------
Exercise of options, net 2,252 839 1,911 696
Short-term bank credit, net (7,840) 7,285 318 8,040
Repayment of long-term loans (3,135) (1,872) (2,294) (1,013)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (8,723) 6,252 (65) 7,723
--------- --------- --------- ---------
Effect of exchange rate changes
on cash and cash equivalents 268 333 13 347
--------- --------- --------- ---------
Increase (decrease) in cash and
cash equivalents 16,392 (2,595) 14,435 4,840
--------- --------- --------- ---------
Cash and cash equivalents at
the beginning of the period 74,929 75,771 76,886 68,336
--------- --------- --------- ---------
Cash and cash equivalents at
the end of the period 91,321 73,176 91,321 73,176
========= ========= ========= =========
GILAT SATELLITE NETWORKS LTD.
CONDENSED EBITDA
US dollars in thousands
Six months ended Three months ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Operating income (loss) 5,521 (330) 3,297 360
Add:
Non-cash stock option
expenses 2,438 990
Deprecation and amortization 10,212 10,207 5,190 4,832
--------- --------- --------- ---------
EBITDA 18,171 9,877 9,477 5,192
========= ========= ========= =========
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