GILAT SATELLITE NETWORKS COMPANY OVERVIEW - NASDAQ, TASE: GILT November 2018 - Leader
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GILAT SATELLITE NETWORKS COMPANY OVERVIEW November 2018 NASDAQ, TASE: GILT
FORWARD LOOKING STATEMENTS DISCLAIMER Certain statements made in this presentation 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 obtain financing and/or 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. Gilat undertakes 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. Unaudited/Non-GAAP Financial Measures This presentation includes financial data that is not audited and financial data that was not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Non-GAAP financial measures appearing in this presentation consist of GAAP financial measures adjusted to exclude, non cash share-based compensation expenses, impairment of goodwill and long lived assets, amortization of acquired intangible assets, restructuring, trade secrets litigation expenses, tax expenses under amnesty program, deferred tax benefit that was recorded for the first time and other non-recurring expenses and net income or loss from discontinued operations. Gilat believes these non- GAAP financial measures provide consistent and comparable measures to help investors understand Gilat’s current and future operating performance. However, our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read in conjunction with Gilat’s consolidated financial statements prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. 2 | Proprietary and Confidential
GILAT – BOUNDLESS COMMUNICATIONS
4G/5G 2G/3G Air Sea Land Consumer Enterprise
MOBILE MOBILITY RURAL BROADBAND
MOST ADVANCED TECHNOLOGY END-TO-END SERVICE GLOBAL PRESENCE
Terrestrial-grade user experience Most stringent service levels 20 sales offices
Established 1987 NASDAQ / TASE: GILT ~1,100 employees
3 | Proprietary and Confidential
BOOMING CAPACITY – GEO + LEO/MEO
Global HTS Bandwidth Supply, Demand and Price per Mbps
$/Mbps/Month Gbps
1,000 10,000
20,000
900 18,000
9,000
~16 times today
800 16,000
8,000
700 14,000
7,000
600 12,000
6,000
ABUNDANCE
500 10,000
5,000
OF CAPACITY
400 8,000
4,000 UNLOCKS
300 6,000
3,000
NEW MARKETS
200 4,000
2,000
100 2,000
1,000
- 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GEO-HTS
GEO-HTS Global Global Demand
Demand GEO-HTS Global
GEO-HTS Global Supply Supply
Weighted Avarage GEO-HTS Price
Non-GEO HTS Global Supply Weighted Avarage GEO-HTS Price
Source: Euroconsult, NSR, 2017
4 | Proprietary and Confidential
AFFORDABLE INTERNET EVERYWHERE
IS BECOMING A “BIRTH RIGHT”
WE ALL WANT BROADBAND WE ALL WANT BROADBAND SATELLITE DELIVERS
Everywhere. Anytime. Affordable.
Everywhere. Anytime.Affordable,
Affordable.Plentiful, Terrestrial-grade User Experience
Mobile Mobility Broadband
5 | Proprietary and Confidential
ACCELERATING CONNECTIVITY – GROWTH AREAS
Mobile Mobility Broadband
Cellular Backhaul, Broadband to the
In the Air, at Sea, on the Ground
Network Resilience, Public Safety Unserved and Underserved
6 | Proprietary and Confidential
LEADING THE FAST GROWING SATELLITE BACKHAUL MARKET
Satellite Backhaul Market
$3,300M “Gilat continues to unlock new opportunities
(2027) and capture a bigger share of the pie…”
Source: NSR, April 2018
$790M
(2017)
7 | Proprietary and Confidential
MOBILE / BACKHAUL HIGHLIGHTS
Focus on developed markets
o North America, Japan, Australia, Europe
Above average gross margin
Long term deals
o Providing recurring revenues
8 | Proprietary and Confidential
METRO AREA - A LIVE EXMPLE 9 | Proprietary and Confidential
MOBILITY – SUPERIOR PASSENGER EXPERIENCE DRIVES DEMAND
Satellite Broadband Connected Aircrafts
Commercial Aircrafts Business Aircrafts
27,800 8,800
(2027) (2027)
5,200 500
(2017) (2017)
Source: EuroConsult, July 2018 Source: EuroConsult, July 2018
10 | Proprietary and ConfidentialExpanding to IFC antennas with Leading
Performance Solutions
Dual Band 400Mbps
Ku/Ka Antenna Modem
ESA/PAA
Ku and Ka
Transceivers
11 | Proprietary and ConfidentialMOBILITY / IFC HIGHLIGHTS
While we continue to grow with Gogo:
o Growing backlog, now >2,200 airplanes to be connected with Gilat
Dual-band Ku/Ka terminal
o Passed DO-160
o Commercially available
ARE
o Making progress with domestic airlines in China
o Based on Gilat’s dual-band Ku/Ka terminal
Business Aviation
o A significant opportunity – over 35,000 airplanes
o Complete offering – modem, antenna and transceiver
12 | Proprietary and ConfidentialBROADBAND / HTS HIGHLIGHTS
Gazprom
o Providing broadband connectivity across Russia over new satellite (Yamal 601 Ka)
o Current phase: ~ $18M for activating third of the satellite capacity
CS-18
o Extending satellite coverage throughout China with new satellite – CS-18
o Gilat is the sole solution to China’s HTS Ka (CS-16 & CS-18)
Hispasat
o Extending agreement to include Brazil on top of Mexico
o Over Amazonas 3 and 5 Ka-band HTS
JSAT
o Delivering wide range of mobility and fixed broadband applications in Japan
NBN progress
o Connecting nationwide businesses and enterprises in regional and rural Australia
13 | Proprietary and ConfidentialNGSO IS MATERIALIZING
O3b mPOWER
882 LEO satellites 292 LEO satellites >10,000 LEO satellites 7 MEO satellites
GEO
GEO 35,786 km
MEO MEO
2,000-10,000 km
LEO
LEO
500-2,000 km
14 | Proprietary and ConfidentialNGSO IS MATERIALIZING
Several constellations in advanced stages: SpaceX, OneWeb, Telesat, mPower
Gilat involved in a number of them
Opportunity is both baseband as well as ESA antennas
o Telesat/GEE IFC demo
15 | Proprietary and ConfidentialSECURING TECHNOLOGY LEADERSHIP IN THE LONG RUN
>$30M/year R&D budget (above sector average)
Over 300 engineers
Over 100 Patents
5 R&D centers (Israel, USA, Bulgaria, Moldova, Singapore)
Pioneering Next Generation Solutions
GEO
MEO
LEO
GEO/MEO/LEO Networks Satellite for 5G Electronically Steered Antennas
16 | Proprietary and ConfidentialBROADBAND / PERU HIGHLIGHTS
Reduced 2018 projections due to
slower than expected progress
Our main interest is not the construction but
recurring maintenance revenue
Plan is to complete first 4 regions in 2019
and move to operations
Target is profitable recurring revenues run rate
of >$50M/year from 2020
17 | Proprietary and ConfidentialFINANCIAL INDICATORS AND ANALYSIS 18 | Proprietary and Confidential
2018 UPDATED GUIDELINES AND OUTLOOK – INCREASED PROFITABILITY
US$ MILLIONS
Revenues
w/o Terrestrial Infrastructure
Revenues $242M-$248M ($204.5M)
18%-21% YoY
$265M-$275M ($282.8M)
Mobility Solutions Revenues
(3%)-(6%) YoY
Mainly IFC
$98M-$100M ($88.4M)
11%-13% YoY
Adjusted EBITDA Operating Profit
$35M-$37M ($26.2M) GAAP $22M-$24M ($10.9M)
34%-41% YoY Non GAAP $26M-$28M ($18.5M )
19 | Proprietary and ConfidentialEXECUTING PROFITABLE GROWTH STRATEGY
Updated 2018 Management Objectives (US$ millions)
Annual Revenues Adjusted EBITDA GAAP Operating Profit
279.6 282.8 265-275 35-37
22-24
26.2
19.2
10.9
0.8
2016 2017 2018E 2016 2017 2018E 2016 2017 2018E
Revenues: $265M - $275M
GAAP Operating Profit: $22M - $24M
Adjusted EBITDA: $35M - $37M
20 | Proprietary and ConfidentialGILAT REVENUES & TERRESTRIAL INFRASTRUCTURE BREAKDOWN
US$ millions
$280M $283M
$265M-$275M
$23M-$27M
$78M
$92M
$242M-$248M
$188M $205M
2016 2017 2018E
Satellite Terrestrial Infra.
21 | Proprietary and ConfidentialYEARLY REVENUE PER SEGMENT
US$ millions
$280M $283M
$265M-$275M
$23M-$27M
$78M
$92M
$98M-$100M
$63M $88M
$144M-$148M
$125M $116M
2016 2017 2018E
Fixed Mobility Terrestrial Infra.
22 | Proprietary and ConfidentialQ3 2018 PROFIT AND LOSS HIGHLIGHTS
US$ MILLIONS
Revenues Gross Profit
w/o Terrestrial Infrastructure GAAP 39% (29%)
$56.8M ($48.5M) Non GAAP 39% (31%)
17% YoY
Revenues OPEX
GAAP $18.2M ($17.0M)
Fixed Networks Revenues Non GAAP $18.0M ($16.7M)
$62.8M ($69.9M) $34.9M ($29.6M)
(10%) YoY 18% YoY Operating Profit
GAAP $6.0M ($3.3M)
Mobility Solutions Revenues Non GAAP $6.5M ($4.9M)
Mainly IFC Operating Margin
$21.8M ($18.9M) GAAP 10% (5%)
16% YoY Non GAAP 10% (7%)
Net Profit
Adjusted EBITDA
GAAP $8.7M ($2.1M)
$9.1M ($7.1M)
Non GAAP $5.1M ($3.6M)
*) Q3-18 (Q3-17)
23 | Proprietary and ConfidentialQUARTERLY PROFIT AND LOSS HIGHLIGHTS
US$ MILLIONS, EXCEPT PER SHARE DATA
GAAP Q3 17 Q4 17 Q1 18 Q2 18 Q3 18
Revenues 69.9 82.7 67.4 66.5 62.8
Gross Profit 20.3 25.2 21.4 22.4 24.2
Gross Margin 29% 31% 32% 34% 39%
R&D net 6.9 8.2 8.0 7.9 8.2
S&M 5.8 6.6 5.4 6.3 5.5
G&A 4.3 5.0 4.3 4.1 4.6
Other expenses (income)* - (0.2) - - -
Operating income 3.3 5.6 3.7 4.1 6.0
Net income (loss) 2.1 3.4 2.3 2.2 8.7
Diluted EPS 0.04 0.06 0.04 0.04 0.16
Non-GAAP**
Gross Margin 31% 32% 34% 36% 39%
Operating Income 4.9 7.0 5.1 5.7 6.5
Net income 3.6 4.7 3.8 3.7 5.1
Adjusted EBITDA 7.1 9.0 7.5 8.1 9.1
* Include tax amnesty and trade secrets litigation expenses
** Adjustments reflect the effect of non-cash stock based compensation as per ASC 718, amortization of intangible assets related to shares
acquisition transactions, impairments, restructuring costs, trade secrets litigation expenses, tax expense under amnesty program and first time recognition of deferred tax benefit
24 | Proprietary and ConfidentialBALANCE SHEET HIGHLIGHTS
US$ MILLIONS
Cash and equivalents1 DSO2 Total Assets
$103.3 ($95.8) 73 days (64 days) $391.3 ($371.8)
Cash From Operation
Total Debt Shareholders equity
$9.6M increase
$12.7 ($12.8) $233.5M ($223.1M)
($7.6M decrease)
1) Including cash and cash equivalents, restricted cash and net of short term bank credits
2) DSO calculation excludes Terrestrial Infrastructure Projects Segment
3) Q3-18 (Q2-18)
25 | Proprietary and ConfidentialIN SUMMARY – UNIQUELY POSITIONED FOR UNLOCKING OPPORTUNITIES
Oversupply of capacity unlocks new markets
Demand for plentiful affordable broadband,
anywhere anytime, is soaring
Leading in the main growth areas –
Mobile Backhaul & IFC Mobility
Product leadership and innovation
Focused on strategy execution and profitability
26 | Proprietary and ConfidentialTHANK YOU Gilat Satellite Networks | info@gilat.com | www.gilat.com
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