Gilat Backlog Doubles Amid Sharp Declines in Sales and Earnings
PARIS — Satellite ground equipment and services provider Gilat Satellite Networks on Feb. 18 reported sharply lower revenue and operating earnings for 2013 but said its backlog rose on South American government broadband-deployment contracts.
Petah Tikva, Israel-based Gilat said it is streamlining its operations but not letting up on research-and-development spending on Ka-band broadband applications for military, civil and commercial markets, both fixed and mobile.
In a conference call with investors, Gilat Chief Executive Erez Antebi said 2013 was “a challenging year” as the company’s forecast U.S. military business stalled with the U.S. government’s budget sequestration.
Antebi said that while U.S. military spending is headed for a broad decline, those companies — like Gilat — that are part of already confirmed “programs of record” in intelligence, surveillance and reconnaissance should come out OK in the medium term.
Gilat is rolling out several new products in 2014 including an X-, Ku- and Ka-band terminal and a separate terminal that offers Ku-band with military and commercial Ka-band capability. Gilat is specializing in small, lightweight satellite communications gear, and Antebi said that among the company’s new products is a terminal designed for small unmanned aerial vehicles.
On the civil government side of the business, Antebi said the first half of 2014 is likely to be slow because a new project in Colombia for broadband deployment will not begin to generate revenue until the middle of the year. The company in late 2013 won a contract valued at up to $99 million with the Colombian government, in addition to a $30 million contract for similar satellite services there.
It was these two contracts that accounted for the company’s near doubling of its backlog as of Dec. 31 compared with a year earlier, to $228 million.
Gilat is nearing the end of a 48,000-terminal contract with Australia’s NBN Co. for interim consumer broadband services using Thaicom’s IPStar/Thaicom 4 Ku-band satellite. Gilat earlier had said the contract could extend to around 55,000 terminals, but the follow-on order has not yet materialized.
NBN has purchased two large Ka-band satellites to provide subsidized satellite broadband to any Australian. The deployment of these two satellites has been viewed as a threat to Gilat, and to Thaicom, whose role in Australia once the NBN infrastructure is in place is unclear.
Meanwhile, a similar, if less ambitious, Russian government Ka-band satellite network for which Gilat had been selected as a ground hardware provider now appears to have been canceled. Antebi referred to it as being “on hold.” Both Russian satellite fleet operators are deploying their own Ka-band satellites for consumer broadband and Antebi said Gilat is in the hunt for more Russian business.
Gilat’s delayed sale of its Spacenet U.S. subsidiary to SageNet of Tulsa, Okla., closed in December. Spacenet, which manages corporate satellite networks with Gilat-built satellite terminals at more than 100,000 locations, generated $77 million in 2012 revenue but reported an operating loss of $2 million that year. Its 2012 EBITDA, or earnings before interest, taxes, depreciation and amortization, was $2 million.
Gilat said it expects to report a capital loss of between $1 million and $3 million on the sale, and that Spacenet under SageNet’s ownership is expected to remain a large Gilat customer.
Gilat reported $235 million in revenue for 2013, down 13.5 percent from 2012. Operating earnings were $4.4 million for the year, down from $19.1 million in 2012. With the Spacenet revenue no longer expected, Gilat said its 2013 revenue would be about $242.5 million, with an EBITDA margin of 9 percent.
The company said it had a cash balance of $86.8 million as of Dec. 31, up from $67.4 million a year ago.
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