Gilat Expects Wavestream Addition To Buoy 2011 Profitability

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PARIS — Satellite ground terminal and services provider Gilat Satellite Networks on Feb. 22 said demand from corporate networks, lottery systems and government-backed rural telecommunications projects will boost its revenue in 2011 after a generally flat 2010.

When Gilat’s recent acquisition of power-amplifier builder Wavestream is added into the equation, the revenue growth will reach 42 percent, with improved profitability, Gilat officials said.

Petah Tikva, Israel-based Gilat also is counting on one or more Ka-band satellite broadband projects to emerge in Latin America, Russia and Australia, with Gilat competing for work on all of them.

In a conference call with investors, Gilat Chief Executive Amiram Levinberg declined to comment on whether Gilat’s strategy for its Spacenet division in the United States would change following the purchase of rival Hughes Communications of Germantown, Md., by EchoStar of Littleton, Colo.

Unlike Hughes and ViaSat of Carlsbad, Calif., Gilat has steered clear of satellite consumer broadband in recent years, remaining focused on corporate and government business.

In the United States, Gilat’s growth strategy appears focused most sharply on the defense market through its Spacenet Integrated Government Solutions (SIGS) division. It is with the defense market in mind that Gilat in 2010 purchased antenna designer RaySat Antenna of Vienna, Va. In December, Gilat closed on its largest-ever acquisition, of San Dimas, Calif.-based Wavestream Corp., a manufacturer of power amplifiers that is well positioned with companies serving the U.S. Defense Department.

The Wavestream purchase has substantially changed Gilat’s revenue profile. Following a strong revenue increase at the end of the year, Gilat reported 2010 revenue of $233 million, a 2.1 percent increase over 2009. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 6 percent of revenue.

Gilat Chief Financial Officer Ari Krashin said Wavestream, whose purchase was not completed until December, contributed about $4 million to Gilat revenue in 2010. Gilat officials had said at the time of the purchase that Wavestream revenue for 2010 would be about $70 million.

For 2011, Gilat is forecasting revenue of at least $330 million, with an EBITDA margin of 10 percent. Much of the increase comes from having Wavestream revenue for the full year, although Levinberg said the company’s other businesses, including corporate and government VSAT, or very small aperture terminal, satellite networks, also would be growing.

Gilat’s backlog stood at more than $232 million at Dec. 31, up 29 percent from a year earlier. Several large contracts with lottery systems in the United States — 33,000 sites in five states, including contracts signed in January — helped swell the backlog.

While not counted in the backlog figure for the end of the year, Gilat in January booked a contract extension with the government of Colombia to extend its rural telecommunications contract for a year. The extension is valued at $21 million, Gilat said. The company’s difficulties with Colombia on contract terms and payment schedules appear to be a thing of the past.

Levinberg said the contract wins in recent months represent “the strongest bookings in years.”

Gilat said 36 percent of its revenue in 2010 came from customers in the United States and 36 percent from Latin America. Asia accounted for 16 percent of revenue, with Africa and Europe at 7 percent and 5 percent, respectively.

Gilat agreed to pay $130 million in cash for Wavestream, with an adjustment of up to $7 million based on Wavestream’s performance.

Gilat reported cash of $57.2 million as of Dec. 31, down from $123 million a year earlier reflecting the Wavestream and RaySat acquisitions.