FORM
6 – K
SECURITIES
AND EXCHANGE COMMISSION
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 February 2010
Gilat
Satellite Networks Ltd.
(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
x Form 40-F o
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 o No x
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 the script related to Registrant’s conference call held on 16
February, 2010 after the announcement of Registrant's results for the quarter
ending December 31, 2009.
This
report on Form 6-K is being incorporated by reference into the Registration
Statement on Form F-3 (Registration No. 333-160683) and the Registration
Statements on Form S-8 (Registration Nos. 333- 158476, 333-96630, 333-132649,
333-123410, 333-113932, 333-08826, 333-10092, 333-12466 and
333-12988).
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.
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Gilat
Satellite Networks Ltd.
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(Registrant)
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Dated
February 22, 2010
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By: |
/s/ Rachel Prishkolnik
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Rachel
Prishkolnik
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Corporate
Secretary
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CONFERENCE
CALL SCRIPT - Gilat Satellite Networks
February
2010
Tom
Watts
Good
morning and good afternoon. Thank you for joining us today for Gilat’s fourth
quarter 2009 results conference call.
A
recording of the call will be available beginning at approximately 12:00 PM
Eastern Time, today, February 16th, 2010 until February 18th, 2010 at 12:00 PM.
Our earnings press release and website provide details on accessing the archived
call.
Investors
are urged to read the forward-looking statements in our earnings release, which
say that statements made on this earnings call which are not historical facts
may be deemed forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All forward-looking statements,
including statements regarding future financial operating results involve risks,
uncertainties and contingencies, many of which are beyond the control of Gilat
and which may cause actual results to differ materially from anticipated
results. Gilat is under no obligation to update or alter our forward-looking
statements whether as a result of new information, future events or otherwise
and we expressly disclaim any obligation to do so. More detailed information
about risk factors can be found in our reports filed with the Securities &
Exchange Commission.
That
said, on the call this morning is Amiram Levinberg, Gilat’s Chairman of the
Board and Chief Executive Officer and Ari Krashin, Chief Financial
Officer. Amiram please go ahead.
Amiram
Thank
you, Tom. Good day everyone.
I would
like to begin today’s call with a snapshot of our fourth quarter results,
followed by a more detailed review of our business during the
quarter. Following the quarterly review, Ari will
take you through the detailed financial results. After this, I will summarize
2009 and share with you our management objectives for the coming year. We will
open the floor for questions right after this.
In the
fourth quarter, we continued to increase our free cash position and saw a
significant improvement in bookings, compared to the previous quarters of the
year. Revenues also increased slightly compared to last quarter, but declined
compared to the comparable quarter in 2008. We finished the quarter with a small
operating profit.
Summarizing
the year 2009, this was a challenging year in general, a harsher market
environment has impacted our business. We have taken measurable steps to offset
the reduction in revenues during the year, and in this way offset most of the
negative impact on our financial results. We will go into more detail in the
2009 summary a bit later.
In the
fourth quarter, US, market conditions remained challenging and continued to
affect Spacenet's revenues, which declined compared to the fourth quarter in
2008. The quarter ended with the award of a significant contract from
Regis Corporation, a global leader in beauty salons. Up until now,
Spacenet has mostly been doing managed network services for customers using both
satellite and terrestrial technologies. What is special in this deal is that
there is no satellite component, and there are only terrestrial links. Spacenet
has been selected solely due to its capability in managing huge, complicated
enterprise networks and due to our unique Prysm Pro product. We see this as an
important achievement that may open larger opportunities for us in the managed
network services market. I’ll expand on it a bit later
In line
with our strategy to focus on the government sector, we established SIGS;
Spacenet’s Integrated Government Solutions division led by Ms. Susan Miller, an
industry veteran with over 20 years of experience in the telecommunications and
satellite sector. During the quarter we were awarded several government sector
deals, which, while not yet significant in size, are significant to our efforts
to branch out into this sector and further expand our offering.
We had a
very strong quarter in Latin America - Revenues increased this quarter compared
to the comparable quarter in 2008 and we received several very substantial
contract awards in this region. We announced two universal
service obligation- type projects in the region; Telefonica del Peru and an
extension in Costa Rica with ICE. This is a segment where Gilat
continues to be very well positioned.
Following
our successful fulfillment of the new agreements with the Colombian Government
during 2009, the Ministry of Communications in Colombia extended and amended the
agreements for the provision of services under the Rural Communitarian Telephony
(Compartel II) and Telecentros projects for an additional one-year term, through
December 2010. The current extension for continued service provides
for a government subsidy of approximately $1 million per month, which is
dependent upon meeting certain installation schedules, performance indicators
and providing similar services to those provided over the past
year.
The
operations in Colombia continued to have a positive impact our business this
quarter. We continued to release money from the restricted cash held
by trustees in Colombia and therefore recognized more revenues from our
Colombian operations.
Our
success in Latin America was offset by weaker results in some of the other
regions where we continue to witness a slowdown in business. While our bookings
increased significantly this quarter compared to previous quarters, it is still
too early to determine whether the market conditions are improving or expected
to improve in the coming quarters.
Moving to
the financial indicators summary slide, revenues for the fourth quarter of 2009
were approximately $56.6 million – an increase over the previous quarter and a
decrease compared to the comparable quarter of 2008. This quarter, we again were
able to balance our financial results by maintaining cost control, finishing the
quarter with a slight profit while increasing our free cash balances
position.
For the
year 2009, we recorded revenues of $228.1 million compared to $267.5 million for
the comparable period in 2008. Net income for the year 2009, was $1.9 million,
compared to net loss of $1.1 million in 2008. The decline in our revenues
compared to 2008 can be attributed to the tougher market environment in
2009.
Our
backlog remains steady compared to that of last year, at approximately $181
million.
Ari will
discuss the Q4 2009 and annual results in more detail later in the
call.
Getting
into a little more detail on our business in the developed markets – one of the
highlights of the quarter and full year was the award of the REGIS Corporation
contract. Regis, a global leader in beauty salons, hair restoration
centers and cosmetology education, is using Spacenet’s managed network services
and Prysm Pro network management appliance to provide integrated support and
management for its business communication infrastructure. This infrastructure
includes DSL, 3G data over cellular, analog and digital voice, WiFi and VPN
networking at its beauty salon stores.
Spacenet
will provide its Prysm Pro network appliance to over 7,000 Regis Corporation
North American locations. The PrysmPro, announced earlier this year,
provides support for automatic hybrid switching between wireline and wireless
technologies for network backup, integrated Wi-Fi hotspot services for
customers, integrated Analog Telephone Adapter (ATA) for VoIP functionality, and
Point of Sale hardware for retail applications. The new award
reflects our strategy to strengthen our position in the managed network services
market, irrespective of the communication technology.
As I
mentioned earlier, we are focused on expanding our presence within the
government sector and to this end, we have established our SIGS business unit.
During the quarter, we made progress in our efforts to expand our services to
government customers at the municipal, state and federal level, mostly for
emergency response. We also received another small contract for the DoD so we
are seeing progress in expanding our business in this sector.
The year
was also highlighted by new deals in the gaming sector, which continues to be an
important market for us in the US.
Now
turning to the Emerging Markets:
Latin
America remains a very significant market for us. The year was
highlighted by a mix of large scale contract awards in the region including
projects for USO, enterprise, government and energy sectors. We announced two
more USO projects in the region this quarter. For one of these
projects, Gilat is providing a 3,500 site SkyEdge II network to Telefonica del
Peru to enable the delivery of broadband internet services to remote areas in
the country. This contract is part of Telefonica Latin
America's initiative to deploy broadband services across the region, and Gilat
was chosen as the supplier of broadband satellite communications networks for
several Telefonica subsidiaries.
Instituto
Costarricense de Electricidad (ICE), Costa Rica’s national telcois another
example. In this case, we were chosen to provide a 500-site expansion to meet
the requirements of ICE's Universal Service Obligations.
In
addition, we were chosen to provide a SkyEdge II network to serve ICE's
corporate customers in Costa Rica. Similarly, the SkyEdge II network
which Gilat is delivering to STL, Ghana, is another example of the benefits of
this platform for the corporate sector. The new 1,000 site SkyEdge II
network will be used to provide broadband satellite-based services to STL's
enterprise, health care and financial services customers in West
Africa.
During
the quarter, we also deployed two additional government defense agency contracts
in Asia. We were awarded several defense agency contracts in Asia in
2009, and we view this as an important step in expanding our government and
defense-related business.
SkyEdge
II continues to gain traction in this sector as it is well suited to meet the
mission-critical application requirements of the corporate and financial
services industry.
During
2009 we continued to strengthen our SkyEdge II platform and released new
features and capabilities. SkyEdge II is a leading platform in terms of
performance and bandwidth efficiency, providing the best total cost of ownership
to satellite service providers.
One such
project that is using SkyEdge II is GESAC in Brazil, where with our technology,
the Ministry of Education is serving about 11,000 public schools and Internet
centers throughout Brazil. GESAC, is the Brazilian Ministry of Communications'
program for digital inclusion, and calls for the delivery of broadband Internet
services to underserved public institutions. Our customer, Embratel is using the
new SkyEdge II network to deliver broadband Internet services to thousands of
schools and public Internet centers (Telecentros) in more than 4,000 cities
nationwide.
Bandwidth
efficiency was one of the most important factors for this project, and we see
SkyEdge II excelling in this aspect. As I have said before, we are always proud
to participate in these types of projects that have a substantial and lasting
effect on the communities, improving not only their quality of life today, but
also enabling future generations of children to have a springboard for their
future.
During
2009 we were also chosen by Telefonica in their regional bid and by Optus in a
tender for their next-generation VSAT platform. We think all of these are
encouraging signs regarding our technology leadership.
We have
made two recent announcements regarding our technology. The first was that we
have deployed in two Asian networks a Bandwidth Optimizer product, or BWO. This
solution uses noise cancellation technology to save satellite capacity and is
suitable for both our SkyEdge and SkyEdge II platforms.
The
second announcement was that we are the first to receive certification for the
latest DVB-RCS version 1.3 requirements. DVB-RCS is an open ETSI standard for
two way communication defining an optimized return channel supported by multiple
VSATs and hub system suppliers. It has been mandated by many governments and
institutions around the globe.
That
concludes our business overview. Now I would like to turn the call over to Ari
Krashin, our CFO, who will review the financials. Ari?
Speaker: Ari
Krashin
Thanks.
Good morning and good afternoon everyone.
Revenues
for the fourth quarter were $56.6 million, compared to $66.1 million in the
fourth quarter of 2008. Our revenues this quarter reflect the continuing affects
of the slowdown in the markets we experienced during the year. In comparison to
the third quarter, we had a slight increase in revenues, which is attributed
mainly to the higher level of bookings during the second half of the year and
particularly during Q4.
This
quarter, we were able to release $6.2 million of restricted cash in Colombia,
which is reflected in our revenues. In 2009 we released the entire
$24 million in restricted cash that was held by trustees at the beginning of the
year. Following to the successful implementation of the amended
Compartel projects, last month we signed an additional extension for the
remainder of 2010. We expect that this will contribute approximately
$10 to $12 million in revenues in 2010, should we meet the operational
indicators.
Our gross
margin for the fourth quarter was 33.1% reflecting an increase from the 30.7% in
the comparable quarter of 2008.
The
improvement in our gross margin this quarter reflects our continuing efforts to
improve our profitability, both through managing the type of transactions we
have and through a focus on costs and budget control.
As we
continue to mention every quarter, our gross margin is also affected by the mix
of equipment and services, the size of our deals and the timing in which
transactions are consummated. Each of these factors result in
variations in our gross margins.
Net
R&D expenses decreased from $5.0 million in the fourth quarter of 2008 to
$3.4 million this quarter.
Selling,
Marketing, General and Administrative expenses decreased from $17.0
million in the fourth quarter of 2008 to approximately $15.2 million this
quarter.
The
overall decrease in our operational expenses, reflect the effect of
the head count reduction we had at the beginning of the year and the cost
cutting measures we took at the end of the second quarter of 2009.
Going
into 2010, in support of our strategy, we intend to increase our budget by
approximately $7-$8 million. Approximately half of this will be allocated to
R&D, and the remainder will be allocated to other activities in the company.
This increase in budget will be gradual over the year.
Our
operating income for the quarter was approximately $200
thousand compared to an operating loss of approximately $6.8 million in the
comparable quarter of 2008. On a Non-GAAP basis we had an operating income of
approximately $400 thousand this quarter, compared to a loss of approximately
$1.6 million in the comparable quarter of 2008.
The
improvement in our operating income this quarter, despite the reduction in
revenues compared to last year, was achieved mainly through the higher level of
gross margins, combined with the reduction in expenses.
Our GAAP
net income for the quarter was $300 thousand dollars, or 1 cent per diluted
share, compared to a loss of $6.5 million or a loss of 16 cents per diluted
share in the same quarter of 2008. On a Non-GAAP basis, net income for the
quarter was $600 thousand dollars, or 1 cent per diluted share, compared to a
loss of $1.3 million or a loss of 3 cents per diluted share in the same quarter
of 2008.
Now let’s
look at our financial highlights for 2009.
Our
revenues in 2009 were $228.1 million compared to $267.5 million in 2008. As
mentioned earlier, the decrease in our revenues year over year reflected the
continuing effects of the slowdown in the economy, the decline in the markets in
which we operate and the relatively low level of bookings we had during the
first half of 2009.
During
this year, we took some cost cutting measures in order to balance our operating
expenses with the lower level of revenues. The steps we have taken enabled us to
remain break-even despite revenue declines.
Our net
income for the year was $1.9 million or 4 cents per diluted share, compared to a
loss of $1.1 million or a loss of 3 cents per diluted share in
2008.
On a Non
GAAP basis, during 2009, we had a net income of $2.8 million or 6 cents per
diluted share, compared to a net income of $4.6 million or 11 cents per diluted
share in 2008.
Geographic
revenue distribution for the year was as follows: Latin America accounted for
$89 million, or 39%, The U.S accounted for $85 million, or 37%, Asia accounted
for $36 million, or 16%, Africa accounted for $11 million or 5% and Europe
accounted for $7 million, or 3%.
When
comparing 2009 figures to 2008, in absolute terms, we see growth in Latin
America mainly due to our revenues from the Colombia operations and the release
of the restricted cash, while other regions experienced a revenue
reduction.
During
the fourth quarter, we continued to increase our free cash balances by
approximately $7.5 million. At the end of the year, our free cash balances
totaled $154.4 million.
Our trade
receivables at the end of the quarter were $45.6 million, representing DSOs of
73 days. This represents an improvement from 2008 mainly as a result
of our efforts to manage our working capital and focus on payment
terms.
Our
shareholder's equity at the end of the quarter totaled $232.3
million.
In
summary, 2009 was a year of tight cost control and expense reduction to ensure
that our business remained strong financially, even in the face of a challenging
market environment. During 2009, we increased our free cash by
approximately $17 million and reached approximately $154 million in free cash
with only $30 million in debt which gives us a solid foundation to build the
business in 2010 and onwards.
Now I'd
like to turn the call back to Amiram. Amiram?
Thank you
Ari.
Before
moving to our 2010 management objectives, I would like to give you a short
overview on how we see the market.
2009 was
not a good year for the VSAT market. We estimate that the total VSAT market
declined in terms of revenues last year compared to 2008. This is as a result of
a mix of reasons, but we think primarily it is a result of the global financial
crisis and shortage of satellite capacity over certain regions. Looking at
market analyst reports, we see estimates stating that the economic crisis, while
still not over, is showing some signs of improvement. Market analysts also
estimate that satellite capacity will increase, so we believe the pent up demand
will bring a return to market growth. For this reason, we will increase our
investment and budget in the VSAT market, to be able to benefit from the growth,
when it comes, which we estimate will start in 2010, and likely to be more
significant in 2011 and onwards. This investment will be both in the core
markets where we are active today and in entry to military markets.
Regarding
the increase of budget for activities in our core markets; our focus will be to
improve our competitiveness especially in market segments where we are less
active today, such as small and high end networks. You may recall our
announcement of the NetEdge targeting just this segment. Another example is the
expansion of our Managed Network Services to satellite, hybrid
satellite-terrestrial and even to all-terrestrial networks.
This
budget allocation will probably not have a substantial impact on our sales in
2010 but we believe it will in 2011 and onwards.
The
second area I said we want to focus on is the military market. We think the
military market for our product base will continue to grow in the future. We
will therefore be allocating a significant budget toward this market. Already we
have established SIGS and we recruited Ms Susan Miller to head this activity. We
have also had some first small successes in 2009, both in the US DoD market and
in the international Defense market and you may recall several announcements
relating to this market in the past year.
The
investment in the DoD market is longer term and we expect to see substantial
revenue coming from this organic initiative only in 2012 and onwards. We are
also targeting non-organic growth and are looking for potential candidates. As I
am sure you remember, we have over $150 million of free cash, very low debt and
several alternatives for financing if needed, and we will strive to generate
growth to our business through M&A activities as well.
As we
move on to our 2010 management objectives, we have taken into account the market
environment that lies ahead in 2010 and we will increase our budget for our core
market activities and for entry to the military market. We have set
our financial management objectives to increase our 2009 revenue levels and to
improve profitability.
To
summarize our call, while we had a Year over Year decline in revenues this
quarter, we were able to significantly balance it by maintaining cost control.
We finished the quarter with a sequential increase in revenues, a small
operating profit and had a sequential increase in cash. This also is a summary
of 2009, with a decline in revenues compared to 2008, but with only a small loss
and with a significant increase in free cash.
Looking
at 2010, we have a clear vision of where we want to be. We have excellent
technology; SkyEdge II is a leading VSAT platform in the market and the PrysmPro
is a unique product.
We want
to strengthen our position in the market as well as focus more on the higher end
segments. We also want to focus on the Defense Markets, which
includes the US DOD and international Defense Agencies. Our budget and roadmap
have been adjusted to support this strategy. We have a strong balance sheet to
finance M&A activity which supports our strategy.
That
concludes our review. We would now like to open the floor for
questions.
Operator?
QUESTION
AND ANSWER
Thank
you. (Operator Instructions). There are no questions at this time.
Before I
ask Mr. Levinberg to go ahead with his closing statement, I would like to remind
participants that a replay of this call is scheduled to begin two hours after
the conference. In the US, please call 1-888-269-0005. In Israel, please call
03-925-5921. Internationally, please call 9723-925-5921. Additionally, a replay
of this call will also be available on the Company's website,
www.gilat.com.
Mr.
Levinberg, would you like to make your concluding statement?
Amiram
Levinberg - Gilat Satellite
Networks Ltd - Chairman and CEO
No, I'd
just like to thank you, everyone, for joining us for this quarter's call. Good
afternoon and good-bye.
*************************************************************
Operator
Thank
you. This concludes Gilat's Fourth Quarter 2009 Results Conference Call. Thank
you for your participation. You may go ahead and disconnect.
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