Gilat Satellite Networks Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Gilad's first quarter 2023 results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 9th, 2023. By now, you should have all received the company's press release. If you have not received it, please contact Gilat's investor relations team at EK Global Investor Relations at 1-646-688-3559 or view it in the news section of the company's website, www.gilat.com. I would now like to hand over the call to Mr. Ehud Helft of EK Global Investor Relations. Mr. Helft, would you like to begin?

Good morning and good afternoon, everyone. Thank you for joining us today for Gilad's first quarter 2023 results conference call and webcast. A recording of this call will be available beginning at approximately noon Eastern time today, May 9, as a webcast on Gilad's website for a period of 30 days. Also, please note that investors are urged to read the forward-looking statements in Gilad's earnings release with a reminder that statements made on this earnings call that are not historical facts may be deemed forward-looking statements within their meaning of the Private Security Litigation Reform Act of 1995. All such forward-looking statements, including statements regarding future financial operating results, involve risks, uncertainties, and contingencies, many of which are beyond the control of Gilad and which may cause actual results to differ materially from the anticipated results. Gilad is under no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise. and the company explicitly disclaimed any obligation to do so. More detailed information about risk factors can be found in Gilad's report filed with the Security and Exchange Commission. With that, let me turn to introductions. On the call today are Mr. Adis Fadia, Gilad's CEO, and Mr. Gil Benyamini, Gilad's CFO. I would now like to turn the call over to Adis Fadia.

Thank you, Uhud, and good day to everyone. I want to thank you for joining us today for our first quarter of 2023 earning call. 2023 started very well for Gilad. The first quarter of 2023 was another quarter in which we showed solid year-over-year revenue growth. Our growth was broad across multiple business areas and totaled 15% compared to the same quarter last year. Adding to that the significant improvement in our profit margins with gross margin reaching a multi-year high of 42% and adjusted EBITDA of $8.4 million, more than tripled the adjusted EBITDA of the same quarter last year. As you can imagine, I am very pleased with the results of the first quarter. Looking ahead, we are increasing our profitability expectations for the year. We expect GAAP operating profit of between $16 to $20 million and adjusted EBITDA of between $31 to $35 million while keeping the revenues guidance at the same level of between $260 to $280 million. 2023 is turning out to be a very strong and profitable year for Gilad. I am pleased to highlight three major activities achieved this quarter. First, we continue to make great progress with our strategy to be the partner of choice for the satellite operators. Second, we signed this quarter a strategic agreement with a leading IFC service provider with a potential of tens of millions of dollars for the development and supply of electronically steered antenna. And third, we signed an agreement to acquire DataPass, Inc., a U.S. defense integrator, to significantly boost our defense offering, focusing on the U.S. Department of Defense. I will now focus on some additional business achievements and opportunities. The new era of satellite communications continues to be a primary focus for Gilad. We strengthened and expanded our strategic relationship with the satellite operators SCS and Intelsat, receiving orders of tens of millions of dollars during the first quarter of 2023. During the first quarter, Hispasat, a leading global satellite operator based in Spain, chose SkyH4, Gilad's next-generation platform, for its new, highly flexible and efficient Amazonas Nexus satellite. This is further testament to the great market acceptance of SkyH4 as we experience additional operators choosing Gilad's next generation platform. We have a growing pipeline of operators that see the value of the SkyH4, which was designed to meet the need for VHTS, multi-orbit, software-defined satellites, and serves multiple applications. Particularly noteworthy is the expanded strategic partnership with SCS to include OS3B Classic, SCS's existing Neo-Constellation, in addition to SkyH4 already being a platform of choice for the O3B Empire and STS-17. Furthermore, InterSat is strengthening its strategic partnership with Gilad and joining the multi-service capabilities of Gilad's platforms and terminals such as in-flight connectivity and cellular back-on. As a reminder, SkyH4 was chosen for InterSat's high-throughput satellite IS-40E, which was launched last month. In our ISSPA product line, we are on track with previously reported projects with significant potential for large NGSO constellations. The IFC segment remains a strategic market and significant growth engine. As I mentioned earlier, I am excited to share the win for a major ESA project with the potential of tens of millions of dollars with the leading IFC service provider. The ESA terminal will enable us to increase our IFC presence with an additional product and to enter new market segments such as IFC for business jets, as well as connectivity for government and military aviation. This third ESA project is an important turning point and growth engine as we enter to the new promising and growing ESA market. Furthermore, we are collaborating with our partners on several potential projects for both ESA and IFC transceivers product lines. In addition, InterSat continues to expand its global IFC network to include both Skyh4 and Skyh2C working together. This demonstrates a great advantage to our partners on upward compatibility while protecting their past investments. We expect even further expansion as IFC picks up and InterSat broadens its global coverage with increased capacity to serve additional aircraft. Gilad's platforms will operate on multiple satellites, including Intelsat IS-40E, ISPASAT Nexus IS-40C, and UDESAT E10B. During the first quarter, we signed an agreement to acquire DataPass Inc., a U.S. defense satellite integrator. This is a major step in our initiative to increase our presence in the strategic growing defense market. The acquisition is an important milestone for the expansion of Gilad's business into the U.S. DoD, and government sectors, as well as into other international governments and defense markets. The acquisition price is a fixed component and an earner component that together total to an enterprise value of up to $45 million. As part of the acquisition, Gilad will assume approximately $15 million of data plus debt, mainly to banks, and most of the reminder of the purchase price of up to $30 million, including the earner portion, will be paid in Gilad shares. I am pleased that we are progressing well with the closing of the transaction that is subject to certain regulatory approvals, mainly CFIUS approval in the U.S. We expect our revenues in the defense sector to increase by approximately $50 million on a yearly basis following the closing of the acquisition, which is expected in the third quarter of 2023. In addition, this quarter, we launched two new products for the defense market that we expect to further enhance our offering. First is the Endurance, a modular, hot, swappable, high-power amplifier solution designed to disrupt the industry by its ability to replace existing SATCOM solutions based on cube technology. The USDOD is already evaluating this SSPA for a significant SATCOM program. Once certified, we expect follow-on orders valued at millions of dollars per year in the coming few years and the ability to pursue additional USD and commercial programs. The second addition to our portfolio for the military and government market is the new satellite modem, SKY-H4 Taurus-M. This new modem can also operate with SKY-H2C and as such protects past investments of customers who have already adopted Gilad's leading platform. In our strategic cellular backhaul growth engine, we continue to expand our global presence with multi-million dollar orders. We continue to receive orders from leading mobile network operators as well as from satellite operators who have chosen Gilad as the lead technology for cellular backhaul, including this quarter in Australia, Latin America, and Africa. In the enterprise market, two deals stood out during the quarter. First, in Asia, a multi-million dollar order was received to expand an advanced disaster response national network to ensure service continuity. And second, in Latin America, a world-leading financial service company is deploying millions of dollars of Gilad technology across the country for communication backup over satellite to expand the reliability and robustness of the network. In Peru, we made progress this quarter with Monatel accepting the network in our fifth project in the Ica region. This will allow us to shift to the operation phase and to provide services to customers. Furthermore, I am pleased to report that in January this year, Gilad Peru received about $3.2 million as initial payment for the first arbitration of the two arbitrations won against Ponatel and the Peruvian Ministry of Communication in 2018 and in 2022 for a total amount of approximately $29 million. To conclude, I believe that Gilad today is in its best position it has been in a long time. Revenue is growing strongly with bookings, backlog and pipeline at a very healthy level. This is due primarily, but not solely, to the strengthening and growing of the relationship with the satellite operators, to significantly build our position in the defense market with the agreement to acquire DataPath, and to embarking on a NISA terminal project for IFC with a potential of tens of millions of dollars. Just as important, looking ahead, we are well on track with our revenue expectations for 2023 of between $260 to $280 million. representing year-over-year growth in revenues of 13% at the midpoint. We are increasing our profitability expectations, gap operating profit of between $16 to $20 million, and adjusted EBITDA of between $31 to $35 million, representing year-over-year growth of 31% at the midpoint. I am looking forward to a successful year and materializing many of the opportunities discussed, as well as capturing additional large projects. And with that, I hand over to Gil Biniamini, our CFO. Gil.