Ladies and gentlemen, thank you for joining us today. Welcome to Compugen's third quarter 2023 results conference call. At this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded. An audio webcast of this call will be made available on the investor section of Compugen's website, www.cgen.com. Please note that if the sirens go off during this call, we will need to end the call to take shelter. I would now like to introduce Yvonne Naughton, Head of Investor Relations and Corporate Communications. Yvonne, please go ahead.
Thank you, Yoni, and thank you all for joining us on the call today. Joining me from Compugen for prepared remarks are Dr. Anat Cohen-Dayag, President and Chief Executive Officer, and Alberto Sessa, Chief Financial Officer. Dr. Henry Adewoye, Chief Medical Officer, will join us for the Q&A session. Before we begin, we would like to remind you that during this call, the company may make projections or forward-looking statements regarding future events, business outlook, research and development efforts and their potential outcome, anticipated progress and plans, results and timelines for its programs, financial and accounting-related matters. I ncluding projected financial information, as well as statements regarding the company's future cash position and other results and the company's future initiatives. We wish to caution you that such statements reflect only the company's current beliefs, expectations and assumptions, and that actual results, performance or achievements of the company may differ materially.
These statements are subject to known and unknown risks and uncertainties, which could cause the company's actual results to differ materially from those projected in such forward-looking statements. A nd we refer you to the SEC filings for more details on these risks, including the company's most recent annual report on Form 20-F, filed with the SEC on February 28, 2023, as later amended. The company undertakes no obligation to update projections and forward-looking statements in the future. Now I turn the call over to Anat.
Thank you, Yvonne. Good morning and good afternoon, everyone. W elcome to our third quarter 2023 update. I will start by saying a few words on the heartbreaking situation in Israel, a humanitarian disaster. We are traumatized and devastated by the inhuman slaughtering and kidnapping of civilians by the terrorist group, Hamas. This brutal attack shook us to our core. I'm deeply thankful for all the kind words of support I've received from so many friends, colleagues, partners, investors, analysts, and the medical associations from across the world. Your solidarity means so much to me and provides comfort amidst all the anguish and unbearable pain. Thank you. We recognize the emotional toll this is taking on our employees in Israel, and we're taking care to manage the employee needs with a lot of sensitivity and care.
Despite what our team members are going through, this is a time when we see teamwork at its best. Everyone supporting each other and stepping in to ensure we have no gaps. The teams are working hard together to ensure we continue to execute and meet our goals. Some are giving 150% when others are not able to. I'm seeing it every day, and it makes me proud. The infrastructure for remote working was established during the COVID pandemic. A nd although we allow certain teams to work remotely, we are encouraging our employees to come to the office. As a global company with headquarters in Israel and presence in the U.S., Europe, and Singapore, some management members and teams responsible for some of our key functions, including clinical development, preclinical development, and IT systems, are based outside of Israel.
Our clinical trials are run in the U.S. and operating in the ordinary course of business, including with respect to CMC and drug supply. Also, most of our preclinical activities related to COM503 are performed outside of Israel. We continue to work with no material impact on our operations, and if this changes, we will communicate it to the market. At Compugen, our goal is to transform the treatment of cancer patients who have no effective treatment options by using our pioneering computational platform to discover novel drug targets and develop potential first-in-class drugs. On this front, we're executing on our differentiated clinical approach to evaluate the blockade of the three pathways, PVRIG, TIGIT, and PD-1.
We're also advancing IND enabling studies with our lead preclinical potential first-in-class anti-IL-18 BP antibody, COM503, offering a novel approach to harness cytokine biology to address resistance to cancer immunotherapy. We're advancing our earlier-stage pipeline with additional new potential first-in-class programs. At SITC conference, which just took place, we presented additional data reinforcing a COM701 mediated anti-tumor activity in tumors typically not responding to immunotherapy. This data, which we continue to collect and share from our prior signal-seeking studies, adds to the breadth of tumor types, typically not responding to anti-PD-1, but responding to COM701 combination. Also, the biopsies taken from patients treated in these studies allows us to advance our biomarker insights, as well as further confirm the COM701 mediated mechanism of action. And in parallel, we're conducting our ongoing studies focusing on MSS CRC and platinum-resistant ovarian cancer.
Building on data we presented at ESMO IO last year at SITC, we reported clinically meaningful, durable partial responses in platinum-resistant ovarian cancer patients treated with COM701 triple combination, with no new safety signals. Three patients are continuing study treatment for more than 16 months. While the numbers are small, typical median duration of response for this population is three to four months with standard chemotherapy, while 6.9 months reported in patients treated with a recently approved antibody drug conjugate. In addition to these durable responses, our triple combination has the potential added benefit of a favorable safety and tolerability profile, which as we reported previously, investigators believe is important for patients' quality of life.
We also reported that clinical benefit defined as partial response or stable disease of at least 180 days was independent of baseline inflammatory status and was associated with an increase in CD8+ T cell infiltration into the tumor, suggesting again, and consistent with what was previously reported a COM701 mediated mechanism of action. Excitingly, at SITC, we showed for the first time in tumor biopsies, an association between the expression of the PVRIG ligand PVRL2, and clinical benefit, which may suggest the potential of patients' baseline PVRL2 levels as a biomarker to help enrich for patients who may gain clinical benefit from COM701 combination. This is consistent with the basic computational-driven hypothesis we shared for this pathway in the past.
This initial association finding suggests a COM701 mediated mechanism of action and has the potential for informing our studies, and I will come back to it later. At SITC, we also reported data in heavily pretreated metastatic breast cancer patients. COM701, when combined with nivolumab, resulted in preliminary antitumor activity with an overall response rate of 12%, including one complete response for over 21 months in a patient with HER2-negative metastatic breast cancer, a tumor that is considered immune cold. A partial response for 10 months in a patient with a triple-negative breast cancer, which is the fastest-growing and most aggressive kind of breast cancer. The disease control rate was 29%, and the three patients with stable disease were PD-L1 low and with low tumor mutation burden at baseline, suggesting a COM701 mediated mechanism of action.
And again, we reported good safety and tolerability with this dual combination. These findings are important because this is yet another indication in which patients are deriving durable benefit from COM701 combinations, despite typically not responding to immunotherapy. Additionally, like the initial biomarker work in platinum-resistant ovarian cancer, in these metastatic breast cancer patients, we showed that baseline PVRL2 expression levels are higher in patients with clinical benefit, further supporting our biomarker hypothesis. And finally, at SITC, as part of an oral and poster presentation, we shared new data on our preclinical potential first-in-class anti-IL-18 binding protein antibody, COM503, further supporting our exciting novel approach to harness cytokine biology to tackle resistance to cancer immunotherapy.
As a reminder, there is a huge excitement in this space, as cytokines have the potential to be powerful therapeutics, but have been plagued with challenges of giving them systemically at levels high enough to reach and modulate the tumor microenvironment, without causing systemic side effects. We have found a way to address this for the IL-18 pathway. COM503 blocks the interaction between IL-18 binding protein and IL-18, thereby freeing natural IL-18 to inhibit cancer growth in the tumor microenvironment. The data we presented at SITC addressed two pertinent questions. One, are IL-18 levels in the tumor sufficient to provoke an anti-tumor response following antibody blockade of IL-18BP? And two, is an IL-18BP antibody safer than an engineered IL-18 cytokine that is given systemically?
With respect to the first question relating to IL-18 levels in the tumor, we showed that, one, antibody inhibition of IL-18BP, free natural IL-18 prevent tumor growth in multiple mouse tumor models. And two, COM503 has the potential to release local production of IL-18 in human tumors above the minimum range needed to stimulate the immune system. We also showed that antibody inhibition of IL-18BP induced a significant increase in functional immune cells, such as the effector T cells, and induced a T cell clonal expansion in the tumor as well as immune memory response. So our data suggests that the answer to the first question is yes. IL-18 levels in the tumor are sufficient to provoke an anti-tumor immune response following antibody blockade of IL-18BP.
In addressing the second question relating to whether an IL-18BP antibody is safer than an engineered IL-18 cytokine given systemically, we showed that an engineered cytokine generated peripheral inflammatory responses, evidenced by increased serum cytokines and lymphocytes. This contrasts with our IL-18BP antibody approach, which modulates the tumor microenvironment without affecting the periphery. The overall data for our COM503 program suggests that our anti-IL-18BP antibody approach has a leading edge in inhibiting tumor growth while avoiding peripheral toxicity associated with administration of a recombinant IL-18 cytokine. Along with a successful CT, I would like to refer to additional progress we have made in the quarter. We're delighted to report that we have completed enrollment in the MSS CRC proof of concept study, which is a testament to the substantial unmet medical need in these patients and lack of alternative options.
We continue to monitor patients on study treatment, and we believe it will be more prudent to provide an update when we have longer follow-up from this cohort in the first half of 2024, and our preference is to do this at a medical conference. In the platinum-resistant ovarian cancer study, enrollment is increasing since we last reported with the activation of two additional sites. Nevertheless, completion of enrollment of up to 20 patients will move into 2024. The platinum-resistant ovarian cancer landscape is continually evolving and becoming more competitive. Although we did not expect an impact of mirvetuximab on our enrollment, which, as per label, is restricted to about 40% of FOXL2 high patients, ovarian cancer investigators are indicating that as the clinical community gain more confidence in the use of mirvetuximab, this is having an impact on our enrollment.
Following comprehensive discussions with our investigators, we're optimistic that we can address this gap and are working closely with our investigators on patient enrollment. Our investigators remain enthusiastic to further enroll for our study based on the durability of responses with our triple combination reported at SITC, as well as favorable safety profile. In addition to our progress, I'm delighted to see the progress of our partner, AstraZeneca, is making with rilvegostomig, their PD-1 TIGIT bispecific, derived from our COM902, which has progressed into phase III as adjuvant therapy for biliary tract cancer after resection in combination with chemotherapy. In addition, AstraZeneca continues to progress their rilvegostomig phase I and II program in additional indications. I believe that the progress of the rilvegostomig clinical program demonstrates the commitment to explore the potential of TIGIT and our differentiated anti-TIGIT COM902.
Like COM902, a reduced FC effector function anti-TIGIT antibody, rilvegostomig was engineered to reduce FC effector functionality with the potential to enhance antitumor activity. Now, moving on to what you should expect to see from us next. First, we plan to report data from our ongoing proof of concept study in MSS CRC in the first half of 2024. Second, we plan to enroll up to 20 patients in our ongoing proof of concept study in platinum-resistant ovarian cancer, and report data in 2024. More specific guidance will be shared during our end-of-year conference call. Third, identification of a predictive biomarker to enrich for responders to our COM701 combination was always important for us.
To this extent, we're excited about the progress we have made on generating initial biomarker data, which I alluded to earlier, showing for the first time an association between the expression of PVRIG ligand PVRL2 and clinical benefits that is consistent with our computational predictions. We will continue to build on these preliminary findings as part of our ongoing platinum-resistant ovarian cancer study, in which biopsies are mandatory. In parallel, we're also optimizing our PVRL2 assay to fit a potential patient selection study. Having the potential to enrich for responders in the platinum-resistant ovarian cancer patient population, together with the durability of response and the safety profile of our triplet combination, may allow us to build a unique development path for our triplet regimen. We will communicate early next year on how we will use this data to inform future directions.
Finally, we're on track for IND filing for COM503 in 2024. Before handing over to Alberto, I will touch briefly on our finances, and then Alberto will go into the details. We have an expected cash runway through at least the end of 2024, which we believe is sufficient to support all planned operations. This does not include any potential cash inflows, including potential milestone payments, which we may become eligible for through our partnership with AstraZeneca. Also, as we indicated, obtaining non-dilutive cash from partnering is a priority, and we are focusing our efforts on that front. With that, I will hand over to Alberto for the financial update.
Thank you, Anat. I'm happy to summarize our financial results. I will start with our cash balance. As of September 30, 2023, cash, cash equivalents, and cash investments were approximately $57.5 million, compared with approximately $83.7 million as of September 31st, 2022, affirming our focus on cash management while continuing our execution on our DNAM-1 axis hypothesis and progressing our lead preclinical drug candidate, COM503. As Anat mentioned, we have an expected cash runway through at least the end of 2024, which we believe is sufficient to support all our planned operations. The company has no debt. Now, regarding expenses. Expenses for the third quarter of 2023 were in line with our plans.
R&D expenses for the third quarter of 2023 were $8.3 million, down from $9.3 million in the third quarter of 2022. The decrease is mainly due to lower expenses associated with our CMC activities, offset by an increase in clinical trial expenses and by the end of the amortization of the deferred participation in R&D expenses, following the termination of the agreement with BMS in the third quarter of 2022. G&A expenses for the third quarter of 2023 were $2.3 million, compared to $2.6 million in the third quarter of 2022.
Net loss for the third quarter of 2023 was $9.9 million, or $0.11 per basic and diluted share, compared to a net loss of $11.7 million, or $0.14 per basic and diluted share in the third quarter of 2022. With that, I will hand back to Anat to summarize.
Thank you, Alberto. To summarize, we continue to execute. With our most recent data presented at SITC, we continue to provide evidence supporting a potential COM701 mediated clinical benefit in how to treat patients who are not responding to standard of care and failed prior IO therapy. This strengthens our path as we continue to pursue our ongoing proof-of-concept studies, designed to reinforce the data in our two selected indications and continue to inform our complementary biomarker strategy. We're looking forward to presenting data from these studies in 2024 and providing more details on our biomarker strategy, informing future direction and related studies. We've always said that blocking TIGIT may not be enough, and the PVRIG may be needed.
This belief is consistently being reinforced as we roll out our clinical data across multiple indications, and most evidently in hard-to-treat patients who are not responding to standard of care and failed IO therapy. With COM701 and COM902, our two wholly owned PVRIG and TIGIT programs, we are the leader in the unique chemotherapy-free triple combination approach of blocking three active immune checkpoints, PVRIG, TIGIT, and PD-1, with initial clinical data to support our hypothesis. We're also paving the way in harnessing cytokine biology to address cancer immunotherapy resistance, which is a field of high interest to the industry. With COM503, targeting the IL-18 pathway, we're on track to IND filing in 2024. I would like to thank all our employees for their dedication, teamwork, and resilience despite the challenges we have been enduring in Israel.
With that, I will turn the call back to the operator to initiate the Q&A session. Actually, before we go to the operator, I see Pierre Ferré, our Vice President of Preclinical Development, just joined us fresh off the plane from SITC in San Diego. Pierre will be glad to answer any questions on COM503, which sparked a lot of interest after his oral presentation at SITC. Welcome, Pierre. Yoni, you can now initiate the Q&A session.
Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star one. If you wish to decline from the polling process, please press star two. If you're using speaker equipment, kindly lift the handset before pressing the numbers. Please stand by while we poll for your questions. The first question is from Asthika Goonewardene of Truist. Please go ahead.
Hi, thanks for taking my questions. I'm Jane, and I'm on the line for Asthika. So I have a question regarding about... The first question is about what's the expected your expected milestones or timelines in 2024 and beyond for the program you co-developed with your partner, AstraZeneca? And then could you tell more details about how you both parties will handle this program? How will you monitor and evaluate the progress and the performance of this program? That's my first question. Second question is regarding of your your of course the COM503.
So I would like to know, or I would like to ask, how are you going to determine the optimal dose and the schedule for this COM503, and then in the animal or human study, preclinical and clinical. And then how you, how will you account for the variability and variability and also stability of this IL-18 and IL-18 BP levels in the different, you know, individuals or conditions? Okay, that's my two questions. Thank you.
Thank you, Jane. I'll start with the first question that relates to AstraZeneca, and then Pierre will take the second question that relates to COM503. First, I'll say that with AstraZeneca, the partnership that we have is actually a license agreement where we license to AstraZeneca the rights to develop bispecific antibodies based on our COM902. And from the get-go, this agreement is actually granting the rights for AstraZeneca for the full development and the later commercialization of the program. We're getting updates on this program, but this program is really progressed by AstraZeneca, and obviously, any information about this program will be disclosed only by AstraZeneca. Specifically, for contractual reasons, I cannot provide any insight about the specific milestones and the breakdown and the timing and the eligibility.
The only insight that I can give on this front is that, on the clinical milestones that we were already obtaining, we were eligible for milestones for the initiation of patient dosing in phase I and phase II. It was $6 million for phase I and $7 million for phase II. Other than that, at this point in time, I cannot say more. A nd as I stated, this is really AstraZeneca strategy in how to advance these programs, to which indications and at what timing. Pierre, will you take the next three questions?
Yes, my pleasure. So you were asking how we would conduct the phase one study to go to the active dose. So to do that, we will of course run a phase one cancer patient with standard dose escalation, with some accelerating maybe dose situations. About the dose itself, we have built a large experience at Compugen on the tools and the methods needed to measure all the components required for the pathway. We have built a comprehensive translational package with all our experience in vivo, with vivo models, ovarian cancers, and also lots of experience on in vitro testing on human samples. So we have made, and this will be ongoing, for the rest of the time that goes to the clinical trial.
We have built comprehensive PKPD modeling that we will aim to follow during the course of the study. With the tool that we have, we can monitor the suppression of IL-18BP in the periphery of the patients, and that will be the basis, the main basis of reaching the actual dose. A very interesting thing with that program is the safety so far that we've seen in all the animal models and also the human in vitro models that we have tested. And so with that safety in hand, if that transfer into the expected high tolerance in patients, we really think that we are able to reach active dose levels that saturate IL-18BP target easily in the tumor.
Thank you again for taking my question.
The next question is from Daina Graybosch of Leerink Partners. Please go ahead.
Hi, good morning. This is Jeff on for Daina. I just have a few questions related to the biomarker data you reported today. Can you just recap where you are in the process of developing companion diagnostics to enrich for PVRL2 patients retrospectively? And how would this path differ for IHC versus genomic amplification companion diagnostic? And is any one more practical than the other to implement? You know, second, do you think the data you shared on PVRL2 expression ovarian cancer and that genomic amplification data more broadly is something you can leverage to facilitate enrollment in the indication? And next year, when you report ovarian and MSS CRC data, do you plan to show this retrospective PVRL2 expression data in these patients? Thank you.
Thank you, Jeff. I'll start with answering the first portion of the question of where we are and how we move forward, and then Pierre can relate to the IHC and genomics and genomic consideration. I'll just say that at this point in time, first, we're very excited with the data that we got. It's still initial, but it's pointing in the exact right direction that we were thinking of at the stage that we build the hypothesis based on computational data. And we are continuing to collect data, and this is from the ongoing study. It is important for us to add more patients and generate more robust data as we go with the ovarian cancer study.
For the meantime, we're also developing an assay, but I want to make sure, maybe Pierre would want to relate with the, as well when he answers. It is not the final companion diagnostic assay. We're now in parallel of collecting more data. We're optimizing the assay that will be used eventually for screening patients in a study. And it's not, it's not going to be the ultimate companion diagnostic assay. But we're trying to work aggressively on both sides, on collecting the data and optimizing an assay, so we are ready to be able to take it forward, based on pending the data will continue to look good. Pierre, do you want to relate to the additional questions or to add?
Yeah, I would say that the IHC assay is being optimized for use in the central laboratory that we already used in the recent past to generate those data. And based on those data, we are optimizing it further to make it easier on practical terms in a day-to-day basis, when, if and when we will activate prospective patient selection. And about the genomics, indeed, in the poster that we reported in SITC, we have flagged that one of our patients having the highest score on IHC PVRL2 is also showing a genomic amplification that may be detected perhaps in the future from peripheral blood, from the periphery. So it will be a non-invasive way of assessing the biomarker and the possibility that the patient may respond.
We view that association between genomic amplification and the high score PVRL2 are the first confirmation that there is something there of interest. In public databases, on ovarian cancer, it is a low proportion of patients that are having genomic amplification. We don't think that immediately it will be achievable to screen patient on that front. But we are intrigued also by the fact that there are gains, not only amplification, but also gains. And, you know, this is something that we will explore, of course, in parallel, but we do think that the IHC that we have in hand will be proximal for any study, if we are going to activate that.
Thanks for taking my question.
The next question is from Steve Willey of Stifel. Please go ahead.
Yeah, good morning. Thanks for taking the questions. Can you just speak to, I guess, how many sites are currently active in the ovarian trial? I guess how many have you brought on just within the past few months? And I guess over the longer term, do you think you need to bring on more sites in order to, in order to expedite patient enrollment?
Thank you, Steve. So right now we have nine sites active, we have a few more, which is based on the plan that we've already rolled when we were thinking about ramping up. And we don't think that we should add additional sites beyond what we planned and what we're looking to do now. And the reason for this is what I was just alluding to in the prepared remarks. So first, we believe that the close monitoring that we're doing now with the investigators, and again, trying to make sure that the study is on the radar. This is something that is that is going to achieve the goal, and this is after we added ovarian cancer-specific sites, the sites that are ongoing, specifically ovarian cancer patients.
So these, these two things, adding the sites, making sure that we speak with the investigators. A nd we have to, I have to say that, hearing their comments about how they think about the triplet activity, mainly the durability in conjunction with the safety for these patients. They're really experienced so many lines of treatment, we don't really need to convince them. So we believe that the ramp-up that we started to see will continue, and that we don't need to add additional sites to the study.
Okay. And then I think you said that, I mean, you're obviously assaying for PVRL2 expression, so I think you said biopsy is mandatory. Is the ask of a patient, both in on treatment and then, I guess, a baseline and then multiple on treatment biopsies, or are you just looking for one specific biopsy? And I guess is that second on treatment biopsy requirement, is that in any way rate limiting in terms of your ability to get patients to solicit consent?
It's a very good question, and maybe Henry will want to add anything about this, but that in any case, in any study, when you ask for biopsies, this is a hurdle, obviously, because patient needs to go through some invasive approach. But we don't anticipate at this point in time that this is a big hurdle. We ask for mandatory biopsies at baseline prior to treatment and also on treatment. And this is really serving us in order to make sure that eventually we can go with the platinum-resistant ovarian cancer data that we have into what eventually will be a biomarker-driven study that will allow us to maximize the potential of COM701 treatment for patients that may respond to this treatment.
At this point in time, this is mandatory. With this mandatory request, we do see a ramp up, and we believe that this will not be the issue for enrollment.
Okay. And then, just lastly, on the colorectal trial, I know this is open label. Do you have a sense as to what the distribution of patients looks like with respect to the presence or absence of liver metastases at baseline? Thanks.
So I'll start, and then Henry maybe wants to add. Yes, it's open label, we're familiar with it. While we're not looking every day on the patient distribution, we're familiar with this. We are this kind of study that allows for liver mets. And that's unique, and this is because we believe that there could be some edge there based on the prior data. But as I said, we continue to monitor patients, we continue to collect the data, and we're thinking very hard on what data we should share while the study is continuing. But we've made the decision that it's better for us not to share portions of data, incomplete picture. It is better for us to have a longer-term follow-up and share a full picture.
As I said, preferably in a medical conference, when investors will be able to see the full picture of the data. Henry, anything else you would like to add on the liver mets, on the question?
Thank you, Anat. I think you've covered the major part of the question. But just to give some color, looking back at the data we presented previously on the 22 subjects, patients, with microsatellite colorectal cancer. A little above three quarters of those patients have liver mets. That was the initial presentation we had. The number of patients that we anticipate will have liver mets will also probably be around that number, based solely on the fact that most of these patients have exhausted all available standard of care therapies. And in addition to that, most, the most common site of the metastasis of colorectal cancer, if you just look at the anatomy, is the liver.
So, between half to about 2/3 to about 3/4 of patients will probably have liver mets on an analysis. And I'm just making an assumption here and a projection until we do look at that data next year, like Anat has mentioned, before we'll be able to give you more substantive information on that regard.
Okay, thanks for taking the questions.
Maybe, Steve. M aybe I'll just add, just to make sure that it is clear that in a biomarker-driven study, we will obviously only require for a baseline biopsy, pre-treatment biopsy, but not an on-treatment biopsy, so it will be less complicated.
This concludes the Q&A session of Compugen's Investor Relations conference call. Thank you for your participation. You may go ahead and disconnect.
Ladies and gentlemen, thank you for standing by. Welcome to Gilat's third 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 November 7, 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?
Yeah. Good morning. Good afternoon, everyone. Thank you for joining us today for Gilat's Third Quarter 2023 Results conference call and webcast. A recording of this call will be available beginning at approximately noon, Eastern Time today, November 9, November 7, sorry, the webcast on Gilat website for a period of 30 days. Also, please note that investors are urged to read the forward-looking statements in Gilat'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 the meaning of the Private Securities 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 Gilat, and which may cause actual results to differ materially from anticipated results.
Gilat 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 expressly disclaims any obligation to do so. More detailed information about risk factors can be found in Gilat's reports filed in the Securities and Exchange Commission. With that said, let me turn to introduction. On the call today are Mr. Adi Sfadia, Gilat's CEO, and Mr. Gil Benyamini, Gilat CFO. I would now like to turn over the call to Adi Sfadia. Adi, go ahead, sir.
Thank you, Ehud, and good day to everyone. I want to thank you for joining us today for our third quarter of 2023 earnings call. I want to take a moment to comment on the tragic events of October 7 and the war in Israel. Our thoughts and prayers are with the victims and families of this horrific attack. We are very proud of our employees' response to this crisis and their dedication to the company during this time. We also want to thank our partners, customers, suppliers, and the world community at large for their full-hearted support. Before I discuss the business results of the quarter, I want to emphasize that Gilat is a strong global company with operation and development centers worldwide. Our operation remains unaffected by the recent events in Israel.
We continue to closely monitor the situation and have implemented relevant measures and refreshed our business continuity plans to minimize any potential effect, if at all, on our business. Now, let's move to the business review of the third quarter of 2023. We are pleased with our results for the third quarter, particularly the continued revenue growth, combined with the continued improvement of our profitability. The good performance was due to growing interest in our solutions, as well as advancement in the satellite communication space in general. In particular, I would mention the in-flight connectivity market that contribute significantly to our revenue growth and profitability this quarter. We report significant improved profitability and adjusted EBITDA, demonstrating the operating leverage inherent in our business.
In fact, our year-to-date adjusted EBITDA of $27 million already exceeds the adjusted EBITDA from the whole of 2022. We are very pleased with the progress made this year, and we expect this trend to continue. Looking ahead, we are narrowing our revenue and profitability expectations for the full year 2023. We expect revenues of between $265 million-$275 million. We are increasing our GAAP operating income to between $29 million-$31 million due to one-time income net that Gil Benyamini, our CFO, will discuss in his comments. We expect adjusted EBITDA of between $35 million-$37 million, representing year-over-year growth of 43% at the midpoint.
In the Very High Throughput Satellite, the VHTS, and the Non-Geostationary Satellite, the NGSO constellations business, we continue to lead with follow-on multi-million-dollar orders from our strategic partners, the satellite operators. Network extensions and delivery of Gilat's multi-orbit acceleration platform, the SkyEdge IV, and their various VSATs, are taking place globally in support of multiple applications such as in-flight connectivity, cellular backhaul, and enterprise. In the third quarter, we secured a new win for millions of dollars for our multi-application platform to support new high throughput satellite. This satellite will be used primarily for IFC, with maritime and cellular backhaul as secondary applications. In our SSPA product line, I am pleased to report that we continue to take progress in a major project with significant potential for a large NGSO constellation. We are on track and expect to pass qualification process in Q4 this year.
This quarter continues to be a strong quarter for Gilat cellular backhaul solution over satellite. A significant award this quarter for approximately $20 million for a contract extension from Tier 1 MNO in the United States. Gilat continues to support this Tier 1 customer with a multi-year, end-to-end managed services contract for satellite-based cellular backhaul and emergency response services. Furthermore, a most exciting technical milestone was achieved with SkyEdge IV Aquarius VSAT for 5G cellular backhaul in India, with Reliance Jio over SES O3b mPOWER services. An outstanding performance of 1 Gbps was showcased in India's first satellite-based gigafiber service, called Jio Space Fiber, at the India Mobile Congress. The amazing success demonstrates high-speed backhauling services over satellite to deliver high throughput connectivity to previously inaccessible geographic within India. I couldn't be prouder of our team who made this happen.
During the quarter, we built upon our ongoing activity with Intelsat, with an additional multi-million-dollar deal to enhance the global network and Taurus modem deployments that operate both on SkyEdge IV and SkyEdge II-c. In addition, we engaged in our SSPA business in several new opportunities for next generation IFC equipment, which we hope will mature in the next few months. This success, in addition to our ongoing business with another large aerospace integrator, a long-time partner in the IFC market, will continually rely on Gilat transistors. In March this year, we signed an agreement to acquire DataPath, Inc, a leading U.S. defense satellite integrator. This is a major step in our initiative to increase our presence in the strategically growing defense market.
The acquisition is an important step in the expansion of Gilat business into the U.S. DoD and government sector, as well as into other international government and defense markets. We are progressing very well towards the closing of the transaction. We expect our revenues in the defense sector to increase by approximately $50 million on a yearly basis, following the imminent closing of this acquisition. We are now awaiting final regulatory approval, which by recent indication, should arrive soon, following which we expect closing to happen this quarter. We further expect that the forthcoming closing of DataPath acquisition will provide a tailwind for major defense opportunities. As I have mentioned in the past, we are putting great focus on the defense market, and we are seeing slow but good progress in this area and expect this extra focus will bear fruit soon.
In the third quarter, we already advanced a project with the Ministry of Defense of a country in Southeast Asia. We continue to grow our pipeline and are working on several exciting deals, which we hope will materialize in the near future. Furthermore, our enterprise customers worldwide continue to depend on us to enhance their business, and new opportunities continue to arise. For example, we received a managed service contract expansion from a large government corporation in Asia Pacific, to provide connectivity for multiple applications across the nation. This includes, but not limited to, enterprise applications with strong opportunities for several backhaul emergency response and mobility applications such as Comms on the Move and Comms on the Pause. Providing social inclusion is a big part of our strategy, and we have exemplified also a new deal in the Philippines.
A new global network was deployed to provide connectivity to the unconnected, leveraging our SkyEdge II-c platform and Gemini VSAT. In Peru, we are progressing towards completing the construction of the Amazonas region, which is the sixth region awarded to Gilat back in 2018. We expect to enter acceptance process soon, enabling us to deliver the network to Pronatel and to move into the operational phase in the first half of 2024. Furthermore, in Peru, we are expecting additional progress in the next few months. This includes the maturity of several large RFPs with Pronatel and the Peruvian government, as well as several project extensions. We are most pleased with the strong pipeline we have in Peru. To conclude, I'm pleased with our ongoing support of our partners, as well as our ability to capture significant new opportunities.
We continue to lead with our next generation platform, SkyEdge IV, that support multiple orbits and verticals, including our strategic markets of mobility, solar, vehicle, and defense. We also secured new opportunities for our SSPA business, especially in the IFC segment, and are seeing increased opportunities in that line of business. We have a strong pipeline and expect the materialization of important deals over the coming months. With that, I hand over to Gil Benyamini, our CFO. Gil, please.
Thank you, Adi. Good morning and good afternoon to everyone. I would like to remind everyone that our financial results are presented on both GAAP and non-GAAP basis. We regularly use supplemental non-GAAP financial measures internally to understand, manage, and evaluate our business and to make operating decisions. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating performance. Non-GAAP financial measures mainly exclude the effect of non-cash stock-based compensation expenses, amortization of purchased intangibles, amortization of intangible assets related to acquisition transactions, lease incentive amortization, impairment of held-for-sale assets, income tax effect on adjustments, one-time changes of deferred tax assets, and other operating income or expenses. The reconciliation table in our press release highlights this data, and our non-GAAP information presented excluded, exclude, excludes these items.
I will now move to our financial highlights for the third quarter of 2023. Overall, as Adi mentioned earlier, we are very pleased with the strong results of this quarter. We reported a 6% year-over-year growth in revenue and a solid improvement in profitability. Non-GAAP gross margin was 41%, and our adjusted EBITDA reached $9.5 million, higher by 30% compared to Q3 last year. Given the strong performance to date, alongside with expected timing of Q4 deliverables and our proximity to the end of the year, we narrowed our revenue and adjusted EBITDA guidance and increased our GAAP operating income guidance, which I will cover later. In terms of our financial results, revenues for the third quarter was $63.9 million, 6% higher than those of third quarter of last year.
This was driven by growth in the Satellite Network segment, mainly from the cellular backhaul, enterprise, and mobility verticals. In terms of revenue breakdown by segment, Q3 2023 revenues of the Satellite Network segment were $40.7 million, compared to $32.4 million in the same quarter last year. The significant increase mainly resulted from some large deals, which were delivered this quarter to our strategic customers in the mobility market, as well as the high volume with our enterprise and cellular backhaul customer base. Q3 2023 revenues of the Integrated Solutions segment were $11 million, compared to $15.7 million in the same quarter last year. The decline was mainly due to a transition period between strategic and large projects in the segment.
Q3 2023 revenues of the Network Infrastructure and Services segment were $12.2 million, compared to $12.3 million in the same quarter last year. I would now like to summarize our third quarter, both GAAP and non-GAAP results. Our GAAP gross margin in Q3 2023 improved to 40.4%, compared to 38.2% in the same quarter last year. The improvement in our gross margin was mainly due to a favorable product and services revenue mix recognized this quarter and the higher level of revenue. I note that revenue margins and profitability may fluctuate between quarters as an outcome of the actual revenue volume and deal mix.
GAAP operating expenses in Q3 2023 were $13.1 million in the quarter, or 20% of revenue, compared with $19.6 million, or 33% of revenues in the same quarter last year. The significant decline in GAAP operating expenses was due to a win of a Philippines lawsuit, which was settled this quarter and resulted in a one-time other income, as well as the sale of real estate in Bulgaria, and therefore a reduction in GAAP OpEx of $7.4 million. GAAP operating income for the quarter improved to $12.7 million, compared to $3.4 million in the same quarter last year. GAAP operating income in Q3 2023, excluding the one-time other income, was $5.3 million, higher by 55% compared to Q3 2022.
GAAP net income in the third quarter was $10.2 million, or diluted earnings per share of $0.18. This is compared to a GAAP net income of $2.1 million, or diluted earnings per share of $0.04 in the same quarter last year. GAAP net income in Q3 2023, excluding the one-time other income, was $3.8 million, almost double that over the third quarter last year. Moving to the non-GAAP results, our non-GAAP gross margin in Q3 2023 improved to 40.5%, compared to 38.3% in the same quarter last year. Non-GAAP operating expenses in Q3 2023 were $19.8 million, compared with $18.7 million in the same quarter last year.
Non-GAAP operating income for the quarter improved to $6.1 million, compared to $4.4 million in the same quarter last year. Non-GAAP net income in the third quarter was $4.6 million, or diluted earnings per share of $0.08. This is compared with a non-GAAP net income of $3 million, or diluted earnings per share of $0.06 in the same quarter last year. Adjusted EBITDA for the quarter was $9.5 million, an improvement of 30%, compared with an adjusted EBITDA of $7.3 million in the same quarter last year.
Moving to our balance sheet, as of September 30, 2023, our total cash and cash equivalents, including restricted cash, was $100.3 million, compared with $87.8 million on June 30, 2023, and compared to $69.9 million as of September 30, 2022. We do not hold any debt. In terms of cash flow, we generated $13.8 million from operating activities during the third quarter of 2023, which also includes the collection of the lawsuit award in the Philippines, as I mentioned earlier. DSOs, which exclude receivables and revenue from our terrestrial network construction projects in Peru, were 75 days higher than the previous quarter DSO, which were 63 days.
The increase was impacted by an increase in receivables, partially offset with increase in revenues, and is in line with our credit policy. Our shareholders' equity as of September 30, 2023, totals about $265 million, compared with $255 million at the end of June 2023. Looking ahead, as I already mentioned, due to our proximity to year-end, we have narrowed our revenue guidance and adjusted EBITDA guidance range for the year. Given the one-time other income, as mentioned before, we are updating our GAAP operating income target for the year. Our updated expectations show a strong 2023, with revenue of between $265 million-$275 million, representing year-over-year growth of 30% at the midpoint.
GAAP operating income of between $29 million-$31 million, representing year-over-year growth of around 3 x at the midpoint, and adjusted EBITDA of between $35 million-$37 million, representing year-over-year growth of 43% at the midpoint. All in all, as have been mentioned, we are very pleased with our performance today, and we expect to conclude 2023 as a strong year for Gilat. That concludes my financial review. I would now like to open the call and would be happy to take your questions. Operator, please.
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly listen to handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Ryan Koontz of Needham & Company. Please go ahead.
Hi, thanks for the question, and I'm glad to hear everyone from the company is safe. Can we start maybe with gross margins and maybe talk through some of the puts and takes on gross margins? Looks like a nice step up sequentially in September, but maybe I'm reading into the implied guidance for December, it'll be another step down. Maybe is there some product mix issues there that are swinging gross margin around?
Yeah. Hi, Ryan. So, as you know, gross margins are affected mainly by volume and mix. The changes during this year between quarters were mainly due to mix changes of our products. While delivering some of the products, for instance, in the IFC and NGSO, usually with higher profit margins and other products with lower ones. Plus, we have the Peru effect, which was more stronger in Q2 and lowered the gross margins a bit, so it fluctuates, but I think that what we see now is the trend throughout the year.
So I would also say that, you know, looking at Gilat on a quarter-by-quarter basis may be a bit misleading, and I would look on a year-to-date basis or trailing twelve months, and I think that this would give a better picture.
That's fair. Thanks for that clarification. And on your recent win in the backhaul, sounds like with a large U.S. operator, any timing around your expectations for when you might start to see revenue from that?
Hi, Ryan. Actually, we are seeing revenues already. It's the third extension of this project. Actually, we already entered the seventh year of doing business with that customer, and it's around $1.5 million per quarter, slightly more than that, with some upside, every quarter.
Nice. Great. Sounds like, you know, IFC was strong in the quarter. Any more color you can share with us on your kind of progress in the IFC market here in the near term, the next, either in Q3 or in the next few quarters?
In the IFC, what we see is a lot of interest. We have several main customers. The main one is Intelsat, and we have a large, very large U.S. integrator who bundles our SSPA with his terminals. And this business continues regularly and we see almost every quarter additional orders, may it be additional modems, network extensions, or additional SSPAs. We do have some small customers for our baseband and modems and other customers for SSPA. We are seeing a lot of interest on our SSPA product line with some smaller works that soon will become a very large customers. So we expect to have a strong year in 2023 in general and also a strong year in 2024 in the IFC.
Great. That's really helpful. And in the types of planes these are going on to, is this more going downmarket kind of business jets?
Also business jets, yes. Right now, the main focus is on the commercial, but also on the business jets.
Got it. Helpful. I think that's all I have. I'll pass the call through.
Yeah. Ryan, I just would like to mention another thing. If you remember last quarter, we announced our Satcom Direct deal to develop an electronically steered antenna. So we are in the development process, and we expect to see revenue within, let's say, 18 months from today. So in 2025, we expect additional growth in this sector.
Great. That's for transmission?
That's for business jets, yes. Yeah.
Okay.
Yeah, this is for business jets.
Got it. All right, great. Thanks for that.
Thank you.
The next question is from Chris Quilty of Quilty Analytics. Please go ahead.
Speaking of business jets, you guys were the new entrant last quarter, with the Satcom Direct announcement. And this quarter, we just got the announcement that Hughes is now, like, jumped into the ring with the Delta order. I'm assuming that's something you couldn't address timing-wise because of your new product, but, you know, from what you know competitively, how does the Satcom Direct product you're developing stack up against the recent Hughes announcement?
Yeah. So first of all, you know, it's news that HNS is getting into the... Or being a service provider in IFC. Their main focus is on the regional jets, and they are using a flat panel antenna from ThinKom. Satcom Direct is, their main focus is on business jets and military jets. And we are developing for them the ESA, the electronically steered antenna. So it's a, it's a completely different type of terminal.
Understand. Do you see any other product line extensions? You know, you're starting at the biz jet level with the Satcom Direct product. Does it scale up to commercial aircraft?
The business jet has a smaller antenna, and Satcom Direct's antenna is focused on the OneWeb constellation. For GEO, we need a bigger antenna, and this is part of our roadmap as well. But this antenna for commercial aviation will be for GEO and LEO as well, not only for GEO.
Gotcha. Switching gears, the Aquarius wasn't a product line you talked about much. I think you did a relaunch with SkyEdge IV in 2021- 2022. Is that correct?
Yeah.
So, you know, has that product line, you know, caught on in the way that the SkyEdge IV has? Or is it just such a ultra-high performance, you know, product line that, you know, it just takes much longer for it to gain traction in the market?
So, the Aquarius product portfolio is a new product portfolio dedicated for SkyEdge IV. We do have several SkyEdge II-c modems that also works on SkyEdge IV, but the Aquarius is the new line of products. So, it started with cruise with SES mPOWER, but not only. We're now seeing it on cellular backhaul, and we see more in the future. As I mentioned in my notes, we recently demo 1 GB per second with the SES and the Reliance Jio in India. This is a robust achievement, and those modems are supposed to be with a very high speed performance. Of course, fits to the 5G requirements.
Right. Switching gears again. I think you mentioned, w ell, first of all, could you just repeat the DataPath revenue contribution for next year? But I think you indicated that's all classified as defense. There may be very small commercial sliver in there, but from a reporting perspective, can you remind us, Gil, does it all land in integrated networks, or does it get spread, you know, across multiple segments?
So the DataPath revenues is around $50 million, ± 10%. And it's probably will land on the satellite networks, but it's still under accounting review. So it's a bit early to say.
All right. Fair enough. And, in general, I mean, I know you don't provide, orders per se, you know, in terms of an order booked, but, you know, what have you seen, you know, as you look back, I guess, over 2023, what have you seen in the trend line towards order strength or weakness over the course of the year? And, and sort of what are you baking in, you know, as you go into Q4?
So it's, it really, depend on the segment, but in, in general, I would say that, our bookings or order in are give or take, as expected at the beginning of the year when we put the, the guidance. We are seeing a lot of traction in, in IFC and in cellular backhaul. In the defense, we are developing, our pipeline. I'm sure you know that the sales cycle is very long in the defense. So we, we are seeing slow but very good progress, and we hope to have a tailwind once we close the DataPath acquisition. We are seeing some slowness in integrated solution order, but we expect to, to ramp up in the next quarter or two.
In Peru, it really depend on local RFPs, and we know that the government planned to launch several very large RFPs in the next few weeks, and we also expect some contract expansions and extensions. So we expect a strong close for the year in Peru.
Gotcha. You mentioned integrated solutions, and obviously there's been a lot of weakness this year. Can you remind us, I mean, is that... Certainly most of the defense companies that I deal with have talked about order slowness with the government. Do you think it is more related to the macro government purchasing environment, or is it, you know, specific to the programs that you're working on, that you've seen some delays?
I think it's, it's combination of, of the two. But I would say that the majority of the slowness is the shift that we are seeing between several large projects which ended during 2022, early 2023, and the other large projects that we awarded, we expect them to to uplift towards mid or end of next, next year. So it seems like a transition year.
Oh, gotcha. That's, that's good color I wasn't aware of. And then I guess, final question. And sorry, this is a little esoteric, but, Gilat, it looks like you're, crap! You lost it in the model. I'll, I'll catch you on that one offline. Never mind.
No problem, Chris. Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes, thank you. Excellent quarter. Congratulations. So, I didn't hear any comment on Peru. Could you give an update on Peru, please? And also, the second question is, I may have missed the comment. Do you expect to close on the DataPath this year?
Can you repeat your question again about Peru?
Yeah. Just a general update on Peru. I missed-
Sure.
Hearing anything on that.
Sure. So, in Peru, business as usual, we are close to the end of finishing the sixth region, the Amazonas region, that awarded back in 2018. We expect to start the acceptance procedures with the government before the end of the quarter, and to final, well, final acceptance towards the mid of next year, and then to switch to operation phase. In parallel, we see a lot of or a lot of bids that are coming up soon in the quarter, and we are also expecting several contract expansion and extensions, so we expect to have a strong a strong booking quarter for Peru. As for DataPath, indeed, we are progressing towards closing this quarter.
We already received the CFIUS approval, and we still awaiting one last government approval, which by recent indication we expect to get it in the next if not days, then weeks. And there are some lesser customary closing conditions, which we expect to achieve as well in the next few weeks. So indeed, we are expecting to close the transaction this quarter.
Thank you. And also regarding the DataPath, do you anticipate keeping that operation as a separate subsidiary, or do you expect to integrate that into your military and defense operations?
Combination of the two. Now, DataPath is going to be important leg in our defense strategy. B ut we do expect them to continue to work independently and to grow their business while using Gilat and Wavestream resources in the defense in order to increase the overall defense presence of Gilat worldwide.
Thank you very much, Adi.
Thank you, Gunther.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement?
I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon or speak to you in our next call. Thank you very much and have a great day.
Thank you. This concludes Gilat's third quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.