Ladies and gentlemen, thank you for standing by. Welcome to Gilat's first quarter 2022 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 23, 2022. By now, you should have all received the company's press release. If you have not received it, please contact Gilat Investor Relations team at GK Investor & Public 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 GK Investor Relations. Mr. Helft, would you like to begin, please?
Thank you, operator. Good morning and good afternoon, everyone. Thank you for joining us today for Gilat's first quarter 2022 results conference call and webcast. A recording of this call will be available beginning at approximately noon Eastern Time today, May 23, as a webcast on Gilat's website for a period of 30 days. Also, please note that investors are urged to read the forward-looking statement in Gilat's earnings release, with a reminder that statements made on this earnings call 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 report filed with the Securities and Exchange Commission. With that said, let me turn to the introductions. On the call today are Mr. Adi Sfadia, the Gilat CEO, and Mr. Gil Benyamini, Gilat CFO. I would now like to turn over the call to Adi. Adi, we're ready to begin.
Thank you, Ehud, and good day to everyone. I would like to thank you for joining us today for our first quarter of 2022 earnings call. We are pleased with the results of the first quarter of 2022, which showed strong revenue growth and improved adjusted EBITDA profitability. First quarter revenues were $51.4 million, up 19% year-over-year. Adjusted EBITDA was $2.5 million compared to an adjusted EBITDA loss of $1.3 million a year ago. More importantly, as we discussed in the last earnings call, looking ahead, we expect 2022 to be a strong year, and we reiterate our annual guidance and management objective as we announced in February. I will now focus on some of the business achievements and discuss some of the recent highlights.
I am pleased to report that we are progressing as planned in the new era of satellite communication, consisting of very high throughput satellite known as VHTS and non-geostationary orbit constellation known as NGSO. Further to our launch last quarter of Gilat next generation platform, SkyEdge IV , we are continuing to see significantly increased interest in our multi-orbit, multi-service platform with additional orders and growing pipeline. SkyEdge IV is being well accepted as we are competing on important opportunities for additional major satellite operators. In addition, we're encouraged by additional GEO software-defined satellite launch plans since SkyEdge IV was built with an architecture to support these next generation satellites. In addition to the progress with SkyEdge IV , I would like to share that we continue as planned with two other major achievements for our SSPA product lines reported last quarter.
We are progressing well with the development as part of the multi-year contract, which has a potential of hundreds of millions of dollars to customize and provide our leading technology for NGSO constellations. Furthermore, we have received additional multi-million dollar orders from a leading satellite operator for our SSPA product line to support low Earth orbit constellations. Gilat sees solid growth potential in the emerging VHTS and NGSO satellite communication market, and we are on track to meet the goal of capturing a strong position in this mega market. The ground segment market alone is estimated to reach multi-billion dollars over the next few years, according to industry analyst NSR. We see increased activity in the mobility market as orders continue to pick up.
Intelsat has made a strategic decision and selected Gilat SkyEdge IV as a platform to provide IFC services over North America with the latest IS-40e high-throughput satellite. In addition, Intelsat expanded its IFC capabilities with SkyEdge IV operating with Gilat's Taurus Aero modems to serve its global network with enhanced user experience. These modems provide a high-quality IFC for commercial aviation, regional aircraft, and business jets while leveraging interoperability with SkyEdge IV and SkyEdge II-c. In the maritime market segment, we are progressing with a contract to deliver SkyEdge IV platform and our Aquarius modems to top cruise lines that will use SES O3b mPOWER, as well as SES geostationary satellite fleet. On another front, we achieved an important milestone with our electronically steered antenna for IFC. This past quarter, we achieved a breakthrough when operating on the Airbus C-295 flight test bed.
Gilat ESA terminal worked in conjunction with our SkyEdge II-c platform and the Taurus Aero modem. The project marks a successful completion of the final phase of five-year European Clean Sky 2 ISSA project. I'm optimistic that Gilat's technology will provide the needed capabilities for Gilat to continue to be the leading solution for Internet connectivity during travel in the air, at sea, and on land. In the cellular backhaul segment, we continue to lead the industry with multimillion-dollar orders this quarter for network expansion received from tier one MNOs worldwide. This is a testament to our proven technology and close working relationship with our partners. I am happy to report a win in the second-largest country in Africa, the Democratic Republic of Congo. Gilat was selected by Intelsat in the multimillion-dollar deal to provide cellular backhaul over satellite to a leading mobile network operator.
We see good potential to capture additional market share in the DRC, consisting of 90 million and growing population. We also achieved a milestone with our partner team in Brazil in reaching 1,000 sites of 4G cellular backhaul over satellite network, the largest such network in Latin America. Furthermore, we expect to significantly expand Latin business in Latin America with thousands of additional VSATs and related services, indicating, yet again, our proven leading cellular backhaul over satellite technology. Looking forward, we expect additional business with the MNOs worldwide as this market significantly grows in the coming years. According to industry analyst NSR, in an April 2022 report, the modem market revenues are forecasted to grow at a rate of 13% per year on an average over the next 10 years.
The 4G market is forecasted to be about 75% of modem shipments in 2022, as well as the majority of shipments through 2031. The 5G market expected to start only in 2024 and to pick up in growth only in 2026. Gilat intend to support and lead the market transition to 5G with our newest technology. In the enterprise segment, I am pleased to report a multimillion-dollar deal to support business continuity for a large U.S. retailer, retail network. SkyEdge II-chubs and VSATs support thousands of storefronts throughout the United States with the required gateway backup to guarantee that each of the stores have the assurance of always being connected. We are increasing our focus in the defense market and are seeing success with our product line for unmanned aerial vehicles known as UAVs.
A world-leading UAV manufacturer placed an order for our satellite terminals as a satellite antenna solution for its tactical UAVs, and we are hoping to close additional such deals soon. In Peru, we continue to successfully execute our strategy while making progress in building the terrestrial network in Ica and Amazonas and providing services in Huancavelica, Ayacucho, Apurímac, and Cusco, as well as to local service providers and MNOs. In 2022, we expect to turn a corner in Peru and for our business in Peru to become more profitable. I'd like to conclude by sharing few more points. As we said in the last several calls, we plan to continue to heavily invest in R&D to maintain our leadership position and to be prepared for the wealth of opportunities that we see ahead of us.
We also are carefully monitoring the global supply chain issues, and so far, we have managed it well and have been able to meet most of our commitments to customers and partners. Finally, I'm pleased to say that we have a strong backlog and a healthy pipeline and good visibility into 2022. We therefore reiterate our management objective for 2022, as we announced in February. Our revenue guidance is between $245 million-$265 million. We expect GAAP operating income of between $5 million-$9 million and adjusted EBITDA of between $20 million-$24 million. With that, I'd like to hand over to our CFO, Gil Benyamini. Gil, we are now ready for your report. Please go ahead.
Thank you, Adi. Good morning and good afternoon to everyone. I would like to remind everyone that our financial results are presented both on a 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 that 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 stock-based compensation, amortization of purchased intangibles, amortization of lease incentives, litigation expenses or income related to trade secrets claims, reorganization costs, merger, acquisition, and related litigation costs, adjustments of assets that are held for sale and settlement, and the initial recognition of deferred tax assets with respect to carry forward losses. The reconciliation table in our press release highlights the data, and our non-GAAP information presented excludes these items.
I will now move on to our financial highlights for the first quarter of 2022. Overall, as Adi mentioned earlier, we're pleased with the continued improvement in our results for the quarter. The results show continued recovery from the corona downturn and demonstrate that we remain on the right track, and we are becoming increasingly optimistic about our prospects in the quarters ahead. While our performance demonstrates a very solid improvement, there remain global macroeconomic headwinds, including ongoing electronic component supply constraints, as well as price increases across the board. I'm pleased to say, however, that our performance shows that we have been able to mitigate the issues without significant impact to date.
In terms of our financial results, revenues for the first quarter were 51.4 million, up 19% when compared to 43.4 million in the first quarter of 2021. The improvements were mainly driven by growth from NGSO, in-flight connectivity, and terrestrial network operation services. In terms of revenue breakdown by segment. As described in our annual report commencing Q1 2022, in order to reflect our new management's approach in managing the operations, organizational alignment, customer base, and end markets, we now operate in three new operating segments: Satellite Networks, Integrated Solutions, and Networks Infrastructure and Services.
Q1 2022 revenues of the Satellite Network segment, which provides advanced broadband satellite communication network and associated professional services, turnkey solution, and managed services in the cellular backhaul enterprise, IFC, and defense markets, were $24.8 million, compared to $25.6 million in the same quarter last year. Q1 2022 revenues of the Integrated Solution segment, which provides products and solutions for mission-critical defense and broadcast satellite communication systems, advanced on-the-move and on-the-pause satellite communications equipment system and solutions, including airborne ground mobile satellite systems and solutions, were $13.7 million compared to $6.7 million in the same quarter last year. The improvement in the segment was primarily driven by strong revenue growth from NGSO and defense markets, as well as initial recovery within the in-flight connectivity market.
Q1 2022 revenues of the Networks Infrastructure and Services segment, which provides terrestrial and satellite network construction and operation services, were $12.9 million compared to $11 million in the same quarter last year. The improvement was mainly due to higher revenues during the operating phase of the project, partially offset by a decrease in revenues during the construction phase. I would now like to summarize our first quarter GAAP and non-GAAP results. Our GAAP gross margin Q1 2022 improved to 31.9% compared to 28.8% in the same quarter last year. GAAP operating expenses in Q1 2022 were $17.4 million in the quarter compared with $16 million in the first quarter of last year.
GAAP operating loss for the quarter improved to $1 million compared to an operating loss of $3.5 million in the same quarter last year. GAAP net loss in the first quarter was $2.5 million or diluted loss per share of $0.04. This is compared with net loss of $5 million or loss per share of $0.09 in the same quarter last year. Moving to non-GAAP results. Our non-GAAP gross margin Q1 2022 improved to 32% compared to 28.9% in the same quarter last year. Non-GAAP operating expenses in Q1 2022 were $16.7 million in the quarter, compared with $16.2 million in the first quarter of last year.
Non-GAAP operating loss for the quarter improved to $0.3 million, compared with an operating loss of $3.6 million in the same quarter last year. Non-GAAP net loss in the first quarter was $1.8 million or diluted loss per share of $0.03. This is compared with net loss of $5.1 million or loss per share of $0.09 in the same quarter of last year. Adjusted EBITDA for the quarter improved to $2.5 million compared with an adjusted EBITDA loss of $1.3 million in the same quarter of last year. Moving to the balance sheet. As of March 31st, 2022, our total cash and cash equivalents, including short-term deposits and restricted cash, were $77.3 million, compared with $86.6 million on December 31st, 2021.
We do not hold any debt. In terms of cash flow, we used about $7.4 million for operating activities during the first quarter of 2022, out of which about $4.2 million used for our Peru operating activities, as some payments from the government were delayed. We do expect to get them in the upcoming two quarters. DSO, which excludes receivables and revenue of our Terrestrial Infrastructure Project segment, increased to 93 days compared to 60 days in the previous quarters due to lower revenues and higher volume of sales at the second half of the quarter. The company hasn't changed its credit terms with its customers, and we do not see an unfavorable change in our collection. We expect the DSO to decrease during the next quarters of 2022.
Our shareholders' equity as of March 31st, 2022, totals about $247 million compared with $248 million at the end of 2021. Looking ahead, as Adi already mentioned, we reiterated our guidance for the year. Our expectations remain for a strong 2022 with revenue between $245 and $265 million, and an adjusted EBITDA of between $20 million-$24 million. That concludes my financial review. I would like now to open the call for 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're using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Chris Quilty of Quilty Analytics. Please go ahead.
Thank you. Wanted to start with maybe a bit of a macro overview of the environment. Obviously, a bit of a turbulent start to the year here, and you're clearly forecasting good growth and a pretty strong order book. Can you give us a sense of how the orders or book-to-bill shaped up during Q1, and did you see any changes over the course of the quarter? Has the current environment in any way, you know, impacted your outlook for the full year?
Hi, Chris. This is Adi. The book-to-bill ratio is a data that we are not publicly providing. It's a bit misleading this ratio because I remind you that in 2015 and later on in 2018, we booked close to $550 million backlog from the project in Peru. If you offset this huge backlog that you know we need to recognize over the period of 13-15 years, depend on the project, in most of the quarters, our book-to-bill ratio is above one. We are generating backlog from the Satellite Networks and Integrated Solutions business.
As for the macroeconomic, we had a very strong quarter this quarter, especially with orders from Intelsat, both to the Aero modem and to the SkyEdge IV for the IS-40e satellite, the new satellite. We continue to see a very strong pipeline, mainly large orders with satellite operators, some whom we are working with and some which we have a very good pipeline for new RFIs and RFPs that are in process. We see a lot of good vibe. As I said in my script, the SkyEdge IV is well accepted and designed to meet the challenges of the very high throughput and the NGSO constellation. We believe it. We are well positioned to take a decent market share.
Great. Specifically with the IFC market, I'm not as familiar with. I think it's the Integrated Solution segment where that falls now. Looks like you had really good year-over-year growth. Where do you think that market is in terms of its recovery? Do you feel like we're back at 50% point or 80% point, in terms of, you know, the ordering activity that you're seeing in that market?
First, IFC is today basically in two segments. It depends on exactly which product line. The Intelsat business and the satellite network and the Aero modem is under Satellite Networks, and the SSPA product line is under Integrated Solution. The growth in Integrated Solution is mainly derived not necessarily from IFC rather from gateway solutions that we are providing. To follow up on your questions in IFC, we do see more traction in the market. We do see more network expansions, the need of stronger modems on the aircraft, and this is one of the reasons why we believe Intelsat decided to replace the 200 Mbps modems to 400 Mbps modem. We believe, you know, the current plan is to start delivering it towards the second half or towards the end of the year to 2023.
Great. It sounds like the progress in Peru continues, and I think you had indicated in prior quarters a significant improvement in profitability. Obviously, that's forecasted into or embedded into your current forecast, excuse me. Can you give us a sense of the degree of improvement that you expect this year? Is that even throughout the course of the year, or is it in any way back-ended or front-ended?
As we said several times in the past, we expect to reach $50 million in recurring revenue per year. We reach this in backlog. We still have two large projects that we need to finish the construction in order to start recognizing the revenues from the services. I believe that, you know, for affecting Q1, you start to see the profitability in Peru, and it's give or take spread along the year. I think in Q4, we'll see additional projects and some each project in some cases is part of the services that are unique to Q4. I expect a bit more profitability in Q4, but we are going to see the very nice profits with Peru every quarter. Once we finish the network construction, the margins will increase because the construction phase comes with relatively low margins.
Great. I know another big contributor this year is some gateway rollouts with SES on O3b mPOWER . They've had some delays in terms of timing, relatively minor, but have you seen a subsequent delay in your orders or planned rollout for that program?
No. Actually, we are working very closely with SES. Most of the orders for the rollout today, we already received in 2019, which also affect the book-to-bill ratio because it's a part of our backlog. As we started the deliveries from Q4 last year, and it spread until the end of the year. For now, we don't see any delay in terms of gateway rollout. In fact, we see a lot of opportunities with SES. Right now, the orders is for the global deployment, and we expect to see increased business from in-country gateways, which will include also our equipment, and it's a huge potential for us.
Great. Final question on the SSPA business. Can you give us a sense of where you're seeing the mix there in terms of major end markets, or not as much mix, but the growth of IFC versus sort of traditional defense applications?
In the Integrated Solution, the three main market is defense, IFC, and gateways. I think that you know we expect IFC to increase a bit just to return to give or take normal number that we used to see in the past. Defense, it really depends on budget and on projects that we got the award. We have several decent projects that we are now in a development phase, and we expect to start delivering towards the end of the year in 2023. I think a large part of the growth will come from the solution for the gateways, especially for the LEO gateways, and later on, also for GEO gateways.
Great. Thank you very much, and I'll circle back in the queue.
Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Thank you and good morning. First, congratulations on outstanding performance, Adi and company. Secondly, is there any relationship to the evolving Starlink, about SpaceX, continues to send out many low orbit satellites? Is anything that Gilat has to do with this thing, both competitive or maybe non-competitive?
No doubt, Starlink is a disruptive solution in the market. They start with the consumer, and now they are aiming other market segment. We are not competing head-to-head with Starlink because they, you know, they would like to provide also the service itself, so they are competing with our customers. To be honest, right now, we don't yet feel the pressure from them. Probably, you know, they will grow in the future, so we might feel it. Right now, their main focus is in the consumer market, and consumer is not our focus. We do have solution for consumer because it's a must-have when you sell multi-application platform to a VHTS satellite. You need also to have a consumer solution. Our main growth will come from cellular backhaul, in-flight connectivity, maritime, and enterprise solution, and less from consumer. As of today, we don't feel any competitive pressure from Starlink.
Thank you. It actually appears that as SpaceX develops Starlink further, it actually may generate interest in the non-consumer area, which could benefit Gilat possibly. The last question I have is regarding the structure of the board. During this past year, the board share representation by FIMI has dropped from nearly 50% to the last report of 9%, which is a big drop. Is there any plans or consideration of realigning the board to better reflect the share ownership?
It's a good question, which I don't have an answer. You know, the board is getting elected for a period of time. We have, as far as I remember, in the coming AGM, some of the Board members will be up for election again, and you know, you will see it then. Right now it's not something that we can have the info or can discuss with the public.
Thank you, Adi, and I continue with the good wishes.
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. The next question is a follow-up question from Chris Quilty of Quilty Analytics. Please go ahead.
Thanks, guys. One other question just on the IFC antenna, you know, some new developments, but that product has been in development for several years, and I think I read a recent trade interview where, you know, you're on the normal path, you're looking at another two to three years for that thing to get fully certified where it could be operationally installed. Meanwhile, I'm reading news stories where SpaceX, you know, to your point, is now making overtures in certain enterprise markets and in the IFC market, they've their name has been shown up and associated with both Delta and Alaska.
I guess the question is, you know, is there anything that you know of that would enable SpaceX to move at some sort of a rate of installation beyond what you're anticipating for, you know, a multi-year period to go through all the certification?
Yeah. If I remember correctly, SpaceX announced something with Hawaiian Airlines. First of all, as far as we know, SpaceX is developing their own product in most of the cases. We have a very good and unique electronically steered antenna solution, but there is a you know, we are not developing the antenna as off-the-shelf product. At the end, it need to fit to, in most of the cases, to existing base split and radome, and you need to have a customer in order to have the needed specification. We reached to a point that we won't be able to progress significantly without a customer ordering the exact specification of the antenna. In parallel, we are thinking how to utilize this technology in other places, and once we'll have something to announce, we'll share it with you.
Great. Thank you very much.
Thank you, Chris.
There are no further questions at this time. Mr. Benyamini, would you like to make your concluding statement?
I want to thank you all for joining us this call and for your time and attention. We hope to see you soon and speak with you in our next call. Thank you very much and have a great day.
This concludes the first quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.