Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Fourth Quarter 2021 results conference call. All participants are at present in listen-only mode. Following the management formal presentation, instruction 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. February 15th, 2022. 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 GK Investor & Public Relations at 1-646-688-8359 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?
A recording of this call will be available beginning approximately noon Eastern Time today, February 15th, and will be available for telephone replay until November 15th at noon. Webcast will be archived on the 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 are not historical facts, which may be 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 operational results, involve risks, uncertainties and contingencies, many of which are beyond control of Gilat and which may cause actual results to differ materially from those 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 with the Securities and Exchange Commission. With that said, let me turn to introductions. On the call today are Mr. Adi Sfadia, Gilat CEO, and Mr. Gil Benyamini, Gilat CFO. I would now like to turn over the call to Adi Sfadia. Adi, we are ready to begin.
Thank you, Ehud, and good day to everyone. I would like to thank you for joining us today for our fourth quarter and full year 2021 earnings call. Our results in 2021 showed strong revenue growth with even stronger profitability growth. This capped off strong end to 2021, which we see as a transition year for Gilat and was a challenging year in many aspects. Fourth quarter revenues were $67 million, up 68% year-over-year. Adjusted EBITDA was $10.6 million, up from only $1 million a year ago.
For 2021, we reported revenue of $219 million, up 32% from 2020, and adjusted EBITDA of $15.7 million versus an adjusted EBITDA loss of $3.3 million in 2020. More importantly, looking ahead, we expect 2022 to be a stronger year. The improved visibility across our various business segments allow us to provide for the first time in two years full year guidance, which I will elaborate on at the end of my statement. I will now focus on some of the business achievements and discuss some of the recent highlights.
I'm excited to report that we recently launched Gilat next generation platform, SkyEdge IV, with a goal to increase our market share in the ground segment market of the new era of satellite communications, consisting of non-geostationary orbit constellation known as NGSO and very high throughput satellites known as VHTS. Today's new era consists of new multi-orbit constellation and very high throughput satellites that meet the demands for connectivity everywhere all the time. This market dynamic presents unique opportunities for Gilat since SkyEdge IV is a software-centric platform. We therefore expect to see a favorable mix of software licenses in addition to hardware sales. I am proud to report that we recently closed strategic SkyEdge IV deals with both Intelsat and SES, and we have a healthy pipeline as we move forward. With SkyEdge IV, our goal is to capture a leading position of this multi-billion dollar emerging market.
SkyEdge IV opens new markets and enhance our leadership in others. This includes fortifying our 4G cellular backhaul leadership and opening up 5G opportunities. SkyEdge IV is further growing Gilat's leadership in mobility, both in IFC and maritime, as well as positioning us for enlarging our pipeline in the defense and enterprise market. SkyEdge IV is equipped with an elastic architecture built to deliver speeds of gigabits per second and unmatched CapEx and OpEx efficiency, supporting next generation software-defined satellites and simultaneously supporting any application, even the most demanding situation. In addition to the exciting news about SkyEdge IV, I would like to shed more light on two outstanding achievements in the NGSO and VHTS market. The first achievement is that we entered into a multi-year contract with a potential of $ hundreds of millions to customize and provide our leading technology for NGSO constellations.
Upon signing this contract, we received the first $multi-million purchase order for initial units. The second achievement is we received orders totaling over $40 million for a leading satellite operator for our SSPA product line to support low Earth orbit constellation. Gilat sees solid growth potential in the emerging VHTS and NGSO satellite communication market and is materializing its goal to benefit from these growing mega markets. I'm happy to report that in the mobility market segment, we continue to see market recovery. In the IFC segment, Gilat expanded its strategic partnership with Intelsat for commercial aviation. As a reminder, at the end of 2020, Intelsat acquired global commercial aviation business. Intelsat selected Gilat SkyEdge for the platform to provide IFC services over North America with the latest IS-40e super satellite that is expected to be launched during 2022.
In addition, Intelsat global IFC network will be expanded by Gilat to the growing use of IFC over Asia. We expect additional significant revenue in this segment as Intelsat continue to enhance and expand their network. Moving on to maritime. We secured a deal in the fourth quarter with a new service provider in Eurasia for expanded maritime connectivity for commercial fishing and maritime transport markets. This recent maritime success is on top of the reported multimillion-dollar deal with SES that we closed during 2021 for SkyEdge IV, which provides Gilat with access to top cruise lines and maritime service providers that will use SES O3b mPOWER, as well as the geostationary satellite fleet. I'm optimistic that Gilat technology will 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 had new accounts penetration with one of the world's largest mobile operators. This achievement has significant upside potential for Gilat as we continue to strengthen our proven global market leadership for 4G backhaul over satellite market. In the fourth quarter, we also received the managed service contract extension from a leading operator in Mexico. Furthermore, in the last quarter of 2021, we received orders totaling millions of dollars from other Tier 1 mobile operators around the globe, which contributed to our strong performance in 2021 in the cellular backhaul market segment. The mobile operators continue to expand their network coverage to remote areas with Gilat cellular backhaul over satellite solution. We also see them using our equipment for emergency response services as well as for IoT.
We believe that we'll continue to see additional business growth with the MNOs as this market is expected to significantly grow in the coming years. Gilat further intends to support and lead the market transition to 5G with our newest technology. In the fourth quarter, we closed a significant multi-million-dollar deal with one of the largest service providers in Eurasia. We were chosen as a ground segment provider to modernize and expand satellite communications throughout the region for a variety of applications, including maritime, land mobility, and consumer. Furthermore, we were awarded several additional contracts to expand broadband networks with thousands of VSATs to assist people overcoming some of the pandemic consequences. The defense market is a growing focus area for Gilat.
During the last quarter of 2021, we secured over $5 million for solid-state power amplifiers from a Tier 1 U.S. global military terminal provider. This contract was an extension to the initial $5 million order from this customer that we reported earlier in the year, and we expect additional expansion for this project in 2022. Our defense segment received additional focus during the year, and we saw several multimillion-dollar global deals, including the first commitment for our new multi-orbit next-generation platform, SkyEdge IV, to a defense customer. In Peru, we are making progress in building the terrestrial networks in Ica and Amazonas and providing services in Huancavelica, Ayacucho, Apurimac, and Cusco, while successfully executing on our strategy. We have received orders for services in Peru during 2021, totaling more than $40 million.
As such, we achieved our goal of $50 million in annually sharing revenue run rate ahead of our stated objectives. In 2022, we expect to turn a corner in Peru and for our business in Peru to become significantly profitable. I'd like to conclude with sharing a few more points. We plan to continue to heavily invest in R&D to maintain our leadership position and be prepared for the world of opportunities ahead. We also are carefully monitoring the global supply chain crisis, and so far, I am proud that in 2021, we have managed to meet our commitments. Finally, I am pleased to say that we have a strong backlog and a healthy pipeline and a good visibility into 2022. We therefore have decided to share with you our guidance for 2022.
Our revenue guidance is between $245 million-$265 million, which represent a growth of between 12%-21% from our comparable 2021 results. We expect GAAP operating income of between $5 million-$9 million and adjusted EBITDA of between $20 million-$24 million. This represents an adjusted EBITDA increase of between 27%-53% year over year, even with significant increase in our investment in R&D. We expect that as we move along the year and our visibility will further improve, we'll be able to narrow the range of our guidance. With that, I'd like to hand over to our new CFO, Gil Benyamini. Welcome, Gil. 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 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 one-time changes in deferred tax assets. The reconciliation table in our press release highlights this data, and our non-GAAP information excludes these items.
I will now move to our financial highlights for the fourth quarter and full year 2021. Overall, as Adi mentioned earlier, we are very pleased with our improvement in our results for both the quarter and the year. The results demonstrate that as we exit 2021, we are on the right track, and we can now be increasingly optimistic about our prospects in the quarters ahead. While our performance demonstrate a very solid improvement, there remain global macroeconomic headwinds related to COVID, including the electronic component supply constraints. I'm pleased to say, however, that our performance in 2021 demonstrated that we have been able to mitigate the issue without any significant impact to date.
In terms of our financial results, revenues for the fourth quarter were $67.3 million, up 68% when compared to $42.6 million in the fourth quarter of 2020. Revenues were up 35% versus $49.9 million in the prior quarter. For the year, revenues were $218.8 million, up 32% versus $165.9 million in 2020. The improvements were driven by growth from enterprise programs, cellular backhaul, NGSO, and defense markets. In terms of the revenue breakdown by segment, Fixed Network segment revenues in Q4 2021 were $37 million compared to $25.1 million in the same quarter last year, and $22.3 million in the prior quarter.
Mobility Solution segment revenues in Q4 2021 were $25 million compared to $11.8 million in the same quarter last year, and $21.6 million in the prior quarter. The improvement in the segment was primarily driven by strong revenue growth from the NGSO and defense markets. Terrestrial Infrastructure Project segment revenues, which include the construction revenues for our projects for Pronatel in Peru, were $5.3 million compared to $5.8 million in the same quarter last year, and $6 million in the prior quarter. I would now like to summarize our fourth quarter non-GAAP results. You can view our full results, including our GAAP results in the press release we issued earlier today.
Our non-GAAP gross margin in Q4 2021 improved to 37.2% compared to 31.3% in the same quarter last year, and 35.5% in the prior quarter. Non-GAAP operating expenses in Q4 2021 were $18.2 million in the quarter, compared with $15 million in the fourth quarter of last year, and $16.2 million in the previous quarter. I know that last year, due to the COVID-19 pandemic, we had made temporary cost reductions, which mainly consisted of a reduction of our global workforce to an 80% work scope. In December 2020, we returned all our employees back to 100%. I would also like to note that in the previous quarter, we've benefited from COVID-related grants.
We increased the investment in R&D compared with last year to ensure timely delivery of the existing large projects we've been awarded, mainly in the LEO/MEO constellation, and continued our investment in our new SkyEdge IV platform. Non-GAAP operating income for the quarter was improved to $6.8 million, compared with an operating loss of $1.6 million in the same quarter last year, and an operating income of $1.5 million in the previous quarter. Non-GAAP net income in the fourth quarter was $5.9 million, or diluted earnings per share of $0.10. This is compared with net loss of $1.9 million, or loss per share of $0.03 in the same quarter last year. In the previous quarter, we reported a non-GAAP net income of $0.7 million, or earnings per share of $0.01.
Adjusted EBITDA for the quarter improved to $10.6 million compared with an adjusted EBITDA of $1.1 million in the same quarter last year. In the previous quarter, we reported an adjusted EBITDA of $4 million. For the year, adjusted EBITDA was $15.7 million, compared with an adjusted EBITDA loss of $3.3 million in 2020.
Moving to our balance sheet. As of December 31, 2021, our total cash and equivalents, including short-term deposits and restricted cash, were $86.6 million compared with $85.4 million on September 30, 2021. In terms of cash flow, we generated about $18.9 million from operating activities in 2021. DSO, which include our fixed networks and mobility solution segments and exclude receivables and revenue of our terrestrial infrastructure project segment, decreased to 60 days compared to 66 days in the previous quarter. Our shareholders' equity at the end of 2021 totaled about $232 million, compared with $234 million at the end of 2020.
Looking ahead, as Adi already mentioned, we're expecting a strong 2022, with revenue of between $245 million-$265 million and 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 called in the order they are received. Please stand by while we call for your questions. The first question is from Chris Quilty. Please go ahead.
Thank you. Some congratulations on some good results. Wanted to get perhaps a little bit more detail at the segment level and looking specifically at the fixed networks business. Was the growth within that business, either on a sequential or year-on-year basis, was it driven, you know, particularly by the cellular backhaul market or enterprise or the terrestrial portion, or was it fairly even across all end markets?
Hi, Chris. Nice to talk to you again. I think that the main growth came both from the cellular backhaul. We had a very good year and a very good quarter with cellular backhaul. In addition, we started to provide the operational phase in Peru, so it also supported the revenue growth in the fourth quarter.
understand. On that operational phase in Peru, I know you don't break it out specifically, but you know, based upon hitting the run rates that you had previously talked about, fair to assume that you're doing you know, north of $10 million or so exiting Q4? The second question on the Peru networks. Can you give us some sense of breakout of, you've had announcements around separate agreements with partners, whether Facebook, which I think is pulling out of some of these activities and other local carriers. How did the revenue break down between those different end users of the network?
Okay. As we said, we reached a yearly run rate of $50 million. Some of it will kick in only once we finish to build the network in Ica and Amazonas, which is expected towards second half of this year, early 2023, depends on the network. Excluding that, we expect to have around $45 million. On average, it's slightly above $10 million a quarter. The agreement we have with IPT, Internet para Todos, which is the consortium of Facebook and Telefónica in Peru, is aimed to provide capacity, you know, terrestrial capacity for cellular backhaul.
It's I don't remember if we gave the exact amount, but it's an agreement of north of $20 million for four or five years. We are in the midst of providing the service. Not everything is already up and running. We believe that we'll have more during 2022. Most of our business in Peru is with the government. Pronatel is the main customer, which is a government-owned entity under the Ministry of Telecommunications, and the majority of our revenues comes from working with the Ministry of Telecommunications.
Just a clarification, when you talk about the $50 million run rate, is it the aggregation of both the government and Telefónica, or is the Telefónica incremental?
No, the $50 million is all our business, both terrestrial services and the satellite services business that we have in Peru, including the private and the public sector.
Great. Is it fair to assume that, you know, the separate terrestrial segment, that we'll see a continual decline in those revenues as the infrastructure build-up wraps up? Do you expect it to continue into 2023, or should that close out in 2022?
Yeah. Internally, our goal is to finish the construction as soon as possible, knowing how complicated it is to work in Peru. I think it's fair to assume that we will be dragged into 2023, at least in one of the networks. I guess it will be Amazonas because it's a much larger and more complicated area to work with. I hope this answers your question.
Nope, that answered it. Also, if I can just follow up on the you know, specifically on SES. Last year, you talked about the timing of the mPOWER constellation and the build-out, and you implied that really wouldn't kick off until 2022. Is the schedule still holding there, and what sort of a material impact do you expect that specific contract to have this year?
Yeah. The mPOWER agreement was signed in 2019, and drove a significant shift in our R&D to start working on the next generation platform, which we recently officially launched. Unofficially, we already started to sell it. We delivered to SES some of the operational gateways towards the end of 2021, so we are on track, and we expect to continue to deliver during the first half of 2022. Part of the growth that we are going to see in 2022 will come from the backlog that we have with SES and other customers like Intelsat and others.
Great. Circling back on the SkyEdge II, or SkyEdge IV, excuse me, what happened to three? First of all, you have to explain what happened to three.
Oh, that's a good question. That's a really good question. You know, we had a month ago, two months ago, a discussion in management where SkyEdge three went. Actually, we had SkyEdge II, and then for some reason, we decided to go with SkyEdge II-C, which typically was the SkyEdge three, and then we jumped to SkyEdge IV. This is just a marketing names.
Okay. I'll give you a pass on that one.
Next time I'll drag the marketing guy with me so he can give an answer.
Can you give us a sense of both the timing on that development and the overall cost, and maybe just a refresher, as you went through those increments from, you know, two to two C to four, you know, the development timeline of how long you, how often you've been refreshing the product line?
First of all, today, most of our baseband R&D, which is based in Israel, in Moldova and Bulgaria, is focused on the SkyEdge IV. I would say that close to 70% of the R&D. The SkyEdge IV is a significant improvement of SkyEdge II. It's not just a simple evolution. It's a major leap that we developed. Usually once every five to seven years, we release such a major enhancement to our platform. This time, we also allow part of our modems to have interoperability or backward compatibility with SkyEdge II. Some of our, you know, depending on the network, will have the opportunity to benefit from past investments.
Gotcha. A specific question around, you mentioned both in the press release and I think the script, about the software, revenue aspect of the product or software licenses. Is that an indication that you expect a higher percentage of recurring software support, or are you implying that there's ways to, you know, flash the software onto older devices and just, you know, not sell hardware, but just to sell software?
I think it's a combination. We are not yet, you know, with a subscription-based software. Probably it will take another few years for the industry to move to a total cloud solution on a subscription base. This is mainly hardware and software perpetual license sales, and when you grow the network in most of the instances, you will need to buy a software upgrade without the need of increasing the hardware. It depends again on the size of the network and the number of gateways and data centers, but this is the main idea. It's definitely going to drive our gross margin by several points higher.
Perfect. I'll ask one more financial question and then pass. I noticed there was a little bit of a step up, both in CapEx and D&A, which I think was amortization of lease incentives. Can you give, you know, some details on that along with, you know, is the three to four run rate on CapEx something we should use going into 2022 or do you have a range we should expect?
In terms of CapEx, I think that the amount we saw in 2021 will continue, plus minus, I would say $1 million to 2022. We are investing a lot in R&D and test equipment. You know, if you had traditional headcount and you want to accelerate, you need more test equipment for the sake of the example. We are going to refresh our manufacturing facility in Wavestream as we have more and more SSPA orders and things like that. These are the main reasons for CapEx.
In addition, we had some, you know, earlier in the year, for example, we got an award of a Wi-Fi hotspot in Peru, where we provide the hardware as a CapEx and then just provide the recurring services. So this also goes to CapEx. So in those cases, some of the projects that we provide as a managed service require CapEx investment, and this might lead to fluctuation in our CapEx. It depends on the project. As for the G&A, I think that there is no main reason for the increase. You know, year-over-year, it's mainly because in most of 2020, we had less employees, and most of the workforce worked 80%.
In December, as Gil mentioned in his script, we returned to work at full force at 100%. I don't see a specific increase besides the fact that the U.S. dollar and shekel exchange is a bit unfavorable in the last few years.
Great. Thank you.
Thank you, Chris.
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 your concluding statement?
Thank you. 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 fourth quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.