Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Third Quarter 2021 Results Conference Call. All participants are present in listen-only mode. Following the management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. Just a reminder, this conference is being recorded, November 9, 2021. 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 and Public Relations at 1-646-688-6559, 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?
Good morning. Good afternoon, everyone. Thank you for joining us. Today is Gilat's third quarter 2021 results conference call and webcast. The recording of this call will be available beginning at approximately 12:00 P.M. Eastern Time today, November 9, 2021 as a webcast on Gilat's website for a period of 30 days. Also, please note that you are encouraged to read the forward-looking statements in Gilat's annual release with a reminder that statements made on this earnings call that are not historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Also, forward-looking statements, including statements regarding future financial operating results, there are risks, uncertainties, and contingencies, many of which are beyond the control of Gilat and which may cause actual results to differ materially from the anticipated results.
The company shall be under no obligation to update or alter these forward-looking statements, whether as a result of new information, future events or otherwise. The company explicitly 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, let me turn to introductions. On the call today are Mr. Adi Sfadia, Gilat CEO, and Mr. Bosmat Halpern, Gilat CFO. I would now like to turn the call over to Adi Sfadia. Adi, we are ready to hear you.
Thank you, Ron, and good day to everyone. I would like to thank you all for joining us today for our third quarter 2021 earnings call. I am pleased with our results this quarter, which continue to show progress in recovery with improvement in our gross profitability and the return to operating and net profit. We grew revenue by 34% year-over-year to $60 million, and our adjusted EBITDA was $4 million, significantly above the third quarter of last year and about $1.5 million above the previous quarter. I'm excited to share this quarter was a very strong quarter for our strategic focus areas of Non-Geostationary Orbit constellations and Very High Throughput Satellites. Furthermore, during this quarter, we had some substantial strategic gains and new customer wins. We continue recovery and progress in all our markets, including in the IFC segment.
These gains will be reflected in our financial performance in future quarters. Global supply issues, components scarcity, and price increase are affecting the satellite industry as well. Like others, we are facing some significant headwinds, however, we are making great efforts to overcome these challenges. Thus far, we've been mostly successful, and we hope that this will continue to be the case until the ease that is expected towards the second half of next year. As I explained last quarter, in order to materialize the significant opportunities we are already experiencing in NGSO, we are increasing R&D investment to better support future growth. I will focus on some of the biggest achievements in more detail and discuss some of the recent highlights. In the last few months, we have been experiencing significant activity in the strategic non-geostationary orbit satellite constellation and the Very High Throughput Satellite segment.
Specifically, the third quarter was a very strong quarter for Gilat in those segments. We continued this quarter to receive orders of approximately $70 million from a leading satellite operator for support of a low Earth orbit constellation to be delivered later on in 2022 and beyond. In addition, we have major projects on our pipeline, of which we hope to secure several in the coming quarters. These projects will utilize our next generation platform, new gyro and NGSO modem, and solid state power amplifiers. Furthermore, we are making additional investments, including a substantial effort in R&D, which are supporting major progress with the ground segment for the SES O3b mPOWER satellite constellation and other projects in our pipeline. We expect to start seeing significant revenues from the SES mPOWER project in the coming quarters.
As a leading provider for this market, we see solid growth potentials comprising of hundreds of millions of dollars in market opportunities that we expect to materialize in the coming years. Mobility is a major focus area and growth engine for Gilat. In the IFC market, we are seeing initial seeds of recovery, evident by significant orders signing for more than $50 million from several key players with delivery planned for 2022 and beyond. This will support our future growth. For initial recovery, we expect the mobility segment to return to be a substantial part of our business as passengers increasingly demand reliable, high-speed during travel and the expectation of connectivity all the time and anywhere has only strengthened during the pandemic. Gilat is highly committed to this strategic market, and we view the pandemic impact over the past as temporary issue.
However, we do believe it will still take some time for the IFC industry to return to its pre-COVID-19 levels and for LAC IFC segment to recover to its full potential. In Peru, we were awarded approximately $28 million in multi-year service agreements by Telefónica for operating the regional transport networks to support mobile connectivity and services across the four regions via Cusco, Arequipa, Huancavelica and Cusco. With these wins, we are meeting our stated goal of about $50 million in annual recurring average run rates from Peru, DSO and the state objectives. During the quarter, LAC continued to lead the 4G cellular backhaul of the satellite market segment. As tier one global mobile operators expand their networks with orders totaling multi-millions of dollars.
Gilat's well-recognized solution supports leading mobile operators worldwide with applications such as emergency response and coverage to remote regions, and at times as an obligation to us, their local government mandates. This market segment has strategic value for Gilat, and as such, we see great potential to expand our leadership as market adoption of 5G is growing. In the enterprise segment, we have signed with SES for a $ multi-million contract for multiple broadband applications in Latin America. Gilat multi-service platform was chosen to support SES in rural backhauling, enterprise and universal service obligation projects in the regions of Andean and in rural Argentina. In addition, Gilat continued to secure orders totaling $ multi-millions for a variety of enterprise applications throughout the world, including in the United States, Russia, India, Australia, and the Philippines.
Overall, when I'm looking into the future with the recent wins and the strong momentum we are seeing across our business, I'm increasingly confident that we'll show significant top-line growth with double-digit growth in adjusted EBITDA in 2020. I'm sure that this is only the beginning of a long growth path ahead of us in the years to come. With that, I'd like to hand over to Bosmat Halpern . Bosmat Halpern, 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 consist of the effect of stock-based compensation, amortization of purchased intangibles, amortization of leasing incentives, litigation expenses or income related to trade secrets claims, reorganization costs, merger acquisition and related litigation costs and settlements, and initial recognition of deferred tax assets with respect to carryforward losses. The reconciliation table in our press release highlights this data, and our non-GAAP information presented excludes these items.
I will now move to our financial highlights for the third quarter of 2021. Overall, as Adi mentioned earlier, we are pleased with the results, and we are increasingly positive about our prospects in the future in the quarters ahead. Our quarterly results showed solid year-over-year improvement in both revenue margins and profitability. While we face some short-term headwinds given the electronic component supply constraints affecting the global economy, which I will discuss in a few minutes, our improving performance so far this year demonstrates that we are moving in the right direction. In terms of our financial results, revenues for the third quarter were $49.9 million, up 34% compared to $37.3 million in the third quarter of 2020. In the prior quarter, revenues were $56.9 million.
The year-over-year increase was driven by revenue growth from cellular backhaul and USO defense and enterprise broadband markets. In terms of revenue breakdown by segment, Fixed Networks segment revenues were $22.2 million, compared to $22.8 million in the same quarter last year and $30.8 million in the previous quarter. Mobility Solutions segment revenues were $21.6 million, compared to $9.2 million in the same quarter last year and $19.9 million in the previous quarter. Improvement in this segment was primarily driven by strong revenue growth from USO and defense markets, while in-flight connectivity or IFC remains weak.
The regional infrastructure projects segment revenue, which include the construction revenues for our projects for Telefónica in Peru, were $6 million compared to $5.3 million in the same quarter last year and $6.2 million in the previous quarter. Now looking at our quarterly results on a GAAP basis. GAAP gross margin improved to 35% compared to 25% in the same quarter last year and 29% in the previous quarter. GAAP operating income for the quarter was $918,000, compared with an operating loss in the same quarter last year of $10.9 million dollars, which included costs related to the Comtech merger deal of $1.2 million. In the previous quarter, we operated in loss with $337,000.
GAAP net income in the quarter was $168,000 or $0.00 per diluted share. In the same quarter last year, we reported net loss of $11.6 million or $0.21 per share, which included costs related to the Comtech merger deal. In the previous quarter, we reported a net loss of $129,000. To summarize the quarterly non-GAAP results. Our non-GAAP gross margin improved to 35% compared to 25% in the same quarter last year and 29% in the previous quarter. We had $16.2 million in non-GAAP operating expenses in the quarter, compared with $11.4 million in the first quarter of last year and $16.6 million in the previous quarter.
I note that last year, due to COVID-19 pandemic, we had made temporary cost reductions, which mainly consisted of a reduction of our global workforce to 80% work scope. In December 2020, we returned all our employees back to 100%. Further, I would like to note in this quarter we benefited from cost-related cuts. We increased the investment in R&D to ensure timely delivery of existing large projects we've been awarded, mainly in NGSO constellations, and also to capture other opportunities we see ahead of us. Non-GAAP operating income was improved to $1.5 million compared to an operating loss of $1.9 million in the same quarter last year and operating income of $183,000 in the previous quarter.
Non-GAAP net income in the third quarter was $712 thousand, or earnings of $0.01 per diluted share. This is compared with a net loss of $2.6 million or a loss of $0.05 per share in the same quarter last year. In the previous quarter, we reported a non-GAAP net income of $391 thousand or earnings of $0.01 per diluted share. Adjusted EBITDA for the quarter improved to $4 million compared with an adjusted EBITDA of $562 thousand in the same quarter of last year. In the previous quarter, we reported an adjusted EBITDA of $2.5 million. Moving to our balance sheet.
As of September 30, 2021, our total cash and cash equivalents, including short-term deposits and restricted cash, were $85.4 million, compared with $82 million as of June 30, 2021. In terms of cash flow, we generated about $5 million from operating activities. Days sales outstanding, which include our fixed network and location solution segments and excludes receivable and revenues of our terrestrial infrastructure project segment, were 66 days compared to 65 days in the previous quarter. Our shareholders' equity at the end of the third quarter totaled about $229.2 million, compared with $228.7 million at the end of the previous quarter. Similar to other companies, we are experiencing the global shortage of electronic components and materials, which has been intensifying since early 2021 across many of our suppliers.
Component lead times continue to increase as scarcity is increasing component prices. The extent of these shortages is unprecedented and is expected to persist for the immediate future. I stress that this is a worldwide issue affecting everyone in the market. Given our careful planning and prudent inventory management, we have been mostly able to manage the impact so far, and I hope that we will be able to maintain this and we'll, of course, keep you updated. All in all, we're encouraged by our return to growth and profitability and the strong backlog and VHTS momentum which cause us to believe that 2022 will be a very strong year for Gilat with significant growth both in revenue and in adjusted EBITDA. 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 are using speaker equipment, kindly lift 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 and congratulations on the strong bottom line results, especially in light of the sequential downtick in the fixed network business. Can you help us understand what components of that business were down, sequentially? Were those issues sort of temporary contract delays or timing? You know, should we expect Q4 to move back towards the sort of run rate you were at, earlier in the year?
Yeah. Hi, Chris. It's Bosmat Halpern. The sequential decrease that we see, you know, as you know, Gilat is very difficult to measure quarter over quarter. The way our business is run is that we may have very large projects which are deployed in one quarter and then the next quarter may be a bit lower. Usually it is better to look at them year-over-year basis. When we look at the fixed network segment this quarter, actually we had some significant deployments in Q2 for CBH and enterprise in Japan and Asia. Some of the deployments we were going into this quarter will stay to next quarter.
We do believe that next quarter is going to be the strongest quarter of the year, and we will see this going back up in Q4.
Got it. Mostly just timing related issues.
Exactly.
Also, I think this is the best gross margin that you've posted in quite a while. Again, in light of a little bit of a revenue shortfall in the quarter, can you detail for us what contributed? Was it simply a mix related issue to the margins?
Sure. As you know, our margins are always very volatile between the different deals in regions and segments. It's also, you know, quarter-over-quarter it changes a lot. The different revenue mix significantly shifts our margins. We had this quarter a more favorable mix of deals which contributed to our gross margin. As I said, we also benefited from COVID-19 related grants, which helped the margin and also the mobility segment revenue were higher, which usually positive towards our margins.
Great. Can you remind us, you know, within the fixed network segment, you know, the general margin profile of the, you know, the subsegments or the markets, that fall within fixed network, how they rank?
Yeah, sure. If you're watching, most of it, we're talking about the cellular backhaul. The cellular backhaul is the highest margin of those subsegments, if you call it. It's above the average of the six. We have enterprise. By the way, enterprise and the crew operations, which are about the average margin of the six segments. We have the consumer, which is lower, the last business, which is the lowest margins of all of those subsegments.
Great. Thanks for that detail. Also, I think you mentioned during the call, and I missed the number, but significant orders in the IFC market. Was it $15 million?
Yeah. Yeah, slightly above $15 million. We are seeing slightly more traction in this segment. You know, I guess we all understand that returning to pre-COVID level will take a while and probably only in the second half of next year. Only this week international flights to the U.S. opened. It will take some time, but we do see some more traction and receive some large orders to be delivered in 2022 onward. It will affect our revenue and growth in the next year.
Great. Were those orders with existing legacy customers or new customer wins?
Mainly with existing legacy customers.
Great. Another question on the script. I think you mentioned orders for LEO constellation to be delivered in 2022. What was that number?
It was 717.
Understand. Those are orders under your existing contracts that you have, not a new win.
Correct. Those are on existing contracts.
Good. I guess final question on Peru. You indicated that you hit the $50 million run rate, and presumably that is at the exit of Q3, so it should be reflected in Q4, you know, higher revenue moving forward Q4 and into next year.
Correct. $50 million, but it's a run rate. We will see a run rate of slightly above $43.4 million. You know, you need to take one fourth of it. Once we will get into operational phase in Ica and Amazonas, we'll hit $50 million per year. In terms of backlog, we have about $50 million a year.
Great. Actually, one final question. Can you give us a sense of the book to bill in the quarter, either corporate-wide or, you know, if there's any significant outliers among the segments?
Yeah. It's significantly above one. We call it book to revenue because billing and revenue in Gilat is not always tied together. It was significantly above one.
Great. Thank you.
Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes. Congratulations, and Adi, would you make some comments on the military or the defense business to see how that's going?
Yeah, sure. As we said in the last several earnings calls, we are investing more and more in the defense segment, which we haven't invested in the last several years. We saw several very nice wins in Asia, Middle East, and some in Latam. We are trying to duplicate it in other places in the world, mainly for base vessels and antennas. It's something that we won't be able to measure quarter-over-quarter because to penetrate a new defense organization takes a lot of time and require a lot of investment. In some cases, a specific development and security measures. In general, we expect a lot from this segment in the coming years.
Thank you, Adi.
Thank you, Gunther Karger.
Ms. Halpern, would you like to give your concluding statement?
Yeah. I want to thank everyone 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 2021 results conference call. Thank you for your participation. You may go ahead and disconnect your lines.