Ladies and gentlemen, thank you for standing by. Welcome to Gilat Second Quarter. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded August 10, 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-six forty six-six eighty eight 3,559 or view it in the News section of the company's website, www.kilat.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 2nd quarter results conference call and webcast. Recording of this call will be available beginning at approximately noon Eastern Time today, August 10, 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 statements in Gilat's earning 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 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 Pressley disclaims any obligation to do this. More detailed information about the risk factors can be found on Gilat's report filed with the Securities and Exchange Commission. And with that, let me turn to introductions. On the call today are Mr.
Adi Sfadia, Gilat's CEO and Ms. Wozmat Harpen, Gilat's CFO. I would now like to turn the call over to Adi. Adi, we're ready to begin.
Thank you, Ehud, and good day, everyone. I would like to thank you for joining us today for our Q2 of 2021 earnings call. I'm very pleased with our results this quarter, which demonstrate a solid improvement and return to profitability in our business. We showed strong revenue growth of 49% year over year and 27% quarter over quarter. The improvement was throughout our income statement with improved gross margins And a return to profitability on non GAAP basis with positive EBIT of $200,000 and adjusted EBITDA of $2,500,000 Our performance was driven by the cellular backhaul, NGSO, enterprise broadband and defense markets, which have shown significant progress and we momentum to continue for the foreseeable future.
We also made significant progress in the mobility market and in our operation in Peru, securing significant deals. Looking ahead throughout 2021, we expect to continue our growth trend In both revenues and profitability, we expect the cellular backhaul and GSO and our operation in Peru We'll be the main growth drivers for the remainder of 2021 and beyond. Moreover, looking further out into 2022, We believe that it will be a year of significant growth for our company as our NGSO project further materializes And our Mobility segment grows with maritime and defense opportunities and the expected recovery of IFC. In order to material the significant opportunities we see ahead, we are investing increased efforts in R and D to better support our future growth. Now I'll focus on some of the business achievements and highlights for the quarter.
Mobility is a major focus area and growth engine for Gilat. We recently secured a multimillion dollar agreement with SCS for our next generation mobility platform. This is a breakthrough in solidifying our leadership In the mobility market, enabling supply of initial maritime services to some of the world's top cruise liners and maritime service providers. Connectivity will be delivered by our multi orbit platform utilizing the O3B Empire Constellation and other FCS GEO satellite including FCS17. In the IFC market, we are seeing initial seasonal recovery.
This remains a highly strategic market for Gilat and we view the short term impact from the pandemic over the past few quarters as temporary issue. However, we do believe it will still take some time for the IFC industry to return to its pre COVID levels And for Gilat IFC segment to recover to its full potential. In the defense segment, we are seeing growing global opportunities As we mentioned last quarter, we closed several important multimillion dollar deals in both Latin America and Asia. Furthermore, we were awarded a $5,000,000 contract by Tier 1 U. S.
Terminal provider to power Telecom Terminals for militaries worldwide. This is in addition to our ongoing successful supply of high quality military communication products To the U. S. Department of Defense and the U. S.
Army from our U. S. Subsidiary WaveStream. In Peru, we received a $13,000,000 award from Bonatelle To provide public free Wi Fi services across hundreds of sites in the regions of Ayacucho, Apurima, Huancavelica and Cusco. This 2 year project has potential for further expansion to thousands of additional sites and extensions for additional years.
We are making significant progress with our strategy to deliver services over the network and as such expect to meet our previously Stated goal of $50,000,000 in annual recurring revenues from Peru. The non gestationary orbit satellite constellation The very high throughput satellite segments continue to be a major strategic focus area and growth engine for Gila. As a leading provider for this market, we see solid growth potential comprising of 100 of 1,000,000 of dollars in market opportunities For which we are making very significant progress in several fronts. We continue to receive multimillion dollar orders from a leading satellite operator For support of low air orbit constellation, as we reported in the past, our subsidiary wave stream was chosen to supply gateway solid state We also continue our development of the ground segment for the ACS O3BN power satellite constellation and expect to start seeing significant revenue from this project in the coming quarters. The Cellular VACO segment continued to be a strategic importance to us.
We saw significant expansion and follow on orders during the quarter from our Tier 1 MNO globally. This is a testament to the great value that our customer sees in our solution as they continue to expand their networks. I would like to highlight our leading M and O customer in Latin America who expanded a multimillion dollar IoT project For additional coverage provided by Gilat Cellular Backhaul Solutions, the mobile operators expand its agricultural IoT network to address the critical need to enable better communication between the field and the office. On the 5 gs front, as the market adoption of 5 gs is growing, We see strong potential for Gilat to expand its leadership. This will initially be with the drive towards additional 4 gs deployments And as a next step with 5 gs as it spreads to rural areas.
In North America, we closed a deal estimated at over $5,000,000 With Pacific Dataport to provide broadband coverage in Alaska for everyone everywhere. This strategic agreement will utilize Gilat's multi application platform to provide both fixed and mobility applications. In the Enterprise segment, we also closed important deals in Latin America including one with Telefonica. In summary, as you can see, it has been very active and successful quarter for Gilat And I'm particularly satisfied with our solid strategic and financial performance over the past quarter. This strength was driven by cellular backhaul, NGSO And defense markets, enabling very strong revenue growth and our return to profitability on non GAAP and EBITDA level, following the COVID-nineteen downturn over the past year.
Furthermore, we won new service projects in Peru, which will bring us recurring revenues in the future as well as new contracts in defense and maritime markets. We expect our momentum to continue for the remainder of 2021 providing continued growth in both revenues and profits. Moreover, looking further out into 2022 and beyond, we Significant growth primarily in the following market segments. In the NGSI and VHTS segment, we see opportunities of 100 of 1,000,000 of dollars For which we are making very significant progress. In the mobility segment, we expect to strengthen our leadership with the SCS award for our mobility and maritime platform As well as we expect the recovery of the IFC market as air travel picks up.
In the Cellular and Vehicle of the Satellite segment, we are The global leaders in 4 gs and LTE and as such we expect to enjoy the growing opportunity as markets adopt 5 gs for which we have proven technology. In the defense segment, we believe that our game momentum with global wins this quarter has further potential of tens of 1,000,000 of dollars. I'm excited with our potential and look forward to reporting on our progress over the coming quarters and years. And with that, I'd like to hand over to Bussmann. Bussmann, 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, these non GAAP financial measures should be considered in addition to and not in lieu of comparable GAAP financial measures.
Non GAAP financial measures mainly exclude The effects of stock based compensation, amortization of purchased intangibles, amortization of lease incentive, Litigation expenses or income related to trade secrets claims reorganization costs Merger acquisition and related litigation costs and settlement and initial recognition of deferred tax assets with respect to carry forward losses. The reconciliation table in our press release highlights this data and our non GAAP information presented I will now move to our financial highlights For the Q2 of 2021, overall, as Adi mentioned earlier, we are pleased with the results. Our quarterly results showed continued sequential improvement and strong year over year improvement in both revenue and profitability. Notably, we are very happy to have returned to profitability on a non GAAP basis in the quarter, which we expect to maintain and improve in the coming quarters. The trend indicates that we are moving in the right direction and even while the COVID pandemic remains in the background, There is a clear stabilization of our end markets.
Our improvement does not yet have the significant contribution of the in flight connectivity Our IFC vertical, which remains weak. In terms of our financial results, revenues for the 2nd quarter were $56,900,000 up 49% when compared to $38,300,000 in the Q2 of 2020 and up 27% compared to $44,700,000 in the previous quarter. The increase Was driven by revenue growth from Enterprise Broadband, Cellular Barrel, NGSO and Defense Markets. In terms of the revenue breakdown by segment, Fixed Network segment revenues were $30,800,000 compared to $21,800,000 in the same quarter last year. We also saw an improvement compared with the previous quarter With fixed networks revenues were $25,300,000 These results demonstrate the significant improvement in the business We have been seeing in this segment and we expect that it will show continued improvement in the second half of twenty twenty one.
Mobility Solutions segment revenues were $19,900,000 compared to $14,000,000 in the same quarter last year. Compared to previous quarter, we saw an increase from $11,100,000 The improvement in this segment is driven by revenues from NG, so in Defense Markets, while IFC remains weak. Terrestrial Infrastructure Project segment revenues, which include The construction revenues for our projects in Peru for PRONOTEL were $6,200,000 compared to $2,500,000 In the same quarter last year and $8,300,000 in the previous quarter. To summarize the quarterly GAAP results, Our GAAP gross margin improved to 29% compared to 25% in the same quarter last year and 28% in the previous quarter. GAAP operating loss improved to $300,000 compared to operating loss of 3,500,000 In the same quarter last year and operating loss of $3,700,000 in the previous quarter.
GAAP net loss In the second quarter improved to $100,000 or $0.00 per share compared with a net loss of $4,200,000 Or loss of $0.08 per share in the same quarter last year. In the previous quarter, we had a GAAP net loss of $5,100,000 for a loss of $0.09 per share. Now looking at our quarterly results on a non GAAP basis. Non GAAP gross margin improved to 29% compared to 25% in the same quarter last year and 28% in the previous quarter. I'm very encouraged as I said before by our return to profitability on a non GAAP basis, while we continue to invest significantly in R and D.
Non GAAP operating income for the quarter was $200,000 compared with an operating loss In the same quarter last year of $2,600,000 In the previous quarter, the operating loss was $3,800,000 I note that we had $16,600,000 in non GAAP operating expenses in the quarter compared with $12,200,000 In the Q2 of last year and $16,200,000 in the previous quarter. The Q2 of last year included temporary cost reductions, which mainly consisted of reduction of our global workforce to 80% work scope. We returned all our employees to 100% work scope In December 2020, we continue to invest significant efforts in R and D to ensure timely delivery of the existing large projects We have been awarded mainly in LEO and MEO constellations and also to capture other opportunities we see ahead of us. Non GAAP net income in the quarter was $400,000 or $0.01 per share. In the same quarter last year, We reported net loss of $3,300,000 or $0.06 per share.
In the previous quarter, we reported a net loss of $5,200,000 or $0.09 per share. Adjusted EBITDA for the quarter improved to $2,500,000 Compared with an adjusted EBITDA of $100,000 in the same quarter of last year, in the previous quarter, we reported an adjusted EBITDA loss Of $1,400,000 Moving to our balance sheet. As of June 30, 2021, Our total cash and equivalents and short term deposits, including restricted cash, were $82,000,000 compared with $75,600,000 at the end of the previous quarter. In terms of cash flow, we generated $8,400,000 From operating activities, DSOs, which include our Fixed Networks and Mobility Solutions segments and exclude receivables and revenues of our terrestrial infrastructure project segment decreased to 65 days compared to 77 days In the previous quarter, with regards to our inventory, as you probably know and heard, there is a global shortage of electronic components and materials, which has been ongoing now since early 2021 and is affecting us and numerous other companies. However, given our careful planning and prudent inventory management, we have been able to manage the impact thus far And we continue to work hard and are leveraging our strong cash position to ensure we have sufficient inventory available to meet the demand for our solutions.
Our shareholders' equity at the end of the second quarter totaled 228 $700,000 compared with $228,100,000 at the end of the previous quarter. Looking ahead, all in all, we are encouraged with the continued sequential improvement in our results on both the top and bottom line. As Adi mentioned, we view 2021 as a year of recovery in which we emerge from the COVID-nineteen crisis. We look forward to a year of continued revenue growth and improved profitability in 2021 and much more so in 2022. That concludes my financial review.
I would now like to open the call for questions. Operator, please?
Thank Your questions will be pulled in the order they are received. Please stand by while we poll for your questions. The first question is from Chris Quilty of Quilty Analytics. Please go ahead.
Thank you and congratulations on the good results. A question for Bose Matt on the last point you mentioned around the chip Shortages, are you seeing improvements or is the situation getting worse there? And how should we think about that in terms of either Restricted sales capability or impact on margins for the balance of the year?
Hi, Chris. Thank you for the question. Right now, we mainly are in control of those Shortages, we do see impact of the lead times of our equipment And that's why we are managing that by ordering ahead of time. Sometimes we need to order a year in advance. I do not expect it to have material impact on our margins or on our results As we manage it correctly, however, I do expect that our inventory levels will Slightly grow because of those shortages.
Fortunately, you have the cash to front that. And I guess on a similar angle with the resurgence of the Delta variant, are you Seeing any impact on your business in terms of trends either globally By region or by market activity?
Hi, Chris. This is Adi. The delta variant, I think 2 months ago, we thought that the We are far from finishing this episode. We started to meet Some customers are now it seems like due to the restriction in Israel and worldwide, we need to reduce our travel Significantly again, but from business perspective more or less it's the same in the last 6 months, we don't see additional effect. But again, I learned from The last 15 months that every month you learn something new.
But right now, It's the same situation as it was in the last 6 months.
Great. And a follow-up on I think you had stated in the script that you expect Peru to be the primary growth driver in the back half of the year. Is that expected to come on the terrestrial side or services? And Will that have any kind of a material impact on the gross margins that you report in the back half of the year relative to the first half?
The growth should come from services mainly from services, most of them on the terrestrial network that we are building. And it's going that we are building and it's going to increase our margin Especially in Peru, the effect on the consolidated P and L We'll be it depends on the other revenue mix not only on Peru. But if we take Peru as a standalone, Peru margin should increase significantly with winning additional service bids and I guess that it will also increase our overall Gross margin.
Great. And congrats on the new defense wins. Can you Help us understand, are those wins that you're seeing in the Defense segment Generally new programs starts or are these programs where you're going in and taking away business competitively?
It's a combination of both. In the U. S, there are some programs that we are continuing to get Although in some cases it's a new project under existing programs or if we consider a program A huge budget basket under the DoD, but we do see more and more business outside of the U. S, Especially for broadband solution gateway hubs and VSATs For non U. S.
Countries, and we do see some new programs in the DoD that we are now Trying to find our way in.
Great. I know you don't typically provide book to bill per se, but can you give us a sense of what the order Trend is looking like either in the quarter or year to date, and I would guess generally at a top level And specifically with regard to IFC, whether you're seeing any early leads there of order activity picking up?
In the last few quarters on average our book to revenue ratio was higher than 1, Which I think it's good situation. On IFC, we are seeing Initial feeds of orders for both SSPAs, box and amplifiers And also for baseband, but it's the beginning. We hope it's Beginning of a trend, to be honest, the delta variant now Probably we'll delay again the recovery by a quarter or 2 until people will understand Where it's going to take us?
And are you Changing your strategy at all with regard to the IFC market, obviously Intelsat, the former Gogo large anchor Customer, but in terms of your approach to the airline customers, are you working primarily through partners or Directly and has anything changed post COVID with the opportunity set there?
No. I think that our strategy haven't changed. Here and there we do talk with the end users, but we are Primarily focused on supporting our partners Honeywell, Gogo and NuVu Global Eagle, supporting their requirements. We do participate in some of New RFPs that service providers issued in the last few months and probably will issue Additionally in the next few quarters, but we have no intention to go directly to the airlines.
Great. And final question on the NGSO market. Obviously, SCS with MPOWER is The big growth driver going into 2022, but are there additional opportunities out there obviously Telesat and Amazon being the largest potential opportunities, but are there other Potential constellations or competitive wins that you see in the next say 12 to 24 months?
Without naming names, we are working with I think except SpaceX, we are working With all the we're trying to work with all the big satellite operators. There are a lot of new initiatives startups that Raising a lot of money either with IPO, private money or under SPACs and we have discussions with them as well. I do believe that we'll see success in getting awards in the next few quarters.
Great. Congratulations.
Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes. Good morning and congratulations on continued excellent results. Thank you, Vincent. Regarding the Defense Military Business, I know that let's say a year ago that Business was relatively minor. Since then, I've noticed the increasing number of wins.
At the present time, what percentage of total business is represented by the defense And military worldwide.
Indeed a few quarters ago, defense business was relatively minor and we are saying I think in the last 2 or 3 quarters that we are Seeing more and more traction from defense worldwide. We had several awards. I think that the second quarter this quarter was The strongest one, in terms of revenue, it's not a data that we Provides that we do see increased portion of defense revenues. It's becoming a trend although I can't say it's a quarterly it's a quarter over quarter trend. I remind everyone that our business is vary from quarter to quarter and both Top line and margins depend on the revenue mix.
But we do see more and more business from the defense coming in.
Yes. Thank you, Adi.
Thank you,
Please stand by while we poll for more questions. There are no further questions at this time. Ms. Halpern, would you like to make your concluding statement?
Yes. Thank you. I want to thank everyone Thank you very much and have a great day.
Thank you. This concludes Gilat's Q2 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.