Ladies and gentlemen, thank you for standing by. Welcome to Gilat's 4th Quarter and Full Year 2020 Results Conference Call. All participants are at present in a listen only mode. Following the management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded February 16, 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-three thousand five hundred and fifty nine or view it in the News section of company's website at www.gidlast.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr.
Ehud, would you like to begin, please?
Thank you, operator. Good morning and good afternoon, everyone. Thank you for joining us today for Gilat's 4th quarter and A recording of this call will be available beginning at approximately noon Eastern Time today, February 16, And will be available for telephone replay until February 19 at noon. The webcast will be archived on Glass website for a period of 30 days. Also please note that investors are urged to read the forward looking statements in the IR's earnings release with a reminder that statements made on this earnings call that are not Historical facts may be deemed forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
All such forward looking statements, including statements regarding future financial report, operational 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 explicitly disclaims any obligation to do so. More detailed information about the 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 Fadia, Gilat's CEO And Mr. Grossmart Halpin, Gilat's CFO. I would now like to turn the call over to Adi Fadia. Adi,
Thank you, Ehud, and good day to everyone. I would like to thank you for joining us today For our quarterly earnings call, I'm happy to report our Q4 2020 results as well as to provide a summary of our performance in 2020. During 2020 and especially during the second half of the year, we made major technological achievements And closed some very significant deals, all of which position us very well for 2021 and onward. We reduced our operating cost by close to 20% to better align our cost with the 2020 revenue level, which allowed us to maintain a positive EBITDA over the past three quarters. As you know, in the Q4 of 2020, Our merger with Comtech was terminated with a settlement that was reached on all pending litigation for a payment of $70,000,000 to Gilat by Comtech.
We recently shared approximately $55,000,000 of dividend with our shareholders derived From this termination fee net of transaction and litigation costs. Moving ahead, we are continuing at full force to implement our strategy, which we believe will generate long term value for our shareholders. In Q4, we continued the trend of recovery that started in Q3. We closed multimillion dollar deals in our strategic growth areas that I will go into shortly. On the financial front, In 2020, we saw a decline in our revenues to $165,900,000 from 263 point $5,000,000 in 2019 due to the COVID-nineteen pandemic, which was primarily because of the absence of travel And therefore a sharp decline in our IFC business.
Taking a closer look at the Q4 of 2020, Overall, our revenue showed improvement over the previous quarter with a 14% quarter over quarter increase to $42,600,000 This recovery demonstrates that we are heading back in the right direction. While improved versus the previous quarter, The Mobility segment remains weak reflecting the pandemic's continued effect on the international travel and the IFC vertical. As the vaccine continued to be rolled out globally and hopefully life return to normal, we believe the IFC market will have a strong recovery and hold much Growth potential for Gilat in the coming quarters years. On the bottom line, our adjusted EBITDA in Q4 was $1,100,000 An improvement versus the previous quarter of about $600,000 As our revenues continue to recover in 2021, We would expect much of this growth to benefit our bottom line. Looking ahead, our recent strong booking levels in the last two quarters is a good sign And we expect the financial improvements to be continued into 2021 with the quarter over quarter progress.
We hope and expect that air travel will resume in the second half of twenty twenty one and therefore the need for our IFC product solution will return and even increase. With that, we will return to the profitability level that we saw in years prior to the pandemic. The non geostationary orbit satellite constellation and the very high throughput satellite continue to be a major strategic focus area for Gilat. I'm excited to report that at the end of Q4 of 2020, we secured an award estimated over $50,000,000 For a contract to provide gateway solid state power amplifiers for a low earth orbit broadband satellite constellation. The award was granted by a leading satellite operator for gateway SSPAs to be supplied by Gilat subsidiary WaveStream.
This key achievement together with our major win last year to provide the ground segment for the SCS-03B Empire Satellite Constellation has further solidified our position as a front runner in providing the ground segment for NGSO constellations. As we reported last quarter, we expanded the O3B Empire partnership with SCS with a multimillion dollar follow on order for high speed modems. The models will deliver multi gigabit throughput targeting high end services over the constellation Mainly for maritime and government applications. Furthermore, the VHTS and the NGSO market holds significant growth potential for Gilat, Comprising of 100 of 1,000,000 of dollars of market opportunities, we believe that we are well positioned to win this additional NGSO and VHTS business As opportunities mature, cellular backhaul over satellite is a strategic growth engine for Gilat We had notable achievement during the second half of twenty twenty both from major deals that we closed As well as from technology leadership perspective, our managed service strategy of providing end to end services continue to be successful, Bringing in larger contracts with recurring revenue. At the end of 2020, we closed a multimillion dollar contract expansion with Globe, Philippines' largest mobile network operator.
Globe chose Gilat's robust end to end solution providing high quality service to quickly expand The nationwide coverage answering the rapidly growing connectivity demand. This deal follows 3 major managed service achievements reported last quarter Leading MNOs 1 in Mexico and 2 in the United States. Gilat's strategy to supply MNOs with managed services proven to be most successful And enhanced with our significant local presence and support as well as strengthened by our proven delivery capabilities. I would like to share an event that most recently demonstrate Gilat's excellent service capabilities. You may recall that A massive explosion took place in downtown of Nashville, Tennessee on Christmas Day.
This explosion caused major communication disruption to 19 Southern Link sites that could not pass vital traffic to both communication and utility monitoring. Southern Link is our new customer, which we reported last quarter and I'm proud to share that Gilat's excellent intervention Supported by its regional team and global network operations center brought their site back online in record time. In addition to managed service here, we closed several of our backhaul equipment deals of national importance in Mexico. Gilat works closely with its long time partner, the satellite operator, Hispasat and the service provider, Access. Gilat supplied them with network equipment and VSAT to enable them to provide services to the MNOs in Mexico.
Gilat is supporting both of these partners to extend the service of Altan La Rede Compartida, the shared telecommunication network in Mexico that is built to supply connectivity to over 3,000,000 people. Mexico's underserved rural population will benefit 4.5 gs LTE coverage enjoying high quality mobile broadband voice and data services. In addition, Gilatso Access is providing The satellite network and equipment in Mexico to LATAM's largest MNO to bring connectivity to rural Mexico. These deals in Mexico are in addition to other important cellular backhaul equipment deals closed earlier in the year in Africa and Kazakhstan. On the technology readiness side, we conducted in the second half of twenty twenty a most successful test delivering 5 gs traffic With outstanding performance over the Ticom GEO HTS satellite, thus providing that we are ready to implement in the 5 To implementation in the 5 gs architecture.
Before moving on the mobile segment, I would like to share with you that we are making additional headway with our for 5 gs networks with the upcoming launch of our next generation family of VSATs. These ultra high performance multi orbit VSATs provide the Required performance and provide the support for seamless satellite handover. Satellite communication is essential to materialize the 5 gs vision And is an essential enabler to provide the scale and the scope for connectivity everywhere. Gilead is a recognized leader in the cellular backhaul of our satellite He is well positioned to become a major participant in the evolving 5 gs ecosystem. Gilat has proven multiple times That this technology is ready to support the 5 gs experience, which will directly influence the way people live and work.
I am confident that with our achievement in the 5 gs important market, Gilat will continue to lead the industry with its innovative solutions. In concluding of the cellular backhaul section, I want to share that Giard continues to be a global leader For 4 gs LTE cellular backhaulover satellite with more than 80% market share in such installations worldwide, We believe that the 5 gs adoption initially in cities will drive additional 4 gs deployment over satellite backhauling in southern and rural areas Well, terrestrial coverage is less feasible. At the 2nd stage, 5 d deployment over satellite will spread to rural areas as well Answering the promise of universal coverage and closing the digital divide, this market size is It's expected to become around $200,000,000 per year for satellite equipment only and more than $6,000,000,000 a year for satellite equipment, services and capacity in few years, Thus holding a huge potential for Gilat. As is well known and was mentioned in our previous conference call, The Mobility segment was most heavily hit by the COVID-nineteen pandemic. Saying that, we continue to view this segment as a strategic for Gilat And view the pandemic effect as temporary.
Upon an industry recovery, we expect this segment to grow in importance As air passenger increasingly demand reliable high Internet high speed Internet connection during travel, We expect this trend to be further strengthened with the introduction of free Wi Fi for IFC, which will significantly increase take up rates And we'll provide a strong tailwind to the industry and to Gilat. In addition, we closed a deal To equip hundreds of boats and vessels and cruise ships with satellite communication, Gilat modems and transceivers were successfully deployed On maritime vessels in Asia, providing an excellent user experience operating over China Satcom HTS Ka band network, Providing multiple switchovers between the satellite beams. As the world is seeing the light at the end of the tunnel of the pandemic, We expect the maritime market to pick up and for Gilat to materialize additional opportunities and will support our future revenue growth. ESA antenna progress was achieved as reported in recent announcement. We completed a successful integration with Inmarsat's Operational Global Express Network.
This was the first time a live demonstration of an ESA terminal was performed on Inmarsat Operational GX Satellite. This integration further emphasized Gilat's ESA leadership and readiness for commercial deployment. However, as this project requires significant development resources, we are seeing delays in market adoption due to the pandemic. We expect that the availability of new Lille Constellation Aero Services will expedite adoption. The new driver for ESA adoption is Business Aviation With thousands of smaller aircraft which cannot fit the tail mount antenna, ESA brings a significant opportunity to this market That mechanical antennas cannot bring.
Therefore, our focus is the short term business jet opportunities, which require a smaller form factor Ethernet terminal. Now moving to the defense segment, where we saw significant achievement from our subsidiary WaveStream throughout the year. Western closed multiple multimillion dollar contract with U. S. Department of Defense for which they are trusted supplier providing high quality military communication products.
These awards that total approximately $9,000,000 during 2020 Our continued sign of face in WaveStream ability to execute at high level and support the DoD needs for years to come. In addition, I would like to share that we are seeing a growing opportunity for defense product solution and applications worldwide. Therefore, we have hired the retired Brigadier General from the Israeli Defense Forces to aid Gilat's Defense Business to maximize these opportunities. As we have reported in the past, our business in Peru in the first three regions awarded in early 2015 moved into operational phase And we are now delivering services to half a 1000000 people. Also we are in acceptance process regarding the 4th regional that were ordered in late 2015.
Due to the recent COVID-nineteen restriction in Peru, the acceptance may be further delayed from the end of Q1 To Q2, 2021, allowing us at that time to enter to the operational phase and start recognizing The related recurring service revenues. We are progressing with the additional two regions which were awarded in 2019 Slower than expected due to the pandemic restrictions in Peru. We have also made significant progress during the year In implementing our strategy of profitable recurring revenues, as we reported in the past, we were awarded a substantial 5 year expansion contract by IPT, A consortium consisting of Telefonica and Facebook among others. In addition, we secured this quarter a large multimillion dollar deal with CORPAK, The Peruvian Corporation of Commercial Airports and Aviation. We are providing mission critical telecom system to 29 airports.
This wins follows Gilat's proven execution capabilities for large scale government projects and we It will open the door for additional large deals. In closing, I would like to reiterate that In Q4, we continued our path to recovery that began in Q3. During Q4, we closed multimillion dollar deals in our strategic growth areas And achieved strong booking levels. We have a strong pipeline supported by innovative technology, a dedicated management team And excellent employees, which give me the confidence that the financial improvement will continue into 2021. I further expect that Gilat will continue to see quarter over quarter progress with a return to higher profitability in the second half of twenty twenty one.
In flight connectivity plays a major role in attracting air traveling customers. As such, I'm confident that as air travel resumes And continues to be its recovery, it will bring a significant increase in demand of our products and solutions allowing us to return to the profitability we saw in years prior to the COVID-nineteen pandemic. Bossmar, we are ready now 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, trade secrets and other litigation expenses, reorganization costs, Merger, acquisition and related litigation expenses or income net 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 exclude these items. And now our financial highlights for the Q4 of 2020 followed by our full year 2020 highlights. Overall, our quarterly results showed an improvement over the prior quarter With strong quarterly bookings, we believe they represent a stabilization in our end markets with the exception of the inflight connectivity or IFC vertical, which is yet to show signs of meaningful recovery. Revenues for the Q4 were $42,600,000 compared to SEK 78,300,000 in the Q4 of 2019. The year over year decline primarily reflects the continued impact of the COVID-nineteen pandemic on revenue from IFC in our Mobility Solutions segment.
However, When compared to the previous quarter, revenues increased by more than 14% compared to $37,300,000 Fixed network segment revenues were $25,100,000 compared to $33,200,000 in the same quarter last year. The decrease year over year is mainly due to the COVID-nineteen pandemic. We saw an improvement compared with the previous quarter where fixed networks revenues were $22,800,000 Mobility Solutions segment revenues were $11,800,000 and ultimately on the IFC market. However, we did see an increase compared with CAD 9,200,000 in the previous quarter. Terrestrial Infrastructure Project segment revenues, which include the construction revenues for our projects for Pronatel in Peru, was $5,800,000 compared to $11,100,000 in the same quarter last year and $5,300,000 in the previous quarter.
COVID-nineteen and the local lockdowns in Peru caused a slower than expected progress. In general, As we have discussed previously, during the construction phase, revenues from Frohneltel will vary quarter over quarter depending on the percentage of the project's completion. To summarize the quarterly GAAP results, our GAAP gross margin was 31% compared to 35% in the same quarter last year and 25% in the prior quarter. The change in gross margin is mainly due to the revenue mix and change in revenue volume as a portion of our expenses It's fixed and does not change in full correlation with the revenue volumes. GAAP operating income was $62,700,000 Compared to operating income of DKK 9,200,000 in the same quarter last year and operating loss of DKK 10,900,000 in the previous quarter, We recorded net income of $64,800,000 in Q4 as a termination fee from Comtech For the cancellation of the merger agreement, GAAP net income in the 4th quarter was $62,400,000 or $1.12 per diluted share compared with a net income of $24,000,000 or $0.43 per diluted share In the same quarter last year.
In the Q4 of last year, we recorded a tax benefit of $15,500,000 Net loss in the previous quarter was $11,600,000 or a loss of $0.21 per diluted share. Now looking at our quarterly results on a non GAAP basis. Non GAAP gross margin was 31% compared to 35% in the same quarter last year and 25% in the previous quarter. Operating loss for the quarter was $1,600,000 compared with an operating income in the same quarter last year of $9,900,000 We saw an improvement compared with the previous quarter's operating loss of $1,900,000 Q4 operating expenses were $15,000,000 compared with $17,300,000 in the Q4 of last year at CAD 11,400,000 in the previous quarter. Throughout 2020, we have put significant efforts in matching our ongoing operating expenses with the reduced revenue levels.
Those reductions include Reduction in force, temporary salary and FTE reduction and other cost reduction initiatives and our success is clear given the significant reduction in expenses. Q4 operating expenses were higher than those of the previous quarter, mainly due to the fact that we returned our staff to full time starting December, Increased sales and marketing expenses as a consequence of year end sales commission expenses due to higher level of bookings and to the fact that in the previous quarter, we benefited from collection of doubtful debts. Net loss in the quarter was $1,900,000 or $0.03 per diluted share. In the same quarter last year, we reported net income of $9,100,000 was $0.16 per diluted share. We improved versus the previous quarter in which we reported a net loss of $2,600,000 or $0.05 per diluted share.
Adjusted EBITDA for the Q4 of 2020 was $1,100,000 compared with $13,100,000 in the same quarter of last year and an improvement compared with $600,000 in the previous quarter. To summarize our full year results, revenues were $165,900,000 versus CHF 263,500,000 in 2019. The decline, as explained earlier, was due to the impact of COVID-nineteen on our business, mainly in IFC. GAAP gross margin was 25% versus 36% last year. GAAP operating income, which includes $53,600,000 from the Comtech termination fee net of transaction and litigation expenses was $37,600,000 versus $25,600,000 last year and GAAP net income was $34,900,000 versus net income of $36,500,000 last year.
GAAP earnings per diluted share was $0.63 versus $0.65 last year. On a non GAAP basis, gross margin was 25% versus 37% last year. Operating loss was $13,700,000 versus operating income of $29,200,000 And net loss was $16,400,000 versus net income of $24,700,000 last year. Loss per diluted share was $0.30 versus earnings per diluted share of $0.44 last year. Adjusted EBITDA loss was $3,300,000 in 20.20 compared to adjusted EBITDA income of $40,200,000 in 2019.
Moving to our balance sheet. As of December 31, 2020, Our total cash and cash equivalents, including restricted cash, were CAD 116,000,000 an increase of CAD 38,700,000 from the previous quarter. During the Q4, we received CAD 70,000,000 from Comtech as termination fees And paid expenses related to the merger and litigation in the amount of $9,500,000 in addition to 4,200,000 Paid in previous quarters, bringing the net cash proceeds from Comtech termination payment to $56,300,000 in the full year of 2020. In addition, in the Q4, we paid $20,000,000 as a special dividend to our shareholders, An additional $35,000,000 dividend to shareholders was paid on January 14, 2021. This represents a total special dividend payment to shareholders of CAD 55,000,000 equivalent to CAD0.99 per share.
DSOs, which include our Fixed Networks and Mobility Solutions segments and exclude receivables and revenues of our Terrestrial Our shareholders' equity at the end of the year totaled $233,800,000 compared with $225,300,000 at the end of the previous quarter. Looking ahead, We are encouraged with the stabilization in our end markets, which enabled us to show quarter over quarter improvements in our results. We are also pleased with a strong booking levels in the quarter and we expect the improvements to continue into 2021. As Adi mentioned, we view 2021 as a year of transition and recovery in which we will emerge from the COVID-nineteen crisis. We hope and expect that towards the second half of the year, we will see the return of air travel and with it, IFT related revenues.
We look forward to a year of revenue growth along with improved profitability, mainly in the second half of twenty twenty one. That concludes my financial review. I would now like to open the call for questions. Operator, please?
Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Please stand by while we poll for your questions. The first question is from Chris Quilty of Quilty Analyst. Please go ahead.
Hi, good morning actually good afternoon and congratulations on the results. A question for you on The WaveStream Leo Gateway contract award, can you give us a sense of what you think the determining factor was In that award? And secondarily, are there opportunities with that same customer On the modem side or was this just simply a bid on the amplifier?
Hi, Chris. Good to hear from you. I think the main factors that Make WaveStream the award is the technology And the ability to supply with high quality. And WaveStream has proven in the past that they have those Capabilities. In this specific constellation, I don't think we have Opportunity on the modem side.
And are there other modem opportunities that you're still pursuing?
Definitely, there are several opportunities in the NGSO, both LEO and MEO That we are pursuing and I hope that we will be able to report some progress during the coming few months quarters.
And do you have an update on progress where you stand with SES on the MPOWER program?
Yes, sure. So we were awarded about a year ago for the ground equipment, the baseband It was a large award. We are in development efforts to We'll be able to provide it on time by the end of 2021. In addition, about a quarter ago or 3 months ago, we were awarded a development of point to point Modem, especially for the maritime and government application. And I think that the potential For us with SCS and MPOWER is still significant and we are working on several opportunities that Will mature in the coming few months.
One other question on WaveStream. I think you mentioned in the press release Some ongoing U. S. Government or military program wins. Now that The Win T program is dead and maybe not fully dead, still living in a zombie state.
Where are those new orders coming from? I mean what type of programs or specific programs are you seeing demand from?
Yes. Some of them are still going to this wind program and some In some cases, even I don't allow to know exactly where they are going to, but There will be programs that we cannot disclose the names. Okay.
And you mentioned initial 5 gs demonstrations on the modem side. Where are we in that process? You've got great market share on the 4 gs side. Do you expect to see Sizable 5 gs related orders in the next year or a couple of years for Are most of the deployments at this time being done more in the urban core where satellite is not needed?
So I think you already answered it. We demonstrated our 5 gs capabilities and We are going to launch additional products and solutions for the 5 gs architecture and market. But what we see right now is that 5 gs is deployed maybe mainly in urban areas where fiber is available. But one thing that we do see on a lot of license requirements worldwide Is that the MNOs required to cover with 4 gs a lot of rural areas That it will take them a lot of time to have 5 gs and this is enormous potential over 4 gs. Later on, I guess at the second stage, we will see 5 gs backhauling over satellite deployed in rural areas.
I think based on some market analysis that we are getting from analysts to cover the market, Just the equipment part of the 4 gs and 5 gs alone can be in a few years more than $200,000,000 a year. And today based on NSR, we hold more than 40% of the overall satellite cellular backhaul market, 2 gs, 3 gs and 4 gs. And if you look only on the 4 gs, we have more than 80% market share. So with significant increase in the market plus our market share, I think it's going to represent a Huge opportunity for Gilat, not taking into account that we are also selling managed service including reselling capacity, Which provide us also a significant opportunity to increase our top line and also the bottom line.
Understand. And final question for you on the maritime market. That's a new market entry for Gilat, I guess in recent years, it sounds like the one win right now is in China, but do you have a strategy To broaden that on a more global basis and given the fact that there's already very embedded suppliers in that market, iDirect and KVH proprietary and Inmarsat has its ecosystem. What would be your approach to that market?
So first of all, indeed you are correct that the maritime is a segment or vertical that we haven't played And wasn't a significant player. We had recent success in Asia, in China indeed. And also as I said, point to point modem that we are developing for MPOWER is also Targeting the maritime market and I think that with that we can take significant market share together with the CS on that. And we have other opportunities and I think that it's a very large market. Indeed there are strong players, But I think with the next generation visa that we will announce soon, I think we have a fair share to take a decent market share in the maritime.
Very good. Thank you.
Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes. Good morning and good afternoon. First of all, Adi, congratulations. So we've come a long ways. And secondly, a question, where are we on the high speed train segment of the market?
High Speed Train was a promise several years ago. We made a lot of progress in China, but since then It's a bit on hold. It's mainly depends on the end user needs and it's like Additional add ons that we can the train manufacturer can add, We have some success in Spain of selling our antennas to trains and Several opportunities worldwide, but it's not going to be a significant growth agent rather a few $1,000,000 a year.
Thank you, Abid.
Thank you, Gantir.
There are no further questions at this time. Before I ask Ms. Basmat Halpern To go ahead with our closing statement, I would like to remind participants that a replay of this call is scheduled to begin 2 hours after the conference. In the U. S, please call 1-eight 80eight-three 20six-nine 3110.
In Israel, please call 03925,5004. Internationally, please call 972 3,925,9004. Ms. Halpern, would you like to make your concluding statement?
Yes, thank you. I want to thank you all for joining us on this call and for your time and attention. And we hope to see you soon or speak to you in the next call. Thank you very much and have a great day.
Thank you. This concludes Gilat's 4th quarter and full year 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.