Welcome to Gilat's first quarter 2019 results conference call. All participants are present in a 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. As a reminder, this conference is being recorded May 14th, 2019. I would now like to turn the call over to June Filingeri of Comm-Partners LLC to read the safe harbor statement. June, please go ahead.
Thank you. Good morning, good afternoon, everyone. Thank you for joining us today for Gilat's first quarter 2019 conference call and webcast. A recording of this call will be available beginning at approximately noon Eastern time today, May 14th, and will be available for telephone replay until May 17th at noon. The 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 releases with 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 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 Yona Ovadia, Gilat's CEO, and Adi Sfadia, Gilat's Chief Financial Officer. I would now like to turn the call over to Yona Ovadia. Yona, we are ready to begin.
Thank you, June. Good morning, good afternoon, and good evening, everybody. Thank you for joining us. As you may have seen in our announcement earlier today, I'm pleased to share with you that Gilat achieved positive results for the first quarter of 2019, as we continue to focus on building a mix of high-quality revenues through our growth engines of broadband, mobile cellular backhaul, and mobility IFC, as well as improving profitability. In addition, Gilat received market recognition for our leadership in the 4G LTE cellular backhaul . As a result, we achieved adjusted EBITDA of $8.2 million versus $7.5 million in the first quarter of 2018, as well as GAAP operating income of $4.5 million versus $3.7 million in the first quarter of 2018, an increase of 21.7%.
We also reported revenues of $62.1 million, a 7.8% decrease in total revenues versus the first quarter of 2018, mainly reflecting lower infrastructure revenues from our projects for Pronatel in Peru. As planned, we are winding down the construction phase in our first three regions of Huancavelica, Apurimac, and Ayacucho, and preparing to move to the operational phase in these regions throughout 2019. We are pleased to see our other growth engines largely compensating for the reduction in construction revenues. I will elaborate on our progress in Peru in a few moments. Moving on to a review of the business. In our focus area of mobility IFC, we see continued progress, further solidifying and expanding our leadership in the fast-growing IFC market.
First, Gilat continues to supply Gogo with Aero modems for their 2Ku solution, reaching more than 1,100 aircraft at the end of the first quarter, with a backlog of approximately additional 900 aircraft. Additionally, Honeywell has selected Gilat's Aero modem for its JetWave satellite communication solution. The integration of Gilat Aero modem will enable Honeywell to offer its JetWave solution within territories, as well as roam in and out of territories where Gilat's ground network is deployed. The Honeywell Gilat solution will be deployed first in China over Gilat's already deployed HTS Ka-band network for both domestic and cross-border flights, then expected to expand to additional regions around the globe.
To summarize the IFC section, I want to emphasize that securing Honeywell as an additional major customer to our Aero modem, along with our longtime partner, Gogo, as well as other opportunities, is a testament to Gilat's recognized global HTS and IFC leadership. We are making headway in realizing Gilat's vision of providing broadband worldwide with unparalleled passenger user experience. This quarter was also a good quarter in our strategic growth engine of cellular backhaul. We received a deal with TIM Brasil to enable 4G services for the agricultural IoT business. The initial forecast calls for 1,000 Gilat VSATs to complement 4G TIM in the Field cellular coverage program. Gilat also continued as the frontrunner in the 4G LTE satellite backhaul market, with extensions of projects with existing customers as we received additional orders worldwide from Asia, Africa, Australia, and the Americas.
I'm gratified to report that Gilat was recognized by the industry analyst NSR in a report published in April 19, last month, as the world leader in shipments of cellular backhaul over satellite, achieving a 35% market share in modem shipments. NSR further points out, I'm quoting, "Being able to differentiate with a compelling managed service offer is key to gain business and defend healthy margins." Gilat cellular backhaul strategy focuses on T1 MNOs deploying LTE networks throughout the globe, we offer just exactly that. Fully turnkey solutions providing managed services in numerous deployments in the Americas and Asia. In the area of broadband, Gilat expanded its business this quarter with Eutelsat in Russia.
Beeline Russia is their own brand and one of the leading Russian mobile network operators will utilize Gilat's advanced technology and Eutelsat network communication services in Ka-band to provide high-speed broadband connectivity for multiple applications to address the Beeline business offering with affordable cost in areas without terrestrial connectivity. The broadband service will extend mobile coverage, give internet access, enable Wi-Fi points, video surveillance, telephony services, cloud PBX, and organize virtual private networks. Additional progress has been achieved in the broadband area in other regions as well. In Australia, we recognized revenue in the first quarter for the first major deal that was secured last year with NBN, we are progressing with gateway deployments around this project according to schedule. In Latam, we are expanding our business with our partner Hispasat to include additional service providers with thousands of VSATs providing internet to schools and other enterprises.
I would like also to say a couple of words on NGSO. We view NGSO and specifically LEO and MEO as a natural expansion of Gilat's broadband strategy and a significant growth opportunity. This quarter, we had achieved a first-ever successful test that was conducted demonstrating 5G connectivity over a LEO satellite powered by Gilat's modem over Telesat's LEO test satellite. The successful test was done at the 5G Innovation Center at the University of Surrey, conducted by a T1 European operator, demonstrating 5G backhauling by Gilat over a LEO satellite. This achievement of 5G connectivity is in addition to our previously reported first-ever and successful demonstrations of live in-flight communications and exceptional maritime connectivity over Telesat's phase one LEO satellite. It further demonstrates the benefits of Gilat's continued investment and leadership in the next-gen areas of NGSO and 5G.
As we have announced previously, we have significantly increased R&D investment in 2019 to maintain our current technology advantage as well as to press forward with our product roadmap, including our IFC antennas, as well as NGSO baseband in support of opportunities in LEO, MEO, and 5G. In Peru, we are progressing with acceptance testing of the first three regions that we have won from FITEL, Huancavelica, Ayacucho, and Apurimac, we are on track to complete the construction of these regions in 2019. We are also finalizing the fourth region, Cusco, and completion is expected in the first half of 2020. Meanwhile, we're also making progress in building the Ica and Amazonas networks, which we won in 2018. As we've said in the past, our interest in Peru is not the construction U.S. dollars, but mainly the operational fees.
With acceptance of these regions in 2019 and 2020, we look forward to moving to the operational phase of these regions, which yield higher margins. We remain committed to making Peru a source of recurring, profitable revenue for Gilat. In summary, we're encouraged by the opportunities ahead in our growth engines of cellular backhaul, mobility IFC, and broadband. With this solid start of the year, we reiterate our management objectives for 2019 of revenue range between $275 million-$295 million, GAAP operating income of between $23 million and $27 million, and adjusted EBITDA between $38 million and $42 million. With that, Adi, we are ready for your report. Please go ahead.
Thank you, Yona, and good morning and good afternoon, 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 purchase intangibles, amortization of lease incentive, litigation expenses or income related to trade secret claims, expenses for tax contingency to be paid under an amnesty program, 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 first quarter of 2019. Revenues for the first quarter of 2019 were $62.1 million, about 8% lower compared to $67.4 million in the first quarter of 2018, mainly due to lower revenues recognized from the Pronatel project in Peru. Our Fixed segment revenues, which include cellular backhaul revenues for the first quarter of 2019, were $36.4 million compared to $37.6 million in the same quarter last year, and $35.4 million in the previous quarter. Our Mobility Solution revenues for the first quarter were $20.9 million compared to $20.8 million in the same quarter last year. Mobility revenues in the fourth quarter of 2018 were $29.6 million. The decrease is primarily due to seasonality in our business, with our fourth quarter typically our strongest and the first quarter our lightest.
Terrestrial Infrastructure Project segment revenues were $4.8 million compared to $9 million in the same quarter last year and $4.8 million in the previous quarter. As discussed previously, revenues from Pronatel can vary quarter to quarter, depending on the percentage of the project's completion. In total, in the first quarter of 2019, Fixed Networks represented 59% of revenues, Mobility Solution represented 34%, and Terrestrial Infrastructure represented 7% of revenues. In the first quarter of 2018, those percentages were 56% for Fixed Networks, 31% for Mobility Solution, and 13% for Terrestrial Infrastructure, demonstrating the shift of our revenue mix towards our areas of strategic focus, as well as the wind-down of the construction phase of our initial projects in Peru. Our GAAP gross margin in the first quarter of 2019 increased to 37.9% of revenues from 31.7% in the same quarter last year.
The increase in our gross margin is mainly attributable to a more favorable revenue mix, in addition to lower construction revenues from Pronatel in Peru, which has significantly lower margins in the construction phase. Our gross margin in the previous quarter was 37.3%. Total operating expenses on a GAAP basis for the first quarter were $19.1 million compared to $17.7 million in the same quarter of last year and $18.5 million in the previous quarter. GAAP operating profit in Q1 was $4.5 million compared to an operating profit of $3.7 million in the same quarter last year and $7.5 million in the previous quarter.
GAAP net income was $2.8 million, or income of $0.05 per diluted share, compared to a net income of $2.3 million or $0.04 per diluted share in the same quarter last year, and net income of $5.3 million or $0.09 per diluted share in the previous quarter. On a non-GAAP basis, operating income for the first quarter was $5.6 million or 9% of revenues, compared to an operating income of $5.1 million or 7.6% of revenues in the same quarter last year. Non-GAAP operating income for the previous quarter was $7.9 million, or 11.3% of revenues. Non-GAAP net income in the first quarter was $4 million or $0.07 per diluted share, compared to non-GAAP net income of $3.8 million or $0.07 per diluted share in the same quarter last year. Non-GAAP net income for the previous quarter was $5.7 million, or $0.10 per diluted share.
Adjusted EBITDA for the first quarter was $8.2 million or 13.2% of revenues, compared to adjusted EBITDA of $7.5 million or 11.2% of revenues in the same quarter last year. Adjusted EBITDA in the previous quarter was $10.5 million or 15.1% of revenues. As of March 31st, 2019, our total cash and equivalent, including restricted cash, were $104.3 million, before distributing a cash dividend of approximately $25 million in early April. DSOs, which include our Fixed Networks and Mobility Solution segments and exclude receivables and revenues of our Terrestrial Infrastructure segment, increased to 75 days compared to 71 days in the previous quarter. Our shareholders' equity at the end of the quarter totaled about $219.4 million after the reduction of payable dividend, compared with $239.1 million at the end of the fourth quarter of 2018. That concludes our review. Thank you for your attention.
I would like now to open the call for questions. Operator, please.
Thank you. Ladies and gentlemen, at this time, we'll 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 the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Gunther Karger of Discovery Group. Please go ahead.
Yeah, good morning, of course, good afternoon. The only comment I have is to congratulate you on setting your goals and executing them so well. Thank you. Thank you, Gunther.
The next question is from Michael Hebner of IFS Securities. Please go ahead.
Yeah, good morning. Every time, I think this is three or four calls now, what are you doing to reach out to the investment community to get more people interested in this? Seems like a lot of people are interested in 5G and this backhaul stuff.
We are doing the regular stuff, trying to use media, trying to meet investors, present in IR conferences. The regular stuff. Investing a lot of effort, both on the media and the investor community.
What are you seeing in the 5G? What type of backhaul, what type of increased stuff? When are these phone companies and various players going to start spending on this?
I'm sorry, what was the question again?
As you're looking forward, are you seeing more money coming into the industry? I see that Elon Musk is putting up these low-flying satellites, and I see in your press release that people are using your business. What types of opportunity are you seeing with the 5G and these low-flying satellites?
Well, I think that there is tectonic changes, a change that will apply in the industry once those constellations are operational. The amount of capacity that these conversions will add is much bigger than what is up there today. I'm sure that as a result, many things will happen, among which are, first of all, reduction of the cost of capacity. Secondly, the reduction and the abundance of capacity will create more demand because it's more affordable in a larger part of the world. As a result, the consumption of the average person in the world, and particularly in territories that are hard to reach, will go up, probably significantly up. This creates new markets, and this is part of our strategy to try and capture these markets.
We're currently competing, for starters, on the baseband platforms for these NGSO operators, we're in discussions with some of them. We are also promoting the use of this capacity, particularly 5G with the telcos, which are our prime market when we talk about cellular backhaul. We also believe that it will positively influence the IFC market, which is another strategic growth area for us. In general, from our perspective, once the NGSO constellations are operational, the affordability and availability of capacity will be such that it will be a boost to our business, therefore we are adapting our technology to support 5G, to support large pipelines, we believe that there will be a need for this investment. The only thing I would just be cautious about is we're not talking about those constellations up there and operational in 2019 or 2020.
Some of them may be partly operational in 2021, it will intensify in 2022, 2023, and so forth. It will take a few years for this to mature, unquestionably, it's going to revolutionize the market.
In your opinion, like now at home, we can get broadband, we get to use whatever we want. Most of the satellite services where you get broadband from, they limit you to so much per month. In the future, the satellite companies are going to be able to offer unlimited like the cable companies?
I think that the models are beginning to move to unlimited. If you look at North America, what we see, the large operators offering, instead of reduced cost, they're offering more capacity, which is natural. They're moving from a certain amount to unlimited in an effort to defend the price. I think that, like I said, they will be able to hold the line, only so much. In a question of years, it's not months, not too many years, I think there will be a significant price reduction in parallel to increase in available capacity.
Thank you.
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. Before I ask Mr. Sfadia to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin two hours after the conference. In the U.S., please call 1-888-326-9310. In Israel, please call 03-925-5900. Internationally, please call 972-3-925-5900. Mr. Sfadia, would you like to make your concluding statement?
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 First Quarter 2019 Results Conference Call. Thank you for your participation. You may disconnect.