Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Fourth Quarter 2021 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 15, 2022. By now, you should have all received the company's press release. If you have not received it, please contact Gilat's Investor Relations team at GK Investor and Public Relations at 1 (646) 688-3559 or view it in the News section of the company's website, www.gilat.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin, please?

A recording of this call will be available beginning at approximately noon Eastern time today, February 15 and will be available for telephone replay until November 15 at noon. Webcast will be archived on the Gilat’s website for a period of 30 days. Also, please note that investors are urged to read their forward-looking statements in Gilat's earnings release with a reminder that statements made on this earnings call are not historical facts may 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 operation 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 explicitly disclaim 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 Sfadia, Gilat's CEO; and Mr. Gil Benyamini, Gilat's CFO. I would now like to turn the call over to Adi Sfadia. Adi, we are ready to begin.

Thank you, Ehud, and good day to everyone. I would like to thank you for joining us today for our fourth quarter and full year 2021 earnings call. Our results in 2021 showed strong revenue growth with even stronger profitability growth. This kept of strong end to 2021, which we see as a transition year for Gilat and was a challenging year in many aspects. First quarter revenues were $67 million, up 58% year-over-year. Adjusted EBITDA was $10.6 million up from only $1 million a year ago. For 2021 we reported revenue of $219 million, up 32% from 2020 and adjusted EBITDA of $15.7 million versus an adjusted EBITDA loss of $3.3 million in 2020. More importantly, looking ahead we expect 2022 to be a stronger year. The improved visibility across our various business segments allow us to provide for the first time in two years full year guidance which I will elaborate on at the end of my statement. I will focus on some of the business achievements and discuss some of the recent highlights. I'm excited to report that we recently launched Gilat next generation platforms SkyEdge IV with a goal to increase our market share in the ground segment’s market of the new era of satellite communications, consisting of non-geostationary orbit constellation known as NGSO and very high throughput satellites known as VHTS. Today we consist of new multi orbit constellation and very high throughput satellites that meet the demands for connectivity everywhere all the time. This market dynamic presents unique opportunities for Gilat SkyEdge IV is a software centric platform. We therefore expect to see a favorable mix of software license sales in addition to hardware sales. I'm proud to report that we recently closed strategic SkyEdge IV deals with both Intelsat and SES and we…

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 intangibles, amortization of fleet incentives, litigation expenses or income related to trade secret claims, reorganization costs, merger and acquisition and related litigation costs, adjustments of assets that are held for sale and one time changes in deferred tax assets. The reconciliation table in our press release highlights this data and our non-GAAP information exclude these items. I will now move to our financial highlights for the fourth quarter and full year 2021. Overall, as Adi mentioned earlier, we are very pleased with our improvement in our results for both the quarter and the year. The results demonstrate that as we exit 2021 we are on the right track and we can now be increasingly optimistic about our prospects in the quarters ahead. While our performance demonstrate a very solid improvement, the remain global macroeconomics headwinds related to COVID including the electronic components supply constraints. I'm pleased to say however, the top performance in 2021 demonstrated that we've been able to mitigate the issue without any significant impact today. In terms of our financial results, revenues for the fourth quarter was $67.3 million up 58% when compared to $42.6 million in the fourth quarter of 2020. Revenues were up 35% versus $49 .9 million in the prior quarter. For the year revenues were $218.8 million up 32% versus…

Thank you. Ladies and gentlemen this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Chris Quilty. Please go ahead.

Thank you. [Guys] reflections on some good results. I wanted to get perhaps a little bit more detail at the segment level and looking specifically at the fixed network business. Was the growth within that business either on a sequential or year-over-year business? Was it driven particularly by NGA, sorry by the Cellular Backhaul market, or [Enterprise] for terrestrial portion or was it fairly even across all those markets?

Hi, Chris. Nice to talk to you again. I think that the main goals came, both from the cellular backhaul. We had a very good year and a very good quarter on cellular backhaul and in addition to starting provide, we started to provide the operational phases too. So it also supported the revenue growth in the fourth quarter.

Understanding and on that operational phase in Peru, I know you don't break it out specifically, but based upon hitting the run rates that you had previously talked about, fair to assume that you're doing north of 10 million or so exiting Q4. And the second question on the Peru networks, can you give us some sense of breakout of you had announcements around separate agreement with partners whether Facebook, which I think is pulling out of some of these activities, and other local carriers. How does the revenue breakdown between those different end users of the network?

Okay. So as we said we reached to a yearly run rate of $50 million, some of it will kick-in, only once we finished to build a network in ICA and Amazonas, which is expected towards the second half of this year, early 2023 depends on the network. So excluding that we have, we expect to have around $45 million. So on average slightly above $10 million a quarter. The agreement we have with IPT Internet para Todos which is a consortium of Facebook and Telefónica in Peru is aim to provide the capacity, terrestrial capacity for cellular backhaul. And I don't remember if we gave the exact amount, but it's an agreement of north of $20 million for four years or five years and we are in the midst of providing the service or not everything is already up and running. We believe that we love more doing in 2022. Most of our business in Peru is with the government. Pronatel is the main customer which is a government owned entity under the Ministry of Telecommunications and the majority of our revenues comes from working with the Ministry of Telecommunications.

And just a clarification when you talk about the $50 million run rate. Is it the aggregation of both the government and Telefonica or is that Telefonica incremental?

No, $50 million is all our business, both terrestrial services and satellite services business that we have in Peru including the private and the public section.

Right. And is it fair to assume that, the separate terrestrial segment that will see a continual decline in those revenues as the infrastructure build up wraps up? And do you expect it to continue into 2023? Or should that close out in 2022?

Yes. Internally our goal is to finish the construction as soon as possible knowing how complicated is to work in Peru, I think it's fair to assume that we will be dragged into 2023, at least in one of the networks. I guess it will be Amazonas because it's much larger and more complicated area to work with. I hope this answers your question.

Yes. That answered it. Also, if I can just follow up on the specifically on SES. Last year you talked about the timing of the mPower constellation build out and you implied that that really wouldn't kick off until 2022. Is this schedule still holding there? And what sort of a material impact do you expect that specific contract to have this year?

So the mPower agreement was signed in 2019 and drive a significant shift in our R&D to start working on the next generation platform which we recently -- officially launched. Unofficially, we already started to sell it. We deliver to SES some of the operational gateways towards the end of 2021 and we are on track and we expect to continue to deliver during the first half of 2022. Part of the growth that we are going to see in 2022 will come from the backlog that we have with SES and other customers like Intelsat and others.

Great. And circling back on the SkyEdge IV what happened to three? First of all, you have to explain what happened to three?

That's a good question. That's a really good question. We had a month ago, two months ago, discussion in the management where SkyEdge III went. So actually we had SkyEdge II and then we for some reason we decided to go with SkyEdge II-c which typically was the SkyEdge III and then we jumped to SkyEdge IV. So this is just the marketing names.

Okay, I'll give you a pass on that.

Next time I will join the marketing guy with me, so he can give an answer.

Yes. So can you give us a sense of the – also timing on that development and the overall costs and maybe just a refresher as you went through those increments from II to II-c to IV, the development timeline of how long, how often you've been refreshing the product line.

So first of all today, most of a based on R&D which is based in Israel, Moldova and Bulgaria is focused on the sky SkyEdge IV. I would say that close to 70% of the R&D. The SkyEdge IV is a significant improvement of SkyEdge II, it's not just a simple evolution, it's a major leap that we developed. Usually once every seven, five to seven years, we released such a major enhancement to our platform and this time, we also allow part of our modems to have interoperability over backward compatibility with guides to some of our depends on the network will have the opportunity to benefit from past investments.

Got you. And specific question around, you mentioned both in the press release and I think the script about the software revenue aspect of the product or software licenses. Is that an indication that you expect a higher percentage of recurring software support? Or are you implying that there's ways to flash the software on older devices and just not sell hardware but just to sell software?

I think it's combination. We’ve not yet the subscription based software. Probably it will take another few years for the industry to move to a total cloud solution on a subscription based. This is mainly hardware and software perpetual license sales. And when you grow the network, in some, in most of these instances, you will need to buy a software upgrade without the need of increasing the hardware. It depends, again on the size of the network and the number of gateways and data centers. But this is the main idea. So it's definitely going to drive our gross margin by several points higher.

Perfect. I'll ask one more financial question and then pass. I noticed there was a little bit of a step up both in CapEx and D&A, which I think was amortization of lease incentive. Can you give some details on that along with the Q4 run rate on CapEx something we should use going into 2022. Or do you have a range you should expect?

In terms of CapEx I think the amount we saw in 2021 will continue plus minus to 1 million to 2022. We are investing a lot in R&D and test equipment. If you had traditional headcount and you want to accelerate, you need more test equipment for the sake of the example. We are going to refresh our manufacturing facility in Wavestream as we have more and more SSPA orders and things like that. These are the main reasons for CapEx. In addition, we had some earlier days, for example, we got an award of the Wi-Fi Hotspot in Peru where we provided the hardware as a CapEx and then just provided the caring services. So this also goes to CapEx. So in those cases, some of the projects that we provide as a managed service require CapEx investment. And this might lead to fluctuation in our CapEx. It depends on the project. As for the G&A I think that the main, there is no main reason for the increase. It's mainly because most of 2020 we had less employees in most of the workforce were 80% and in December as Gil mentioned in the script, we returned to work at full force at 100%. So I don't see a specific increase besides the fact that the U.S. dollar and Shekel exchange is a bit unfavorable in the last few years.

Right, thank you.

Thank you, Chris.

[Operator Instructions] There are no further questions at this time. Mr. Benyamini would you like to make your concluding statement?

Thank you. I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon or speak to you in our next call. Thank you very much, and have a great day.

Thank you. This concludes Gilat's fourth quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.