Gilat Satellite Networks Ltd. (GILT) Q4 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Fourth Quarter and Full Year 2017 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded, February 13, 2018. I would now like to turn over the call to June Filingeri of Comm-Partners LLC to read the safe harbor statement. June, Please go ahead.

All right. Thank you, Elana. Good morning, good afternoon, everyone. Thank you for joining us today for Gilat's Fourth Quarter 2017 Conference Call and Webcast. A recording of this call will be available beginning at approximately noon Eastern time today, February 13, and will be available for telephone replay until February 16 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 the 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, and good morning, good afternoon, and good evening, everyone. Thank you for joining us today. Today, I would like to summarize our financial and business results for 2017 as well as provide some guidance for 2018. First, summarizing fourth quarter and full year 2017, I am pleased to report that we achieved good results in the fourth quarter of 2017, concluding a year of significant progress for Gilat. In Q4 2017, we achieved revenues of $82.7 million and adjusted EBITDA of $9 million. These results brings us to -- bring us to an on-target revenues of $282.8 million in 2017 in accord with our guidance, and to an adjusted EBITDA of $26.2 million, which actually exceeds the high-end of our adjusted EBITDA target of $24 million to $26 million, which in itself was upgraded mid-year from $20 million to $24 million and therefore represents an increase of 36.2% versus adjusted EBITDA of $19.2 million in 2016. We have also expressed in the past our long-term commitment to being profitable on a GAAP basis, and we are pleased to have exceeded our own expectations, reaching this goal as early as 2017 with operating income of $10.9 million versus $800,000 in 2016. And GAAP net income of $6.8 million versus a loss of $5.3 million in 2016. [Technical Difficulty]. Over the past year, we have improved the bottom line. We are focused on building a mix of quality and profitable revenues through our strategic growth engines of mobile cellular backhaul and mobility, in-flight connectivity or otherwise IFC, combined with blindingly relentless efforts to drive cost out of the business. Our performance in 2017 is indicative of the progress we have made on both fronts and of the solid foundation on which Gilat stands today. Looking at 2018 and as a multiyear plan, our intent is to continue to focus on improving both the top line, but even more so the bottom line results. We will continue to develop our growth engines of mobile and mobility IFC, as we see growing reception to our solution and services. We plan to expand our offering in these areas [Technical Difficulty].

Please excuse interruption. It seems that Mr. Ovadia has been disconnected. Let me please try to reconnect. [Technical Difficulty].

Ladies and gentlemen, thank you for standing by. We apologize for the technical difficulties on Veidan's part. The conference will resume. I will now hand the call over to Mr. Yona Ovadia.

Thank you. Ladies and gentlemen, I apologize for this hiccup. I see no alternative, since I don't know when we were disconnected just to start from the beginning. So I would like to summarize first our financial numbers for 2017 and '18, and again, apologies if this is a repetition and for the technical hiccup we have here. So as I said, in 2017 fourth quarter, we achieved revenues of $82.7 million and adjusted EBITDA of $9 million. Overall, for the year, our results are $282.8 million in accordance with our guideline and adjusted EBITDA of $26.2 million, which exceeds our -- the high-end of our adjusted EBITDA targets of $24 million to $26 million, which again, in turn, were upgraded mid-year from $20 million to $24 million. Also, we were able to be profitable on a GAAP basis, which was earlier compared to our own plans. And we have reached an operating income of $10.9 million versus $800,000 in 2016 and GAAP net income of $6.8 million versus a loss of $5.3 million in '16. And on a non-GAAP basis, 2017 net income reached $14.6 million. Our numbers for 2018 are -- to increase our top line to $285 million to $305 million, representing a growth of 1% to 8% from 2017's $282 million. GAAP operating income of between $17 million to $21 million, representing 56% to 93% increase compared to 2017, and adjusted EBITDA of between $30 million to $34 million which represents a growth of 15% to 30% from 2017's $26.2 million. From a business perspective, the fourth quarter also reflected the overall results of 2017. And I would like to focus on 3 areas where we have had substantial achievements, and are confident of our continued growth in 2018. I would like to start the business review this time with a few words on the recovery of our enterprise business, where we see the fruit of our continued efforts in this segment. [Technical Difficulty]

Ladies and gentlemen, the speaker has disconnected from -- Mr. Ovadia's speaker has disconnected from the conference. Please hold, while we try to reconnect them. [Technical Difficulty].

Ladies and gentlemen, thank you for standing by. Mr. Yona Ovadia has -- please continue.

Okay, ladies and gentlemen, again, apologies for these technical challenges. Let me continue from the point of a business review. Hopefully, this is the end of the challenges we -- the hiccups we had here. So on the enterprise side, I'd like to start the business review with a few words on the recovery of the enterprise business, where we see the fruit of our continued efforts in this segment. I am truly pleased to report that we have closed a substantial deal of tens of millions of dollars with Speedcast for NBN in Australia, to meet the demand for broadband services for business and government customers in Australia. Gilat's multi-application platform will serve Australia's nationwide regional and rural business. In this long-term project, Gilat is responsible for the supplies, configuration and specialist operation support of the satellite network platform and is responsible for meeting strict service levels. In addition, we see enterprise opportunities in Africa. We secured a contract with Openserve, a Telkom South Africa subsidiary that will use Gilat's satellite solutions with advanced Layer 2 functionality to expand its terrestrial network further in areas of need. Furthermore, we are seeing beginning of recovery of the enterprise business in Latin America as evidenced by our project with Telebras in Brazil. And we believe that this trend will accelerate, and hope to be able to report further in the coming weeks and months. Lastly, our business is -- in Peru, is progressing in accordance with project milestones. We plan to complete the 4 regions in 2018 and move to ongoing operations with recurring and more profitable revenue as was our goal. Due to our focus on profitability, we were not awarded new regions in the recent bid of December 2017. However, we expect to bid on additional regions in the coming rounds later in 2018. Again, assuming that we believe we can be profitable in those regions. In cellular backhaul, during 2017, we established our leadership the in LTE backhaul space with Tier-1 MNO wins around the globe, many of them with end-to-end, long-term contracts. This meets our strategy to engage in projects with recurring revenues with the goal of maintaining a more consistent and profitable revenue stream. In 2017, we secured the LTE backhaul business, mainly in North America with T-Mobile and Sprint, but also some wins in other regions, namely with Globe in the Philippines, and a leading MNO in Latin America. In Q4, we also announced an LTE backhaul win with KDDI in Japan and secured a backhaul deal in Europe. We believe that with every win, even the conservatives amount the MNOs realize that satellite-based LTE is a legitimate tool for quality, affordable broadband. We further believe that our advantage in this growing market is not only technological, but also our unique experience in integrating satellite-based networks to the MNO's core network and meeting their rigorous SLAs. We intend to continue to develop this business with equal focus on North America as well as other parts of the world. Mobility IFC is the second key market for us where we have seen noteworthy achievements throughout the year as well as in the fourth quarter. In 2017, we saw revenues in this space grow significantly from our full portfolio of 5C solutions including terminal antennas, transceivers, aero modems and the network platform. Gogo, of course, is one of the pillars of our IFC business. Gogo's IFC service was enhanced with Gilat global and largest of its kind satellite network covering over a dozen satellites. And our Taurus aero modem is now in use by 5 airlines in hundreds of airplanes. And based on Gogo's backlog, over 2,000 aircraft are expected to fly with Gogo aero modem providing an outstanding passenger user experience. As we discussed previously, we are in the process of expanding our IFC product portfolio, with a goal to be a significant player for the IFC antenna terminal. This quarter, we demonstrated outstanding performance for our dual-band Ku/Ka terminal during a live customer showcase in China. We, in addition to our focus on commercial aviation, while exploring adjacent verticals where we expect sizable growth over the next years. We continue to be encouraged by the response we see in the marketplace to our offering. And we expect to see major progress in the coming few months and quarters. In summary, 2017 was a year of major progress for Gilat, as measured by the substantial growth in our profitability and the important initial results of our growth engines. As we look ahead at the market, we see the trend of abundance of capacity continuing and accelerating and consequently driving additional price reduction of space segment. And this will undoubtedly unlock new markets and grow demand and opportunity. We believe that broadband, quality, ample, affordable broadband in mobile cellular backhaul and Mobility IFC are 2 of those markets, and of course, we will keep an -- our eyes open as the market evolves. Therefore, our plan for 2018 is continue executing upon the same strategy and expand within our growth engines, in parallel with further progress in our enterprise business. To meet this goal, we will continue to invest in R&D to maintain and grow competitive advantage in technology. Of key importance for us will be to maintain our leadership in spectral efficiency and cost per bit. Given our achievements to date, and the potential we see in the marketplace, we are optimistic about 2018 in which we plan to deliver even better profitability in comparison to 2017. Adi, we are now ready for your report. Please go ahead.

Thank you, 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 measure 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, litigation expenses related to trade secret claims and expenses for tax contingency to be paid under an amnesty program. Reconciliation table in our press release highlight this data, and our non-GAAP information presented exclude these items. I will start with some brief highlights of our 2017 full year results. Total 2017 revenues were $282.8 million compared to $279.6 million in 2016. Our total revenues include revenues from constructing the Fitel network in Peru. Terrestrial infrastructure construction revenues were $78.3 million in 2017 compared to $91.6 million in 2016. We expect these revenues to continue to decrease in 2018, as we plan to complete the construction of the network during the second half of the year. Excluding this construction revenues in Peru, our 2017 revenues were $204.5 million compared to $188 million in 2016, an increase of 9% year-over-year. Our mobility segment revenues were $88.4 million compared to $62.9 million in 2016, about 41% year-over-year growth, mainly due to substantial increase in our IFC revenues. Our commercial segment revenues decreased to $83.9 million from $94 million in 2016, mainly due to lower revenues in Asia-Pacific and China, partially offset by higher revenues in Latin America, especially in the fourth quarter of 2017. Our service segment revenues decreased to $110.5 million from $122.6 million in 2016, mainly due to lower revenues from our construction activity in Peru. Excluding construction revenues, service segment revenues were $32.2 million in 2017 compared to $31 million in 2016. On a GAAP basis, we are reporting full year operating income of $10.9 million compared to operating income of $755,000 in 2016. Net income on a GAAP basis for 2017 was $6.8 million or $0.12 per diluted share compared to a loss of $5.3 million or $0.10 per diluted share in 2016. As we have said many times, our goal is to achieve net income on a GAAP basis. I am happy to say that this is the first time in 7 years that a company has achieved full year GAAP net income. On a non-GAAP basis, we are reporting full year operating income of $18.5 million compared to non-GAAP operating income of $11.7 million in 2016, an increase of 58.1%. Non-GAAP net income for 2017 increased to $14.6 million or $0.27 per diluted share for non-GAAP net income of $5.6 million or $0.11 per diluted share in 2016. Adjusted EBITDA for 2017 increased to 36.4% to $26.2 million or 9.3% of revenues compared to an adjusted EBITDA of $19.2 million or 6.9% of revenues in 2016. I will now move to our financial highlights for the fourth quarter of 2017. Revenues for the fourth quarter of 2017 were $82.7 million compared to $80.3 million in the same quarter of last year and $69.9 million in the previous quarter. Our GAAP gross margin in the fourth quarter of 2017 was 30.5% of revenue compared to 30.1% of revenues in the same quarter last year and 29.1% in the previous quarter. Total operating expenses on a GAAP basis for the fourth quarter were $19.6 million compared to $17.7 million in the same quarter of last year and $17 million in the previous quarter. The main increase was in our R&D expenses, which represented 9.9% of revenues due to increased investment in our product portfolio. Sales and marketing expenses were 8% of revenues, while G&A were 6.1% of revenues. GAAP operating income was $5.6 million in the fourth quarter compared to $6.5 million in the same quarter last year and $3.3 million in the previous quarter. GAAP net income was $3.4 million or $0.06 per diluted share compared to net income of $4.5 million or $0.08 per diluted share in the same quarter last year. Net income in the previous quarter was $2.1 million or $0.04 per diluted share. On a non-GAAP basis, operating income for the fourth quarter was $7 million compared to $9 million in the same quarter last year and $4.9 million in the previous quarter. Non-GAAP net income was $4.7 million or $0.09 per diluted share compared to non-GAAP net income of $7 million or $0.13 per diluted share in the same quarter of last year. Non-GAAP net income for the previous quarter was $3.6 million or $0.07 per diluted share. Adjusted EBITDA for the fourth quarter of 2017 was $9 million compared to an adjusted EBITDA of $10.8 million in the same quarter last year. Adjusted EBITDA for the previous quarter was $7.1 million. As of December 31, 2017, our total cash and equivalents, including restricted cash net of short-term bank loans and credits, was $86.8 million, a decrease of $21.4 million from the previous quarter. The main reason for the decrease was delayed payment from our project in Peru, that has already been received in January, 2018. DSOs, which exclude receivables and revenues of our service segment, increased to 75 days compared to 64 days in the previous quarter. Our shareholders' equity at the end of the quarter totaled to about $218.3 million. As Yona mentioned, our management objective for 2018, our revenues of between $285 million to $305 million. Excluding expected terrestrial infrastructure construction revenues in Peru of about between $38 million and $42 million, we are targeting full year revenues of between $247 million to $263 million. This represents a growth of between 21% to 29% from our comparable 2017 results. We expect GAAP operating income of between $17 million to $21 million and adjusted EBITDA of between $30 million to $34 million. In closing, we have concluded a very good year for Gilat. We focused on increasing our profitability, and we're really successful in exceeding our adjusted EBITDA guidelines with adjusted EBITDA of $26.2 million representing 36.2% growth year-over-year. We have a strong balance sheet with cash and equivalents of approximately $87 million, which gives the company the flexibility to make the right decision needed to support the execution of our strategy. In 2018, we will continue to focus on bottom line profitability with expected growth of between 15% to 30% in our adjusted EBITDA. That concludes our review. Thank you for your attention. I would like now to open the call for questions. Operator, please.

[Operator Instructions]. The first question is from Gunther Karger of Discovery Group.

Just want to congratulate you on an excellent quarter and a year. Very good execution of your plan.

Thank you, Gunther.

And the next question is from Mike Hebner of IFS Securities.

So when I'm looking at this, and I'm looking at the number of shares traded, what is your public or relations strategy to get out the word? And what's your exit strategy here, the end game?

Good question. First of all, we are investing a lot of efforts. In our strategy, we are meeting a lot of investors. We are going through a lot of conferences, both in Israel and in the U.S. And we have plans to continue to do -- doing so. In addition, we are trying to increase our mid-year exposure. And we are doing on ongoing basis. As for exit strategy, we are here to manage the company and to increase the profitability, which always helps with investors, good results always helps. No, I cannot say anymore about the exit strategy.

It seems like one of these ETF baskets -- or one of the strategies that invest in 5G and in this telecom thing, it seems like there's some baskets out there that you need to be communicating with some of these people when they automatically buy your stock. A lot of people are buying this 5G and this strategy, you guys are a big piece of that, it's quite evident. And it seems like you need to be -- you traded 5,000 shares today, you average 21,000 shares a day.

In this 5G is very interesting field, and a lot of interest there. We have also looking a way into 5G in our technology. And I hear what you're saying and we will consider this also with our IR strategy.

[Operator Instructions]. The next question is from Andrew Spinola of Wells Fargo.

I was wondering, have you articulated in the past or could you possibly articulate your thoughts on capital allocation? And what you think in general your strategy with this cash might be?

We are about close to $90 million in cash. It's -- gives us the flexibility to think of how to grow the business organically and inorganically. And there's nothing to say right now beside we are considering our option. And we are lucky to have this flexibility.

Could you possibly expand just to help my understanding of what you're doing in the backhaul markets? I know you're talking about a recurring revenue stream from that business. And I think typically, I would have thought you'd be selling VSATs and hubs, primarily. So what is the recurring piece of the backhaul business?

Let me explain, Andrew. The change that we have done in the last 2 years and our value proposition to MNOs is, that we are offering them a multiyear service that includes all components, the hubs, the VSATs , the space segment in most cases, the installation and the maintenance. So what we are selling them is a service. Let's say that we cover a certain geography, we give certain level of service, of course, according to the requirements of the -- of our MNO customer, and we managed it, we build, we operate and manage the network for them. We are measured by service levels and we charge monthly on a multiyear basis. So at the end of the day, with or without space segment, depending on the case, it's kind of a turnkey solution. All components built in, they get their network expanded, we get a monthly fee. And our day-to-day challenge is to meet the service levels that we are committed to. And with that, we hope that happy customer grows the business. That's in a nutshell what we do.

So I understand that, that business model -- does the cost of your equipment -- are you sort of absorbing that as CapEx? Is that how that works?

In most cases. We bundle everything, all the components, the hardware, the installation, operation, the space segment, everything is bundled into a package. And the price that we are being paid for is a recurring monthly fee that incorporates everything. Going back to your earlier question, normally -- obviously, this is a CapEx or OpEx model. So we take a certain investment at the beginning. And we see the ongoing return over that investment. So when we have cash in the bank, it allows us to take such deals, absorb the initial investments and see the returns over the term of the agreement. We normally seek between 3- to 5-year agreements. And we do the initial investment on our dime. Again, using some of the cash that we have, and we provide this end-to-end solution on a monthly recurring basis.

Andrew, I think it's important to note that we are very flexible in terms of the model we are offering the MNOs. So it can be either, pay by the drink, per site, per exact SLA that they want, we are very flexible in order to win the business and grow our business.

Understood. If you should I think about this, since you own the equipment, does this model get better and better for you over time as you add additional carriers? So if I'm thinking in the U.S., where we have 4 wireless carriers, can you -- if you start to sign up more of them, can you leverage the existing equipment? Or does the equipment have to be per carrier, separate?

It gets better and better twofold Andrew, one, when you look at a certain deal and we have a multiyear deal where we provide a service, and we are measured by service levels. That gives us the flexibility but also the burden to meet the SLAs while improving our business and operation, because we get a fixed amount and whatever we can squeeze out of the deal is ours. That's one tool that we have to continuously improve profitability in such deals. Then come the volume play as you mentioned. The more deals we have, the more carriers we serve, the more capacity we buy, we become a bigger and bigger consumer. Admittedly we're still small, but we plan to grow. And we can benefit from volume discounts. So the answer is, the more we grow, the more leverage I have to get volume discounts from my suppliers.

Right. And at this point, is any of this activity or is there any visibility to the small cell business that is supposed to be such a large business in the longer term with 5G, and potentially, attractive for satellite because it might be too expensive to roll fiber to those small cells. Has that sort of -- is that on your radar at this time or are the telcos talking about it or where are small cells right now?

We are working both small cells... [Technical Difficulty]

Ladies and gentlemen, Mr. Ovadia and Mr. Sfadia have disconnected from the conference. Please hold while we reconnect them. [Technical Difficulty].

Ladies and gentlemen, thank you for standing by. Mr. Ovadia and Mr. Sfadia have joined the conference.

So, ladies and gentlemen, again, I apologize for this hiccup. This actually just demonstrates that we could have equally used the satellite-based technology with a better quality. But going back to your question, Andrew, we are working both macro cells and small cells. We believe that we see a growing interest in demand again, one, because the cost of the space segment continues to go down, that makes this tool more affordable, more and more around the world; and secondly, indeed when our customers look forward, what they see is huge increase in demand moving from 4G to 5G, and they will want answers for their customers across their territories. So definitely, 5G is a huge promise that -- I don't think it's a 2018 thing, but while we're looking at it, we're incorporating it into our long-term R&D plans. And we intend to be a player in the market, it will be -- continue to grow once this is a viable technology.

Yona, this is Andrew, can you still hear me?

Yes, I hear you.

Okay, so I'm still in there. I wasn't sure if I was still in the queue. Last question for me.

Did you heard my answer?

I did, yes. ViaSat had mentioned on its call that they had a recent win in the U.S. with Comcast and their ability to sort of -- for some quick service business, where they're going to provide the connectivity sort of in the areas where Comcast doesn't have a network. Now I've sort of heard this discussed a little bit that, similarly to LTE backhaul, and now the capacity is getting so much cheaper, we might actually start to see enterprises go back to using it more in the developed markets as well to sort of put together a nationwide networks. And I'm just wondering -- I guess I lied, I have a second question as well. Could you elaborate if you are starting to see anything pick up on the enterprise side? If you think that could be a longer-term opportunity to develop markets similar to how backhaul's sort of emerging? And then also could you just maybe expand a little bit on what's going on with Speedcast? What that -- what you're serving there? I guess my understanding was a lot of that capacity is already full on the consumer side, so just wondering what the long-term plan is with that win and what you're going to be doing there?

All right. So you are looking for a buy-one-get-one-free question, I guess. All right. I think that what you just shared with us regarding ViaSat is another angle into the fact that satellite-based connectivity -- satellite-based broadband is becoming a mainstream vehicle. Currently, we are focused on cellular backhaul, but definitely this is an adjacent area where the price of capacity has gone so much down that it is becoming either price competitive or even affordable to go and provide enterprise, which is the Comcast example that you gave, to give them connectivity to their customers -- enterprise customers whoever they may be. Star chains or fast food places or whatever. Definitely, this is an adjacent area. And I think that it will continue to boom as the price of capacity going down. And again, I'm assuming -- I don't know the details, but assuming once ViaSat-2 is there, that they have of plenty of capacity and they can drop the price to a level where this is becoming a very attractive option for enterprises to use. So definitely, I totally believe in that. And as I said, this is just another adjacent market where price and quality drive demand. And enables things that were unheard of either technologically or price-wise in the past. And in my opinion, I'll be very -- I'll summarize with it, it will only accelerate. Regarding NBN -- that's your -- the second question. NBN has launched 2 satellites, as you surely know. And the initial plan was to use this for consumer business only, which ViaSat has been serving for the last few years. But there is growing demand also to provide broadband connectivity to enterprise, plus this is another vehicle that NBN management sees as a way for accelerated return on investments. So they decided to launch a second satellite and to use a lot of -- to allocate a lot of capacity for businesses as well as, by the way, for IFC. So in order to serve that business, they needed a platform that meets the demanding requirements of businesses, including in difficult territories like North -- the northern part of Australia. And definitely, we are very pleased to have won this part of the business. I do not want to refer to who the other competitors were, but I'm very pleased that we were selected as the best technology available to serve those remote territories plus to provide the best return on investment. Now we are not priming NBN, we are subbed to Speedcast. The main reason being that the overall bid required solutions that are not within our core business, like BSS and [indiscernible]. We don't have these. We don't want to have these. And Speedcast was able to provide those parts of the bids. Therefore, we partnered with them. And they are doing what we cannot do. While within our core business, technology and services, we do everything end-to-end for NBN. I hope that address both of your questions.

We have a follow-up question from Gunther Karger of Discovery Group.

I realize that the military business has become a very small part of [Technical Difficulty].

Gunther, we can't hear you.

Can you hear me?

Now it's better, yes.

Can you hear me now?

Yes.

Okay, great. I realized that the defense business is a small of your business. It's not a great focus. However, I'm aware that budgets are increasing, particularly in the U.S. and the military side, and especially in the area of special forces and rapid deployments, which is very suitable for satellite communications. And in addition to that is the application of satellite services to unmanned vehicles both surface and aerial. Is there anything there going on at Gilat in this area? Or is that completely gone?

That's a good question, Gunther. First of all, our hands are full with what we have doing these days with our focus on growth area, on cellular backhaul, managed service and in-flight connectivity. Having said that we do have a dedicated teams that work on the military arena. And we are participating in several bids. We are not investing in R&D unless we will win something. If we will win, we will announce, we'll invest. We do have some unique equipment for special forces and for UAVs. And if we will win, we'll continue to invest. Currently, our main focus is on our growth area, IFC and the cellular backhaul.

There are no further questions at this time. Before I ask Mr. Adi 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 03-925-5901. Internationally, please call 972-392-55901. Mr. Sfadia, would you like to make your concluding statement?

Yes. First, I would like to apologize, again, on the several technical problems that we faced today. I assure you that it will not happen next time. And I would like to thank, everyone, for joining us for the call today and thank you for your time and attention. We hope to see you soon. I'll speak with you on our next call. Thank you very much, and have a great day.

Thank you. This concludes Gilat's Fourth Quarter 2017 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.