<SEC-DOCUMENT>0001178913-14-002675.txt : 20140814
<SEC-HEADER>0001178913-14-002675.hdr.sgml : 20140814
<ACCEPTANCE-DATETIME>20140814101940
ACCESSION NUMBER:		0001178913-14-002675
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20140814
FILED AS OF DATE:		20140814
DATE AS OF CHANGE:		20140814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GILAT SATELLITE NETWORKS LTD
		CENTRAL INDEX KEY:			0000897322
		STANDARD INDUSTRIAL CLASSIFICATION:	RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-21218
		FILM NUMBER:		141040122

	BUSINESS ADDRESS:	
		STREET 1:		C/O GILAT SATELLITE NETWORKS INC
		STREET 2:		1651 OLD MEADOW RD
		CITY:			MCLEAN
		STATE:			VA
		ZIP:			22102
		BUSINESS PHONE:		7037349401

	MAIL ADDRESS:	
		STREET 1:		GILAT HOUSE YEGIA KAPAYIM STREET
		STREET 2:		DANIV PARK
		CITY:			KIRYAT ARYE PETAH TI
		STATE:			L3
		ZIP:			00000
</SEC-HEADER>
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<TYPE>6-K
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<FILENAME>zk1415429.htm
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Washington, D.C. 20549</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Pursuant to Rule 13a &#8211; 16 or 15d &#8211; 16</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">of the Securities Exchange Act of 1934</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">For the Month of August, 2014</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 16pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 16pt; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Gilat Satellite Networks Ltd.</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Gilat House, Yegia Kapayim Street</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Daniv Park, Kiryat Arye, Petah Tikva, Israel</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Form 20-F&#160;<font style="DISPLAY: inline;" face="Wingdings">x<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font>Form 40-F&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Yes <font style="DISPLAY: inline;" face="Wingdings">o<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font></font>No&#160;<font style="DISPLAY: inline;" face="Wingdings">x</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If &#8220;Yes&#8221; is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">N/A</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We consent to the incorporation by reference of the GAAP financial information included herein, in the Registration Statements on Form F-3 (registration nos. 333-195680, 333-160683 and no. 333-174142) and registration statements on form s-8 (registration nos. 333-96630, 333-113932, 333-123410, 333-132649, 333-158476, 333-180552 and 333-187021).</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">August 13, 2014</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Operator</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Ladies and gentlemen, thank you for standing by. Welcome to Gilat&#8217;s Second Quarter 2014 Results Conference Call. All participants are present in listen-only mode. Following the management&#8217;s formal presentation, instructions will be given for the question-and-answer session. For operator assistance during the conference, press *0. As a reminder this conference is being recorded August 13</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">I would now like to turn the call over to Philip Carlson of KCSA to read the Safe Harbor statement. Philip, please go ahead.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Philip Carlson</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Good morning and good afternoon everyone. Thank you for joining us today for Gilat&#8217;s second quarter results conference call. A recording of this call will be available beginning at approximately noon Eastern Daylight Time today, August 13 until August 15 at noon.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our earnings press release and website provide details on accessing the archived call. Investors are urged to read the forward-looking statements in our earnings releases, which state that statements made on this earnings call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All 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 our forward-looking statements, whether as a result of new information, future events, or otherwise. We expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our reports filed with the Securities and Exchange Commission.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">With that said, on the call today is Erez Antebi, Gilat&#8217;s Chief Executive Officer, and Yaniv Reinhold, Chief Financial Officer. Erez, please go ahead.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Erez Antebi</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Thank you, Phil, and good day everyone. I would like to begin by providing a high level overview of the second quarter results, and then discuss the business. Following my comments, Yaniv will discuss our financial results. I will then summarize and open the call for questions.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our revenues for the second quarter of 2014 were <font style="DISPLAY: inline; FONT-WEIGHT: bold">$54.1m</font>, compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$50.9m</font>&#160;in the first quarter of 2014. The revenue increase is attributable to our three divisions, which have all performed better than in the first quarter.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We are continuing to see the results of the cost cutting efforts implemented last year. Our Commercial and Defense divisions improved their profitability when compared to the first quarter of 2014. Consequently, our non-GAAP operating income increased to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.5</font>&#160;million in the second quarter compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.5</font>&#160;million in the first quarter of 2014. GAAP operating loss for the second quarter of 2014 was $0.5 million as compared to an operating loss of $1.5 million in the first quarter of 2014.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our EBIDTA also improved to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$3.9</font>&#160;million in the second quarter compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$2.8</font>&#160;million in the first quarter of 2014.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As we have mentioned before, the second half of 2014 should show progressive improvement and end with a strong fourth quarter. Management reaffirms the 2014 objectives for annual revenues of $240-$245 million and EBITDA margin levels of approximately 9%.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">I will now discuss some of our business highlights for the quarter.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Let&#8217;s start with the <font style="DISPLAY: inline; FONT-WEIGHT: bold">Commercial </font>Division.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Addressing the strategic market for <font style="DISPLAY: inline; FONT-WEIGHT: bold">High Throughput Satellites </font>and Ka band &#8211; which provides broadband access to consumers and businesses &#8211; we signed two additional Internet Service Providers in Europe for the SES Broadband Service network. One of these ISPs is Swisscom, the leading telco operator in Switzerland. Swisscom is our first ISP in Switzerland. We are happy to see the distribution channels for the Ka Band services continuing to expand.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We also received our first orders for VSATs for use with the IPSTAR satellite in Indonesia with Thaicom. We previously announced an agreement with IPSTAR last year, and announced the commencement of service earlier this year. We have started some marketing activities and these results are the fruit of this.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We have received an expansion order from Hispasat, which provides wholesale services to ISPs in Spain over a Ku satellite. The expansion is with our latest SkyEdge II-c product, and is targeting residential consumers and small enterprises in sub-urban regions. The ISP for this expansion is Euskaltel for the Basque region.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In Australia, we are continuing to operate the network and provide services including field maintenance for the NBN project. At this stage, we do not expect an expansion of the FRSS service to include additional sites.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Looking forward we see a healthy pipeline of HTS networks that are planned for launch. We are working to be the ground equipment provider for many of these opportunities. A few of these could still be decided in 2014. We intend to continue to pursue the opportunities we see in this market going forward.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Moving to a different market segment; <font style="DISPLAY: inline; FONT-WEIGHT: bold">cellular backhaul</font> continues to be an important application in the market.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We had awards and deployments of cellular backhaul networks around the world. For example, one of these is for replacing SCPC modems with our TDMA VSATs in Asia. Another network in the CIS is to provide backhaul connectivity for CDMA cells in remote regions. These networks currently connect 2G and 3G cellular technologies. Going forward, we believe that as Data will become a bigger driver for mobile networks, we will see a bigger move to 4G as well.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As we mentioned previously, we launched two products this year relevant for the cellular backhaul market: SkyEdge II-c Capricorn &#8211; our newest VSAT and CellEdge - Gilat&#8217;s small cell solution over satellite.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We believe that the Capricorn is the fastest TDMA VSAT in the market today, reaching download speeds of up to 200Mbps. As more networks move from 2G to 3G to LTE, the need for high speed data grows. Today we are already seeing customer requirements to connect LTE base stations with such high speeds. I would like to take a minute and explain why we think that TDMA is so important for LTE data networks. As mobile subscribers consume more and more data, this has become the majority of the traffic in the network. While the peak speeds continue to grow, the variability of traffic in the link also grows.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Some of the time users may be downloading content at very high speed, at other times users are not downloading at all. An SCPC link has a fixed amount of capacity, therefore the link is often not filled and much of the capacity goes to waste. Our Capricorn TDMA VSAT is able to share bandwidth between multiple sites, allocating capacity to the link that has more traffic. The combination of 200 Mbps capability and TDMA, translates into much better economics for the mobile operator when deploying satellite for LTE networks. We believe that with both TDMA and up to 200 Mbps speed Capricorn has a significant advantage over the competition.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In the second quarter, the Capricorn successfully completed tests on the IPSTAR satellite for 4G LTE cellular backhaul traffic. The results were very positive, and this strengthens our view that satellite is an excellent solution for providing rapid deployment of LTE to underserved areas. The solution is being tested for LTE/ 4G Cellular Backhaul at a tier-one operator in East Asia and we are seeing heightened interest from other mobile operators for this solution.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our second product, CellEdge, brings many benefits to mobile network operators who need affordable cell coverage in remote areas. As a reminder CellEdge is a complete turnkey solution in which we have combined the Small Cell, the VSAT, the energy solution and the infrastructure. All optimized for challenging environments. CellEdge can also be deployed in a very short time, so it is especially valuable when the operator has tight deadlines for deployment. For example, the order we received from a leading mobile operator in Brazil, which I mentioned in the last quarter, has already been deployed in a very short timeframe considering it included site survey and acquisition, equipment delivery, installation and activation of the network. This is an excellent validation that we can deliver the solution quickly and successfully to leading mobile network operators.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We have signed up a new tier-one telecom operator in the Asia-Pacific region for our VSAT network. It is interesting to note that we are also providing this customer hub operations and teleport services as value-added services in addition to the VSATs.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Gilat received several projects in Angola for the expansion of SkyEdge and SkyEdge II networks as well as a new network. The expansions include integrated solutions in addition to the VSATs, such as solar panels and peripheral equipment.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In Latin America, we have expanded our reach to Chile where we were not present. We have installed a SkyEdge II-c HUB and will supply several hundred VSATs for an operator in Chile. This is an important milestone for Gilat, as we were able to replace a competitor&#8217;s network in a country where we had not had a presence.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Following the previously announced order of Entel Bolivia, we continue to implement the Telecentros project. The network is used for the Bolivian government&#8217;s national digital inclusion initiative and operates over the first Bolivian communications satellite, Tupac Katari - 1, which was launched in December 2013.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Now moving to the <font style="DISPLAY: inline; FONT-WEIGHT: bold">Defense</font> Division</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The second quarter was a better quarter for our defense division, and we continue to see an improved sales pipeline into the future. We believe the defense sector has improved this year compared to 2013 and we are continuing to see more visibility with DoD programs compared to the previous year.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Outside of the US, we are seeing increased interest in satcom. In the second quarter of 2014, we were awarded deals in LATAM and in Asia for defense agencies. In LATAM, we are providing the satellite communications to connect a UAV ground control stations to the core network. In Asia, the network provides star and mesh connectivity to remote stations. Our modems will be connected to various antenna configurations, including manpack units.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As a reminder, Gilat develops all the components required for on-the-move applications and on-the-pause terminals; we typically provide low profile tracking antennas, power amplifiers and modems that we sell to defense system integrators. In some cases, we also supply complete terminals. Our main strengths are in applications that require smaller size, lighter weight and lower power terminals. This is where we believe Gilat has a significant advantage over our competitors. We see two main applications in which these advantages are highly required; unmanned platforms and manpack terminals.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our solutions for unmanned platforms, called BlackRay, are based on either our low profile antennas or our new small lightweight parabolic antennas. They are available in both Ka and Ku bands, thus providing operators flexibility when choosing satellite capacity. The BlackRay terminals are one of the smallest and most compact units available on the market. Their small size and light-weight extends the operational range of these UAVs as well as increasing the mission payload capacity.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our SatTrooper manpack terminals are available in Ku and Ka bands. It is one of the smallest and lightest auto-point terminals in the market. One reason for this is its very low power consumption, which reduces weight of the energy pack. At the same time, the SatTrooper enables very high speed transmissions, such as video.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In the US, we continue our focus on programs of record as well as various needs that are raised by users.&#160;&#160;Lockheed Martin recently chose our BlackRay terminal for its Fury Unmanned Aircraft Systems. It has now made some additional follow-on purchases to support deployments within the continental US. We have also sold our SR71 RaySat Antenna, MLT modem and Wavestream BUC to the United States Special Operations Command, or SOCOM. SOCOM is the Unified Combatant Command charged with overseeing the various Special Operations Component Commands of the Army, Air Force, Navy and Marine Corps of the United States Armed Forces.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April, Inmarsat sponsored an invitation only Industry event for multiple US Government Agencies including SOCOM, to evaluate new technology for future requirements. We participated in this Limited User Evaluation which was conducted by Inmarsat at their ground station in Italy. Inmarsat is planning to service the various US government agencies services worldwide, with its new Global Express Ka satellite constellation; hence the significance of this evaluation. The Gilat equipment tested included Raysat on-the-move terminals and the SatTrooper manpack terminal. We were also proud to have the Wavestream wideband 12W BUC used by many of the participating vendor&#8217;s terminals, in addition to being used in our own terminals. We are very satisfied with the good results demonstrated by all our equipment in the tests.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As mentioned, the tests used the new Inmarsat Global Express Ka Band satellite. It is the first operational satellite of the Global Express Constellation planned to have global coverage by 2015.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Regarding the <font style="DISPLAY: inline; FONT-WEIGHT: bold">Services </font>Division, the installation and deployment of Gilat Colombia&#8217;s project to provide Internet services to communities in remote areas in Colombia is on track and we have already started to generate initial revenues from this project. As I have stated on previous calls, significant revenues will be generated in the second half of 2014 starting in the third quarter.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In addition, Gilat Colombia has signed a contract to provide telephony services in some remote regions to one of our competitors in country. This enables us to leverage the telephony infrastructure we have built in Colombia to generate further revenues.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In Peru, the Integraci&#243;n Amaz&#243;nica Loreto, or IAL project is being rolled-out according to plan. This project includes the deployment and operation of microwave infrastructure as well as wireless service to 70 communities along the most remote section of the Amazon River. We have not recorded revenues from this project yet, however; we expect to generate revenues beginning in the second half of 2014.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This year, the Peruvian government is expected to issue additional requests for proposals for Wireless and Fiber projects in remote regions of Peru. Each of these projects are expected to be worth tens of millions of dollars. We have responded in the past to tenders without satellite communications, such as IAL and Fitel 10. Based on this experience, we intend to respond to some of these tenders as well.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">That concludes our business overview. I would now like to turn the call over to Yaniv Reinhold, our CFO who will review the financials. Yaniv, please?</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Yaniv Reinhold</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Thanks, Erez and hello everyone. I would like to remind everyone that our financial results are presented both on a GAAP and non-GAAP basis. The GAAP financial results include the effect of non-cash stock options expenses as per ASC 718, amortization of intangible assets resulting from the purchase price allocation, restructuring costs and net income (loss) from discontinued operations.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The reconciliation table in our press release highlights this data, and our non-GAAP information is presented excluding these items.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Now moving to our financial highlights for the second quarter of 2014.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Revenues for the second quarter of 2014 were <font style="DISPLAY: inline; FONT-WEIGHT: bold">$54.1</font> million, compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$61.9</font> million for the same period in 2013. The difference is mostly attributed to the decrease in revenues in our Services division. The MINTIC project in Colombia, which started to bring in initial revenues in the second quarter, will generate increased revenues in the third and fourth quarter. We will also generate revenues from the IAL project in Peru beginning in the third quarter.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On a GAAP basis, our gross margin this quarter reached approximately <font style="DISPLAY: inline; FONT-WEIGHT: bold">35.7%</font> compared to approximately <font style="DISPLAY: inline; FONT-WEIGHT: bold">32.3%</font> in the comparable period last year. As we have mentioned over the past few quarters, our gross margin is affected by the regions in which we operate and the types of deals we recognize. The increase in our gross margin this quarter was primarily due to two reasons. The first is due to the mix of deals with a higher margin in the Commercial division and the second is due to our cost reduction in COGs.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Gross R&amp;D expenses on a GAAP basis were <font style="DISPLAY: inline; FONT-WEIGHT: bold">$6.9</font> million this quarter compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$7.1</font> million in the same quarter of 2013. The decrease in R&amp;D expenses reflects our reduction in fixed expenses, which was offset by the negative effect of the Shekel / Dollar exchange rate. The Shekel significantly appreciated in value over the last year against the US Dollar. This has caused an increase in our expenses in Dollar terms.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Moving to selling, marketing, general and administrative expenses. On a GAAP basis, expenses for the quarter remained relatively constant at <font style="DISPLAY: inline; FONT-WEIGHT: bold">$13.5</font> million compared to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$13.4</font> million for the same quarter last year. We experienced higher variable expenses, which were offset by a reduction in fixed expenses.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Operating loss on a GAAP basis was <font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.5</font> million in the second quarter of 2014 compared to an operating loss of <font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.1</font> million in the comparable quarter of 2013.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We regularly use supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating cash flow performance.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On a non-GAAP basis, operating income was <font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.5</font> million in the second quarter of 2014 compared to operating income of <font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.9</font> million in the comparable quarter of 2013.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On a GAAP basis, net loss from continuing operations<font style="DISPLAY: inline; FONT-SIZE: 10pt">&#160;</font>for the quarter was <font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.4</font> million, or a loss of <font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.03</font> per diluted share compared to net loss from continuing operations of <font style="DISPLAY: inline; FONT-WEIGHT: bold">$2.9</font> million, or a loss of <font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.07</font> per diluted share in the same quarter of 2013.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of June 30, 2014, our total cash balances, including restricted cash, net of short-term bank credits, decreased to <font style="DISPLAY: inline; FONT-WEIGHT: bold">$59.3</font> million. This was mainly due to our investments in the IAL project in Peru and the MINTIC project in Colombia.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">That concludes our financial review for the quarter, and now I would like to turn the call back to Erez. Erez?</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">To summarize, we are seeing progress across all of our divisions as we continued to execute our plan and growth strategy in the second quarter. Our cost cutting measures implemented in 2013 continue to bear fruit as we have seen an increase in profitability.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In our Commercial Division, we see significant market potential in High Throughput Satellites and cellular backhaul applications and we believe we have the right solutions to expand upon our growing global footprint.&#160;&#160;We had several deployments of our cellular backhaul networks around the world that included our newest and the fastest TDMA VSAT in the market today, SkyEdge II-c Capricorn and CellEdge, our small cell solution over satellite.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our Defense Division has improved, given the increased visibility from DoD programs. We are beginning to see an improved sales pipeline and were recently awarded contracts for defense agencies in LATAM and Asia. We expect to see continued growth across this division as we believe we hold a significant advantage over our competitors when it comes to small, light-weight and lower power terminals.</font></div>

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<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">For these reasons, we believe that the second half of 2014 will be stronger than the first half of the year. We feel confident we are on track to meet our 2014 objectives for annual revenues of $240-$245 million and EBITDA margin levels of approximately 9%.</font></div>

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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Thank you. Ladies and Gentlemen, at this time we will begin the question and answer session. If you have a question, please press *1. If you wish to cancel your request please press *2. If you are using speaker equipment kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please standby while we poll for your questions. The first question is from Gunther Karger of Discovery Group. Please go ahead.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Good afternoon Erez and everyone. Great report.&#160;&#160;One question regarding the aviation industry. &#8230; in that sector, in aviation type of business.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">I&#8217;m sorry you were breaking up, did you ask about the aviation sector business?</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Yes, you are right. I didn&#8217;t discuss it in the call. This is continuing business. There haven&#8217;t been any significant developments.&#160;&#160;We are continuing to sell into that sector. I continue to view that as a growth area for us, especially when the Global Xpress constellation comes online and we&#8217;ll start providing terminals, sorry units, to Honeywell to serve airlines on the InmarSat Global Xpress. It continues to look good and I would say business as usual for now.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Thank you Erez and second question if I could with regard to the defense sector. I know you announced continuing growth in that area, but the current unrest worldwide, particularly in the special operations type of business, do you think that what&#8217;s happening now globally is increasing your outlook in that sector or the results that you reported reflect what you had originally anticipated.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">I don&#8217;t think that we see anything that is immediate, as an immediate result of very recent developments of the past few weeks. But I would say that in general over the past year, what we are seeing is that there are heightened tensions in various conflict areas around the world, in Eastern Asia and Eastern Europe and in other areas and we see increasing requirements and even starting to see budgets and programs in other countries that perhaps two years ago we didn&#8217;t see having programs in satcom for their special forces.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If there are any additional questions, please press *1. If you wish to cancel your request please press *2. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Erez Antebi 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 US, please call 1-888-326-9310. In Israel please call 03-9255937. Internationally please call 972-3-9255937. Mr. Antebi would you like to make your concluding statement?</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">I just want to thank everyone for listening in on the call. I appreciate the time and I hope to meet you on the next conference call if not earlier. Thank you very much and good morning or good afternoon to all. Bye bye.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Thank you.&#160;&#160;This concludes Gilat&#8217;s second quarter 2014 results conference call. Thank you for your participation, you may go ahead and disconnect.</font></div>
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