Gilat Satellite Networks Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Second quarter revenues rose 37% to $105 M (including $36 M from Stellar Blue), with adjusted EBITDA up 17% to $11.8 M ($13.3 M excluding Stellar Blue losses, a 32% yoy gain).
  • Positive Sentiment: Full‐year guidance was narrowed and raised to $435–$455 M in revenue (46% growth at midpoint) and $50–$53 M in adjusted EBITDA (22% growth).
  • Positive Sentiment: Defense division secured $8 M of Gilat DataPass orders from the Israeli MoD and a $7 M initial US Army field service contract (up to $70 M over five years).
  • Positive Sentiment: Commercial wins included a $40 M contract for the virtualized SkyEdge 4 platform plus over $47 M in multi‐orbit ground‐segment orders from tier‐one satellite operators.
  • Positive Sentiment: Stellar Blue ramp is on track with 225 terminals delivered and ~1,000‐aircraft backlog, aiming for $120–$150 M 2025 revenue and positive EBITDA in H2.
AI Generated. May Contain Errors.
Earnings Conference Call
Gilat Satellite Networks Q2 2025
00:00 / 00:00

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Second Quarter twenty twenty five Results Conference Call. Participants are at present in listen only mode.

Operator

Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded 08/26/2025. By now, you should have all received the company's press release. If you have not received it, please view it in the News section of the company's website, www.gillot.com. I would now like to hand over the call to Mr. Alex Vialta of Alliance Advisors IR. Mr. Vialta, would you like to begin, please?

Alex Villalta
Vice President at Alliance Advisors IR

Thank you, operator, and good day to everyone. Thank you for joining us for Gilat Satellite Network's earnings conference call for the 2020. With us on today's call are Mr. Adi Sadia, Gilat's CEO and Mr. Gil Benyamini, Gilat's CFO.

Alex Villalta
Vice President at Alliance Advisors IR

Earnings press release was issued earlier today, and if anyone has not received a copy, I invite you to visit the company's website at gilat.com, where you'll find the release in the Investor Relations section. Before turning the call over to management, I'd like to remind everyone that some statements made during the conference call contain forward looking statements based on current expectations. Actual results could differ materially from these projected as a result of various risks and uncertainties. The potential risks and uncertainties could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U. S.

Alex Villalta
Vice President at Alliance Advisors IR

And foreign military spend, acceptance of our new products on a global basis and disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather or other factors not under our control. The company cautions investors not to place undue reliance on forward looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Keylot's financial results is included in the company's filings with the SEC, including the latest quarterly report on Form 10 Q. In addition, on today's call, management will refer to certain non GAAP financial measures that management considers to be useful and differ from GAAP.

Alex Villalta
Vice President at Alliance Advisors IR

These non GAAP measures should be considered supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to CEO, Adi. Please go ahead, Adi.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Thank you, Alex, and good day, everyone. Thank you for joining us today to discuss Gilat's second quarter twenty twenty five results. Please note that we are posting a PowerPoint presentation on our website with all the data we will discuss today. The second quarter not only showed strong performance, but also validated our growth strategy across each of our growth engines. Our priorities in 2025 remains on capturing the growing opportunities emerging from our acquisition of Stellar Blue earlier this year and investing in Gilat Defense to better position to drive revenue growth in 2026.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

These drivers, along with our strong presence in VHDS and NGSO constellations, continue to fuel our growth and strengthen our market leadership. Second quarter revenues reached $105,000,000 a 37% increase year over year, which includes about $36,000,000 in revenues from Stellar Glue. Adjusted EBITDA was $11,800,000 17% above the same quarter last year, including Stellar Blue's expected ramp up losses of about $1,500,000 Excluding Stellar Blue loss, our adjusted EBITDA for the second quarter was about $13,300,000 representing a 32 year over year increase. Seller Blue's yearly performance remains on track with revenue expectation of between $120,000,000 and $150,000,000 Now on to the business review. In the second quarter, our defense division continued to set the foundation for future growth.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Continuing geopolitical tension and shifting global security priorities are promoting governments to increase their defense spending and allocate more of their budget to secure satellite communications. This is generating increased interest in mission critical Satcom solutions, and Gilat Defense is well positioned to meet these evolving operational needs. We are seeing active engagement from customers across multiple regions, including North America, Europe, and Asia Pacific. Gilat Defense is also extending our global footprint by leveraging top line synergies between Gilat, Datapath, and WaveStream by offering a broader range of solutions to defense customers. In the second quarter, over $8,000,000 of Gilat Data Pass systems were ordered by the Israeli Ministry of Defense, demonstrating the strong value of our technology and the applicability of our solutions to diverse mission requirements.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

During the second quarter, Gilat Datapest was awarded a contract to provide a field service and technical services in support of the US Army. The award includes an initial order of more than $7,000,000 with an option to extend the program for up to five years, reaching estimated order of up to $70,000,000. With a clear strategy and growing global presence and unwavering focus on mission critical connectivity, the lack of defense is positioned for substantial growth and long term impact in this essential sector. Turning to our commercial business. Q two was a milestone quarter driven by strong bookings, strategic wins, and continued adoption of our next generation satellite communication platform.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Our momentum reflects both the accelerating transformation of the industry and Gilat's success in aligning these technology and solutions with the need of our customers. One of the most significant announcement this quarter was the signing of a $40,000,000 contract for a virtualized Skydrome platform. This landmark agreement not only demonstrate the trust our customer placed in Gilat, but also highlight the critical industry shift in our satellite communication infrastructure is being deployed. Skyge for virtualization empowers operators to move to cloud native software defined environments designed for scale, agility, and interoperability with next generation satellites. Evolving to a software only cloud based platform elevates Gilat's positioning with higher value, improved margins, and provides the option to sell through a platform as a service business model.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

During the second quarter, we announced over $47,000,000 in orders from tier one satellite operators. These orders underscore the surging demand for Gilat multi orbit ground segment technologies, driven by increasing demand for IFC solutions and the widespread adoption of GEO, MEO and LEO architectures. Operators are making substantial investment in ground system that can seamlessly manage multi organ connectivity across a range of use cases, including fixed broadband mobility solutions and critical government services. These orders also span multiple regions and program types, including both network expansions and new deployments, highlighting the global relevance of our technology and the growing trust in our platforms to support mission critical services. Moving on to Stellar Group.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We announced receiving 27,000,000 in orders from our Stellar Group portfolio. With more than 150,000 community flight hours deployment of over 225 terminals, Gilat sidewinder is a terminal is exceeding expectation for performance, reliability, and user experience. Production ramp up is progressing slowly, and and we expect to see more units delivered in q three and q four this year with better margins. StellarView continues to StellarView continues to work closely with its partners to secure new fleet wins. We are confident these efforts will yield positive results soon.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Looking ahead, we remain focused on expanding our leadership across key verticals and deepening our relationship with strategic partners. With strong customer demand and differentiated technology portfolio, we believe Gilat is well positioned for continued growth in our commercial business. Q2 was an outstanding quarter for Gilat Peru, highlighted by the award of more than $60,000,000 in new orders from Bonatelli. As a reminder, these orders were delayed last quarter. The awards are for upgrading the regional network infrastructure that was originally awarded to us in 02/2015, bringing high speed Internet to more than 800 public institutions, including schools, health care, and police stations across more than 280 localities.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

This award reflects Gilatte Peru's continued partnership with the Peruvian state and our long standing commitment to digital inclusion demonstrating once again the key role Gilatte Peru plays in delivering meaningful nationwide impact. Digital inclusion is a key priority worldwide, and the expertise developed by Gilas Peru in connection in connecting remote and underserved communities is now being leveraged in other regions around the world, allowing us to replicate proven models and accelerate similar similar projects globally. In Peru, we still expect to receive several large RFPs and orders from existing project expansions and renewals in the coming few quarters. I'm pleased to say that we continue to have a strong backlog and a healthy pipeline of opportunities in all divisions. On the strength of our results year to date, improved visibility and business momentum, we are resetting our full year guidance.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We are narrowing our revenue range to $4.35 to $455,000,000 for a higher revenue growth rate of approximately 46% at the midpoint. We have also narrowed our adjusted EBITDA guidance range, now targeting between 50,000,000 to $53,000,000 for a higher growth rate of approximately 22% at the midpoint. Gilat remains strategically well positioned for sustained growth, supported by strong demand for secure high performance connectivity across commercial and defense markets. As satellite networks evolve, expanding in capacity, shifting to multi orbit, GEO, MEO, and LEO architectures, and moving towards software defined infrastructure, our portfolio is uniquely equipped to meet these emerging requirements with the scalability, flexibility, and the reliability our customer expect. Gilat Defense continue with a focused road map and expanding sales resources to broaden engagement and awareness of our technological expertise and our role in supporting the mission critical satellite connectivity needs of governments and defense agencies in The US and allied countries.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

In our commercial division, we are meeting the growing industry demands for virtualized, software defined ground infrastructure that enables more agile, scalable network deployments. Our multi orbit platform are delivering seamless connectivity across GEO, MEO, and LEO constellations, positioning Gilat as a key enabler of next generation satellite networks. At the same time, Gilat's sidewinder is a terminal continues to gain traction with ongoing progress in integration and certification across multiple aviation segments. In Peru, we play a vital role in expanding access to digital inclusion services, strengthening public infrastructure, and supporting long term national connectivity goals. Our local presence and trusted partnership with the Peruvian state remains key differentiation differentiator as we help to close the digital divide in underserved regions.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We are very happy with the progress we are making across the company and remain focused on advancing our priority, deepening customer relationship and delivering meaningful results as we support the evolving needs of the rapidly changing satellite communication market. And with that, I will hand over the call to Gil Binhamini, our CFO. Gil, please go ahead.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Thank you, Adi. Good morning, and good afternoon to everyone. Before I dive into the numbers, I would like to remind everyone that our financial results are presented both on GAAP and non GAAP basis. I will now walk through our financial highlights for the second quarter of twenty twenty five. As Adi mentioned, we're very pleased with our second quarter performance.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

We closed the second quarter and the first half of the year delivering sustained improvements in our results, giving us strong momentum going forward. In terms of our financial results, revenues for the second quarter were $105,000,000 37% increase compared to $76,600,000 in Q2 'twenty four. In terms of revenue breakdown by segments, q two twenty five revenues for the commercial segment were $69,100,000 compared to $43,400,000 in the same quarter last year. The 59% increase was primarily due to the contribution of Stella Blue, which we acquired in early January this year. Stella Blue generated $36,000,000, which was partially offset by the termination of our activity in Russia in 2024.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Q2 'twenty five revenues for the defense segment were $20,000,000 similar to the second quarter last year. Q2 'twenty five revenues for the Peru segment were $15,900,000 compared to $13,900,000 in Q2 'twenty four. Our GAAP gross margin in q two twenty five decreased to 30.4% compared to 34.7% in q two twenty four. The decrease is primarily due to lower margins in Stella Blue as it ramps up production as well as amortization of purchased intangibles. GAAP operating expenses in Q2 'twenty five were $26,200,000 compared to $23,800,000 in Q2 'twenty four.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

The increase is primarily due to consolidation of Stellar Blue, amortization of purchased intangibles, partially offset by other income, which included proceeds from an arbitration that were were recognized in q two twenty five. As a result, GAAP operating income in Q2 'twenty five was $5,700,000 compared to GAAP operating income of $2,800,000 in Q2 'twenty four. GAAP net income in Q2 'twenty five was $9,800,000 or a diluted income per share of $0.17 compared to GAAP net income of $1,300,000 or diluted income per share of $02 in Q2 'twenty four. Moving to our non GAAP results. Our non GAAP gross margin in Q2 twenty twenty five decreased to 32.9% compared to 36.8% in Q2 twenty twenty four.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Non GAAP operating expenses in Q2 twenty twenty five were $25,200,000 compared to $20,900,000 in Q2 'twenty four. The non GAAP operating income in Q2 'twenty five was $9,300,000 compared to $7,300,000 in Q2 'twenty four. Non GAAP net income in Q2 'twenty five was $12,000,000 or a diluted income per share of $0.21 compared to a net income of $5,600,000 or income per share of $0.10 in Q2 'twenty four. Adjusted EBITDA in q two twenty five was $11,800,000 compared to an adjusted EBITDA of $10,100,000 in q two twenty four. Our q two twenty five organic adjusted EBITDA, excluding Stellar Blue losses, was approximately $13,300,000 a 32% increase compared with q two twenty four.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Moving to our balance sheet. On 01/06/2025, the company secured a $100,000,000 credit line from bank consortium from which we utilized $60,000,000 to finance the acquisition of Stellar Group. As a result, as of June 3025, total cash, cash equivalents, and restricted cash were 65,400,000.0 or approximately 5,500,000.0 net of loans compared to 3,800,000.0 on 03/31/2025. In terms of cash flow, we provided 5,100,000.0 from operating activities in q two twenty five. DSOs, which excludes receivables and revenue of our terrestrial network construction projects in Peru, were sixty days, a decrease from seventy five days in previous quarter.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Our shareholders' equity as of June 3025 totaled to $316,000,000 compared with $300,000,000 at March 3125. Looking ahead, as Adi mentioned, we're narrowing our guidance range and raising the guidance midpoints for 2025 revenue and EBITDA. Revenue is now expected to be between 435,000,000 and 455,000,000, representing year over year growth of 46% at the midpoint. The adjusted EBITDA is expected expected to be between 50,000,000 and $53,000,000 representing year over year growth of 22% at the midpoint. That concludes my financial review.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

I would now like to open the call for questions. Operator, please.

Operator

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you are dialing in, please press 1. The first question is from Ryan Kuntz of Needham and Co. Please go ahead.

Ryan Koontz
MD - Research Analyst at Needham & Company

Great. Thanks for the question. I wanted to ask about the ramp at Stellar Blue, obviously, doing well there. How are you feeling about the second half ramp, your ability to meet customer demand? And then from a margin perspective, improving margins on Stellar Blue, can you give us a rough idea of where those margins are at today and where you expect them to be at the end of the year?

Ryan Koontz
MD - Research Analyst at Needham & Company

And particularly on a non GAAP basis would be really helpful. You.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Ryan. Good to hear from you again. So I think that the production ramp up in Stellar Lou is is progressing. As you remember, last quarter, we said that there is one specific component that our vendors are struggling with. So we are seeing better results in the third quarter, and our internal solution is in the certification stages and will be ready for shipment towards the end of this quarter.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So we definitely see a a ramp up in Stellar Blue ability to deliver in the third quarter and even more in the fourth quarter. As for the overall margins, I will let Gil to to give you the the input.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

So our margins are ramping up a bit slower than expected mainly due to the component challenge. We see them ramping. We started the year still at the low rate, you know, pace, and now we're moving to regular production pace. So I guess that we'll see towards the third and even more in the fourth quarter. And in the beginning of next year, we'll see a more material improvement in the in the margin of the product.

Ryan Koontz
MD - Research Analyst at Needham & Company

Great. That's helpful. Thank you. And then on your virtualization win for SkyEdge four, what's the fulfillment model look like there? Are you just shipping software to cost hardware?

Ryan Koontz
MD - Research Analyst at Needham & Company

Are you having to ship appliances with that? And then how do you think about pricing and utilization there? Do you sell licenses? Can it be sold on a consumption base or even a subscription based model? What what's what's happening with virtualized SkyH4, please?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So the the initial order that we received is basically to operate our software on a cloud commercial off the shelf equipment. So it will be from a revenue recognition perspective, it will be a license sale or or a CapEx. It's a onetime sale plus ongoing maintenance services. Future upgrades will be also a software only. The overall business is that the or the price is give or take the same price as if we sell the hardware.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

But in this case, the customer needs to bring its own hardware. In most of the cases, most of the customers will prefer to build their own private cloud, but it will be able also to run it on a a public cloud. We also have a a flexible several flexible business models, including where we build the the cloud for the customers, provide our licenses, and do some kind of a platform of a service or a subscription based or consumption based model. Based on our history, most of the customers at the end wants to to buy in a CapEx mode, but we are open for recurring revenue business model as well.

Ryan Koontz
MD - Research Analyst at Needham & Company

That's great. Thanks for that. Maybe just one last question on Peru. Are there any major decisions coming in the next in the second half of this year that that think can improve that business top line?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Yes. I I think that the order that we received this quarter were delayed at least from late December and will help us ramping up ramping up Peru's revenues in 02/2025. But we do expect another large order in the next few weeks or the next two months. And in addition, there are several large RFPs that are expected to be issued in by the Peruvian government, and we expect to participate in in those RFPs. And even if we take some of them, it will help us to generate significant growth in in Gilat, Peru.

Ryan Koontz
MD - Research Analyst at Needham & Company

Great. Thanks for all that. That's all the questions I have.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Thank you, Ryan.

Operator

The next The next question is from Louie DiPalma of William Blair. Please go ahead.

Louie Dipalma
Research Analyst - Industrials at William Blair

Adi and Gil, good afternoon.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Hi, Louie. How are you?

Louie Dipalma
Research Analyst - Industrials at William Blair

Great. What are the main contributors to the improved outlook that weren't in the prior guidance or the different assumptions? And should we assume that the new programs that you've won in terms of the revenue carries over into 2026?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Can you repeat the first question? You're a bit disconnected.

Louie Dipalma
Research Analyst - Industrials at William Blair

Yeah. No problem. What are the main contributors to the improved guidance?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Okay. So the main contributor, you know, we we started the year with a relatively a relatively high range of the guidance because of the acquisition of Stellar Blue and the unknowns this acquisition. Today, we have much better visibility both to Stellar Blue and Gilat. The last recent business award, the significant award that we announced, and the backlog that we have, including the opportunities that we feel comfortable in our pipeline, gave us the the assurance that we can increase our guidance for the year. Yeah. Now as for your second question

Louie Dipalma
Research Analyst - Industrials at William Blair

And

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

some of some of the some of the awards that recently we received will be dragged as well into into 02/1926, and some of it even further like Peru, which is building the network or upgrading the network and then another four to five years of recurring services.

Louie Dipalma
Research Analyst - Industrials at William Blair

Fantastic. And you discussed I I believe you said that there are now 225 Stellar Blue Sidewinder terminals that have been deployed, which I assume means are flying. What is the backlog now for future shipments? It seems that you've won and you announced and you discussed on today's call several new contracts and you have original contracts with American Airlines, Air Canada and I believe also Alaska Airlines. So what is the backlog?

Louie Dipalma
Research Analyst - Industrials at William Blair

What was the backlog at the end of the quarter?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So so we it's not the data that we are providing on a quarterly basis. But when we acquired StellarBlue, we said that we have close to slightly below 1,000 aircraft in backlog, so you can do the math. There are additional awards that our customers already received but haven't placed a PO with with Gilat. So we do expect to have large orders in the next few weeks or or coming quarter.

Louie Dipalma
Research Analyst - Industrials at William Blair

Great. And also related to Stellar Blue, what is the status of the different milestone payments associated with the acquisition?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Okay. So I'll remind everyone that we have three types of earn outs. The first earn out milestone ended at the end of the second quarter and was to reduce the operational risk and the new product introduction risk. Stellantoo had to deliver 350 terminals before the end of the second quarter, which they failed Gilat failed to do. We delivered only 225 aircraft because of several reasons, but mainly because of the production ramp up and some vendors inability to deliver products on time.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

The so the first hour of air note payment is not going to be paid. The second air note is to get all the new orders of summing to a range of between 120 to $140,000,000. And it's until the end of this the fourth quarter this year. And it's I think it's too early to tell if we will meet the earn out milestone or not. We do see a a strong pipeline with the with the with our customers.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So we do expect to get a significant amount of orders before the end of the before the end of the year. So I believe that there is a very good chance that Stellalu will be able to meet the milestone. Of course, it's need to be in the profitability that was set in the agreement. So the cost reduction initiatives that we are taking, including shifting some of the production internally and developing some substitute product to a very expensive one needs to take needs to happen, and we are on our way of of doing so. The third earn out is until mid two thousand and twenty six, and he's signing up to four strategic agreements.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Each one is about 25,000,000. Strategic agreement need to be at least $35,000,000 of orders. It's significantly better profitability than the existing one and to be door opener to a new market. So it should be a, for example, line fit with Airbus, significant order from defense customers and and other tier one vendors in the market. We have a ongoing discussion with several strategic customers, but it's really too early to say. There is almost a year until the end.

Louie Dipalma
Research Analyst - Industrials at William Blair

Great. And that is super helpful. And and one final question. It seems that UTelstat has signed agreements to raise significant funding from different parties to support OneWeb Gen two or the general OneWeb constellation. And what is your view of how OneWeb Gen two and Iris Squared will proceed?

Louie Dipalma
Research Analyst - Industrials at William Blair

Do you believe that OneWebgen two and Iris Squared are going to be the same constellation? And what are the potential opportunities for Gilat associated with both of these plants?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So we we no. Based on the discussion we had in with Intelsat in the last several quarters, they want to integrate one of Gen two and Iris Square together as the the same as the SCS with the MEO 100 and the Iris Square because Iris is going to be a multi orbit constellation. So they want to to tie together, and they won't take any decision on one of Gen two before they will know exactly what is going on with Iris square. As for Iris Square, we received the first RFI this quarter for the end user terminal, and the additional RFI will follow and then RFPs. We do believe that awards will be granted not before midyear midyear next year.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

You know, the iSquare is, I think, is almost fully subsidized by the or financed by the EU regulator, the the €12,000,000,000 project. I think 40% also comes from the operators, EUTELSAT, SCS, and ISPASAT, and the rest is coming from the European committee. All in all, we believe that Tynes Square will be a bit delayed, but they will launch the constellation. And then one of Gen two will follow. For the lab, it's a very One one Sure. Go ahead.

Louie Dipalma
Research Analyst - Industrials at William Blair

Thank you. And one final one. The the Intelsat SES merger recently closed, and I know it only closed a few weeks ago, but have you observed any changes in customer behavior as both SES and an Intelsat are fairly large customers of yours? And how would you assess the the impact of the deal?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Yeah. So we'll just add one small thing about Iris Square. I think it's a extremely important and very large opportunity for Gilat. We have a decent EU presence, which will give us the right qualification to participate in the programs. And as such, we received the RFI.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So we do see the this is a top priority for Gilat to get an award over there. As for Indusat and SCS merger, indeed, it's, think, three or four weeks into the merger. But what we see today is that the people that we used to work on both sides are are there. And from customer perspective, the relationship are very strong. We keep on seeing a lot of interest on both side, both from Intelstad and from SES for Gilat equipment on the terminals, on the East side, on the Skyd 4 side, and also on the Sky 2 C for IFC side.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So we do expect to see a significant business from the combined company in the next few months.

Louie Dipalma
Research Analyst - Industrials at William Blair

Fantastic. Thanks, everyone.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Thank you, Louis. Talk to you soon.

Operator

The next question is from Omri Efroni of Oppenheimer. Please go ahead.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Hi, guys, and congrats on the great quarter. I have a few questions about Stellar Blue as the analyst. Last quarter, you said the guidance was for Stellar Blue from the revenue between $120,000,000 to $150,000,000 and EBITDA positive in the 2025. So I only wanted to make sure that the guidance is still intact. That's the first one.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

And then for the follow-up, I was wondering about if you can give some more some more color about the defense division. And what are you seeing here? So and what do you see from from demand, especially from the Israeli defense ministry and Europe? Thank you.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Okay. So, yes, the the guidance for Stereo still stay in place, 120 to $150,000,000 in revenues. We do expect them to significantly reduce the the losses and to show their positive EBITDA. You saw in the announcement that in my script, I said that we reduced the losses from $3,500,000 in the first quarter to $1,500,000 this quarter, and we do expect them to progress quarter over quarter and show positive EBITDA on the second half of the year and even to be able to reach a a 10 EBITDA ratio at towards the end of the towards the end of the quarter. I'm not sure it will be a full quarter, but towards the end of the quarter, once the cost reduction will be in place, and we will be able to start delivering the replacement for the component that is developed by another vendor, we'll see a decent profitability from Stellar Blue.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

As for the defense, we do see a lot of interest from several countries. It's mainly discussions on capabilities and things like that. We're having a lot of proof of concept and demo sessions not only in Europe, but worldwide. In parallel, we are building our Salesforce, investing a lot of money in that. You see the increase in in our OpEx, also in new product and solutions for the defense.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

One of them is our next generation tactical model, which will be one of the most advanced and resilient model in the in the industry. And in Israel, we announced several awards, and we still have ongoing interest. Of course, I cannot get into specific. Sometimes, don't know all the specifics because in in some cases, it's a secured secured project, but we are progressing very well in all fronts. Also in The US, we we announced several large orders on the service side, on the product side, and there is a lot business going on that we'll see in the next quarter or two.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Got it. So just if I may, just to be just to be clear, even with the component change from the other vendor that is going to take place in the third and the end of the third quarter, still the guidance of the Astellablue acquisition is intact, even if we're with the new new component.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Yeah.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Okay.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

It's still staying in place. Most of the most of the information that I'm I'm giving you today, we knew in advance when we gave the guidance at the beginning of the year. Development and ramp up of production sometimes take time, but I think that we are progressing on a monthly basis, and and we see the progress.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

You saw the significant reduction in the losses this quarter, and I'm sure that we'll move to a positive EBITDA during the second half of the of the year.

Omri Efroni
Investment Research at Oppenheimer & Co. Inc.

Okay. Thank you very much.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Thank you, Unger.

Operator

The next question is from Chris Quilty of Quilty Analytics. Please go ahead.

Chris Quilty
Co-CEO & President at Quilty Space

Thanks, guys. I just wanted to follow-up on the Stellar Blue and the order front. I know that I think last quarter you were certified by Panasonic, which is I think one of your big lead customers. So fair to expect we should see something this quarter in terms of announcements? And additionally, where should we look for large follow on orders?

Chris Quilty
Co-CEO & President at Quilty Space

Are these done more directly with the airlines, or do you have other partners you're working with?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Hi, Chris. So, yes, we did we we started to work on the certification with Panasonic last quarter. We are about to finish them. We already received from Panasonic prior to closing order of slightly below 100 aircraft, we expect to see additional order. But, you know, Panasonic and Intercept as other customers usually don't order in advance.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

They usually order back to back, and there is about nine months lead time. So and they have a delivery schedule that they are committing to the airline. So we do expect to get in the coming few months order from both Intercept and Panasonic. In parallel, we are working with with other players in the market, but it's in early stages, so it's it's too early to discuss.

Chris Quilty
Co-CEO & President at Quilty Space

Got it. I think you also indicated that with the SVS Intelsat acquisition, do you think there was in advance of the close any activities hold up in orders as they process that may have created a little near term backlog of potential orders going into the back half of the year? Or did you just see normal purchasing activity by both entities?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

No. I think we saw a normal purchasing activity. You know, in some cases, we work together with together with our partners, helping them promoting their services and our equipment. And in in relatively large number of cases, the order comes back to back when they get the orders from their customers. So we know we know the situation, and and business is continuing as usual.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We do expect to to have a strong second half with with the the merged company.

Chris Quilty
Co-CEO & President at Quilty Space

Great. Follow-up question on the SkyEdge four platform and maybe a specific end market in cellular backhaul, which seems to have slowed down in the last year to year and a half. Are there any specific dynamics that you're seeing there? And how does the new virtualized platform, you know, help, if at all, in that that particular market?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

So in in general, I agree that there is a a bit of a slowness in the cellular backhaul market. It's coupled by the promise of the direct to device and the real players that are all also aiming this market. What we see right now is significantly less new RFPs and the customer extensions. Customers waiting for the five g at the end and to see how it's going to be integrated with with the five g network that they have today. Direct to device cannot provide the speed that the standard cellular record can provide.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We do have you know, with existing customers, we do get follow on orders, not in the same magnitude that we saw we saw in the past. We believe that it will take another, I would say, several few quarters until the market will return to to normal on the cellular record. Skype for the virtual platform is just running the Skype for software over cloud commercial of the self of the shelf, sorry, equipment. It's not going to at least not in in this space additional features, but we it will allow operators to have the agility and flexibility that they need and also will allow us to sell in a more compelling business models.

Chris Quilty
Co-CEO & President at Quilty Space

Understand. I think I see it. You did I hear you say that, you know, cost customers go ahead.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

No. Go ahead. Go ahead.

Chris Quilty
Co-CEO & President at Quilty Space

So, Gil, I was gonna say, you mentioned that on the SkyEdge for sales that customers are generally making a CapEx acquisition. Are you selling at the same price for the software only as you would have software hosted on a piece of hardware? Or is it something less than that? And how do we think about both revenue growth would slow if you're selling software only for less, but margins would change. Are we going to see that impact, you know, putting aside Stellar Blue in the model in '25, or is that more out into a 2627 impact?

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

So with respect to to to pricing, there is no prices are are similar between the the CapEx hardware model and the and the software model. From our perspective, prices are are the same. Can you repeat the second the second question, Chris?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

The effect on the margins.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Yeah. So so the effect on yeah. The the effect on on the margins, you know, is is very positive because once once we develop the software, it will be more like software kind of margins rather than harder ones.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Chris, I want to add that even today with Skydex four, the ratio between software and and the hardware is changed significantly in comparison to Skydex two c. Today, at the first day, we provide almost the all the hardware the customer will need and all the expansions and the upgrades are almost entirely software. So and and we are starting to see the effect in the commercial segment. But as you said, Ceruleu takes it a bit a bit down. I think we'll see a gradual progress in the next few years to increase the commercial business margins.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

But the virtual platform will be ready two years from today. So the real effect, I would say, we will we'll start to see towards, let's say, 2000 and the 2027.

Chris Quilty
Co-CEO & President at Quilty Space

Got it. And final question on the the amplifier wave stream business. I know there's still a a large NGSO order out there. Any progress on moving on that?

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Yes. There's a lot of progress on on this front. We already received more than $30,000,000. We are delivering in orders. We are delivering every quarter based on the customer needs.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

We do expect to get additional orders in the next few months. We see also around it also defense business that can be can be built. So we we expect also defense order to this specific constellation. But it has its own pace. It's not everything at one day.

Chris Quilty
Co-CEO & President at Quilty Space

Right. And I lied because I do have one final question for Gil. There were a number of gyrations on the balance sheet between contract assets, inventories, long term receivables. Anything we should focus on there in terms of modeling?

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

No. I think that, you know, all the changes are mainly in the in the working capital related to deliveries. We had some some reduction in the inventory due to timing of of deliveries between q one and and q two. It also affected AR, of course. So so the the changes over there are relatively relatively large.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

But more than that, I wouldn't say that there is something new to take into account when you model the company.

Chris Quilty
Co-CEO & President at Quilty Space

So so no material changes in, you know, either the need or cash generation from working capital, you know, as we go through the balance of the year?

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

No. You know, it always depends on the on the, I would say, POs that we get. Some of them, like the Peruvian award that we just reported, is usually associated with advanced payments. So I I would expect this to positively affect the balance sheet in the next quarter of or two, but this is something that we we're used to see from time to time. So I wouldn't describe it as as unique, but just a reflection of of orders and its timing on the balance sheet.

Chris Quilty
Co-CEO & President at Quilty Space

Great quarter, guys. Keep up the good work.

Operator

next question is from Gunther Carrager of Discovery Group. Please go ahead.

Gunther Karger
Hedge Fund Manager at Discovery Group

Yes. Thank you for taking the question. I have a comment rather than a question. I'm particularly pleased with your progress in the defense business, which I long time ago, so it was a big piece of growth business. And secondly, is to congratulate you on excellent performance. So that's my comment.

Adi Sfadia
Adi Sfadia
CEO at Gilat Satellite Networks

Thank you, Gandhi.

Gunther Karger
Hedge Fund Manager at Discovery Group

Thank you.

Operator

The next question is from Sergei Glenanov. Please go ahead.

Sergey Glinyanov
Senior Analyst - Equity Research at Freedom Broker

Hi, gentlemen. My congratulation with your performance in second quarter. So we saw that operating margin is improved compared to 2025. What is the primary reason your what is primary effect for that improvement of pricing margin if we exclude the effect from still Maybe you implemented some initiatives that may that could reduce the cost or something else.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

So hi, Sergei. First of all, Stellar Blue has the most, I would say, substantial effect on the changes in the gross margin comparing comparing this year and then previous year. And we also got some improvement in the gross margin of of Celeblo compared to compared to q one. So I would say that this is one major driver of of the change. We also had some better gross margin in Peru this quarter that also improved, you know, the weighted the weighted gross margin.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

So so both together created a better gross margin. And, of course, you know, the the the revenue mix also affects the gross margin, although there are no other, you know, unique things to to discuss, but it can vary and fluctuate between quarters.

Sergey Glinyanov
Senior Analyst - Equity Research at Freedom Broker

Yeah. Thank you, Gil. And continuing the topic about your backlog, you obtained probably more than one and a half million dollar of new orders for second quarter. I get that is pretty much than a year ago and only $27,000,000 for Stellar blue Stellar blue antennas. What is backlog volume in commercial and defense segments now and average exercise period excluding Stellar blue?

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

So so I I did discuss the Stellar Blue before about entering into the deal with about 1,000 antennas. The the nature of deals there are are not, you know, a monthly kind of deals. Usually, it comes in in large batches. And as Adi mentioned, we're expecting to see some pretty pretty soon. With respect to the backlog of of the commercial and the defense, so this is this is a number that we don't share.

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

I can I can share with you that we usually have visibility for for a year that we enter of at least 50% for for the upcoming year, and then some of the backlog is also relevant for for the years after? So without stating any numbers, we have a decent amount of backlog that allows us to see future growth.

Operator

There are no further questions at this time. Mr. Bingamini, would you like to make your concluding statement?

Gil Benyamini
Gil Benyamini
CFO at Gilat Satellite Networks

Yes. Thank you. I would like 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.

Operator

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

Executives
    • Adi Sfadia
      Adi Sfadia
      CEO
    • Gil Benyamini
      Gil Benyamini
      CFO
Analysts
    • Alex Villalta
      Vice President at Alliance Advisors IR
    • Ryan Koontz
      MD - Research Analyst at Needham & Company
    • Louie Dipalma
      Research Analyst - Industrials at William Blair
    • Omri Efroni
      Investment Research at Oppenheimer & Co. Inc.
    • Chris Quilty
      Co-CEO & President at Quilty Space
    • Gunther Karger
      Hedge Fund Manager at Discovery Group
    • Sergey Glinyanov
      Senior Analyst - Equity Research at Freedom Broker
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