Gilat Satellite Networks Ltd. Q1 FY2025 earnings call

Defense Business - Strong start to the year with successful launch of Gilat Defense Division at Satellite 2025 Conference. Awarded over $5 million to support critical connectivity for US DoD and international defense forces, secured $4 million and $6 million contracts, and launched new products like GLT modem, Aquarius Pro DS modem, and Gilat DataPath 2.6 meter terminal. Increased investment in R&D and sales and marketing.### Commercial Business - Continued momentum in system deliveries and customer expansions. Stellar Blu's Sidewinder ESA installed on over 150 aircraft with 70,000+ flight hours of connectivity. Successfully tested and certified by Panasonic. Plans for LEO business aviation terminal with production-ready antenna by end of 2025. Expanding strategic collaboration with partners for next-generation aviation ESA terminals.### Peru Division - Strong pipeline but several large projects face delays. Expecting revenue recovery with project renewals in Q2/Q3, hardware deliveries in Q3, and conclusion of large project negotiations in next few months.

Q1 2025 revenues reached $92 million, a 21% increase year-over-year. Revenue breakdown by segment: Commercial segment had $64.2 million in Q1 '25 (56% increase, primarily due to Stellar Blu acquisition, offset by termination of Russia activity in 2024); Defense segment had $23 million (34% increase, driven by high deliveries to defense customers in US and Asia); Peru segment had $4.8 million (decline due to delays in renewing several projects, postponing major project bids, and slower progress on expanding existing projects).

- 2025 revenue projected between $415 million and $455 million, representing 42% year-over-year growth at the midpoint.### - Adjusted EBITDA expected between $47 million and $53 million, representing 18% year-over-year growth at the midpoint.### - Stellar Blu's yearly revenue expectation is between $120 million and $150 million, and it's expected to reach a 10% adjusted EBITDA margin run rate during the second half of 2025.

• Uncertain global economic conditions. - Reductions in revenues from key customers. - Delays or deductions in US and foreign military spending. - Acceptance of new products on a global basis. - Disruptions or delays in supply of raw materials and components due to business conditions, global conflicts, weather or other factors not under control.

Q: European defense spending impact on Defense?

A: Generally speaking, yes. We are seeing a lot of traction from Europe defense increased budget. Nothing yet materialized, but we are seeing a lot of demand requests for RFPs and things like that. So we believe that, at the midterm, we'll see decent business from Europe that will support our growth in Defense.

Q: Boeing line-fit milestone?

A: Generally speaking, there are some adaptation to the terminal and now we are in the certification process. So it seems like that within the next two or three quarters, we'll get this qualification and we'll be ready. And then it's up to the customers to order it.

Q: Peru revenue linearity?

A: So Peru linearity is a bit challenging. So we do expect Peru revenue run rate to be $45 million to $50 million. This quarter it was relatively low because several large projects that are about to be renewed, the renewal was delayed, and we expect to have it hopefully in Q2 and if not in early Q3. In addition, part of the recurring revenue in Peru, we need to deliver some hardware equipment once every year. And we do expect it during the third quarter. This is a chunk of $7 million or $8 million of hardware revenue every year. In addition, there are several large projects, especially large expansions of existing projects where we do not compete against others. It's just negotiation with the government and we expect to conclude the negotiation in the next few months and revenue will return to the same levels that we saw in recent years.

Q: Stellar Blu commercial go-to-market?

A: In terms of progress at Stellar Blu, we made good progress during the quarter. We have supply chain issues with one component, working to replace it. We have internally enough resources to achieve our goals. Most technology sales is with Intelsat and Panasonic, and our superior technology helps them in competitive market environments.

Q: Sidewinder production and revenue structure?

A: Indeed we are expecting by the end of the year, before the end of the year to reach to about 100 units per month. Right now, close to 100 units per month expected by end of Q2/early Q3. In 2025 100% of our revenues will come from retrofit, we do expect that towards mid or the second half of 2026, the split will be closer to 50-50. And on the long-term I think that it will be slightly more line-fit than retrofit, although the retrofit will continue to be a significant market for us.

Q: Balance sheet items?

A: Of course we applied acquisition accounting. It means that we consolidate all of the assets and liabilities of Stellar Blu into the balance sheet. There are some advances and other items. We applied purchase price allocation, under which we've allocated the excess amount that we paid on top of the tangible assets to goodwill and to other intangible assets as well as creating a provision for the earn-out according to modeling the earn-out and in present values. The intangible assets are depreciated. Most of the assets, the underlying assets are the backlog, the technology and the customer agreements. So we depreciate it over their effective life. The backlog would usually be four to six quarters and the other assets would be much longer like 10 years. And of course we have financing expenses for the loan in the P&L. About $3.5 million of amortization are expected quarterly.