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CALL PARTICIPANTS
Chief Executive Officer — Adi Sfadia
Chief Financial Officer — Gil Benyamini
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RISKS
Peru Segment Revenue: Reported $4.8 million, down from $17.7 million in Q1 2024, attributed to project renewal delays, postponements of major bids, and slower expansions.
Gross Margin: GAAP gross margin fell to 30.9%, compared to 36.9% in Q1 2024, driven by lower Stellar Blue margins, amortization of intangibles, and weakness in Peru.
GAAP Operating Results: The company reported a GAAP operating loss of $700,000, compared to $5.4 million operating income in Q1 2024, attributed to acquisition-related costs and amortization, and no repeat of prior-year Peru arbitration gains.
Stellar Blue EBITDA: Adjusted EBITDA includes a $3.6 million loss from Stellar Blue; management said, “right now the first earn-out is not on track from a payments perspective” due to component and cost challenges.
SUMMARY
Gilat Satellite Networks Ltd. (GILT -9.73%) integrated Stellar Blue’s first full-quarter results, producing $92 million in revenue, a 21% increase in revenue, led primarily by its Commercial and Defense divisions, despite notable weakness in Peru. The company reaffirmed its 2025 annual guidance of $415 million to $455 million in revenue and adjusted EBITDA of $47 million to $53 million (non-GAAP), projecting 42% and 18% annual growth at their midpoints, respectively. Management highlighted progress on its Boeing OEM qualification for the Sidewinder product, which is expected to complete certification within two to three quarters, potentially enabling line-fit installations with major airline customers by early 2026.
The Commercial segment posted $64.2 million in GAAP revenue, up 56%, mainly due to the Stellar Blue acquisition, while Defense recorded $23 million, a 34% year-over-year gain.
Stellar Blue contributed $25 million to revenue but had a $3.6 million adjusted EBITDA loss; management expects a 10% adjusted EBITDA margin run rate for this business (Stellar Blue, non-GAAP) in the second half of 2025.
Management reiterated that approximately 80% of forecasted 2025 annual revenue is already supported by backlog commitments.
Company disclosed a $100 million credit line secured in January and ended the quarter with $64.3 million in cash and equivalents, and $3.8 million net of loans as of March 31, 2025.
TAKEAWAYS
Total Revenue: $92 million, representing a 21% year-over-year increase (period not specified as fiscal or calendar), with growth led by Commercial and Defense, offset in part by Peru declines.
Commercial Segment Revenue: $64.2 million in GAAP revenue, a 56% increase, mainly attributed to the acquisition of Stellar Blue.
Defense Segment Revenue: $23 million, up 34%, driven by U.S. and Asian defense deliveries and a series of contracts, including multimillion-dollar U.S DoD and UAV deals.
Peru Segment Revenue: $4.8 million, down from $17.7 million in Q1 2024, due to project delays, major bid postponements, and the completion of the Amazonas expansion phase last year.
Stellar Blue Contribution: $25 million to total revenue, with an adjusted EBITDA loss of $3.6 million; the company affirmed full-year 2025 Stellar Blue revenue guidance of $120 million to $150 million and expects a 10% adjusted EBITDA margin run rate for Stellar Blue in the second half of 2025.
GAAP Gross Margin: GAAP gross margin was 30.9%, compared to 36.9% in Q1 2024, primarily reflecting lower margins in Stellar Blue and amortization of purchased intangibles.
Adjusted EBITDA: Adjusted EBITDA was $7.6 million, compared to $9.3 million in Q1 2024, with organic adjusted EBITDA, excluding Stellar Blue, was $11.2 million (up 20%).
GAAP Net Loss: $6 million, equating to a $0.10 loss per share, compared to $5 million income ($0.09 per share) in the prior year period.
Cash Used in Operations: $6.6 million outflow, reflecting working capital needs and acquisition-related expenses for Stellar Blue.
Line Fit vs. Retrofit Aviation Revenue: Management stated that “100% of our revenues will come from retrofit” in 2025, with a shift toward a more balanced split expected in 2026 and beyond.
Boeing OEM Qualification Milestone: Management said, “within the next two or three quarters, we’ll get this qualification” enabling airline customers to line-fit Sidewinder antennas at Boeing facilities once certified.
Production Ramp for Sidewinder: Anticipated achievement of “about 100 units per month” by late Q2 or early Q3 2025, contingent on resolving component supply and qualification issues.
R&D and Sales Investment: Company is increasing allocations to R&D and sales/marketing for Gilat Defense in 2025, with multiple new products launched this quarter targeting GEO, MEO, and LEO constellations.
Tariff and Supply Chain Adaptation: CEO Sfadia explained the company “shift some of the raw material sourcing from high to low tariff countries.” notably into the U.S, and expects minimal near-term tariff impact.
2025 Guidance Reiterated: Revenue guidance for 2025 of $415 million to $455 million and adjusted EBITDA of $47 million to $53 million was reaffirmed, underpinned by a robust backlog and pipeline.
INDUSTRY GLOSSARY
IFC (In-Flight Connectivity): Connectivity services provided to aircraft for passenger or operations communications using satellite technology.
LEO/MEO/GEO Constellations: Satellite groupings in Low, Medium, and Geostationary Earth Orbits, respectively, offering different latency and coverage profiles for communications.
ESA (Electronically Steered Array): A type of phased-array antenna technology enabling electronic beam steering, critical for multi-orbit and mobile satellite connectivity.
Line Fit: Installation of equipment (such as antennas) during the original manufacturing process of an aircraft, as opposed to retrofit, which takes place after delivery.
Sidewinder: Gilat’s main multi-orbit ESA terminal product line for aviation connectivity, operational with both LEO and GEO satellites, referenced for current and future aircraft deployments.
SkyH4/SkyEdge: Gilat ground segment technology platforms supporting satellite communication with advanced baseband capability and support for next-generation constellations.
SSPA (Solid-State Power Amplifier): A key satellite hardware component that amplifies RF signals in ground stations or on-board communication terminals.
VHTS (Very High Throughput Satellite): Satellite technology offering large capacity and data rates, supporting advanced broadband and connectivity applications.
Full Conference Call Transcript
Adi Sfadia, Gilat’s CEO, and Mr. Gil Benyamini, Gilat’s CFO. The earnings press release was issued earlier today and is available on Gilat’s website under the Investor Relations section. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties.
The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U.S. and foreign military spending, acceptance of new products on a global basis, and disruptions or delays in the 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 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 Gilat’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. These non-GAAP measures should be considered supplemental to configuring corresponding GAAP figures. With that, I would now like to turn the call over to Mr. Sfadia. Please go ahead, Adi.
Adi Sfadia: Thank you, Alex, and good day to everyone. Thank you for joining us today as we discuss our first quarter of 2025 earning results. The first quarter of 2025 marked the first quarter operating under our newly aligned organizational structure. Today, we will provide an update on our Gilat Defense, Gilat Commercial, and Gilat Peru divisions, offering insight into how our strategies are driving growth and capturing opportunities in key markets. We will discuss key achievements for the quarter and our opportunities and plans to continue accelerating revenues in 2025 as we capitalize on the acquisition of Stellar Blue and the continued strong demand for Gilat Defense Solutions.
We are already seeing the benefits of this change, particularly in our main growth engines, defense, VHTS, and NGSO constellations, and in-flight connectivity. We began 2025 with a good first quarter. Q1 revenues reached $92 million, a 21% increase year over year. Adjusted EBITDA was $7.6 million. Q1 2025 was the first quarter we included Stellar Blue’s results in our financial results. Stellar Blue contributed about $25 million to our top line and incurred an adjusted EBITDA loss of about $3.6 million. Excluding the loss, our adjusted EBITDA for the quarter was about $11.2 million, representing a 20% year-over-year increase. Stellar Blue’s yearly performance remains on track with revenue expectations of between $120 million and $150 million.
We also expect Stellar Blue to reach a 10% adjusted EBITDA margin run rate during the second half of the year. Before reviewing the performance of each division, I want to address the impact of the current global macroeconomic turmoil and the shifting international trade policies and tariffs on Gilat’s business. The global economic uncertainty and the shifting international trade policies are creating new challenges. It is still too early to fully assess the impact as new facts emerge daily. Recognizing these trends early, we proactively initiated adjustments to our raw material sourcing several months ago. This involved strategically shifting from higher to lower tariff countries and to the U.S. Importantly, a significant share of our U.S.
Defense business is sourced and manufactured domestically in the U.S., supporting stability in this environment. We intend to monitor the worldwide developments closely and will adapt our strategies as needed to ensure business continuity and minimize potential disruption. Now on to the business review. We had a strong start to the year with the successful launch of the Gilat Defense division during the Satellite 2025 conference in Washington, D.C., in early March. The market response has been very positive, and we are already seeing results that confirm we made the right decision to unify our defense portfolio into a single Gilat Defense business.
The dynamic macro geopolitical landscape is driving increased defense budgets, and accordingly, there is a growing demand for secure, high-performance communication over satellites. We are well-positioned to meet these mission-critical needs. We are seeing demand from diverse geographical markets, including North America, Europe, and the Asia-Pacific region. In Europe specifically, recent events have accelerated efforts to develop sovereign communications networks with growing investments from both the European Union and individual countries. This trend is creating significant opportunities, and we believe Europe will become an increasingly important market for Gilat Defense going forward. In Q1, awards spanned a diverse global customer base, reflecting demand for a broad range of products and services.
This broad portfolio, coupled with our global presence, continues to position us as a trusted and reliable partner for defense organizations worldwide. During Q1, Gilat Defense was awarded over $5 million to support critical connectivity for the U.S. DoD and international defense forces with our decaf terminals and field support services. We also secured $4 million in orders for unique CCT portable satellite terminals for global defense customers and another $6 million contract in Asia for our market-leading SkyEdge platform. Gilat Data Pass was also awarded up to $23 million for a multiyear contract to service satellite transportable terminals for the U.S. DoD customers.
Gilat Data Pass will deliver critical program management, field services, and technical support, ensuring operational readiness and continued reliability of these vital communication assets. Gilat Data Pass was also awarded a contract of more than $11 million for DICKET 3,420 terminals to a leading UAV company. In addition, we received a multimillion-dollar order from a global defense organization for the supply of advanced antenna technology to be integrated into the organization’s state-of-the-art defense communication systems. These wins validate the strength of our integrated technologies across Gilat Defense product lines and highlight the increasing trust customers have in our ability to deliver mission-critical communication in challenging environments.
As I mentioned during the fourth quarter call, we are increasing our investment in allocating more resources to R&D as well as to sales and marketing at Gilat Defense in 2025. This quarter, we launched several new products, including our new GLT modem, the Aquarius Pro DS modem, and the Gilat Data Pass 2.6-meter terminal. We are highly optimistic that these products will be adopted to serve on GEO, MEO, and LEO constellations for critical government applications. We plan to continue investing significantly in Gilat Defense as we execute our strategy to lead in this important sector.
Turning to our commercial business, we are seeing continued momentum in both system deliveries and customer expansions as airlines prioritize next-generation connectivity experiences for passengers, including free Wi-Fi plans and connectivity on regional jets. We received $15 million in orders from various satellite operators, including for our SkyH4 platform to support IFC services and for high-performance SSPAs designed to support LEO constellations. The growing adoption of LEO and MEO constellations connectivity is creating favorable conditions for growth. These developments underscore the increasing demand for our solutions in this rapidly evolving market.
Also, in the IFC sector, with respect to Stellar Blue, Intelsat has already installed
