Q2 2024 Gilat Satellite Networks Ltd Earnings Call
Ladies and gentlemen, thank you for standing by. The conference will begin shortly.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Gilat's second quarter 2024 results conference call. All participants are at present in listen-only mode.
Ladies and gentlemen, thank you for standing by.
Operator: Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. August 7th, 2024.
All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. August 7, 2024.
Operator: By now, you should have all received the company's press release. If you have not received it, please contact Gilat's investor relations team at ekglobalinvestorelations at 1-646-688-3559 or view it in the news section of the company's website, www.gilat.com. I would now like to hand over the call to Mr. Ehud Helft of EK Global Relations, Investor Relations. Mr. Helft, would you like to begin, please? Yes, thank you.
Speaker Change: By now, you should have all received the company's press release. If you have not received it, please contact Elock's Investor Relations team at...
Speaker Change: UK Global Investor Relations at 1-646-688-3559.
or view it in the news section of the company's website www.kilat.com. I would now like to hand over the call to Mr. Ehud Helft of EK Global Relations.
Ehud Helft: Yeah, thank you, operator. Good morning and good afternoon, everyone.
Ehud Helft: Mr. Helft, would you like to begin please? Thank you, operator. Good morning and good afternoon, everyone. Thank you for joining us today for the last second quarter of the 2024 Results Conference call and webcast.
Ehud Helft: Thank you for joining us today for Gilat's second quarter 2024 results conference call and webcast. A recording of this call will be available beginning at approximately noon Eastern time today, August 7, as a webcast on Gilat's website for a period of 30 days. Also, please note that investors are urged to read the forward-looking statements in Gilat's earnings release with the reminder that statements made on this early call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Security Litigation Reforms Act of 1995.
Speaker Change: A recording of this call will be available beginning at approximately noon eastern time today, August 7, as a webcast on Gilat's website for a period of 30 days.
Speaker Change: Also, please note that investors are urged to read the forward-looking statements in Gilat's earnings release, with the reminder that statements made on this earnings call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Security Litigation Reforms Act of 1995.
Ehud Helft: All such forward-looking statements, including statements regarding future financial operating results, involve risks, uncertainties, and contingencies, many of which are beyond the control of Gilat and which may cause actual results to differ prematurely from anticipated results. Elad is under no obligation to update or alter these forward-looking statements as a result of new information, future events, or otherwise, and the company explicitly exclaims any obligation to do so. More detailed information about risk factors can be found in the last report filed with the Security and Exchange Commission.
Speaker Change: Gilat is under no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise, and the company explicitly disclaims any obligation to do so.
Ehud Helft: With that, let me turn to the introduction. On the call today are Mr. Adi Sfadia, Gilat CEO, and Mr. Gil Benyamini, Gilat CFO. I would now like to turn the call over to Adi Sfadia. Adi, go ahead, please.
Speaker Change: On the call today are Mr. Adi Sfadia, GILAD CEO, and Mr. Gil Benyamini, GILAD CFO.
Ehud Helft: I would now like to turn the call over to Adi Sfadia. Adi, go ahead, please. Thank you, Ehud, and good day. Thank you for joining us today for our second quarter of 2024, Erling Koontz.
Adi Sfadia: Thank you and good day. Thank you for joining us today for our second quarter of 2024. The second quarter of 2024 was a good quarter for Gilat, in which we showed year-over-year revenue growth. This was primarily due to the strong momentum in our defense business, with a significant contribution following the acquisition of data. We expect this strong momentum to continue in the quarters ahead. In addition, another key achievement was our ability to increase our adjusted EBITDA by 10% year-over-year, exceeding $10 million.
Speaker Change: We expect this strong momentum to continue in the quarters ahead. In addition, another key achievement was our ability to increase our adjusted EBITDA by 10% year-over-year, exceeding $10 million.
Adi Sfadia: Most importantly, during the second quarter, we took a major strategic step and announced the acquisition of Stellar Blue Solutions, a leader and first to market in delivering electronically steerable antennas for the in-flight connectivity market. The closing of the acquisition is on track and expected around the beginning of the fourth quarter of this year. In a minute, Gil will discuss the financial elements of the deal in more detail, but before that, I want to discuss why I'm so excited about this acquisition and why this acquisition carries significant potential for Gilat.
Speaker Change: Most importantly, during the second quarter, we took a major strategic step and announced the acquisition of Stellar Blue Solutions, a leader and first to market in delivering electronically steerable antenna for the in-flight connectivity market.
Speaker Change: In a minute, Gil will discuss the financial elements of the deal in more detail, but before that I want to discuss why I am so excited about this acquisition and why this acquisition carries significant potential for Gilat.
Adi Sfadia: The acquisition of CellarBlue culminated many months of deep due diligence looking at all aspects of the IFC market, the company, its long-term growth potential, and potential synergies with Gilat's existing business infrastructure. This deal has the potential to unlock new strategic customers and create additional significant revenue for Gilat. Just recently, Stereoblue completed qualification and earned supplemental type certification on the multi-orbit sidewinder aeroterminal.
Adi Sfadia: We have a vision to broaden this product line with a more comprehensive suite of products for the IFC market. I can share that the company has started delivering the first Isothermial units to its customers. As such, we expect Stellar Blue to earn between $120 to $150 million in revenues in 2025 and be accretive to our non-gap results. Furthermore, we estimate that whilst Stellar Blue reaches its target manufacturing capacity during the second half of 2025, its EBITDA margin will be above 10%. Assuming closing will happen at the beginning of Q4, we estimate Seller Blue revenues to be between $25 to $35 million in Q4 of 2024.
Adi Sfadia: I am confident in Stellar Zeus's team, its leadership, its offering, and its go-to-market strategy. This acquisition will position us as a market leader for aviation ESA, a market that we believe is set to explode in the coming years. In the longer term, we can leverage the technology portfolio into other large adjacent markets. Overall, I believe this acquisition can transform Gilat into a high-growth company for the years to come, and I look forward to welcoming Stellar Blue's team to Gilat once we close. As for 2024 Outlook, we are reiterating the guidance we gave earlier this year in February 2024.
Adi Sfadia: I would note that once we close the Stellar Blue acquisition, we will provide updated guidance to account for the contribution from Stellar Blue in 2024. Now, let's move to the business review for the second quarter of 2024. In the very high throughput satellite, the VHTS, and the non-geostationary satellite, the NTSO Constellations Market, we continue to lead the market and grow our business with follow-on multi-million dollar orders from our strategic partners, the satellite operators, which mainly include STS and Intelsat, among others.
Adi Sfadia: This is driven by increasing demand for Gilat SkyEdge platforms as satellite operators expand their networks and deliver a wider range of applications to a growing number of users. Recently, we announced that the company was awarded over $9 million in community orders from multiple satellite operators to expand their global satcom networks by utilizing Gilat's innovative and field-proven solution. Gilat Solutions will enable a wide range of services and applications over Jio, Mio, and Leo, including in-flight connectivity, maritime and land mobility, cellular background, enterprise services, and more.
Gil Benyamini: Gilat solutions will enable a wide range of services and applications over GEO, MEO and LEO including in-flight connectivity, maritime, land mobility, cellular beacons, enterprise services and more.
Adi Sfadia: Also, during the quarter, we announced that SCSO3B Empire launched its services via Gilat SkyEdge4 platform. SkyEdge4, the industry-first multi-orbit NeoGeo system, is enabling SCSO3B Empire's software-driven constellation to deliver services with unparalleled flexibility and scale. Our increased focus on the defense market is already bearing fruit. During the second quarter, we announced that Nicole Robinson has been appointed President of DATAPAC
Speaker Change: ScotchForm, the industry-first multi-orbit NeoGeo system is enabling SES-O3B Empire software-driven constellations to deliver services with unparalleled flexibility and scale.
Speaker Change: Our increased focus on the defense market is already bearing fruits.
Speaker Change: During the second quarter, we announced that Nicole Robinson has been appointed President of Datapack.
Adi Sfadia: Ms. Robinson is an International Satellite Industry executive with a proven record of driving growth, managing global sales and operational teams, and deploying next-generation technology for the benefit of government and defense organizations, businesses, and communities globally. Q2 was also our second full quarter of consolidating revenues from DataPass into the defense sector under the satellite network segment. Furthermore, we recently announced several new projects that were awarded to DataPath and WaveStream. DataPath received over $9 million in orders in support of the U.S. Department of Defense and other agencies participating in field service and technical service programs worldwide.
Nicole Robinson: with a proven record of driving growth, managing global sales and operational teams, and deploying next generation technology for the benefit of government and defense organizations, businesses and communities globally.
Adi Sfadia: Datapass is deploying technical services and field services in Europe, the Middle East, and the United States to support U.S. defense end-users' critical connectivity requirements. These orders include both contract extensions and new contracts from various partners and agencies. DataPass was also awarded a multi-year contract of over $5 million from the National Defense Organization to upgrade their DICAT transportable SATCOM network hub. DataPath's multi-band tactical decat terminals deliver the operation flexibility, capacity, connectivity, rapid deployability, and control required to support demanding communication in remote locations. These terminals deliver secure, reliable communication anywhere it is needed to establish network connectivity to support a mission with minimal manpower.
Nicole Robinson: DataPath is deploying technical services and field services in Europe , the Middle East and the United States to support U.S. defense end-users' critical connectivity requirements. These orders include both contract extensions and new contracts from various partners and agencies.
Nicole Robinson: DataPass was also awarded a multi-year contract of over $5 million from National Defense Organization to upgrade their DCAT transportable satcom network hubs.
Nicole Robinson: DataPath's multi-band tactical decat terminals deliver the operation flexibility, capacity, connectivity, rapid deployability, and control required to support demanding communication in remote locations.
Adi Sfadia: In addition, WaveStream, one of our U.S.-based subsidiaries, received a significant order from a Tier 1 U.S. global military terminal provider for the MicroStream solid-state power amplifier for satellite communication terminals sold to militaries throughout the world. We continue to make great progress in the mobility sector, demonstrating solid year-over-year growth, developing more products, adding more customers, and supporting more verticals. During the second quarter, we received over 14 million dollars in orders from several prominent service providers and system integrators for IFC products and solutions. This includes Network Equipment, VSATS, and HAB. Solid State Power Amplifier and additional IFC auxiliary products.
Speaker Change: In addition, WaveStream, one of our U.S.-based subsidiaries, received a significant order from a Tier 1 U.S. global military terminal provider for their MicroStream solid-state power amplifier for satellite communication terminals sold to militaries throughout the world.
Speaker Change: We continue to make great progress in the mobility sector, demonstrating solid year-over-year growth, developing more products, adding more customers and supporting more verticals.
Speaker Change: During the second quarter, we received over $14 million in orders from several prominent service providers and system integrators for the IFC products and solutions.
Speaker Change: This includes network equipment, VSATs, HAP, solid-state power amplifiers, and additional IFC auxiliary products.
Adi Sfadia: These orders from new partnerships and existing customers demonstrate the company's leadership position in the growing IFC market for commercial and business aviation. During the quarter, SES announced its Open Orbit initiative, which will allow the use of KAE networks for global IFC connectivity. I am optimistic that this initiative will be part of our significant growth in this market. In Peru, we are progressing faster than planned in implementing the Amazonas region's $17 million expansion project.
Speaker Change: These orders from new partnerships and existing customers demonstrate the company's leadership position in the growing IFC market for commercial and business aviation.
Speaker Change: During the quarter, SES announced its Open Orbits initiative, which will allow the use of KAE networks for global IFC connectivity. I am optimistic that this initiative will be part of our significant growth in this market.
Speaker Change: In Peru, we are progressing faster than planned in implementing the Amazonas region's $17 million expansion project.
Adi Sfadia: We expect to finish the implementation of this expansion before the end of the year. In addition, we expect to move to the operational phase in the Six Regions Project of Buonatelle in the Amazonas region during the third quarter. This follows the completion of the acceptance process, which is currently underway. During the quarter, we received the following orders for over $10 million from Internet Para Todos, IPT, a consortium comprised of Telefonica and MetaFacebook to deliver several backhoe services across rural areas in Peru. IPT is a global collaborative initiative to bridge the digital divide in Latin America under a sustainable model that would allow to overcome the obstacles of bringing connectivity to rural and geographically complex areas.
Speaker Change: We expect to finish the implementation of this expansion before the end of the year. In addition, we expect to move to the operational phase in the Six Regions project of Puanatel in the Amazonas region during the third quarter.
Speaker Change: This follows the completion of the acceptance process which is currently underway.
Speaker Change: During the quarter, we received the following orders for over $10 million from Internet Para Todos, IPT, a consortium comprised of Telefonica and MetaFacebook, to deliver cellular backhoe services across rural areas in Peru.
Speaker Change: IPT is a global collaborative initiative to bridge the digital divide in Latin America under a sustainable model that would allow to overcome the obstacles of bringing connectivity to rural and geographically complex areas.
Adi Sfadia: Gilat will provide access to high-speed terrestrial connectivity to over 1 million more people living in rural areas. Furthermore, in Peru, we are expecting additional progress in the next few months. This includes the maturity of several large RFPs with PONATEL and the Peruvian government, as well as several project extensions.
Speaker Change: Gilat will provide access to high-speed terrestrial connectivity to over 1 million more people living in rural areas. Furthermore, in Peru, we are expecting additional progress in the next few months. This includes the maturity of several large RFPs with PONATEL and the Peruvian government, as well as several project extensions.
Adi Sfadia: We are very pleased with the strong pipeline in Peru for the rest of the year. To conclude, the second quarter has been very valuable for Gilat; our acquisition of Stellar Blue solutions has the potential to be a significant growth engine for Gilat, and it will establish us as a market leader for aviation ISA, a market that we believe is set to explode in the coming years. I am pleased with our second quarter results, which include the contribution of our acquisition of DataPass and strong momentum in our defense business.
Speaker Change: We are very pleased with the strong pipeline in Peru for the rest of the year. To conclude, the second quarter has been very valuable for Gilat. Our acquisition of Stellar Blue solutions has the potential to be a significant growth engine for Gilat and it will establish us
Speaker Change: As a market leader for aviation, ISA is a market that we believe is set to explode in the coming years.
Speaker Change: I am pleased with our second quarter results.
Speaker Change: which include the contribution of our acquisition of DataPath and strong momentum in our defense business.
Adi Sfadia: We continue to lead with our next generation platform, the SkyEdge4, which supports multiple orbits, verticals, and applications, including our strategic markets of mobility, cellular vehicles, and defense. We are particularly proud of our contribution to the SVF, also known as the Empire Service Launch. During the second quarter, we made significant progress in expanding our IFC footprint into business and commercial aviation, including the SES Open Orbits Initiative. We have a strong pipeline and expect the materialization of important deals over the coming months. With that, I will hand over to Gil Benyamini, RCF4. Gil, please.
Speaker Change: We continue to lead with our next generation platform, the SKYDS4, which supports multiple orbits, verticals and applications, including our strategic markets of mobility, cellular vehicles and defense.
Speaker Change: We are particularly proud of our contribution to the SES-OSABI Empire service launch. During the second quarter, we made significant progress in expanding our IFC footprint into business and commercial aviation, including the SES Open Orbits initiative.
Speaker Change: We have a strong pipeline and expect the materialization of important deals over the coming months.
Gil Benyamini: With that, I will hand over to Gil Benyamini, RCFO. Gil, please. Thank you, Adi. Good day to everyone. I would like to remind everyone that our financial results are presented on both GAAP and non-GAAP basis.
Gil Benyamini: Please. Thank you, Adi. Good day to everyone. I would like to remind everyone that our financial results are presented on both a GAAP and a non-GAAP basis. We regularly use supplemental non-GAAP financial measures internally to understand, manage, and evaluate our business and to make operating decisions. We believe that these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating performance. Non-GAAP financial measures mainly exclude, if and when applicable, the effect of non-cash stock-based compensation expenses, amortization of purchased intangibles, lease incentive amortization, other non-recurring expenses, other integration expenses, one-time changes in deferred tax assets, other operating net, and income tax effects on the relevant adjustments.
Gil Benyamini: We regularly use supplemental non- GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. We believe that these non- GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating performance.
Gil Benyamini: non-GAAP financial measures mainly exclude, if and when applicable, the effect of non-cash stock-based compensation expenses, amortization of purchased intangibles, leased incentive amortization, other non-recurring expenses.
Gil Benyamini: Other integration expenses, one-time changes of deferred tax assets, other operating income net and income tax effect on the relevant adjustments.
Gil Benyamini: The reconciliation table in our press release highlights this data, and our non-GAP information presented excludes this item. Before moving to the financial highlights, I would like to review the Stellar Blue acquisition and provide you with more financial information on the consideration components of the deal. The initial consideration at closing is 98 million dollars.
Gil Benyamini: The reconciliation table in our press release highlights this data, and our non-GAAP information presented excludes these items.
Gil Benyamini: This will be financed from both internal resources as well as a bank loan, ensuring that we continue to maintain a strong level of working capital. The deal is structured with incentives to deliver accelerated growth with focus on three main areas. Parts 1 and 2 of the earn-out, which totals to $48 million, cover the ability of the company to successfully execute its plans for the near future and requires that Stellar Blue ramp up its production line and deliver a grid number of ESA terminals, not less than specific margins, and that Stellar Blue brings additional new orders at agreed margins, equivalent more or less to its existing backlog.
Gil Benyamini: Before moving to the financial highlights, I would like to review the Stellar Blue acquisition and provide you with more financial information on the consideration components of the deal.
Gil Benyamini: The initial consideration at closing is 98 million dollars. This will be financed from both internal resources as well as a bank loan, ensuring that we continue to maintain a strong level of working capital.
Gil Benyamini: The deal is structured with incentives to deliver accelerated growth with focus on three main areas.
Gil Benyamini: Parts 1 and 2 of the earn-out, which totals to $48 million,
Gil Benyamini: covers the ability of the company to successfully execute its plans for the new future.
Gil Benyamini: and requires that Stellar Blue ramp up its production line and deliver a grid number of ESA terminals, not less than a specific margin, and that Stellar Blue brings additional new orders at agreed margins, equivalent more or less to its existing backlog.
Gil Benyamini: These conditions, combined with the existing backlog, support our expectations of between $120 to $150 million for revenues for 2025 and provide further grounds for future growth within the existing markets and customers. Parts 1 and 2 of the earnouts are expected to be paid, if due, 12 and 18 months post-signing respectively.
Gil Benyamini: These conditions, combined with the existing backlog, support our expectations of between $120 to $150 million outlook for revenues for 2025 and provide further grounds for future growth within the existing markets and customers.
Gil Benyamini: Parts 1 and 2 of the earnouts are expected to be paid if due 12 and 18 months post-signing respectfully.
Gil Benyamini: Part 3 of the earnout, which totals up to $99 million, is conditioned upon engaging in new strategic customer agreements with enhanced product offerings, both in and beyond the IFC market. These envisioned agreements would build upon Stellar Blue's proven multi-orbit platform, but apply to new service providers and mobility markets, with an opportunity for significantly higher margins, all within two years from the signing of the purchase agreement. As Adi mentioned, we believe that this acquisition transforms Gilat into a high-growth company for the years ahead. I will now move to our financial highlights for the second quarter of 2024. Overall, as Adi mentioned earlier, we are very pleased with the strong start to 2024.
Gil Benyamini: Part 3 of the earn-out, which totals an additional up to $99 million,
Gil Benyamini: is conditioned upon engaging in new strategic customer agreements.
Gil Benyamini: with enhanced product offerings both in and beyond the IFC market.
Gil Benyamini: These envisioned agreements would build upon Stellar Blue's proven multi-orbit platform, but apply to new service providers and mobility markets with an opportunity for significantly higher margins, all within two years from signing of the purchase agreement.
Gil Benyamini: As Adi mentioned, we believe that this acquisition transforms Gilat to a high-growth company for the years ahead.
Speaker Change: I will now move to our financial highlights for the second quarter of 2024.
Speaker Change: Overall, as Adi mentioned earlier, we are very pleased with the strong start of 2024. We reported a 13% year-over-year growth in revenues. This was driven mainly by our current recent acquisition of datapaths.
Gil Benyamini: We reported a 13% year-over-year growth in revenues. This was driven mainly by our recent acquisition of datapaths. Non-GAAP growth margin was 37%, and our adjusted EBITDA reached $10.1 million, 10% growth over Q2 of last year. We are optimistic about our prospects in the quarter ahead, and we reiterated our guidance for 2024, which I'll cover later in terms of our financial results in more detail. Revenue for the second quarter was $76.6 million, 13% higher than the second quarter of last year, which was $67.6 million. The improvement was driven by growth in the satellite network segment.
Speaker Change: non-GAAP growth margin was 37% and our adjusted EBITDA reached $10.1 million, 10% growth over Q2 of last year.
Speaker Change: We are optimistic about our prospects in the quarter ahead and we reiterated our guidance for 2024, which I'll cover later.
Speaker Change: in terms of our financial results in more detail.
Speaker Change: Revenue for the second quarter was $76.6 million, 13% higher than those of the second quarter of last year, which were $67.6 million. The improvement was driven by growth in the satellite network segment.
Gil Benyamini: In terms of the revenue breakdown by segment, Q2'24 revenues of the satellite network segment were $50.6 million compared to $40.7 million in the same quarter last year. Q2'24 revenues of the Integrated Solutions segment were $13 million compared to $12.7 million in the same quarter last year. And Q2-24 revenues of the Networks, Infrastructure, and Services segment were $13.1 million compared to $14.2 million in the same quarter last year. The decrease was due to lower services revenue this year. I would now like to summarize our first quarter and our second quarter results, both GAF and non-GAF.
Speaker Change: In terms of the revenue breakdown by segment, G224 revenues of the satellite network segment were $50.6 million compared to $40.7 million in the same quarter last year.
Speaker Change: Q224 revenues of the integrated solution segment were $13 million compared to $12.7 million in the same quarter last year.
Speaker Change: and Q2-24 revenues of the Networks, Infrastructure and Services segment were $13.1 million compared to $14.2 million in the same quarter last year. The decrease was due to lower services revenues this quarter.
Speaker Change: I would now like to summarize our second quarter, both GAAP and non-GAAP results.
Gil Benyamini: Our GAAP gross margin for Q2-24 was 34.7% compared to 37.8% in the same quarter last year. The reduction in our gross margin was mainly due to datapaths' gross margin, which is lower than the Gilat average, and the depreciation of a backlog in tangible assets associated with the acquisition of datapaths. This was partially offset due to a favorable product and services mix in the current quarter compared to Q2 of last year. Gap operating expenses in Q2-24 were $23.8 million, an increase of $3.7 million versus the same quarter last year. This quarter, we have the impact of approximately $2.4 million of amortization of purchased intangibles and other acquisition-related expenses. These impacts are included only in the gap number.
Speaker Change: Our gas gross margin for Q2-24 was 34.7% compared to 37.8% in the same quarter last year.
Speaker Change: The reduction in gross margin was mainly due to data passes, gross margin which are lower than the Gilat average.
Speaker Change: and the depreciation of a backlog intangible asset associated with the acquisition of DataPath. This was partially offset due to a favorable product and services mix in the current quarter compared to Q2 of last year.
Speaker Change: Gap operating expenses in Q2-24 were $23.8 million, an increase of $3.7 million versus the same quarter last year.
Speaker Change: This quarter, we have the impact of approximately $2.4 million of amortization of purchased intangibles and other acquisition-related expenses. These impacts are included only in the GAAP numbers.
Gil Benyamini: I also note that this quarter we have the operational expenses related data path which we didn't have in the second quarter of class. Gap operating income for the quarter is $2.8 million compared to $5.4 million in the same quarter last year. Gap net income in the second quarter was $1.3 million, or $0.02 per diluted share. This is compared to a Gap net income of $4.3 million, or diluted earnings per share of $0.08, in the same quarter last year.
Speaker Change: I also note that this quarter we have the operational expenses related data path which we didn't have in the second quarter of last year.
Speaker Change: Gap operating income for the quarter is $2.8 million compared to $5.4 million in the same quarter last year.
Speaker Change: Gap net income in the second quarter was $1.3 million or $0.02 per diluted share. This is compared to a gap net income of $4.3 million or diluted earnings per share of $0.08 in the same quarter last year.
Gil Benyamini: Moving to the non-GAAP results, our non-GAAP gross margin in Q2-24 was 36.8% compared to 37.9% in the same quarter last year. As I mentioned earlier, this difference is mainly due to data path lower gross margin compared to Gilat's outgoings.
Gil Benyamini: Non-GAAP operating expenses in Q2-24 were $20.9 million compared with $19.6 million in the same quarter last year, primarily due to the cost of data protection. Non-GAAP operating income for the quarter improved to $7.3 million compared to $6.1 million in the same quarter last year. Non-GAAP net income in the quarter was $5.6 million, or diluted earnings per share of $0.10. This is compared with $4.9 million, or diluted earnings per share of $0.09, in the same quarter last year. The adjusted EBITDA for the quarter improved to $10.1 million, an increase of 10% compared with the adjusted EBITDA of $9.2 million in the same quarter of last year.
Speaker Change: Non-GAP operating expenses in Q2-24 were $20.9 million compared with $19.6 million in December last year, primarily due to the conciliation of data path expenses.
Speaker Change: Adjusted EB-DAF for the quarter improved to $10.1 million, an increase of 10% compared with the adjusted EB-DAF of $9.2 million in the same quarter of last year.
Gil Benyamini: Moving to the balance sheet, as of June 30, 2024, our total cash and cash equivalents and restricted cash net of short-term debt were $94.6 million, compared with $98.5 million on March 31, 2024 and compared to $87.8 million as of June 30, 2023. In terms of cash flow, we used $3.5 million for operating activities during the second quarter of 2024. Due to changes in working capital, we expect an operating cash inflow in the next quarter.
Speaker Change: DSO, which excludes receivables and revenues of our terrestrial network construction project in Peru, were 88 days, higher than previous quarter's DSO, which were 76 days. This KPI is within our normal range of up to 90 days.
Speaker Change: Our shareholders' equity as of June 30, 2024, increased to $283 million, compared with $281 million at the end of March, 2024.
Speaker Change: Looking ahead, we reiterate our guidance for the year, our expectations remain for revenue between
Speaker Change: $305 to $325 million, representing year-over-year growth of 18% at the midpoint.
Speaker Change: Gap Operating Income of between $15-19 million and Adjusted Dividends of between $40-44 million dollars, representing year-over-year growth of 15% at the midpoint.
Gil Benyamini: We also made a net repayment of loans of $4.6 million. DSO, which excludes receivables and revenues of our terrestrial network construction projects in Peru, was 88 days, higher than previous quarters' DSO, which was 76 days. This KPI is within our normal range of up to 90 days. Our shareholders' equity as of June 30, 2024, increased to $283 million, compared with $281 million at the end of March 24. Looking ahead, we reiterate our guidance for the year.
Gil Benyamini: Our expectations remain for revenue of between $305 to $325 million, representing year-over-year growth of 18% at the midpoint, gap operating income of between $15 to $19 million, and adjusted divisional revenue of between $40 to $44 million, representing year-over-year growth of 15% at the midpoint. That concludes my financial review. I would now like to open the call and would be happy to take your questions. Operator, please.
Speaker Change: Thank you. Ladies and gentlemen...
Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers.
Speaker Change: At this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 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.
Operator: Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Ryan Koontz of Needham & Co. Please go ahead.
Speaker Change: Please stand by while we poll for your questions.
Speaker Change: The first question is from Ryan Koontz of Needham & Company. Please go ahead.
Ryan Koontz: Good morning. A nice quarter.
Ryan Koontz: Good morning. Nice quarter. Thanks for the opportunity and the questions.
Ryan Koontz: Thanks for the opportunity and the questions. Can you maybe update us on what your view is of, you know, cross-selling with Datapath? You made some comments in your prepared remarks. I think I didn't quite capture what the intention of your commentary was. I know that was something that you were working on and sounded like more of a 25-type opportunity, maybe. Can you update us on that?
Ryan Koontz: Can you update us maybe on what your view is of, you know, cross-selling with data paths? You made a...
Speaker Change: Footwork Team tension of your commentary was, I know that was something that...
Speaker Change: You're working on and sound like more of a 25 type opportunity maybe can you update us on that?
Adi Sfadia: Thanks Ryan for popping on the call. Indeed, cross-selling Datapass equipment goes both ways. Datapass to bring Gilat's equipment into the DoD, and Gilat to sell Datapass equipment worldwide. We are progressing. We are starting to have a dialogue with some of the DOD agencies and promoting DataPass equipment worldwide. To be honest, we are more optimistic these days. We see much more potential than we thought we would see in the first year from signing.
Speaker Change: Yeah, thanks Ryan for being on the call.
Speaker Change: Indeed, they are cross-selling data bus equipment.
Speaker Change: It goes both ways, Datapass to bring Gilat's equipment into the DoD and Gilat to sell Datapass equipment worldwide. We are progressing. We are starting to have a dialogue.
Speaker Change: with some of the DOD agencies and promoting data pass equipment worldwide.
Speaker Change: To be honest, we are more optimistic these days. We see much more potential than we thought we would see in the first year.
Adi Sfadia: The first collaboration was between WaveStream and DataPass; it's a $12 million order that we received last quarter. Other than that, there is a pipeline that is developing, and I hope that we will be able to announce several awards soon.
Speaker Change: The first collaboration was between Wavestream and Datapath. It's a $12 million order that we received last quarter.
Speaker Change: Other than that, there is a pipeline that is developing and I hope that we will be able to announce several awards soon.
Ryan Koontz: Great, that makes a lot of sense. Thanks for that. On the infrastructure business, it sounds like you're progressing there with your customer approvals. What should we think about the gross margin outlook there post-approval of the Amazonia region?
Speaker Change: Great, that makes a lot of sense. Thanks for that. On the infrastructure business, it sounds like you're progressing there with your customer approvals. How should we think about the gross margin outlook there post-approval of the Amazonia region?
Adi Sfadia: So usually, the construction phase is associated with a lower gross margin than the service or operation part of this business. So, we expect to finish the construction, or almost all of it, by the end of this year, and naturally, this will push up the gross margin of this segment to be higher next year.
Speaker Change: So usually the construction phase is associated with a lower gross margin than the service or operation part of this business.
Speaker Change: So we expect to finish the construction, or almost all of it, by the end of this year.
Speaker Change: Naturally, this will push up.
Speaker Change: The the gross margin of this this segment to be higher next year
Ryan Koontz: Great, thanks for that. And on your progress in the LEO market, I wonder if you could share any anecdotes, whether customer-specific or general. Obviously, OneWeb has begun its commercial launch. What should investors think about your current mix of business relative to the LEO market, and how do you see that market developing over the next 18 months from Gilat's perspective?
Speaker Change: Thanks for that. On your progress in the LEO market, I wonder if you could share any anecdotes, whether customer specific or general.
Speaker Change: OneWeb has begun their commercial launch. How should investors think about your current mix of business relative to the Leo market and how do you see that market developing over the next
Adi Sfadia: Up until today, most of the business we have got in the LEO segment relates to solid-state power amplifiers for Constellation Gateways. We are not allowed to name names, but we are working with big players in this segment.
Gilad: from Gilat's perspective.
Gilad: So.
Speaker Change: Up until today, most of the business we got...
Speaker Change: On the LEO segment, it relates to solid state power amplifiers for constellation gateways.
Speaker Change: We are not allowed to name names, but we are working with big players in this segment.
Adi Sfadia: Right now, we see two very large opportunities from our perspective on the LEO segment, which include SSPA, networks, modems, and also Thank you. We are one of the two finalists in OneWeb, and I believe that they should make a decision in the coming quarter or so. Iris, we answered the RFIs, and we expect them to launch the RFPs soon. Thank you, and we are eligible to participate because we have a large operation in Europe.
Speaker Change: We are, right now we see two very large opportunities from our perspective on the LEO segment, which include SSPA, networks, modems, and also a...
Speaker Change: We are one of two finalists in OneWeb and I believe that they should take a decision in the coming quarter or so. Iris, we answered the RFIs and we expect them to launch the RFPs.
Speaker Change: and we are eligible to participate because we have a large operation in Europe .
Adi Sfadia: In addition, what we see on the Leo side is that it drives a lot of IFC business. For example, Intercept acquired OneWeb, and it will drive a lot of business in the IFC, especially in the electronic steerable antenna, which is part of the main motivation and rationale for the Stellar Blue acquisition. So, to summarize, I think that we are expecting a good year and we are hoping that the IFC will do a lot of business from LEO in the coming few quarters.
Speaker Change: In addition, what we see on the Leo side is that it drives a lot of IFC business. For example, Intercept bots from OneWeb.
Speaker Change: It will drive a lot of business in the IFC, especially in the electronic steerable antenna, which is part of the main motivation and rationale for the Stellar Blue acquisition.
Speaker Change: So, to summarize, I think that we are expecting, we are expecting...
Speaker Change: A lot of business from LEO in the coming few quarters. I forgot to mention that also the SATCOM direct antenna development...
Adi Sfadia: I forgot to mention that also the Satcom Direct Antenna Development Award that we got about a year ago is also related to the OneWeb Constellation. Over there, we are developing an ESA terminal for business aviation over OneWeb. So all in all, we are seeing very nice business, and with these two opportunities, they are very significant for Gilat.
Speaker Change: The award that we got about a year ago is also related to the OneWeb constellation. Over there we are developing an ESA terminal for business aviation over OneWeb.
Speaker Change: So all in all, we are seeing a very nice business, and with the two opportunities, they are very significant for Gilat.
Ryan Koontz: That's great, Adi. A great update there.
Ryan Koontz: Go into steps, and follow up on that in your Stellar Blue comments. What should we think of as the key milestones that you're tracking, and what are the greatest challenges with getting the production capacity going on StellarBlue? It sounds like, with their terrific backlog, it's... It's really just a matter of execution here and what he views as the biggest challenges there. So you.
Speaker Change: That's great, Adi. Great update there. Go into steps, follow up on that in your Stellar Blue comments.
Speaker Change: What should we think of as the key milestones that you're tracking and what are the greatest challenges with?
Speaker Change: Getting the production capacity going on Stellar Blue. It sounds like with their terrific backlog, it's really just a matter of execution here and what do you view as the biggest challenges there?
Speaker Change: Execution is always the name of the game and indeed Stellar Blue is now in the midst of moving from
Adi Sfadia: Execution is always the name of the game, and indeed Stellar Blue is now in the midst of moving from Thank you very much for joining us on this session of the Adi Satellite Network. This is the first session of the Adi Satellite Network. We are in the development phase to execution delivery phase. I can share that they have already delivered the first unit to the customers. The initial forecast we gave for next year from $100-$150 million to $120-$150 million. It's still preliminary, of course, and not guidance. I think that, like every company, to execute and bring in more orders are the two main challenges of Stellar Blue.
Speaker Change: They passed certifications and are in the midst of ramping up production.
Speaker Change: Since we have much more confidence today, we even a bit upgrade the initial forecast we gave for next year from $100 to $150 million dollars to $120 to $150 million dollars.
Speaker Change: I think that, as every company, to execute and bring more orders, those are the two main challenges of Stellar Blue.
Ryan Koontz: And in terms of that wrap, in terms of supply chain and these sorts of things, are there real challenges there with sourcing, or is it more challenges with regard to, you know, any new products that are ramping through, you know, the production process?
Speaker Change: In terms of that ramp, in terms of supply chain and these sorts of things, are there real challenges there with sourcing, or is it more challenges with regards to...
Adi Sfadia: No, we don't see any supply chain-specific issues, it's just ramping up new product introduction into the market, which usually takes time. It's not something that is unique to Stellar Blue; it's within every company, including with Gilat. When we launched a new product, at the beginning, there were challenges from the manufacturing line.
Speaker Change: Production Process.
Speaker Change: No, we don't see any supply chain...
Speaker Change: Specific issues, it's just ramping up new product introduction into the market, which usually takes time, it's not...
Speaker Change: It's not something that is unique to Stellar Blue, it's within every company, including with Gilat, when we launched a new product, at the beginning there are challenges on the manufacturing line.
Ryan Koontz: Okay, perfect. That's all I got. Thanks for the commentary. Thank you, Ryan.
Speaker Change: Okay. Perfect. That's all I've got. Thanks for the commentary. Thank you, Ryan. See you soon.
Operator: Thank you, Ryan. See you soon.
Christopher Quilty: The next question is from Chris Quilty of Quilty Space. Please go ahead.
Speaker Change: The next question is from Chris Quilty of Quilty Space. Please go ahead.
Christopher Quilty: Thank you. Nice results, guys. Just to follow up on that last question, maybe it sounds like the supply chain in the manufacturing is going well, but can you touch on the STC process? I think you mentioned you're making progress there, but, you know, how broadly are you targeting STCs on different airframes and, you know, who is leading that effort? Is that happening internally at Stellar Blue, or do you have partners and Unknown Speaker 0.0.0?
Chris Quilty: Thank you, nice results guys. Just to follow up on that last question, maybe, it sounds like the supply chain in the manufacturing is going well, but can you touch on the STC process? I think you did mention you're making progress there, but...
Speaker Change: how broadly are you targeting SBCs on different airframes?
Speaker Change: Who is leading that effort? Is that happening internally at Stellar Blue or do you have partners working on that?
Adi Sfadia: It's a combination of Stellar Blue and the responsibility of the customers, and it's progressing as we expected. Recently, Stellar Blue announced that they had received several certifications, and we see it on track, and I think it's not halting any deliveries. The only thing is ramping up production and starting to deliver more units per month. Now we are talking about a few units per month; soon we will be talking about ten units, tens of units, and hopefully, by the second half of next year, we'll be able to deliver more than 100 units per month.
Speaker Change: It's a combination of Stellar Blue and the responsibility of the customers and it's progressing as we expected. Recently Stellar Blue announced that they got several certifications and we see it on track.
Speaker Change: And I think it's not halting any deliveries.
Speaker Change: The only thing is ramping up production and starting to deliver more units per month.
Speaker Change: Now we are talking about a few units per month, soon we are talking about ten units, tens of units and hopefully by the second half of next year we will be able to deliver more than 100 units per month.
Christopher Quilty: Great. Gil, a couple of housekeeping questions. I know last quarter you kind of gave us the breakdown of the DataPath contribution for organic growth versus acquired growth. Can you share that this quarter?
Speaker Change: Give us a couple housekeeping questions. I know last quarter you kind of gave us the breakdown of the data path contribution of those the organic growth versus
Gil Benyamini: This quarter, as I mentioned, most of the growth came from datapath. If we look on a quarterly basis, organic growth was negative 4%. On a 6-month basis, it was plus 4%, as expected. And I remind everyone that we like to analyze Gilat not on a quarterly basis but over a longer period of time due to the timing of specific deliveries that might shift a bit to the right or to the left. So, generally, we're on track.
Speaker Change: Acquired
Speaker Change: Can you share that this quarter?
Speaker Change: Yes, sure. So this quarter, as I mentioned, most of the growth came from data paths.
Speaker Change: If we look on a quarterly basis...
Speaker Change: the organic growth was negative 4% on six months.
Speaker Change: 4% as expected, and I remind everyone that we like to analyze the lab not on a quarterly basis, but on a longer period of time.
Speaker Change: period kind of analysis, due to timing of specific deliveries, that might shift a bit to the right or to the left. So, generally, we are on track.
Christopher Quilty: Great. And is the run rate for the amortization reported in the quarter consistent with what we should expect on a go-forward basis now that data path is rolled in and excluding Stellar Blue, obviously?
Speaker Change: Is the run rate for the amortization reported in the quarter consistent with what we should
Gil Benyamini: Yeah. So yeah. Yeah.
Gil Benyamini: Yeah, so in general, as I said in my script, it's about $2.4 million per Q in these quarters. Usually, there are, I would say, two components that might affect this number. First is the...
Gil Benyamini: Amortization or net income at the end of the day is also affected by Gilat's share price due to the fact that part of the payment is in shares, so it may fluctuate up or down. The second thing is that part of the amortization is associated with backlog, which is usually amortized over up to 18 months, so you can expect a drop in this $2.4 million around 18 months after a closing, which will be the middle of next year.
Speaker Change: So it may fluctuate up or down.
Speaker Change: The second thing is that part of the amortization is associated with backlog, which is usually amortized over up to 18 months. So you can expect...
Gil Benyamini: I think there is a schedule on the 20th of the amortization, but it should be.
Christopher Quilty: And you mentioned backlog, so I'll ask, and I know you don't provide backlog, but, excluding, you know, the data path, what are you seeing in overall trends in terms of order pipeline this year, relative to your expectations, and, you know, are there any factors? We're not, on the defense market, dealing with a continuing resolution in the U.S. In the aviation market, we are dealing with Boeing and late deliveries. You know, are any of those macro factors impacting your outlook, or is it more just company and deal specific?
Speaker Change: And you mentioned backlog, so I'll ask, and I know you don't provide backlog, but excluding the data pack, what are you seeing in overall trends in terms of order pipeline this year?
Speaker Change: In the aviation market, we are dealing with Boeing and late deliveries. Are any of those macro factors impacting your outlook, or is it more just company and deal specific?
Adi Sfadia: In Gilat, in most cases, it's company and deal specific. But what we do see is strong momentum in the IFC, tied to Intersat, an SES Open Space initiative. We do see, um, eh, eh... A lot of headwinds in the defense. Not only through DataPass but also through WaveStream and the satellite networks at Gilat. But overall, if you look at the combined forecast, we haven't changed our guidance. That means that we are on track with our expectations.
Speaker Change: Tied to InterSat and SES Open Space Initiative.
Speaker Change: We do see...
Speaker Change: A lot of headwinds in the defense.
Christopher Quilty: Great. And specific to the cellular backhaul market, you were running really hot, you know, I think a year ago or so with a lot of orders. It feels like that market has sort of slowed down a bit. Is that a correct perception? And do you see any, you know, discrete large opportunities or reasons that the market might pick up a little bit on a go forward?
Speaker Change: Great. And specific to the cellular backhaul market, you were running really hot.
Adi Sfadia: I agree that the last quarter on solar backhaul was a bit slower than usual, but we don't think it's a trend, we think it's a one-off in the industry. You know, based on the analysts who cover the market, everyone expects that this market will... We have seen growth from 150 million dollars' reward in dung today to around 350-400 million dollars in seven years or so, so we share the same expectations We see a nice pipeline. So we really hope that it will return. We do see, and we're starting to see a lot of 5G opportunities. The 5G will drive significant goals in years to come.
Speaker Change: I agree that the last quarter on solar backhaul was a bit slower than usual, but we don't think it's a trend, we think it's a one-off in the industry.
Speaker Change: Based on the analysts who cover the market, everyone expects that this market will
Speaker Change: So we really hope that it will return. We are starting to see a lot of 5G opportunities. 5G will drive significant growth in years to come.
Christopher Quilty: And remind me, is the SkyEdge 4 fully 5G compatible, or is that a new platform upgrade? No, 5G is fully compatible.
Adi Sfadia: Now the 5G is fully, the Sky 4 is fully 5G compatible. I remind you that about a quarter ago in India, we demonstrated, together with SES and one of the largest Indian operators, more than 600 megabits per second into the handset, which is on SkyEdge 4 together with the SCS M-Power. So from a speed perspective and latency perspective, we are already there. Of course, no one will get 600 megabits per second to the answer, but this is up to the operator, not up to us.
Speaker Change: Now the 5G is fully, the Sky 4 is fully 5G compatible. I remind you that about a quarter ago in India, we demonstrate together with SCS and...
Speaker Change: One of the largest Indian operators, more than 600 Mbps into the handset, which is on SkyEdge 4 together with SCS M-Power.
Speaker Change: So, from speed perspective and latency, we are already there. Of course, no one will get 600 megabits per second to the answer, but this is up to the operator, not up to us.
Christopher Quilty: Can't you put a special mode in there?
Adi Sfadia: Are you serious? I can't!
Christopher Quilty: All right, so a follow-up question just on, you know, you talked about the Gilat ESA. Can one of you guys come up with a name for that product so we don't have to call it the Gilat ESA?
Speaker Change: All right. So a follow-up question just on, you know, you had talked about the Gilat ESA. A, when are you guys coming up with a name for that product so we don't have to call it the Gilat ESA?
Christopher Quilty: You know, any updates there, obviously you have that as a project with Satcom Direct. You know, Hughes has sort of come into that market with a OneWeb-compatible ESA. What is the business jet market looking like? And, you know, what do you think the opportunity size for that product is relative to Stellar Blue?
Speaker Change: You know, any updates there, obviously you have that as a project with Satcom Direct.
Speaker Change: Hughes has sort of come into that market with a OneWeb compatible ESA. What is that business jet market looking like and what do you think the opportunity size for that product is relative to Stellar Blue?
Adi Sfadia: So, first of all, ESR solutions are called, in general, ESR as a... Family. We see a lot of players getting into the market, but in the end, usually, each and every service provider has its own unique terminal. Usually, it's one terminal. In rare cases, you see them working with more than one terminal.
Speaker Change: So first of all our ESR solutions are called in general ESR.
Speaker Change: But...
Adi Sfadia: I know that H&S is cooperating with Gogo on the BA side, but give or take, this is what we see right now. The business of aviation is a very large market with a lot of potential, and I think that there is room for several players over there to grow.
Speaker Change: But give or take, this is what we see right now.
Speaker Change: The business of aviation is a very large market with a lot of potential and I think that there is room for several players over there to grow.
Christopher Quilty: Gotcha. And I guess maybe the final question here, when you look at the defense market opportunity, clearly you're still working the data path angle, but have they historically had international exposure for that business, or was it overwhelmingly U.S. based, and do you have sort of the sales channel within Gilat to move those products, or does that take some investment in sales and marketing and overseas distribution for some of those projects?
Speaker Change: Gotcha.
Speaker Change: And I guess maybe final question here, when you look at the defense market opportunity
Speaker Change: Clearly, you're still working the data path angle, but
Speaker Change: You know, sort of the sales channel within Gilat to move those products or does that take some investment in sales and marketing and overseas distribution for some of those projects.
Adi Sfadia: So, historically, give or take, about 10% of data bus business was internationally. They have some channels worldwide, especially in Europe, and they work directly in some Asian countries. But now that Gilat has a foot on the ground in those countries, we think that we can accelerate the penetration and increase the business. We are already seeing some opportunities in Asia and Latin America, and in Europe, and other places, and I think that there is the potential to double data bus revenues both in the U.S. and internationally.
Speaker Change: Thank you.
Speaker Change: They have some channels worldwide, especially in Europe , and they work directly in some of the Asian countries.
Speaker Change: I think that there is a potential to double data bus revenues both in the U.S. and internationally.
Gunther Karger: The next question is from Gunther Karger of Discovery Group. Please go ahead.
Gunther Karger: Yes, thank you for taking the question. Regarding aviation communications, concerning the recent shutdown, the shutdown of the commercial air transport system because of communications, is there any opportunity for Gilat and the upcoming..., uh... acquisition to serve that market? I'm talking about operational communications between air traffic control centers and the aircraft in between.
Speaker Change: If there are any opportunities for Gilat and the upcoming acquisition to serve that market, I'm talking about operational communications between air traffic control centers and the aircraft in between.
Adi Sfadia: Our terminal serves the passengers. Of course, they can serve the crew also, but it's not built in a way to have secure communication between the traffic control and the crew. Of course, if something doesn't work, they can try and use our equipment, but it's not built for that.
Gunther Karger: Thank you. It seems like that could be an enormous opportunity because that's an archaic system that is creating the problem that we have.
Speaker Change: and Gil Benyamini. Thank you.
Speaker Change: Thank you. It seems like that could be an enormous opportunity because that's an archaic system which is creating the problem that we have.
Adi Sfadia: It's definitely an opportunity. We are trying to focus right now on delivering our commitment to customers, but when reviewing adjacent markets and future growth engines, it's something that we're definitely going to explore.
Gunther Karger: Thanks very much. Good luck. Thank you. Thank you, Dr.
Speaker Change: Thanks very much. Good luck. Thank you. Thank you, Gunther.
Sergei Lukyanov: The next question is from Sergei Lukyanov of Freedom Brokers Capital. Please go ahead.
Sergei Lukyanov: Hello everyone. At this moment, I have a couple of questions, and most of them are regarding solar blue. The first, I'm just wondering what sales growth rate and margins do you expect for this month, the next several years after 2025, and maybe at least 12 figures. Any thoughts?
Speaker Change: Hello everyone. At this moment I have a couple of questions and most of them are regarding the Solar Blue. The first, I'm just wondering what sales growth rate and margin do you expect from this one in the next several years after 2025? Maybe at least Ralph figures any thoughts.
Adi Sfadia: The only figures right now that we can share are what I said earlier, that we expect, assuming we close at the beginning of Q4, we expect Stellar Blue revenues to be between $25-$35 million, and 2015 revenues will be between $120-$150 million. And once Stellar Blue reaches Q4, we expect revenues to be between $25-$35 million. Capacity Milestone In the second half of the year, we expect them to be at above 10% EBITDA.
Ralph: The only figures right now that we can share is what I said earlier, that we expect, assuming we close at the beginning of Q4, we expect Stellar Blue...
Speaker Change: The revenue is to be between 25 to 35 million dollars.
Speaker Change: in 2015 the revenues are between 2025, sorry revenues will be between $120 million to $150 million and once Star Labs Blue reaches the
Speaker Change: Capacity milestone on the second half of the year, we expect them to be at above 10% EBITDA.
Sergei Lukyanov: Oh, okay, um... The second is the preparation of the next line. There is some decrease in the amount of R&D amount in the presentation itself for a lot of quarters. Will such a situation be stable for the next time, or will Gilat need R&D after the Satellite acquisition?
Gil Benyamini: So R&D changed a bit, you know, comparing to last quarter; there's some fluctuation due to the consumption of equipment and so on, and the portion of R&D which is classified as cost of goods sold in NRE projects, so it might fluctuate a bit. Another thing that affects R&D is grants, which were higher this quarter than last quarter. Not materially, but to some extent higher, so all in all, this was the reason for R&D to decrease a bit.
Speaker Change: you know, consumption of equipment and so on and the portion of R&D which is classified to cost of goods sold in NRE projects, so it might fluctuate a bit.
Speaker Change: Another thing that affects R&D is grants, which are higher.
Speaker Change: This quarter than last quarter, not materially, but to some extent higher. So all in all, this is the reason for R&D to decrease a bit.
Sergei Lukyanov: Finally, as I mentioned a few minutes ago, we have already had PSR 2013 and 2014, the portfolio of ESA for business innovation and education. What is the future of this ESA family? Could it be replaced by other blue products? And if so, how could that affect the company itself?
Speaker Change: And finally, as it was mentioned,
Speaker Change: Thank You.
Speaker Change: minutes ago. We have already had TSR 2030 and 2040, the portfolio for ESA.
Speaker Change: for Business Innovation and Education. What is the future of this family? Could it be replaced by other blue products? And if yes, how could it affect the computer-related services?
Adi Sfadia: These are two separate projects. We have no intention to replace either of the technologies. Each one is designed for its own specific customers. We plan to keep them as is.
Speaker Change: Those are two separate projects. We have no intention to replace neither of the technologies. Each one is designed for its own specific customers.
Speaker Change: We plan to keep it as is.
Sergei Lukyanov: Thank you.
Speaker Change: Okay, thank you. Thank you.
Operator: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2.
Speaker Change: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions.
Operator: Please stand by while we poll for more questions. There are no further questions at this time. Mr. Benyamini, would you like to make your concluding statement? Thank you.
Speaker Change: There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement? Yes, thank you. I want 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.
Gil Benyamini: Yes, thank you. I want 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 on our next call. Thank you very much, and have a great day.
Operator: Thank you. This concludes Gilat's second quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.
Speaker Change: Thank you. This concludes Gilat's second quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.